Show Notes
“You changed the business I sold you so you could underpay me!”
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By deed P sold their shares in an online retail business to D.P was to receive $20M, some shares in D, and the Earn Out Amount (“EOM”): [3]
According to the deed, the EOM was the Base EOM of $10M plus the Additional EOM: [6]
The Additional EOM was the rounded difference between the Base EOM (I.e. $10M) and “Earnings”: [7]
“Earnings” meant EBITDA over the relevant year. The deed contained a mechanism for D send a proposed Earnings calculation (as part of a P and L), for P to make a reply including setting out “Contested Matters”, for the parties to negotiate the contested matters in good faith, and for the matter to be referred to an expert if negotiations failed: [10] - [14]
D sent a P and L suggesting Earnings were ~$6M (making the Additional EOM zero): [16]
P sent a reply calculating Earnings at ~$15M (taking the Additional EOM to its maximum possible figure) and raising Contested Matters: [17]
Following unsuccessful good faith negotiations, the matter was referred to an expert: [18]
How was the expert to calculate Earnings?: [19]
Cll 2.1 and 2.2 of the deed required Earnings to be calc’d disregarding revenues or expenses not part of the Co’s ordinary business including: costs relating to the share sale, restructure costs, certain related party transactions, and the costs of kicking off any new business: [21]
Cl 2.3 of the deed noted the parties’ agreement that Earnings were to be calc’d as if the Co’s business were run the same way post-purchase as it had been pre-purchase; and that D would not make big changes to the Co’s business (or, if D did make big changes, the EOM would be normalised to exclude those changes’ impact): [21]
P sued, seeking declarations that the expert determine Earnings in accordance with all of the above. D resisted: [25] - [27]
The Court found for the P: [28]
The well-known principles regarding contractual interpretation were (respectfully) helpfully restated at [29] - [33]
The Court noted the parties’ explicit agreement on the mandatory language in Cl 2.3; that Earnings *must* be calculated that way: [48] - [50]
The proper construction was found to be on that basis: [54]
P’s pressed for their Contested Matters to be referred to the expert.P said Earnings had to be adjusted due to D failing to implement a new website, leading to lower website traffic. The Court accepted this Contested Matter was appropriately dealt with by the expert: [63] - [77]
Similarly: P’s complaint regarding D’s failure to implement P’s logistics proposal was to be properly dealt with by the expert: [78] - [82]
Again similarly: P’s complaint that D’s marketing efforts wrongly focussed on conversion rather than branding was properly dealt with by the expert: [83] - [86]
The expert was required to value Earnings as P proposed, and to deal with P’s Contested Matters: [87]
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In 2026 James had the opportunity to sit down with Ben Hudson from the Unbilled Unfiltered podcast for a wide-ranging discussion about legal practice, the lawyers James is "deeply unimpressed" by, and what role a failed rap career plays for a litigator. You can find the podcast here: https://www.unbilledunfiltered.com/
“Put me back as director and correct the share register!” ___ P sought an interlocutory injunction. P said they had been invalidly removed as Dir of a Co, and their shareholding improperly diluted: [1], [2] P said D had taken control of the Co to make it sell its business and property: [1] P helped establish the Co, contributing assets: [7](1) – (2) There was past tension between P and a former Dir (now dead) leading to D’s involvement: [7](5) – (6) In August 2026 resol’s were passed including appointing P as Dir: [7](10) Later, forms were lodged suggesting P was removed as Dir, despite not having resigned nor having been provided with notice of any meeting re P’s potential removal as Dir: [7](12) P was then excluded from the Co’s mgmt: [7](13) Evidence suggested D was in Thailand: [7](17) In Sep 2026, P visited the Co’s offices only to be told the Co’s business had been sold, with responses to some Qs being “above [the answerer’s] paygrade”: [8] (The evidence was incomplete re the progress of any potential sale: [10]) P’s lawyer tried to inspect the Co’s books and records at its agent’s office and was turned away: [9] The Court considered the relevant law noting P had to show (i) a prima facie case, and (ii) that the balance of convenience favoured relief: [3] – [5] P’s claims were broadly stated; unauthorised dealings and “unwarranted oppression”: [12] The injunction sought was to prevent the Co dealing with its business and real property: [13] The Court found it arguable that (i) P was improperly removed as Dir, and (ii) an unauthorised agreement may have been improperly made with a 3rd party to sell the Co’s business: [14], [15] Further, it was arguable that (iii) any dist’n of sale proceeds would not be in a proportion with the true shareholding in the Co: [14] 1st re balance of convenience: there was a prospect of a sale completing and proceeds flowing to D out of jurisdiction, radically altering the status quo: [15] 2nd re BoC: even though the orders might complicate a possible sale and the Co’s mgmt, notice could be given to third parties and there was liberty for parties to apply – largely curing this issue: [16] The relief sought by the P was granted: [17] ___ Please follow leading partnership and shareholder disputes lawyer James d'Apice, Coffee and a Case Note, and Gravamen on your favourite platform. www.gravamen.com.au
