Corporate Law

This article discusses the legal remedies available to handle oppressive and discriminatory behavior within a company. It explores the provisions under the Corporations Act 2001(Cth) and provides relevant case examples. The remedies discussed include equitable remedies and derivative actions.

Running head: CORPORATE LAW
Corporate Law
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1CORPORATE LAW
In the instant situation, five Brown brothers has established the company named the
Grumpy Grand Pty Ltd. In its initial stages, the business has been showing positive results.
The Brown brothers have shared the liabilities and the rights equally with respect to decision
making as well as profit sharing. Previously the company was affluent but it started
deteriorating in the last couple of years, which also deteriorated the relationship existing
between the brothers. The youngest brother named Tim has been bullied by the other four
elder brothers. The elder brothers were carrying out such a behaviour towards him with the
motive of taking away his share of the company without making any payment with respect to
the same. When the elder brothers got the hint of Tim preparing to resign, they continued
with the bullying. They used their right to vote for majority and does block the ideas of Tim.
The elder brothers were also making sale with respect of valuable assets belonging to the
company at bargain cost, irrespective of the protests presented by Tim against the same. The
issue arising from the given situation is whether any remedy of equitable nature or statutory
nature is available to Tim for the purpose of handling the present conditions.
The section 232, 234, 233 and 236 of the Corporations Act 2001(Cth)(CA) needs to be
mentioned for the purpose of analysing these facts.
The court has been conferred with the power to deliver sentence under section 233 of the
CA, if it is satisfied that the affairs of the company has been conducted or a proposal of such
a conduction of the affairs of the company or any actual action or omission on the part of the
company or carried out on behalf of the company or even in the resolution pertaining to the
members or a class of member of a company is contradicting or is hostile to the interest of
any member or is evidently oppressive towards a member or a class of members belonging to
the company in that capacity or in any other capacity. This has been provided under section
232 of the CA. The same can be illustrated with the case of Taxa Australia Pty Ltd v G Wang
& Anor [2018] NSWSC 1412. Under section 233, the court has also been conferred with the

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discretion to hold any act or resolution that has been passed by any of the members belonging
to the company, which can be proved to be discriminatory and biased against a class of
members for a particular member acting in the particular capacity or any specific capacity in
the company subjected to be held liable.
The court has the right to make any decision, that it is satisfied to provide a deemed
resolution of the dispute arising among the company. Such an order may include winding up
of the company, repeal or modification of the present constitution of the company, control
and regulation to be imposed upon the conduction of the affairs belonging to the company for
the purpose of future affairs or for the appointment of a receiver and manager with respect to
any particular or all the property belonging to the company. Court may also deliver a decision
for the purchase with respect to shares, for the purpose of effecting an appropriate reduction
in the share capital belonging to the company. This can be illustrated with the case of
Atlasview Ltd v Brightview Ltd [2004] 2 BCLC 191. The court may also order the company
to pursue legal proceeding or to even pursue a proceeding of criminal nature and also to
defend any specific existing legal proceeding. This has been illustrated with the case of Coast
Corp Pacific Pty Ltd v Stockland Development Pty Ltd [2018] QSC 305. The court also has
the discretion to make orders, which will authorise a member of the company or any other
person who has subsequently became a member by virtue of any transfer of share by will or
by the operations of the law to enforce a proceeding or a criminal proceeding or even defend
a lawsuit or in this continuation, that is needed to be brought with respect to a proceeding that
has been carried out under the name of the company. This can be illustrated with the case of
Chaudhary v Bandicoot Group Pty Ltd [2017] FCA 517. The court is also conferred with the
discretion to prohibit a person from involving into any specific conduct or it can also restrict
a person from carrying out any specific action. This can be illustrated with the case of
Gamlestaden v Baltic Partners Ltd [2007] 4 All ER 164 at 172.

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It has been held in the case of Pentridge Village Pty Ltd (in liq) v Capital Finance
Australia Ltd [2018] VSC 633, that when the court has ordered for the winding up of a
company, the comapny needs to ensure that the winding up has been carried out in
accordance with provisions under the CA and in this respect, it can be said that section 461 of
the CA needs to be applied. All the charges that are needed to be applied will be imposed in
accordance with the same.
When the court orders for the repeal or modification with respect to the constitution
belonging to a company or has ordered for the purpose of adoption of a new constitution with
respect to the company, in such a case the company does not have the discretion to repel or
modify the constitution going beyond the order of the court. This has been provided under
section 136 of the CA. however, such an alteration or modification pertaining to the
constitution belonging to a company can be affected, if the order has conferred a right to the
company or the company has availed a leave from the court to that effect.
Any company that has been found to make such decisions going beyond the rights of the
shareholders and causing detriment to the shareholders will be enough to invite a right of the
shareholders to bring a derivative action against the company and the directors of the
company under section 237 of the CA. This can be father illustrated with the case of
Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52.
Derivative action that has been allowed by virtue of section 237, to the shareholders is
required to be instituted under the name of the company or on behalf of the company. The
company has the power to bring an action under the section only if it can be established that
the directors were in breach of their duties and the other shareholders are involved in a
process which has the effect of violation of the Constitution belonging to the company. This

