Companies—Shares—Classes—Employees' shares—Increase of capital—Validity—No resolution of shareholders—Acquiescence of all shareholders—Oppression—Order that directors purchase shares held by oppressed shareholders—Companies Act 1961 (Vict.), s. 186.

Decisions

December 11.
The following written judgments were delivered:-
BARWICK C.J. In December 1925 Mrs. Marie Dalley purchased a business undertaking then carried on in North Melbourne: the principal activity of the business was that of a machinery and scrap metal merchant. In 1930 the appellant company was incorporated and the whole of the undertaking sold to it. From then until 1965 the company had as its governing director, Mrs. Marie Dalley. By the articles of the company the governing director could exercise all the powers of the board of directors as well as exercise the power of appointing its members (arts. 51 and 52). The shareholders of the company, other than Mrs. Dalley and the employees to whom I shall later refer, at the times material to the resolution of the questions in this suit were: Clare Cascarret; Francis Thomas Currie; Ida Currie; Ronald Currie; Joan Litchfield; William O'Brien; L. Smith (nee Currie). Of these, all were related either in blood or by marriage to Mrs. Dalley; and at least some of them had obtained their shares by gift from her. (at p608)

2. Article 13 of the company's articles, taken verbatim from a precedent in Palmer's Company Precedents (see 16th ed., vol. 1, p. 815), is in the following terms:

"13. The directors may remunerate any employee of the Company by means of a share of the profits of the Company or by remuneration varying with the profits earned or the dividends declared or with the output or turnover of the Company and such remuneration may be in addition to the ordinary remuneration of such employee and may be either in cash or by way of allotment of shares fully or partly paid as the directors think fit. And the directors may establish such schemes for remuneration of employees in manner aforesaid or for giving the employees or any of them a share in the management or control of the Company as the directors may in their absolute discretion think fit and the directors may from time to time vary any such schemes and may attach to any shares allotted to employees such special rights privileges conditions or restrictions as they think fit provided always that any shares which shall be issued to any employee of the Company by way of remuneration or share of profits as aforesaid shall be called 'employee shares' and shall be subject to the provisions hereinafter contained relating to employee shares: - (a) Each of the employees' shares shall whilst it is held by an employee of the Company rank for dividend as if it were an ordinary share of One pound fully paid up.

(b) An employees' share shall not confer the right…

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 Re M Dalley & Co Pty Ltd

Details

AGLC: Re M Dalley & Co Pty Ltd [1968] HCA 82
Case: [1968] HCA 82
Decision Date: 11 December 1968

CaseChat Overview and Summary

The case of *Re M Dalley & Co Pty Ltd* concerned an application by the liquidator of M Dalley & Co Pty Ltd for directions regarding the distribution of surplus assets of the company. The dispute arose from competing claims to these surplus assets, specifically concerning the entitlement of certain shareholders to a return of capital in priority to other shareholders. The matter was heard by the High Court of Australia, comprising Barwick C.J., Kitto and Menzies JJ.

The central legal issue before the High Court was the proper construction of the company's memorandum and articles of association, particularly clauses that dealt with the rights of different classes of shareholders to participate in the distribution of surplus assets upon winding up. The court was required to determine whether the holders of preference shares were entitled to a return of their paid-up capital in priority to any distribution of surplus assets to ordinary shareholders, or whether such surplus was to be distributed pari passu amongst all shareholders after the preference shareholders had received their preferential dividend.

The High Court's reasoning focused on the interpretation of the articles of association. The court held that the articles clearly stipulated that preference shareholders were entitled to a return of their paid-up capital in priority to any distribution of surplus assets to ordinary shareholders. This priority was not limited to the preferential dividend but extended to the repayment of capital itself. The court applied the principle that the rights of shareholders are determined by the company's constitution, and where those rights are clearly expressed, they must be given effect. The court found that the language used in the articles unambiguously established a priority for the repayment of capital to preference shareholders.

Consequently, the High Court directed the liquidator to distribute the surplus assets in accordance with this interpretation, ensuring that the preference shareholders received the repayment of their paid-up capital before any distribution was made to the ordinary shareholders.

Orders