Key Takeaways

1. In a 50/50 joint venture, persistent inaction or “ghosting” by a director/shareholder can constitute actionable oppression under section 232 of the Corporations Act 2001 (Cth) (the Act). Passive obstruction is not a protected strategy in a deadlocked environment.
2. The Court will prioritise a compulsory buyout over the “nuclear option” of winding up a solvent company. Under section 467(4) of the Act, the Court may refuse a winding-up order if a less destructive remedy, such as a buyout, is available and the party seeking liquidation is acting unreasonably.
3. A prior “open offer” made during a dispute can serve as a reliable valuation benchmark for a court-ordered buyout. This avoids the delay and expense of court-appointed expert valuations where a transparent commercial offer has already established a “real-world” price.
4. Refusing to consent to a transaction that would benefit the venture (such as a reduction in a personal guarantee) without a legitimate commercial reason may be deemed unfairly prejudicial conduct.

Background

The proceedings involved a residential property development joint venture (JV) structured through Lamrock Place Property Pty Ltd (the Trustee) and an associated fixed unit trust. The Plaintiff and Defendant each held a 50% interest in both the shares of the Trustee and the units of the Trust.

Following a breakdown in mutual trust and confidence, the project reached a state of total corporate governance deadlock. The Plaintiff alleged that the Defendant had engaged in oppressive conduct by:

• Systematically failing to respond to critical project communications;
• Withholding approval for capital calls required to fund essential project levies; and
• Refusing to sign documents required to reduce a personal guarantee that burdened the venture.

The Defendant filed a cross-claim, alleging that the Plaintiff had misled them regarding the interest margins charged within the acquisition finance arrangements and that the Plaintiff had breached fiduciary duties.

The Issues

The Court was required to determine:

1. Whether the Defendant’s “passive” obstruction constituted oppression in the context of a 50/50 deadlock.
2. Whether the financing arrangements involving the interest margins were commercially unfair or misleading.
3. The appropriate remedy to “unscramble” the deadlocked venture: a compulsory buyout or a winding-up order.
4. How to determine the fair value for a buyout without incurring excessive expert costs.

The Decision

Justice Nixon found in favour of the Plaintiff, dismissing the Defendant’s cross-claim in its entirety. The Court held that the Defendant’s conduct crossed the line from hard-bargaining to actionable oppression. Rather than winding up the solvent Trustee company, his Honour exercised the Court’s broad discretion under section 233 of the Act to order the Defendant to sell their shares and units to the Plaintiff.

The Quasi-Partnership Doctrine

The Court applied Ebrahimi v Westbourne Galleries Ltd [1973] AC 360, noting that the 50/50 SPV was a “quasi-partnership” built on mutual confidence. Because the parties’ relationship was the foundation of the venture, the Defendant’s constructive abandonment of their management duties was a breach of the fundamental understanding that both would participate in the venture’s success.

The Objective Test for Unfairness

The Defendant argued they were entitled to withhold consent to protect their position. However, the Court applied an objective test: would a reasonable board of directors consider the conduct unfair? Nixon J concluded that “ghosting” a partner and blocking essential funding while a project is ongoing is objectively unfair and prejudicial, regardless of the Defendant’s subjective intent.

Selection of Remedy

The Court addressed the “minimum relief” principle. While winding up is a common remedy for deadlock, the Court held it should be avoided if a buyout can effectively resolve the oppression while preserving the company’s assets. Under section 467(4) of the Act, the Court favoured the buyout to prevent the destruction of commercial value that liquidation would entail.

The Valuation Breakthrough

In a significant procedural development, the Court used a flexible approach to valuation. Instead of ordering a new expert report, the Court adopted the price from a previous “open offer” made by the Plaintiff. The Court reasoned that a transparent, documented offer made during the dispute provided a reliable commercial benchmark, rewarding the party that had attempted a reasonable settlement.

Conclusion

In the matter of Lamrock Place Property Pty Ltd [2026] NSWSC 52 serves as a critical reminder that 50% ownership does not grant a “right to silence” or a “veto” that can be used to paralyse a venture. For developers, the case highlights the tactical importance of maintaining a clear paper trail and the potential for “open offers” to set the valuation floor in future litigation.