Corporate Law Assignment: Shareholder Rights and Remedies Analysis

This assignment examines a case involving a private company, 'The Grumpy Grande Pty Ltd,' formed by five brothers, highlighting shareholder disputes and breaches of contract. The report identifies two key issues: equitable remedies available to the youngest brother, Tim, and the statutory remedies he qualifies for. It explores the application of contract law, detailing equitable remedies like specific performance, contract rescission, reformation, and injunction, alongside statutory remedies including damages and liquidated claims. The analysis references relevant sections of the Corporations Act 2001, the Competition and Consumer Act 2010 (Cth), and related case law to determine the rights of shareholders and potential remedies for Tim, including claims for breach of contract, oppression, and equitable compensation, concluding that Tim can pursue both equitable and statutory remedies.

Running head: CORPORATE LAW
CORPORATE LAW
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Author Note

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Table of Contents
Facts.................................................................................................................................................2
Issue.................................................................................................................................................2
Rule..................................................................................................................................................3
Application......................................................................................................................................5
Conclusion.......................................................................................................................................7
Reference.........................................................................................................................................8

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Facts
In the given case it can be seen that in 2010 a private company named ‘The Grumpy
Grande Pty Ltd’ was formed by five Brown brothers. The brothers decided to share profit sharing
and decision making equally. The constitution of the company stated that the company
specializes in delivering fresh brewed premium coffee to different sporting, corporate or social
events. The constitution of the company included the five brothers as the sole directors and
shareholders of the company and that all business decisions would be made with majority votes.
The company’s constitution further stated that the shares could only be sold to the existing
directors internally with the permission of other directors. In few years with the slowing down of
the business there was a great strain in relation between the five brothers. In suspicion that the
younger brother Tim was thinking of resigning from the company all other brothers bullied Tim
by using their majority votes to block Tim’s ideas relating to business. The brothers further sold
valuable assets of the company to themselves at bargain prices ignoring the protests of Tim. The
conversation of the oldest brother on phone was overheard by Tim one afternoon. The oldest
brother was heard discussing blocking Tim’s shares to be sold by using their majority votes. The
brother was further heard saying that if they could make Tim angry enough he will walk out of
his own from the business and the others would not be liable to pay anything to Tim.
Issue
In the given case two issues are found. The first issue is finding out the equitable
remedies available to the youngest brother Tim. The second issue is finding the statutory
remedies that Tim is qualified for in the given situation.

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Rule
The case amounts to breach of contract. And Tim is qualified to certain equitable as well
as statutory remedies under the law of contract. According the contract law in the case of a
breach of contract certain remedies are available to an aggrieved party. Remedies available to the
parties are of two types- statutory or legal remedies and equitable remedies. To recover damages
other than monetary damage statutory or legal remedies are granted. For receiving monetary
compensation to recover loss sustained by aggrieved party equitable remedies are granted.
Equitable Remedy
Equitable remedies can be defined under the contract law as remedies enforced by
aggrieved parties against breach of contract. Equitable damages are granted when the payment of
damages is seen to be insufficient or inadequate for the settlement of the case. The courts in
certain cases find the legal damages to be insufficient or unavailable and are legally bound to
grant equitable remedies. Three significant equitable remedies are available under the contract
law- Specific Performance, Contract Rescission and Contract Reformation.
Specific Performance- A specific performance is a decree or court order requiring the
party who is in breach of contract to complete their part of bargain according to the contract.
This includes the promises agreed at the time of signing the agreement. The court can order the
party in breach to execute the contract in ways the court deems fit. This type of orders, however
are issued by court only when the legal damages are unavailable to issue to the aggrieved parties.
Contract Rescission- The parties of a contract can cancel and rescind a contract when a
contract, due to non-performance over a long period of time, turns old. In the place of the old
contract however a new contract is needed to be written.

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Contract Reformation- The parties of a contract can decide to reform and rewrite an old
contract in case there is a presence of a mistake of facts or any of the contractual terms is
misrepresented. The main requisite of reformation of contract is that there must exist a contract
to rectify. Reformation of contract may whole or partial depending on the necessity of the
parties.
Injunction- Apart from the 3 main types there is another type of equitable remedy granted
to the aggrieved parties. Injunction is granted to the breaching parties to refrain them from doing
something if it is found by the Court that the specific conduct creates obstacle in completing the
contract.
Statutory Remedies
The damages or monetary compensation that can be given to the aggrieved parties of
breach of contract can be classified under the statutory remedies. Statutory remedies are called
legal remedies as most of the remedies are incorporated in statutes or legal documents. Statutory
remedies include damages and liquidated claims.
Damages- Damages are often being directed to pay by the parties breaching the contract
for non-performance of their obligations. Damages are designed to be paid in a way that would
put the aggrieved party in a position which they would have been in the absence of a breach of
contract. As the exact loss sustained is not possible to be calculated in most cases so the damages
cannot be calculated with minute precision.
Liquidated claims- Liquidated claims can be described as the remedies mentioned in the
agreement for a breach of the contract that breaching party has to pay to the aggrieved party. The

