In White Family No 1 Pty Ltd v Organic Brands Pty Ltd  VSC 247, the parties had agreed to establish a business together, incorporating the company in 2007. Over the next 2 years their relationship deteriorated and the affairs of the company fell into disarray. The plaintiff subsequently brought an action to wind up the company on just and equitable grounds, under s461(1)(k) of the Corporations Act 2001 (Cth).
The Court firstly confirmed and applied the tests established in previous decisions that invoking this ground requires a breakdown or loss of confidence between the parties, and that:
- the breakdown must be of such degree and nature that it materially frustrates the commercially viable and sensible operations of the company; and
- there must generally be a restriction on the transfer of the member's interest.
The ground was satisfied on the facts of the case, given that the relationship between the parties had broken down irretrievably, there was a deadlock in the management of the company that went beyond a mere disagreement as to how the affairs of the company should be run, and the Court considered that the continuation of enterprise would be a futility. Further, the company was constituted as a proprietary limited company and its constitution imposed a restriction on the ability of the shareholders to transfer their shares.
The Court also rejected the defendants' argument that the proceeding should be dealt with as an oppression action and that they should buy out the plaintiff, as it was impossible to properly value the company's shares.
This case provides a clear example of the Court utilising its broad discretion to wind up a company on just and equitable grounds, given the serious breakdown that occurred in the management of the company.