Business Law

This case study discusses the rights and remedies available to a director in a company under the Corporations Act 2001 (Cth) in a situation of discrimination and oppression by other shareholders.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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Table of Contents
Facts and Issue...............................................................................................................2
Rule or Law....................................................................................................................2
Application.....................................................................................................................3
Conclusion......................................................................................................................6
References......................................................................................................................8

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Facts and Issue
This case is based on the company named ‘the Grumpy Grande Pty Ltd’ formed by
the five brown brothers for selling premium coffee to corporate events. The company
included in its constitution that the five brothers shall be the only shareholder as well as
director of the company along with the clause that the shareholders shall not be able to sell
their shares without taking permission from the other shareholders and also that a shareholder
can only sell his shares to the existing shareholders only and not to an outsider. Like most
company, Grumpy Grande Pty Ltd also included the clause of dominance of majority
decision for making significant decisions for the company that would involve the majority of
the shareholders to agree to a particular matter to give it an effect. The company functioned
fairly on the initial months and then issues started to crop up between brothers. The four elder
brothers started to gang up against the youngest brother, Tim. Using the power of majority
decision they started to dispose of assets of the company without valuing the opinion of Tim.
The brothers were trying to kick out Tim from the company as well.
In this situation, Tim is advised as per the rights that are available to him as a director
of a company, under Corporations Act 2001 (Cth).
Rule or Law
Section 232 of the Corporations Act 2001 (Cth) empowers the court to deliver an
order under section 233 of the same Act pertaining to the conduct of the affairs of the
company; or an act or omission created by the company; or a resolution taken or to be taken
by the company which is either contravening the interest of the members of such company or
which is unfair, discriminatory and oppressive towards other members as observed in Fexuto
Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97. Shareholders comes under the
purview of ‘members’ in this section. Section 233 of the Corporations Act 2001 (Cth) lays

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down the various orders that a court can make regarding matters which seems inappropriate
for the best interest of company, like an order to wound up the company; an order to modify
or repeal the existing constitution of the company; an order pertaining to a matter for the
regulation of the affairs of the company for future incidents; an order pertaining to the
purchase of any shares by a member who has been given the authority by the company itself
to purchase share or a purchase of share that has been made with a reduction in the share
capital of the company as held in Atlasview Ltd v Brightview Ltd [2004] 2 BCLC 191; an
order to appoint a receiver and/or a manger for a property of company; an order to restrain a
person from carrying out certain actions detrimental to the company or an order requiring a
person do certain acts for the benefit of the company, as held in Maher v Honeysett and
Maher Electrical Contractors Pty Ltd [2005] NSWSC 859.
Section 234 empowers certain people or class of people to apply before the court for
court orders for matters stated under section 233. It empowers the members of the company
to seek for an order of the court against other members of the company. Such ‘member’
includes a person who has been a member of the company but removed for selective
reduction; a person was a member but now ceased to be so; a person who has certain amount
of shares of the company vested upon them by law; or a person who has been empowered by
ASIC.
Part 2 of the Corporations Act 2001 (Cth) enhances the decision of the federal
government pertaining to actions that can be taken against the shareholders and the directors
of a company under section 237 of the Corporations Act 2001 (Cth), as seen in the case of
Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52. Under this provision,
the shareholders of a company has the power of institute derivative actions in the name of the
company for restoring the best interest of the company.

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Application
In this case, the five brother formed the company ‘Grumpy Grande Pty Ltd’ for
selling premium coffee to corporate events. The company included in its constitution that the
five brothers shall be the only shareholder as well as director of the company along with the
clause that the shareholders shall not be able to sell their shares without taking permission
from the other shareholders and also that a shareholder can only sell his shares to the existing
shareholders only and not to an outsider. Like most company, Grumpy Grande Pty Ltd also
included the clause of dominance of majority decision for making significant decisions for
the company that would involve the majority of the shareholders to agree to a particular
matter to give it an effect. However, on a later date the four elder brothers ganged up against
the youngest brother, Tim. Using the power of majority decision they started to dispose of
assets of the company without valuing the opinion of Tim. The brothers were trying to kick
out Tim from the company as well. Here, it can be clearly seen that there is a discrimination
towards Tim from the four brother who are the equal shareholders and director of the
company, making it justified by Tim to bring in actions against them. He may approach the
court to enforce a court order under section 233 of the Corporations Act 2001 in order to ask
the brothers to stop harassing him and to carry out a conduct for the best interest of the
company. An oppressive conduct of the directors or the majority shareholders can result to
breach of director’s duty as observed in Dodrill v Irish Restaurant & Bar Co Pty Ltd [2009]
QSC 317.
Therefore, Tim can enforce his right to apply for a court order as held under section
233 against the oppressive conduct of his brothers. The court may apply its discretion as held
under section 233 of the Act. Tim may seek relief for being the prolonged victim of bullying
and oppression, like it was witnessed in Fitzpatrick v Cheal [2012] NSWSC 261; (2012) 264
FLR 313. However there are judgments which abstained an individual shareholder to bring in

