Corporate Law (BO1CLAW314) Research Essay: Shareholder Rights

This essay examines the legal avenues available to a shareholder, Tim, facing oppression within a private company, "the Grumpy Grande PTY Ltd" (TGG). The essay explores the circumstances of the case, where Tim's brothers attempted to undermine his business interests and shares. It analyzes both statutory and equitable remedies, including actions under section 232 and 233 of the relevant act, which address shareholder oppression and unfair discrimination. The essay references relevant case law such as Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd, Re Optimisation Australia Pty Ltd, and Foss v Harbottle to support its arguments. It delves into the court's powers to intervene, including orders to wind up the company, modify its constitution, or compel share purchases. Furthermore, the essay discusses derivative actions, enabling shareholders to act on behalf of the company. It also explores equitable remedies like compensation for breaches of fiduciary duty, considering the principles of equitable damages and their application to the case. The conclusion affirms the availability of both statutory and equitable remedies for Tim, offering a comprehensive overview of his legal options.

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

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The issues involved in the given case is that whether the youngest brother Tim is eligible
to any equitable or statutory remedies if he institutes a case against his 4 brothers in the court in
his present situation. The instant case is about a private company “the Grumpy Grande PTY Ltd”
(TGG). The company was established by 5 Brown Brothers in 2010. Initially the business was
super hit and successful. The Brown have entrusted themselves with equal rights and liabilities in
making any decision for the company. They also share the profit equally. Though the company
was doing good in early days of its formation, later on mainly after few years the business was
doing good. This affected the relationship among the brothers also. Tim, the youngest brother
wanted to leave the business as it was not doing good. The moment the four came to know this
that Tim had a plan to quit their business, they began to oppress him and was even planning to
take away the shares belonging to Tim without giving him actual payment. Tim was under
constant oppression and bullying from his brothers. They were blocking Tim’s business ideas by
using their majority vote. They even attempted to sell the valuable assets of the company at the
cost price to themselves though Tim protested against it.
It was given by Section 232 of the act that a court can order as per sec 233 if it appears to
the court that the operation of the company’s affairs, or any actual or proposed act its or omission
by the company or on behalf of it, or any present resolution or a future resolution of a single
member or by a group of members, is found to be oppressing to, or unfair or prejudicial to or any
unfair discrimination is found against any member in that particular or any other capacity. This
section is also applicable to anyone to whom the company transferred his shares by will or by
law and such person is regarded as the member of the company as seen in the case of Fexuto Pty
Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672; 19 ACLC 856.

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Under the provisions of section 233, the court is having an authority to give order which
it considers perfect for a given company. It was held it Re Optimisation Australia Pty Ltd [2018]
NSWSC 31 case also. It can make the following orders. It can give order to wind the company.
Court can even pass order to modify or repeal the existing constitution of the company as given
in Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359. Orders
regulating the affairs of the company can also be made. It can also make order for purchasing
members’ shares of company or any person to whom the share is transferred by will or by law.
This was found in Gamlestaden v Baltic Partners Ltd [2007] 4 All ER 164 at 172. The court may
order to institute, prosecute, discontinue or defend any particular proceedings. The order to
appoint a receiver or manager or both for the concerned property of the company can be given if
the court feels it is needed. The court can even make order to restrain any person from getting
involved in a particular conduct or from committing a particular act as seen in the LPD Holdings
(Aus) Pty Ltd v Phillips [2013] QSC 225. By order, it may require any person to do a particular
job. The court even can give orders for the purchasing of share after reducing the share capital of
the company as observed in Atlasview Ltd v Brightview Ltd [2004] 2 BCLC 191.
The court makes an order that a company to be wound a per this section, the provisions of
law in relation to winding up of a company will be applied such that the order was made under
section 461 of the said act and with the charges that are required and necessary for this purpose.
This can be found out in the case of Maher v Honeysett and Maher Electrical Contractors Pty Ltd
[2005] NSWSC 859 at [29].
In addition to this, when the court makes order for altering the constitution, such that any
order made as per this section 233, that modifies or repeals the constitution of the company or
requires the company to adopt a constitution, then the company will not have any authority or

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power under section 136 to make changes or to repeal the constitution when the change or repeal
is found to be to consistent with the law provisions until the order states that the company has no
power to bring such a change or repeal or the leave of the court is obtained by the company first.
According to the decision given by the respected Federal Government in connection to
the modifying and amplifying the rights of the shareholders of a company as given in Part 2F. 1A
of the said Act, the shareholders belonging to any company have been authorized with derivative
actions that can be taken against the company and its directors under section 237 of the said act.
This type of observation was found in the case of Chahwan v Euphoric Pty Ltd t/as Clay &
Michel [2008] NSWCA 52; (2008) 65 ACSR 661. Due to this provision, the shareholders are
empowered to institute a statutory derivative action either in the name of the company or on
behalf of the company where they have their shares (Vivien 2017). These actions can be even
taken the shareholders who have breached their duties or who have breached the constitution of
the company. This was decided by the Court of Appeal of Victoria in the True Value Solar
Holdings Pty Ltd and Anor v Fernandez (2013) VSCA 27 case.
Application:
As per the facts of the case and according to the constitution of the company, TGG
mainly has specialization in bringing premium coffee quality which is brewed freshly from the
minivan back, to any corporate, spotting or social event directly. The consitutio0n of the
company also showed that the five Brown brothers are directors plus the shareholders of their
company. It also provided that if one of the brothers want to sell the shares allotted to him in the
company, he will be allowed to do so only with the previous permission of the other directors.
Even if the directors have allowed selling the shares, they have to sell the shares to the existing

