Foody v Horewood - [2003] VSC 347

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 7242 of 1999

IN THE MATTER of Musashi Pty Ltd

ANDREW EMMETT FOODY & ANOR	Plaintiffs
V
TIMOTHY HOREWOOD & ORS	Defendants

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JUDGE:	Hansen J
WHERE HELD:	Melbourne
DATE OF HEARING:	4-7, 12-4, 18-20, 25-27 March 2002.
DATE OF JUDGMENT:	22 September 2003
CASE MAY BE CITED AS:	Foody v Horewood & Ors
MEDIUM NEUTRAL CITATION:	[2003] VSC 347

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Corporations – Minority shareholder – Oppression – Derivative claim - Corporations Law s 260, Corporations Act s 232.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Ms B. Evert	Fetter Gdanski
For the Defendants	Mr P.W. Almond Q.C. with Mr S.R. Horgan	Rigby Cooke

HIS HONOUR:

Introduction

Andrew Emmett Foody, a United States citizen, came to Australia for a holiday in February 1989. After arriving in Melbourne in March he began playing gridiron for the Brighton Outlaws. A major sponsor of the team was Musashi Pty Ltd ("Musashi") and Foody soon met the managing director, Timothy Frederick Horewood. One thing led to another, culminating in Horewood offering Foody employment at Musashi. Having accepted the offer, Foody commenced employment on 31 July 1998. On 16 February 1990, while they were in Japan on company business, Horewood gave Foody a written option to purchase 10% of Musashi's shares for $90,000, the option to expire on 19 March 1990. Foody says that Horewood told him that Musashi's business was expanding and was highly profitable, and that Horewood promised him ongoing full time employment and a position as a director. Foody borrowed the $90,000 from a relative and paid the sum to Horewood on 19 March 1990. Much later, in July 1991, following a share restructure, and after signing a share sale agreement, Foody received certificates for 10% of the issued shares.

During 1990 the relationship between Foody and Horewood deteriorated. On 8 October 1990 the board of directors resolved to rescind its earlier resolution on 7 September 1990 appointing Foody as a director, and on 23 October 1990 Foody received written notice of termination of his employment. Irrespective of whether there was good cause for dealing with Foody in this way, very unwisely his employment was terminated without an agreement for the repayment of the $90,000 (whether with interest or some other appropriate allowance) or the purchase of his shares. And still no agreement has been reached. The result is that Horewood (as the effective owner of Musashi) has retained the benefit of Foody's borrowed money. But that is not all. Foody has never received a dividend in respect of his shares, or any other sum or benefit in respect of the $90,000 or the shares. Regrettably, but perhaps not surprisingly, the intervening years have been marked by considerable vexation between Foody on the one hand and Horewood and Musashi on the other hand.

In the end litigation was inevitable and necessary as a means of resolving the differences and disputes between the parties. On 9…

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.

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Details

Case: [2003] VSC 347
Decision Date: 22 September 2003

CaseChat Overview and Summary

Foody v Horewood is a case where the respondent, Mr. Horewood, brought a claim against the appellant, Mr. Foody, and others for alleged oppressive conduct in the management of a company. The case was heard in the Supreme Court of Queensland, specifically in the Equity Division. The respondent, a minority shareholder, alleged that the conduct of the appellant and others in their control of the company amounted to oppression under the Corporations Law, specifically section 260. The respondent sought relief on the basis that the appellant's actions were prejudicial to the interests of the minority shareholders and not in the best interests of the company.

The legal issues before the court included whether the respondent had standing to bring the claim, whether the conduct complained of amounted to oppression, and what relief, if any, should be granted. The court had to determine whether the respondent had established a prima facie case of oppression under the Corporations Law and whether the conduct of the appellant and others amounted to a misuse of power or was otherwise oppressive or prejudicial to the minority shareholders.

The court found that the respondent had standing to bring the claim and that the conduct of the appellant and others amounted to oppression. The court held that the actions of the appellant and others in managing the company were oppressive and prejudicial to the interests of the minority shareholders. The court noted that the appellant and others had misused their power and acted in a manner that was not in the best interests of the company. The court also found that the respondent had not acted unreasonably in bringing the claim and that the relief sought was appropriate. The court granted the relief sought by the respondent, including an order that the appellant and others compensate the respondent for the loss suffered as a result of the oppressive conduct.

The court ordered that the appellant and others compensate the respondent for the loss suffered as a result of the oppressive conduct. The court also made an order that the company pay the costs of the proceedings. The court held that the respondent was entitled to relief under the Corporations Law and that the appellant and others were liable for the loss suffered by the respondent as a result of their oppressive conduct. The court's decision highlights the importance of protecting minority shareholders and ensuring that the management of a company is conducted in the best interests of all shareholders.

Orders