In late April, Jeweller reported on the unusual case of Craig Miller's ousting from the CEO position of his company, JC Jewels.
The Melbourne-based company claims to be Australia’s largest lab-created diamond wholesaler.
Miller — who was recently elected president of the Diamond Dealers Club of Australia - was a director and 25 per cent shareholder in JC Jewels when he was suddenly terminated. According to Australian Securities and Investments Commission (ASIC) records at the time of publication, he remains as such.
Jeweller recently learned that following his unexpected ousting, Miller sought an interlocutory injunction to be reinstated as CEO. This is a court order to compel or prevent a party from doing certain acts pending the final determination of the case.
Dispute background
On 6 April, Craig, and Lonn Miller – who also worked for JC Jewels – received termination letters.
According to NSW Supreme Court documents, “The letter to Miller offered that he could resign in lieu of termination and asked him to tender his resignation by 5pm Sunday 7th April 2024. No such offer was made to Lonn. Miller did not resign.
“Miller and Lonn then sought reinstatement which was not responded to. Shortly thereafter, Miller and Lonn’s access to JCJ’s office was cut off.”
Subsequently, they were physically locked out of the Sydney office and denied access to the company’s software, including email, supplier WhatsApp chat groups, and bank accounts.
The termination letters outlined the following reasoning: “As you are aware, JC Jewels has undertaken a review of the business and has determined that in order to ensure the long-term profitability of the business a restructure must occur.
“As a consequence, your employment is being terminated. Your termination is due to the corporate and financial restructuring of JC Jewels. As a small business employer, we note that redundancy is not payable.”
Legal proceedings were then commenced on 19 April 2024.
Background reading: Diamond dealer ousted from own company
Miller was seeking “a variety of final relief including an order declaring that the conduct of JCJ’s affairs is and has been, oppressive to, unfairly prejudicial to, or unfairly discriminatory against, Miller.”
There was a dispute about who started the company and when. Court documents detail that it was formed in September 2018, and Miller was appointed in August 2020.
It is worth noting that in December 2023, Miller had offered to sell his shares to the other directors. There was also a dispute about the background and details of Lonn Miller’s employment contract.
“Lonn was employed by JCJ as Sales Director by a written document entitled Heads of Agreement and dated 6 October 2020. The agreement provided that 5% Class B Shares would be created as an option to Lonn upon him reaching a target of $2,000,000 in revenue within a 12-month time frame being granted Class B,” the documents state.
However, there was disagreement on whether Lonn reached the $2 million target because it “appears to have involved [Craig] Miller apparently transferring to [brother] Lonn a number of Miller’s [his] clients.”
Miller’s termination letter also raised a dispute about his alleged misuse of a company credit card. He denied there had been any wrongdoing.
In his 7 May decision, Justice Pike noted: ”The suggestion was that Miller had misused his corporate credit card, and this appears to have contributed, at least in part, to the breakdown in trust and confidence referred to by [director and shareholder Stephen] Braun.
“Counsel for the plaintiffs [Miller] took objection to this material being admitted into evidence on the present application. I admitted it over objection. I do not need to, and do not, make any findings in relation to these allegations. Miller strongly denies that there has been any wrongdoing.
“The fact that the allegations have been made, and there is a dispute about them, goes to the present state of the relationship between the plaintiffs on the one hand and the other owners on the other.”
Decisions and determinations
The interlocutory relief sought by Craig and Lonn Miller failed.
In an interesting decision dated 7 May, four days after the hearing, Justice Pike dismissed the interlocutory injunction and awarded costs against the brothers.
The judgement made several salient points as to why he dismissed the interlocutory injunction, including the following: “And contrary to what was contended by the plaintiffs, reinstatement would not be maintaining the status quo, but rather upsetting it.”
Put simply, Justice Ian Pike explained how the company had ‘moved on’ since the Millers had been terminated.
“Reinstating Miller and Lonn would also bring about an outcome which the majority of the owners of the business do not want in circumstances where there appears to be a breakdown in trust and confidence. Miller said as much at the Board meeting held on 14 November 2023,” the documents state.
Background reading: Supreme Court NSW - Judgement 7 May 2024
“I do not accept any contention that the assertions of a loss of trust and confidence made by Mr Braun in his affidavit are somehow confected. The termination of Miller and Lonn suggests quite clearly that the majority of the owners no longer want them working in the day to day operations of the business. Miller also seeks a buy out as his primary final relief.”
As previously reported, when Jeweller contacted JC Jewels in April for comment, director Stephen Braun was asked about the circumstances of the company’s restructuring.
“We're in a competitive market and restructures are not uncommon and often necessary,” he explained.
“While we recognise that restructures can be challenging for all parties involved, we're confident this decision is in the best interest of the company and our customers.”
Lessons learned
This legal case is a fascinating lesson for many small businesses. In particular, it demonstrates how the breakdown of complicated interpersonal relationships may be assessed in court.
The case became the subject of a YouTube video hosted by James d’Apice, founder and principal lawyer of Gravamen - a boutique law firm specialising in shareholder and partnership disputes.
As part of the Coffee and a Case Note series, d’Apice explained that Justice Pike’s decision to dismiss the case was based on the ‘balance of convenience’ test.
This test involves the court determining whether the inconvenience or injury the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury the defendant would suffer if an injunction were granted.
James d’Apice, founder and principal lawyer of Gravamen and hosts a Youtube channel called Coffee and a Case Note.
d’Apice explains the various factors a court must consider when evaluating such a case.
“The court noted that in matters of this type, generally speaking, the court is going to be reluctant to order interlocutory relief. We can understand that this makes sense because we have the expression of the will of the majority of the shareholders and the majority of the board,” d’Apice explains.
“They’ve said, ‘We don’t like plaintiffs one and two anymore, and we want them gone.’ The court is going to be reluctant to force back into the company people who the majority have already said they want gone, and so that weighs against the balance of convenience test.”
He continues: “And so what we have here is the plaintiffs failing in their application to be reinstated as CEO and sales director, and they’re left to fight another day in relation to the buyout of their shares, but that disposes of their application for an interlocutory injunction.”
Following their termination from JC Jewels, Craig and Lonn Miller have since started a new retail business - Jewelco - based in Rose Bay, Sydney.
ASIC records reveal that the Jewelco business name was registered on 12 March 2023, around a month before the Millers were locked out of the JC Jewels office.
Craig Miller was contacted several times prior to publication; however, he did not respond to requests for comment.
Footnote The Diamond Dealers Club of Australia (DDCA) is a member of the World Federation of Diamond Bourses (WFDB). As detailed above, Craig Miller became president of the DDCA around nine months ago; however, bizarrely, the WFDB website still lists Rami Baron as president. This is despite the fact that the WFDB interviewed Miller, as the new president, for an article that was published on its website on 13 August.
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Court documents
Supreme Court NSW - Judgement 7 May 2024
Supreme Court NSW - Costs Order 16 May 2024
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