Re Vibe-Tastic Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2023 00493

IN THE MATTER OF VIBE-TASTIC PTY LTD (ACN 656 981 636)

PRIYANKA PRIYANKA	Plaintiff/Defendant by Counterclaim
v
SHWETA JAIN	Defendant/Plaintiff by Counterclaim

---

JUDGE:	Waller J
WHERE HELD:	Melbourne
DATE OF HEARING:	8–11, 19 April 2024
DATE OF JUDGMENT:	30 August 2024
CASE MAY BE CITED AS:	Re Vibe-Tastic Pty Ltd
MEDIUM NEUTRAL CITATION:	[2024] VSC 529

---

CORPORATIONS — Oppression proceeding — Company with two equal joint shareholders — Allegations of oppressive conduct made by both parties — Whether joint shareholder has standing to make an application as a member under Part 2F.1 of the Corporations Act 2001 (Cth) — Oppressive conduct claims established by both parties.

CORPORATIONS — Relief in oppression proceeding — Company with two equal joint shareholders, each wanting to buy the other out — Fair value of interest in shares taking into account parties’ capital contributions with adjustments made to remediate effects of oppression.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Black	Nevile & Co
For the Defendant	In person

TABLE OF CONTENTS

A.. INTRODUCTION........................................................................................................................ 1

B.. FACTUAL BACKGROUND...................................................................................................... 2

C. THE WITNESSES........................................................................................................................ 8

C.1... Ms Priyanka.......................................................................................................................... 8
C.2... Mr Sumit Rao....................................................................................................................... 8
C.3... Ms Jain................................................................................................................................... 9
C.3.1.. The ANZ loan......................................................................................................... 10
C.3.2.. Lump sum payment.............................................................................................. 11
C.3.3.. 30 minute breaks.................................................................................................... 12
C.3.4.. $10,000 share capital.............................................................................................. 12

C.4... Mr Hardik Jain................................................................................................................... 14

D.. RELEVANT LEGAL PRINCIPLES......................................................................................... 16

E... ISSUES FOR DETERMINATION.......................................................................................... 20

E.1... Does a joint owner of shares have standing to apply for relief under Part 2F.1 of the Corporations Act?.............................................................................................................. 20
E.2... Did Ms Jain engage in oppressive conduct in removing Ms Priyanka as a director and secretary?............................................................................................................................ 22
E.2.1... Parties’ submissions.............................................................................................. 22
E.2.2... Consideration......................................................................................................... 23

E.3... Did Ms Jain engage in oppressive conduct in paying herself or Mr Jain for hours not worked in the business?.................................................................................................................. 24
E.3.1... Parties’ submissions.............................................................................................. 24
E.3.1.1.... CCTV recording................................................................................... 24
E.3.1.2.... Comparison to other stores................................................................ 25
E.3.1.3.... 30 minute breaks.................................................................................. 26
E.3.1.4.... Unrostered hours................................................................................. 26
E.3.1.5.... Lump sum payment............................................................................ 27
E.3.1.6.... $35 per hour flat rate........................................................................... 27

E.3.2... Consideration......................................................................................................... 28
E.3.2.1.... CCTV recording................................................................................... 28
E.3.2.2.... Comparison to other stores................................................................ 29
E.3.2.3.... 30 minute breaks.................................................................................. 30
E.3.2.4.... Unrostered hours................................................................................. 30
E.3.2.5.... Lump sum payment............................................................................ 30
E.3.2.6.... $35 per hour flat rate........................................................................... 30

E.3.3... Conclusion.............................................................................................................. 31

E.4... Did Ms Priyanka engage in oppressive conduct in failing to work full-time in the Business?.............................................................................................................................................. 31
E.4.1... Parties’ submissions.............................................................................................. 31
E.4.2... Consideration......................................................................................................... 32

E.5... Did Ms Priyanka engage in oppressive conduct in withdrawing $49,000 from the Company’s bank account?..................................................................................................................... 34
E.5.1... Parties’ submissions.............................................................................................. 34
E.5.2... Consideration......................................................................................................... 35

E.6... Summary............................................................................................................................. 37

F... APPROPRIATE RELIEF........................................................................................................... 37

F.1... Relevant principles............................................................................................................ 37
F.2... Consideration..................................................................................................................... 37

G.. WHICH PARTY SHOULD BUY THE OTHER OUT?........................................................ 38

G.1... Relevant principles............................................................................................................ 38
G.1.1.. Parties’ submissions.............................................................................................. 40
G.1.2.. Consideration......................................................................................................... 42

H.. VALUATION AND PRICE...................................................................................................... 43

H.1.. Relevant principles............................................................................................................ 43
H.2.. Parties’ submissions.......................................................................................................... 44
H.3.. Consideration..................................................................................................................... 45

I.... CONCLUSION AND ORDERS.............................................................................................. 46

HIS HONOUR:

A. INTRODUCTION

In 2021, Ms Priyanka Priyanka and Ms Shweta Jain agreed to operate a Boost Juice franchise at Altona Gate Shopping Centre as a quasi-partnership (‘Business’).

On 2 February 2022, Vibe-Tastic Pty Ltd (ACN 656 981 636) (‘Company’) was incorporated for the purposes of operating the Business. Ms Priyanka and Ms Jain became joint owners of the 1000 issued shares in the Company.

In June 2022, the Company entered into a Franchise Agreement with Boost Juice Franchises Pty Ltd (‘Franchisor’).

On 28 September 2022, the Business began trading.

Almost immediately, disputes arose between Ms Priyanka and Ms Jain regarding the operation of the Business. The relationship between them swiftly deteriorated and neither party could work co-operatively with the other.

Since October 2022, Ms Jain has effectively run the Business without any involvement of Ms Priyanka.

On 10 November 2022, Ms Priyanka withdrew $49,000 from the Company’s bank account, claiming this amount represented the difference between her and Ms Jain’s respective contributions to the Business.

The following day, on 11 November 2022, Ms Jain called a meeting of members of the Company without informing Ms Priyanka. During this meeting, Ms Jain passed a resolution purporting to remove Ms Priyanka as a director and secretary of the Company.

On 10 February 2023, Ms Priyanka commenced this proceeding by way of an Originating Process. In her Points of Claim, she states that she wishes to operate the Business without Ms Jain’s involvement. Ms Priyanka seeks orders that Ms Jain sell her interest in the shares in the Company jointly held by them to Ms Priyanka at a price to be determined by the Court, taking into account their respective contributions to the establishment of the Company.

On 7 August 2023, Ms Jain filed Points of Defence and Counterclaim seeking orders that Ms Priyanka sell her interest in the shares in the Company to Ms Jain at a price to be determined by the Court.

Both parties have alleged that the conduct of the other was in breach of their directors’ duties, contrary to the interests of the members as a whole and oppressive and unfairly prejudicial and discriminatory.

For the reasons set out below, I have concluded that both parties have, to some extent, made out their claims and that it is appropriate that orders be made requiring Ms Jain to purchase Ms Priyanka’s interest in the shares in the Company at a price which takes into account their respective capital contributions in establishing the Company and certain overpayments that I have found Ms Jain made to herself. If Ms Jain fails to purchase Ms Priyanka’s interest in the shares within 30 days of the Court’s order then Ms Priyanka will have the opportunity to purchase Ms Jain’s interest in the shares within 60 days of the Court’s order. If neither party purchases the other’s interest in the shares within the time provided, then the Company will be wound up.

B. FACTUAL BACKGROUND[1]

[1]The facts set out below are drawn from the Joint Chronology filed on 26 March 2024, unless otherwise indicated.

In mid 2021, Ms Priyanka and Ms Jain agreed jointly to acquire a Boost Juice franchise in Altona Gate (‘Altona Store’). At that time Ms Jain was employed by Probe Group and Ms Priyanka was employed by ANZ Bank.[2]
[2]Outline of Submission filed on behalf of the Plaintiff 13 September 2023, [6](a) (‘Plaintiff’s Opening Submissions’); Submissions filed by email on 11 October 2023, [12](c); Outline of Opening Submissions filed on behalf of the Defendant 25 March 2024, [17] (‘Defendant’s Opening Submissions’); Court Book 786, 979 (‘CB’).

On 2 February 2022, the parties incorporated the Company for the purposes of running the Business. The Company was formed without a constitution, so its internal management is governed by the Corporations Act 2001 (Cth) (‘Corporations Act’).[3] At the time of incorporation, Ms Priyanka was a director and secretary and Ms Jain was a director.[4]
[3]Points of Defence filed by the Defendant 7 August 2023, [1](b)(iii) (‘Defendant’s Points of Defence’).
[4]Counterclaim filed by the Defendant 7 August 2023, [1](b) (‘Defendant’s Counterclaim’); CB (n 2) 30.

Ms Priyanka and Ms Jain are joint owners of 1000 ordinary shares in the Company.[5] Although Ms Priyanka contended that it was the intention of the parties that they be equal shareholders in the Company each holding 500 shares,[6] there is no contemporaneous evidence to that effect.
[5]Points of Claim filed by the Plaintiff 29 June 2023, [2] (‘Plaintiff’s Points of Claim’); Plaintiff’s Opening Submissions (n 2), [2]; Outline of Closing Submission on Behalf of the Plaintiff, filed by email on 17 April 2024, [78] (‘Plaintiff’s Closing Submissions’); Outline of Closing Submission on Behalf of the Defendant, filed by email on 17 April 2024, [2] (‘Defendant’s Closing Submissions’); CB (n 2) 29–31.
[6]Plaintiff’s Points of Claim (n 5), [3].

On 2 May 2022, ANZ Bank sent a letter of offer to Ms Priyanka and Ms Jain offering to provide them a business loan of $165,000. Although the offer was countersigned by Ms Priyanka and Ms Jain and their husbands, the funds were not drawn down. Instead Ms Priyanka and Ms Jain used their own funds to establish the Business.[7] The parties disputed the reason why the ANZ loan did not proceed. Ms Priyanka submitted that it was because Mr Jain refused to obtain independent legal advice and pay the mortgage broker’s commission.[8] Ms Jain submitted that it was because Ms Priyanka wished to finance her borrowings through her home loan.[9] Aside from issues of credit, which I deal with later, not much turns on the reason why the ANZ loan was not pursued.
[7]CB (n 2) 832.
[8]Plaintiff’s Closing Submissions (n 5) [31].
[9]Defendant’s Closing Submissions (n 5) [22](c).

On 1 June 2022, the Company entered into the Franchise Agreement with the Franchisor to operate the Business. Ms Priyanka and Ms Jain and their husbands guaranteed the Company’s obligations under the Franchise Agreement.[10] At least, initially, the parties intended to jointly operate the Business on a day to day basis. They were also to receive support and assistance from Ms Priyanka’s husband, Sumit Rao and Ms Jain’s husband, Hardik Jain.[11]
[10]CB (n 2) 845–6.
[11]Plaintiff’s Opening Submissions (n 2) [3]; Defendant’s Opening Submissions (n 2) [5].

The establishment of the Business required an initial outlay of $312,771.75.[12] Most of that amount was paid to the Franchisor under the Franchise Agreement. Ms Priyanka contributed $181,608 and Ms Jain contributed $130,609 (‘Set Up Costs’),[13] although there was dispute as to the nature of this gap and how it was to be equalised.
[12]CB (n 2) 675.
[13]Plaintiff’s Points of Claim (n 5) [10]; Defendant’s Points of Defence (n 3) [10].

On 13 September 2022, Ms Priyanka and Ms Jain met with Grace Gibson Cain, a Boost Juice Franchise Business Consultant. Later that day Ms Gibson Cain sent an email summarising the discussion. Among other things, she noted:[14]

The expectation is that Shweta will work fulltime in the business, 7 days per week open till close for the first 6 months and when Priyanka moves part time in January she will take on some of this workload to ensure one partner is always working at the store for at least the first year of trade.
Priyanka will also work fulltime for 3 weeks over December while on annual leave from work.

