Disputes between shareholders and directors can have serious consequences. The recent case of Van Wijk (Trustee), in the matter of Power Infrastructure Services Pty Ltd v Power Infrastructure Services Pty Ltd [2014] FCA 1430 demonstrates that one such consequence is directors having control of the company taken away from them. In this article we illustrate the impact on the company for directors and shareholders who fail to reach an agreement.


These proceedings were brought about by Mr Van Wijk who sought the winding up of Power Infrastructure Services Pty Ltd (Power) and was applying for the Court to appoint a provisional liquidator to Power.

Power is in the business of designing and constructing switchgear. It is a subsidiary of another company HVLV Pty Ltd (HVLV); however, it is not a wholly-owned subsidiary. HVLV, in turn, is a wholly-owned subsidiary of a listed public company, Viento Group Limited (Viento Group).

Power has a number of shareholders with HVLV being a majority shareholder, having a 50% ownership in Power. The company operates in Queensland and Western Australia and as such there is a geographic split between minority shareholders.

Since about March 2014 endeavours had been made by shareholders in Power to reach an agreement (a shareholder agreement) as to the governance of their relations and the operation and management of Power.  However, no such agreement had ever been reached and the Court stated that it had no confidence at all that any such agreement would ever be reached. The reason for this was the breakdown of the relationship between Mr Van Wijk and Mr Farrell.

Mr Van Wijk was the representative director for Queensland-based minority shareholders and Mr Farrell was another director of Power. They had a very hostile relationship and the evidence lead was that it was showing no signs of improving.

Fueling that hostility, in September 2014 the board of Power resolved that intercompany transfers would be required to be authorised by Mr Van Wijk or Mr Guy. Mr Guy was the representative director for Western-Australian based minority shareholders. Despite this, a week later there was a transfer of half a million dollars from Power’s bank account to the Viento Group’s bank account. This transfer was said to have the approval of Mr Farrell.

The Court concluded that the impression which all this created was that there was an inevitable tension between the interests in the conduct of Power’s place as a subordinate, but not wholly-owned subordinate in the Viento Group. The Court was of the view that this tension was unlikely to be removed other than by either:

  • An acquisition by minority shareholders of the majority shareholding interest in Power, resulting in the exit of Power from the Viento Group; or
  • The acquisition of minority shareholding interests by majority shareholding interests resulting in an exit of minority shareholders from Power and Power then becoming a completely owned subordinate of the Viento Group.

However, the Court then considered whether particular behaviours on the part of Mr Farrell have had the effect of intruding on the worth of the value of Power and its business. They formed the view that the hostility between Mr Van Wijk and Mr Farrell meant there would not be any clean buyout of either majority or minority.

Power’s business also substantially relied on its relations with its suppliers and there was evidence that Mr Van Wijk had received numerous queries from suppliers regarding outstanding payments owed by Power. Mr Van Wijk had difficulty in securing the latest accounts of Power and the most recent exchanges between Mr Van Wijk and Mr Farrell revolved around Mr Van Wijk’s ongoing endeavours to secure further business for Power in Queensland. The Court concluded that the company’s ability to secure ongoing business had been “terminally affected” by the state of relations between Mr Van Wijk and Mr Farrell.


The Court considered the potential negative effects of appointing a provisional liquidator. An example was that Power’s contract with BHP Billiton could be affected as the order for the appointment of a liquidator or a winding-up application could enliven an ability on the part of BHP Billiton to terminate the contract. The Court also stated that the potential for the unemployment of the existing workforce of Power could not be underestimated.

The Court acknowledged that the appointment of a provisional liquidator is perceived as a drastic measure. However, such an order may be made in circumstances where a company’s ongoing business requires material cooperation and trust, so that in the absence of this the continuation is futile. The Court stated “it is difficult to see how the future business operations of Power can in anyway be continued, given the acrimony that exists between Mr Farrell and Mr Van Wijk.”[1]

The Court did not consider there to be, given the failure to form a shareholder’s agreement, any prospect of resolution of difference affecting the day-to-day operations of the company. Nor did they think it realistic that an uncontroversial buyout could be achieved. Based on this the Court ordered the appointment of a provisional liquidator.


This case demonstrates that, where directors and shareholders fail to reach an agreement they may have control of the company taken away and a provisional liquidator appointed. Whilst a provisional liquidator has the power to operate the business of the company or to close the business and sell off assets, it is perceived as a negative event in the general market place and can trigger contractual breaches.

Another possible consequence of shareholder disputes is a court ordered winding up. In the case discussed, though the outcome of the application was not decided at this instance, Mr Van Wijk had applied for the winding up of Power under theCorporations Act 2001 (Cth) on the grounds that:

  • The directors had acted in affairs of their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever that appeared to be unfair or unjust to other members (s 461(1)(e));
  • Affairs of the company are being conducted in a manner that was oppressive or unfairly prejudicial to or discriminatory against member(s) or in a manner contrary to the interests of the members as a whole (s 461(1)(f)); or
  • The Court would be of the opinion that it is just and equitable that the company be wound up (s 461(1)(k)).

A breakdown of relations between company’s members may support a winding up on the just and equitable ground where it frustrates the commercially sensible operations of the company.[2] Thus it is possible that a shareholder dispute could result in the company’s winding-up.

To avoid situations like the Power case, companies would best seek to resolve issues internally, before escalation sees the matter taken out of their hands.