Question

Melissa, Joan, Sally and Giovanni own equal shares in Tropical Fruit Juice Pty Ltd. They are also directors of the company. Melissa, Sally and Giovanni feel that the business is running smoothly so they start to neglect keeping up to date with the company’s financial situation and business. They lose interest in the business and they just want to collect remuneration as directors. Joan complains to Melissa, Sally and Giovanni via e-mail and she tells them that they are expected to attend the business regularly and keep up to date with its financial situation. Joan’s relationship with the other directors broke down beyond repair after several heated exchanges. Melissa, Sally and Giovanni call a shareholders meeting and they pass a resolution which removes Joan as a director of the company. They also call a board meeting and increase director remuneration to a point which leaves the company with no profits. After the meeting Giovanni grinned at Joan and said: “you see, we can do whatever we want as we are the majority”. Joan thinks this is incorrect and she seeks your advice.

Advise Joan of her prospects of bringing:

• a claim for statutory oppression and what remedies she should seek; and
• a derivative action on the behalf of the company. You must also explain on what basis the derivative action will be brought.

Answer 1

a) Opression remedy which protect the interest of shareholders and other stakeholders of the company against the wrongful corporate conduct . The oppression remedy is the personal remedy available to a complainant where a corporation ,a board or a corporation 's affiliate acts in a manner oppressive or unfairly prejudicial to, or which unfairly disregards, that complainant’s individual interests. In the given case Joan has looked after the business of Tropical fruit juice pvt ltd in in a well manner ,other directors was incapable of running the business .Joan did the duties of director and others have failed with their duties .so in this case ,Joan has to demostrate that the alleged wrongful conduct has been oppressive ,unfairly prejudiced or unfairly disregarded its personal interest .

b) Derivative action behalf of the company ,empowers complainants to commence an action on behalf of the corporation to remedy alleged wrongs done to the corporation itself . In this given case court can interfere the matter .Claims for wrongs to the coporation by majority members alleged to have directly affected the personal interests of a miniority member ,where there are a relatively limited number of shareholders and as such the minority shareholders may be uniquely impacted.Since derivate action is a corporate remedy.If the court found that the claim must be brought as a derivative action where wrongful conduct is alleged to have affected a corporation and wrongful conduct affects the shareholders equally.The court will identify three points for the claim that must be pursued by way of derivative action :

• the alleged wrongful conduct is done to a public corporation   
• the relief sought is for the benefit of corporation
• there is no personal element .

in the given case , the rest of the directors have directed for increase in the remuneration of the directors ,this has lead to no profit in the company .

So the court will see this fact and take decisions regarding the wrongful corporate conduct.