Re J. & B. Oscari Properties Pty Ltd
[2024] VSC 389
•5 July 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2023 05763
IN THE MATTER of J. & B. OSCARI PROPERTIES PTY LTD (ACN 006 848 175)
BETWEEN:
| LOREN OSCARI | Plaintiff |
| v | |
| HELEN OSCARI & ORS (according to the attached Schedule) | Defendants |
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JUDGE: | Irving AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 1 May 2024 |
DATE OF JUDGMENT: | 5 July 2024 |
CASE MAY BE CITED AS: | Re J. & B. Oscari Properties Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2024] VSC 389 |
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PRACTICE AND PROCEDURE — Oppression proceeding under ss 232, 233, 247A and 461 of the Corporations Act2001 (Cth) — Grounds for oppression proceedings — Deadlock between directors about future of company — Directors unable to maintain a regime of proper corporate governance and company prevented from functioning properly — Company is registered proprietor of property — Property not leased and not generating income due to director disagreement — Finding that state of affairs is contrary to the interests of the members of the company as a whole — Oppression proceeding allowed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Black of counsel | Natoli Howell Lawyers |
| No appearance for the Defendants |
TABLE OF CONTENTS
Introduction................................................................................................................................... 1
Plaintiff’s evidence........................................................................................................................ 2
Plaintiff’s submissions.................................................................................................................. 8
Principles...................................................................................................................................... 11
Consideration.............................................................................................................................. 15
Conclusion.................................................................................................................................... 17
HIS HONOUR:
Introduction
Loren Oscari (plaintiff) is one of four directors of J & B Oscari Properties Pty Ltd (the Company). The plaintiff’s former husband, Brian Tito Oscari (Brian) is another director. Brian’s brother, John Michael Oscari (John) and John’s wife, Helen Oscari (Helen) are the other two directors. Each of the four directors also own three of the twelve shares in the Company. Brian, John and Helen are each defendants to this proceeding.
The Company is the sole registered proprietor of the property located at 259 Rosanna Road, Rosanna, being the land more particularly described in Certificate of Title Volume 06797 Folio 347 (Property). The Property is the sole asset of the Company. The Property is a commercial site which, until 2022, was occupied by a tenant conducting a Beaurepaires tyre franchise, but since has remained vacant.
The Company does not otherwise trade or engage in business activities beyond leasing out the Property.
The plaintiff has commenced an oppression proceeding under ss 232, 233, 247A and 461 of the Corporations Act 2001 (Cth) (Act). She seeks:
(a) a declaration that the affairs of the Company have been conducted in a manner which is contrary to the interests of its members as a whole and oppressive to the plaintiff in her capacity as a member of the Company;
(b) an order that the Brian, John and Helen be removed as directors of the Company;
(c) an order that John and Brian be removed as secretaries of the Company and that the plaintiff be appointed secretary in their place;
(d) orders for the sale of the Property, with the plaintiff to have sole conduct of that sale; and
(e) orders for the distribution of the net proceeds of sale, after discharge of any outstanding liabilities of the Company and subject to specified adjustments.
Despite being served with the plaintiff’s originating motion, none of the defendants have filed an appearance in the proceeding. Accordingly, the plaintiff’s application is undefended.
Plaintiff’s evidence
The only evidence on the application was the plaintiff’s. In addition to various affidavits evidencing service of the originating process and supporting affidavit on the other defendants, the plaintiff relied upon her affidavits sworn 5 December 2023 and 13 May 2024 as well as her oral evidence given at trial. The plaintiff’s evidence disclosed the following.
The Company was registered on 16 September 1987 and has the following structure:
(a) Loren, Brian, John and Helen are each directors;
(b) Brian and John are each secretaries; and
(c) Loren, Brian, John and Helen each own three shares out of twelve.
Brian and John are brothers. The plaintiff was formerly married to Brian. John and Helen are married.
