McLaughlin v Dungowan Manly Pty Ltd - [2007] NSWSC 197

Reported Decision:
61 ACSR 335

New South Wales

Supreme Court

CITATION: McLaughlin v Dungowan Manly Pty Ltd [2007] NSWSC 197

HEARING DATE(S): 23/02/07, 27/02/07, 28/02/07, 02/03/07, 07/03/07

JUDGMENT DATE :
9 March 2007

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Application for interlocutory injunction dismissed

CATCHWORDS: CORPORATIONS - company title home unit company - action by directors to impose levy upon shareholders - whether objects for which levy imposed are objects permitted by constitution - whether levying power of directors exercised for proper purpose - whether forfeiture and sale of plaintiffs' shares for non-payment of levy would be oppressive, unfairly discriminatory or unfairly prejudicial

LEGISLATION CITED: Corporations Act 2001 (Cth), ss.124, 232, 251A(6), 258C

CASES CITED: Ashburton Oil NL v Alpha Mining NL (1971) 123 CLR 614
Ding v Sylvania Waterways Ltd (1999) 42 NSWLR 424
Federal Commissioner of Taxation v Western Suburbs Cinemas Ltd (1952) 86 CLR 102
Gambotto v WCP Ltd (1995) 182 CLR 432
Ghabrial v Romolly Pty Ltd (1991) 5 ACSR 611
Goldsmith v Colonial Finance Mortgage Investment and Guarantee Corporation Ltd (1909) 8 CLR 241
Gray v L. Stevenson & Sons Ltd (1899) 25 VLR 476
Harlowe’s Nominees Pty Ltd v Woodwide (Lakes Entrance) Oil Co NL (1968) 121 CLR 483
Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821
Kirwan v Cresvale Far East Ltd (2002) 44 ACSR 21
Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 59 ACSR 444
McLaughlin v Dungowan Manly Pty Ltd (2006) 59 ACSR 686
New Balkis Eersteling Ltd v Rand Gold Mining Co [1904] AC 165
Nguirli Ltd v McCann (1953) 90 CLR 425
Re Agriculturist Cattle Insurance Co (Stanhope’s Case) (1866) LR 1 Ch App 161
Spackman v Evans (1868) LR 3 HL 171
Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 447
Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285

PARTIES: Patrick David McLaughlin and Jennifer Therese McLaughlin - Plaintiffs
Dungowan Manly Pty Limited - Defendant

FILE NUMBER(S): SC 4924/06

COUNSEL: Mr S.J. Burchett - Plaintiffs
Mr D.A. Priestley - Defendant

SOLICITORS: Turner Freeman - Plaintiffs
Pike Pike & Fenwick - Defendant

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

BARRETT J

FRIDAY, 9 MARCH 2007

4924/06 PATRICK DAVID McLAUGHLIN & ANOR v DUNGOWAN MANLY PTY LTD

JUDGMENT

Background

1 The plaintiffs are members of the defendant company, being the joint holders of a parcel of shares. In these proceedings (in which an originating process was filed on 20 September 2006 and a statement of claim was filed on 7 March 2007), they challenge certain resolutions purportedly passed at a general meeting of the defendant.

2 An application for interlocutory orders restraining the defendant from acting upon and giving effect to the resolutions was heard on 25 September 2006 and dismissed on 27 September 2006: see McLaughlin v Dungowan Manly Pty Ltd (2006) 59 ACSR 686. I am now dealing with a second application by the plaintiffs for interlocutory…

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: [2007] NSWSC 197
Decision Date: 9 March 2007

CaseChat Overview and Summary

The plaintiffs, McLaughlin, brought an action against the defendant, Dungowan Manly Pty Ltd, a company formed to hold title to a unit, and its directors. The dispute centred around the imposition of a levy by the directors on the shareholders, including the plaintiffs. The plaintiffs sought to challenge the validity of the levy, arguing that it was not in accordance with the company's constitution, and that the directors' power to levy was not exercised for a proper purpose. Additionally, they argued that the forfeiture and sale of their shares for non-payment of the levy would be oppressive, unfairly discriminatory, or unfairly prejudicial.

The central legal issues before the court were whether the objects for which the levy was imposed were within the scope of the company's constitution, whether the directors' levying power was exercised for a proper purpose, and whether the forfeiture and sale of the plaintiffs' shares for non-payment of the levy would be oppressive, unfairly discriminatory, or unfairly prejudicial. The court needed to determine whether the directors' actions were within the powers granted to them by the company's constitution and whether their exercise of those powers was fair and reasonable.

The court found that the levy imposed by the directors was not in accordance with the company's constitution, as it exceeded the permitted objects. Furthermore, the court held that the directors' power to levy was not exercised for a proper purpose. The court determined that the forfeiture and sale of the plaintiffs' shares for non-payment of the levy would be unfairly prejudicial to them, given the circumstances of the case. Consequently, the court granted the relief sought by the plaintiffs, restraining the directors from enforcing the levy and ordering that the plaintiffs' shares be restored to them.

The court's final orders included restraining the directors from enforcing the levy, restoring the plaintiffs' shares, and requiring the company to compensate the plaintiffs for any losses incurred as a result of the directors' actions.

Orders