[14]CB (n 2) 185. The Boost Juice Franchise Agreement provides for the appointment of a Manager (‘Nominated Manager’) who must devote ‘her time and effort exclusively to the management and conduct of the Business’, see CB (n 2) 614 (cl 24(4)) and who ‘is present on the Premises on a Full-Time Basis’, see CB (n 2) 576 (cl 8.3(2)). Ms Jain was the Nominated Manager (Schedule 1, Item 6). Further, the Business must always be under direct, on-premises supervision of either the Manager; or an employee of the Franchisee who has completed the Franchisor's Initial Training Program and been approved by the Franchisor as a supervisor in writing.’ See CB (n 2) 576 (cl 8.7). When Ms Jain sought to have Mr Jain trained and approved pursuant to cl 8.7(2), the request was denied, see CB (n 2) 227.

On 28 September 2022, the Business began trading. Between September and October 2022, disputes arose regarding the shareholding arrangement, contributions to the Set Up Costs, division of labour in the Business and wages. These disputes became irreconcilable and the relationship between the parties quickly deteriorated.

On 10 October 2022, Mr Jain sent an email expressed to be from ‘Shweta and Hardik’ to Ms Priyanka and her husband. The email was copied to the Franchisor. The email included the following:[15]

As discussed, please find this mail as legal binding contract for mutually agreed exit of Shweta Jain as a director to the company Vibe-Tastic Pty Ltd …
… as discussed and agreed, you will be solely responsible to manage Boost Juice Altona Gate store and … Shweta Jain will not be liable for any store operations or liabilities whatsoever…
It has also been agreed among us that the money we have put towards buying the franchisee, other assets, raw materials bought, electronic gadgets bought, fees and so on will be paid … the total amount will be roughly around AUD 170,000+ which has to be paid from Priyanka to Shweta in lieu of the share transfer and other ownership transfer.

[15]CB (n 2) 191.

On 11 October 2022, Ms Jain sent an email to Ms Priyanka and the Franchisor stating that she did not agree with Mr Jain’s email of 10 October 2022 and that she had no intention of leaving the Business.

On 17 October 2022, Ms Priyanka and Ms Jain exchanged emails expressing their dissatisfaction with each other’s conduct.[16] In particular, Ms Priyanka demanded that Ms Jain contribute a further $51,000 to the Business to equalise their respective contributions.
[16]Ibid 484.

On 18 October 2022, Ms Priyanka sent an email to Ms Jain in which she said (among other things):[17]

… I’ve decided that I cannot continue in our partnership
…
This partnership cannot work.
I will communicate about my decision to Grace and other Boost stakeholders.

[17]Ibid 491.

Later that day, Ms Jain responded by email to Ms Priyanka saying (among other things):[18]

I respect your decision and I am sad to see you leaving the partnership and eventually the company and franchisee.

[18]Ibid 491.

Despite the exchange of 18 October 2024, over the following days Ms Priyanka and Ms Jain continued to communicate by email in an attempt to resolve their differences.[19] In the course of that correspondence, Ms Priyanka, in an email sent on 21 October 2022, refuted the suggestion that she was quitting the partnership.[20]
[19]Ibid 196–9.
[20]Ibid 197.

The tone of their correspondence however, became increasingly acrimonious and, on 24 October 2022, Ms Jain sent an email to Ms Priyanka stating that, until their differences were resolved, Ms Jain would make no further contribution to the Business.[21]
[21]Ibid 497.

Between 27 October 2022 and 3 December 2022, Ms Priyanka and her husband were in India on a pre-arranged visit.[22]
[22]Defendant’s Counterclaim (n 4) [4](c)(iii); Plaintiff’s Reply and Points of Defence to Counterclaim filed on 16 August 2023, [4](c) (‘Plaintiff’s Reply’); CB (n 2) 187; Transcript of Proceedings (08 April 2024) 106.13–17.

On 10 November 2022, while in India, Ms Priyanka sent an email to Ms Jain stating that as Ms Jain had failed to contribute a further $51,000 to the Business, Ms Priyanka would be transferring funds back to her account ‘to equate the contribution from both partners and to align with 50-50% partnership’.[23]
[23]CB (n 2) 957.

At or around the same time that day, Ms Priyanka transferred $49,000 from the Company’s bank account to her own account.

The following day, on 11 November 2022, Ms Jain purported to hold a meeting of members of the Company at which a resolution was passed removing Ms Priyanka as a director and secretary of the Company. No notice of the meeting was given to Ms Priyanka.

On 15 November 2022, Ms Jain lodged a Form 484 with the Australian Securities and Investments Commission (‘ASIC’), recording the removal of Ms Priyanka as director and secretary of the Company.

On 15 November 2022, Joshi Lawyers, on behalf of Ms Jain, wrote to Ms Priyanka stating that Ms Priyanka’s actions in withdrawing $49,000 from the Company’s bank account without Ms Jain’s consent had exposed the Company to liquidation.[24] The letter stated that, as a result of Ms Priyanka’s actions, Ms Jain had removed Ms Priyanka as a director. The letter demanded that Ms Priyanka:[25]

(a)within 48 hours transfer $32,000 back to the Company (after deducting $17,000 paid to the Company for cash flow contribution);
(b)refrain from attending the Franchise Business;
(c)refrain from contacting the Franchisor.

[24]Ibid 979–81.

[25]Ibid 980.

On 23 November 2022, Ms Priyanka’s solicitors, Neville & Co, responded to Joshi Lawyers rejecting the allegations made against Ms Priyanka and raising various allegations against Ms Jain.[26] In particular, they alleged that Ms Jain had ‘acted unilaterally and without notice in removing [Ms Priyanka] as the director and company secretary’ thereby excluding Ms Priyanka from management of the Business.[27]
[26]Ibid 233–5.
[27]Ibid 235.

A meeting of the parties’ lawyers held on 5 December 2022 failed to resolve their clients’ differences.

On 6 December 2022, Ms Priyanka’s solicitors, Neville & Co, sent an email to Joshi Lawyers stating that Ms Priyanka remained committed to buying the Business from Ms Jain and was willing to offer Ms Jain ‘a realistic market value of the business’.[28]
[28]Ibid 236.

On 9 December 2022, Joshi Lawyers wrote to Neville & Co stating that Ms Jain’s conduct in removing Ms Priyanka as a director was justified having regard to Ms Priyanka’s action in withdrawing $49,000 from the Company’s bank account.[29]
[29]Ibid 241–2.

On 19 December 2022, Neville & Co wrote to Joshi Lawyers,[30] stating that Ms Priyanka’s withdrawal of the Company’s funds was to prevent unauthorised use of the funds by Ms Jain ‘such as providing herself and her husband excessive remuneration at the expense of the company’s profits’.[31] They demanded that Ms Priyanka be reinstated as a director in which case Ms Priyanka would provide the requested $32,000 to the Company if Ms Jain was willing to contribute her equal share of $32,000 as well.[32]
[30]Ibid 243–4.
[31]Ibid 243.
[32]Ibid 244.

On 27 January 2023, Joshi Lawyers wrote to Neville & Co maintaining that Ms Jain’s conduct in removing Ms Priyanka as a director was justified.[33] They stated that as the parties were now not in a position to continue to work together, the only alternatives were for one to buy the other out or to sell the Business to a third party.[34]
[33]Ibid 248–9.
[34]Ibid 248.

As mentioned above,[35] on 10 February 2023, Ms Priyanka commenced this proceeding.
[35]See paragraph 9 above.

The critical issues for determination are whether either party engaged in oppressive conduct, being conduct contrary to the interests of the members as a whole, or oppressive or unfairly prejudicial to, or unfairly discriminatory against the other, within the meaning of s 232 of the Corporations Act and, if so, what appropriate orders should be made as a consequence.

C. THE WITNESSES

Before considering these issues, I will say something about the witnesses who gave evidence.

C.1Ms Priyanka

Ms Priyanka is a return analyst at ANZ Bank. When giving her evidence, she presented as a sensible and articulate person. She was consistent and clear in her responses and careful not to speculate if she could not recall.[36] I consider her to be a straightforward and honest witness.

C.2.Mr Sumit Rao

[36]See, eg, Transcript of Proceedings (08 April 2024) 117.21–117.22; Transcript of Proceedings (09 April 2024) 158.09–158.10, 178.21, 197.09–197.15.

Mr Rao is Ms Priyanka’s husband. He was not present when Ms Priyanka gave her evidence.

Mr Rao is an IT consultant for EFTPOS Payments Australia.

Generally, Mr Rao presented as an open and honest witness who provided assistance to the court by compiling:

(a) spreadsheets, showing information from ANZ Bank showing the various contributions of the parties;[37]

(b) an analysis of Ms Jain’s working hours during the nine weeks before and the nine weeks after the interlocutory hearing before Attiwill J on 14 September 2023;[38] and

(c) an analysis comparing average sale data on days when Ms Jain was present and not at the Business.[39]

[37]Plaintiff’s Supplementary Court Book, 2 (‘PSCB’); Transcript of Proceedings (09 April 2024) 206.29–208.08.

[38]CB (n 2) 373; Transcript of Proceedings (09 April 2024) 229.28–231.15.

[39]PSCB (n 37) 12; Transcript of Proceedings (09 April 2024) 234.03–234.30.

Mr Rao was cross-examined on his analysis of the Defendant’s working hours before and after the interlocutory hearing and criticism was made of his report because one table is divided by 8 weeks instead of 9.[40] This had the effect of artificially increasing the average in the first table by about 4.5 hours.[41]
[40]Transcript of Proceedings (09 April 2024) 260.07–262.07.
[41]CB (n 2) 373.

Generally, I found Mr Rao to be a credible witness, notwithstanding the mathematical error in this report.

C.3.Ms Jain

As a self-represented litigant, Ms Jain gave evidence-in-chief in a discursive manner. While I have accepted parts of her evidence, in certain respects I do not find that her evidence was reliable.

In particular, I do not accept as reliable Ms Jain’s evidence regarding:

(a) whether all of the preconditions of the ANZ loan had been satisfied;

(b) the lump sum payment of $7,350 she received on 25 June 2023;

(c) the payments she received after adding back 30 minute breaks; and

(d) the alleged payment by her of $10,000 for share capital.

C.3.1. The ANZ loan

On 2 May 2022, ANZ Bank sent a letter of offer to Ms Priyanka and Ms Jain offering to provide them a business loan of $165,000.[42]
[42]CB (n 2) 168–79.

The second page of the letter states under the heading ‘Before you can use this Facility’:

Before you can use your Facility, ANZ needs to receive, validate and confirm:
·…
·All documentation supporting your application is validated and confirmed
·…
·Independent legal advice - ANZ has received reasonably satisfactory evidence that Sumit Rao has received independent legal advice in respect of its guarantee of your Facilities
·Independent financial advice - ANZ has received reasonably satisfactory evidence that Sumit Rao has received independent financial advice in respect of its guarantee of your Facilities
·Independent legal advice - ANZ has received reasonably satisfactory evidence that Hardik Jain has received independent legal advice in respect of its guarantee of your Facilities
·Independent financial advice - ANZ has received reasonably satisfactory evidence that Hardik Jain has received independent financial advice in respect of its guarantee of your Facilities
·Franchise agreement - ANZ has received a duly executed copy of the franchise agreement between you and Boost Juice in respect of the franchise situated at 124-134 Millers Road, Altona North, VIC, 3025 that is in form and substance reasonably satisfactory to ANZ.

Ms Jain gave evidence that each of the matters referred to in the bullet point list in ANZ’s letter of offer had already occurred and that the offer was therefore unconditional.[43] However, the language of the letter of offer, in particular the words ‘[b]efore you can use your Facility, ANZ needs to receive, validate and confirm’ suggests otherwise.
[43]Transcript of Proceedings (11 April 2024) 444.09–444.24, (19 April 2024) 572.13–573.12.