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directors only, that is, selling of shares to outsiders is prohibited. The constitution also provides
that each and every decision is to be taken after using majority of votes.
When the other brothers had suspicion that Tim may resign, the other four brothers
bullied him and unfair discrimination was inflicted upon him. Following the provisions of
section 232(e), courts can make any suitable order under section 233 as Tim in the given case
brief was subjected to oppression and unfair discrimination. In the case of Martin v Australian
Squash Club Pty Ltd (1996) 14 ACLC 452 it was held that any conduct that may cause breach of
the duties of the directors may prove oppression. Similar type of observation was also found in
Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428; (2009) 74 ACSR 282. The court
in Dodrill v Irish Restaurant & Bar Co Pty Ltd [2009] QSC 317 held that for oppression by the
directors, section 232 can be invoked.
Hence, Tim can apply to the court of appropriate jurisdiction such that court can make
proper decisions in section 233 as provided in the case of Vadori v AAV Plumbing Pty Ltd
[2010] NSWSC 274; (2010) 77 ACSR 616. While making decision under the said section, the
court will take into account the facts and circumstances of the case and then make an order
(Campbell 2015). The court has the option to grant the remedy as it considers appropriate
however, the claimant can also seek remedy or relief to the court. The court will first consider
that the remedy which is the least intrusive to eliminate the oppression. This type of similar
observation was found in Fitzpatrick v Cheal [2012] NSWSC 261; (2012) 264 FLR 313.
According to the rule established in the leading case of Foss v Harbottle (1843) 67 ER
189, an individual shareholder is barred from suing in a court for the any wrong inflicted to the
company or for any complain in respect of any internal irregularities of the company. This rule

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of Foss v Harbottle restricted the shareholders in this way. To overcome the crisis and difficulty
created by this rule, the provisions of statutory derivative action were brought to enlarge and
modify the rights of the share holders (Chen 2017). Thus under this provision, Tim being a share
holder can also seek remedy.
Thus from the discussion made above, Tim can apply to the court for appropriate
statutory remedy. In addition to these, he can even seek equitable remedies too. Equitable
remedy is available against any equitable breach of duty like the breach of any fiduciary duty as
observed in the case of Swansson v Pratt [2002] NSWSC 583 and even for the breach of any non
fiduciary equitable duties as put forwarded in the Nicholls v Michael Wilson & Partners Ltd
[2012] NSWCA 383.
The equitable remedy has followed mainly three types of principle without which it
cannot be availed (Bray 2016). Firstly, the purpose of granting equitable remedy is to
compensate what has been lost or suffered as held in the case of Permanent Building Society (in
liq) v Wheeler (1994) 11 WAR 187. Hence, compensation is calculated and measured by
considering and taking into account the loss actually incurred. In this regard, Tim cannot claim
as anything perceivable is not lost by him due to this oppression. However, he can obviously
claim for the mental pressure and stress he suffered from such acts of his brothers against him.
The second principle is that while calculating and assessing the equitable damage, the
common law factors like remoteness of the damage or reasonable foreseeability of the damage
must not be considered as they can affect the amount of the damage claimed by the claimant (Dal
2015). The cause for this is that duty to make restitution as imposed and applied by the courts of

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equity to the directors of the company and others is more strict and absolute than the duty to pay
damages in tort or breach of contract of the common law (Stewart, Kent and Routledge 2015).
The third principle in this regard is that although the equitable duties impose a deterrence
factor but in general there exists no penalty while making the assessment of the damages as held
in LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo & Anor.
Thus as per Swindle v Harrison [1997] 4 All ER 705, Tim can make claims in the court
against his brothers in the court of equity. He will not be needed to show any pecuniary or
financial loss while claiming the remedy as observed in Youyang Pty Ltd v Minter Ellison
Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 at [44] case.
Conclusion:
Thus from the discussion made above, it can be concluded that there are both statutory
and equitable remedies available to Tim as per the statutory law and principles of equity. In the
courts of equity, he can claim for compensation together with injunction too and to avail
statutory remedy under section 233 he can make claims in the common law court of appropriate
jurisdiction.

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References:
Atlasview Ltd v Brightview Ltd [2004] 2 BCLC 191
Bray, S.L., 2016. The System of Equitable Remedies. UCLA L. Rev., 63, p.530
Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359
Campbell, Joseph. "Corporate Law, the Courts and Corporate Personality." Company and
Securities Law Journal 33.4 (2015): 227-238
Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52; (2008) 65 ACSR 661
Chen, V., 2017. The Statutory Derivative Action in Malaysia: Comparison with an Australian
Judicial Approach.
Dal Pont, G., 2015. Equity and trusts in Australia
Dodrill v Irish Restaurant & Bar Co Pty Ltd [2009] QSC 317
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672; 19 ACLC
856
Fitzpatrick v Cheal [2012] NSWSC 261; (2012) 264 FLR 313
Foss v Harbottle (1843) 67 ER 189
Gamlestaden v Baltic Partners Ltd [2007] 4 All ER 164 at 172
LPD Holdings (Aus) Pty Ltd v Phillips [2013] QSC 225
LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo & Anor

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Maher v Honeysett and Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [29]
Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452
Nicholls v Michael Wilson & Partners Ltd [2012] NSWCA 383
Re Optimisation Australia Pty Ltd [2018] NSWSC 31
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)
Swansson v Pratt [2002] NSWSC 583
Swindle v Harrison [1997] 4 All ER 705
The Corporations Act 2001
True Value Solar Holdings Pty Ltd and Anor v Fernandez (2013) VSCA 27
Vadori v AAV Plumbing Pty Ltd [2010] NSWSC 274; (2010) 77 ACSR 616
Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428; (2009) 74 ACSR 282
Vivien, C.H.E.N., 2017. The Statutory Derivative Action in Malaysia: Comparison with an
Australian Judicial Approach. Asian Journal of Comparative Law, 12(2), pp.281-309
Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 at [44]