JAB Nominees (Aust) Pty Ltd v Auswild

JAB Nominees (Aust) Pty Ltd brought proceedings against its shareholders, Auswild, alleging oppressive conduct by the directors and related shareholders. The defendants argued that the directors' decision to file and maintain a proceeding against them constituted oppressive conduct, a breach of directors' duties, and a breach of fiduciary conflict rules. The defendants also sought relief in the form of equitable compensation and an order that the directors indemnify the corporation for the costs incurred in the proceeding. The defendants further sought an indemnity costs order against the directors and related shareholders, and a gross sum costs order to save time and costs.

The court examined whether the directors' actions in filing and maintaining the proceeding against the defendants amounted to oppressive conduct, a breach of the duty to act in good faith in the best interests of the corporation, and a breach of the fiduciary conflict rule. The court also considered whether the 'but for' test was a causative requirement in a claim for equitable compensation for a breach of the conflict rule. Furthermore, the court assessed whether the proceeding had no chance of success, and whether the failure of the fraud claims was sufficient to justify an indemnity costs order. The court also examined whether a gross sum costs order would result in significant savings in time and costs.

The court held that the directors' decision to file and maintain the proceeding against the defendants was not oppressive conduct, nor did it breach the directors' duties or the fiduciary conflict rule. The court found that the 'but for' test was not a causative requirement in a claim for equitable compensation for a breach of the conflict rule, and that the burden of proof of causation in such a claim was on the defendants. The court also held that the proceeding had a reasonable prospect of success, and that the failure of the fraud claims was not sufficient to justify an indemnity costs order. Finally, the court held that a gross sum costs order was not appropriate in this case due to the complexity of the costs orders.

The court dismissed the defendants' claims and ordered the defendants to pay the corporation's costs of the proceeding on an indemnity basis. The court also ordered that the directors and related shareholders pay the defendants' costs of the proceeding on an indemnity basis, and that the defendants pay the corporation's costs of the proceeding on a costs in the cause basis.