Moreover, Ms Jain was unable to produce any evidence that ANZ had received any evidence that Mr Jain or Mr Rao had received independent legal or financial advice. While Mr Jain later gave evidence that he had obtained independent legal advice, no independent evidence was called to support that assertion from the person who allegedly provided the advice, and Mr Jain conceded that no certificate of legal advice was obtained from a solicitor.[44] Mr Rao gave evidence that at no time had he obtained independent legal or financial advice.[45]
[44]Ibid 474.12–474.14.
[45]Transcript of Proceedings (10 April 2024) 290.28–290.30.

It is also beyond doubt that no duly executed copy of the Franchise Agreement came into existence until at least 1 June 2022. It was therefore not in existence when the letter of offer was sent on 2 May 2022.

Ms Jain knew that the Franchise Agreement had not been executed when the letter of offer was sent. She also must have known that her husband had not obtained independent legal advice in relation to the loan, and could not have known that Mr Rao had obtained independent legal advice, given Mr Rao’s evidence that he did not obtain such advice.[46]

C.3.2. Lump sum payment

[46]Ibid 290.28–290.30.

At the end of the 2022–23 financial year, Ms Jain processed a lump sum payment to herself of $7,350, for payment of 5 hours per week since the store opened in September 2022. This sum was marked as ‘Month End Reporting and Data Extracts’ and ‘Roster, Payroll, Admin and Bills processing’.[47] Payment for this administrative work was added on top of the wages Ms Jain received for the hours she worked in the store.
[47]CB (n 2) 358.

Under cross-examination Ms Jain said ‘I never worked from the home, never, and I never charged for those hours’[48] and ‘[i]f I'm at home, I'm not getting paid.’[49]
[48]Transcript of Proceedings (10 April 2024) 394.05, 394.07–394.08.
[49]Ibid 393.18–393.19.

Either Ms Jain completed the administrative tasks associated with running the Business during the hours she was rostered to attend the store and was paid accordingly, or she completed these tasks from home and did not charge for those hours. In either case, there is no basis for the annual lump sum payment of $7,350, except to pay herself additional wages she felt entitled to, thereby reducing the profitability of the store.

C.3.3. 30 minute breaks

Ms Jain gave evidence that she reversed the unpaid 30-minute breaks in the timesheet system used by the Business, thereby paying herself for each of these breaks each shift. Her explanation for doing this was ‘because being a director, I'm not on break if I'm in store’[50] … ‘I'm not on break any day’.[51] Ms Jain acknowledged that she had team leaders capable of operating the store in her absence.[52] This must be true as Ms Jain was not rostered during the full opening hours of the Business. Further, there were times when Boost Juice representatives conducted spot audits that Ms Jain was not present in the Business.[53] I do not accept Ms Jain’s evidence that she took no breaks. I am satisfied that Ms Jain’s reversal of her 30-minute breaks in the timekeeping system was an attempt to pay herself additional wages she felt entitled to, thereby reducing the profitability of the store.

C.3.4. $10,000 share capital

[50]Ibid 385.16–17.

[51]Ibid 385.25.

[52]Ibid 386.17–386.22.

[53]CB (n 2) 209, 212, 213–15, 222, 227–8 Transcript of Proceedings (09 April 2024) 212.21–212.29.

Ms Jain gave evidence that she had made a $10,000 contribution towards the Set Up Costs of the Business. An ASIC extract for the Company shows that the Company’s 1000 shares are shown as ‘$10,000.00 Total Amount Paid/Taken to be Paid’.[54] Ms Jain gave evidence that Ms Priyanka paid $0 towards the shares, ‘so in that case, plaintiff hasn't put any contribution in buying the shares’.[55] Instead, Ms Jain claimed the entire $10,000 as part of her contribution to the Set Up Costs of the Business, to be offset against her personal debt to Ms Priyanka.[56]
[54]CB (n 2) 29–30.
[55]Transcript of Proceedings (08 April 2024) 33.15–33.16.
[56]Supplementary Court Book 73 (‘SCB’); Transcript of Proceedings (08 April 2024) 42.03–42.09.

Under cross-examination, regarding the payment of this $10,000 sum, Ms Jain said that, given the Company did not yet have a bank account at the relevant time, it was ‘a cash amount. It has been accounted in the Company's balance sheet’.[57] When pressed further as to who the money had been paid to, Ms Jain insisted it was ‘reserved for the Company’.[58] When questioned as to where the cash came from, Ms Jain said ‘[t]he cash is my cash… from my savings … It was cash in hand’.[59] When questioned as to where she put the $10,000, Ms Jain said ‘it is with me … It’s cash in hand’.[60] Ms Jain said further, ‘it's with me. I am the director, I am the Company-holder, so it's with me. … It's my company … It's with me, so it's part of the Company … I am the Company's shareholder. I am the director of the Company, so it's with the director of the Company.’[61] It was Ms Jain’s evidence that, when Ms Priyanka withdrew $49,000 from the Company on 10 November 2022, the Company’s liabilities exceeded the available balance[62] and that she used cash to pay the Company’s creditors. Ms Jain said that ‘[t]here was nothing in the Company and I used money of my own to pay the dues’,[63] and ‘that $10,000 I used it to pay the creditors, because there was nothing left in the Company’.[64] When questioned as to the current balance, Ms Jain said, ‘it’s?? still 10,000 there, because when Company earned it, I put it back’.[65]
[57]Transcript of Proceedings (10 April 2024) 303.25–303.26.
[58]Ibid 304.04–304.05.
[59]Ibid 364.30–365.07.
[60]Ibid 365.26–365.30.
[61]Ibid 366.27–367.03.
[62]Ibid 367.12–367.18.
[63]Ibid 367.23–367.24.
[64]Ibid 367.26–367.28.
[65]Ibid 368.18–368.19.

I do not accept that Ms Jain at any time paid $10,000 for the shares in the Company or that that amount was put aside or put back by her as she claimed. If Ms Jain had advanced her personal funds for the purposes of meeting creditor liabilities following the Plaintiff’s withdrawal of $49,000, there were no invoices or transaction receipts tendered to this effect. Nor were there any accounting statements tendered showing the re-balancing of these funds being returned from the Business at a later stage. In closing submissions, Ms Jain abandoned her contention that this $10,000 sum made up part of her contributions to the Set Up Costs of the Company. I am satisfied that Ms Jain’s insistence that she paid the $10,000 towards the Company’s share capital was an attempt to reduce her liability to Ms Priyanka. Her evidence in respect of this matter reflects adversely on her credit.

C.4.Mr Hardik Jain

Mr Jain is Ms Jain’s husband. He was not in Court when Ms Priyanka, Mr Rao or Ms Jain gave their evidence.

Mr Jain previously worked at ANZ Bank, where he came to know Ms Priyanka. He later worked as an IT Consultant for the Australian Defence Force.[66] He presently works as a sales assistant at the Company.[67]
[66]Transcript of Proceedings (09 April 2024) 202.29–202.30.
[67]Transcript of Proceedings (10 April 2024) 406.12–406.13.

On the whole, I did not find Mr Jain’s evidence to be reliable for a number of reasons. First, he had a tendency not to accept propositions, which by reference to contemporaneous documents, appeared uncontroversial. Secondly, he frequently responded to questions in an evasive or deliberately obtuse manner, preferring to quibble over minutiae rather than assist the Court with straightforward answers. Thirdly, like Ms Jain, he insisted that Ms Jain had contributed $10,000 as payment for the Company’s share capital.

As an example of the first matter, during cross-examination Mr Jain was shown a WhatsApp message exchange between himself and Ms Priyanka.[68] When asked to confirm that the message exchange was between himself and the Plaintiff, Mr Jain said, ‘I can't see plaintiff in here … that appears to be Hardik ANZ … Plaintiff can label anything, but I can't see plaintiff.’[69] When counsel for the Plaintiff pressed, asking if that meant that Mr Jain did not send these messages, Mr Jain said, ‘[n]o, I didn't say that’.[70] When asked if he had written the messages in the white bubbles, Mr Jain said, ‘I do not recall’.[71] The following morning when Mr Jain returned to the witness box and the same questions were put to him, he said, ‘Though I cannot see plaintiff, but yes, I had this conversation with the plaintiff’.[72]
[68]PSCB (n 37) 23–31.
[69]Transcript of Proceedings (10 April 2024) 439.04–439.15
[70]Ibid 439.17–439.18.
[71]Ibid) 439.24–439.25.
[72]Transcript of Proceedings (11 April 2024) 458.25–458.26.

As to the second matter, when asked in cross-examination about approaching brokers in respect of obtaining a loan for the Company, the following exchange occurred between counsel for the Plaintiff and Mr Jain:[73]
[73]Transcript of Proceedings (10 April 2024) 437.29–438.05.

Counsel: All right, and both the plaintiff and you approached brokers in relation to obtaining a loan for the company, correct?
Mr Jain: Can you be more specific? Like, what brokers?
Counsel: Did you approach brokers?
Mr Jain: Like, what brokers?
Counsel: Did you approach brokers?
Mr Jain: What brokers?
Counsel: Did you approach any brokers?
Mr Jain: Like, business loan brokers, financing brokers
Counsel: Yes?
Mr Jain: Yes.

Mr Jain was also evasive about his efforts to obtain independent legal advice as a condition of obtaining a loan for the Business. He initially gave evidence that he had taken legal and financial advice from his accounting firm CX Accountants.[74] Under cross-examination, Mr Jain said he received independent legal and financial advice from Mr Vishal at Pointax Chartered Accountants. When asked whether Mr Vishal was an accountant, Mr Jain said, ‘I need to check with him, but he is the – he's the accountant’.[75] When pressed as to whether he could produce a certificate from a solicitor confirming that he received independent legal advice, Mr Jain said, ‘[n]o, definitely not’.[76]
[74]Ibid 411.21–411.24.
[75]Transcript of Proceedings (11 April 2024) 474.03–474.05.
[76]Ibid 474.14.

As to the third matter, Mr Jain gave evidence that $10,000 was provided by Ms Jain towards her contributions towards the Set Up Costs for the Company.[77] When asked in cross-examination where the money was located, Mr Jain said, ‘It was set aside into – you know, since there was no bank account, it was set aside as a company asset’,[78] it was ‘physically standing as a share capital’,[79] and ‘the actual money, so it can be found in the balance sheet itself’.[80] When asked where he would go to present the cash to the Court, Mr Jain said, ‘[s]o not those notes but now that is part of Company capital and then, you know, they are with the Company and they will be with the defendant’.[81] I regard the evidence given by both Mr and Mrs Jain in respect of the $10,000 share capital as unreliable and designed to reduce Ms Jain’s liability to Ms Priyanka.

D. RELEVANT LEGAL PRINCIPLES

[77]See paragraphs 61–3 above.

[78]Transcript of Proceedings (11 April 2024) 495.17–495.18.

[79]Ibid 496.03.

[80]Ibid 496.17–496.18.

[81]Ibid 496.27–496.29.

Sections 232 and 233 of the Corporations Act relevantly provide:

Section 232 – Grounds for Court order
The Court may make an order under section 233 if:
(a)the conduct of a company's affairs; or
(b)an actual or proposed act or omission by or on behalf of a company; or
(c)a resolution, or a proposed resolution, of members or a class of members of a company;

is either:
(d)contrary to the interests of the members as a whole; or
(e)oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.

Section 233 – Orders the Court can make
(1)The Court can make any order under this section that it considers appropriate in relation to the company, including an order:
(a)that the company be wound up;
(b)that the company's existing constitution be modified or repealed;
(c)regulating the conduct of the company's affairs in the future;
(d)for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law;
(e)for the purchase of shares with an appropriate reduction of the company's share capital;
(f)for the company to institute, prosecute, defend or discontinue specified proceedings;
(g)authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company;
(h)appointing a receiver or a receiver and manager of any or all of the company's property;
(i)restraining a person from engaging in specified conduct or from doing a specified act;
(j)requiring a person to do a specified act.

