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Grace v Grace

Grace v Grace

Case [2007] NSWSC 6 18 January 2007

Oppression

Just and Equitable Grounds

Winding Up & Liquidation

Corporate Law & Governance

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Reported Decision:
(2007) 25 ACLC 141

New South Wales

Supreme Court

CITATION: David Alexander Grace v Deborah Sharon Grace & 5 ors [2007] NSWSC 6

HEARING DATE(S): 21, 22 December 2006

JUDGMENT DATE :
18 January 2007

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Brereton J

DECISION: Provisional liquidator appointed to third and fourth defendant companies, but not fifth defendant. Interlocutory injunction granted restraining fifth defendant from alienating encumbering or dealing with assets except with consent of plaintiff or upon 7 days notice to plaintiff, and restraining first and second defendant directors from causing or permitting any prohibited dealing. Order for delivery of books of fifth defendant to neutral premises with all directors to have supervised access.

CATCHWORDS: CORPORATIONS – External administration – winding up – provisional liquidation – circumstances in which appointment made – where winding up application based on oppression and just and equitable grounds – where “buy-out order” more likely than winding up order - where seriously arguable case that plaintiff should be entitled to control of two companies but not third company - where defendants consent to final winding up order but not to appointment of provisional liquidator in respect of the two companies, and oppose winding up of third – where significant risk that company resources will be expended on defence of majority, but otherwise no jeopardy to assets - significance of probable destination of future control of companies

LEGISLATION CITED: (CTH) Corporations Act, ss 233, 461(1)(k)
(CTH) Family Law Act 1975, s 79

CASES CITED: Alessi v The Original Australian Art Co Pty Ltd (1989) 7 ACLC 595
Australian Securities Commission v Solomon (1996) 19 ACSR 73
Re Carapark Industries Pty Ltd (in liq) [1967] 1 NSWR 337
Re Club Mediterranean Pty Ltd (1975) 11 SASR 481; 1 ACLR 36
Constantinidis v JGL Trading Pty Ltd (1995) 17 ACSR 625
Re D G Brims and Sons Pty Ltd (1995) 16 ACSR 559
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688
Re J N Taylor Holdings Ltd; Zempilas v J N Taylor Holdings Ltd (1990) 3 ACSR 600
Lubavitch Mazal Pty Limited v Yeshiva Properties No 1 Pty Limited (2003) 47 ACSR 197
Re McLennan Holdings Pty Ltd (1983) 7 ACLR 732; 1 ACLC 786
Natural Extracts Pty Ltd v Stotter (unreported, FCA, 18 December 1998, Hely J)
O’Toole & O’Toole (1991) 105 FLR 339; (1991) 15 Fam LR 265; (1992) FLC 92-285
Rural Industries Cooperative Society Ltd v Porky Pigs Pty Ltd (1988) 12 ACLR 794
Triulcio v Chase Property Investments Pty Ltd [2003] NSWSC 861
Wimborne v Brien (1997) 23 ACSR 576
Zempilas v JN Taylor Holdings Ltd (No 2) (1990) 55 SASR 103; 3 ACSR 518

PARTIES: David Alexander Grace (plaintiff)
Deborah Sharon Grace (first defendant)
Julienne Grace (second defendant)
Nevilda Holdings Pty Ltd (third defendant)
Nevilda Investments Pty Ltd (fourth defendant)
Sharander Pty Ltd (fifth defendant)
Dutchie Pty Ltd (sixth defendant)

FILE NUMBER(S): SC 5626/06

COUNSEL: D L Williams SC w N…

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 Grace v Grace

Details

AGLC: Grace v Grace [2007] NSWSC 6
Case: [2007] NSWSC 6
Decision Date: 18 January 2007

CaseChat Overview and Summary

In the matter of Grace v Grace, the plaintiffs, who were shareholders in three companies, sought a winding up order on the grounds of oppression and the just and equitable principle. The defendants, who were also shareholders and directors, opposed the winding up of two of the companies but did not object to the winding up of the third. The court was required to decide whether the appointment of a provisional liquidator for the two companies in question was appropriate, given the circumstances of the case.

The court considered the nature of the dispute and the likelihood of the plaintiff's case succeeding. It was found that there was a seriously arguable case that the plaintiff should be entitled to control of two of the companies, but not the third. The court also noted that a "buy-out order" was more likely than a winding up order, but that there was a significant risk that company resources would be expended on the defence of the majority shareholders. The court held that the appointment of a provisional liquidator was appropriate, given the potential for the majority shareholders to dissipate company assets in the defence of the winding up application.

The court emphasised the importance of the probable destination of future control of the companies in making its decision. The court found that the risk of dissipation of company assets outweighed the risk of prejudice to the minority shareholders, and that the appointment of a provisional liquidator was necessary to protect the companies' assets. The court made a final winding up order in respect of the third company, but did not appoint a provisional liquidator for the other two companies, given the defendants' consent to the winding up order.

In summary, the court found that the appointment of a provisional liquidator was appropriate in this case, given the risk of dissipation of company assets and the probable destination of future control of the companies. The court made a final winding up order in respect of the third company, but did not appoint a provisional liquidator for the other two companies, given the defendants' consent to the winding up order.

Orders