Coffee and a Case Note James d'Apice

Gaaaah! James got to be the first ever private practice lawyer on Mel Storey's incredible in-house counsel themed podcast, Counsel!

This pod was recorded IMMEDIATELY after James launched his firm Gravamen at the Happy Lawyer Happy Life retreat in November 2023.

Grab yourself a mimosa and enjoy this incredible chat.

A link to Mel's podcast is here: https://www.counselpodcast.com

“Give me back my job selling diamonds!”

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A Co that sold diamonds and jewellery had 4 shareholders, entities related to the Co’s directors who were P1, D2, D3, and D4: [1], [9]

P1 and their sibling, P2, were fired by the Co from their roles as CEO and sales director respectively: [3]

The Ps (including P1’s shareholding entity) sued alleging the Co’s conduct was oppressive to P1 and seeking inter alia P1 and P2’s reinstatement on the basis of s232 oppression: [4], [5]

A Terms Sheet and employment contract governed P1’s relationship with the Co and Dirs: [11], [12]

Following slackening performance the Dirs met in Nov 2023. They resolved to reduce P1’s salary by 11%. P1 mentioned that P1 and P2 may not be compatible with the Dirs into the future: [24], [25]

In December 2023 P1 offered to sell their and P2’s shares (on the basis P2’s option had vested) for $750K: [27], [28]

D2 responded that P1 could expect a response in January 2024: [29]

Apparently with no further word in the intervening period, in April 2024 P1 and P2 received letters purporting to terminate their employment immediately: [30], [31]

P1 and P2 sought reinstatement and were then prevented from entering the Co’s premises: [35]

The Co’s Sydney office was closed. An industry publication informed other jewellers of P1’s and P2’s departure. Allegations were made regarding P1’s use of their Co credit card: [37], [38], [40]

The Court had to consider (i) whether there was a serious question to be tried, and (ii) whether the balance of convenience weighed in favour of reinstatement: [41] - [43]

The Court accepted there was a serious question to be tried because - apparently in breach of the Terms Sheet - a resolution was reached to terminate P1 and P2, and to close the Sydney office, in the absence of P1: [48]

A complexity arose: P1’s employment contract gave the Co broad termination rights that, arguably, meant the Co’s approach was not oppressive: [50] - [52]

The Ps failed on their balance of convenience argument for four reasons: (i) the inconsistency between an interlocutory order for reinstatement and final order for a share buyout [54] - [56]; (ii) damages being adequate, noting any final share valuation will account for oppressive behaviour [57]; (iii) reinstatement would upset, not maintain, the status quo as new people were performing P1’s and P2’s roles [58]; and (iv) generally, the Court’s reluctance to make reinstatement orders over the wishes of majority business owners: [59] - [62]

The Court declined to order the interlocutory relief sought: [63]

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Please consider giving Coffee and a Case Note, James d'Apice and Gravamen a follow on your favourite platform!

#auslaw #gravamen

James got to sit down for a chat about his progression through the world of legal practice with the legal Amogh Kadhe, of the ChatterMatters Podcast in early 2024.

Please enjoy!

You can find the ChatterMatters LinkedIn page here: https://www.linkedin.com/company/chattermatters-podcast/?originalSubdomain=au

“I’ve retired as a partner. I want market value with no discounts!”

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In 2018, 4 Cos entered into a partnership agreement. The business related to growing and selling tea: [1], [5]

P retired from the partnership. The agreement provided that the partnership would not be dissolved on a partner’s retirement: [2]

The question was: what value should P receive for its partnership stake?P argued for, in essence, a pro rata distribution according to its 19% stake: [3]

The Ds, who were the remaining partners, argued for a market value approach i.e. including discounts for P’s lack of control and the lack of marketability of P’s stake: [4]

The partnership agreement provided that the partners were entitled to the property and goodwill of the partnership in their respective shares: [8]

P sued, and initially applied for the appointment of a receiver to the partnership’s assets without pressing this application: [21]

By consent, the parties sought orders appointing a referee, a valuer, to value P’s interest in the partnership including goodwill at the date of retirement: [22] - [24]

The valuer sought further instruction on the basis of the valuation; fair value, market value, equitable value etc: [25]