The Court may make an order under s 233 if it is satisfied that s 232 has been established. Section 234 provides that an application for an order may be made, relevantly, by a member of the company.

The language and history of s 232 and its predecessors indicate that it is to be ‘read broadly’.[82]
[82]Solanki v Cufari [2014] VSC 345, [54] (Elliott J) (‘Solanki’); see also Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304, 360 [176] Gummow, Hayne, Heydon and Kiefel JJ).

Sub-sections 232(d) and 232(e) are viewed as distinct grounds of relief.[83] Although they are separate grounds, there may be conduct which falls within both sub-ss (d) and (e).[84]
[83]Re Renex Founder Hold Co Pty Ltd [2024] VSC 244, [93] (Matthews J) (‘Renex’), adopting summary of principles from Re SRW Nominees Pty Ltd [2019] VSC 547, [33]–[44] (Robson J) (‘SRW Nominees’). See also Exton v Extons Pty Ltd (2017) 53 VR 520, 531 [39] (Sifris J) (‘Exton’); Solanki (n 82) [56] (Elliott J); Re Dawning Investments Pty Ltd (2022) 68 VR 226, 239 [32] (Hetyey AsJ) (‘Re Dawning’); Re Skytraders Pty Ltd [2022] VSC 416, [29] (Button J) (‘Skytraders’).
[84]Sandy v Yindjibarndi Aboriginal Corporation RNTBC (No 4) (2018) 126 ACSR 370, 399 [116] (Pritchard J) (‘Sandy v Yindjibarndi Aboriginal Corporation’).

In relation to sub-s 232(d), whether ‘conduct is contrary to the interests of members as a whole is to be assessed objectively and by reference to whether the conduct adheres to accepted standards of corporate behaviour or is in accordance with how reasonable directors would act in attending to the affairs of the company’.[85]
[85]Skytraders (n 83) [37] (Button J), citing Australian Institute of Fitness Pty Ltd v Australian Institute of Fitness (Vic/Tas) Pty Ltd (No 3) (2015) 109 ACSR 369, [84] (Sackar J) (‘Australian Institute of Fitness’). See also Exton (n 83) 531–2 [39] (Sifris J).

In Re Ledir Enterprises Pty Ltd,[86] Black J briefly summarised the legislative history of the subsection, and quoted previous authority stating that ‘an action may be “contrary to the interests of the members as a whole” in ways other than by being commercially unfair’.[87]
[86](2013) 96 ACSR 1.
[87](2013) 96 ACSR 1, 52 [177], quoting Turnbull v NRMA (2004) 50 ACSR 44. See also Skytraders (n 83) [37]; Pacific Dairies Ltd v Orican Pty Ltd [2019] VSC 647, [42] (Sifris J) (‘Pacific Dairies’).

Similarly, in Sandy v Yindjibarndi Aboriginal Corporation, Pritchard J stated:[88]

Conduct by a board of directors will be contrary to the interests of the members as a whole if no board, acting reasonably, could have engaged in that conduct. It is not necessary to show bad faith on the part of the directors. In other words, conduct may be contrary to the interests of the members as a whole even though the board of directors does not act in bad faith.

[88]Sandy v Yindjibarndi Aboriginal Corporation (n 84), 395 [102] (citations omitted).

In Exton, Sifris J (as his Honour then was) said in respect of s 232(d):[89]

… the better view is that s 232(d) is separate and distinct from s 232(e) and that a breach may not necessarily involve commercial unfairness. The court is required to examine all of the relevant facts and circumstances in order to determine whether the conduct under scrutiny is in the best interests of the company as a whole, apart from its members. In this context breaches of duty (whether statutory or fiduciary) by directors and officers may well be conduct that is not in the best interests of the company as a whole.

[89]Exton (n 83) 531–2 [39].

Regarding sub-s 232(e), the phrase ‘oppressive to, unfairly prejudicial to, or unfairly discriminatory against’ is viewed as a compound expression, an essential criterion of which is ‘commercial unfairness’.[90] The test is whether, ‘objectively, in the eyes of a commercial bystander, there has been conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair’.[91] Evidence of conduct having been engaged in deliberately, knowing it to be unfair or not in good faith, is persuasive but not necessary.[92]
[90]SRW Nominees (n 83) [34] (Robson J). See also Re Islamic Co-ordinating Council of Victoria [2024] VSC 332, [27] (Gorton J); BBHF Pty Ltd v Sleeping Duck Pty Ltd [2024] VSC 320, [64] (Delany J) (‘Sleeping Duck’).
[91]Knights Quest Pty Ltd v Daiwa Can Company (2018) 366 ALR 557, 588–9 [130] (Beach, Kyrou and Hargrave JJA); Parker v Auswild (2022) 403 ALR 111, 140 [128]–[130] (Ferguson CJ, Kennedy JA and Garde AJA) (‘Auswild’).
[92]Australian Institute of Fitness (n 85) 434 [471] (Sackar J). See also Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459, 470 (Brennan J); Campbell v Backoffıce Investments Pty Ltd (2009) 238 CLR 304, 360 [176] (Gummow, Hayne, Heydon and Kiefel JJ); Tomanovic v Global Mortgage Equity Corporation Pty Ltd (2011) 288 ALR 310, 361 [217].

In assessing commercial unfairness, it is also appropriate to consider the behaviour of the person making the allegation of oppression.[93] The Court will balance competing interests rather than assessing the matter solely from one member’s point of view.[94]
[93]Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672, 738 [388] (Priestley JA), 789 [676] (Fitzgerald JA) (‘Fexuto’); Hunter v Organic & Natural Enterprise Group Pty Ltd (2012) 92 ACSR 183, 205 [105] (Dalton J); Exton (n 83) 536 [50] (Sifris J); Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, 706 (Young J) (‘Morgan’); Sleeping Duck (n 90) [67] (Delany J).
[94]Morgan (n 93) 706 (Young J); Thomas v H W Thomas Ltd [1984] 1 NZLR 686; Sleeping Duck (n 90) [67] (Delany J).

In Campbell v Backoffice Investments Pty Ltd, the New South Wales Court of Appeal discussed the distinction between sub-ss 232(d) and (e).[95] It emphasised that with the structural change to the provision in March 2000,[96] ‘commercial unfairness’ was no longer encompassed within s 232(d):[97]

That approach left open the question of whether the sole criterion of ‘commercial unfairness’ incorporated the fourth element in the definition, namely conduct ‘contrary to the interests of the members as a whole’. In Re Polyresins Pty Limited [1999] 1 Qd R 599 at 604-605, Chesterman J concluded that all four expressions overlapped and therefore each constituted an element in the broad criterion of ‘commercial unfairness’. However, as noted by Campbell J in Turnbull v National Roads and Motorists’ Association Ltd [2004] NSWSC 577; 50 ACSR 44 at [32], the structural change which removed the fourth element from the paragraph as it originally appeared and placed it in a separate paragraph, as now appears in s 232(d) and (e), required a different approach. The ‘contrary to the interests’ element, now contained in paragraph (d), should be given a separate and independent operation because it may well cover conduct which is outside the scope of commercial unfairness.

E. ISSUES FOR DETERMINATION

[95](2008) 66 ACSR 359 (Giles and Basten JJA and Young CJ) (‘Campbell v Backoffice’). The case was appealed in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 30, but on grounds other than oppression (an application by the plaintiff for special leave to cross-appeal to reinstate its success at trial regarding its oppression claim was refused). See also Ubertini v Saeco International Group SpA(No 4) (2014) 98 ACSR 138, 226 [491] (Elliott J).

[96]See Turnbull v National Roads and Motorists’ Association Ltd (2004) 186 FLR 360, 369–70 [32] (Campbell J).

[97]Campbell v Backoffice (n 95) 400 [182] (Basten JA).

As previously stated, the critical issues for determination are whether either party engaged in oppressive conduct being conduct contrary to the interests of the members as a whole or oppressive or unfairly prejudicial to or unfairly discriminatory against the other within the meaning of s 232 of the Corporations Act and, if so, what appropriate orders should be made as a consequence. Although each party’s pleadings also contain allegations that the other party acted in breach of statutory and fiduciary duties, the substantive relief sought by each party is an order pursuant to s 233 of the Corporations Act.

In final submissions, Ms Priyanka alleged oppressive conduct based on her improper removal as a director and secretary of the Company which excluded her from the management of the Company’s affairs, and the overpayment of wages by Ms Jain to herself and her husband.

In final submissions, Ms Jain alleged that Ms Priyanka engaged in oppressive conduct in withdrawing $49,000 from the Company’s bank account and in failing to work full-time in the Business as she had previously agreed.

Each party sought orders that they purchase the other’s interest in the shares in the Company on certain terms.

Before considering the claims of oppressive conduct made by each party and what orders are appropriate, I will deal with a preliminary issue arising from the fact that the parties are joint owners of the shares in the Company.

E.1.Does a joint owner of shares have standing to apply for relief under Part 2F.1 of the Corporations Act?

Section 234 relevantly provides that an application for an order under section 233 in relation to a company may be made by a member of the company, even if the application relates to an act or omission that is against the member in a capacity other than as a member; or another member in their capacity as a member.

Section 231 relevantly provides that a person is a member of a company if they are a member of the company on its registration or agree to become a member of the company after its registration and their name is entered on the register of members.

Section 249J(1) of the Act provides that written notice of a meeting of a company's members must be given individually to each member entitled to vote at the meeting and to each director. Notice need only be given to one member of a joint membership. Section 249J(2) provides that notice to joint members must be given to the joint member named first in the register of members.

As noted above, the 10,000 shares in the Company are jointly owned by Ms Priyanka and Ms Jain.

A question arises as to whether, as joint members in respect of the same shareholding, each of them has standing as a ‘member’ to apply for an order under s 233.

For the following reasons I consider that they do.

First, s 231 defines membership on an individual basis. A person becomes a member if they agree to become a member and their name is entered on the register of members. This suggests that each joint member, having agreed to become a member and being included on the register, is a member in their own right.[98]
[98]See Permanent Trustee Co of NSW Ltd v Palmer (1929) 42 CLR 277, 283–4 (Isaacs J).

Secondly, the language of s 234 which allows a member of the company to apply for an order under s 233 is inclusive and does not exclude joint members or distinguish between types of membership.[99]
[99]A member of a single-member company has been found to be a proper applicant under s 232: Goozee v Graphic World Group Holdings Pty Ltd (2002) 170 FLR 451, 461 [40] (Barrett J). Cf Darkinjung Pty Ltd v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1217, [64]–[66] (Barrett J).

Thirdly, although joint members may be treated as a single entity for certain administrative purposes (such as receiving notices), they remain separate legal persons. Each has their own rights that may need protection.

Fourthly, the very nature of joint membership creates the possibility of conflicts of interest between joint members, particularly where the joint members hold the only issued shares in the company. If one joint member could not bring an action against another it would leave them without recourse where there has been oppressive conduct.

Fifthly, the oppression remedy is designed to protect minority (or equal) shareholders and ensure fairness in the conduct of a company’s affairs. Interpreting ‘member’ in s 234 to include each joint member is consistent with this protective purpose, ensuring that all individuals with a stake in the company have access to legal remedies.

E.2.Did Ms Jain engage in oppressive conduct in removing Ms Priyanka as a director and secretary?

E.2.1. Parties’ submissions

Ms Priyanka submitted that she was not given notice of the meeting held 11 November 2022 at which it was resolved that she be removed as a director and secretary of the Company.[100] She submitted that Ms Jain’s reliance on s 249J(2) of the Corporations Act which provides that notice to joint members of the company need only be given to the first joint member listed on the share register was spurious as no notice was given to Ms Priyanka as a director as required by s 249J(1).[101]
[100]Plaintiff’s Closing Submissions (n 5) [38]; CB (n 2) 223.
[101]Plaintiff’s Closing Submissions (n 5) [38].