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can be illustrated with the case of MG Corrosion Consultants Pty Ltd v Vinciguerra [2011]
FCAFC 31.
The shareholders whose rights has been thus deprived has the option of availing the
remedy in the equity courts. In such courts, the shareholder is not under an obligation to
disclose or establish any economic or financial damage or loss for the purpose of availing
remedy. the same can be illustrated with the case of Lewis Securities Ltd (in liq) v Carter
[2018] NSWCA 118.
In the present situation, five Brown brothers has established the company named the
Grumpy Grand Pty Ltd. In its initial stages, the business has been showing positive results.
The Brown brothers have shared the liabilities and the rights equally with respect to decision
making as well as profit sharing.
The constitution of the company has been conferring the right of the brothers to make a
sale with respect to the shares of the company to be subjected to a majority vote to be carried
out for the purpose of allowing the same. Again, such a sale is only permissible when made
to the existing members and not to the outsiders. Other business decisions are also subjected
to the majority vote.
Previously the company was affluent but it started deteriorating in the last couple of years,
which also deteriorated the relationship existing between the brothers. The elder brothers
were also making sale with respect of valuable assets belonging to the company at bargain
cost, irrespective of the protests presented by Tim against the same. This can be construed as
the affairs of the company being conducted or a proposal of such a conduction of the affairs
of the company or any actual action or omission on the part of the company or carried out on
behalf of the company or even in the resolution pertaining to the members or a class of
member of a company is contradicting or is hostile to the interest of any member or is

5CORPORATE LAW
evidently oppressive towards a member or a class of members belonging to the company in
that capacity or in any other capacity. This has been provided under section 232 of the CA.
The same can be illustrated with the case of Taxa Australia Pty Ltd v G Wang & Anor [2018]
NSWSC 1412.
The youngest brother named Tim has been bullied by the other four elder brothers. The
elder brothers were carrying out such a behaviour towards him with the motive of taking
away his share of the company without making any payment with respect to the same. When
the elder brothers got the hint of Tim preparing to resign, they continued with the bullying.
This will attract section 233 by virtue of which, the court has also been conferred with the
discretion to hold any act or resolution that has been passed by any of the members belonging
to the company, which can be proved to be discriminatory and biased against a class of
members for a particular member acting in the particular capacity or any specific capacity in
the company subjected to be held liable. It can also be construed that the company has been
found to make such decisions going beyond the rights of the shareholders and causing
detriment to the shareholders will be enough to invite a right of the shareholders to bring a
derivative action against the company and the directors of the company under section 237 of
the CA. This can be father illustrated with the case of Chahwan v Euphoric Pty Ltd t/as Clay
& Michel [2008] NSWCA 52.
In such a case, the remedy available to Tim is the derivative action. Derivative action that
has been allowed by virtue of section 237, to Tim is required to be instituted under the name
of the company or on behalf of the company. The company has the power to bring an action
under the section only if it can be established that the directors were in breach of their duties
and the other shareholders are involved in a process which has the effect of violation of the
Constitution belonging to the company. This can be illustrated with the case of MG
Corrosion Consultants Pty Ltd v Vinciguerra [2011] FCAFC 31.

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Another remedy that Tim could avail is the equitable remedy. For the purpose of that same
he will have the option of availing the remedy in the equity courts. In such courts, the he is
not under an obligation to disclose or establish any economic or financial damage or loss for
the purpose of availing remedy. The same can be illustrated with the case of Lewis Securities
Ltd (in liq) v Carter [2018] NSWCA 118.

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References
Atlasview Ltd v Brightview Ltd [2004] 2 BCLC 191
Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52
Chaudhary v Bandicoot Group Pty Ltd [2017] FCA 517
Coast Corp Pacific Pty Ltd v Stockland Development Pty Ltd [2018] QSC 305
Gamlestaden v Baltic Partners Ltd [2007] 4 All ER 164 at 172
Lewis Securities Ltd (in liq) v Carter [2018] NSWCA 118
MG Corrosion Consultants Pty Ltd v Vinciguerra [2011] FCAFC 31
Pentridge Village Pty Ltd (in liq) v Capital Finance Australia Ltd [2018] VSC 633
Taxa Australia Pty Ltd v G Wang & Anor [2018] NSWSC 1412
The Corporations Act 2001(Cth)