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Salter v Gilbertson

Salter v Gilbertson

Case [2003] VSCA 1 18 February 2003

Contract Formation

Breach of Contract

Unconscionable Conduct

Corporate Law & Governance

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

No.7074 of 2000

JOY SALTER & ORS.
	Appellants
v.
GEORGE GILBERTSON & ORS.	Respondents

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JUDGES:	WINNEKE, P., PHILLIPS and BATT, JJ.A.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	21 October 2002
DATE OF JUDGMENT:	18 February 2003
MEDIUM NEUTRAL CITATION:	[2003] VSCA 1

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Corporations – Vendor and purchaser – Sale of shares by minority shareholders to majority – Contract providing for sale to and purchase by majority shareholders “and/or nominee” – Purported nomination of company itself and proposal for company to enter buy-back agreement with minority shareholders – Whether nomination of company effective to substitute the company as purchaser under the contract – Whether nomination effective at all - Corporations Law Part 2J.1 Div.2, ss.257A-257H.

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APPEARANCES:	Counsel	Solicitors
For the Appellants	Mr. P.W. Almond Q.C. with Mr. S. Steward	Fitzpatrick Teale
For the Respondents	Mr. F.X. Costigan Q.C. with Mr. J.D. Loewenstein	Rigby Cooke

WINNEKE, P.:

For the reasons given by Phillips, J.A., I agree that this appeal should be allowed.

PHILLIPS, J.A.:

This is an unfortunate dispute between members of an extended family. The first appellant is sister to the first respondent and all of the parties are related by blood or by marriage. All are, or were, shareholders in the company George Raymond Pty. Ltd. (“the company”). The present proceeding stems from earlier litigation in which the present appellants, as minority shareholders in the company, sued the present respondents, the majority shareholders, alleging oppression in the conduct of the affairs of the company and seeking orders, inter alia, that the shares of the minority be purchased by the first respondent, George Robert Gilbertson, by the other shareholders in the company or by the company. The trial judge found in favour of the applicants and then stood the matter over to see if the parties could reach agreement on the orders to be made. Negotiations followed and on 14 April 2000 terms of settlement were signed, which included, by clause 9, agreement to execute upon request a formal deed of release embodying the terms of settlement. Such a deed was executed and parts exchanged on 21 June 2000. The deed, the clauses of which replicated all the clauses of the terms of settlement save clause 9, was backdated to 14 April 2000. This proceeding concerns the interpretation of that deed.

The appeal is, in essence, over a short point. Clause 1 of the deed (in which the majority shareholders were referred to as the respondents and the minority shareholders as the applicants) read as follows:-

“The respondents agree to purchase and the applicants agree to sell the shares [i.e., the shares of the applicants] to the respondents and/or their nominees for the sum of $3,650,000.00 payable in the following instalments....”

Nine instalments totalling $3.65 million were then listed, and the dates on which they were to be paid. The first, of $50,000.00, was payable on 30 June 2000; the next, of $125,000.00, on 30 September 2000 and the last, of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Salter v Gilbertson

Details

AGLC: Salter v Gilbertson [2003] VSCA 1
Case: [2003] VSCA 1
Decision Date: 18 February 2003

CaseChat Overview and Summary

In the case of Salter v Gilbertson, the dispute arose from the sale of shares in a company by minority shareholders to majority shareholders. The sale agreement stipulated that the shares would be sold to the majority shareholders or their nominee. The minority shareholders attempted to nominate the company itself as their nominee and proposed that the company enter into a buy-back agreement with them. The court was required to determine whether the nomination of the company was effective and whether it could substitute the company as the purchaser under the contract. Additionally, the court had to consider whether the nomination of the company was effective at all in light of the Corporations Law Part 2J.1 Div.2, ss.257A-257H.

The court's analysis focused on the interpretation of the share sale agreement and the legal implications of nominating a company as a nominee. It examined whether the nomination clause allowed for the substitution of the company as the purchaser and if such a nomination was permissible under the Corporations Law. The court also considered whether the proposed buy-back agreement between the company and the minority shareholders complied with the relevant provisions of the Corporations Law.

Ultimately, the court found that the nomination of the company itself as the nominee was not effective. The court held that the nomination clause did not permit the substitution of the company as the purchaser and that such a nomination was impermissible under the Corporations Law. Consequently, the proposed buy-back agreement between the company and the minority shareholders was also deemed invalid. The court's decision was grounded in the strict interpretation of the share sale agreement and the statutory provisions governing the sale of shares in a company.

The final orders of the court affirmed that the nomination of the company as a nominee was ineffective, and the proposed buy-back agreement was invalid. The court ruled that the minority shareholders were required to sell their shares directly to the majority shareholders or their nominee, as stipulated in the original share sale agreement. The decision underscored the importance of clear and precise contractual language in share sale agreements and the limitations imposed by the Corporations Law on the nomination of a company as a nominee.

Orders