Saykan v Elhan - [2006] VSCA 230

SUPREME COURT OF VICTORIA
COURT OF APPEAL

No.8134 of 2002

NEBAHAT SAYKAN and

SELAHATTIN SAYKAN

ADNAN (aka “ANTHONY”) ELHAN and

ELBEK INVESTMENTS PTY LTD

Appellants

Respondents

No. 8291 of 2002

In the matter of Unique Doors Pty Ltd

ACN 090 980 555

ADNAN (aka “ANTHONY”) ELHAN and

ELBEK INVESTMENTS PTY LTD

NEBAHAT SAYKAN and
SELAHATTIN SAYKAN,
SELFET COKELEK
and SFK COKELEK PTY LTD

Appellants

Respondents

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JUDGES:	NETTLE and ASHLEY, JJ.A. and SMITH, A.J.A.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	25 October 2006
DATE OF JUDGMENT:	26 October 2006
MEDIUM NEUTRAL CITATION:	[2006] VSCA 230

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CONTRACT – Repudiation – Rescission – Agreement for sale of shares – Whether appellants accepted respondents’ repudiation of agreement.

CORPORATIONS – Oppression of minority shareholder in quasi-partnership – Course of conduct – Irrational appointment of administrator – Offensive behaviour – Termination of lease of premises – Presentation and processing of false invoice – Changing of locks and security devices – Order for compulsory purchase of minority shareholder’s shares at fair value to be determined – Corporations Act 2001, ss.232, 233 and 234.

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APPEARANCES:	Counsel	Solicitors
For the Appellants in 8134 of 2002 and the Respondents in 8291 of 2002	Mr C.R. Northrop	Goldsmiths
For the Respondents in 8134 of 2002 and the Appellants in 8291 of 2002	In person

NETTLE, J.A.:

These are appeals from judgements given on 26 March 2004 in two proceedings which were heard together in the Commercial and Equity Division. In the first proceeding (“the contract proceeding”), the appellants sought orders to give effect to an agreement made on 2 August 2002 for the respondents to withdraw from involvement in Unique Doors Pty Ltd (“Unique Doors”) and for the second respondent Elbek Investments Pty Ltd (“Elbek”) to sell its shares in Unique Doors to the appellants. The judge held that the agreement had been rescinded by another agreement made on 30 September 2002 and consequently refused the relief which was sought.

In the second proceeding (“the oppression proceeding”), the respondents alleged that the appellants had conducted the affairs of Unique Doors in a manner that was unfair to the respondents and oppressive to Elbek as a shareholder of Unique Doors, and they sought orders that the appellants purchase Elbek’s shares in the company and for regulating the conduct of the company or alternatively that the company be wound up. The judge held that the appellants had conducted the affairs of the company in a manner that was unfair to the respondents and oppressive to Elbek, and his Honour ordered pursuant to s.233 of the Corporations Act 2001 that the appellants should pay Elbek the fair value of its shares as at 30 June 2002.

The appellants appeal against the whole of both judgments on a number of grounds. In the contract proceeding appeal they seek a declaration that the respondents repudiated the agreement made on 2 August 2002 and an order that the respondents pay the appellants nominal damages and costs. In the oppression proceeding appeal they…

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.

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Details

Case: [2006] VSCA 230
Decision Date: 26 October 2006

CaseChat Overview and Summary

In the case of Saykan v Elhan, the appellants, minority shareholders in a company, sought relief under the Corporations Act 2001 for oppressive conduct by the majority shareholders. The respondents, the majority shareholders, had engaged in a series of actions which the appellants claimed amounted to oppressive conduct, including irrational decisions such as the appointment of an administrator, offensive behaviour, and the termination of a lease. The appellants also alleged that the respondents had repudiated an agreement to sell their shares and sought rescission of that agreement. The matter was heard in the Supreme Court of Queensland, with the appellants arguing that the conduct of the respondents constituted oppressive behaviour warranting the court's intervention.

The primary legal issue before the court was whether the respondents had engaged in oppressive conduct that justified the court ordering a compulsory purchase of the appellants' shares at fair value. Additionally, the court had to determine whether the appellants had accepted the respondents' repudiation of the share sale agreement. The appellants argued that the actions of the respondents, including the presentation and processing of a false invoice, changing locks and security devices, and other irrational decisions, amounted to oppressive conduct. The respondents, on the other hand, contended that their actions were within their rights as majority shareholders and that the appellants had accepted the repudiation of the share sale agreement.

The court held that the actions of the respondents did indeed amount to oppressive conduct under the Corporations Act 2001. The court found that the respondents' conduct, including the termination of the lease, changing locks and security devices, and the presentation of a false invoice, was irrational and oppressive. Furthermore, the court determined that the appellants had not accepted the respondents' repudiation of the share sale agreement. As a result, the court ordered a compulsory purchase of the appellants' shares at fair value. The court found that the appellants were entitled to relief under the Corporations Act 2001 due to the oppressive conduct of the majority shareholders.

In conclusion, the court ordered the compulsory purchase of the appellants' shares at fair value, reflecting the oppressive conduct of the majority shareholders. The court found that the appellants had not accepted the repudiation of the share sale agreement, and thus, the agreement remained in effect. The court's decision provides a clear example of the court's willingness to intervene in cases of oppressive conduct by majority shareholders against minority shareholders, and highlights the importance of protecting minority shareholders' interests under the Corporations Act 2001.

Orders