Venture capitalist Adir Shiffman has failed in his court attempt to receive a 20 per cent stake in online mattress retailer Sleeping Duck.
But, although Victorian Supreme Court judge Jim Delany rejected Dr Shiffman’s allegations that founders Selvam Sinnappan and Winston Wijeyeratne engaged in conduct that was “oppressive, unfairly prejudicial and or unfairly discriminatory” towards him, the door for possible appeal has been left open.
“I have found that none of the pleaded acts of oppression relied on by BBHF (a company associated with Dr Shiffman) has been made out,” Justice Delany said in his judgment, released on Friday.
Catapult Group International executive chairman Adir Shiffman.
“For that reason, the oppression claim in the proceeding is dismissed.”
Responding to the outcome, Dr Shiffman said: “We are carefully reviewing the judgment and considering our options, as an ongoing significant shareholder in Sleeping Duck.”
Mr Sinnappan welcomed the court’s judgment.
“We’ve always tried our best to do the right thing and treat everyone fairly,” he said in a statement.
“We are happy to have stood for our values and are relieved that the comprehensive judgment delivered by the Honourable Justice Delany sets out the circumstances so clearly and transparently.”
Dr Shiffman first launched the case in November 2021 and alleged Mr Sinnappan and Mr Wijeyeratne froze him out of an “active” role in the company in November 2020 in favour of Prateek Bandopadhayay, who eventually received shares and diluted Dr Shiffman’s stake.
He wanted the court to force Sleeping Duck to issue him with 10 per cent of shares and options to acquire a further 10 per cent, or to make them buy Dr Shiffman’s shares at their “fair value” as at October 2021 when he argued the business was worth between $170m and $196m. Sleeping Duck argued it was worth less at that time, at between $121.8m and $126m.
Mr Sinnappan accepted that, after Dr Shiffman became involved in the company from 2018, Sleeping Duck “enjoyed tremendous success”, with revenue soaring from about $3.3m –$3.5m in 2018 to more than $9m in FY19 and to about $45m in 2020, Justice Delany said.
The judge said he accepted Dr Shiffman was “trying to be completely precise in being truthful” and had no doubt “Dr Shiffman genuinely believes that” he was shut out of the business.
However, “for the purposes of an oppression proceeding, commercial unfairness has an objective standard” that was not met, Justice Delany said.
He said Dr Shiffman agreed to “go passive” in September 2021, was not excluded and rejected his claim Sleeping Duck agreed to take all reasonable steps to sell down his shareholding in exchange for him becoming a passive investor.