Oppressive conduct, what meets the threshold under s232?

As a professional liability and director liability litigator I routinely deal with:

• professionally liability predominantly for building practitioners (PI insurance); and

• director liability (D&O insurance).

Materially, these the two areas of focus for our entire firm Brockhill & Usherwood Lawyers.

This means dealing with oppression claims, but when it comes to oppressive conduct a lot of things get thrown around as oppressive.

Conduct that falls within s232 requires a careful factual consideration.

Under s232 (e) a plaintiff need prove that there has been commercial unfairness that is so unfair that a reasonable director would not think the decision fair.

Sections 232(d) & (e) are grounds for relief and conduct can be contrary to the interests of the members as a whole even if it isn’t “commercially unfair”.

Moreover what is fair is not to be assessed in a vacuum but the context in which the conduct relates is key.

The matter of Skytraders Pty Ltd is an excellent case to consider the above concepts and what amounts to oppressive conduct.

Whilst this case dates back to July 2022, the decision of Justice Button provides an important reference point for how oppressive conduct may be assessed.

This includes that conduct is to be assessed objectively and by reference to:

• whether the conduct adheres to accepted standards; or

• is in accordance with how reasonable directors would act; and

• a grant of a remedy for oppressive conduct is discretionary;

• Remedies for oppressive conduct are designed to bring an end to the oppression and to compensate the person oppressed.

However, the conduct questioned by the plaintiff in Skytraders (who was a 30% shareholder) did not establish oppression.

Further the just and equitable ground of windup sought by the plaintiff fell away when oppression was not proven.

One example of an allegation that failed in that case included that the company in question paid legal fees which both benefited the defendant company and the majority shareholder. Whilst this actually occurred it was not found to be oppressive given the amount of fees was relatively small in size and said to have been reimbursed.

Justice Burton observed that while it may be technically oppressive it was found not to be determined as such.

This is but one of many considerations but the case should be a solid reminder and one guide for practitioners to refer when cases of oppression are being alleged and assessed.

Clients will often form their own view on matters that they say are oppressive but reference to comparative issues in other cases but these must be studied carefully.

This is such a common claim but one that routinely gets thrown around in many cases where the facts may be tenuous.

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tagged as:

• building disputes