Court Rules in Favor of Egg Farming Investors: Essential Terms of Contract Agreed Upon

Re Australian Organic Eggs Pty Ltd [2022] VSC 747 (5 December 2022)

Two plaintiffs invested a total of $6 million in an organic egg-farming venture, with one of them also investing $1.5 million in an egg grading venture. They claim they invested under agreements to issue shares to them in the operating and land-holding companies, and seek orders to put them in the position they would have been in had the agreements been performed. The plaintiffs also seek the issue of units in a unit trust that holds the land where the egg-farming business was established. One plaintiff seeks orders to correct the share register of a company that operates the egg grading venture, while the other seeks orders to cancel the transfer of 50 shares and record the issue of 100 new shares to her.

Facts:

In early September 2018, Mr. Sun met Steven at Spring Ranch farm, where Steven introduced the idea of an egg farm investment. No specific investment details were discussed at that time.

On 6 January 2019, Steven informed Mr. Sun that he and Tom had already purchased the land for the new egg farm. On 9 January 2019, a meeting was held to discuss the new egg farm investment, where $3 million was identified as the required investment, and each co-investor would receive a 25% interest in the business and land.

Tom later informed Mr. Sun that the egg farm investment would be established as an organic egg farm, requiring $6 million from investors, and that a new entity for an egg grading facility was proposed. Mr. Sun agreed to invest $1.5 million for a 50% interest in the egg grading facility.

Transfer forms in relation to the shares in AOE Pty Ltd, Kerang Pty Ltd, and SRO Pty Ltd were signed by Ms. Liu, but it was later revealed that existing shares were transferred instead of issuing new ones. It is unclear whether or not Ms. Liu reached an agreement for the issue of shares in those companies.

Ruling:

The case concerns a dispute between investors and a company over the terms of their investment in an egg farming venture. Although there was no formal contract, the court can still find and enforce a contract if the parties' interactions and conduct demonstrate that they mutually agreed to essential terms and intended to be bound. The court will examine the whole of the parties' interactions, including conversations, conduct, and written documentation, to determine whether there was an ascertainable and determinate intention to contract.

In this case, the parties believed they had made a concluded and enforceable contract, and the essential terms of the bargain were explicitly agreed upon during their conversations. The parties' conduct, including the substantial payments made by the plaintiffs and the construction of the egg farm sheds, is consistent with the parties performing the agreements they had reached.

While the precise means of how the plaintiffs were to receive their 25% interests were not explicitly discussed, the only means consistent with the bargain was for the equity interests to be conveyed by the issue of shares by the company and the issue of units in the Trust. The explicit agreement of the parties as to the interest that the investors would have in the land necessarily entails an agreement to convey that which was necessary for the investors to have the legal and economic entitlement to the relevant parcel of land.

Orders:

The Court has made orders in relation to the shareholdings of Australian Organic Eggs Pty Ltd, Seasons Kerang Pty Ltd, Seasons Ranch Pty Ltd, and Seasons Ranch Organic Pty Ltd. The orders require the companies to issue and deliver share certificates to the first and second plaintiffs and correct their respective registers to record the correct shareholdings. The purported transfer of shares by the fifth defendant to the first plaintiff and the second plaintiff is declared void and of no effect.

The third defendant is also ordered to issue 50 A class units in the Seasons Ranch Unit Trust to each of the first and second plaintiffs and remove any record of the transfer of shares from the fifth defendant to each of the plaintiffs. The fourth defendant is also ordered to issue 50 fully paid ordinary shares to the first and second plaintiffs and remove any record of the transfer of shares from the fifth defendant to the first plaintiff.

The orders are stayed for two weeks or until further order of the Court, and there is no order as to costs.