This case concerned proceedings brought by Mr Frank Grego, a shareholder of Jimmi Dexta Pty Ltd (Jimmi Dexta), against the company's other shareholders, alleging oppressive conduct under s232 of the Corporations Act 2001 (Cth).
In finding for Mr Grego, Ferguson J held that there had been several instances of oppressive conduct, including:
- a demand made by the shareholders that Mr Grego pay $160,000 into the company or face removal as a shareholder and director. Her Honour held that this was an unreasonable demand in circumstances where it had been agreed that Mr Grego would not contribute money to the company, but instead provide financial expertise.
- the improper exclusion of Mr Grego from participating in Jimmi Dexta's management. Her Honour noted that although it was within the shareholders' power to terminate Mr Grego's employment and remove him as director, this conduct was oppressive given that the company operated on the basis that each of the shareholders would play an active role in its management.
- the failure to make Mr Grego a reasonable offer for his shares. Her Honour held that it was oppressive for the shareholders to value Mr Grego's shares at nil, especially given that Mr Grego had previously received an offer of over $32,000 for his shares. Further it was no defence that their offer, if accepted, would likely mean that Mr Grego would be released from a guarantee that he had given in his capacity as a shareholder.
- the incorporation of a new company, JD Brands Pty Ltd, which the other shareholders used to divert the assets of the Company. Her Honour held that this was oppressive conduct, even if those assets had minimal value.
- the shareholders' refusal, after proceedings had been commenced, to honour the company's financial obligations towards Mr Grego in relation to the payment of expenses incurred in his capacity as an employee.
- the incorrect characterisation of certain payments made by the other shareholders as loans. Her Honour considered that, given that there was no documentation or discussion as to interest or repayment terms, these transactions should have been characterised instead as capital. The incorrect characterisation was oppressive because it had the effect of diminishing the value of the company and therefore prejudicing Mr Grego's interests.
This case provides a clear example of conduct which the Court will find oppressive. While separate instances of conduct may not be held to be oppressive, the totality of the circumstances may result in oppressive conduct being established.