In the matter of Lanmar Pty Ltd (No 2) [2026] NSWSC 800 (Black J, 10 July 2026)
The recent decision in the matter of Lanmar Pty Ltd (No 2) [2026] NSWSC 800 offers a clear case study in shareholder oppression law. It explores three intersecting themes. These include the misapplication of employment frameworks to director-shareholder relationships. They also include the risks of seeking corporate governance advice from artificial intelligence. Finally, the case charts the evolving remedial landscape in shareholder oppression matters. Justice Black’s judgment offers a careful analysis of quasi-partnership principles. It also delivers a pointed reminder that “ChatGPT did not prove to be a prudent choice of adviser so far as matters of Australian corporate law were concerned” (at [137]).
The Company and the Dispute
Drew Landes and Martin Drebber established Lanmar Pty Ltd in July 2020. It began as a defence consulting firm. Peter O’Connor later joined as a third director. Therefore, each director held one-third of the company’s shares through their respective holding companies. The company provided engineering, asset management, and consulting services. Its main clients were the Commonwealth and the Department of Defence. It grew from three founders to around 40 employees over five years. It operated under informal “Lanmar Principles” established in 2021. These principles emphasised trust, equal contribution, and shared decision-making among the three equal shareholders. This arrangement bore the hallmarks of a quasi-partnership. It featured equal shareholding and active participation in management by all members. Mutual trust and confidence formed the foundation of the relationship.
In February 2025, during preparation of a tender for a substantial Naval Asset Management System Support (NAMSS) contract, Drebber and O’Connor became dissatisfied with Landes’ contribution to the business. On 20 February 2025, Drebber texted O’Connor: “I think he needs to go.” O’Connor responded: “Let’s talk it over Monday. It needs to be addressed.” Drebber replied: “He’s a complete dud”. Rather than seeking legal advice, they turned to ChatGPT. On 24 February 2025, O’Connor emailed Drebber a document prepared with ChatGPT’s assistance, headed “HR problem resolution”.
The problem with the ChatGPT advice was fundamental: it framed the issue as an employment matter, deploying a “START” framework (Situation, Task, Action, Result, Target) designed for employee performance management. This was a significant category error. Directors can, in some circumstances, also be employees of their companies. But employment contracts did not bind the three directors of Lanmar. They were director-shareholders in a quasi-partnership. The Corporations Act 2001 (Cth), the company’s constitution, and mutual understandings governed their rights and obligations. The employment-style framework referenced an Employee Assistance Provider and performance improvement plans. It also threatened removal of “Directors remuneration.” None of this had proper application to co-directors holding equal stakes in a closely held company.
The ChatGPT-generated document also contemplated steps that would potentially breach the directors’ duties under s 181 of the Corporations Act, including diverting business opportunities away from Lanmar to other companies controlled by Drebber and O’Connor. On 26 February 2025, Drebber and O’Connor met with Landes. According to Landes’ evidence, which Justice Black accepted, Drebber stated: “Drew we have some serious concerns about your performance and we have lost confidence in you. We’ve done our research. We know we can get rid of you”. Drebber fairly accepted in cross-examination that he said words to this effect. An email sent after the meeting—but drafted before it—purported to reallocate responsibilities and threatened further action if Landes did not “turn it around”.
Landes responded on 3 March 2025, identifying what he described as the fundamental error in the majority directors’ approach. He was, he noted, “a founding director of Lanmar, bound only to perform my obligations as a director in accordance with the requirements of the [Corporations Act]” (at [170]). From this point, Drebber and O’Connor were squarely on notice that their approach raised serious legal difficulties. The issue could not be managed as if Landes were an underperforming employee subject to performance review and disciplinary proceedings. He was a director and equal shareholder, and any change to his role required either his consent or a properly structured exit involving the acquisition of his shares at fair value.
The Exclusion and Its Consequences
What followed was a systematic course of exclusion. The majority shut Landes out of negotiations for the NAMSS contract. This contract was of central importance to the company’s future. On 24 July 2025, a company-wide meeting gave an overview of Lanmar’s business and future projects. Nobody informed or invited Landes to that meeting. Drebber instructed the company’s bank not to deal with Landes. The majority hired employees without his involvement. They also negotiated contracts with a related entity, Forge Pty Ltd. Drebber and O’Connor were conflicted as directors of both companies. Landes, the only unconflicted director, was excluded from those negotiations.