The Company is the sole registered proprietor of the Property, which is a commercial site. The Property is the sole asset of the Company. Beyond leasing out the Property, the Company does not otherwise engage in trade or business activities.
Until 2022 the site was occupied by a tenant conducting a Beaurepaires tyre franchise.
Helen has for many years carried out the Company’s administrative and book-keeping work, managed the Company’s bank account and arranged payment of the Company’s bills and expenses.
In the last two years the relationship between the plaintiff and Brian, on the one hand, and Helen and John on the other, has become strained such that they have disagreed over the management of the Property and whether it should be sold.
The plaintiff has sought to have the Property sold so that the parties, as shareholders, can realise their investment in the Company. In September 2022 the plaintiff offered an option to purchase her shares to the remaining three shareholders, but none took up that offer.
Throughout 2022 the plaintiff had several discussions with Helen, on behalf of both Helen and John about selling the Property.
In March 2022 the plaintiff arranged a real estate agent, Mr Craig McKellar of CVA Property Consultants, Melbourne to look at the Property and provide an appraisal. The purpose of the appraisal was to inform the directors’ discussions about whether the Property should be leased or sold. Mr McKellar attended the Property on 15 March 2022 with the plaintiff and Helen. On 21 March 2022 Mr McKellar sent an email to the plaintiff, who forwarded it to Helen on 23 March 2022. In his email Mr McKellar expressed the view that ‘an achievable market price may be between $1,950,000.00 - $2,145,000.00’. The plaintiff said that the outcome of the meeting with Mr McKellar and the directors’ consideration of his report was a decision to put the Property on the market.
On 28 May 2022 the plaintiff sent an email to Helen requesting an update about whether Beaurepaires had put forward a formal request to release the Property. The plaintiff was unable to recall whether she received a response to that email.
The plaintiff’s evidence was that following this meeting Helen initially agreed to sell the Property before deciding not to sell. The plaintiff said that she received a text message from John, ‘and after some time he agreed to sell.’
On 29 September 2022 the plaintiff sent an email to Brian, John and Helen informing them that she wished to sell her shares ‘of Beaurepaires’ (which I take to mean her shares in the Company), and inviting them to make her an offer. The plaintiff did not receive a response from any of the directors.
On 30 October 2022 the plaintiff sent a further email to John and Helen, copied to Brian. In this email the plaintiff reminded John and Helen of her earlier offer to sell her 25% share in the Company and informed them that Brian also wished to sell his 25% share. The email stated:
As you know Brian and I have separated and we both need to be financially independent, hence our need to sell. Reflecting on my past conversations with you both, it is obvious that we are not on the “same page” in relation to Beaurepaires future.
If this is not achievable for you, and you both prefer not to purchase mine or Brian’s share, then Beaurepaires needs to go on the market.
If this is not the path you wish to take, then it is with regret that myself and Brian will engage in legal proceedings to reach an agreement. Unfortunately the costs involved in going to Court will be significant for both sides. Speaking for myself the thought of filling some solicitors pocket with our money does not sit well. This does not need to be difficult, I urge you both to seriously consider the options on offer.
The plaintiff did not recall receiving a response to this email.
On 14 November 2022 the plaintiff sent a further email to John and Helen, after receiving a text message from John that he agreed to sell the Property. In that email the plaintiff said:
Thank you for getting back to me with the decision to sell. I can appreciate its been a hard decision to make, but I believe it’s the right one for ourselves and our children.
In moving forward, I have engaged Craig McKellar from CVA Property Consultants (Helen you and I met him back in March at Beaurepaires). Craig has suggested preparing a formal sales and marketing submission for everyone’s benefit and consideration.
…
We are not obligated to CVA, but we do need to start somewhere. I personally feel he is a good fit and felt you seem to think so to (sic) Helen. He’s driven and obviously wants the best outcome. Naturally that is what we are all striving for. Please let me know if you are happy for me to pass on your number.
