Someone recently bought our

students are currently browsing our notes.

X

Shareholders Remedies Oppression Notes

Law Notes > Business Associations 1 Notes

This is an extract of our Shareholders Remedies Oppression document, which we sell as part of our Business Associations 1 Notes collection written by the top tier of University Of New South Wales students.

The following is a more accessble plain text extract of the PDF sample above, taken from our Business Associations 1 Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Class 18 - Shareholders Remedies: Oppression The Statutory Remedy for Oppression
[8.180] Early interpretationsRemedies for oppression existed in the UK since 1947 - amendments to the original provision as enacted in Australia have been continual - generally they have been directed at freeing the provisions from judicial fetters placed upon predecessors
? Surprisingly the first two decisions on the sections interpreted its scope broadly - it was then to be progressively confined L C B Gower, The Principles of Modern Company Law

Scottish Co-op Wholesale Society v Meyer (the first) - two petitioners (MD and minority shareholders) of a subsidiary formed by the co-op to enable it to enter the rayon industry. Later the need to operate through a separate company ceased, so they ran it to the ground

Held: The case of oppression was established. The HOL ordered a payout to the minor shareholders at a fair value (the price had the oppression had not occurred)

Re H R Harmer - the founder of a stamp dealer firm incorporated it in 1947, giving his two sons directorships and a majority shareholding. The father essentially had voting control an ran the business as his own, asserting he was entitled to. His unbusinesslike manner made the company unsuccessful

Held: Oppression was made out - he demoted the father to 'consultant' and prohibited him from interfering with the company other than pursuant to board division.

The definition of oppression was said to mean "burdensome, harsh and wrongful" with the conduct complained relating to the complainant in their capacity as member and to the conduct of the company's affairs. It has to be a course of conduct, not just an act of impropriety

But in Re Bellador Silk the petitioner failed because the proceedings were brought for a collateral purpose (thus an abuse of process) and concerned the petitioner as a director rath than member

And Re Five Minute Car Wash - though the MD was "unwise, inefficient and careless" and the controlling shareholders failed to exercise controlled; oppression was not established sin the MD didn't act "unscrupulously, unfairly or with any lack of probity". Mere omissions of th controlling shareholders weren't "designed to achieve some unfair advantage"

Re Tivoli Freeholds Ltd [1972] VR 445 Menhennitt J began by noting that the definition of oppression depends on all the circumstances and doesn't admit universal definition. Some of the matters included are:

(1) Those alleging that the affairs of the company were conducted in a manner oppressiv to them must establish conduct which is "unfair or...burdensome harsh and wrongful" to the other members of the company or some of them, and lacks that degree of probity which they are entitled to expect in the conduct of the company's affairs" His honour interpreted the lack of probity as being one reason that can independently lead oppression - it is not expressed as an additional requirement but rather in the alternative

(5) Oppression may occur even although all the members of a company are treated equally. The unfairness may arise by reason of an advantage to a parent company (6) It must also be established that oppression results from "some overbearing act or attitude on the part of the oppressor" - some course of conduct that is unfair (looking both from the POV of the oppressor and the oppressed) (7) Further, it wasn't intended to give jurisdiction to the court to interfere with internal management where directors act honestly without any purpose of advancing persona interests at the expense of the company
[8.195] The modern grounds of relief?The grounds in part 2F.1 are the result of progressive refinement of the section. On application of current and former members (s 234) a court can make a wide range of remedial orders under s 233 if the conduct of the company's affairs, actual or proposed action by/on behalf of the company or a resolution proposed is either: o Contrary to the interests of the members as a whole o Oppressive to, unfairly prejudicial to, unfairly discriminates against a member or members whether in that capacity or any other capacity (s 232) The words unfairly prejudicial to were formulated by an English company law review that considered "oppressive" too strong a word and recommend the section be extended to include visible departure from standards of fair dealing and a violation of the conditions of fair play on which every shareholder entrusting money to the company is entitled to rely. Possible instances included" o Directors appointing themselves to post and paying themselves excessive salaries to deprive shareholders of dividends o Refusing to register personal representatives in respect of shares devolving on them in that capacity and thus forcing the personal representatives to sell their shares to the directors at an adequate price o Issuing shares to directors on advantageous terms o Passing non-cumulative preference dividends on shares held by a minority The words unfairly discriminatory were adopted in an NZ committee but never explained properly

?

Wayde v NSW Rugby League looks at the degree to which courts have departed from the standard of "burdensome, harsh and wrongful" Wayde v New South Wales Rugby League Ltd (1985) 59 ALJR 798

Facts: The NSWRL was incorporated with the object including 'fostering and control of the game and such action as may be conducive to its best interest' - the CC authorizing the BO to determine which team participates in competitions. The board in 1984 consulted with district clubs concerning the conduct of a premiership competition - calling for applications entry. After consultation, the board adopted a proposal that the number of competing teams be reduced from 13 to 12 and the inclusion of 'Wests' was refused. Two members of Wests sought relief under Pt 2F.1 (under the predecessor provisions)

Mason ACJ, Wilson, Deane and Dawson JJ noted that this was a decision made in good faith taking relevant considerations into account and a decision made within power.?

The decision was taken honestly in pursuit of the object of fostering the game, as per its MOA The board was obliged to look at the difficulties presented by a competition occupyin too long a period of the year and exercise its power appropriately. It is not to be suggested that they didn't know the consequences for Wests

Nonetheless the appellants submitted that though the board could conclude that a competition of 12 was preferable, the facts that 12 wasn't wholly unworkable and that West were viable competitors lead to the conclusion that the prejudice to them outweighs the benefits to the League such as to be unfair

? This is answered by the fact that the League was constituted to promote the best interests of the Sport and empowered to decide which teams participated - these clu chose to incorporate on this basis and Wests fully appreciated that it had no secure right to participate in the competition
? Here, the Board was confronted with the interests Wests on one hand and that of the whole League on the other - given their special experience and the bona fide exercis of the power, a court must exercise caution in determining an application under s 233 to avoid an unwarranted assumption of the management in the company
? The appellants faced a difficult task in proving that the decision was unfairly prejudic to Wests and not in the best interests of the company. The effect of the decisions on Wests were harsh - but it hasn't been shown that they were oppressive or unfairly prejudicial or discriminatory such was to warrant the conclusion that the affairs o f th company were being conducted in this way Brennan J noted the uselessness of the nature of the phrase "interests of the members as whole" in cases where the exercise of a power by its nature was to discriminate amongst members. Thus the primary consideration was whether the relevant expressions were "oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member"Where directors are empowered to discriminate, a decision made in good faith, isn't without more "oppressive...discriminatory against, a member" - there must be actua

Buy the full version of these notes or essay plans and more in our Business Associations 1 Notes.