JUDGE:	FERGUSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	2- 4, 9-13, 16-18 May, 20-23, 27 June, 3, 4, 9 August 2011
DATE OF JUDGMENT:	26 April 2012
CASE MAY BE CITED AS:	Wain & Ors v Drapac & Ors
MEDIUM NEUTRAL CITATION:	[2012] VSC 156

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EQUITY – Beneficial ownership of shares in companies and units in trusts – Employees holding copy share and unit certificates - Whether copy share and unit certificates held as an escrow – Whether resulting trust

CORPORATIONS – Oppression – termination of employment and removal as director – Conduct of director in relation to loan by related company – Plan to dilute shareholders’ interests – No reasonable offer to purchase – Whether orders for purchase of shares and units at fair value should be made - Corporations Act 2001 (Cth) ss 53, 232, 233

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr I.G. Waller SC with Mr H.L. Redd	Isakow Lawyers
For the Defendants	Mr P.B. Murdoch QC with Dr A.P. Trichardt	B2B Lawyers

TABLE OF CONTENTS

Introduction......................................................................................................................................... 2

Observations about the main witnesses........................................................................................ 5

Mr Michael Drapac....................................................................................................................... 5

Ms Melissa Weston (formerly Lazzaro)..................................................................................... 5

Mr Wain.......................................................................................................................................... 6

Mr Murchie.................................................................................................................................... 6

Mr Mercuri..................................................................................................................................... 7

Are Mr Wain and Mr Murchie beneficially entitled to the shares and units that they hold?..... 7

Has there been oppression?........................................................................................................... 46

Termination of Mr Wain’s employment.................................................................................. 46

1-13 Cobden Street, South Melbourne..................................................................................... 47
High Street, Kew...................................................................................................................... 51
36, 36a and 38 Church Street, Hawthorn................................................................................ 57
Fortitude Valley, Brisbane........................................................................................................ 58
Events leading to the termination of Mr Wain’s employment.................................................. 60
Conduct in relation to Le Boulevard........................................................................................ 66

Removal of Mr Wain as a director............................................................................................ 79

Resignation of Adam Murchie.................................................................................................. 81

Copy of the server....................................................................................................................... 82

Conclusion in relation to oppression....................................................................................... 84

What is the appropriate relief?....................................................................................................... 89

Did Mr Wain and Mr Murchie breach their employment agreements or duties as directors? 95

Conclusion......................................................................................................................................... 96

Schedule – The Drapac Group...................................................................................................... 97

HER HONOUR:

Introduction

Michael Drapac has been a successful businessman.[1] With the assistance of his staff, he has built a profitable property development and investment business over a period of more than two decades through a number of companies and trusts that he controlled (“the Drapac Group”). A list of the Drapac Group companies and trusts is attached to these reasons.
[1]Mr Drapac is the first defendant and a plaintiff by counterclaim. The other defendants and plaintiffs by counterclaim are companies controlled by Mr Drapac.

Over time, Mr Drapac has employed a number of young people in the business. Two such employees were Ashley Wain and Adam Murchie.[2] In a two year period from July 2004 to July 2006, Mr Wain and Mr Murchie (either directly or through companies that they control) were issued with shares…

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 Wain v Drapac

Details

AGLC: Wain v Drapac [2012] VSC 156
Case: [2012] VSC 156
Decision Date: 26 April 2012

CaseChat Overview and Summary

The case of Wain v Drapac involved the respondents, who were employees of the appellant, holding copy share and unit certificates in various companies and trusts. The dispute centered around whether these certificates constituted an escrow and if a resulting trust applied. Additionally, the case examined whether the respondents' termination and removal as directors constituted oppression under the Corporations Act 2001 (Cth), particularly concerning the conduct of the appellant in relation to loans from related companies and plans to dilute shareholders' interests. The court also considered if the respondents were entitled to an order for the purchase of their shares and units at fair value.

The legal issues the court needed to address included determining the nature of the respondents' holding of the copy share and unit certificates, whether these certificates were held as an escrow or if a resulting trust existed, and whether the appellant's conduct amounted to oppression under the Corporations Act 2001 (Cth). The court had to consider the respondents' entitlement to an order for the purchase of their shares and units at fair value, and whether the appellant's actions warranted such an order.

In its reasoning, the court held that the copy share and unit certificates were not held as an escrow, nor did they establish a resulting trust. The respondents held the certificates as beneficial owners. Regarding oppression, the court found that the appellant's conduct, including the termination of the respondents' employment and removal as directors, did constitute oppressive conduct under the Corporations Act 2001 (Cth). The court also concluded that the respondents were entitled to an order for the purchase of their shares and units at fair value, as there was no reasonable offer to purchase made by the appellant.

The final orders of the court required the appellant to purchase the respondents' shares and units at fair value, reflecting the court's findings of oppression and the respondents' entitlement to compensation. The specific terms of the purchase, including the fair value determination, were to be resolved by the parties or through further court proceedings as necessary.

Orders