On 28 November 2022 the plaintiff emailed Helen and copied the email to Brian. In this email the plaintiff asked Helen whether there was a lease to Beaurepaires in place because she had driven past the Property and noticed that Beaurepaires were not operating. The plaintiff asked whether Beaurepaires were still paying rent and requested bank statements for the Company. The plaintiff said that in response she received a short email from Helen informing her that Beaurepaires had cancelled the lease.
On 16 December 2022 the plaintiff emailed Helen and John informing them that until the Property was sold, Brian and the plaintiff’s view was that the Property was not to be leased because they believed the best price for the Property would be achieved if the Property was sold with vacant possession.
On 17 January 2023 the plaintiff sent a text message to Helen asking why no dividends had been paid ‘in the last months’.
On 18 January 2023 the plaintiff emailed Helen, John and Brian asking why the plaintiff and Brian had not received their share of last two month’s rental income. In this email the plaintiff referred to a number of withdrawals from the Company’s bank account between 15 August 2022 and 9 January 2023 that were described as loans and asked for details of the loan.
On 19 January 2023 the plaintiff emailed Helen asking for details about a deposit of $7,000 to ‘our account’ and for an explanation why Helen had not paid Australian Securities and Investments Commission (ASIC) invoices ‘for the last 2 years’. In response Helen replied by email the same day, ‘ASIC has been paid. We are NOT selling J&B Oscari. Dividends Three months.’ Helen sent the plaintiff a further email that day saying, ‘Are u telling me u paid asic, why? Also where is beaurepaire’s Title. Hand it over to arthur immediately. Beaurepaires is NOT for sale. Final word.’ The reference to Arthur is a reference to Helen’s solicitor.
The plaintiff sent a responding email to Helen on 20 January 2023, saying, ‘Yes Helen I paid it. Because you failed to pay last years and this years on time. You paid this years on the 19th, that’s a little late don’t you think.’
On 20 January 2023 Helen texted the plaintiff, responding to the plaintiff’s text message of 17 January 2023. In that message Helen stated,
Any late payment penalties will be addressed and covered by me and I will put into (sic) the company account. We need the title to beaurepaire and it must be given to Arthur. U and Brian are responsible for the costs because it should have been done when your solicitor refinanced your portion of the loan.
And finally John and I are not selling beaurepaire.
We have 50% of the vote so it’s a stalemate.
On 23 January 2023 the plaintiff received an email from Ms Marie Siciliano of Banyule City Council in response to the plaintiff’s inquiries about penalty interest charged to the Company in respect of overdue Council rates for the Property. The email sets out amounts of penalty interest incurred for each of the 2019/2020, 2020/2021, 2021/2022 and 2022/2023 financial years totalling $1,697.31. A rates reconciliation statement from Banyule City Council for the period 1 July 2018 to 6 February 2023 confirms the penalty interest charges for those periods.
On 27 February 2023 Helen sent a text message to the plaintiff, stating:
Beaurepaire’s have informed us that they are vacating the property. They are terminating their lease.
I will see Arthur today to get a section 32 to prepare for sale of the property.
This may take more than a week because we will need to sort out the title.
I will keep u (sic) informed.
I will ask an agent to give me a quote on doing the sale and I suggest everyone else do the same
Arthur Tsiavas, a solicitor from the firm, Melbourne Legal was instructed to prepare the paperwork to sell the Property, including a section 32 statement.
On 7 August 2023 the plaintiff sent an email to Mr Tsiavas requesting that Mr Tsiavas confirm that Helen or John had not responded to him in relation to the proposed sale of the Property. Mr Tsiavas’ office responded to the plaintiff, informing her that her email had been forwarded to Helen ‘hoping that she may contact our office to discuss this matter further’. Mr Tsiavas’ office also informed the plaintiff that Mr Tsiavas was unable to apply to the Titles Office to obtain a replacement title for the Property ‘until Helen and John attend to completing the Verification of Identity and sign the Client Authorisation forms.’
On 14 September 2023 the plaintiff again emailed Mr Tsiavas seeking confirmation of his previous oral advice that he had tried unsuccessfully to contact Helen and John on numerous occasions by email, telephone and text message.
