Lake House Corporation Limited v Timor Resources Holdings Pty Ltd [2026] FCA 335

This case arose from a control and governance dispute inside a private company with two competing shareholder blocs and a negotiated board structure. Timor Resources Holdings Pty Ltd was an Australian oil and gas exploration company. Lake House had originally invested through convertible notes, and after later conversions it became a very substantial shareholder, holding 48.05 percent of the company.

The commercial background mattered. In mid-2024, there had already been a dispute about the company’s reporting obligations, refusal to execute a prescribed shareholders deed, and concerns that note conversion could trigger a change in control. That earlier dispute was resolved by a new shareholders deed signed on 26 August 2024. The deed was not a side document of minor importance. It was part of the bargain that settled the earlier conflict and set the governance rules going forward.

The deed created a carefully balanced board. Shareholders with a sufficient stake could appoint shareholder directors. There was also to be an independent director, appointed by unanimous agreement of the shareholder directors or, if that failed, through a specified dispute resolver process. The deed also said the board could remove the independent director by Special Director Approval.

By early 2026, the board had five directors: two appointed by Lake House, two appointed by the Nepean shareholders, and one independent director, Mr Moyes. Disputes then arose around board meetings in February and March 2026, including whether Ms Osborne had resigned or agreed to resign and whether she still held delegated CEO power. In that setting, Ms Osborne and the Nepean shareholders alleged that Mr Moyes had not acted impartially or in the company’s best interests. Lake House and Mr Moyes disagreed.

On 18 February 2026, various shareholders including the Nepean shareholders issued a notice of general meeting to remove Mr Moyes as independent director and appoint Dr King in his place. Lake House said that move bypassed the agreed governance framework in the shareholders deed. It commenced Federal Court proceedings on 11 March 2026 seeking declarations and an injunction to stop the meeting.

The constitution and the shareholders deed both dealt with board composition, but they did so in different ways. The constitution empowered the company by resolution to remove a director and appoint another person in that director’s place. On a quick reading, that might suggest shareholders could use an ordinary company meeting to change the board.

The shareholders deed was more specific. It set the maximum number of directors at six unless the board unanimously decided otherwise. It gave shareholders with a relevant proportion of 20 percent or more the right to appoint shareholder directors. It then created a separate regime for the independent director. Clause 2.8 dealt with appointment. Clause 2.9 said the board could remove the independent director by Special Director Approval.

The most important drafting for the case was clause 2.4. That clause said the company must not do certain listed things without the required approval, and the parties had to use all voting rights and any other powers of control available to them, whether as shareholders, through a director or otherwise, to procure that the company did not do those things. Schedule 3 item 7 included appointing or removing an independent director, other than an appointment pursuant to clause 2.8.

The deed also contained a precedence clause. It said that where the deed and the constitution dealt with the same or a similar topic differently, the deed prevailed in relation to that topic. It also included a mechanism under which shareholders could be required to take steps to amend the constitution if the board agreed there was a difference and an amendment was needed.

The Nepean shareholders argued that appointment and removal of directors was governed by the constitution and that the shareholders deed was ineffective to the extent it purported to confer power on the board to remove the independent director. Lake House argued that, whether or not the deed had modified the constitution, it still bound the parties as a contract and prevented them from using a general meeting to remove and replace the independent director outside the agreed process.

The central issue was whether the proposed general meeting could lawfully be used to remove the independent director and appoint a replacement. That required the court to decide how the constitution and the shareholders deed interacted, and whether the deed regulated the shareholders’ use of voting rights strongly enough to stop the meeting.

Lake House sought declarations in two alternative forms. One was that the shareholders deed had modified the constitution so that an independent director could only be appointed or removed under clauses 2.8 and 2.9 of the deed. The alternative was that, even if the deed had not modified the constitution, an independent director could still only be appointed or removed under those clauses because the deed contractually governed how the parties would exercise their rights and powers in relation to the company.

The court also had to decide whether the notice of general meeting dated 18 February 2026 was invalid and whether an injunction should be granted before the meeting occurred. That mattered because the Nepean shareholders had undertaken to vote to adjourn the meeting to 20 March 2026 so the case could be heard, but they maintained their substantive position and later offered to vote against the resolutions only if the proceeding was discontinued with no order as to costs.

The legal debate therefore had two layers. First, did the deed actually cover this conduct? Second, if it did, could the court enforce the deed in advance of breach by stopping the meeting itself?

Jackman J found for Lake House. The court declared that an independent director may only be appointed to, and removed from, office pursuant to clauses 2.8 and 2.9 of the shareholders deed. It also declared that the notice of general meeting dated 18 February 2026 was invalid and of no effect.

