PLAINTIFF BRINGS OPPRESSION PROCEEDINGS AS A MINORITY SHAREHOLDER DUE TO HIS DILUTED SHARES
SIAH -v- WONG [2021] WASC 19 (29 January 2021)
This case involves the plaintiff alleging that the defendant unlawfully diluted his shares which constitutes oppression that entitles him to seek for the majority shareholders to buy out his shares.
Facts:
The plaintiff, Teck Hin Siah, is a minority shareholder of the fourth defendant, Firstland Unlimited Pty Ltd (the Company). The first defendant, Mr. Leon Wong, is the the controlling majority shareholders of the Company.
As at 5 May 2014, Mr Siah’s shareholding in the company was 45%. On 9 January 2017, as a result of what Mr. Siah claims was a purported increase in the share capital of the Company, Mr. Siah's shares in the Company were reduced and became 12%.
Mr. Siah has instituted oppression proceedings, principally seeking orders that Firstland Investments, and Firstland, purchase his shares in the Company.
The defendant claims that a resolution was passed at this meeting that each of the shareholders of the Company were given 14 days to pay the following amounts of additional paid-up capital. Mr Siah voted against the resolution. His evidence is that the call for capital was not for the Company but was for funds to be paid to the Han Jie Firstland partnership for the construction of the Bentley Project (by the Company).
Issue: Was the plaintiff oppressed when his shares were diluted?
Law:
- Section 232 and 233 of the Corporations Act 2001
Analysis:
Plainly, the minute of a meeting of directors was also fictitious and a sham. There was no basis to cause new shares to be issued in the Company and thereby dilute Mr. Siah's shareholding. The acts of Mr Wong in purporting to make a call for capital and issue new share capital in the Company in the face of opposition by Mr. Siah, and in circumstances where there was no legitimate reason for doing so, was a deliberate and calculated ploy to dilute Mr. Siah's shareholding.
Importantly, there is no credible evidence that payments of 'capital' were paid by Firstland and Firstland Investments to the Company's accounts in consideration for the number of shares of each of these companies to be increased.
It is clear that Mr. Wong caused the unlawful divestiture of Mr. Siah's shares in the Company which conduct amounted to oppression as his shares were devalued and his voting power diluted. By diluting Mr. Siah's shareholding in the Company, Mr. Wong has acted in a way that is oppressive to Mr. Siah. This conduct is not only discriminatory and prejudicial to Mr. Siah but it is also unfair for the purposes of s 232 of the Corporations Act.
Conclusion: For these reasons, a declaration should be made that the resolution purported to be made on 5 December 2016 to increase the share capital of the Company by 55,500 shares is invalid and is set aside. This declaration will have the effect that Mr. Siah holds, and continues to hold since 5 May 2014, 45% shareholding in the Company.
