Black FridayUp to $500 off your legals

Selected cases

Full Court of the Federal Court of Australia · [2026] FCAFC 139

Aulich v Scott

The two appellant directors, Benjamin Aulich and Peter Woodhouse, participated with Erin Taylor in share issues after Joanna Scott asked...

Full Court of the Federal Court of Australia30 Oct 2026

Plain-English explainers, not legal advice. Use the linked official source for section-level detail, and get advice for your situation.

Get legal help

Start here

Quick read

  • A rights issue or pro-rata offer is not automatically fair.
  • The two appellant directors, Benjamin Aulich and Peter Woodhouse, participated with Erin Taylor in share issues after Joanna Scott asked the other shareholders to buy...

Use this to check

  • A proportionate offer can still be oppressive when its real purpose is to dilute a shareholder
  • A constitutional power to issue shares remains subject to directors' duties and the oppression remedy
  • Capital needs, issue size and issue price should be supported by current financial evidence

Decision snapshot

  1. What happened

    • Benjamin Aulich and Peter Woodhouse practised law through a group of companies with Erin Taylor.
    • Joanna Scott held interests in Aulich Civil Law Pty Ltd and Aulich Property Trading Pty Ltd.
    • On 12 March 2020, Jack Pappas proposed that the other shareholders buy Ms Scott out and said she would be flexible about timing.
    • The private response was hostile.

  2. What the court had to decide

    • The appeal asked whether the trial judge was wrong to find that the ACL and APT share issues were principally undertaken for an improper purpose and were oppressive under the Corporations Act.
    • The directors argued that the companies faced financial uncertainty, the constitutions permitted the issues and every shareholder received a proportionate offer.

  3. What the court decided

    • The Full Court dismissed the appeal and ordered the directors to pay Ms Scott's appeal costs.
    • It upheld the finding that the share issues were commercially unfair and driven by the purpose of diluting her interests.
    • The formal power to allot shares, and the fact that the offers were proportionate, did not answer the oppression claim.

Practical impact

Practical read

  • A rights issue or pro-rata offer is not automatically fair.
  • Directors should be able to explain why the company needs capital, how the amount and issue price were set, what alternatives were considered and how the issue affects ownership.
  • Those questions become especially important when the issue follows a shareholder dispute.
  • The personal order in this case was novel and depended on the Court's findings and the loss proved by Ms Scott.

Practical takeaways

  • A proportionate offer can still be oppressive when its real purpose is to dilute a shareholder
  • A constitutional power to issue shares remains subject to directors' duties and the oppression remedy
  • Capital needs, issue size and issue price should be supported by current financial evidence
  • Internal communications can be powerful evidence of purpose
  • Later corporate distress did not remove the loss caused by the earlier dilution on the facts of this case

How a buyout request became a dilution dispute

Ms Scott did not begin by demanding that the companies be broken up. Her husband proposed that the other shareholders buy her out and said she would be flexible about timing. The remaining principals knew the interests had substantial value and discussed a possible funded sale.

The tone changed in private emails. The proposal was described as the start of a war. The principals discussed the risk of an oppression claim and the fact that they could not readily fund a buyout at the values being discussed. That chronology mattered when the Court later examined the stated reason for the share issues.

The ACL issue reduced 25 shares to a tiny fraction

ACL issued 99,900 new shares at $1 each. Ms Scott was offered 24,975 shares, matching her existing proportion, but did not accept. The other shareholders took up the issue. She was left with 25 shares out of 100,000.

BAP distributed $132,000 from tax savings, and about $99,000 was used to subscribe for ACL shares. ACL also held about $2 million in a CBA account at 1 April 2020. There was no evidence that the directors knew the full balance, although a 19 March email referred to $1 million in the CBA tax-savings account. The Court considered the funding path, cash position and lack of a proper valuation when testing the capital-raising explanation.

