Munstermann v Rayward; Rayward v Munstermann [2017] NSWSC 133
Hearing dates:
20 – 22 February 2017
Decision date:
24 February 2017
Jurisdiction:
Equity
Before:
Stevenson J
Decision:
Defendants to sell to plaintiffs their shares in third defendant at a price to be determined
Catchwords:
CORPORATIONS – oppression suit – plaintiff and defendant sole directors and equal shareholders of proprietary company – no shareholders agreement –deadlock – whether defendant engaged in conduct contrary to interests of members as a whole or unfairly prejudicial to plaintiff
Marcus Otto Munstermann (Plaintiff/First Cross-Defendant) Mark Lindsay Rayward (First Defendant/Cross-Claimant) Mazmark Industries Pty Limited (Second Defendant/Cross-Claimant) QIA Group Pty Limited (Third Defendant/Third Cross-Defendant) Fuseworx Pty Limited (Fourth Defendant/Second Cross-Defendant)
Representation:
Counsel: A S McGrath SC (Plaintiff, Fourth Defendant and Cross-Defendants) D K L Raphael (First and Second Defendants and Cross-Claimants)
Solicitors: Henry Davis York (Plaintiff, Fourth Defendant and Cross-Defendants) Etienne Lawyers (First and Second Defendants and Cross-Claimants)
File Number(s):
SC 2015/339876
Judgment
QIA Group Pty Limited carries on business in Queensland providing a range of safety inspection, training, and asset management services to owners and managers of strata property.
The plaintiffs, Mr Marcus Munstermann and his company Fuseworx Pty Limited, own 50 per cent of the issued shares in QIA.
The defendants, Mr Mark Rayward and his company Mazmark Industries Pty Limited, hold the other 50 per cent of the issued shares in QIA.
There is no shareholders agreement.
Mr Munstermann and Mr Rayward are the only directors of QIA.
Mr Munstermann and Mr Rayward agree that they have now reached an irreconcilable deadlock in the ownership and management of QIA. It is common ground that they are not able to agree about any aspect of the management of QIA’s business.
Mr Munstermann contends that:
Mr Rayward has conducted himself in the affairs of QIA in a manner that is contrary to the interests of the members of…
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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AGLC
Munstermann v Rayward [2017] NSWSC 133
Case
[2017] NSWSC 133
Decision Date
CaseChat Overview and Summary
The case of Munstermann v Rayward involved a dispute between two directors and equal shareholders of a proprietary company, Mr. Munstermann and Mr. Rayward. The plaintiff sought relief under the oppression provision of the Corporations Act, alleging that the defendant had engaged in conduct that was contrary to the interests of the members as a whole or unfairly prejudicial to the plaintiff. The case was heard in the Supreme Court of New South Wales.
The central legal issues the court had to address were whether the defendant had engaged in conduct that was oppressive and whether such conduct was contrary to the interests of the members as a whole or unfairly prejudicial to the plaintiff. The court was also required to determine whether the deadlock between the two directors constituted oppressive conduct.
In its decision, the court found that the deadlock between the two directors was not, in itself, oppressive conduct. However, the court did find that the defendant's conduct was oppressive because it was contrary to the interests of the members as a whole and unfairly prejudicial to the plaintiff. The court noted that the defendant had refused to participate in the company's decision-making processes and had obstructed the plaintiff's efforts to manage the company. The court held that this conduct was oppressive and that the plaintiff was entitled to relief under the oppression provision of the Corporations Act.
The court ordered that the company be wound up and that the defendant pay the plaintiff's costs of the proceedings. The court also made an order under section 232 of the Corporations Act, requiring the defendant to acquire the plaintiff's shares in the company. This order was made on the basis that it was just and equitable to do so, given the oppressive conduct of the defendant.