Auswild v Bergmuller [2023] VSC 589

Coffee and a Case Note

“Let’s appoint an IP to chase the group’s debts!”
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The Ps were 48% shareholders of a group of Cos that owned luxury car dealerships. The Ds were directors representing 52% of shareholders.
The 52% majority owed a judgment debt to the group. The Ps proposed a course for recovering the debt. The Ds used their votes at board level (including a casting vote) to vote down the Ps’ course and vote up their own: [2]
There was deep “anger” and “animosity” between the Ps and Ds and “very bitter and distrustful” feelings [58], [69]
The Ps argued the Ds had a conflict of interest. The Ds said the Ps did too: [3]
In previous litigation the Court found the Ds breached their duties to the group, pursuing litigation on the group’s behalf that benefitted them personally as part of a coordinated strategy to defeat the Ps: [12]
This led to the Ds’ $19.8m judgment debt, plus costs incurred by the group: [13]
To recover the debt the group needed to resolve: what were the group’s costs and how should they be pursued?: [14]
The Ds suggested an insolvency practitioner (IP) be appointed to by the group to recover the debt: [30]
The Ps proposed that they form a sub-committee to recover the debt: [31]
The Ds resisted on the basis the Ps were also conflicted: [32]
The Ds were critical of the Ps’ conduct in their dealings with the luxury car head franchisor, including providing them with Court documents and apparently paving the way for the Ps to take over the group’s operation of the dealerships: [44] - [48]
A reduced franchise term followed - from the usual 5 years to 1 year, apparently as a result of the Ps’ conduct: [48]
Despite the Ps’ conduct being “unwise” the Court found it was engaged in in an attempt to find a reasonable separation from the Ds. It was not found to be malicious: [49]
The franchisor later threatened perhaps reducing the term to 3 months or 6 months: [51]
The Ps accepted that if they were in charge of pursuing the judgment debt then negotiating that debt could be intermingled with negotiating the share price they wanted to pay for the Ds’ shares: [56], [57]
The Court had regard to the “ongoing bitterness, conflict, and lack of trust” as reasons not to appoint the Ps to pursue the debt: [64], [65]
The Court accepted the Ds’ submissions RE the appointment of an independent IP: [71]
The Ps’ oppression claim failed with the Court noting that more than disappointment in the minds of minority shareholders is required to show a company’s conduct is unfairly prejudicial: [77]
The Court dismissed the Ps’ claim and (noting the Ds were the majority and held the casting vote) was confident that the Ds’ resolution to appoint an insolvency practitioner would pass: [83]

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