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Patterson v Humfrey

Patterson v Humfrey

Case [2014] WASC 446 28 November 2014

Oppressive and Unfairly Prejudicial Conduct

Misappropriation of Company's Assets

Buy-Back of Shares

Unconscionable Conduct

Corporate Law & Governance

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JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: PATTERSON -v- HUMFREY [2014] WASC 446

CORAM: LE MIERE J

HEARD: 28, 31 MARCH, 1-4, 14, 28 APRIL 2014

DELIVERED : 28 NOVEMBER 2014

FILE NO/S: COR 134 of 2013

MATTER :Skybow Holdings Pty Ltd
Section 232 and 233 of the Corporations Act

BETWEEN: CRAIG PATTERSON
First Plaintiff
LYNDA PATTERSON
Second Plaintiff
RODALE NOMINEES PTY LTD
Third Plaintiff
AND
BARRY HUMFREY
First Defendant
MARY HUMFREY
Second Defendant
KENESTA PTY LTD
Third Defendant

Catchwords:

Oppressive and unfairly prejudicial conduct - Corporations Act 2001 (Cth) s 232 - Misappropriation of company's assets - Whether the Court can grant relief to plaintiffs who hold 50% of the shares - Plaintiffs do not have majority of votes - Defendants had de facto control of company

Relief - Corporations Act 2001 (Cth) s 233 - Order for defendants to acquire plaintiffs' shares by way of buy back - Purchase price of shares

Legislation:

Corporations Act 2001 (Cth), s 180, s 181, s 232, s 233, s 286
Rules of the Supreme Court 1971 (WA), O 45 r 2, O 45 r 11

Result:

Plaintiffs' claim upheld

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr M L Bennett & Mr D Banda
Second Plaintiff            :     Mr M L Bennett & Mr D Banda
Third Plaintiff               :     Mr M L Bennett & Mr D Banda
First Defendant             :     Mr C S Williams
Second Defendant         :     Mr C S Williams
Third Defendant           :     Mr C S Williams

Solicitors:

First Plaintiff                :     Bennett + Co
Second Plaintiff            :     Bennett + Co
Third Plaintiff               :     Bennett + Co
First Defendant             :     Solomon Brothers
Second Defendant         :     Solomon Brothers
Third Defendant           :     Solomon Brothers

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

Atlasview Ltd v Brightview Ltd [2004] 2 BCLC 191
Barnes v Addy (1874) LR 9 Ch App 244
Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359
Fedorovitch v St Aubins Pty Ltd [1999] NSWSC 776; (1999) 17 ACLC 1558
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 2) (1998) 29 ACSR 290
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672
Gamlestaden v Baltic Partners Ltd [2007] 4 All ER 164
Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 20 ACLC 1502
Jones v Dunkel (1959) 101 CLR 298
LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo [2013] QSC 225
National Building Maintenance Ltd v Dove [1972] 5 WWR 410
Rankine v Rankine (1995) 18 ACSR 725
Re Bright Pine Mills Pty Ltd [1969] VR 1002
Re Chime Corp Ltd (2004) 7 HKCFAR 546
Re Golden Bread Pty Ltd [1977] Qd R 44
Re National Building Maintenance Ltd [1971] 1 WWR 8
Re North Coast Transit Pty Ltd [2013] NSWSC 1119
Sanford v Sanford Courier Service Pty Ltd (1986) 10 ACLR 549
Territory Realty Pty Ltd v Garraway [2009] FCA 292
Tomanovic v Global Mortgage Equity Corporation Pty Ltd…

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 Patterson v Humfrey

Details

AGLC: Patterson v Humfrey [2014] WASC 446
Case: [2014] WASC 446
Decision Date: 28 NOVEMBER 2014

CaseChat Overview and Summary

The plaintiffs, who held 50% of the shares in the defendant company, sought relief against the defendants who also held 50% of the shares but had de facto control. The plaintiffs alleged that the defendants had engaged in oppressive and unfairly prejudicial conduct by misappropriating company assets and excluding the plaintiffs from management. The dispute was heard in the Federal Court of Australia, where the plaintiffs sought orders under the Corporations Act 2001 (Cth) for the defendants to acquire their shares and for a declaration of the purchase price.

The central legal issue was whether the plaintiffs, who did not have the majority of votes, could still seek relief against the defendants' oppressive conduct. The court needed to determine if the plaintiffs' shareholding and exclusion from management constituted unfairly prejudicial conduct, and if the court could grant relief in these circumstances. Additionally, the court had to decide the appropriate relief, including whether an order for the defendants to acquire the plaintiffs' shares by way of a buy-back was warranted and determine the fair purchase price of the shares.

The court held that the plaintiffs' exclusion from management and the misappropriation of company assets by the defendants amounted to oppressive and unfairly prejudicial conduct. The court found that even though the plaintiffs did not have the majority of votes, their substantial shareholding and exclusion from management were sufficient grounds for relief. The court granted the relief sought by the plaintiffs, ordering the defendants to acquire the plaintiffs' shares by way of a buy-back. The court also determined the fair purchase price of the shares based on the company's book value and other relevant factors.

The final orders included an order for the defendants to acquire the plaintiffs' shares at a specified purchase price, and a declaration regarding the fair purchase price of the shares. The court's decision emphasised the protection provided to minority shareholders under the Corporations Act 2001 (Cth) and the importance of preventing oppressive conduct by those who hold de facto control of a company.

Orders