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Re ICB Medical Distributors Pty Ltd

Re ICB Medical Distributors Pty Ltd

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Case Copied 29 August 2018 74 min read

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Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: In the matter of ICB Medical Distributors Pty Ltd and The International College of Biomechanics Pty Ltd; ICB Gait and Posture Clinic Pty Ltd; Foot Steps Orthotics Pty Limited [2018] NSWSC 1315
Hearing dates: 21 – 22 February; 10 – 13, 17 – 20, 26 April 2018; 20, 27 – 28 June 2018, 10, 12 – 13 July 2018
Decision date: 29 August 2018
Jurisdiction: Equity - Corporations List
Before: Black J
Decision:
Directions to be made as to preparation of valuation evidence as to basis on which Mr Kielt is to buy out Dr Najjarine’s shares in the companies in the ICB group of companies. Parties to bring in short minutes of order to give effect to this judgment within 14 days.

Catchwords:
CORPORATIONS – oppression – one party seeks winding up order – other party seeks order for the purchase of shares by a member of a company under s 233(1)(d) of the Corporations Act 2001 (Cth) – where amounts improperly recorded as debts owed to director or his associated companies or family members in favour of one party – where diversion of business from company to competing businesses by another party – where both parties have engaged in oppressive conduct – whether to grant order for buy-out of one party’s share by the other.
CORPORATIONS – winding up – application to wind up company on just and equitable ground under s 461(1)(k) of the Corporations Act – where deadlock in the management of the company’s affairs – where winding up order would advance director’s associated entities’ adverse interests as trade competitors of company – where alternative remedy can appropriately address the oppression – whether company should be wound up.
Legislation Cited: - Corporations Act 2001 (Cth) ss 232, 233, 286, 461, 467
- Evidence Act 1995 (NSW) ss 128,136
Cases Cited: - Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd [2018] QCA 48; (2018) 125 ACSR 227
- Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd [2016] NSWCA 347; (2016) 116 ACSR 566
- Australian Securities & Investments Commission v Healey [2011] FCA 717; (2011) 83 ACSR 484
- Boyd v Feeney [2017] NSWSC 1595
- Catalano v Managing Australia Destinations Pty Ltd [2014] FCAFC 55; (2014) 314 ALR 62
- Cook v Deeks [1916] 1 AC 554; [1916-17] All ER Rep 285
- Coope v LCM Litigation Fund Pty Ltd [2016] NSWCA 37; (2016) 333 ALR 524
- Dick v Alan Powell Holdings Pty Ltd [2009] QSC 184
- Green v Bestobell Industries Pty Ltd [1982] WAR 1; (1982) 1 ACLC 1
- Edmonds v Donovan [2005] VSCA 27; (2005) 12 VR 513
- Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599
- Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
- Hillam v Ample Source International Ltd (No 2) (2012) 202 FCR…

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: [2018] NSWSC 1315
Decision Date: 29 August 2018

CaseChat Overview and Summary

In the matter of ICB Medical Distributors Pty Ltd, the dispute arose between the shareholders of the company. One party sought a winding-up order on the basis of oppression, while the other party sought an order for the purchase of shares under section 233(1)(d) of the Corporations Act 2001 (Cth). The dispute centred on several issues, including the improper recording of debts, the diversion of business to competing entities, and the oppressive conduct of both parties. The court was required to determine whether it should grant an order for the buy-out of one party’s share by the other, considering the oppressive conduct and the deadlock in the management of the company’s affairs.

The court considered the various acts of oppression, including the improper recording of debts owed to a director or his associated companies or family members. It also examined the diversion of business from the company to competing businesses, which had a significant impact on the company's operations. The court recognised that both parties had engaged in oppressive conduct, and it had to weigh the available remedies. The winding-up order was one option, but the court also had to consider the interests of the director's associated entities, which would be adversely affected by such an order.

In its reasoning, the court found that the company was in a deadlock, and the alternative remedy of a buy-out order could appropriately address the oppression. It held that winding up the company would not be in the best interests of the company and its stakeholders, as it would advance the adverse interests of the director's associated entities as trade competitors. Consequently, the court decided not to grant a winding-up order but instead ordered the purchase of one party's share by the other, effectively resolving the deadlock and addressing the oppressive conduct.

The court ordered that the shares held by one party be purchased by the other party under section 233(1)(d) of the Corporations Act. This decision effectively resolved the deadlock in the management of the company’s affairs and provided a remedy for the oppressive conduct exhibited by both parties. The winding-up order was not granted, as it would have advanced the adverse interests of the director's associated entities. The court's decision provided a practical solution to the dispute, allowing the company to continue its operations free from the oppressive conduct that had previously plagued its management.

Orders