“I own 40% of you, and I’m winding you up!” ____ The Ps sued to wind up a Co pursuant to s461(1)(k), the “just and equitable” basis. The Co opposed: [1], [4] The Ps held 40% of the Co’s shares, an SPV incorp’d for residential development: [1], [2], [157] The remaining 60% to 2 entities whose controlling minds were also Dirs of the Co: [7] – [11] The Ps referred to: apparent insolvency of the Co, a breakdown of relationships, and “exorbitant” mgmt fees “gouged” by an entity related to 2 of the Co’s Dirs: [3], [149] – [151] In 2021 the Ps and the Co had entered into an arrangement where the Ps loaned ~$5m for buying the property, to be repaid from profits following development: [12] In December 2021, the Co bought the property for ~$10m; funded in part by the Ps’ loan: [13] – [15] The Dirs of the Co incorp’d OtherCo to provided management services to the Co; $30K per month. The Ps were not told of this: [16] – [20] From 2022, the Co undertook various steps (including running NSWLEC proceedings) to obtain relevant DAs: [21] – [28] Rent was collected on the Co’s property from 2022. It was not paid to the Co but was paid to OtherCo: [29] – [31] The Ps initially sued seeking repayment of the $5m. They lost: [32] – [34] The Ps took the view the development was “unviable”; likely unprofitable. The Court accepted this: [43], [95] The Ps’ experts’ figures suggest the development would be worth $22m, for a cost of $35m; a loss of ~$13m: [45] – [88] The Court accepted there was no possibility of the Co obtaining external finance: [110], [158] Nor was it likely finance could be obtained from a related party: [117] The Court noted insolvency may be relevant to a just and equitable wind up application: [118] After extended considering of the relevant tests for insolvency, and with the assistance of expert evidence, the Court accepted the Co was likely cash flow and balance sheet insolvent: [148] The Court lacked confidence in the conduct of the Co’s affairs, such that it was just and equitable that it be wound up: [164] Where the Co was not run as a quasi-partnership, the fact that there was a breakdown in the relationship of trust and confidence between the parties was not sufficient to obtain a winding up order: [169] – [176] The Court found there were no alternative s 467(4) remedies: [177] – [195] The Court ordered that the Co be wound up and that the Ps’ legal costs would be costs in the winding up: [199] ___ Please look out for James d'Apice, Coffee and a Case Note, and Gravamen on your favourite platform. www.gravamen.com.au #auslaw #coffeeandacasenote #gravamen
“You breached the shareholders agreement, so transfer your shares to me!” ___ P and D were shareholders in a Co. P (who held 40%) sued D (who held 60%) alleging D’s breaches of the SHA entitled P to have D’s shares transferred to P: [1] – [4], [7] This breaches, said P, were D taking unauthorised loans and D’s granting security over its shares in the Co: [2] The Co did scaffolding work and was of some size; ~$11m annual revenue, ~55 employees: [6] The Co had developed out of a business operated by D, with P’s controlling mind acting as director and manager: [9] No party challenged the SHA’s validity. It applied: [17] D licensed its IP and provided services to the Co – for payment – over the years: [19], [20] The D’s work for the Co included, necessarily, having some control over the Co’s bank account. The D (whether by its agents or otherwise) made payments from these accounts: [21], [22] Over time a loan balance grew. By 2025 D was indebted to the Co for ~$1.9m: [23] – [27] P’s consent was not sought for the advances that led to this balance. i.e. they were made without P’s approval: [28] In 2025 an insolvency risk loomed for D. It missed some superannuation payments owed to its employees: [29] P issued D a default notice pursuant to the SHA in relation to the loan balance. D accepted the notice was properly issued [30] – [36] The issuing of the notice commenced the SHA’s default sale process: [34] In 2022 D had granted a security of all of its assets (i.e. including its shares in D): [37] In 2025 P discovered the security via a PPSR search conducted as part of prep for P acquiring D’s shares: [39] Shortly after this discovery, P issued a security default notice pursuant to the SHA: [40] Although the breach was remedied after the notice was issued, P had commenced the default sale process beforehand: [41] – [46] Despite D’s contrary assertion, the commencement of other legal proceedings by the Co was not a termination of the SHA – and even if it was, P’s rights pursuant to the default notices survived: [47] – [48] The Court then considered whether specific performance was the appropriate remedy. The remedy of specific performance is discretionary: [49] Damages were an inadequate remedy for the P’s loss. Prima facie: spec perf should be ordered for breaches concerning shares in a private Co: [54] D argued that the SHA had a valuation method, enabling damages to be quantified. The Court disagreed finding the control premium would not be accounted for with that method: [55] – [57] D tendered no evidence of its capacity to remedy the defaults: [62] No hardship issues stood in way of the Court exercising its discretion to order spec perf: [78] P was entitled to spec perf of the share transfer: [79] ___ Please follow James d'Apice, Coffee and a Case Note, and Gravamen on your favourite platform. www.gravamen.com.au
In July 2026, James has an opportunity to sit down with Hall & Wilcox partner and host of the Hall & Wilcox podcast "What's in a name?" to talk about diversity, inclusiveness, and using one's privilege for the benefit of all. You can find the original podcast here: https://hallandwilcox.com.au/news/cultural-inclusion-conversations-whats-in-a-name-season-2/