Case: Re Spargos Mining NL (1990) 3 ACSR 1
Outcome: cited
"contrary to the interests" provision now contained in subpar (d) of s 232 has a separate and distinct area of operation from the "oppression" provisions in subpar (e) of s 232. The manner in which a company is being administered and in which its affairs are conducted may fall within the category of conduct contrary to the interests of the company's members as a whole although it may not be described as oppressive, unfairly prejudicial to, or unfairly discriminatory against members of the company: Turnbull v National Roads &amp; Motorists' Association Limited [2004] NSWSC 577 ; (2004) 50 ACSR 44 at 52, 57; Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95 ; (2008) 66 ACSR 359 at 400. (See also Re Spargos Mining NL (1990) 3 ACSR 1 at 42; Shelton v NRMA Limited (2005) 51 ACSR 278.) An example of such conduct may be found where a company is formed for the purpose of undertaking particular activities but the directors and management disregard those activities and direct the company into different commercial areas. In the course of final submissions Senior Counsel for the plaintiff submitted that the Council ought to be condemned for its failure to meet the expectations of its members. However, s 232 is not a punitive provision but rather a remedial provision: Re Spargos Mining NL (supra) at 44. The remedy to be granted under ss 232 and 233 is not to punish or to condemn but rather to remedy and end such oppression as has existed or such conduct which has arisen. Senior Counsel for the plaintiff explained the concerns of the plaintiff in response to a question I put to him when he drew my attention to the fact that in the audited financial statements for the year ended 30 June 2008 there was a significant variation in the figure shown as the surplus between the draft financial statements and the final financial statements. The Income Statement in the draft financial statements showed a net surplus for the period ended 30 June 2008 of $666,448 whereas the Income Statement in the final financial statements showed a net surplus of $1,074,464 for the same period. I asked Counsel how he put the variation on the issue of oppression. Counsel responded: "Your Honour, it doesn't constitute oppression in itself, the clause starting with the financial records, but it's consistent with a company that's not paying attention to its objectives and its data, which is included to have good governance and financial controls. We say it's consistent with an organisation that simply isn't effectively pursuing its objectives and properly conducting its affairs. But in itself, it doesn't constitute oppression and as it doesn't disclose insolvency it isn't a ground we rely upon for winding up. We don't pursue winding up. But, your Honour, it's also consistent with a course of conduct with not providing documents which ought to have been provided. When they're requested they're still not provided, let alone within a reasonable time. So, it's consistent with the other complaints we make and supportive of the proposition that confronted with the failure to properly conduct the company and pursue its objects and involve members in the way that had been contemplated and then failure to disclose financial information to establish the basis upon which it could fund the activities it was supposed to pursue or any budget for the business plans that had been produced, Mr Szental was really left ... He either walked away, saying well it doesn't matter that this company is not being conducted properly, it doesn't matter that it's not pursuing its objectives, it doesn't matter that the demand side policies aren't being developed and advocated. It doesn't matter that there's a process by which there is a selection of representatives not based on any procedure or structure to participate in briefings and advocacy. He could do that, that would be an easy thing to do. Or he could do it really as the only effective form of proceeding that he could bring, which is this proceeding, to attempt to remedy those deficiencies, which is what he's done." Mr Szental's concerns were understandable but they do not warrant a finding of oppression. Further, by the commencement of the final hearing the substantive matters complained of by the plaintiff had been attended to by the Council. That consequence gives rise to the question as to whether it is open to a court to grant relief under s 233(1) when the conduct complained of, although in existence at the time the proceeding was filed, is no longer continuing as at the date of the trial or thereafter.