Dividends were withheld. A cashflow model prepared on 13 March 2025 included planned dividend payments. The next day, an amended model removed them entirely. Justice Black found, to the Briginshaw standard, that this change withheld dividends to pressure Landes. The majority directors made this change while they were in dispute with him. A 9 May 2025 meeting passed resolutions reviewing directors’ compensation. These resolutions also reintroduced performance-based bonuses favouring the majority directors. Combined with the withheld dividends, this conduct formed part of the oppressive course the Court found.
The defendants did eventually make several offers to purchase the shares held by Landes’ holding company, WLLHLL Pty Ltd. However, these came late—only from December 2025, months after the exclusionary conduct began and after proceedings were well advanced. A December 2025 offer involved a $500,000 initial payment with earn-out provisions spanning years. March 2026 offers of $6.5 million to $7.5 million were payable in instalments through September 2027, conditional on the NAMSS contract not being terminated or reduced. Justice Black found that none of these offers was reasonable. Each required WLLHLL to transfer its shares and Landes to resign immediately, while remaining exposed to “credit, performance and earnings manipulation risks” for extended periods under the defendants’ management.
The Legal Framework and the Remedy
Section 232 of the Corporations Act permits the Court to grant remedies where conduct is “oppressive to, unfairly prejudicial to, or unfairly discriminatory against” a member. In quasi-partnership companies—where members enter the association expecting to participate in management—the exclusion of a member combined with a failure to offer fair value for their shares will typically constitute oppression: O’Neill v Phillips [1999] 1 WLR 1092; Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343 (at [283]).
Importantly, as the High Court held in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [176], conduct may be oppressive even when a defendant believes they are acting for proper purposes (at [283]). Justice Black did not need to decide whether concerns about Landes’ performance were genuine and justified. Even genuine concerns did not authorise his exclusion from management. The majority still needed to make a reasonable offer to buy out the minority’s shares at fair value.
Having established oppression, Justice Black faced a remedial difficulty. A buy-out order—the usual remedy—could not readily be made. The defendants claimed they could not afford it. Moreover, two valuation experts disagreed widely on the value of WLLHLL’s shares: one valued them at $11.4 million to $14.7 million, the other at $3.7 million to $7.6 million. Justice Black accepted neither valuation. One expert inadequately addressed Lanmar’s concentration risk. Lanmar depended substantially on a single client, the Commonwealth. The Commonwealth retained the power to terminate contracts for convenience. The other expert adopted a “first principles” methodology. This methodology assumed Lanmar had reached “stable maturity.” That assumption was inconsistent with a company experiencing rapid growth.
Rather than ordering a winding up—which would destroy value in a successful, growing business and affect approximately 40 employees—Justice Black turned to an innovative remedy. Following the approach of the Singapore International Commercial Court in Kiri Industries Ltd v Senda International Capital Ltd [2024] SGHC(I) 14, his Honour appointed receivers to sell all the shares in Lanmar en bloc on the open market. This remedy is narrower than a receivership over the business itself. The receivers’ role is confined to managing and executing the share sale. The business continues operating under existing management. Employees keep their jobs. The Commonwealth’s contracts are not disrupted. The market—rather than duelling experts or judicial estimation—determines the shares’ value. Justice Black rejected WLLHLL’s claim for priority over the sale proceeds; all shareholders share proportionally in whatever price the market determines. The defendants ultimately consented to this order.
The case is significant for several reasons. First, the case reinforces that corporations law, not employment law, governs closely held companies. Directors who are also shareholders in a quasi-partnership must manage their relationship within the Corporations Act and the company’s constitution. HR frameworks have no proper role here, however sophisticated the AI tool that generated them.
Second, it underscores that majority power in a closely held company has limits. Even a genuinely held belief that a co-director is underperforming does not authorise exclusion. The majority must still offer to acquire the minority’s shares at fair value. Third, the Kiri Industries approach may prove influential. This approach appoints receivers to sell all shares, rather than ordering a buy-out or winding up. Liquidation would destroy value in solvent, operating businesses where a buy-out is not feasible. A receiver-managed sale offers a middle path here. It preserves the going concern value of the business.
Jake McKinley notes that this article is written for the purpose of providing generalised information and not to provide specialised legal advice. If you require qualified legal advice on anything mentioned in this article, our experienced team of solicitors at Jake McKinley are here to help. Please get in touch with us on 02 9232 8033 today to make an enquiry.
Article Written by Hayden Nelson, Solicitor
