‘Legitimate Expectations’ and the Oppression Remedy

Abstract

Should a shareholder’s legitimate expectations form part of the test employed by courts to decide if the shareholder has been oppressed? The term ‘legitimate expectations’ was first used by an Australian court in an oppression claim more than 40 years ago. Yet there remains disagreement among courts regarding whether the use of the term assists or impedes them in deciding oppression claims. This is an important issue given that the oppression remedy is widely used by shareholders. To advance the debate, the authors examined the 51 Australian judgments in which there is substantive discussion of the term. The analysis undertaken reveals five different approaches to the use of the term in these judgments and no consistent approach adopted by the courts. The evaluation by the authors leads to the conclusion that use of the term ‘legitimate expectations’ has not aided the analysis by courts of whether oppression has occurred, its use has been inconsistent, and therefore it should not be used in cases where oppressive conduct is alleged.

Keywords: oppression remedy; shareholder litigation; legitimate expectations