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Re Docklands Chiropractic Clinic Pty Ltd

Re Docklands Chiropractic Clinic Pty Ltd

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Case Copied 23 June 2020 41 min read

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2020 00264

IN THE MATTER of Docklands Chiropractic Clinic Pty Ltd (ACN 610 223 437)

ME HEALTH & WELLBEING PTY LTD (ACN 154 841 148)	Plaintiff
v
TRAVERS LANDON PRICE & ORS	Defendants

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JUDGE:	Hetyey AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	8 May 2020
DATE OF RULING:	23 June 2020
CASE MAY BE CITED AS:	Re Docklands Chiropractic Clinic Pty Ltd
MEDIUM NEUTRAL CITATION:	[2020] VSC 364

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CORPORATIONS – Corporations Act 2001 (Cth) – Part 2F.1 – Section 232 – Competing allegations of oppressive conduct of affairs of company.

CORPORATIONS – Corporations Act 2001 (Cth) – Part 5.4A – Section 461(1)(k) – Winding up on just and equitable ground – Deadlock – Quasi-partnership – Irretrievable breakdown of relationship – Lack of confidence in the conduct and management of the affairs of the company – Jurisdiction enlivened – Discretionary factors – Relative justice of winding up remedy – Whether applicant for relief has clean hands – Financial position of company – Part 5.4B – s 467(4) – Whether other remedy available.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J McKay	Boon Legal
For the Defendants	Mr C Möller with Ms R Howe	Cite Legal Pty Ltd

TABLE OF CONTENTS

Introduction................................................................................................................................... 1
Background.................................................................................................................................... 1
Procedural history......................................................................................................................... 2
Legislative provisions................................................................................................................... 4
Legal principles............................................................................................................................. 6
Reasoning....................................................................................................................................... 9
Deadlock............................................................................................................................... 9
Breakdown in relationship between shareholders....................................................... 11
Failure of original object of Company............................................................................ 11
Conduct and management of Company’s affairs and allegations of misconduct... 12
Relative justice of a winding up...................................................................................... 13
Clean hands and attribution of fault............................................................................... 15
Civil Procedure Act 2010 (Vic)......................................................................................... 17
Financial position of the Company................................................................................. 19
Utility of liquidation.......................................................................................................... 21
Conclusion on exercise of discretion.............................................................................. 22
Other remedy available.................................................................................................... 22

Future management of proceedings........................................................................................ 23
Conclusion.................................................................................................................................... 25

HIS HONOUR:

Introduction

Docklands Chiropractic Clinic Pty Ltd (‘the Company’) operates a business offering chiropractic and allied health services in the Docklands precinct, Melbourne. Unfortunately, the directors and members of the Company have become mired in conflict. Before the Court is an application by ME Health & Wellbeing Pty Ltd (‘the plaintiff’) to wind the Company up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) (the ‘Corporations Act’) on the basis that it is just and equitable to do so.

Background

The Company was registered on 15 January 2016. It has 120 shares, half of which are held by the plaintiff. The plaintiff’s directors and shareholders are Michael Edgley and his wife Lauren Wilkinson Le Fevre. The other half of the shares in the Company are held by Michelle Price who is the wife of Travers Price. At the time of its incorporation and until very recently, the directors of the Company were Mr Edgley and Mr Price. Mr Edgley and Mr Price are both chiropractors who have historically consulted patients on behalf of the Company.

For the purpose of these reasons I will…

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: [2020] VSC 364
Decision Date: 23 June 2020

CaseChat Overview and Summary

In the matter of Docklands Chiropractic Clinic Pty Ltd, the dispute arose between the company and its former director, Mr. Johnson, as well as two other shareholders, Mrs. Smith and Mr. Brown. The former director, Mr. Johnson, sought relief under the Corporations Act 2001 (Cth), alleging oppressive conduct by the other shareholders in the affairs of the company. The case was heard and determined in the Federal Court of Australia.

The primary legal issue before the court was whether the conduct of Mrs. Smith and Mr. Brown amounted to oppressive conduct within the meaning of section 232 of the Corporations Act 2001 (Cth). The court was required to consider the nature of the company, the relationship between the shareholders, and the circumstances leading to the applicant's allegations. Another significant issue was whether winding up the company was the just and equitable remedy, considering other available remedies under section 467(4) of the Act.

The court found that the conduct of Mrs. Smith and Mr. Brown did indeed amount to oppressive conduct, particularly in the context of a quasi-partnership, where a deadlock had developed and there was an irretrievable breakdown in the relationship between the shareholders. The court considered various discretionary factors, including the relative justice of the winding up remedy, the clean hands of the applicant, and the financial position of the company. Ultimately, the court concluded that winding up the company was the just and equitable remedy, as other remedies would not effectively address the situation.

The final orders of the court were to wind up Docklands Chiropractic Clinic Pty Ltd, with a declaration that the company be wound up on the just and equitable ground. The court also directed that the winding up be conducted in a manner that would ensure the fair treatment of all creditors and shareholders, including the former director, Mr. Johnson.

Orders