Case Study Analysis: Pure Nature Sydney Pty Ltd, Corporations Act

This case study analyzes the legal dispute in the matter of Pure Nature Sydney Pty Ltd [2018] NSWSC 914, focusing on the application of the Corporations Act 2001 (Cth). The case involves a conflict between shareholders and directors, leading to allegations of oppression and a demand for winding up the company. Ms. Chae, a shareholder, sought orders for share purchase or winding up, citing breaches of director duties and deadlock within the company. The court considered issues of oppression under s 233(1)(d) and the just and equitable ground for winding up under s 461(1)(k). The judgment highlights the breakdown of relations and the court's discretion in ordering a winding up, appointing a liquidator due to breaches of duty and oppressive conduct by the directors. The case serves as a precedent for directors regarding their responsibilities and the potential consequences of oppressive behavior or breach of contract within a company. The court ordered the winding of the company by appointing a liquidator considering breach of duties and oppression by both the directors as construed in the decision of Tomanovic v Argyle HQ Pty Ltd.

Running head: CORPORATIONS LAW
CORPORATIONS LAW
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1CORPORATIONS LAW
Case study
The present case involves the whether the company is to be wound up on grounds of
equity and justice as given under section 461(1)(k) of the Corporations Act1 by considering the
application seeking an order for purchasing shares by member belonging to the company as per
section 233(1)(d)2 of the Act.
The company had a business of selling natural health products and supplements to the
tourists of Korea on their visit to Australia. These Korean tourists were brought to the company’s
stores by their tour agents. The plaintiff in the case was Ms Chae, who was a defendant
company’s shareholder. She is also child of Mr Han Young Chae and Ms Kim who was also a
director. Ms Moon, another director of the company was the second defendant. Mr Moon’s
daughter was Ms Hong who is the third defend in the case besides being the shareholder of the
company.
But there happened a bittering of the relation among the parties. The only directors of the
company were Ms Moon and Ms Chae and there was no provision regarding resolving the
deadlock between the directors present in the constitution of the company or in the agreement in
writing of the shareholders. Thus Ms Chae made an application seeking an order under sections
233 (1) (d), 233 (1) (j), 461 (1) (f) and 461 (1) (k) of the Corporations Act3 claiming that Ms
Hong either transfer her share to Ms Chae for consideration decided by the Court or the winding
up of the company on the basis of grounds of equity and justice. Both Ms Moon and Ms Hong
did not agree to the winding up of the company instead they sought interlocutory orders under
1 Corporations Act 2001(Cth), s 461(1)(k).
2 Corporations Act 2001(Cth), s 233(1)(d).
3 Corporations Act 2001(Cth), ss 233(1)(d), 233(1)(j), 461(1)(f), 461(1)(k).

2CORPORATIONS LAW
sections 233(1)(d), 233(1)(j) and 467(1) (c) of CA4 such that the share of the company was
transferred by Ms Chae to Ms Hong.
The employment of Mr Chae was determined without knowledge or assent of another
director Ms Kim by the Company. Further the access of Moon couple was denied to the
operation and finances of the Company. Further Mr Chae formed a new company in competition
with former company. It breaches his duty as a director. In the same way, Mr Moon started a
separate business in competition with the main company due to which he was liable in the same
way as Mr Chae.
The court ordered the winding of the company by appointing a liquidator considering
breach of duties and oppression by both the directors as construed in the decision of Tomanovic v
Argyle HQ Pty Ltd5.
However the court would have taken a different approach while deciding the case by
making the directors liable instead of winding up the company. But the court decision served as a
precedent to the directors to the company such that if they ever involved in oppression or breach
of contract, then the court may use its discretion to wind up the company (Re Yenidje Tobacco
Company Ltd6).
4 Corporations Act 2001(Cth), ss 233(1)(d), 233(1)(j), 467(1)(c).
5 Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 at [39].
6 Re Yenidje Tobacco Company Ltd [1916] 2 Ch 426 at 430.

3CORPORATIONS LAW
References:
Corporations Act 2001(Cth).
Re Yenidje Tobacco Company Ltd [1916] 2 Ch 426 at 430.
Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 at [39].