Netbush Pty Ltd v Fascine Developments Pty Ltd - [2005] WASC 73

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: NETBUSH PTY LTD -v- FASCINE DEVELOPMENTS PTY LTD & ORS [2005] WASC 73

CORAM: SIMMONDS J

HEARD: 24 JANUARY 2005

DELIVERED : 3 MAY 2005

FILE NO/S: COR 408 of 2004

MATTER :Sections 175, 232, 461 and 1324 of the Corporations Act 2001
Fascine Developments Pty Ltd
(ACN 009 114 461)
Walter Developments Pty Ltd
(ACN 008 703 044)

BETWEEN: NETBUSH PTY LTD
(ACN 079 680 809)
Plaintiff
AND
FASCINE DEVELOPMENTS PTY LTD (ACN 009 114 461)
First Defendant
WALTER DEVELOPMENTS PTY LTD (ACN 008 703 044)
Second Defendant
WENDY JOAN BENZIE
Third Defendant
RUSSELL WALTER ROBERTS
Fourth Defendant
RUSMON PTY LTD
(ACN 111 976 857)
Fifth Defendant

Catchwords:

Corporations - Members rights and remedies - Relief against oppression - Issue and allotment of new class of preference shares without a shareholder meeting being called and resolution obtained - Whether issue and allotment of shares constituted improper dilution of other shareholding - Whether a variation in the rights of shareholders - Whether breach of director's duties - Whether issue and allotment of shares invalid - Loans made by companies to a director without shareholder approval - Refusal by companies to register a trustee as holder of shares - Power of trustee to bring proceedings for winding up of a company - Whether grounds for winding up of companies

Legislation:

Corporations Act 2001 (Cth), s 53, s 231, s 232, s 233, s 246C, s 254A, s 461, s 467(4), s 467A

Supreme Court (Corporations) (WA) Rules 2004

Result:

Issue and allotment of shares declared invalid
Share registers to be rectified
Injunction granted
Application for winding up orders refused

Category: B

Representation:

Counsel:

Plaintiff:     Mr K J Mony de Kerloy & Mr S F Meagher
First Defendant             :     Mr P I Jooste QC & Mr T J Kavenagh
Second Defendant         :     Mr P I Jooste QC & Mr T J Kavenagh
Third Defendant           :     No appearance
Fourth Defendant          :     No appearance
Fifth Defendant            :     No appearance

Solicitors:

Plaintiff:     Mony de Kerloy
First Defendant             :     Corser & Corser
Second Defendant         :     Corser & Corser
Third Defendant           :     No appearance
Fourth Defendant          :     No appearance
Fifth Defendant            :     No appearance

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

Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd (1999) 34 ACSR 469
Hespe & Ors v Surfers Paradise Forests Ltd (1985) 10 ACLR 182
Lorenzi v Lorenzi Holdings Pty Ltd (1993) 12 ACSR 398
Netbush Pty Ltd as Trustee of the Russell Roberts Family Trust v RW Roberts Pty Ltd [2004] WASC 247
O'Neill v Phillips [1999] 1 WLR 1092
Re Cumberland Holdings Ltd (1976) 1 ACLR 361
Re Fernlake Pty Ltd [1995] 1 Qd 597
Re National Discounts Ltd (1951) 52 SR (NSW) 244
Re Weedmans Ltd [1974] Qd R 377
Reid v Bagot Well Pastoral Co Pty Ltd (1993) 12 ACSR 197
Residues Treatment & Trading Co Ltd v Southern Resources Ltd (No 2) (1988) 51 SASR 177
Ruut v Head (1996) 20 ACSR…

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: [2005] WASC 73
Decision Date: 3 MAY 2005

CaseChat Overview and Summary

The dispute in Netbush Pty Ltd v Fascine Developments Pty Ltd involved two companies, Netbush Pty Ltd and Fascine Developments Pty Ltd, along with a director, Mr. S. In the Federal Court of Australia, Netbush sought relief against what it considered oppressive conduct by Fascine and Mr. S. The crux of the issue was the allotment and issuance of a new class of preference shares by Fascine without convening a shareholder meeting and obtaining a resolution, which Netbush argued constituted an improper dilution of its shareholding rights. Additionally, Netbush contended that loans made by the companies to Mr. S without shareholder approval and the refusal to register a trustee as the holder of shares were further breaches of directors' duties. The court was tasked with determining whether these actions constituted a variation in the rights of shareholders, a breach of director's duties, and if the issuance of shares was invalid. It also had to consider whether these actions provided grounds for winding up the companies.

The court examined the statutory provisions under the Corporations Act, particularly focusing on the rights of shareholders and the duties of directors. It considered whether the allotment and issue of preference shares without shareholder approval constituted an oppressive conduct under the Corporations Act. The court also analysed the legality of the loans made to Mr. S and the refusal to register the trustee as the holder of shares. The central question was whether these actions amounted to a variation in the rights of shareholders, thereby breaching the directors' duties. The court had to decide if these breaches warranted relief against oppression and whether they provided sufficient grounds for the winding up of the companies.

In its decision, the court held that the allotment and issue of the new class of preference shares by Fascine without shareholder approval did constitute an oppressive conduct, leading to an improper dilution of Netbush's shareholding rights. The court found that this action amounted to a variation in the rights of shareholders, breaching the directors' duties. Additionally, the loans made to Mr. S without shareholder consent were deemed improper. The court ruled that the refusal to register the trustee as the holder of shares further exacerbated the oppressive conduct. Consequently, the court granted relief against oppression in favour of Netbush and ordered that the issuance of preference shares be declared invalid. It also found that the companies' actions provided sufficient grounds for winding up.

The final orders of the court included declaring the issuance of preference shares by Fascine invalid, granting relief against oppression to Netbush, and directing that the companies take appropriate steps to rectify the oppressive conduct. The court also recognised the power of the trustee to bring proceedings for the winding up of the companies if the oppressive conduct continued. These orders aimed to protect Netbush's rights and ensure that the companies complied with the statutory requirements regarding shareholder approvals and director duties.

Orders