A single default notice. No cure period. A 60% shareholding lost at 90% of its fair market value. In this decision, the Supreme Court of New South Wales ordered a majority shareholder to sell its entire stake to the 40% minority shareholder after it made unauthorised loans and granted security over its shares in breach of a shareholders agreement. The decision shows how quickly default and buy-out provisions can take effect, and why a later attempt to fix the breach may come too late.

Key Takeaways

Default rights can crystallise immediately.

Where a clause provides that a right arises “immediately upon” a breach without a cure period, that right may crystallise at once, and a later attempt to remedy the breach will not necessarily undo it.

One clear notice may be enough

The number and form of notices required depend on the proper construction of the shareholders agreement. Where the agreement does not expressly require a further notice after a failure to remedy, a single, clearly worded default notice may be sufficient to commence a compulsory sale process.

Damages may not be enough where control is at stake

Damages may be inadequate for the compulsory sale of shares in a private company, particularly where the acquisition would confer control. A contractual valuation formula may not capture the value of that control, which can support an order for specific performance.

Act consistently with the agreement

A shareholder seeking equitable relief should act consistently with the shareholders agreement and avoid conduct that could disentitle it to relief. Whether a later remedy of the counterparty’s breach affects an accrued contractual right will depend on the wording of the agreement and the point at which that right crystallised.

The detail of the dispute and the Court’s reasoning follow.

Background

The case concerned a Shareholders Agreement between Sibley Investments Pty Ltd (Sibley) and Oldfields Advance Scaffold Pty Ltd (Oldfields Advance) relating to Adelaide Scaffold Solutions Pty Ltd (ASS). Oldfields Advance held 60% of the shares in ASS, and Sibley held the remaining 40%.

From about August 2020, Oldfields Advance caused ASS to advance substantial sums to the broader Oldfields group without the approval of Sibley. Under the Shareholders Agreement, making a loan of more than $50,000 was a “Major Matter” requiring a 75% shareholder vote, and no such approval was given.

Oldfields Advance also granted an “all present and after-acquired property” security interest to Pure Asset Management Pty Ltd, which extended to its ASS shares, without complying with the share dealing requirements in the Shareholders Agreement.

Sibley issued two default notices, the Loan Default Notice and the Security Default Notice, alleging that Oldfields Advance had breached the Shareholders Agreement by making unauthorised loans and granting security over its shares in ASS without consent. Sibley also sought specific performance of the defaulting shareholder provision, under which Oldfields Advance was required to offer its 60% shareholding to Sibley for 90% of its fair market value.

Oldfields Advance admitted the breaches but resisted specific performance. It argued that damages were an adequate remedy and that Sibley did not come to equity with “clean hands” because Sibley had failed to follow the Shareholders Agreement’s dispute resolution procedure and had incorrectly calculated the fair market value of the ASS shares it sought to acquire.

Oldfields Advance was a wholly owned subsidiary of Oldfields Holdings Ltd (OHL), which was placed into liquidation in February 2026 following a winding-up application by the Australian Taxation Office. EQM Holdings Pty Ltd (EQM), which held 50% of the issued shares in OHL, later commenced proceedings against ASS and contended that the Shareholders Agreement had automatically terminated under clause 13.2(b)(iii), which provided:

… it enters into or resolves to enter into an arrangement, composition or compromise with or assignment for the benefit of his/its creditors generally or any class of creditors or proceedings are commenced to sanction such an arrangement, composition or compromise…

Issues in Dispute

The Court addressed the following issues in dispute:

1. whether the Loan Default Notice was validly served by Sibley, and whether a further notice was required after Oldfields Advance failed to remedy the breach within ten days;
2. whether a deed poll later releasing the security interest extinguished the right to acquire the shares that had arisen from the Security Default Notice;
3. whether proceedings commenced by EQM against ASS automatically terminated the Shareholders Agreement pursuant to clause 13.2(b)(iii); and
4. whether specific performance should be ordered, or whether damages were an adequate remedy and equitable discretion should be exercised against the relief.

The Decision

McGrath J found in favour of Sibley and granted specific performance of its right to acquire the 60% shareholding of Oldfields Advance in ASS, based on the following reasons:

1. the Loan Default Notice was valid and served in accordance with the Shareholders Agreement. On the proper construction of clause 10, there was no requirement for a second notice of default after Oldfields Advance failed to remedy the breach within ten days.
2. Sibley’s right to acquire the shares arose immediately upon Oldfields Advance’s breach, because the relevant clause contained no period within which the breach could be remedied before the default arose. A deed poll releasing the security interest on 16 May 2025 came too late, after Sibley had already exercised its rights under the Shareholders Agreement and did not extinguish them.
3. The Court rejected the argument that the proceedings commenced by EQM automatically terminated the Shareholders Agreement. None of the events specified in clause 13.2(b)(iii) had occurred. In any event, the default notices had been served before those proceedings were commenced, and Sibley’s accrued rights therefore survived.
4. Damages were an inadequate remedy. Shares in a private company are not readily available on the open market, and the contractual valuation formula did not capture the “control premium” Sibley would obtain by moving from a 40% minority interest to 100% ownership. The Court also rejected Oldfields Advance’s “clean hands” defence, finding that Sibley’s conduct was consistent with the Shareholders Agreement, having regard to its position as a minority shareholder, and did not amount to misconduct.