Reuther v Wallace

[2022] SASCA 44

SUPREME COURT OF SOUTH AUSTRALIA

(Court of Appeal: Civil)

REUTHER & ANOR v WALLACE

[2022] SASCA 44

Judgment of the Court of Appeal  

(The Honourable Chief Justice Kourakis, the Honourable Justice Doyle and the Honourable Justice Bleby)

12 May 2022

CORPORATIONS - MANAGEMENT AND ADMINISTRATION - FINANCIAL INFORMATION AND AUDIT - FINANCIAL REPORTS - RELIEF FROM REQUIREMENTS AS TO ACCOUNTS AND RECORDS OR FINANCIAL REPORTS

CORPORATIONS - MEMBERSHIP, RIGHTS AND REMEDIES - MEMBERS' REMEDIES AND INTERNAL DISPUTES - OPPRESSIVE OR UNFAIR CONDUCT - WHAT CONSTITUTES - CONDUCT OF OR RELATING TO DIRECTORS

Appeal against a decision of a single judge.

Ms Reuther and Mr Wallace were the directors of AWS, a small proprietary company conducting business in maintaining and constructing wind turbines. They were also in a personal relationship. Each was an employee, and each held 50 per cent of shares in AWS. Their relationship ended acrimoniously, and after falling into dispute regarding the value of the shares and the ability to access records of the company, Mr Wallace ceased his employment with AWS.

Ms Reuther and Mr Wallace reached a mediated settlement regarding AWS. They agreed that Ms Reuther would purchase the shares held by Mr Wallace, valued as at the date of the agreement. That value would be determined by a third-party professional, who would also provide a General Reconciliation, making adjustments for any personal benefits that either party had received in the relevant years. There would be opportunities for the parties to make submissions before the third‑party made final determination of the value of the shares.

On the execution of the mediated agreement on 21 October 2017, Mr Wallace resigned as a director. The effect of the mediated agreement was that Mr Wallace would continue to hold his 50 per cent of shares in AWS, until the date that he would be required to transfer them to Ms Reuther in accordance with the mediated agreement.

Subsequent to execution of the agreement, but prior to completion of the General Reconciliation and valuation, Mr Wallace served notices on AWS pursuant to s 293 of the Corporations Act 2001 (Cth) (‘the Act’), directing it to prepare and send to all shareholders an audited financial report and a directors’ report for the financial years ended 30 June 2019 and 2020, that is, for periods after the date at which the shares were to be valued for the purpose of the mediated agreement.

On 5 January 2021, a judge dismissed Ms Reuther’s application to set aside the notices. On appeal, a single judge of the Supreme Court held that the obligation placed on the company under s 293 to prepare and have audited the reports was a proposed act by or on behalf of the company within the meaning of s 232(b) of the Act. However, he concluded that the issuing of the notices was not contrary to the interests of the members of the company as a whole within the meaning of s 232(d), nor that it was oppressive, unfairly prejudicial…