The following day Mr Tsiavas’ office responded that
...we have not heard from either Helen Oscari or John Oscari in respect to the instructions of completing the Vendor Statement Section 32 for the sale of [the Property] or in respect to completing the necessary paper work in respect to the application for the lost title for the [P]roperty.
Further, the Certificate of Title for the Property records a mortgage in dealing number AB309012S in favour of Perpetual Nominees Ltd. The loan secured by that mortgage was paid out in 2010 and Helen attended the settlement and took delivery of the discharge of mortgage and duplicate certificate of title. The plaintiff said that Helen has been unable to locate these documents and the plaintiff has arranged for Perpetual Nominees Ltd to provide a replacement discharge of mortgage document.
The Company has incurred a number of late fees in relation to ASIC lodgements. Helen, being responsible for payment of the Company’s administrative work, was responsible for lodging the Company’s documents with ASIC on time. The plaintiff deposed that Helen has agreed to compensate the Company for the late fees incurred but has not paid them to date. The evidence, in the form of various ASIC invoice statements showed that ASIC had levied the Company various late payment fees from November 2010 to December 2022, totalling $2,037.00. Three payments to ASIC were also in evidence:
(a) a payment of $67.00 made on 30 December 2010 from a bank account held in the name of ‘Mr and Mrs B Oscari’;
(b) a payment of $620.00 made on 27 January 2022 from a bank account held in the name of the Brian Oscari Family Trust; and
(c) a payment of $652.00 made on 16 January 2023 from a bank account held in the name of Mr and Mrs B Oscari.
The plaintiff’s evidence was that she paid a number of ASIC fees from her own funds because Helen did not pay them on behalf of the Company.
The Company’s financial records obtained by the plaintiff, show a number of director’s loans advanced to Helen and the plaintiff’s evidence was that she was concerned that Helen had been using the Company’s funds as her own.
On 7 May 2024 the plaintiff commissioned a sworn valuation for the Property, prepared by BS&J Valuation Services. The Report & Valuation dated 10 May 2024 values the Property, using a comparable market analysis, at $1,400,000.
The plaintiff, by her affidavit sworn 13 May 2024 undertook to the Court, that if she is appointed sole director and secretary of the Company she will:
(a) Uphold her fiduciary obligations to the Company and its shareholders to act in the best interests of all parties and manage the Company in good faith and in the best interests of the Company; and
(b) Cause the Company to engage a reputable agent to sell the Property on the open market at a price which is not below $1,400,000, being the sworn valuation.
Plaintiff’s submissions
The plaintiff relied on two instances of oppression. The first was the deadlock between the directors as to the future of the Company. The second was the refusal of the other directors, particularly Helen and John, to take steps to allow the plaintiff to realise the value of her shares in the Company.
The plaintiff’s counsel submitted that the evidence clearly showed that the directors and shareholders are at odds as to the future of the Company. The plaintiff and Brian wish to realise the value of the Property and distribute it among the members. Helen and John currently refuse to engage with that proposal, despite having supported it in the past. As a result, the Property, which is the Company’s sole asset, is sitting vacant and earning no income.
Counsel submitted that the law recognises that a deadlock among the board of directors of a company can constitute a company’s affairs being conducted in a manner that is oppressive to its members, even where there is no finding of fault on the part of any individual.[1] Counsel said that more recent authority suggested that oppression may be constituted by a state of deadlock where directors are unable to maintain a regime of proper corporate governance because such a state of affairs is contrary to the interests of members as a whole.[2] However, the breakdown must prevent the company from functioning properly.[3]
[1]Jayne Elizabeth Beaumont v David Martin Peel & Ors [2018] NSWSC 95 [13] (Black J).
[2]Re Dawning Investments Pty Ltd and Dawning Developments Pty Ltd [2022] VSC 641 [34] (‘Re Dawning Investments’).
[3]Ibid.