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action against the other shareholders due to any internal irregularities in a company. This has
certain exceptions where it was established that the internal irregularities of the company was
necessary to be addressed for preventing the detriment of the company along with the several
other people associated with it, yet it is a rare situation. Therefore, for tackling such rare
situation, the concept of derivative action was introduced to expend the right of the
shareholders, especially the ones who are being oppressed by the majority shareholders. This
provision is an excellent ground for Tim to seek a remedy before the court. The rights laid
under the Corporations Act 2001 can mostly be classified as the statutory rights and remedies
as they are laid down in a statute. Statutory remedies mostly include the claim for damages
which is available to Tim against his four oppressive brothers under the provisions of
Corporations Act 2001.
Tim can enforce his right to apply for a court order as held under section 233 against
the oppressive conduct of his brothers. The court may apply its discretion as held under
section 233 of the Act. Tim may seek relief for being the prolonged victim of bullying and
oppression. However there are judgments which abstained an individual shareholder to bring
in action against the other shareholders due to any internal irregularities in a company. This
has certain exceptions where it was established that the internal irregularities of the company
was necessary to be addressed for preventing the detriment of the company along with the
several other people associated with it
On the other hand, Tim can also seek equitable remedy before the court that includes
specific performance and injunction (Hunter 2017). He can seek equitable remedy on the
grounds of breach of duty by the four brother pertaining to their fiduciary duty towards Tim
for being a fellow shareholder and also towards the company, as seen in Swansson v Pratt
[2002] NSWSC 583.. The court may help Tim by issuing an order of injunction against his
brother as the directors and shareholders as well, to stop the oppression and bullying affair

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that they were carrying out against Tim in order to kick him out of the company indirectly. In
addition to injunction, the court may also grant an order of specific performance or restitution
which would require the four brothers to cooperate with Tim for carrying out a good conduct
for running the company. Tim can also seek for equitable compensation, a kind of equitable
remedy which is determined on the basis of the loss sustained by Tim by the discrimination
and oppression of the four brothers. Tim may not be suitable to claim for equitable
compensation as he had not sustained any material loss from the unfair conduct of his
brothers.
Tim may seek for remedy under tort against his brother for they breached their duty of
care towards their fellow shareholder, thereby causing mental harassment to him (Hunter
2017). Damages can be claimed under tort, however, it is subject to proving whether the
brothers, as directors and shareholders, bore any duty of care towards Tim. He may also
claim redressal before the court of equity where he would be asked to establish a damage or
loss or injury for claiming a remedy as held in Youyang Pty Ltd v Minter Ellison Morris
Fletcher [2003] HCA 15.
Conclusion
Therefore, Tim can both seek statutory remedy as well as equitable remedies for a
redressal pertaining to the discrimination and oppression done to him by his brother. Tim can
enforce his right to apply for a court order as held under section 233 against the oppressive
conduct of his brothers. The court may apply its discretion as held under section 233 of the
Act. Tim may seek relief for being the prolonged victim of bullying and oppression. He may
approach the court to enforce a court order under section 233 of the Corporations Act 2001 in
order to ask the brothers to stop harassing him and to carry out a conduct for the best interest
of the company. Tim can also seek equitable remedy before the court that includes specific
performance and injunction. He can seek equitable remedy on the grounds of breach of duty

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by the four brother pertaining to their fiduciary duty towards Tim for being a fellow
shareholder and also towards the company. Tim may seek for remedy under tort against his
brother for they breached their duty of care towards their fellow shareholder, thereby causing
mental harassment to him. Damages can be claimed under tort, however, it is subject to
proving whether the brothers, as directors and shareholders, bore any duty of care towards
Tim. He may also claim redressal before the court of equity where he would be asked to
establish a damage or loss or injury for claiming a remedy. Also, Part 2 of the Corporations
Act 2001 (Cth) enhances the decision of the federal government pertaining to actions that can
be taken against the shareholders and the directors of a company under section 237 of the
Corporations Act 2001 (Cth), thus empowering Tim to seek a redressal under this provision
as well.

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References
Atlasview Ltd v Brightview Ltd [2004] 2 BCLC 191
Cartwright, J., 2016. Contract law: An introduction to the English law of contract for the
civil lawyer. Bloomsbury Publishing
Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52
Corporations Act 2001 (Cth)
Dodrill v Irish Restaurant & Bar Co Pty Ltd [2009] QSC 317
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97
Fitzpatrick v Cheal [2012] NSWSC 261; (2012) 264 FLR 313
Hunter, H., 2017. Modern Law of Contracts
Maher v Honeysett and Maher Electrical Contractors Pty Ltd [2005] NSWSC 859
Swansson v Pratt [2002] NSWSC 583
Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15