Gambotto v WCP Ltd [1995] HCA 12

High Court of Australia Mason C.J. Brennan, Deane, Dawson and McHugh JJ. Gambotto v WCP Ltd [1995] HCA 12

ORDER Appeal allowed with costs. Set aside the orders made by the New South Wales Court of Appeal and in lieu thereof order that the appeal to that Court be dismissed with costs.

Cur. adv vult.

The following written judgments were delivered:—

1995, Mar. 8 Mason C.J., Brennan, Deane and Dawson JJ.

This appeal raises an important question concerning the validity of an amendment to the articles of association of a company, the purpose of which is to enable the shareholder holding 90 per cent or more of the issued shares to acquire compulsorily shares held by minority shareholders. The appeal to this Court is brought by two minority shareholders from a decision of the New South Wales Court of Appeal (Priestley, Meagher and Cripps JJ.A.) allowing an appeal from a declaration made by McLelland J. that the insertion of such an article in the articles of association of the first respondent ("W.C.P.") was invalid and ineffective and from consequential orders, including an injunction.

W.C.P. is a limited liability company with an issued share capital of 16,980,031 ordinary shares of 20 cents each. The majority shareholders, who are wholly-owned subsidiaries of Industrial Equity Ltd. ("I.E.L."), hold 16,929,441 shares (which is approximately 99.7 per cent of the issued capital). The remaining 50,590 shares are held by minority shareholders. The appellants themselves hold 15,898 shares. The shareholding in W.C.P. was such that I.E.L. or a company associated with I.E.L. could not have acquired the appellant's shares compulsorily under either s. 414 or s. 701 of the Corporations Law [1] .

1. See s. 414(5)(b) and s. 701(2)(c)(ii).

On 16 April 1992, W.C.P. notified all its members that a general meeting would be held on 11 May 1992 to consider an amendment to W.C.P.'s articles of association. The amendment proposed was that a new art. 20a should be included in the articles. The effect of art. 20a was to enable any member who was "entitled for the purposes of the Corporations Law to 90% or more of the issued shares" to acquire compulsorily, before 30 June 1992, all the issued shares in W.C.P., not being shares to which the majority members were entitled, at a price of $1.80 per share. The documentation sent to the members included the text of art. 20a, a proxy form and an expert's report valuing the shares at $1.365 per share. The appellants concede that this was an independent and fair valuation.