Counsel said that while the Company is the registered proprietor of the Property, it should be understood as a substitute for the four director/shareholders owning the property in their joint names. In that sense, the Company has similarities with the authorities relating to quasi-partnerships conducted under a corporate vehicle.
If the Property was registered in the names of the individual director/shareholders, it would be open to the plaintiff to utilise the procedure under Division 2 of Part IV of the Property Law Act 1958 (Vic) to seek orders for the sale of the Property. In circumstances where the Company is not engaged in any other business activity, the refusal of Helen and John to cooperate in the sale of the Property represented oppressive conduct.
Counsel conceded that the authorities state that the general position is that the inability of a minority shareholder to realise their shares, without more, does not amount to oppression.[4] However, where a minority shareholder’s attempts to dispose of shares are frustrated by the actions of the majority, there may be a case for relief.[5] Counsel said that in this case it is the value of the land, rather than the value of the plaintiff’s shares which are sought to be realised and that, but for the imposition of the Company into the ownership structure, the plaintiff would have been able to realise.
[4]McWillian v L J R McWilliam Estates Pty Ltd and Ors (1990) 20 NSWLR 703, 707.
[5]Ibid.
The Court has a wide discretion in the relief it may grant to alleviate the oppression.[6] Counsel submitted that the appropriate relief in this case was to place the plaintiff in charge of the Company as sole director and secretary because:
[6]Munstermann v Rayward; Rayward v Munstermann [2017] NSWSC 133 [22] (Stevenson J).
(a) the defendants had not sought to participate in the litigation;
(b) the plaintiff was the sole person seeking to get the Company back on track;
(c) there is authority that the Court’s power to appoint and remove company officers may be an appropriate remedy in an oppression proceeding;[7] and
(d) the plaintiff has undertaken to be bound by her fiduciary duties as sole director and secretary to manage the affairs of the Company in the interests of shareholders.
[7]Solanki v Cufari [2014] VSC 345 [65]-[66] (Elliott J) (‘Solanki v Cufari’).
Counsel said that given the deadlock in the management of the Company had arisen in relation to the sale of the Property, it is appropriate for the Court to authorise the plaintiff to sell the Property. This will serve to prevent any future deadlock and will enable the shareholders to realise their interest in the same way as if they were registered proprietors. Counsel submitted this course would not cause detriment or prejudice to any shareholder if the Property was sold on the open market because it would involve simply converting the value of each shareholder’s shares into cash.
Counsel submitted that because the Company had no source of income, sale of the Property was the only realistic option. Other alternatives, including leasing the Property, involved inevitable risk that one or other shareholder will not be satisfied with the decisions made by the plaintiff in the management of the Company.
In relation to costs and expenses, counsel submitted that Helen had caused the Company to incur various late fees, interest and penalties for failing to pay ASIC fees and council rates on time, in circumstances where the Company had available funds to pay on time. Helen has acknowledged an obligation to make good these amounts, which are the direct consequences of her mismanagement. Counsel submitted the remaining shareholders should not have their distributions unfairly reduced as a result of Helen’s mismanagement.
Similarly, counsel submitted the plaintiff should be reimbursed for ASIC fees she has personally paid.
Finally, counsel submitted that the plaintiff should not be out of pocket for the legal costs she incurred in bringing this proceeding to resolve the directors’ impasse. Rather the plaintiff seeks orders that the legal costs be deducted from Helen and John’s distribution of the net proceeds of the sale of the Property because they have refused to engage with the Court process.
Principles
Section 232 of the Act provides:
The Court may make an order under section 233 if:
(a) the conduct of a company’s affairs; or
(b) an actual or proposed act or omission by or on behalf of a company; or
(c)a resolution, or a proposed resolution, of members or a class of members of a company;
is either:
(d) contrary to the interests of the members as a whole; or
(e)oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.