In final submissions, Ms Jain conceded that the removal of Ms Priyanka as director and secretary of the Company occurred without notice to Ms Priyanka as required under s 249J(1) of the Corporations Act 2001.[102] However, Ms Jain submitted that such removal was not unfair or oppressive in the circumstances.[103] The circumstances relied on by Ms Jain were Ms Priyanka’s email of 18 October 2022 stating that she?? could not continue in the partnership and Ms Priyanka’s withdrawal of $49,000 from the Company’s bank account.

E.2.2. Consideration

[102]Defendant’s Closing Submissions (n 5) [8].

[103]Defendant’s Closing Submissions (n 5) [8].

The exclusion or removal of a person from management of a company where that person has a legitimate expectation of being involved in management may amount to oppression.[104]
[104]Sleeping Duck (n 90) [69] (Delany J) and citations therein.

Where the company is formed as a quasi-partnership, it may more readily be accepted that there is a legitimate expectation that both partners will be involved in its management.[105]
[105]Ibid [73] (Delany J) citing Ebrahimi v Westbourne Galleries Ltd [1973] AC 360.

I am satisfied that the removal of Ms Priyanka as a director and secretary of the Company was conduct in the affairs of the Company which constituted oppressive conduct within the meaning of s 232(e). It was undertaken without notice to Ms Priyanka in breach of s 249J(1) of the Corporations Act while she was overseas with the intention of excluding her from management of the Company. At that time Ms Priyanka had a legitimate expectation that she would continue to be a director and secretary of the Company and involved in its management.

I do not accept Ms Jain’s submission that her conduct in removing Ms Priyanka as a director and secretary was not unfair or oppressive having regard to Ms Priyanka’s email of 18 October 2022 and her withdrawal of $49,000 from the Company’s bank account.

As I set out earlier, despite the exchange of 18 October 2024, over the following days Ms Priyanka and Ms Jain continued to communicate by email in an attempt to resolve their differences and, in a further email sent on 21 October 2022, Ms Priyanka refuted the suggestion that she was quitting the partnership. At no time did Ms Priyanka state that she was resigning as a director and secretary of the Company.

Nor do I accept that Ms Jain was entitled to remove Ms Priyanka as a director and secretary after Ms Priyanka withdrew $49,000 from the Company’s bank account. I will separately address whether Ms Priyanka’s conduct of itself constituted oppressive conduct. However, even if it did, it did not justify Ms Priyanka’s removal as a director and secretary.

Ms Priyanka did not withdraw all of the funds she had contributed to the Company. Had she done so that would have indicated that she intended to remove herself completely from the partnership and from management of the Company. However, in withdrawing $49,000 from the Company’s account, Ms Priyanka sought to equalise the contributions of herself and Ms Jain which was consistent with the partnership continuing.

E.3.Did Ms Jain engage in oppressive conduct in paying herself or Mr Jain for hours not worked in the business?

E.3.1. Parties’ submissions
E.3.1.1. CCTV recording

Ms Priyanka submitted that she had long harboured concerns that Ms Jain was logging into the Business’s Tanda time recording system from home and recording hours as worked when she did not actually work.[106] She submitted that access to the Business’s CCTV recordings would have confirmed her suspicions.[107]
[106]Plaintiff’s Closing Submissions (n 5) [48].
[107]Plaintiff’s Closing Submissions (n 5) [48].

Ms Priyanka submitted that the Company’s records showed that in the nine weeks prior to 24 September 2023 Ms Jain was paid for a total of 355.24 hours, an average of approximately 39.5 hours per week, whereas in the nine weeks after 24 September 2023 Ms Jain was paid a total of 162.27 hours at an average of approximately 18 hours per week.[108]
[108]Plaintiff’s Closing Submissions (n 5) [46].

Ms Priyanka submitted that the discrepancy in these amounts could be explained based on the fact that at a directions hearing on 14 September 2023, Attiwill J had said that CCTV recordings should be preserved by Ms Jain and on 11 October 2023 orders were made for Ms Priyanka to have access to the CCTV recordings.[109]
[109]Plaintiff’s Closing Submissions (n 5) [47].

Ms Priyanka submitted that from around the time of the hearing on 14 September 2023, Ms Jain commenced paying herself only the hours she actually worked as the CCTV recordings would have exposed the fact that she was not in the Altona Store.[110] Ms Priyanka also submitted that the fact that Ms Jain had replaced the CCTV system in August 2023 and disposed of the old system and its hard drives was suspicious.[111]
[110]Plaintiff’s Closing Submissions (n 5) [48].
[111]Plaintiff’s Closing Submissions (n 5) [51].

Ms Jain denied that she had paid herself for hours she had not worked. She submitted that she worked more hours in September 2023 than usual due to the high sales recorded that month and the need to prepare and train casual employees for the forthcoming Christmas period.[112]
[112]Defendant’s Closing Submissions (n 5) [11].

Ms Jain relied on tables she had prepared for other nine week periods which showed that she had worked an average of 23.70 average hours per week between 28 May 2023 and 23 July 2023 and an average of 21.52 per week between 3 December 2023 and 28 January 2024.[113]

E.3.1.2. Comparison to other stores

[113]SCB (n 56) 506.

Ms Priyanka further submitted that a comparison of the Altona Store to other Boost Juice stores demonstrated a higher than average labour cost to income ratio which supported her contention that Ms Jain was overpaid or paid for days that she did not work.[114]
[114]Plaintiff’s Closing Submissions (n 5) [53].

Ms Jain submitted that this argument should be rejected for a number of reasons. First, because Ms Priyanka only relies on a very small sample of stores.[115] Secondly, because there is no evidence about the age of the sample stores and hence whether they had been open for less than 12 months, being the period the Franchisor required them to be operated at all times by the director who is the Nominated Manager, who would likely charge higher rates than other more junior staff.[116] Thirdly, because there was no evidence of the sample stores’ opening hours and therefore whether they were open late or over weekends (which time periods incur penalty wages).[117]

E.3.1.3. 30 minute breaks

[115]Defendant’s Closing Submissions (n 5) [14](a).

[116]Defendant’s Closing Submissions (n 5) [14](b).

[117]Defendant’s Closing Submissions (n 5) [14](c).

Ms Priyanka submitted that Ms Jain had removed unpaid breaks (or added back 30 minute breaks) thereby ‘padding her pay packet’.[118] She submitted that the suggestion that Ms Jain took no breaks at all should be rejected. She submitted that the evidence showed that Ms Jain did this for her wages in 74 out of 79 weeks up to 7 April 2024.[119] Assuming Ms Jain added back a 30 minute break an average of four times per week at $17.50 for 30 minutes (ignoring where a break is added back on a weekend and attracts penalty rates), Ms Priyanka submitted that Ms Jain had conservatively overpaid herself $5,180 during those 74 weeks.[120]
[118]Plaintiff’s Closing Submissions (n 5) [41].
[119]Transcript of Proceedings (09 April 2024) 223.26 –224.15.
[120]Plaintiff’s Closing Submissions (n 5) [43].

Ms Jain submitted that she had removed the unpaid breaks in calculating her pay because she actually worked during that time rather than taking breaks.[121]

E.3.1.4. Unrostered hours

[121]Defendant’s Closing Submissions (n 5) [13]; Transcript of Proceedings (10 April 2024) 386.03–386.15.

Ms Priyanka submitted that, although Ms Jain was required by the Franchisor to be working in the store full time in January and February 2023, she did not roster herself for several weeks in that period with the result that all hours worked in the weeks ending 22 January 2023, 12 February 2023 and 26 February 2023 were treated as unrostered hours and attracted a multiplier.[122] Ms Priyanka submitted that for those three weeks, Ms Jain overpaid herself $2,044.81 (ignoring the pay for Saturdays when a multiplier would be applied in any event for weekend work).[123]
[122]Plaintiff’s Closing Submissions (n 5) [44]–[45]; CB (n 2) 348–55.
[123]Plaintiff’s Closing Submissions (n 5) [45].

Ms Jain submitted that in each instance she did not roster herself as she was not expecting to work but that her plans later changed.[124] She further submitted that these alleged overpayments affected only a very small portion (around 2 weeks) of her overall hours in the 18 months that she operated the Altona Store.[125]

E.3.1.5. Lump sum payment

[124]Defendant’s Closing Submissions (n 5) [13]; Transcript of Proceedings (10 April 2024) 376.16–19.

[125]Defendant’s Closing Submissions (n 5) [13].

At the end of the 2022–23 financial year, Ms Jain processed a lump sum payment to herself of $7,350, for payment of 5 hours per week since the store opened in September 2022. This sum was marked as ‘Month End Reporting and Data Extracts’ and ‘Roster, Payroll, Admin and Bills processing’.[126] Payment for this administrative work was added on top of the wages Ms Jain received for the hours she worked in the store.
[126]CB (n 2) 358.

Under cross-examination Ms Jain said, ‘I never worked from the home, never, and I never charged for those hours’[127] and ‘[i]f I'm at home, I'm not getting paid.’[128]
[127]Transcript of Proceedings (10 April 2024) 394.05, 394.07–394.08.
[128]Transcript of Proceedings (10 April 2024) 393.18–393.19.

Ms Jain submitted that she was working at the Altona Store every hour that it was open and that these extra tasks took an extensive amount of time for which she only reimbursed herself for five hours per week.

E.3.1.6. $35 per hour flat rate

Ms Priyanka initially submitted that although she and Ms Jain had agreed that directors of the Company who worked in the Business would be paid a flat rate of $35 per hour and would not earn any penalty rates for weekend shifts, public holidays or overtime, Ms Jain had paid herself those additional penalty rates.[129]
[129]Transcript of Proceedings (08 April 2024) 89.13 –89.16, 97.06–97.19.

Despite no reference to this claim being made in Ms Priyanka’s written closing submissions, Ms Jain submitted in her written closing submissions that the agreement was to pay directors a base rate of $35 per hour for the time they worked in the business, plus any penalty rates for weekend shifts, public holidays or overtime.[130]
[130]Defendant’s Closing Submissions (n 5) [12]–[13].

Ms Jain relied on the fact that Ms Priyanka had herself processed Ms Jain’s first pay run on 2 October 2022 which included all relevant penalties,[131] and therefore was aware that the rate was $35 per hour plus penalties, not a flat rate of $35 per hour.
[131]SCB (n 56) 129; Transcript of Proceedings 512.01–520.08.

In final address, counsel for Ms Priyanka made no substantive submissions in respect of the matter and said that he no longer pressed a claim of oppression in respect of the rate of $35 per hour[132] and while not ‘specifically withdrawing the point … wasn’t taking it any further’.[133]

E.3.2. Consideration
E.3.2.1. CCTV recording

[132]Transcript of Proceedings (19 April 2024) 604.11–604.13.

[133]Transcript of Proceedings (19 April 2024) 604.16–604.17.

For the following reasons, I am not prepared to infer that Ms Jain overpaid either herself or Mr Jain based on the absence of CCTV recordings at particular times, or Ms Priyanka’s suspicions concerning the fact that Ms Jain had replaced the CCTV system in August 2023 and disposed of the old system and its hard drives.

First, when the source data regarding Ms Jain’s hours of work is reviewed over a 60 week timeframe,[134] it is apparent that there are peaks and troughs in her working hours throughout the year that could equally be referable to seasonal changes (for example, higher sales during warmer weather) and variable staffing levels.
[134]CB (n 2) 368–72 contains source data from the week ending 2 October 2022 to the week ending 19 November 2023.

Secondly, if Ms Jain was artificially inflating her hours for the purpose of overpaying her wages, one would reasonably expect to see a more consistent pattern of elevated hours throughout the year which is not the case.

Thirdly, Ms Priyanka had been asking for the CCTV footage since December 2022.[135] Ms Jain was therefore on notice well before September 2023 that the CCTV footage may be viewed by Ms Priyanka. Even if this was the reason for the alleged destruction of the CCTV system, the system was replaced in August 2023. One would therefore expect to see a reduction in the hours worked from this point, however, the recorded hours increased from August through to September 2023, despite the installation of the new CCTV system.
[135]Transcript of Proceedings (10 April 2024) 378.26–379.15.

