Director Dispute Lawyers in Melbourne

What this practice area covers

This page anchors our work for clients caught inside a contested board. The cluster includes directors facing removal by a shareholder requisitioned meeting, directors defending derivative claims, boards locked in deadlock between equal appointees, founders whose constitution does not match their commercial expectations, and shareholders who need to enforce a breach of duty against a director the company will not act against. It also includes the matters that begin as a shareholder dispute and become a director dispute, because the requested remedy is the removal or replacement of the board.

The disputes we see most often involve private companies and family owned groups. The pressure points are predictable: a co director who is no longer pulling weight, a director who has set up a competing entity, a director whose family law matter is bleeding into board decisions, a chair who is using the casting vote to push through transactions that benefit one side, and a board where two directors will not agree on anything and the company is paralysed. These disputes are commercial first, personal second, and the legal frame must hold that distinction.

We act on matters where the dispute meets a separate workstream. That includes director disputes that run alongside a separation, where the corporate position must be coordinated with family law for business owners, and disputes that are pleaded as shareholder oppression but whose real remedy is at the board. We are comfortable in the Commercial Court of the Supreme Court of Victoria and in the Federal Court, and we run urgent applications to restrain or compel a meeting where the company is at risk in the interim.

The legal framework in Australia

Director conduct in Australia is governed primarily by the Corporations Act 2001 (Cth). Sections 180 to 184 set the substantive duties. Section 180 imposes a duty of care and diligence, measured against the standard of a reasonable person occupying the same office in a corporation in the same circumstances. Section 181 requires directors to act in good faith in the best interests of the corporation and for a proper purpose. Section 182 prohibits the improper use of position, and section 183 prohibits the improper use of information acquired as a director. Section 184 elevates the most serious breaches to criminal offences.

The duty of care under section 180 is objective and is the workhorse provision in most director disputes. The New South Wales Court of Appeal in Daniels v Anderson (1995) 37 NSWLR 438, the AWA litigation, confirmed that the standard is not lowered for inexperience and is raised where a director holds out particular skill. The High Court in Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345, the James Hardie litigation, reinforced the objective standard and held that the non executive directors had breached section 180 by approving the release of a misleading ASX announcement on the company's asbestos liabilities. Section 180 is engaged not only by financial decisions but by reputational and disclosure decisions where the company's interests turn on them.

Australian Securities and Investments Commission v Adler [2002] NSWSC 171 in the Supreme Court of New South Wales remains a frequently cited example of the duties under sections 180, 181, 182, and 183 applied together. The director was found to have used his position to procure a transaction that benefited a related entity, and was disqualified from acting as a director for twenty years. Adler is the example most often used in correspondence when conduct is being characterised as a breach across multiple sections of the Act at once.

On removal, the position differs between public and proprietary companies. Section 203D applies to public companies and provides that a director may be removed by resolution despite anything in the company's constitution, an agreement between the company and the director, or an agreement between any of the members and the director. The procedure requires special notice of at least two months before the meeting at which the resolution is to be moved. The director is entitled to put a written statement to members and to be heard at the meeting. The board cannot remove a fellow director under section 203D. That power sits with the members.

For proprietary companies, the starting point is section 203C, a replaceable rule under which the company may, by resolution of its members, remove a director and appoint another person instead. Because it is a replaceable rule, the company's constitution can displace or modify it (section 135), and a constitution may set its own removal procedure. Section 203E, which makes void any resolution, request or notice of the directors that purports to remove a director, applies only to public companies. In a proprietary company, whether the directors themselves can remove a fellow director therefore depends on what the constitution says. Section 203CA adds one safeguard: a members' resolution to remove a director is void if, at the end of the day it is to take effect, the company would not have at least one director. The practical consequence is that most proprietary company director disputes are won or lost on the constitution, not the Act, and the procedural pathway is determined by close reading of the document rather than by general principle.

Where the company itself will not enforce a breach of duty, the statutory derivative action under Part 2F.1A is the route. Sections 236 and 237 allow a member, former member, or current or former officer to apply for leave to bring proceedings on behalf of the company, or to intervene in proceedings to which the company is a party. The Court will grant leave only if it is satisfied that it is probable the company will not bring the proceedings itself, that the applicant is acting in good faith, that it is in the best interests of the company that leave be granted, that there is a serious question to be tried, and that the company was given at least 14 days' written notice of the application (unless the Court finds leave appropriate without it). The leave hearing is the gateway and is where most derivative actions are won or lost.

How we work across this area

Our approach begins with the documents that actually govern the board. The constitution, the shareholders agreement, the director service contracts, and the minutes of the last three years are read before any position is taken in correspondence. Many director disputes are resolved or reframed by what those documents say about quorum, casting votes, deadlock, notice periods, and the difference between a removal mechanism in the constitution and removal under the Act. A misread constitution is the most common reason a director removal fails.

Where information is being withheld from a director, the first step is usually a written request for inspection in the director's capacity, followed by an application under section 247A if necessary. Directors have a separate, stronger right of access to company records than members do, grounded in their fiduciary obligations to the company. Where a director is being shut out of meetings or papers, the corrective step often produces the documents that anchor the substantive claim.

For removal matters, the litigation is rarely the removal itself. It is the consequence of removal: the director's service contract, any equity vesting, the validity of the resolutions taken at the same meeting, and the personal liability questions that come with departure, including residual exposure under section 588G of the Act for transactions in the period before resignation. We work these workstreams in parallel, not in sequence.

For derivative actions, the leave hearing is treated as the case. Properly framed evidence on the five section 237 requirements, served well, usually determines whether the matter goes any further. The substantive claim is built behind it, but the leave application is where the matter is won.

Tone of correspondence matters. We are direct in pleadings and at the bar table, and measured in everything else. The company usually has staff, customers, and financiers watching. Process aggression for its own sake tends to produce a worse settlement than a measured pace and a credible willingness to run the matter if it is not resolved.