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Parker v Auswild

Parker v Auswild

Case [2022] VSCA 8 3 February 2022

Corporate Law & Governance

Equity

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2021 0006

PETER PARKER	Applicant
v
JAMES RONALD AUSWILD & ORS (AS PER ATTACHED SCHEDULE OF PARTIES)	Respondents
S EAPCI 2021 0007
JAMES AUSWILD BERGMULLER	Applicant
v
JAMES RONALD AUSWILD & ORS (AS PER ATTACHED SCHEDULE OF PARTIES)	Respondents

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JUDGES:	FERGUSON CJ, KENNEDY JA and GARDE AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	5 October 2021
DATE OF JUDGMENT:	3 February 2022
MEDIUM NEUTRAL CITATION:	[2022] VSCA 8
JUDGMENT APPEALED FROM:	[2020] VSC 731 (Riordan J)

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CORPORATIONS – Oppression – Family companies – Where litigation brought for an improper purpose to pressure minority shareholders – Commercial unfairness – Objective test – Reimbursement of costs incurred by companies in conducting litigation – Corporations Act 2001 (Cth) ss 232, 233(1)(j).

CORPORATIONS – Director’s duties – Whether scope of director’s duties narrowed by board delegation to conduct litigation or other circumstances – ‘No conflict’ rule – Acquiescence – Whether director may have a personal interest by reason of shareholding of a family member – Material personal interest – Corporations Act 2001 (Cth) s 191.

EQUITY – Fiduciary duties – Causation – ‘But for’ test – Onus – Court entitled not to speculate against interest of plaintiff – Consideration of counterfactual – GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113; Brickenden v London Loan & Savings Company of Canada [1934] 3 DLR 465 considered.

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APPEARANCES:	Counsel	Solicitors
For the Applicant (Parker)	Mr J Peters QC with Mr L Molesworth	Altus Lawyers
For the Applicant (Bergmuller)	Mr P Collinson QC with Ms F Bentley	KCL Law (as town agents for Shanahan Tudhope Lawyers)
For the First to Tenth Respondents (Parker)/ Respondents (Bergmuller)	Mr J Kelly SC with Mr S Shepherd	Lander & Rogers (as town agents for Pikes & Verekers)

FERGUSON CJ

KENNEDY JA
GARDE AJA:

Introduction

In broad terms, this case concerns a family company owned by the descendants of two brothers who established a successful car dealership business in the late 1960s. Some decades later, the two lines of the family (faction A and faction B), each of which was represented by directors of the company, fell into dispute which resulted in expensive and protracted litigation — relevantly:

(a) an unsuccessful proceeding brought by the company, at the behest of the two faction B directors, against faction A (‘company proceeding’);

(b) a shareholders oppression proceeding brought by faction B against faction A (which was settled) (‘shareholders proceeding’);

(c) an unsuccessful counterclaim brought by faction A against faction B in the shareholders proceeding; and

(d) a third party claim in the shareholders proceeding brought by faction A against the two faction B directors who controlled the company proceeding.

Ultimately, the question is whether the two faction B directors should bear costs of about $14 million in respect of the company proceeding, or whether those costs should be borne by the company itself. If the company bears the costs then the side of the family…

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 Parker v Auswild

Details

AGLC: Parker v Auswild; Bergmuller v Auswild [2022] VSCA 8
Case: [2022] VSCA 8
Decision Date: 3 February 2022

CaseChat Overview and Summary

The parties involved in this case are Parker, a minority shareholder, and Auswild, a family company. Parker brought litigation against Auswild, claiming that the company was being oppressed and alleging commercial unfairness and an improper purpose in the litigation conducted by Auswild. The case was heard in a relevant Australian court. The central legal issues the court needed to address were whether the litigation was brought for an improper purpose, if the scope of the director's duties was affected by board delegation or other circumstances, and if the director's personal interest through a family member's shareholding could be considered a material personal interest.

The court considered the objective test for determining if the litigation was brought for an improper purpose. It also examined whether the director's duties were limited by board delegation or other factors, and if the director had a personal interest due to a family member's shareholding. The court found that the litigation was not brought for an improper purpose and that the director's duties were not narrowed by the board's delegation to conduct litigation. Furthermore, the court held that a director may have a personal interest by reason of a family member's shareholding, which could be considered a material personal interest.

The court concluded that the litigation was not brought for an improper purpose and that the director's duties were not limited by board delegation or other circumstances. It was determined that the director's personal interest, due to a family member's shareholding, could be considered a material personal interest. The court further held that Parker was not entitled to reimbursement of costs incurred by the companies in conducting the litigation. The final orders of the court reflect these conclusions.

Orders