Shareholder’s Rights and Remedies, Study notes of Remedies

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Shareholder’s Rights and Remedies  At issue is whether the shareholders can take action, usually against the directors, if the company is unwilling. o The general rule is that the company is the proper plaintiff: Foss v Harbottle o However there are exceptions to this rule;  Oppression remedy  Statutory derivative action (SDA)  Member’s winding up on the just and equitable ground  Injunction Is the Oppression Remedy available?  Standing to bring an action for oppression is given to; o Members (even if it relates to their capacity other than that of a member or another member in their capacity as a member): s234(a)(i)(ii)  A member is defined in s231 as a member on its registration, if they agree to become a member of the company after its registration and their name is entered into the register, become a member under s167  A majority shareholder may be oppressed by the minority as it may not always be possible for controlling shareholders to eliminate oppressive conduct where the minority control the board of directors: Marks v Roe o A former member who was removed due to a selective capital reduction, or if the application relates to the circumstances under which they ceased to be a member o A person to whom a share in a company has been transmitted by will or law o A person whom ASIC deems appropriate having regard to investigations it has conducted: s234  A member may make an application concerning the conduct of the company’s affairs or an actual or proposed act or omission by the company or a resolution or proposed resolution of the company: s232  The affairs of the company is defined under s53 and is a very broad definition  A company can oppress a member through the acts of a subsidiary; Scottish Co-Op o The conduct, act etc. must be 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: s232(d) and (e)  A member with a collateral purpose seeking an action under the oppression remedy will be denied standing: Re Bellador Silk Ltd Is the conduct, act etc. oppressive, unfairly prejudicial to or unfairly discriminatory against a member?  This test is to be read objectively as a composite whole concerning fairness: Morgan v 45 Flers Ave  Includes behaviour which is ‘burdensome, harsh and wrongful’: Scottish Co-Op o Even if all members are treated uniformly does not make the conduct fair: Scottish Co-Op  The oppressed must be forced to submit to some overbearing act or attitude which is unfair to them: Re Jermyn Turkish Baths  Must be something which is adverse to the member’s financial interests and the point of view of the oppressor and the oppressed are to be balanced: Re Tivoli Freeholds o Loss of confidence in the company is not oppressive o It is not oppressive if a shareholder is locked into the position of a minority shareholder without other adverse consequences: Re Tivoli Freeholds, Re G Jeffrey (Men’s Store) o Not paying dividends as high as they could be is not oppressive: Re G Jeffrey (Men’s Store)  The particular features of the company will be relevant: Re HW Thomas Ltd o Because the company operated conservatively, there was nothing unfair in this situation o If the company is a family company, a higher standard of fairness may be expected than in a large public company: O’Neill v Phillips  This is because in a family company dealings are often informal, loans may not be made on a commercial basis, family members may assume or be given a position of dominance over others: Re George Raymond Pty Ltd; Salter v Gilbertson  Members in small non-listed companies may have common understandings or legitimate expectations about how the company would be operated and so even conduct which may be approved by the constitution could be unfairly prejudicial: Re Tivoli Freeholds  Other examples of oppressive conduct; o Improper diversion of business: Scottish Co-Op o Payment of excessive remuneration: Sanford v Sanford o Unfairly restricting dividends when the situation calls for review of dividend policies: Shamsallah Holdings o Making a share issue with the dominant purpose of reducing a shareholder’s proportional stake in the company: Netbush Pty Ltd v Fascine Developments o Exclusion of a member from management which this is contrary to the constitution: Hogg v Dymock Wayde v NSWRL  Wayde argued that the decision to exclude the team was unfairly prejudicial, discriminatory or oppressive; o The NSWRL board were exercising a specific discretion in the constitution to exclude a team which might cause discrimination or prejudice: was this unfair?  If the power is exercised bona fide and for a proper purpose then the exercise of the power is fair i.e. although the conduct appears to be discriminatory, it is fair when considered in the context of the constitution (will depend on the nature of the company: see above^)  Different approach may have been taken if the directors are exercising a general power of management;  Consider examining the policy and undertake a balancing exercise of different considerations  Would a board acting reasonably have exercised the discretion in that way?  Brennan J did not make this distinction between the exercise of a discretion and general powers of management (is this correct given the width of the powers of management?) 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