In this appeal, there was no challenge to the learned primary judge’s findings of fact, only to the relief granted in the form of an order to wind up the company. The Court allowed the appeal in part on the basis that the learned primary judge had erred in rejecting the established principle that the effect of s 467(4) of the Corporations Act (Cth) 2001 is that winding up of a solvent company is a “remedy of last resort”. The Court makes some pertinent observations regarding the proviso in s 467(4), as well as its relationship with other sections of the Act – in particular, s 233. However, the appellant was ultimately unsuccessful as the Court confirmed that the learned primary judge was correct to make the winding up order.
Gotterson and McMurdo JJA and Jackson J
23 March 2018
The appellant was the majority shareholder in Samgris Resources Pty Ltd. . Two of the respondents in the appeal, Allways Resources Holdings Pty Ltd and McKay Brooke Resources Ltd, were its minority shareholders. .
The respondents brought a proceeding in the trial division, seeking orders under s 233 or s 461 Corporations Act 2001 (Cth). . Under s 233, the respondents claimed relief in the form of an order for the winding up of Samgris or, alternatively, an order that the appellant purchase their shares. . They claimed that the affairs of Samgris had been conducted in a manner which was oppressive or unfairly prejudicial to, or unfairly discriminatory against, them as minority shareholders. . Further or alternatively, the respondents claimed that the affairs of Samgris had been conducted in a manner which was contrary to the interests of the members as a whole. . Under s 461, the respondents sought an order for the winding up of Samgris on similar grounds. .
The primary judge upheld the claims of the respondents and ordered that Samgris be wound up. . In this appeal, the appellant did not challenge the primary judge’s findings of fact. The challenge was to the relief granted, namely an order that Samgris be wound up. . The appellant argued that the primary judge made several errors in determining that the appropriate relief was a winding up order. . The focus of the appellant’s argument was upon the primary judge’s construction of s 467(4) Corporations Act, which provides:
“Where the [winding up] application is made by members as contributories on the ground that it is just and equitable that the company should be wound up or that directors have acted in a manner that appears to be unfair or unjust to other members, the court, if it is of the opinion that:
(a) the applicants are entitled to relief either by winding up the company or by some other means; and
(b) in the absence of any other remedy it would be just and equitable that the company should be wound up;
must make a winding-up order unless it is also of the opinion that some other remedy is available to the applicants and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.”
McMurdo JA (with whom Gotterson JA and Jackson J agreed) ultimately held that the primary judge was correct to order the winding up of Samgris, and dismissed the appeal. .
The appellant’s first argument was that the primary judge erred in concluding that s 467(4) Corporations Act was engaged in the circumstances of this case. . The appellant argued, focusing upon the words “instead of pursuing that other remedy”, that there was another remedy being pursued, namely relief under s 233 for the purchase of the respondents’ shares. . McMurdo JA rejected this argument. . His Honour explained that although both remedies may be claimed in a proceeding, at a point the applicant will have to elect between them. . When the respondents “ultimately pressed for [the winding up order], they were not pursuing the other remedy in the relevant sense”. .
The appellant’s second argument was that s 467(4) did not operate as a constraint on the grounds of relief under s 233. . The appellant argued that where relief is available under s 233, s 467(4) “has no role to play”. . The primary judge, in contrast, had “said that where the facts of the particular case reveal the availability of another remedy, either because oppression is established and other remedies are open under s 233, or for any other reason, it is necessary to consider s 467(4)”. . Of this argument McMurdo JA said:
“No authority is cited for the argument that where, as in the present case, a ground is established for a winding up under s 233 as well as a ground for the same order under s 461(1)(f), (g) or (k), the court should decide whether to order a winding up without reference to s 467(4). In my opinion, that argument cannot be accepted.” .
His Honour held that the primary judge was correct in regarding himself as bound to apply s 467(4) and that the requirements of that section could not be avoided “by a court declaring that it is exercising only the discretion under s 233”. , .
The appellant’s third argument was that the primary judge ought to have applied the statement of McPherson J in Re Dalkeith Investments Pty Ltd (1984) 9 ACLR 247, 252, in considering the predecessor to s 467(4), that “winding up is to be regarded as a remedy of last resort and one which ought not to be granted if some other less drastic form of relief is available and appropriate.” . The primary judge had said that “[i]t would be wrong to regard an order for the winding up of a solvent company as a ‘last resort’” and that “such an absolute statement seeks to impose a limitation on the discretion which is not justified by the wording of the statute”. . His Honour said that the “better approach” was to “regard it to be an extreme step to wind up a solvent company and to bear that consideration in mind when considering whether the remedy is appropriate on the facts of the particular case”. .
McMurdo JA disagreed with this approach, noting that the “evident purpose of the proviso in s 467(4) is to avoid the extreme step of a winding up if there is an alternative and adequate remedy”. . This was “another way of saying what McPherson J said in Re Dalkeith Investments Pty Ltd”. . Further, the principle had been applied in many cases. . McMurdo JA said:
“It follows that I differ from the trial judge in the present case, insofar as he declined to apply the statement in Re Dalkeith Investments Pty Ltd. His Honour apparently regarded that statement as being too restrictive of the power to order a winding up, even where, as he recognised, a court should keep in mind that the winding up of a solvent company is an extreme step. In my view, that is a warning which is not inconsistent with what was said in Re Dalkeith Investments and the cases which have applied it.” .
As this argument was successful, it was necessary for the Court of Appeal to exercise the relevant discretion afresh. . In the result, the Court was not persuaded to make different orders to those of the primary judge, and the appeal was dismissed.