In Crossman v Taylor (No 3) [2011] FCA 734, the plaintiff entered into a joint venture with her fiancé for the acquisition and operation of a marina for houseboats.  The plaintiff brought proceedings against her fiancé following the breakdown of their relationship claiming equalisation of contributions made to the joint venture.

One relevant issue was whether the ex-fiancé's failure to make equal contributions to the joint venture in accordance with statements made before establishing the joint venture amounted to oppressive conduct.  Section 232 of the Corporations Act 2001 (Cth) allows the court to grant remedies if the conduct of a company's affairs was oppressive to a member of the company.  Besanko J noted that an understanding between the parties prior to the incorporation of a company may be relevant to an aspect of the conduct of a company's affairs after incorporation.  However, the mere failure to meet an understanding about contributions was not part of the "conduct of a company's affairs" within the meaning of s 232.

Besanko J further noted that, even if the failure to meet the understanding can be regarded as being in "the conduct of a company's affairs", it could not lead to an order for the payment of a sum of money by one party to the other.  He emphasised that an order on the ground of oppressive conduct requires a direct link between the alleged oppressive conduct and compensation or damages claimed.  An order for such payment would not improve the joint venture company's financial position or affect it in any way.  He noted that other forms of relief might be available, such as the sale of the company's business, winding up of the company or purchase of the plaintiff's shares.

The plaintiff was granted remedies on the grounds of misleading or deceptive conduct, but did not succeed in the oppressive conduct claims.

When negotiating terms prior to the incorporation of a company, parties should clearly set out the intended contributions and other obligations of each party in a shareholders agreement, as they may not be able to rely on an oppression remedy, if expectations are not met.

See case.