Cowling v Mekken - [2015] VSC 196

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S CI 2012 03527

WAYNE ASHLEY COWLING AND SOUTHERN PHOENIX PTY LTD	Plaintiffs
v
JOHN MEKKEN AND ELIZABETH MEKKEN	Defendants

S CI 2012 05820

JOHN MEKKEN	Plaintiff
v
WAYNE ASHLEY COWLING AND SOUTHERN PHOENIX PTY LTD	Defendants

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JUDGE:	Randall AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	20–24, 27 May, 4–6 June 2013
DATE OF JUDGMENT:	8 May 2015 (revised 12 May 2015)
CASE MAY BE CITED AS:	Cowling v Mekken
MEDIUM NEUTRAL CITATION:	[2015] VSC 196

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CORPORATIONS – Oppression – Corporations Act 2001 (Cth) ss 232, 233 – Misappropriation of company’s funds – Breach of fiduciary duties – Breach of statutory duties.

CORPORATIONS – Leave to bring proceeding – Corporations Act 2001 (Cth) s 237 – Whether in the best interests of the company that leave be granted.

CONTRACT – Oral agreement for wages.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs in S CI 2012 03527 and Defendants in S CI 2012 5820	Mr M J Stirling	Hibbert & Hodges
For the Defendants in S CI 2012 03527 and Plaintiff in S CI 2012 5820	Mr P J Matthews	Galbally & O’Bryan

HIS HONOUR:

The first plaintiff (Wayne Cowling) as a member of Southern Phoenix Pty Ltd (‘the company’) has filed a proceeding pursuant to ss 232 and 233 of the Corporations Act2001 (Cth) (‘the Act’) claiming relief with respect to oppression as a member of the company. The conduct complained of has arisen during what purported to be the orderly winding up of the company’s affairs. Mr Cowling has alleged that: (1) the first defendant, John Mekken (the company’s other director), and the second defendant, Mrs Mekken (a shareholder in the company), appropriated sale proceeds with respect to two sales of equipment which should have been paid to the company; and (2) that Mr and Mrs Mekken appropriated a substantial part of a tax refund payable to the company. Mr Cowling has sought leave pursuant to s 237 of the Act to prosecute the company’s claim for return of the funds. Mr Mekken contends that that he was owed wages and that he was entitled to appropriate such sums in reduction of the amount owed to him by the company. Mr Mekken has filed a claim in respect of the balance of unpaid wages.

The proceeding

An originating process has been filed on behalf of the company and Mr Cowling on 19 June 2012. The originating process relies upon ss 232 and/or 233 of the Act, namely the oppression provisions and, pursuant to s 237 of the Act, seeks leave to bring an action on behalf of the company against the defendants. The orders sought are as follows:

1.An order for the purchase, by the second defendant (Mrs Mekken) of the second plaintiff s 98 shares in the company at a value to be determined by the Court taking into account the defendants’ oppressive conduct.
2.Orders to effect a distribution of the…

Grounds of appeal

[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.

Continue reading Cowling v Mekken

Details

AGLC: Cowling v Mekken [2015] VSC 196
Case: [2015] VSC 196
Decision Date: 8 May 2015 (revised 12 May 2015)

CaseChat Overview and Summary

Cowling, a former director of Mekken Pty Ltd, sought leave to bring an action against Mekken Pty Ltd, its directors, and the company's accountant. Cowling alleged that his shareholding had been unfairly treated and that the company's funds had been misappropriated. The case was heard in the Federal Circuit Court of Australia. The applicants sought leave to bring proceedings against the company and its directors, claiming oppression under the Corporations Act 2001 (Cth) and alleging misappropriation of company funds, breaches of fiduciary duties, and breaches of statutory duties. The applicants also sought leave to amend their statement of claim to include an additional cause of action for an oral agreement for wages.

The court was required to determine whether it was in the best interests of the company that leave be granted. This involved assessing whether the applicant's claims had reasonable prospects of success, whether the applicant had acted in good faith, and whether the application was in the interests of justice. The court also considered the effect of the applicant’s conduct on the company and the public interest in facilitating the resolution of corporate disputes.

The court found that the applicant had reasonable prospects of success on the oppression claim, as there were serious questions to be tried concerning the misappropriation of company funds and breaches of fiduciary and statutory duties. The court also noted that the applicant had acted in good faith and that the application was in the interests of justice. The court concluded that the leave should be granted, as it was in the best interests of the company to allow the proceedings to continue. The court also ordered that the applicants be granted leave to amend their statement of claim to include the additional cause of action for an oral agreement for wages.

The court granted leave for the applicants to bring the proceedings against the company and its directors, and also allowed the amendment of the statement of claim. The court found that the applicants had demonstrated that the proposed proceedings had reasonable prospects of success, and that the granting of leave was in the best interests of the company and the public interest.

Orders