The court then restrained the company and the Nepean shareholders from holding or purporting to hold a general meeting at which resolutions were proposed to remove Mr Moyes and appoint Dr King as an independent director. In other words, the court stopped the governance step before it happened.

Importantly, the judge said it was not necessary to decide whether the shareholders deed had effectively modified the constitution. Even assuming it had not, the deed was still effective as a contract governing how the parties would exercise their rights and powers in relation to the company. That was enough to resolve the case.

The court rejected the submission that clauses 2.4, 2.8 and 2.9 of the deed did not regulate shareholders’ rights. The judge said that argument ignored the fact that the deed was a binding contract between the company and its shareholders and ignored clause 2.4(a), which expressly prohibited the company from doing certain things and obliged shareholders to use all voting rights and powers of control to procure that the company did not do those things.

The court also rejected an argument based on clause 2.4(b). The judge described that submission as turning on an elementary misreading of clause 2.4. The clause did not permit conduct. Rather, it prohibited conduct subject to qualifications. The attempt to remove and replace the independent director by company resolution fell within schedule 3 item 7 and therefore within clause 2.4(a). Whether it also fell within clause 2.4(b) or (c) was irrelevant.

On the wording of the declaration, the judge considered whether appointment of an independent director by Special Director Approval should also be included because of the wording of schedule 3 item 7. The court declined to expand the declaration that way. The opening words of item 7, "Without limiting clause 2.8(a)", were read as preserving the unanimity requirement in clause 2.8(a), not creating a new appointment pathway by Special Director Approval. The specific provision was treated as paramount to the more general language in clause 2.4(a).

This decision is especially important for private companies where governance rights were heavily negotiated during an investment, restructuring or dispute settlement. Businesses often assume the constitution is the formal rulebook and the shareholders deed is mainly commercial. The court’s approach shows that this is a dangerous simplification. A shareholders deed can impose direct contractual obligations on the company and on shareholders about how voting rights and control powers must be used.

If your deed says parties must use their voting rights to stop the company taking certain steps without the required approval, that is not merely aspirational language. It can be enforced. A shareholder group that tries to push through a meeting anyway may find the notice declared invalid and the meeting restrained before any vote occurs.

The case is particularly relevant where the board includes founder-appointed directors, investor-appointed directors and an independent director intended to balance competing interests. If the independent director role was part of the negotiated investment architecture, one faction may not be able to remove that person simply by relying on a broad constitutional power to remove directors by shareholder resolution.

It also shows the importance of reading specific clauses together. Here, the court focused on the detailed appointment and removal provisions, the reserved matters clause, the obligation to use voting rights to prevent unauthorised action, and the precedence clause. Businesses should do the same. Before taking action, compare the constitution, shareholders deed, subscription documents, note deeds and any side arrangements. A governance step that looks valid in one document may be prohibited by another.

Finally, the costs outcome should not be overlooked. The court ordered indemnity costs against the Nepean shareholders. The judge said there was absolutely no merit in their submissions about the contractual effect of the shareholders deed, apart from a bona fide dispute about whether the deed modified the constitution, which did not matter to the result. The court also considered their offer unreasonable because it left open the possibility of another meeting and did not address costs already incurred. For business owners, that is a reminder that urgent governance litigation can become very expensive very quickly if a party presses a position the court sees as obviously wrong.

The judgment was delivered by Jackman J on 19 March 2026 in the Federal Court of Australia. The proceeding had been commenced on 11 March 2026 after the meeting notice was issued on 18 February 2026. The matter was listed urgently, with the Nepean shareholders undertaking to vote to adjourn the meeting to 20 March 2026 so the court could determine the dispute first.

The orders included a timetable for submissions and affidavits on the quantification of the indemnity costs order. The judgment therefore resolved the substantive governance dispute and the entitlement to costs, while leaving the amount of the lump sum costs order to be determined later on the papers.

This case is a Federal Court decision on the enforceability of a shareholders deed in the context of a private company governance dispute. As always, outcomes in other matters will depend on the exact drafting of the relevant constitution, deed and transaction documents.

This page is based on the Federal Court of Australia judgment in Lake House Corporation Limited v Timor Resources Holdings Pty Ltd [2026] FCA 335. The judgment records the parties, the relevant governance documents, the competing arguments, the declarations and injunction granted, and the court’s reasons for ordering indemnity costs.

This is general information only and not legal advice. Governance disputes are highly document-specific, and the result in any other matter will depend on the exact wording of the constitution, shareholders deed and surrounding transaction documents.