ALLWAYS RESOURCES HOLDINGS PTY LTD v SAMGRIS  QSC 74
Samgris was registered in 2010 by Dr Wanfu Huang, who was its sole director. Its purpose was to conduct coal exploration in Queensland. It had an association with two entities owned by the People’s Republic of China (the Shaanxi Parties) which were concerned with coal exploration and exploitation.
An agreement was signed between Samgris and the Shaanxi Parties in March 2011 with the apparent intention to involve Samgris and the Shannxi parties (via APJM) in cooperating for coal resource exploration and development. As part of the agreement the Shannxi Parties were to form a joint entity – APJM
The Plaintiffs, Allways Resources Holdings (ARH) and McKay Brooke Resources Limited (MBR) were minority shareholders in the first defendant (Samgris). The second defendant (APJM) was the majority shareholder of Samgris.
Before April 2012, a restructure of Samgris occurred resulting in shares previously held by Dr Huang being held by ARH and MBR. As part of that restructure, a substantial purchase of the shares held by Dr Huang were to be purchased by APJM. The payment for those shares was to be in instalments. This later became an issue of contention. At a Samgris Board meeting on 22 April 2014 Dr Huang proposed that a resolution be passed calling on the shares held by APJM, but most of the directors ‘suggested’ that Samgris suggest to APJM that they pay the money owing. Those directors were the directors appointed by APJM.
On 31 August 2012 a meeting was held, the minutes of which were titled ‘SAMGRIS Resources Pty Ltd’. The minutes record the meeting as clarifying the company structure of Samgris, the structure identified in the minutes makes no note of the role of the board. In giving evidence the Chairman, Mr Song, tried to characterise that meeting as a meeting of APJM, not Samgris. That was rejected on the basis of the contemporaneous characterisation of the minutes (i.e. their title, that they were later provide to all directors of Samgris, and the way in which they were described in correspondence). Mr Song was at the time, Chairman of both APJM and Samgris.
The Plaintiffs allege that from the time they became shareholders until the proceedings commenced in December 2014, APJM had caused Samgris to be managed as if APJM was the sole shareholder, without any regard to the views of ARH or MBR. Furthermore, that the relationship between APJM, and ARH and MBR had reached a point of ‘irretrievable breakdown’ and that they could have ‘no trust and confidence in the proper management of Samgris’.
The Plaintiffs sought to have Samgris wound-up, or alternatively, an order made that APJM purchase the Plaintiffs’ shares in Samgris at a price fixed by the court.
Was the relationship between the members of Samgris a purely commercial one having the character stated in the Act, and the constitution of Samgris, or was it a quasi-partnership, and consequently subject to equitable considerations of legal rights.
Was the conduct complained of ‘oppressive to, unfairly prejudicial to, or unfairly discriminatory against’ ARH and/or MBR.
Is it just and equitable that Samgris should be wound up?
Is it unreasonable that ARH and MBR seek to have Samgris wound-up rather than pursuing another remedy?
FINDINGS AND CONCLUSION
Following the judgement of Lord Wilberforce in Ebrahimi v Westbourne Valleries Ltd, although companies are commercial entities, with all relevant rights and expectations expressed within the companies legislation and the company’s constitution, the exercise of those rights may be made subject to just and equitable considerations. Those include matters of a persona nature arising between individuals. This will likely be the case where:
- An association formed or continued on the basis of a personal relationship, including mutual confidence;
- Agreement or understanding that particularly shareholders will participate in the conduct of the business; and
- Restriction upon the transfer of the members’ interest in the company.
Each of those considerations were present in the relationship between the parties. Consequently, Samgris was a company of the type for which winding-up is the appropriate remedy where the relationship has broken down to an irretrievable degree.
Bond J followed the decision in Hilliam which cautioned that the winding up of a company is an extreme step, and that extremity must be born in mind when deciding whether it is an appropriate remedy.
The phrase ‘oppressive to, unfairly prejudicial to, or unfairly discriminatory against’ is found in s232 of the Act. It is regarded as a compound expression, calling for a single overall judgement of the conduct of the company. The test is whether in the eyes of a reasonable commercial bystander, there has been unfairness to such a degree that reasonable directors would not consider the decision fair.  But in deciding whether the conduct was unfair, it should be understood in the context of the relationship between the parties. 
The 31 August meeting was decisive in characterising the relationship between the parties. There was an attempt by APJM to characterise it as a meeting of a majority shareholder, producing recommendations for the board of Samgris, however that was not consistent with how the meeting was characterised at the time it was held. In particular, it contributed to the destruction of mutual trust and confidence between the parties; the ‘clarified’ structure of Samgris agreed at the meeting provided for authority to flow from the Chair, not from the Board; and by the time the decisions could be complained of, letters of offer of employment had already been issued, and contracts signed.
This was not an isolated incident, and there were several occasions on which Dr Huang raised concerns with the then Chairman of APJM, Mr Song, regarding compliance with Australian company law, and failure to properly communicate about meetings of the Samgris Board. In response, there were attempts by the Mr Song to shut-down those discussions.
In deciding whether a remedy other than winding-up is appropriate, the decision should be made with a view to ending the oppression. Although it is incorrect to consider the remedy of winding-up to be a last resort.
Having regard to the circumstances of the relationship between the Plaintiffs and the Defendants, and the state of Samgris it cannot be said that Samgris is functioning, nor that it can be expected to function going forward. In the absence of anther remedy, the just and equitable remedy is for Samgris to be wound up.
Throughout the dispute, decisions concerning Samgris were made by its Chair and management, without the authority of the Board. APJM and its Chairs had conducted themselves in a manner not considered acceptable by Australian business standards and norms. Furthermore, by failing to engage with the concerns raised by the minority shareholders, APJM left the court with no other option but to wind-up Samgris. From the outset, the minority shareholders were effectively excluded from important aspects of the decision-making process.
Although the share purchase option was suggested as an alternative remedy, it was the view of the court that that process would inevitably drag on for a considerable period, and involve very complex questions of valuation. Consequently, the decision was that Samgris should be wound-up. The judge stayed the order to allow the parties time to resolve the matter out of court.
Different management styles can often result in tensions in the workplace. This is exacerbated when markedly different approaches to managing a business’ affairs are in play at high levels in the company. Preferred methods of operating aside, directors must have regard to the expected standards of operation in the jurisdictions in which they operate.
  AC 360
 Hilliam v Ample Source International Ltd (No 2) (2012) 202 FCR 336, , ,  per Emmett, Jacobson and Buchanan JJ.
 Allways Resources Holdings Pty Ltd v Samgris  QSC 74 .
 Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459, 472 per Brennan J.
 Above n2 .
 Campbell v Backoffice Investments Pty Ltd  NSWCA 95 .