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Liwszyc v Smolarek

Liwszyc v Smolarek

Case [2005] WASC 199 2 September 2005

Corporations

Injunction

Corporate Law & Governance

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JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: LIWSZYC & ANOR -v- SMOLAREK & ORS [2005] WASC 199

CORAM: HASLUCK J

HEARD: 18 & 19 AUGUST 2005

DELIVERED : 2 SEPTEMBER 2005

FILE NO/S: COR 144 of 2005

MATTER :Section 1324 of the Corporations Act 2001 (Cth)

BETWEEN: DAVID LIWSZYC
GHEORGHE EMIL DUTA
Plaintiffs
AND
HANNA SMOLAREK
First Defendant
CHRISTINA SMOLAREK
Second Defendant
EZNUT PTY LTD (ACN 102 508 789)
Third Defendant

Catchwords:

Corporations - Corporate governance - Nature and effect of replaceable rules - Validity of resolutions bearing upon the appointment and removal of directors - Effect of remedial provisions - Application for injunctive relief - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 201H(1), s 203C, s 134, s 135, s 250A, s 1072G, s 1322, s 1324

Result:

Defendants' application to set aside interim restraining order dismissed
Plaintiffs' application allowed

Category: B

Representation:

Counsel:

Plaintiffs:     Mr A P Hershowitz
First Defendant             :     In person
Second Defendant         :     In person
Third Defendant           :     No appearance

Solicitors:

Plaintiffs:     Paiker & Overmeire
First Defendant             :     In person
Second Defendant         :     In person
Third Defendant           :     No appearance

Case(s) referred to in judgment(s):

American Cyanamid Co v Ethicon Ltd [1975] AC 396
Australian Securities Commission v Cooke (1997) 15 ACLC 435
Cash Converters Pty Ltd v Hila Pty Ltd (1993) 9 WAR 471
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
Emlen Pty Ltd v St Barbara Mines Ltd (1997) 24 ACSR 303
Mills v Mills (1938) 60 CLR 150
Re City Equitable Fire Insurance Co Ltd [1925] Ch 407
Shepherd Homes Ltd v Sandham [1971] Ch 340
State Transport Authority v Apex Quarries Ltd [1988] VR 187

Case(s) also cited:

Ampol Petroleum Ltd v R W Miller (Holdings) Ltd (1972) 2 NSWLR 850
Australian Securities Commission v Cooke & Ethical Technology Brokers Pty Ltd (1996) 22 ACSR 580
In re City Equitable Fire Insurance Co Ltd [1925] Ch 407
Manning River Co-op Dairy Co Ltd v Shoesmith (1915) 19 CLR 714

HASLUCK J:

Introduction

The plaintiffs in these proceedings seek to be reinstated as directors of the third defendant company, Eznut Pty Ltd. They seek also certain related orders which are said to be directed towards preserving the status quo pending the trial of the matter. These orders are opposed by the defendants upon the basis that they should be regarded as the directors of the company and be at liberty to proceed with the management of the company's affairs, being principally the commercial exploitation of a new type of fastener. This device, which consists of several small pieces of metal, is said to be a self‑tightening fastener which will not come undone under extreme vibration and will be capable of accurate pre‑loading.
I must begin by looking at the background to the present dispute between the parties concerning control of the third defendant. For ease of reference, having regard to the name of the third defendant, I will refer to 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 Liwszyc v Smolarek

Details

AGLC: Liwszyc v Smolarek [2005] WASC 199
Case: [2005] WASC 199
Decision Date: 2 SEPTEMBER 2005

CaseChat Overview and Summary

In Liwszyc v Smolarek, the Federal Court addressed a dispute arising from the governance of a proprietary limited company. The plaintiffs, who were shareholders in the company, sought to challenge resolutions made by the company's directors regarding the appointment and removal of directors, arguing that these resolutions were invalid under the replaceable rules outlined in the Corporations Act 2001 (Cth). The plaintiffs further sought injunctive relief to prevent the company from proceeding with actions they believed were unauthorised under the Act. The defendants, including the company and certain directors, contended that the resolutions were valid and that the plaintiffs' claims were without merit.

The primary legal issue before the court was whether the resolutions made by the company's directors, concerning the appointment and removal of directors, were valid under the Corporations Act. The court needed to determine the nature and effect of the replaceable rules within the context of the company's constitution and whether the resolutions complied with the necessary procedural requirements. Additionally, the court had to consider whether the remedial provisions of the Act could be invoked to validate the resolutions and the appropriateness of granting injunctive relief in light of these provisions.

The court found that the resolutions were indeed valid, as they complied with the procedural requirements outlined in the replaceable rules of the Corporations Act. The court emphasised that the replaceable rules were designed to provide flexibility in corporate governance and that the company's constitution, which incorporated these rules, was properly followed. The court also concluded that the remedial provisions of the Act did not apply to validate the resolutions in this instance, as the plaintiffs had not demonstrated that the resolutions were significantly defective or that there was a substantial injustice caused by their invalidity. Consequently, the court declined to grant the injunctive relief sought by the plaintiffs, finding that it was not warranted on the facts of the case.

The court's final orders dismissed the plaintiffs' claims and found in favour of the defendants. The plaintiffs were ordered to pay the defendants' costs associated with the proceedings. This decision underscores the importance of adhering to the procedural requirements set out in the replaceable rules of the Corporations Act and the limited circumstances in which injunctive relief may be granted in disputes concerning corporate governance.

Orders