Tosich v Tosich Construction Pty Ltd - [1993] FCA 344

DANKA TOSICH and MILA PINFOLD v. TOSICH CONSTRUCTION PTY LIMITED; STARATOS
NOMINEES PTY LIMITED; LENSKA PTY LIMITED; TOSICH HOLDINGS PTY LIMITED; TOSBRO
PTY LIMITED; DOSSO PTY LIMITED and ROBERT SLOBODON TOSICH
No. G3156 of 1992
FED No. 344
Number of pages - 7
Corporations Law
(1993) 10 ACSR 590

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J(1)

CATCHWORDS

Corporations Law - whether members of a family company have acted irregularly - winding up application - distribution of profits - interpretation and construction of articles of association

HEARING

SYDNEY, 23 April 1993

#DATE 31:5:1993

Counsel for the Applicants : B Walker

Solicitors for the Applicants : Corrs Chambers Westgarth

Counsel for the Respondents : B Oslington QC with

L S Einstein

Solicitors for the Respondents: Baker and McKenzie

ORDER

The Court answers the two questions submitted to it as follows:

Question A

Whether, on the true construction of the Articles of Association of the first, second, third, fourth and fifth respondents all profits of those companies must be distributed by way of dividend unless the holders of the "B", "C", "D" and "F" class shares unanimously agree that all or part of those profits not be distributed?

Answer A

No.

Question B

Whether, on the true construction of the Articles of Association of the first, second, third, fourth and fifth respondents no remuneration may be paid to persons who are directors of those companies, including remuneration for work as an employee rather than as a director, unless the holder of the "B", "C", "D" and "F" class shares resolve upon such remuneration unanimously in general meeting?

Answer B

No.

The Court orders that:

The costs of this application be reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

LOCKHART J The first applicant (Danka Tosich) and the second applicant (Mila Pinfold) are the widow and daughter respectively of the late R D Tosich who founded the six corporate respondents (to which I shall refer as "the Tosich companies") which carry on a building and construction business in and about Sydney. The business is large and the turnover considerable. The children of the marriage of the late R D Tosich and Danka Tosich are Mila Pinfold, the seventh respondent (Robert Slobodon Tosich), Thomas Tosich and John Tosich. Robert Tosich is the chairman and managing director of each of the Tosich companies. John Tosich is employed by the Tosich companies. Thomas Tosich was actively engaged in the affairs of the Tosich companies until October 1989 when the shareholding in the Tosich companies was restructured and arrangements were made between the members of the family in effect to buy out his interest in the companies.

Before the issued capital of the Tosich companies was restructured in October 1989, the shares in the capital of the first respondent, Tosich Construction Pty Limited, was as follows (I shall for convenience refer to Tosich Construction, but the shareholding, and…

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: [1993] FCA 344
Decision Date: 31 MAY 1993

CaseChat Overview and Summary

In the case of Tosich v Tosich Construction Pty Ltd, the dispute arose between the plaintiff and multiple respondents, primarily centred around the interpretation of the Articles of Association concerning profit distribution and remuneration to directors within the companies. The matter was brought before the court through a winding-up application, seeking clarification on how profits should be handled and whether certain resolutions required unanimous consent from specified shareholders.

The legal issues before the court revolved around two primary questions: firstly, whether the Articles mandated that all profits must be distributed by way of dividends unless specific shareholders unanimously agreed otherwise; and secondly, whether remuneration to directors, including employee-related pay, could only be authorised if those specific shareholders unanimously resolved in a general meeting. These questions were critical in determining the extent of the authority held by the shareholders and the procedural requirements for financial and personnel decisions within the companies.

The court's reasoning focused on a detailed examination of the Articles of Association, concluding that neither of the proposed interpretations were correct. The court found that the Articles did not necessitate the unanimous consent of the specified shareholders for profit distribution or remuneration decisions. The court's decision was based on a careful textual analysis and contextual understanding of the Articles, which did not support the plaintiff's assertions. The outcome effectively allowed for more flexibility in the management of the companies' finances and personnel matters.

The final orders of the court included reserving the costs of the application for further determination, in line with the Federal Court Rules. This decision left the parties to address the financial implications of the litigation separately, as per the procedural rules governing such matters.

Orders

Orders of the court

The Court answers the two questions submitted to it as follows:

Question A

Whether, on the true construction of the Articles of Association of the first, second, third, fourth and fifth respondents all profits of those companies must be distributed by way of dividend unless the holders of the "B", "C", "D" and "F" class shares unanimously agree that all or part of those profits not be distributed?

Answer A

No.

Question B

Whether, on the true construction of the Articles of Association of the first, second, third, fourth and fifth respondents no remuneration may be paid to persons who are directors of those companies, including remuneration for work as an employee rather than as a director, unless the holder of the "B", "C", "D" and "F" class shares resolve upon such remuneration unanimously in general meeting?

Answer B

No.

The Court orders that:

The costs of this application be reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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