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payment of such sum is not considered as a penalty. To receive the pre-agreed liquidated sum of
money the aggrieved party might have to sue the party breaching the contract.
The remedies mentioned above are prescribed by court according to the demand of
situations. Equitable remedies do not look for granting damages only like statutory remedies. To
grant the equitable remedies the court may consider several factors including existing or previous
business ventures and bargaining powers of each of the parties in contract. There are certain
situations where a court may award both statutory as well as equitable remedies together. These
situations are known as restitutionary damages.
Under the Competition and Consumer Act 2010 (Cth) provisions relating to claim of
remedies against breach of contract. The provisions relating to statutory remedies are discussed
under the section 12GM of the Australian Securities and Investment Commission Act 2001 and
section 76 of the National Credit Code. Apart from these acts sections 232, 233, 234 and 236 of
the Corporations Act 2001 can be further referred for the case.
Application
Section 232 of the Corporations Act 2001 states that any conduct, or any act or proposed
or any omission of any act by any company or any resolution or members, contradicts to a
member’s interest or is oppressive to any member or members a court can make an order against
the act or omission under section 233. This section was observed in the case of Fexuto Pty Ltd v
Bosnjak Holdings Pty Ltd (2001).
Section 233 states the court having the power to make any order under its discretion to
repeal modify the constitution of the company, wind up the company, to control or regulate

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conduct of affairs of a company which it deems perfect. The appropriate deduction of share
capital of a company comes under the jurisdiction of the court as explained in Atlasview Ltd v
Brightview Ltd (2004).
In the case Maher v Honeysett and Maher Electrical Contractors Pty Ltd [2005] the
winding up of a company by court under section 461 was discussed. Further in the case Chahwan
v Euphoric Pty Ltd t/as Clay & Michel [2008] the rights of shareholders are discussed under the
section 237 of the act.
As per the facts of the case the five brothers are only directors and shareholders as per the
constitution of the company. It is seen that Tim was subjected to unfair discrimination by the
other members of the company. As per the section 232 and 233 of the corporation’s act Tim can
appeal for an order. Observations of this section were made in the cases Martin v Australian
Squash Club Pty Ltd (1996) and Vigliaroni v CPS Investment Holdings Pty Ltd [2009].
Under section 233 of the act Tim has a right to apply for an order considering the
circumstances of the case and making orders accordingly as discussed in the case Vadori v AAV
Plumbing Pty Ltd [2010]. The least intrusive remedy that will eliminate oppression should be
first considered by the court as seen in the case Fitzpatrick v Cheal [2012].
In the case Tim can go to court against his brothers for breach of contract under section
80(1) of the Competition and Consumer Act 2010. He can claim for a prohibitory injunction
against the company’s constitution relating to the majority vote needed to make all business
decisions. As that point has been misused by his other brothers to refuse his active participance
in the business. In the case Swansson v Pratt [2002] and Nicholls v Michael Wilson & Partners

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Ltd [2012] the remedies for breach of equitable duty are discussed. As discussed in the case of
Swindle v Harrison [1997] Tim can also claim for equitable remedies in the courts of equity.
Tim can also apply for statutory claims for damages he has incurred because of his
brothers’ behaviors. The losses he had incurred because of the rejection of his ideas are
claimable as statutory remedies discussed under the section 12GM of the Australian Securities
and Investment Commission Act 2001 and section 76 of the National Credit Code. In the case
Foss v Harbottle (1843) it was given that except in some circumstances the company cannot be
sued by any individual shareholder regarding any internal irregularities. As the rule developed
from the case had a number of exceptions that were difficult to establish the provisions of
statutory derivative action were introduced for enlarging shareholder rights. Tim can also apply
under this action.
Tim is eligible to apply to the court for suitable remedy under the aforementioned
provisions. Tim can claim both equitable remedies and statutory remedies. Further equitable
compensation is also available to him for the breach of fiduciary duty.
Conclusion
It can be concluded from the above discussions that Tim has the options to claim
remedies as per both statutory law and principles of equity. He can claim for both compensation
and injunction under the equitable remedy and under statutory remedies he can claim for
damages and proper jurisdiction.

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Reference
Atlasview Ltd v Brightview Ltd [2004] 2 BCLC 191
Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52; (2008) 65 ACSR 661
Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97
Fitzpatrick v Cheal [2012] NSWSC 261; (2012) 264 FLR 313
Foss v Harbottle (1843) 67 ER 189
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
Swansson v Pratt [2002] NSWSC 583
Swindle v Harrison [1997] 4 All ER 705
Vadori v AAV Plumbing Pty Ltd [2010] NSWSC 274; (2010) 77 ACSR 616
Vigliaroni v CPS Investment Holdings Pty Ltd [2009] Vigliaroni v CPS Investment Holdings Pty
Ltd [2009] VSC 428