Court’s unwillingness to interfere in shareholder disputes

The recent case of Pacific Dairies Limited v Orican Pty Ltd [2019] VSC 647 highlights the unwillingness of Courts to interfere in shareholder disputes. The case involved Mr Clark, the CEO and minority shareholder of Pacific Dairies Limited (the Company), who sought to bring an application under s232 of the Corporations Act 2001 to remove the current directors of the Company and to set aside issues concerning shares and options to the directors. Mr Clark argued that the Court should make an order under s233 pursuant to ss 232(d) and s232(e) due to the fact that since 2015 the Company had not achieved any of its goals announced to the public in relation to business expansion, and despite its deteriorating financial position had paid its directors’ extremely high fees and had made selective shares issue to the directors without offering the same issue to all of the shareholders. In its decision, the Court held that the Company’s conduct did not constitute oppression under s232(e) of the Act. The Court reasoned that although the Company’s conduct could be considered inadequate and that its financial situation was of concern, it could not be established that the conduct amounted to oppression, discriminated against members or was contrary to the interest of members. The Court also cited that it was reluctant to interfere with shareholder democracy, in instances where there is an absence of a winding up application against the company.

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