WCP LTD V Gambotto: An Opportunity for the High Court to Set Some Corporate Law Norms
| DOI | 10.1177/0067205X9402200108 |
| Published date | 01 March 1994 |
| Author | Saul Fridman |
| Date | 01 March 1994 |
| Subject Matter | Article |
WCP
LTD
V GAMBOTTO:
AN
OPPORTUNITY FOR THE
HIGH
COURT TO SET SOME CORPORATE LAW
NORMS
Saul Fridman*
The
High
Court
has
recently
heard
argument
in the case of WCP Ltd v Gambotto. The
case is
on
appeal
from the
New
South Wales Court of Appeal.1 Although the facts of
the case are relatively simple, the issues they raise are rather more complex. WCP Ltd
is a company, the shares of which are almost entirely
owned
by
Industrial Equity Ltd.
In
fact IEL owns all
but
0.3
per
cent of WCP's issued capital. IEL decided
that
there
were advantages to
be
had
by
consolidating its control to 100
per
cent ownership of
WCP.
In
order
to further this objective,
an
amendment
to WCP's articles
was
proposed
which
would
insert a
new
provision permitting the compulsory acquisition of shares
by
any
member
"entitled for
purposes
of the Corporations Law to 90
per
cent or more
of the issued shares" of the company. The effect of this
amendment
would
be
that IEL
would
be
able to compel other shareholders in WCP to sell their shares to it
at
a price
of $1.80
per
share, a price well above the
then
current
market
value of the shares. The
proposed
amendment
was
passed
at
a meeting of the shareholders of the
company
convened for
that
purpose. IEL
did
not
attend the meeting, personally
or
by
proxy,
and
the
amendment
was
approved
unanimously
by
the minority shareholders present.
Mr. Gambotto, a minority shareholder
not
in attendance
at
the meeting, took issue
with this
attempt
to compel
him
to
part
with
his shares,
and
sought
an
order
:nvalidating the
amendment
to the articles
..
He
alleged that the
amendment
to the
trticles constituted
an
act of oppression
or
a fraud of the majority
on
the minority.
At
he
trial, Gambotto succeeded
in
persuading
McLelland J of the oppressive
nature
of
he
compulsory
acquisition of his shares. McLelland J
did
not
provide
substantial
easons for judgement.
He
merely concluded that:
The immediate
purpose
and
effect of the
amendment
was to
permit
the shares of the
minority
shareholders to
be
expropriated
by
the majority shareholders.
In
my
opinion
such
an
amendment
amounts to unjust oppression of those minority shareholders
who
object.2
WCP
was
successful
in
persuading
the
New
South Wales
Court
of
Appeal
that
the
•nendment
to its articles
should
be
permitted
to stand. Meagher JA,
with
whom
riestley
and
Cripps
JJA
agreed,
was
at
some pains to explain the reasons b,ehind the
Lecturer
in
Law, The Australian National University. The author wishes to
thank
Stephen
Bottomley for his comments
on
an
earlier draft. The completion of this
paper
was also
greatly assisted
by
lively interchanges
with
my
corporate
law
colleagues, Stephen
Bottomley
and
Peta Spender.
Any
errors remain, of course,
my
responsibility.
Judgement
reported
at (1993) 10 ACSR 468.
(1992) 10 ACLC 1046 at 1049.
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