BLAW20001 Lecture Notes - Lecture 11: Derivative Suit, Unfair Prejudice In United Kingdom Company Law, Oppression Remedy
5 Jun 2018
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Lecture 11
*If it asks about breach, only answer about breach
*If it asks what action can ASIC take, explain breach then say the action
*If asks what can company do?
State company has both general law and statutory rights.
Then talk about statute first and go through the cases, and give statutory remedies.
Then when you get to general law bit, no need to repeat cases again.
Just add on, "as above," "gives company right to bring an action independently of the statute.."
*Good answers might say why soethig that looks like it ight stik does’t stik
Arguing something in the dividend.
"Could e …, ut o the fats …"
Consequences of breach of duty and members' remedies
Expressly stated to be a duty: director and officers' duty of care, duty to act in good faith, in best
interests' and proper purpose of company, s180-183, s558G, s191
Contraventions are things where the Act says you must do or must not do something
Sometimes it is the company that must or must not do it, sometimes it is the director
Who enforces the duties?
Statutory duties - ASIC enforcement, company compensation remedy
General law duties - company enforces
-> normally a decision of the board [Regal Hastings new board replaced, old board sued]
-> a member can bring an action if directors are involved
Members may have separate statutory remedies on the facts
ASIC enforcement
ASIC has a range of powers to enforce the Corporations Act
Criminal breaches of the Act
-> Specific offences - Schedule 3
--> Eg
s184(1) good faith best interests proper purpose, (2) misuse of position, (3) misuse of information
respectively (criminal version of s181, 182, 183),
s588G(3) (criminal version of insolvent trading),
s209(3) (criminal version of persons involved in the company's contravention of the related party
transactions provision): up to $420, 000 fine and/or 5 years jail
--> actual penalty decided by court
-> other 'prescribed' offences - s1311, $1050 fine - penalty notice imposed by ASIC (if you can't find
punishment in schedule 3)
Civil penalty provisions: Pt 9.4B
Include directors' duties in s180-183,
insolvent trading: s588G (s588G(2) civil penalty version),
breach of Chapter 2E (related parties) (s209(2) civil penalty version),
breach of Ch 2J (capital maintenance) [financial assistance to purchase of shares, share buybacks,
authorised reductions of capital] if the rules are not abided by the company contravenes but is not
liable for an offence - only the person who are involved are liable for a civil penalty breach
find more resources at oneclass.com
find more resources at oneclass.com
ASIC applies to court for a declaration of contravention [ASIC v Healey]
Civil standard of proof, rules of evidence and procedure
Court can make these orders on ASIC's application:
-> pecuniary penalty up to $200,000: s1317G
-> disqualification order: s206C
-> compensation order: s1317H
Company can also apply for compensation even if no action by ASIC: s1317H
Can the director be forgiven for breach of duty?
By the court: s1317S (civil penalties) and s1318 (civil liability eg. general law duty breaches)
Requirements:
-> the officer has acted honestly, AND;
-> considering all circumstances, it is "fair" for the officer to be excused from liability
Company remedies - breach of general law duties
Injunction to stop a future action
Compensation or future damages
Account of profits (eg Regal (Hastings)) - did’t lose aythig ut loss a gai; eg. Dieto divets a
corporate opportunity
Rescission of contract - undoing action
Constructive trust - equitable basis of general law remedies: transfer ownership to a third party but
hold that asset on trust for beneficiaries
-> third party: legal ownership
-> beneficiaries: beneficial ownership
--> breach of duty situation: breach of trust give to company
Some statutory remedies also available to company eg. S1317H compensation
Ratification by the company
Ordinary resolution of members in general meeting can ratify some breaches of general law duties
-> members must be given full information
-> result is director or officer cannot be sued by the company
Not available for statutory duties:
-> Miller v Miller
Company can't ratify where
-> it is oppressive
-> company is virtually insolvent (Kinsella)
-> it breaches the equitable limitation
-> takes away a member's personal right
-> where company property is being taken by directors or majority members
-> where directors are acting for an improper purpose
Introduction to members' remedies
Available where officers have breached their duties, and the oppression remedy is available even
where no breach of officers' duty or any breach of the law
There are statutory and general law remedies
Why do members need remedies?
-> to protect against harm by majority shareholders
-> member can't always exit company (especially if unlisted)
find more resources at oneclass.com
find more resources at oneclass.com
