Corporate Law: Equitable and Statutory Remedies for Breach of Director's Duty

This essay discusses the equitable and statutory remedies available to Tim for the breach of director's duty in The Grumpy Grande Pty Ltd. It covers the relevant sections of the Corporations Act and the Competition and Consumer Act, and the types of remedies available under contract law. The essay cites primary and secondary sources to support the arguments presented.

Running head: CORPORATE LAW
CORPORATE LAW
Name of Student
Name of University
Author Note

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My understanding of the essay question is that I have to find out whether Tim is eligible for
the grant of any equitable or statutory remedy under the contract law of Australia. If yes then
what type of remedies is he eligible for.
The primary authorities I plan to refer to in my essay are:
 Atlasview Ltd v Brightview Ltd [2004] 2 BCLC 191
 Australian Securities and Investment Commission Act 2001
 Gamlestaden v Baltic Partners Ltd [2007] 4 All ER 164 at 172
 Maher v Honeysett and Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [29]
 Nicholls v Michael Wilson & Partners Ltd [2012] NSWCA 383
 The Corporations Act 2001
 Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484
at [44]
 Co-Operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1
The secondary sources I plan to refer to in my essay are:
 Auditing: A Journal of Practice & Theory, 35(1) by Stewart, Kent, and Routledge 2015
 McKendrick, E., 2014Contract law: text, cases, and materials by McKendrick 2014
 Exemplary Damages: A Genuine Concept by Vaclav Janecek 2013
In my essay I plan to argue that the brothers were in breach of directors’ duties against
Tim. In this essay the rights of Tim in availing equitable remedies and statutory remedies for the
breach of director’s duty will be discussed in detail. In the given case it can be seen that five
brothers created a cafe named The Grumpy Grande Pty Ltd (TGG). In the constitution of the
company it was mentioned that the company specializes in delivering fresh brewed coffee to

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various corporate, sporting or social events. The constitution of the company stated that the
decision making process of the company would be done by majority votes. In the constitution it
was further mentioned that the five brothers would be the sole directors and shareholders of the
company. Further the shares of the company were only to be sold with permission of other
directors and that sell can only be internal within the directors. The business was in its initial
stage very successful. However after a few years the business started to deteriorate which
resulted in a strain in relationship between the five brothers. Four of the brothers suspected that
the youngest brother, Tim, was planning to leave the company and started to bully him by
blocking all his business ideas with the help of majority votes. The brothers further sold the
valuable assets of the company at a bargain price among themselves ignoring every protest of
their youngest brother.
After a few days it was overheard by Tim his older brother was planning to block his
shares from selling by majority vote. He further heard his brother stating that if they can make
Tim angry he would walk out of the company on his own and the brothers would not have to pay
him anything.
In the law of contract there are certain remedies available to the aggrieved parties for
every breach of contract. In the Competition and Consumer Act 2010 (Cth) provisions for claim
of remedies against the breach of contract are being mentioned. The provisions for statutory
remedies are mentioned in the section 12GM of the Australian Securities and Investment
Commission Act 2001 and in the section 76 of the National Credit Code. In furtherance sections
232, 233, 234 and 236 of the Corporations Act can be taken into consideration for this case. A
court under section 233 of the Corporations Act can make an order in accordance with section
232 of the same act if it finds that there is a contradiction to any member’s interest there is an

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oppression of any member by an actual act or proposed act or omission of an act. When any
conduct of affairs of a company or any act or omission of any act by the company or its members
or by way of any resolution passed on behalf of the company is prejudicial or discriminatory
against any member of the company then the court can make orders under the section 233 of the
Corporations Act (Stewart, Kent and Routledge, 2015). This was observed in the case Fexuto Pty
Ltd v Bosnjak Holdings Pty ltd (2001).
According to section 233 of the Corporations Act the court in its discretion has authority
to make orders relating to winding up of a company, repealing or modifying constitution of a
company, controlling and regulating the conducts and affairs of a company. A court can order to
refrain or conduct a certain act to any person as seen in the Gamlestaden v Baltic Partners
(2007). A court has the authority to grant orders for the institution, prosecution, defense or
stopping a court proceeding as observed in Campbell v Back office Investments (2008). A court
can order for share purchases that include appropriate share capital deductions as given in the
case Atlasview v Brightview. A court in furtherance can grant a member of a company an
authority to institute, prosecute, defend or discontinue any proceeding in the company’s name. In
addition to this in relation with provisions of the section 461 of the Corporations Act the order of
winding up of a company under section 233 can be applied. This was observed in the case Maher
v Honeysett and Maher (2005). The shareholders of a company can apply for derivative actions
the company and its directors under section 237 of the act as Part 2F. 1A lays down enhancing
the rights of the shareholders as ordered the Federal Government.
For any breach of contract the party in loss is eligible under the laws of contract for
certain remedies. This remedies can be divided into two types- equitable remedies and statutory
or legal remedies. Equitable remedies can help the parties in loss to recover monetary