Following an informal conference with the parties and the valuer the details of which were not in evidence, the valuer prepared their report on the market value basis: [27]

P’s view of what a market valuation entailed differed from the D’s views in that P resisted the suggestion that a discount ought to be applied for lack of control and a lack of marketability; or if those discounts were to be applied they ought to be reduced: [27]

The Ds said P had “agreed” to the more traditional market value approach: [28]

P said it was entitled to recover its share from the partnership as a debt due: [33]

The Ds denied P was entitled to an account and instead considered the valuation as a “stepping stone” to a potential transaction or (if their valuation position was accepted) grounds for a Syers order requiring P to sell to the Ds at the relevant value: [34]

The Court was receptive to P’s suggestion that if P were forced into a minority discount, and the Ds then sold the partnership’s business the Ds would enjoy a windfall: [50]

The Court accepted P’s entitlement to an account noting the parties could have agreed on a different outcome if they wished: [51]

The Court found the P did not “agree” to the minority discount as part of the market valuation process, having openly argued against it through the valuation process: [52] -[57]

The Court accepted P’s view on valuation of its interest and considered as a preliminary matter that legal costs be paid from the assets of the partnership: [65], [68]

The parties were invited to provide SMOs reflecting the outcome: [74]



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Please consider giving Coffee and a Case Note, James d'Apice and Gravamen a follow on your favourite platform!


www.gravamen.com.au
#auslaw #gravamen

“You tried to kick me out of the law firm partnership!”

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A partnership operated a law firm. A deed governed the partners’ relationship. The partners were either fixed draw (“salaried”) partners or (often more lucrative) capital partners: [1], [2]

Each partner was a trustee of a separate trust: [2]

P was a capital partner, purportedly expelled from the partnership in November 2020: [5]

P said the purported expulsion was contrary to the deed; meaning P remained a partner or was entitled to damages: [6]

The Ds characterised the partnership as “easy in, easy out” - partners did not make a contribution to join, and were not “paid out” on their exit: [13]

When a capital partner exited, that exit was a “complete, forced, and absolute divorce from the firm”: [29]

The Ds proposed P’s expulsion by email with a “voting button” mechanism and also proposed that the technical requirements for expulsion (e.g. the giving of 7 days notice) be waived or abridged: [38] - [40]

Crucially, only one button was required to be pressed in order to vote on both proposed Extraordinary Resolutions (which the deed said needed 80% of the vote to pass): first (i) expulsion, and then (ii) waiver of technical requirements: [39]

P said this process was invalid because (i) the waiver of technical requirements (like notice) should come before the substantive expulsion vote, and (ii) the question of waiver and the substantive expulsion vote should have had separate voting buttons, allowing partners to vote separately on each resolution: [41]

The Court found the requirement of notice was for a purpose including, potentially, the marshalling of support by the capital partner at risk of expulsion: [48]

The Court found it undermined the seriousness of the consequences of expulsion for the question to be bundled up with the technical variation resolution (or, in the alternative) before it: [49]

The Court found what had taken place was a “plainly invalid process”: [50]

P’s expulsion from the partnership was, therefore, invalid: [51], [101] - [103]

This view was bolstered by the Court’s finding that the Extraordinary Resolution (as defined in the deed) required 80% of all partners to vote in its favour in order to be passed.This was by contrast to the Ds’ position, who asserted that only 80% of the *voting* partners were needed for such a resolution to pass: [52] - [57]

Noting the solemnity of the outcome of an Extraordinary Resolution, and based on the general tenets of commercial construction, the Court found 80% of the partnership was required to pass an extraordinary resolution, not merely 80% of partners engaging in the vote: [58], [59]

P therefore succeeded in their liability argument, with a cost order made in their favour: [122]

The argument about damages was saved for another day.

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If you get a moment please give Coffee and a Case Note, James d'Apice, and / or Gravamen a follow on your favourite platform.

In March 2024 James had a chat with Josh Lawlor and Monica Walmsley from the Personal Branding Unlocked podcast.

It's a wide-ranging chat that features James' views on his own branding *journey* with some lessons you can apply in your practice.

You can find the PBU pod here: https://www.personalbrandingunlocked.com.au/