IN THE MATTER OF FINANCE & GUARANTEE COMPANY PTY LTD (ACN 000 032 548) (AND OTHERS ACCORDING TO THE SCHEDULE)
BETWEEN:
JAMES RONALD AUSWILD & ANOR (according to the attached Schedule)
Plaintiffs
v
JAMES AUSWILD BERGMULLER & ANOR (according to the attached Schedule)
Defendants
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JUDGE:
Croft J
WHERE HELD:
Melbourne
DATES OF HEARING:
30 & 31 August 2023, 1 September 2023
DATE OF JUDGMENT:
6 October 2023
CASE MAY BE CITED AS:
Auswild v Bergmuller
MEDIUM NEUTRAL CITATION:
[2023] VSC 589
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CORPORATIONS — Directors’ duties — Conflict of interest — Where two groups of directors propose alternative resolutions for recovery of judgment debt — Whether defendant directors had conflict of interest in voting on resolutions for recovery of judgment debt from themselves — Whether directors representing plaintiffs have conflict in proposing alternative resolution to act on behalf of company group — Whether court intervention in ordinary decision‑making process of company group is justified — Where defendants propose alternative resolution to appoint independent insolvency practitioner — Where ongoing conflict and bitterness between two shareholder groups necessitates a clearly independent process for recovery of judgment debt — Where defendants’ undertaking to appoint independent insolvency practitioner is practical resolution to conflict.
CORPORATIONS — Oppression proceeding — Whether defendant directors engaged in oppressive conduct in voting down resolution of directors representing plaintiffs — Where defendants’ conduct not commercially unfair or contrary to accepted standards of corporate behaviour — Whether defendant directors engaged in oppressive conduct in passing resolution to establish committee — Where defendant directors’ resolution not commercially unfair nor would any reasonable director consider unfair or unreasonable — Not oppressive for directors to make legitimate and good faith business decisions despite other differences of opinion — Mark Gerard Ireland as Executor of the Estate of the late Charles Stuart Gordon v Sandra Jane Retallack [2011] NSWSC 846 — Corporations Act 2001 (Cth), ss 232(d) and (e) and 233 — Proceeding dismissed.
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APPEARANCES:
Counsel
Solicitors
For the Plaintiffs
Mr SV Shepherd
Lander & Rogers
For the Defendants
Mr PW Collinson KC and Ms FJ Bentley
Shanahan Tudhope Lawyers (with KCL Law as Town Agent)
HIS HONOUR:
Introduction
This proceeding commenced by application dated 5 December 2022 (as amended 12 December 2022) under s 233 of the Corporations Act 2001 seeking interlocutory and final relief for oppression (“the Application”).
The Plaintiffs are 48% shareholders in the Preston Motors Group of companies (“PMG”). The defendant directors, James Auswild Bergmuller and Peter Parker (“Bergmuller” and “Parker” respectively), who represent the other 52% shareholders, owe the PMG $19.8 million pursuant to a judgment debt.[1] On 23 November 2022 the First Defendant, Bergmuller (using his casting vote), together with the Second Defendant, Parker, voted down the resolution put by directors representing the Plaintiffs, Graham Hamilton and Brian Silvia (“Hamilton” and “Silvia” respectively) and voted up his own resolution on how to recover the judgment debt.
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Auswild v Bergmuller [2023] VSC 589
Case
[2023] VSC 589
Decision Date
CaseChat Overview and Summary
Auswild Pty Ltd brought an action against Bergmuller, a director of the company, regarding the recovery of a judgment debt. The company's directors were divided into two groups, each proposing different resolutions for recovering the debt. The directors representing the plaintiffs argued that the Bergmuller and his group had a conflict of interest in voting on the resolutions. The case was brought before the Supreme Court of New South Wales to determine whether the directors had acted in a manner that amounted to oppressive conduct under the Corporations Act 2001 (Cth).
The court had to decide if the defendant directors had a conflict of interest in voting on resolutions for the recovery of the judgment debt, and whether the directors representing the plaintiffs had a conflict in proposing an alternative resolution. Additionally, the court needed to assess if the court should intervene in the company’s ordinary decision-making process and if the defendants' proposal to appoint an independent insolvency practitioner was a justified resolution to the conflict.
The court found that the Bergmuller and his group did not have a conflict of interest in voting on the resolutions for the recovery of the judgment debt. It was also determined that the directors representing the plaintiffs did not have a conflict in proposing an alternative resolution. The court concluded that the defendants' proposal to appoint an independent insolvency practitioner was a practical resolution to the ongoing conflict between the shareholder groups. The court held that the defendants’ conduct was not oppressive because it was not commercially unfair or contrary to accepted standards of corporate behaviour. The resolution to establish a committee, according to the court, was not unfair or unreasonable and did not amount to oppressive conduct. Therefore, the proceeding was dismissed.
The court dismissed the proceeding brought by Auswild Pty Ltd against Bergmuller, finding that the directors' actions did not constitute oppressive conduct as defined under the Corporations Act 2001 (Cth).