2017 kicks-off with Oppression!

SDW2 Pty Ltd v JLF Corporation Pty Ltd & Ors [2017] QSC 1:  http://www.sclqld.org.au/caselaw/QSC/2017/001

The first reported case of the Supreme Court for 2017 concerned Interlocutory Injunctions and Shareholder Oppression.

The applicant plaintiff sought an interlocutory injunction to restrain the third defendant from holding certain meetings and restraining the first defendant from casting votes on particular resolutions.

Conclusion on whether a prima facie case has been established

Bond J found at [101]: “I am satisfied that SDW2 has established a prima facie case that the purported acquisition by JLF of Shaw Investments’ 14% shareholding of CFMG was void and that JLF threatens to exercise a voting entitlement which there is a prima facie case that it does not have. That voting entitlement would be critical in JLF’s ability to establish the special majority which would be necessary to remove Mr Watson as director.”

There was a grant of an interlocutory injunction upon the usual undertaking as to damages.

About interlocutory injunctions

Bond J confirmed the legal principles governing the disposition of an application for interlocutory injunction that his Honour had discussed in Stacks Managed Investments Ltd v Tolteca Pty Ltd [2015] QSC 234 at 3 to 5 and again in Tribal Health Pty Ltd v Flush Fitness Pty Ltd [2016] QSC 103. In the latter case, his Honour summarised the relevant principles in these terms (at [23]):

“(a) The law in Australia has long regarded it to be necessary to make two main inquiries:
(i) whether the applicant has shown that it has a prima facie case; and
(ii) whether the applicant has shown that the balance of convenience favours the granting of the relief claimed.

(b) The significance of the requirement that a prima facie case be shown is elaborated upon in Australian Broadcasting Corporation v O’Neill(2006) 227 CLR 572 and Live Earth Resource Management Pty Ltd v Live Earth LLC [2007] FCA 1034 at [11] to [13].[2]

(c) The considerations brought to bear on the balance of convenience requirement were the subject of discussion in Australian Broadcasting Corporation v O’Neill and Bowen Central Coal Pty Ltd v Aquila Coal Pty Ltd [2011] QCA 334, the latter case clarifying that the adequacy of an award of damages and the question of the sufficiency of the usual undertaking were to be considered as part of the totality of the balance of convenience question.[3]

(d) The progression of the two main inquiries is not a mechanical exercise. Whether the relief sought is prohibitory or mandatory, the Court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong” in the sense of granting an injunction to a party who fails to establish his right at an ultimate trial, or in failing to grant an injunction to a party who succeeds at trial. In making that decision, the Court should weigh in the balance all relevant factors, including matters pertaining to the strength of the case to be tried[4] and the balance of convenience.

[2] See per Gummow and Hayne JJ at 81 to 84 [65] to [72], Gleeson CJ and Crennan J agreeing at 68 to 69 [19].
[3] See Bowen Central Coal Pty Ltd v Aquila Coal Pty Ltd [2011] QCA 334 at [39] per Fraser JA (with whom White JA and M Wilson AJA agreed).
[4] See Warner-Lambert Company LLC v Apotex Pty Ltd(2014) 311 ALR 632 at 646 [70].
If your client is a minority shareholder affected by oppression, or a majority shareholder resisting an injunction application, contact Janelle Payne at Burnett Lane Chambers.