- Mr and Mrs Smith acquired shares in Dalkeith Investments Pty Ltd (Dalkeith) and entered into an arrangement, which was implied rather than expressed that they constituted a partnership in corporate form.
- The arrangement was a family arrangement in which the expectation was that they co-operate in a friendly manner for their common benefit and not one which was governed by the strict application of company law.
- Mr and Mr Smith’s divorce, and the subsequent litigation, destroyed the family’s relationship.
- It was no longer possible for them to work together. The other directors started making decisions intended to reduce Mr Smith’s voting control over Dalkeith.
- Mr Smith brought a petition to have Dalkeith wound up on orders of shareholder oppression.
- Was Mr Smith entitled to have Dalkeith wound up?
- Mr Smith’s petition was granted.
- Under section 232 of the Corporations Act 2001 (Cth) (and its predecessor legislation), a member of a company can bring action against a company on grounds of oppressive or unfairly prejudicial conduct.
- If the directors make a share issue with the main purpose of reducing a shareholder’s voting control, especially when such a move damages some pre-existing mutual trust and cooperation in management, then such action can be unfairly prejudicial or discriminatory within the meaning of section 232.
“It is clear from the formulation of s 320(1)(a)(ii) that it is no longer necessary that the act complained of be a continuing act. It is enough that there is action, which if not “oppressive” is at least “unfairly prejudicial to” or “unfairly discriminatory against” a particular member. “Oppression” in this context means conduct that is burdensome, harsh or wrongful, or that is lacking in probity or fair dealing: see Scottish Co-operative Wholesale Society Ltd v Meyer  AC 324.”
(McPherson J at page 253)
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