Cowling v Mekken

Case [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:

  1. 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

  1. 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…

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AGLC
Cowling v Mekken [2015] VSC 196
Case
[2015] VSC 196
Decision Date

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

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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