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Litigation and Dispute Resolution update: Pilot program for shareholder disputes

Oct 29, 2014

As of 1 October 2014, the Supreme Court of Victoria has launched a pilot program pursuant to Practice Note No. 5 of 2014.

The pilot program will run for 6 months, and is intended to deal with the numerous applications filed under sections 232 and 233 of the Corporations Act 2001 (Cth) which apply when the affairs of the company have been conducted in an oppressive manner. Hence such claims are usually referred to as shareholder oppression cases or minority shareholder oppression claims since it is invariably the minority shareholder that claims it is being treated unfairly.

The pilot program is intended to deal with small private companies, which form the bulk of oppression claims, and not for publicly listed corporations.

In the past, these proceedings were often costly and the Affidavits that had to be filed at the commencement of the proceedings were extremely lengthy and contained many exhibits.

Under the Practice Note, only a 3 page Affidavit will now be permitted in shareholder disputes. The only exhibit which can be attached to the Affidavit is a company search thus reducing the costs associated with bringing proceedings and the amount of paper the judge would otherwise have to read to determine if the claim has merit.

After the proceedings are commenced, all cases will now be scheduled for an Initial Conference before an Associate Judge of the Supreme Court. The parties and their lawyers must attend and the Associate Judge will see if the case can be resolved before any further steps are taken, or further costs are incurred.

Where the case cannot be resolved at the Initial Conference, further orders will be made including for mediation. The filing of more detailed Affidavits, Points of Claim, and Points of Defence will usually be deferred until after the mediation. Again, the focus is keeping the costs down and trying to resolve shareholder oppression cases as quickly and inexpensively as possible.

From KCL Law’s point of view, the pilot program is a positive development and shows the Supreme Court of Victoria is taking steps to try to reduce the time and expense that these cases have traditionally taken. We have already been involved in an Initial Conference and can confirm the judges are taking a no nonsense approach to oppression cases, with the goal being a quick disposition and focusing on the real issues between the parties.

More information

For the further information, please contact Principal Lawyer David Weinberger.

Note: This update is a guide only and is not intended to constitute legal advice.