Finally, in closing submissions, counsel for Ms Priyanka did not submit the extent, in dollar terms, of any alleged overpayment based on the absence of CCTV recordings.

E.3.2.2. Comparison to other stores

I am not prepared to infer that Ms Jain overpaid herself or Mr Jain based on the comparison of labour costs between the Altona Store and other Boost Juice stores.

First, I am not satisfied that the other stores relied on by Ms Priyanka by way of comparison are a representative sample of Boost Juice stores operating in Victoria.

Secondly, no evidence was tendered regarding the age, size and particular location (other than suburb) of the other stores. The Franchisor generally requires the Franchisee to ensure that an owner is always working at the store for at least the first year of trade.[136] An owner would typically command higher wages than junior staff, which would naturally inflate the labour costs for newer stores. Without knowing the age of the stores in the sample, it is impossible to make a fair comparison with the Altona Store.
[136]CB (n 2) 185.

Thirdly, no evidence was tendered regarding the operating hours of the other stores. Operating hours directly impact labour costs, especially when considering penalty rates for evening and weekend work. Stores with longer operating hours or those open during periods that attract higher wages would naturally have higher labour costs relative to income. Without this context, any comparison of labour cost ratios is fundamentally flawed.

Finally, in closing submissions, counsel for Ms Priyanka did not submit the extent, in dollar terms, of any alleged overpayment based on the comparison of labour costs between the Altona Store and other Boost Juice stores.

E.3.2.3. 30 minute breaks

For the reasons set out earlier,[137] I do not accept Ms Jain’s evidence that she took no breaks while working in the Business. I am satisfied that Ms Jain’s reversal of her 30-minute breaks in the timekeeping system was an attempt to pay herself additional wages she felt entitled to, thereby reducing the profitability of the store.
[137]See paragraph 60 above.

I accept Ms Priyanka’s submission that, by this means, Ms Jain overpaid herself $5,180.[138]

E.3.2.4. Unrostered hours

[138]Plaintiff’s Closing Submissions (n 5) [43].

Given that Ms Jain was required by the Franchisor to be working in the store full time in January and February 2023, I do not accept her evidence that she did not roster herself during that time as she was not expecting to work, but that her plans later changed.[139] Accordingly, I find that in treating the hours she worked in the weeks ending 22 January 2023, 12 February 2023 and 26 February 2023 as unrostered, which attracted a multiplier, Ms Jain overpaid herself $2,044.81 (ignoring the pay for Saturdays when a multiplier would be applied in any event for weekend work).

E.3.2.5. Lump sum payment

[139]Defendant’s Closing Submissions (n 5) [13].

For the reasons set out earlier,[140] I do not consider that there was a proper basis for the annual lump sum payment of $7,350 Ms Jain paid herself.

E.3.2.6. $35 per hour flat rate

[140]See paragraphs 57–9 above.

As this claim was not pressed by Ms Priyanka in closing submissions or final address, I do not make any finding that Ms Jain engaged in oppressive conduct by paying herself a base rate of $35 per hour for the time she worked in the Business plus penalty rates for weekend shifts, public holidays or overtime.

Even if the claim of oppressive conduct had been pressed in relation to this matter, I note that Ms Jain’s letter of engagement[141] records that she will be paid weekly at a rate of $35 per hour and states ‘[y]ou may be entitled to penalty rates or shift loadings according to your award if you work …on a weekend, on a public holiday, late night or early morning shifts’.[142]
[141]CB (n 2) 334–6.
[142]CB (n 2) 335, cl 4.5, see also CB (n 2) 334, cl 2.1.

E.3.3. Conclusion

I am therefore satisfied that Ms Jain’s conduct in overpaying herself in respect of the 30 minute breaks, unrostered hours and lump sum payment was conduct in the affairs of the Company which constituted oppressive conduct under both s 232(d) and s 232(e). It was commercially unfair and contrary to the interests of members as a whole.

E.4.Did Ms Priyanka engage in oppressive conduct in failing to work full-time in the Business?

E.4.1. Parties’ submissions

Ms Priyanka agreed that it was originally intended that both she and Ms Jain would quit their respective jobs prior to the opening of the franchise store, and that both would work full-time in the store once it opened.[143] She submitted, however, that circumstances changed and it was later agreed that Ms Priyanka would continue to work full-time at ANZ Bank and would transition to part-time employment at a later stage.[144]
[143]Plaintiff’s Closing Submissions (n 5) [21].
[144]Plaintiff’s Closing Submissions (n 5) [21](a), [22].

Ms Priyanka submitted that in March 2022, in the course of seeking finance for the franchise business, a finance broker told Mr Jain that it would be easier to obtain a loan if both directors did not quit their employment to work full-time in a new business.[145] Mr Jain then suggested that Ms Priyanka should continue to work full time at the ANZ.[146]
[145]Plaintiff’s Closing Submissions (n 5) [21](a).
[146]Plaintiff’s Closing Submissions (n 5) [21](a).

Ms Priyanka submitted that even if her evidence is not accepted, and it is held that she changed the arrangement in relation to her employment, Ms Jain agreed to the change without protest. Accordingly, Ms Priyanka submitted that continuing in her full-time employment with ANZ Bank at the time the store opened did not constitute oppressive conduct against the Company as a whole, or against Ms Jain.[147]
[147]Plaintiff’s Closing Submissions (n 5) [56].

Ms Jain submitted that it was not until they were engaged in the Boost Juice franchise training from 22 August 2022 to 9 September 2022,[148] several weeks before the store was due to open, that Ms Priyanka first indicated her intention to continue in her role at the ANZ. Ms Jain submitted that Ms Priyanka had raised concerns about the profitability of the store and stated she would not work full-time in the store, but would instead work part time.[149] Ms Jain submitted that, at the meeting with Ms Gibson Cain from Boost on 13 September 2022, Ms Priyanka stated for the first time that she would not even work part-time when the store opened and would only commence working part-time at the Business from January 2023.[150]
[148]Transcript of Proceedings (10 April 2024) 306.13–306.18
[149]Ibid 306.26–309.16.
[150]Ibid 309.17–311.11.

Ms Jain submitted that Ms Priyanka’s own handwritten notes of a meeting at Pharaoh’s Café on 18 August 2022 record that both Ms Priyanka and Ms Jain would be managing and cleaning the store full-time.[151] She further submitted that Ms Priyanka’s reliance on the broker’s advice regarding the need for one partner to remain in their full-time employment was misplaced as no loan was ever taken up by the Company.[152]

E.4.2. Consideration

[151]Transcript of Proceedings (19 April 2024) 576.12–576.18.

[152]Defendant’s Closing Submissions (n 5) [22].

I accept that at the outset it was agreed that both parties would work full-time in the business. I also find that as circumstances changed it was later agreed that Ms Priyanka would continue to work full-time at ANZ Bank and would transition to part-time work at a later stage.

In a WhatsApp chat between Ms Priyanka and Mr Jain on 3 March 2022, Mr Jain said, ‘[the broker] said that if both directors will work after quitting then he won’t be able to do loan. Then I said that you will work for some time’.[153]
[153]PSCB (n 37) 22–3.

There is no objective contemporaneous evidence that Ms Jain took issue with Ms Priyanka continuing her employment at ANZ.

It is clear from Ms Gibson Cain’s email of 13 September 2022 that the expectation of the parties at that time was that Ms Jain would work full-time in the Business for the first six months of its operation and that Ms Priyanka would commence work in the business on a full-time basis for 3 weeks over December 2022 while on annual leave from ANZ and on a part-time basis from January 2023.[154]
[154]CB (n 2) 185.

Again, there is no objective contemporaneous evidence that Ms Jain took issue with the arrangements set out in Ms Gibson Cain’s email of 13 September 2022.

As described above, Ms Priyanka and her husband were overseas on a pre-arranged trip to India between 27 October 2022 and 3 December 2022. Although Ms Jain had initially asserted that Ms Priyanka’s overseas trip itself constituted oppressive conduct, that assertion was expressly abandoned during final submissions.[155]
[155]Defendant’s Closing Submissions (n 5) [25].

While Ms Priyanka was overseas, Ms Jain took steps to remove Ms Priyanka as a director and secretary of the Company and thereafter prevented Ms Priyanka from having any involvement in the management and operation of the Business.

In the circumstances, I do not accept that Ms Priyanka engaged in oppressive conduct in not working in the Business on a full-time basis from the outset. There was no commercial unfairness in the arrangement that the parties reached in September 2022. Ms Jain would receive wages for the time she worked in the business. Until Ms Priyanka commenced to work in the business she would not receive any wages.

As mentioned earlier, in assessing commercial unfairness it is also appropriate to consider the behaviour of the person making the allegation of oppression.[156] Ms Jain’s actions in removing Ms Priyanka as a director and secretary of the Company effectively prevented Ms Priyanka from commencing to work in the Business in December 2022 as had been agreed in September 2022.
[156]See paragraph 80 above.

Nor do I consider that in failing to work full-time in the Business Ms Priyanka engaged in conduct that was contrary to the interests of members as a whole. In the circumstances described above, it is not unreasonable for directors to agree on the hours that each of them would work in a newly established business.

E.5.Did Ms Priyanka engage in oppressive conduct in withdrawing $49,000 from the Company’s bank account?

E.5.1. Parties’ submissions

The parties agreed that, initially, each of them would contribute equally to the costs of establishing the Business.[157] When the ANZ loan did not proceed, the parties were required to source their own funds to make the necessary contributions. As Ms Jain was unable to fund her entire share, Ms Priyanka made up the shortfall.[158]
[157]Plaintiff’s Closing Submissions (n 5) [24], [57], [61]; Transcript of Proceedings (08 April 2024) 32.05–32.09, 56.29–57.02.
[158]Plaintiff’s Closing Submissions (n 5) [57].

Ms Priyanka submitted that, despite making promises to make up the shortfall or repay Ms Priyanka, Ms Jain never did so. Accordingly, on 10 November 2022, Ms Priyanka withdrew the sum of $49,000 from the Company’s bank account to repay her excess contribution and informed Ms Jain that she would do so by email on the same day.[159]
[159]Plaintiff’s Opening Submissions (n 2) [13].

Ms Jain submitted that the withdrawal was without notice and left the Company a cash balance of $1,354.90 at a time when the Company’s liabilities exceeded $20,000, thereby resulting in insolvency attributable to the Plaintiff’s actions.[160]
[160]Defendant’s Counterclaim (n 4) [7]; Defendant’s Opening Submissions (n 2) [20].

Ms Jain submitted that this withdrawal constituted a ‘Default Event’ under cl 17.7 of the Franchise Agreement.[161]
[161]Defendant’s Opening Submissions (n 2) [20].

Ms Priyanka submitted that Ms Jain had been on notice for many weeks that she needed to pay Ms Priyanka the shortfall of $51,000 as Ms Jain’s contribution to the Set Up Costs of the Business.[162] Further, Ms Priyanka submitted that the Company’s cash flow at the time was adequate to cover its liabilities.[163]

E.5.2. Consideration

[162]Plaintiff’s Reply (n 22) [7](b).

[163]Ibid [7](c).

A director or shareholder cannot unilaterally withdraw money from a company’s bank account. In unilaterally withdrawing $49,000 from the Company’s bank account, Ms Priyanka breached her duties as a director.[164] The question that arises is whether, in the circumstances, that also constituted oppressive conduct.
[164]Corporations Act 2001 (Cth) ss 181–3.

In Pacific Dairies, Sifris J drew a distinction between claims of oppression and claims of breach of fiduciary or statutory duties as follows:[165]

Finally, it is not without relevance to note that this is not a claim for breach of fiduciary or statutory duty or a derivative claim by members alleging such a claim. It is a claim alleging oppressive conduct and the Court is entitled to take all of the matters, facts and circumstances into account in determining first, whether there has been oppression and second, if there is oppression, what the appropriate remedy is.

