In the first in a series of articles focusing on shareholders’ remedies, we look at potential changes to shareholders’ remedies in NSW which may involve an expansion of potential claims.
The law in NSW is significantly different to the law in Victoria when it comes to the state court’s respective approaches to granting remedies for oppressive conduct where a company is a trustee holding assets in trust.
Section 232 of the Corporations Act 2001 (Commonwealth) (the Corporations Act) provides that the Court may make an order if the conduct of a company’s affairs, or an actual or proposed act or omission by or on behalf of a company, or a resolution, or a proposed resolution, of members or a class of members of a company, is either:
- Contrary to the interests of the members as a whole; or
- 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 Corporations Act provides that the Court may make any order that it considers appropriate in relation to a company including an order that the company be wound up, that the company’s existing constitution be modified or repealed, regulating the conduct of the company’s affairs in the future, requiring the purchase of any shares by any member or person to whom a share in the company has been trasmitted by will or by operation of law, or various other remedies as provided for in this section.
The Courts in Victoria have interpreted section 232 and 233 of the Corporations Act as enabling beneficiaries of a trust to seek relief for oppressive conduct where the trustee is a company: see Vigliaroni v CPS Investment (2009) 74 ACSR 281.
The Courts in NSW have interpreted section 232 and 233 of the Corporations Act as not being open to beneficiaries of a trust: see Trust Company Limited v Noosa Venture 1 Pty Limited  NSWSC 1334.
It is not clear what the federal Court’s view is in relation to the question.
A recent report of the Victorian Law Reform Commission, entitled “Trading Trusts – Oppression Remedies” recommended legislative reform, essentially to fall in behind the Victorian Court’s position.
The New South Wales Law Reform Commission has put out a Consultation Paper late last year and is seeking submissions.
Given the undesireability of having conflicting legal positions in NSW and Victoria, there would seem to be a real prospect that either NSW will fall in behind Victoria, or the Commonwealth will legislate in relation to this area of the law, or the High Court of Australia will determine the issue.
By Steve McAuley, McAuley Hawach Lawyers
Accredited Specialist – Commercial Litigation
Telephone: (02) 9633 1826
Parramatta Office: Level 7 | 9 George Street | Parramatta NSW 2150 | Australia
PO Box 873 | Parramatta NSW 2124 | Australia
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