APT repeated the pattern in 2021

APT later approved 40,000 new shares at $1 each. Ms Scott was offered 10,000 and did not accept. The other shareholders did. The financial material showed a loss for the period, but it also showed significant related-party receivables. The Court found that the company had not given a convincing explanation for the amount of capital selected or why the issue was commercially necessary.

Looking at both issues together, the trial judge and Full Court found a continuing course of conduct directed at dilution.

Why the Full Court upheld the oppression finding

What the court focused on

  • The buyout request and hostile internal discussion came before the capital calls
  • The directors knew the existing interests were valuable
  • The issue price was not supported by a proper valuation process
  • The amount raised was not tied to a reliable assessment of the companies' needs
  • Alternative funding options were not properly explored
  • About $99,000 distributed from BAP tax savings was used to subscribe for ACL shares
  • The APT issue later used a similar structure without a persuasive capital explanation

No single factor created the result. The Court assessed the whole course of conduct and the commercial effect on Ms Scott. The directors' own communications were especially important because they showed what was being discussed when the formal capital rationale was developed.

Why the directors faced a personal compensation order

By the appeal, ACL was in liquidation and APT was likely to enter administration for reasons unrelated to the oppressive conduct. The directors argued that this changed the position and that personal compensation was not the right remedy. The Full Court disagreed.

The loss was measured when the dilution occurred and later dividends were credited. The Full Court treated direct compensation from the directors to the shareholder as a novel remedy, but held that section 233 permitted it on these facts. It is not an automatic remedy for every oppressive share issue.

What a board should settle before a share issue

  1. Define the capital need

    Use current cashflow information and state the amount, timing and purpose of the funds required.

  2. Test alternatives

    Consider debt, shareholder loans, staged funding, cost reductions and other realistic options, then record why the chosen structure is better.

  3. Set a defensible price

    Use a valuation or another documented pricing method that fits the company and the rights attached to the shares.

  4. Model the ownership effect

    Show how taking up or declining the offer changes voting power, distributions and control for each shareholder.

  5. Manage conflicts

    Identify which directors or shareholders benefit from the issue and use independent advice or decision-makers where appropriate.

  6. Keep the record coherent

    Board papers, financial evidence, emails and resolutions should support the same genuine commercial purpose.

Common questions

Was the share offer unfair simply because Ms Scott did not take it up?

No. The decision turned on the full commercial context and the principal purpose of the issues. The Court accepted that a pro-rata offer can be fair in other circumstances. Here, the timing, internal emails, unsupported issue price, weak capital rationale and movement of funds supported the finding of oppression.

Can directors issue shares at any price allowed by the constitution?

A constitution may give directors a broad allotment power, but directors still have to use it for a proper purpose and consistently with their duties. The Full Court rejected the idea that the constitutional wording answered the oppression claim.

Did the Court require the companies to buy Ms Scott's shares?

No. The remedy upheld on appeal required Mr Aulich and Mr Woodhouse personally, and jointly and severally, to compensate Ms Scott for the loss caused by the dilution, less later dividends. The case therefore does not set a general buyout formula for shareholder disputes.

Why did the later failure of the companies not end the claim?

The oppressive share issues had already reduced the value of Ms Scott's holdings. ACL's later liquidation and APT's likely administration did not repair that earlier loss. The Court focused on the continuing financial effect of the conduct.

What should a small company record before issuing shares?

Record the capital need, current cashflow evidence, funding alternatives, valuation or pricing basis, effect on each shareholder, conflicts, approvals and reasons for the final structure. If the issue may alter control or follows a dispute, independent advice and valuation evidence are particularly important.

Related topics

Companies & Startups

How Sprintlaw can help

Shareholders AgreementCorporate Lawyer Consult

Update history

Case30 Oct 2026

Full Court upholds personal compensation for oppressive share dilution

The Full Court upheld findings that two share issues were used to dilute a shareholder after she proposed a buyout. A proportionate offer and a broad constitutional issue power did not prevent the conduct from being oppressive.