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compensation for recovery m the party in breach. Statutory or legal remedies however are
granted mainly for damage recovery, whereas when there is a insufficiency of monetary damage
equitable remedies are granted to recover loss sustained.
Equitable Remedy- equitable remedies under the contract law can be defined as the
remedies against a breach of contract which are paid only when the damage payments for the
settlements of the case are insufficient or inadequate. A party is entitled for granting four
significant equitable remedies- Specific performance, contract rescission, contract reformation
and injunction. A Specific order can be defined as decree of a court directing the parties in
breach to perform their part of the bargains mentioned in the contract. The court in its own
discretion can specify the parties the order of execution of the contract. This decree is only
issued because of unavailability of issue of damages. A specific performace however is only seen
as secondary remedy. The contract which due to non-performance for a long time, has turned old
can be decided among the parties as a remedy to discharge the contract to cancel or rescind it. A
new contract needs to replace the old contract in this context. This known as Rescission of
Contract. The right to rescind can be lost on certain grounds. A rescission cannot be claimed if
the person has affirmed the contract even after having the knowledge of the misrepresentation of
that contract. Secondly if a third party purchases the goods that were the main subject of the
contract before the contract could be set aside the right to claim rescission would be lost. The
parties to a contract can decide to rewrite a contract if there is a presence of mistake of facts or
misrepresented contract terms. This is known as reformation of contracts. Reformation of
contract can be done wholly or partially. Injunction is granted to the breaching parties to refrain
them from conducting certain acts. If there are obstacles in the way of a contract by the conducts
of any party then the parties are ordered injunction to stop their conducts from being executed.

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Statutory Remedies- Statutory or legal remedies can be referred to as the issue of monetary
compensations and damages to the aggrieved parties for the loss suffered by them by the breach
of the contract. As these remedies are mostly incorporated in the legal documents or statutes for
this reason they are called statutory remedies. Statutory remedies can be of three types-
damages, liquidated claims and remedies under the law. Damages are directed by the court to be
paid to the aggrieved party in a design that would put them in the position where they would
have been in absence of the breach of the contract. Liquidated claims can be defined as remedies
arising only because of its mention in the agreement obliging the breaching party to pay a certain
sum to aggrieved party in case of a breach. Apart from these there are various claims of
statutory remedies under the provisions of the Competition and Consumer Act 2010 (Cth).
It can be seen in the case that according to the constitution of The Grumpy Grand Pty Ltd
that the five brothers are the sole directors of the company and therefore share equal rights and
percent of interest of profit. In furtherance it was also mentioned in the constitution that to sell
the shares of the company the permission of all the directors is needed and also the shares can
only be sold internally to the existing directors. Further the decisions relating to all company
matters are to be decided by maximum vote.
The youngest brother Tim can apply for an order under section 232 of the Corporations
Act 2001 for section 233 as he was discriminated and bullied by other directors of the company.
Tim was subjected to unfair discrimination and oppression and is eligible for order under section
232 of the act. Tim further has the right to seek for a relief under the section 233 of the act. For
any internal irregularities of the company an individual does not hold right to complaint. This
rule however has a number of exceptions that can be difficult to explain and for this reason

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action for statutory derivation was introduced. Tim can apply for the remedies under the rules of
the statutory derivative actions.
Under the provisions mentioned above Tim can apply for equitable remedies for breach
of fiduciary duties as mentioned in the Nicholls v Michael Wilson & Partners Ltd (2012). Tim
can further claim for equitable remedies without showing any monetary damage or loss as seen
in the case of Youyang Pty Ltd V Minter Ellison Morris Fletcher (2003). In the case Co-
operative Insurance Society Ltd v Argyll Stores Ltd (1998) the restrictive nature of the specific
performance has been criticised by the House of Lords (McKendrick, 2014). In this case the
House of Lords refused a specific performance order stating the fact that both the parties were
aware that in case of a breach of covenant it would likely be only limited to an award for damage
as their interest was completely financial hence there has been no breach of faith. Tim can
further claim for restitutionary damages where he will be eligible for both equitable and statutory
remedies. Restitutionary damages are not strictly based on compensation. It is legitimate to
award restitutionary damages for correlative gain of the aggrieved party as it is based on mutual
justification (Janecek, 2013).
I will come to the conclusion that Tim has the right to claim both statutory remedies and
equitable remedies under the provisions of the Corporations Act and the Competition and
Consumer Act. He can claim for injunction and compensation under equitable remedy and
further claim for proper jurisdiction under statutory remedies. Although the equitable remedy is
awarded to a person only when the monetary damages are insufficient for the recovery of the loss
or injury of the party who is aggrieved, yet there are situations where the court becomes bound to
grant both equitable and statutory remedies to the aggrieved parties. This situation can be termed

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as restitutionary damage and their application is very limited. This helps to prevent a party from
being affected badly.

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Reference
Atlasview Ltd v Brightview Ltd [2004] 2 BCLC 191
Australian Securities and Investment Commission Act 2001
Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1
Gamlestaden v Baltic Partners Ltd [2007] 4 All ER 164 at 172
Janecek, V., 2013. Exemplary Damages: A Genuine Concept. Eur. J. Legal Stud., 6, p.243.
Maher v Honeysett and Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [29]
Nicholls v Michael Wilson & Partners Ltd [2012] NSWCA 383
Stewart, J., Kent, P. and Routledge, J., 2015. The association between audit partner rotation and
audit fees: Empirical evidence from the Australian market. Auditing: A Journal of
Practice & Theory, 35(1), pp.181-197.).
The Corporations Act 2001
Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 at [44]