Excluding a Business Co-Owner: Lessons from the Lanmar Decision
A disagreement between business owners can quickly threaten the business they have built. A recent NSW Supreme Court decision shows why excluding a co-owner requires careful legal analysis, particularly when that person is also a director.
In the matter of Lanmar Pty Ltd (No 2) [2026] NSWSC 800, decided by Justice Black on 10 July 2026, offers practical lessons for owners of closely held companies.
What happened?
Lanmar had three directors whose associated companies each held one-third of its shares. Two directors relied on material prepared with ChatGPT’s assistance when dealing with concerns about the third director’s contribution. That material approached the dispute as an employment performance problem.
The Court found oppression through exclusion from management without a reasonable offer to acquire the affected shareholder’s shares, and through the conduct concerning dividends and remuneration. It ordered receivers to sell all the shares together. The expert evidence had not established a value enabling a buy-out order.
A director, shareholder and employee may have different rights
Business owners often wear several hats. Before changing someone’s role, distinguish their employment position, directorship and shareholding. Ending an employment arrangement does not itself resolve ownership rights or remove someone from the board.
Start with the company’s constitution, any shareholders agreement, employment documents and the way the owners agreed to operate. Informal arrangements can leave important questions unanswered when trust breaks down. A majority vote should not be assumed to answer every legal issue.
For owners considering an exit, obtain advice before restricting access, reallocating responsibilities or changing financial arrangements. An apparently convenient step can make a negotiated separation more difficult.
Use AI with care in business disputes
The practical lesson is to check the legal framework before acting on a generated answer. A polished document may address the wrong relationship, overlook key facts or misstate the governing documents.
Ask whether the proposed action has been checked against the actual constitution and agreements, whether conflicts have been identified, and whether its effect on the company and other shareholders has been considered. Obtain advice tailored to the business before implementing a removal or buy-out strategy. Especially legal advice. Chat GPT is not a lawyer, and legal advice can only be provided by a lawyer with a valid practicing certificate.
Valuation and costs need attention too
The later costs decision, In the matter of Lanmar Pty Ltd (No 3) [2026] NSWSC 909, delivered on 30 July 2026, adds another lesson. Although the plaintiff substantially succeeded, the defendants were not ordered to pay the costs associated with its lay and expert valuation evidence. That evidence had not established the share value and had occupied a substantial, separate part of the hearing.
Winning the central dispute does not necessarily mean recovering the costs of every issue. Discuss the evidence needed for the proposed remedy, the assumptions supporting a valuation and the financial consequences of pursuing contested issues.
Plan a workable separation
Before conflict escalates, review decision-making procedures, access to information, remuneration and dividend policies, and exit arrangements. Consider how a buy-out would be valued, funded and secured, and whether mediation could produce a practical agreement.
If you are being excluded, preserve relevant correspondence and obtain advice promptly. If you are seeking another owner’s departure, have the proposed process reviewed before acting.
JSM Lawyers & Notaries can advise on shareholder agreements, business-owner disputes and options for a negotiated exit.
This article provides general information only and is not legal advice. Advice should be obtained about your particular circumstances.
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