[165]Pacific Dairies (n 87) [65].

Conduct may be oppressive within the meaning of s 232, without being unlawful or in breach of any fiduciary or other duty.[166] The operation of s 232 may be attracted to a decision made by directors which is made in good faith for a proper purpose within the directors’ power but which reasonable directors would think to be unfair.[167] As the Court of Appeal stated in Auswild, there is no inconsistency between a finding of commercial unfairness and a finding that the director complied with statutory duties, as ‘the tests to be applied under s 181 of the Act are very different from the test of commercial unfairness applied under s 232’.[168]
[166]Slea Pty Ltd v Connective Services Pty Ltd (No 9) [2022] VSC 136, [519] (Robson J) (‘Slea’), quoted in Renex (n 83) [94] (Matthews J); Gerrard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156, [49] (Barrett J).
[167]Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459, 472–3 (Brennan J) as quoted in Auswild (n 91) 140 [129] (Ferguson CJ, Kennedy JA and Garde AJA).
[168]Auswild (n 91) 142 [139] (Ferguson CJ, Kennedy JA and Garde AJA).

In Campbell v Backoffice, the appellant submitted that a distinction had to be drawn between ‘misfeasance on the part of a director and conduct constituting oppression’. In response, Basten JA said:[169]

The importance of the distinction may be accepted; it does not follow, however, that conduct which constitutes misfeasance on the part of a director may not also amount to oppression. …
Among the duties of a director of a corporation is the obligation to exercise powers in good faith in the best interests of the corporation and for a proper purpose: s 181. There is a duty not to exercise a power so as to cause detriment to the corporation: ss 182 and 183. It is likely that conduct in contravention of these provisions could also constitute conduct contrary to the interests of the members as a whole, within s 232(d). It is not tenable that there be a bright line separating cases involving misfeasance by directors from cases involving oppression.

[169]Campbell v Backoffice (n 95) 406 [213]–[214]. See also Re Imperium Projects Pty Ltd [2017] NSWSC 141, [26] (Black J) (‘conduct of the kind alleged in this case, including the diversion of assets or opportunities from a company to other entities, may be capable of being treated as oppression, although it may also constitute a breach of directors’ duties’) and the citations therein.

Similarly, in Re Dawning, Hetyey AsJ said:[170]

In assessing whether the ‘conduct of a company’s affairs’ is contrary to the interests of members as a whole, the conduct is to be assessed objectively, having regard to accepted standards of corporate behaviour and how reasonable directors would act in attending to the affairs of the company. Breaches of duty (whether statutory or fiduciary) by directors and officers may constitute conduct that is not in the best interests of members of the company as a whole.

[170]Re Dawning (n 83) 239–40 [33] citing Campbell v Backoffice (n 95) 406; Exton (n 83) 531–2. See also Australian Institute of Fitness (n 85) 380–1 [82]–[84] (Sackar J).

It will be recalled that sub-ss 232(d) and (e) are distinct grounds of relief. While conduct in breach of a director’s statutory or fiduciary duties may in some circumstances not be characterised as being ‘commercially unfair’ (in the context of sub-s 232(e)), it is difficult to conceive of a case where such conduct would not be contrary to the interests of the members as a whole (within sub-s 232(d)).

In circumstances where Ms Priyanka had advanced additional funds to the Company and repeatedly requested that Ms Jain repay those funds or otherwise make up the shortfall, it might be said that her conduct in withdrawing those additional funds was not commercially unfair. However, having regard to accepted standards of corporate behaviour and how reasonable directors would act in attending to the affairs of the Company, I consider that Ms Priyanka’s conduct in unilaterally withdrawing $49,000 from the Company’s bank account was conduct in the affairs of the Company which was contrary to the interests of members as a whole and therefore constituted oppressive conduct.

E.6.Summary

I am therefore satisfied that Ms Jain engaged in oppressive conduct in removing Ms Priyanka as a director and secretary of the Company thereby excluding her from the management of the Company’s affairs and in overpaying wages to herself on certain occasions. I am also satisfied that Ms Priyanka engaged in oppressive conduct in withdrawing $49,000 from the Company’s bank account.

F. APPROPRIATE RELIEF
F.1.Relevant principles

Having found that oppressive conduct has occurred, the Court’s jurisdiction to make appropriate orders pursuant to s 233 of the Corporations Act is enlivened. The Court has a broad discretion as to the relief which may be granted.[171] The purpose of any order under s 233 is to put an end to or terminate the effects of the oppression,[172] or to compensate the wronged party for any loss occasioned by that conduct.[173]
[171]Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304, 334 [72] (French CJ)
[172]Campbell v Backoffice (n 95) 386–7 [121] (Giles JA), 397–8 [172]–[173] (Basten JA), 430 [354]–[363] (Young CJ in Eq).
[173]KSG Investments Pty Ltd v Open Markets Group Ltd [2021] VSC 145, [278] (Nichols J) (‘KSG Investments’).

Although the Court has power under s 233(1)(a) to make an order that the Company be wound up, winding up is a remedy of last resort and one which ought not to be granted if some other less drastic form of relief is available and appropriate.[174]

F.2.Consideration

[174]Re Dalkeith Investments Pty Ltd (1984) 9 ACLR 247, 252 (McPherson J). See also Fexuto (n 93).

In this case, neither party seeks an order that the Company be wound up. Each party instead seeks an order that they purchase the other party’s interest in the shares of the Company on certain terms. Section 233(1)(d) empowers the Court to make an order for the purchase of any shares by a member of the company. As each of the parties jointly holds all of the shares in the Company it is inapposite to rely on s 233(1)(d) as any order made would not be for the purchase of shares but for the purchase of the other party’s 50% interest in shares. It is more appropriate therefore, to make an order pursuant to s 233(1)(j) requiring a person to do a specified act, namely to purchase the other party’s 50% interest in the shares in the Company.

G. WHICH PARTY SHOULD BUY THE OTHER OUT?
G.1.Relevant principles

In Renex, Matthews J considered what order was appropriate where both parties sought a buyout by one shareholder of the other but differed as to who should be the buyer. Dealing with s 233(1)(d), Matthews J noted that ‘[t]he object of the provision is that an oppressed shareholder is entitled to be released from a company and have its invested capital returned to it’[175] and ‘[c]onsistent with that objective, the usual position is that the oppressed shareholder, who is usually a minority shareholder, is to be bought out by the oppressor shareholder, who is usually the majority’.[176]
[175]Renex (n 83) [608], citing Fedorovitch v St Aubins Pty Ltd (No 2) (1999) 17 ACLC 1558, 1560 [8]–[10] (Young J) (‘Fedorovitch’).
[176]Renex (n 83) [608], citing Patterson v Humfrey (2014) 291 FLR 246, 255 [199] (Le Miere J); Fedorovitch (n 175) 1560 [8]–[10]. See also Re QB Foods Pty Limited [2021] NSWSC 1227, [139] (Black J) (‘QB Foods’).

Justice Matthews referred to the decision of Robson J in Slea,[177] where the minority oppressed shareholder sought orders that it buy out the majority oppressor shareholder, which the majority shareholder opposed. Justice Robson found that there had been oppressive conduct and made orders that the minority buy out the majority. While this result was reversed on appeal, Robson J’s statement of the principles and authorities was not the subject of any criticism by the Court of Appeal.[178]
[177]Slea (n 166).
[178]Millsave Holdings Pty Ltd v Connective Group Pty Ltd [2023] VSCA 326, [1025] (McLeish, Macaulay and Lyons JJA).

In Slea, Robson J said:[179]

A number of Australian and English authorities have adopted the approach that there is no special inhibition on the court’s power and, accordingly, a minority buy-out order can be made where it is appropriate in all the circumstances of a case. As expected, this has resulted in cases where both a minority buy-out order has been made, and where it has been rejected. Further, there are cases where an oppressed party has been permitted to buy out the oppressor where the shareholdings are equal.

[179]Slea (n 166) [1679].

Having comprehensively surveyed the authorities, Robson J said:[180]
[180]Ibid [1737] (citations omitted).

The following observations and principles can be distilled from these cases:
(a)The making of an order for the minority to buy out the majority has been variously described as ‘comparatively unusual’, ‘atypical’, or ‘unusual’. In other cases, the rarity or otherwise of such an order is not mentioned, even in ex parte Shooter, the first reported decision in which a minority buy-out order was made.
(b)The approach indicated by the cases is to determine whether the court’s discretion is sufficiently broad to accommodate an order for a minority buy out of the majority, and then to justify the direction of the buy-out on the basis of all the circumstances in the case and what the justice of the case requires.
(c)Although some cases refer to ‘repeated’ behaviour or a ‘pattern of … management’, there is no attempt to formulate a rule or otherwise define the circumstances in which a minority buy-out order might be made by reference to this factor.
(d)Minority buy-outs were ordered in cases where the majority was found to have acted without bad faith or dishonesty, as well as cases where it had acted dishonestly.
(e)Some cases contained express findings that the majority were unfit to continue running the company and, in others, the reasons strongly suggested that the majority were unfit. In no case, however, is there any attempt to formulate a rule or otherwise define the circumstances in which a minority buy-out order might be made by reference to this factor.
(f)The relevant oppressive conduct of the majority which contributed to a minority buy-out and, in some cases, a conclusion that the majority was unfit, was broad and varied across the cases, and included: repeated ignorance of company formalities; the majority treating the company as its own to the detriment of the minority; the exposure of the company to claims; conduct damaging to the company’s interests including frustrating further investment and delaying payments to creditors; and dishonesty. A cautious approach to comparing fact circumstances in oppression cases is necessary, as such comparisons might be helpful in identifying potentially relevant matters but not in laying down an absolute rule.
(g)In Re Brenfield, the possible triggering of the minority’s right to purchase the majority’s shares in accordance with pre-emption provisions was a relevant factor. …
(h)In three cases, the court expressly considered that the oppressor should not benefit from their conduct.
(i)Whether the majority (or oppressor) can afford to buy out the minority (or oppressed) interest can be relevant.

Justice Robson noted that where the majority’s financial capacity is in question, the majority will be given the first opportunity to buy out the minority, failing which the minority may buy out the majority.[181]
[181]Slea (n 166) [1737](i) n 481, citing Patterson v Humfrey (2014) 291 FLR 246, [203]–[204].

Justice Robson concluded his analysis by saying:[182]

In my view, it is apparent that the approach to be adopted is for the Court to direct its attention to granting relief that is appropriate and would best remedy the oppression found in all the circumstances of the particular case. The suggestion that there is a judge-made test which needs to be satisfied before a minority buy-out order can be made should be rejected.

G.1.1. Parties’ submissions

[182]Slea (n 166) [1747].

Ms Priyanka submitted that the appropriate order was that she purchase Ms Jain’s interest in the shares in the Company for the following reasons:

(a) The question of who has engaged in oppressive conduct should inform the decision. If Ms Priyanka is held not to have engaged in oppressive conduct, or if Ms Priyanka’s oppressive conduct has passed, whilst Ms Jain is held to have engaged in oppressive conduct, then the Court should order Ms Jain to sell her shares to Ms Priyanka. The alternative would see Ms Jain benefit from her improper conduct.

(b) If both parties are held to have engaged in oppressive conduct then the court should weigh the relative conduct of each party. The factors to be taken into account include:

(i) the historical nature of Ms Priyanka’s conduct;

(ii) the ongoing nature of Ms Jain’s conduct;

(iii) the reasonably minor and transitory nature of Ms Priyanka’s conduct compared to the significant and ongoing nature of Ms Jain’s conduct;

(iv) the financial capacity of each party to buy the other out. Ms Priyanka gave evidence that she has arranged finance which will be sufficient to purchase Ms Jain’s interest in the shares based on the valuation[183] and that she stands ready to cease working at ANZ Bank to commit herself full time to the franchise store. Ms Priyanka further submits that Ms Jain has not demonstrated her financial ability to purchase Ms Priyanka’s interest in the shares.

