Groeneveld Australia Pty Ltd & Ors v Nolten & Ors (No 3) [2010] VSC 533

Groeneveld Australia Pty Ltd & Ors v Nolten & Ors (No 3) [2010] VSC 533
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1.0 CASE INTRODUCTION
1.1 Facts of the case
Groeneveld limited is a multinational company that carries on business in Australia,
providing automated greasing & lubrication systems to transport industries. Mr. Nolten
(defendant) became the managing director of Groeneveld Australia since its inception in
1996. However, his position was terminated on 23rd July 2009 due to allegations of
failure to fulfill his statutory duties as director and employee of Groeneveld limited.
GA took the director to court with claims of entitlement to equitable and common law
remedies against Mr. Nolten for the alleged breaches and losses the company had
suffered as a result of Nolten’s personal interests. These breaches include claims that
Nolten had gone against statutory, fiduciary and contractual duties, failing to disclose
his interests to the board, false representations, breach of the implied term "good faith"
and deceptive conduct contrary to Fair Trading Act 19991.
Mr. Nolten is opposed to the court granting declarations to the GA Company on the
grounds that there can be no utility in those declarations. His consent to judgment may
result in the court granting remedies to the plaintiffs.
1.2 Legal issues
1. Whether relief for declarations of breaches of statutory duties would be
granted to the plaintiffs.
2. Whether director’s breach of fiduciary and statutory duties was a breach of
the term “act of good faith” which is an implied term.
3. Whether there was a breach of Section 9 of the Fair Trading Act 1999.
4. Whether the GA Company was entitled to any of the following remedies-
profits’ accounts, fiduciary skill allowance, equitable compensation, property
or resources.
5. Whether Mr. Nolten took advantage of his position as managing director to
exploit the opportunity presented by Groeneveld South Island Ltd (GSI), a
1 Fair Trading Act 1999

New Zealand based distributor of GA Company, without disclosing his
interests to the GA board.
6. Whether there was proof of fraud and false representations by the director in
his course of discharging duties.
2.0 BREACHES OF DIRECTOR’S DUTIES UNDER THE CORPORATIONS’ ACT 2001
(CTH)
a) Franchise fee claim. It was alleged that various payments had been made to Mr.
Nolten between 2005-2009 by Groeneveld South Island Ltd. Mr. Nolten had an
agreement with GSI that saw them pay a franchise fee to certain companies
associated with him. The payments, according to Mr. Alston, the managing
director of GSI, were made to Mr. Nolten’s account for IT computer services.
He then directed the payments to C&CT Company that was associated with him.
C&CT Company was then engaged to install GA’s computer network knowing
there would arise a conflict of interests. Taking advantage of his position as the
managing director of GA to engage in such a business was a form of exploitation
resulting in a breach. He then failed to disclose the arrangement with GSI to the
GA board which was considered a breach of statutory and fiduciary duties.
(Corporation Act 2001 section 181, 182,183)2
b) Mr. Nolten arranged accommodation for any staff and guests visiting of GA at a
Barkly Street flat owned by Nolten Investments, a company associated with him.
Mr. Nolten failed to disclose his interest in the company to the GA board and
continued to receive payments. However, when it was realized that Nolten
Investments was charging GA accommodation fees, Mr. Nolten arranged for
another company, Travel Store Pty Ltd to request payments from GA to conceal
the previous arrangement.
c) Put and call options exercised over GA shares. It was a contractual right for Mr.
Nolten as managing director of GA to call shares in GA and to direct the shares
to GBV. During his course as a director he was supposed to call shares at any
time after five years from 1 Jan 2003 and six years after the same date for a
second agreement. For the put option, he was entitled to put the shares that he
2 Corporation Act 2001