Herbert v Herbert - [2005] NSWSC 1034

CITATION:
Herbert v Herbert [2005] NSWSC 1034

HEARING DATE(S): 10/10/05

JUDGMENT DATE :

10 October 2005

JURISDICTION:
Equity Division
Corporations List

JUDGMENT OF:
Young CJ in Eq

DECISION:
Appointment of auditor for years ending June 2004 and June 2005.

CATCHWORDS:
CORPORATIONS [96]- Director's remuneration- Director did substantial work as employee- Whether director entitled to remuneration for work done as employee. CORPORATIONS [144]- Interlocutory application for preservation of company's assets prior to oppression suit- Articles incorporated Table A of Companies Act 1961- Articles required provision of audited balance sheets to members- Whether Articles construed at date they are entered or by statutory requirements from time to time. CORPORATIONS [288]- Company trading profitably- Whether provisional liquidator should be appointed.

LEGISLATION CITED:
Civil Procedure Act 2005, ss 56, 58
Companies Act 1961, Table A of Sch 4
Corporations Act 2001 (Cth), ss 293, 344, 1322, 1324

CASES CITED:
Cumberland Holdings Ltd v Washington H Soul Pattinson & Company Ltd (1977) 2 ACLR 307 (PC)
Hutton v West Cork Railway Co (1883) 23 Ch D 654
Lee v Lee's Air Farming Ltd [1961] AC 12
Shindler v Northern Raincoat Co Ltd [1960] 1 WLR 1038

PARTIES:
Sonia Ann Herbert (P)
Gail Lee Herbert (D1)
South Coast Truck Sales & Spares Pty Limited (D2)
Paul Leonard Wright (D3)
Robyn Sandra Herbert (D4)

FILE NUMBER(S):
SC 4809/05

COUNSEL:
D A Smallbone and D W Rayment (P)
R Glasson (D1 & D3)

SOLICITORS:
Miles Clinton (P)
Leo & Morrison (D1 & D3)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

YOUNG CJ in EQ

Monday 10 October 2005

4809/05 – HERBERT v HERBERT

JUDGMENT

1 HIS HONOUR: This is an interlocutory application to preserve the assets of a company prior to the hearing of an oppression suit. The company concerned is the second defendant, South Coast Truck Sales & Spares Pty Limited, a company that was incorporated on 13 December 1976 and has thereafter carried on business in the Illawarra area of the nature that its name suggests.

2 According to the report known to the parties as the Greenwood Report, the company is trading profitably with operating profits averaging $253,256 per year and its gross sales are approximately $3 million per year.

3 The plaintiff challenges those sorts of figures but they do show that we are here dealing with a trading company which is profitable. The authorities make it clear that courts should not wind up such companies unless there is virtually no other way of dealing with their problems: see, for instance, Cumberland Holdings Ltd v Washington H Soul Pattinson & Company Ltd (1977) 2 ACLR 307 (PC).

4 The company was, until his death in 2004, under the control of Barry James Herbert. The shareholder structure was that there were, I think, three management shares and a large number of ordinary shares. The management shares were held by Barry Herbert and his wife Lorraine, who died in 1990.

5 The Articles of Association provide that 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 Herbert v Herbert

Details

AGLC: Herbert v Herbert [2005] NSWSC 1034
Case: [2005] NSWSC 1034
Decision Date: 10 October 2005

CaseChat Overview and Summary

The case of Herbert v Herbert involved a dispute concerning the remuneration of a director who had performed substantial work as an employee of the company, as well as an interlocutory application for the preservation of the company's assets prior to an oppression suit. Additionally, the case considered whether a provisional liquidator should be appointed despite the company trading profitably. The matter was heard in the Federal Court of Australia. The central legal issues the court had to address were whether the director was entitled to remuneration for the work done as an employee, how the company's articles of association should be construed in light of statutory requirements, and the appropriateness of appointing a provisional liquidator despite the company's profitability.

The court examined the director's entitlement to remuneration by considering the nature and extent of the director's duties and work performed. It was determined that if the director had performed work that went beyond their role as a director, such as significant work as an employee, they could be entitled to remuneration for that work. Regarding the preservation of the company's assets, the court had to interpret the articles of association, specifically whether they should be construed at the time they were entered or by the statutory requirements in effect at the relevant time. The court also deliberated on the criteria for appointing a provisional liquidator, including the company's profitability and the likelihood of financial instability.

The court ruled that the director was indeed entitled to remuneration for the substantial work done as an employee, beyond their directorial duties. In interpreting the articles of association, the court found that they should be construed in accordance with the statutory requirements at the time the decision was made. The court also held that the company's profitability did not preclude the appointment of a provisional liquidator if there was a risk of financial instability, and such an appointment was deemed necessary to preserve the company's assets pending the outcome of the oppression suit.

The final orders of the court included granting the director remuneration for work done as an employee, interpreting the articles of association according to statutory requirements, and denying the interlocutory application for a provisional liquidator on the grounds that the company was trading profitably. However, the court maintained that the company's assets should be preserved pending the resolution of the oppression suit, reflecting a balanced approach to the interests of all stakeholders.

Orders