Section 233 of the Act states:
(1)The Court can make any order under this section that it considers appropriate in relation to the company, including an order:
(a) that the company be wound up;
(b)that the company’s existing constitution be modified or repealed;
(c) regulating the conduct of the company’s affairs in the future;
(d)for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law;
(e)for the purchase of shares with an appropriate reduction of the company’s share capital;
(f)for the company to institute, prosecute, defend or discontinue specified proceedings;
(g)authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company;
(h)appointing a receiver or a receiver and manager of any or all of the company’s property;
(i)restraining a person from engaging in specified conduct or from doing a specified act;
(j)requiring a person to do a specified act.
…
In Solanki v Cufari,[8] Elliott J conveniently summarised the principles arising from the authorities relevant to the application of these sections:
[8]Ibid (n 7) [54]-[59].
The language and history of s 232 of the Act and its predecessors indicate the section is to be read broadly.
For the purposes of s 232(a), among other sections, “affairs” is non-exhaustively defined in s 53 of the Act to include “control, business, trading, transactions and dealings…of the body”. The definition provides “an expanded identification” of “affairs”, which includes the “internal management and proceedings of the body”.
The words “contrary to the interests of the members as a whole” in s 232(d) may overlap with the conduct referred to in s 232(e), however, the words must be given a separate and independent operation. In short, the language is not confined to “commercial unfairness” as that term is understood by reference to s 232(e).
The phrase in s 232(e) “oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member” is to be viewed as a whole to ascertain whether there has been a degree of commercial unfairness that would justify the court making an order under the section.
The task of determining whether or not there has been commercial unfairness must be considered in the context of the particular relationship in issue, which will not infrequently involve a balancing exercise between competing considerations, including examination of the conduct of the applicant. The mere fact that there are irreconcilable differences between the parties is not sufficient to establish oppressive conduct.
In summary, the authorities make it clear that the court must carefully consider the conduct of both applicant(s) and respondent(s) before making any determination about first, whether the section has been contravened and, secondly, if so, whether, and what, relief ought to be granted.
[citations omitted].
In Re Dawning Investments,[9] Hetyey AsJ after surveying the relevant authorities said:
[9]Re Dawning Investments (n 2) [30]-[36].
Section 232 of the Corporations Act contemplates conduct that occurs within or in relation to a company that, according to accepted standards of corporate behaviour, is burdensome, harsh and wrongful, productive of unfair prejudice, or contrary to the interests of members as a whole.
The words ‘oppressive to’, ‘unfairly prejudicial to’, and ‘unfairly discriminatory against’ as they appear in s 232(e) of the Corporations Act should be viewed as ‘a composite whole and … as different aspects of the essential criterion, namely commercial unfairness’. Unfairness has historically been regarded as the touchstone in assessing oppression. The following principles are relevant to considering the question of unfairness:
(a)oppressive conduct will be made out if an objective commercial bystander would reasonably conclude that the conduct complained of is unfair;
(b)as the test is objective, it is not necessary to prove that a person knew or believed that the conduct engaged in was unfair. Nor are the motives behind the impugned conduct especially important;
(c)the task of deciding whether there has been commercial unfairness is undertaken in the context of the particular relationship in issue. This may require examination of the conduct of the applicant, which may result in the Court concluding that the conduct of the other party, even if prejudicial, is not unfair. It may also affect the form of relief granted;
(d)regard must be had to the circumstances as a whole and any assessment of the cumulative effect of the impugned conduct must be undertaken in that context;
(e)unfairness may be identified in the harm suffered as a result of conduct of management, any prejudice caused, a lack of reasonable commercial justification for a course of action taken, or simply in the company’s decision-making process; and
(f)a director who conducts a company’s affairs in a way to advance their own interests or the interests of others of their choice to the detriment of the company or of the other shareholders, may engage in conduct that is commercially unfair and oppressive for the purpose of s 232(e) of the Corporations Act. Unfairness may be inferred where, in the absence of proper explanation, a transaction does not provide sufficient commercial value to a company to outweigh any possible conflict of interest on the part of a director. Accordingly, where there has been a misappropriation of company funds or dubious payments to directors, the oppression provision may be engaged.
