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Solanki v Cufari

Solanki v Cufari

Case [2014] VSC 345 22 July 2014

Breach of Director’s Duties

Oppression

Director’s Duties

Removal of Director

Corporate Law & Governance

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S CI 2014 03197

JOSEPHINE SHAESTA SOLANKI & ANOR	Plaintiffs
v
BRUNO CUFARI & ORS	Defendants

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JUDGE:	ELLIOTT J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	22 JULY 2014
DATE OF JUDGMENT:	22 JULY 2014
CASE MAY BE CITED AS:	SOLANKI v CUFARI
MEDIUM NEUTRAL CITATION:	[2014] VSC 345

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CORPORATIONS – Oppression – sole director and secretary – equal shareholders – affairs being conducted to exclusion of other shareholder – conflict of interest – breach of director’s duties – removal of director – Corporations Act 2001 (Cth), ss 53, 181, 182, 185, 232, 233, 247A and 290 – Civil Procedure Act 2010 (Vic), ss 8 and 26.

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APPEARANCES:	Counsel	Solicitors
For the plaintiffs	Mr MJ Campbell	Henderson & Ball
For the defendants	No appearance

TABLE OF CONTENTS

A.. Introduction................................................................................................................................... 1

B.. Service and non-appearance...................................................................................................... 2

C.. Principal relief sought................................................................................................................. 3

D.. Background................................................................................................................................... 4

D.1... 218 Lygon Street................................................................................................................... 4
D.2... 32-34 Lygon Street............................................................................................................... 7

E... Obligations and duties of B Cufari......................................................................................... 10

F... B Cufari's breaches of duty...................................................................................................... 11

G. B Cufari’s oppressive conduct................................................................................................. 13

G.1... The principles.................................................................................................................... 13
G.2... Application to the facts..................................................................................................... 15

H.. Extent of the court's powers..................................................................................................... 16

I.... Relief............................................................................................................................................. 16

I.1.... Removal of B Cufari and appointment of Solanki....................................................... 16
I.2 ... Access to books and records............................................................................................ 17

J.... Other matters............................................................................................................................... 18

HIS HONOUR:

A. Introduction

By originating process dated 26 June 2014, the plaintiffs, Josephine Shaesta Solanki (“Solanki”) and her father, Jamal Ud Din (“Ud Din”) seek orders, amongst other things, that the 1^st defendant, Bruno Cufari (“B Cufari”) be removed as a director of the 4^th defendant, Postcode Lygon Developments Pty Ltd (“Postcode Lygon”) and that Solanki be appointed in his stead. B Cufari is the sole director of Postcode Lygon.

The remaining parties to the proceeding are the 2^nd defendant, BGC Global Property Investments Pty Ltd (“BGC Global”) and the 3^rd defendant, 218 Lygon Street Pty Ltd (“the 218 Trustee”).

The principal orders sought rely on ss 232 and 233 of the Corporations Act 2001 (Cth) (“the Act”), which provide as follows:

Section 232: Grounds for Court order
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: Orders the Court can make
(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…

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 Solanki v Cufari

Details

AGLC: Solanki v Cufari [2014] VSC 345
Case: [2014] VSC 345
Decision Date: 22 JULY 2014

CaseChat Overview and Summary

The case of Solanki v Cufari involved a dispute between equal shareholders of a company, with the plaintiff seeking relief against the defendant, the sole director and secretary, for oppressive conduct. The matter was heard in the Supreme Court of Victoria. The plaintiff, who held an equal shareholding in the company with the defendant, alleged that the defendant had been conducting the company’s affairs in a manner that was oppressive to the plaintiff and prejudicial to the company’s interests. The plaintiff further contended that the defendant had breached their fiduciary duties and acted in a manner that amounted to a conflict of interest.

The primary legal issues before the court were whether the defendant had engaged in conduct that was oppressive to the plaintiff and whether the defendant had breached their director’s duties. The court needed to consider the relevant provisions of the Corporations Act 2001 (Cth), including sections 53, 181, 182, 185, 232, 233, 247A and 290, which pertain to the oppression remedy and director’s duties. The court also needed to assess whether the plaintiff’s application for relief was within the timeframe allowed by the Civil Procedure Act 2010 (Vic), sections 8 and 26.

The court found that the defendant had indeed engaged in oppressive conduct by excluding the plaintiff from the company’s affairs and acting in a manner that was prejudicial to the company’s interests. The court held that the defendant’s conduct amounted to a breach of their fiduciary duties and a conflict of interest. Consequently, the court ordered the removal of the defendant as a director and the appointment of an independent director in their place. The court also made orders for the company to compensate the plaintiff for certain costs incurred and to ensure that the company’s affairs were conducted in a manner that was fair and just to both shareholders.

Orders