JC Jewels Pty Ltd [2024] NSWSC 532

Coffee and a Case Note

“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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