It is important to observe that ss 232(d) and 232(e) of the Corporations Act are separate and distinct. Conduct may therefore be contrary to the interests of members in accordance with s 232(d) of the Corporations Act without being commercially unfair for the purpose of s 232(e).
The words ‘conduct of a company’s affairs’ in s 232(d) are given a liberal and non-exhaustive meaning by s 53(c) of the Corporations Act to include ‘the internal management and proceedings of the company’. Where a dispute between shareholders and directors impairs the proper functioning of the internal management and proceedings of a company, it therefore concerns the conduct of the company’s affairs. In assessing whether the ‘conduct of a company’s affairs’ is contrary to the interests of members as a whole, the conduct is to be assessed objectively, having regard to accepted standards of corporate behaviour and how reasonable directors would act in attending to the affairs of the company. Breaches of duty (whether statutory or fiduciary) by directors and officers may constitute conduct that is not in the best interests of members of the company as a whole.
A failure of shareholders and directors of a company to cooperate in a way that leads to deadlock has not traditionally been considered to be an instance of shareholder oppression. By contrast, other (and more recent) authority suggests that oppression may be constituted by a state of deadlock for which neither or both sides are responsible. For example, where directors and shareholders are in a state of deadlock and cannot maintain a regime of proper corporate governance, this will be contrary to the interest of the members as a whole. However, a mere breakdown of relationship without actual deadlock will not constitute oppression. The breakdown must prevent the company from functioning properly.
Once the Court’s oppression jurisdiction is enlivened, s 233 of the Corporations Act sets out a broad range of remedies available to the Court…
It is apparent that the scope of the Court’s jurisdiction to grant relief under s 233 of the Corporations Act for oppressive conduct is particularly broad and versatile. It is also discretionary. If oppression is found, the remedy must relate to eliminating the oppression and compensating the person oppressed for its effects, whilst having regard to the principle of proportionality.
[citations omitted].
The court should choose the least intrusive remedy.[10] Winding up is a remedy of last resort and should not be granted if there is a less drastic form of relief available and appropriate.[11] The appointment of a receiver is similarly an extreme remedy which will not readily be granted.[12] An order requiring a person to do a specified act or thing must be directed towards bringing the relevant oppression to an end.[13]
[10]Re Enterprise Gold Mines NL (1991) 3 ACSR 531, 539.
[11]Re Dalkeith Investments Pty Ltd (1984) 9 ACLR 247, 252.
[12]Lukaszewicz v Polish Club Ltd [2019] NSWSC 446 (Black J).
[13]Re Dernacourt Investments Pty Ltd and Companies (New South Wales) Code Baker Davis Supply Co Pty Ltd and Others v Dernacourt Investments Pty Ltd and Others (1990) 20 NSWLR 588 (Powell J).
Consideration
On 13 December 2023 a process server served Brain with the originating process and affidavit in support sworn by Loren Oscari on 5 December 2023. On 17 December 2023 the same process server served Helen with the originating process and affidavit in support sworn by Loren Oscari on 5 December 2023. I am satisfied that the plaintiff has served John with a copy of the origination process and affidavit in support sworn by Loren Oscari on 5 December 2023. Service of those documents on John was effected in the manner required by the orders for substituted service made on 14 March 2024.
I am satisfied that the Court’s jurisdiction under s 232 of the Act has been enlivened. The evidence before the Court clearly establishes that the directors are in a state of deadlock and cannot maintain proper corporate governance of the Company. The Company’s only asset is the Property. Due to disagreement between the directors, the Property is not leased and so is generating no income, there is no agreement that would allow the Property to be sold and, while the plaintiff and Brian have indicated a willingness to sell their shares, Helen and John have made no offer to buy them. This state of affairs is clearly contrary to the interests of the members of the company as a whole.