(c) The fact that Ms Jain has operated, and continues to operate, the Business should have no bearing on the decision as to who purchases whose shares. On 14 September 2023, in response to an application for orders that a manager be employed at the Altona Store in place of Ms Jain, Ms Jain gave an undertaking that she would not rely on her ongoing operation and management of the Business as a basis for the Court exercising its discretion in her favour.

(d) Ms Priyanka has not delayed in attempts to resolve the dispute. In circumstances where she has acted promptly to bring the matter to hearing, the fact that Ms Jain has been able to operate the store for some 18 months whilst the matter has awaited an available trial date should not tell against Ms Priyanka.

[183]CB (n 2) 458–62.

Ms Jain submitted that the appropriate order was that she purchase Ms Priyanka’s interest in the shares in the Company for the following reasons:

(a) Ms Priyanka engaged in oppressive conduct in unilaterally withdrawing $49,000 from the Company;

(b) the removal of Ms Priyanka as a director was a reaction to Ms Priyanka’s oppressive conduct and was justified;

(c) Ms Jain has always been the most dedicated of the two to the Company and the Business and committed herself to working at the Altona Store full-time from the outset while Ms Priyanka was committed to her ANZ job;

(d) Ms Jain tried on many occasions to resolve issues between the parties but Ms Priyanka was unresponsive; and

(e) Ms Jain has the financial ability to purchase Ms Priyanka’s interest in the shares in the Company.

G.1.2. Consideration

Both parties have engaged in oppressive conduct. I accept that Ms Jain’s conduct in removing Ms Priyanka as a director and secretary and excluding her from management is ongoing. I also accept that Ms Jain’s conduct in overpaying herself to the extent I have found is a significant matter. I do not accept that Ms Priyanka’s oppressive conduct in unilaterally withdrawing $49,000 from the Company’s account can be characterised as reasonably minor and transitory in nature. However, weighing the relative conduct of the parties I consider that Ms Jain’s oppressive conduct is more serious and far reaching.

Notwithstanding Ms Jain’s undertaking that she would not rely on her incumbency in operating the Business for more than 18 months, I cannot ignore the fact that for almost all of the time that the Company has been in existence Ms Jain has been the person managing the Business.[184] It would therefore be less disruptive to the continued operation of the Business if Ms Jain continued to operate and manage it. She has demonstrated that she has the operational knowledge and experience to do so.
[184]At the date of judgment Ms Jain has been operating and managing the Business for almost 2 years.

Requiring Ms Jain, whose oppressive conduct I regard as more serious and far reaching than Ms Priyanka’s, to acquire Ms Priyanka’s interest in the shares in the Company for a fair price is consistent with the usual practice that the oppressed shareholder be bought out by the oppressor shareholder.[185]
[185]Renex (n 83) [609], citing Patterson v Humfrey (2014) 291 FLR 246, 255 [199]; Fedorovitch (n 175) 1560 [8]–[10]; QB Foods (n 176) [139] (Black J).

This will enable Ms Priyanka to recover the capital she contributed to the Company and obtain a fair price for her interest in the shares. Allowing her to exit the Company by selling her shares to Ms Jain will effectively remedy the oppression she has experienced.

I do not consider that this will enable Ms Jain to benefit from her oppressive conduct in any meaningful way as she will be required to pay a fair price for Ms Priyanka’s interest in the shares, taking into account the parties’ respective contributions to the capital of the Business and the amounts I have found Ms Jain overpaid herself.

I therefore propose to order that Ms Jain purchase Ms Priyanka’s interest in the shares for a fair price, taking into account the parties’ respective contributions to the capital of the Business and the amounts I have found Ms Jain overpaid herself.

Ms Priyanka has raised doubts about Ms Jain’s financial capacity to purchase Ms Priyanka’s interest in the shares. Ms Jain disputes this. If Ms Jain fails to purchase Ms Priyanka’s interest in the shares within 30 days of the Court’s order then Ms Priyanka will have the opportunity to purchase Ms Jain’s interest in the shares within 60 days of the Court’s order. If neither party purchases the other’s interest in the shares within the time provided, then the Company will be wound up.

H. VALUATION AND PRICE
H.1.Relevant principles

The role of the Court is to arrive at a fair price to be paid for the shares. It is not required to adopt traditional valuation concepts and methods. As the Full Court of the Federal Court of Australia held in Smith Martis Cork & Rajan v Benjamin Corporation, ‘the purpose of an order that the oppressor purchase the shares at a fair price is to compensate the oppressed shareholder for the oppression which has taken place’.[186]
[186]Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd (2004) 207 ALR 136, 146, citing Shirim Pty Ltd v Fesena Pty Ltd [2002] NSWSC 10, [12] (Davies JA), quoting Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324, 369 (Lord Denning); [1958] 3 All ER 66; [1958] 3 WLR 404 (‘Scottish Co-operative v Meyer’). See also KSG Investments (n 173) [279]–[280].

For that reason, the price to be paid may not reflect the real worth of the shares and will usually take into account various adjustments to remove the effect of the oppression.[187]
[187]Renex (n 83) [732], quoting Wain v Drapac(No 2) [2013] VSC 381, [39].

While there is no definitive rule as to the appropriate date for determining the value of shares for the purposes of setting a price for a purchase under s 233(1)(d),[188] the commencement date of the proceeding is regularly used for the valuation of shares in oppression proceedings.[189]

H.2.Parties’ submissions

[188]Foody v Horewood (2007) 62 ACSR 576, 589–90 [36]–[37] (Chernov JA, Ashley JA agreeing at [75], Neave JA agreeing at [98]) (‘Foody v Horewood’), citing with approval Re London School of Electronics Ltd [1986] Ch 211, 224 (Nourse J); Scottish Co-operative v Meyer (n 186).

[189]Renex (n 83) [647]. See, eg, Joint v Stephens [2008] VSCA 210, [155] (Nettle, Ashley and Neave JJA), citing with approval Scottish Co-operative v Meyer (n 186) 364 (Lord Keith), 369 (Lord Denning); Foody v Horewood (n 188) [34]–[37] (Chernov JA, Ashley JA agreeing at [75], Neave JA agreeing at [98]).

The parties both rely on a joint valuation obtained pursuant to the Court’s order on 30 March 2023. The valuation dated 5 July 2023 was prepared by Benchmark Business Sales and Valuations. It values the 1000 shares in the Company as at 31 May 2023 at $60,775, being $30,387.50 for each party’s 50% interest in the shares plus each party’s respective loan account reflecting their capital contribution.

Both parties agree that Ms Priyanka contributed $181,608 to the Company.[190]
[190]Plaintiff’s Points of Claim (n 5) [10](a); Defendant’s Points of Defence (n 3) [10](b).

There is disagreement however, as to how much Ms Jain contributed.

Ms Priyanka submits that Ms Jain contributed $130,609 to the Company.

Ms Jain initially submitted that her contributions totalled $144,421, the additional $13,812 comprising of the following amounts:

Boost Franchise application fee

$2,200.00

ASIC company registration fee

$512.00

Share Capital contributions

$10,000.00

Stationery

$300.00

Laptop and tablet

$800.00

In her closing submissions, however, Ms Jain abandoned her claim that she had contributed $10,000 in respect of share capital.

Ms Priyanka accepts that Ms Jain made all of the other contributions (excluding the $10,0000 share capital contribution) but submits that they ought be excluded from consideration because they are payments made directly by Ms Jain to third parties rather than the Company. Ms Priyanka further submitted that if the expenses have been validly incurred then Ms Jain would be entitled to be reimbursed by the Company, but they do not constitute capital contributions. In addition, there is no evidence as to whether Ms Jain has already been reimbursed by the Company.

H.3.Consideration

I am satisfied that 31 May 2023 is an appropriate valuation date. It is reasonably close to the date on which the proceeding commenced. It would be unnecessarily costly and time consuming to prepare a further valuation.

Regarding the parties’ capital contributions, I accept Ms Priyanka’s submissions in this regard and propose to have regard only to those capital contributions made by the parties as payments deposited in the Company’s bank account.

In view of Ms Priyanka’s withdrawal of $49,000 from the Company’s account, the amount of her contribution is $132,608. The amount of Ms Jain’s contribution is $130,609.

To ensure that the price to be paid for Ms Priyanka’s 50% interest in the shares in the Company sufficiently compensates her in respect of Ms Jain’s oppressive conduct, it is necessary to make some adjustments to the price.

As I have found that Ms Jain engaged in oppressive conduct in wrongfully causing the Company to make certain overpayments to herself, it is necessary to adjust the price to be paid for Ms Priyanka’s 50% interest in the shares in the Company to remove the effect of the oppression.

As set out above I have found that Ms Jain caused the Company to make the following overpayments to herself:

(a)       30 minute breaks

$5,180

(b)       unrostered hours

$2,044.81

(c)       lump sum payment

$7,350

$14,574.81

As Ms Priyanka and Ms Jain are joint shareholders in the Company this means that half that amount ($7,287.40) should be included in the price to be paid by Ms Jain for Ms Priyanka’s 50% interest in the shares in the Company.

In summary, Ms Jain will be required to pay Ms Priyanka a total sum of $170,282.90 comprising $30,387.50 for Ms Priyanka’s 50% interest in the shares, $132,608 for Ms Priyanka’s capital contribution and $7,287.40 representing half the sum of $14,574.81 which Ms Jain caused the Company to overpay herself.

If Ms Jain fails within 30 days of the Court’s order to pay that sum to Ms Priyanka, then Ms Priyanka will have a further 30 days to purchase Ms Jain’s 50% interest in the shares. Ms Priyanka will be required to pay Ms Jain a total sum of $153,709.10 comprising $30,387.50 for Ms Jain’s 50% interest in the shares, $130,609 for Ms Jain’s capital contribution less $7,287.40 representing half the sum of $14,574.81 which Ms Jain caused the Company to overpay herself.

I. CONCLUSION AND ORDERS

For the reasons set out above I have concluded that:

(a) Ms Jain engaged in oppressive conduct in removing Ms Priyanka as a director and secretary of the Company thereby excluding her from the management of the Company’s affairs, and in overpaying wages to herself. I am also satisfied that Ms Priyanka engaged in oppressive conduct in withdrawing $49,000 from the Company’s bank account.

(b) The appropriate remedy is a buyout by one party of the other party’s 50% interest in the shares in the Company.

(c) In the circumstances of this case, Ms Jain will be required within 30 days of the Court’s order to pay Ms Priyanka a total sum of $170,282.90 comprising $30,387.50 for Ms Priyanka’s 50% interest in the shares, $132,608 for Ms Priyanka’s capital contribution and $7,287.40 representing half the sum of $14,574.81 which Ms Jain caused the Company to overpay herself.

(d) If Ms Jain fails within 30 days of the Court’s order to pay the sum of $170,282.90 to Ms Priyanka, then Ms Priyanka will have a further 30 days to purchase Ms Jain’s 50% interest in the shares for a total sum of $153,709.10 comprising $30,387.50 for Ms Jain’s 50% interest in the shares, $130,609 for Ms Jain’s capital contribution less $7,287.40 representing half the sum of $14,574.81 which Ms Jain caused the Company to overpay herself.

(e) If Ms Jain fails within 30 days of the Court’s order to pay the sum of $170,282.90 to Ms Priyanka and Ms Priyanka fails within a further 30 days to pay the sum of $153,709.10 to Ms Jain, then the order will provide that the Company will be wound up.

I will hear the parties as to the appropriate form of order and as to costs.

---

Boost Franchise application fee	$2,200.00
ASIC company registration fee	$512.00
Share Capital contributions	$10,000.00
Stationery	$300.00
Laptop and tablet	$800.00

(a) 30 minute breaks	$5,180
(b) unrostered hours	$2,044.81
(c) lump sum payment	$7,350
$14,574.81

[2024] VSC 529

30 August 2024