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Gambotto v WCP

[1995] 182 CLR 432

Case summary last updated at 21/01/2020 16:16 by the Oxbridge Notes in-house law team.

Judgement for the case Gambotto v WCP

Was proposed alteration to articles giving company power to buy out shareholders compulsorily.C, a minority member, sued on grounds that alteration was invalid. Held:
 
·       In expropriation cases, test from Allen is “inappropriate” 
·       Test should be whether alteration of articles is “beyond any purpose contemplated by articles or oppressive (as that term is understood in company law)”
o   And alteration will be for proper purpose where:
i)         Company is at risk of “significant detriment or harm”; and
ii)        Act of expropriation is a reasonable means of alleviating that harm
·       Where this not case, resolution unlawful: 
Ø  even if minority is being compensated for their shares
Ø  even if those in favour bona fide believe it is in best interests of company 
Ø  oreven if alteration is actually for benefit of company!
·       Burden to show alteration is valid is on the majority.
·       This test better reflects the proprietary nature of a share.
 
Facts
·       Company gained tax advantages from buy out of C’s shares, and C himself would be better off if he were expropriated than if he were to remain a member of company.
·       Despite this, alteration invalid.
 

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