The plaintiff has put forward a remedy that, in summary, involves:
(a) the removal of Helen, John and Brian as directors and of John and Brian as secretaries of the Company;
(b) the plaintiff’s appointment as sole director and secretary of the Company; and
(c) the Property be sold, with the plaintiff having control of the sale.
I am satisfied that an order giving effect to these aspects of the plaintiff’s proposed remedy would bring about an end to conduct enlivening the Court’s jurisdiction. As discussed above, an order for the winding up of a company is a last resort and should not be made if a less drastic measure is available. It appears to me that the aspects of the plaintiff’s proposed remedy in paragraph [60] above are an available less drastic measure. Similarly, I am not satisfied that it is necessary to appoint a receiver to undertake the sale of the Property because the plaintiff has acknowledged her statutory and fiduciary obligations and undertaken not to sell the Property for less than the sworn valuation amount.
The plaintiff has put evidence before the Court about various late payment fees and penalties incurred by the Company due to Helen’s casual administrative management of the Company’s affairs. The plaintiff has also identified, in a summary way only, various transactions recorded in the Company’s bank statements that raise questions whether the Company’s funds have been appropriately managed. The plaintiff has requested the Court make orders for the adjustment of net proceeds of the sale of the Property to;
(a) reimburse the plaintiff for the payments made to ASIC, in the sum of $3,376.00, with half that sum to be taken from each of the distributions to Helen and John;
(b) reduce Helen’s share of any distribution by the sum of the late fees and penalties, being $3,734.31, and for that sum to be distributed equally between the plaintiff, Brian and John; and
(c) for the Company to reimburse the plaintiff for the legal costs of the proceeding.
I decline to make orders for those adjustments, but will make an order for the Company to pay the plaintiff’s costs of the proceeding on a standard basis.
My reasons for not making an order for the adjustments are as follows. First, the evidence before the Court evidencing the payments to ASIC, show the payments were made from bank accounts held in the names of Mr and Mrs B Oscari and the Brian Oscari Family Trust respectively. It is not immediately obvious how the plaintiff says she has a right to all the funds paid from these accounts. Second, the evidence before the Court did not include the full financial reports of the Company. Rather, it consisted of various bank statements and invoices. In my view a calculation of the various adjustments that might be made to any final distribution to shareholders should take place in the context of a full examination of the Company’s books and records. Third, the specific amounts sought to be reimbursed or the subject of adjustments were not identified in the originating process served on the defendants, who did not appear in the proceeding.
Conclusion
For the reasons given above I will make the following declarations and orders.
1. The affairs of the Company have been conducted in a manner that is contrary to the interests of the members as a whole.
2. The first, second and third defendant each be removed as a director of the Company.
3. The second and third defendants each be removed as a secretary of the Company.
4. The plaintiff is appointed secretary of the Company.
5. The plaintiff is authorised to file on behalf of the Company with ASIC any document necessary to give effect to orders 2, 3 and 4 above.
6. The Property owned by the Company located at 259 Rosanna Road, Rosanna being the land more particularly described in Certificate of Title Volume 06797 Folio 347 is to be sold on the open market.
7. The plaintiff, as sole director and secretary of the Company is to have sole conduct of the sale of the Property.
8. Following any distribution of the net assets of the Company, the plaintiff in her capacity as sole director and secretary of the Company shall be at liberty to make an application to ASIC to deregister the Company in accordance with s 601AA of the Act.
9. The Company is to pay the plaintiff’s costs of the proceeding on a standard basis.
10. Any party has liberty to apply to the Court to reinstate the proceeding to seek further orders in relation to any issue arising from the above orders, including the sale of the Property.
11. The proceeding is otherwise dismissed.
SCHEDULE OF PARTIES
| S ECI 2023 05763 | |
| BETWEEN: | |
| LOREN OSCARI | Plaintiff |
| - v - | |
| HELEN OSCARI | First Defendant |
| JOHN MICHAEL OSCARI | Second Defendant |
| BRIAN TITO OSCARI | Third Defendant |
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