Director No More: Court Sides with Husband Amidst Financial Collapse in Neame & Neame Dispute
Introduction
The Federal Circuit and Family Court of Australia in Neame & Neame (No 3) [2025] FedCFamC1F 127 dealt with an urgent and contentious interim application within protracted family law proceedings. The wife, removed as the sole director of a family business by the husband, sought reinstatement amidst claims of financial mismanagement and control over shared assets. The judgment navigated family law, corporate governance, and fiduciary obligations within the backdrop of failing finances and pending property settlement.
Facts and Issues
Facts
- Neame Pty Ltd was incorporated in 2011 as the corporate trustee of the Neame Family Trust.
- D Pty Ltd (a company operating under a franchise called H Company – Suburb J) was created in 2012.
- The husband was the sole director until 2020, when the wife assumed the role following separation.
- Orders in August 2022 made the wife responsible for managing D Pty Ltd’s financial obligations.
- By June 2024, D Pty Ltd accrued over $443,000 in debt, with further mortgage and tax arrears.
- In January 2025, the husband lawfully removed the wife as director and reinstated himself.
- The wife sought her reinstatement, set-aside of shareholding changes, and contempt findings.
Legal Issues
- Was the wife entitled to be reinstated as director of D Pty Ltd pending trial?
- Was the husband's unilateral action removing the wife valid under corporate law and prior family orders?
- Should injunctive relief restrain the husband from altering company and trust structures?
- Should costs be awarded given the interim nature and context of proceedings?
Application of Law
The Court applied both family law principles under the Family Law Act 1975 (Cth) and corporate governance standards under the Corporations Act 2001 (Cth).
Corporate Entitlement
Justice Hartnett found the husband, as the director of Neame Pty Ltd (sole shareholder of D Pty Ltd), was entitled—if not obligated—under corporate law to act to preserve the company’s viability. The corporate constitution and trust structure gave him authority to replace the director (wife) via member resolution
.
Family Law Context
The August 2022 Orders assigned the wife operational responsibility. However, the Court noted those obligations were not met, resulting in severe financial deterioration of the business. The judge highlighted an absence of clarity about how company income was applied by the wife, and that evidence would be explored at the resumed trial
.
No Injunction Justified
The wife's request for injunctive relief and reinstatement was denied. The Court declined to override the corporate action in the interim, citing the husband's control as being in the best interests of preserving the asset pool. This included granting the wife view-only access to accounts and restraining her from interfering in company operations
.
Judgment Analysis and Reasoning
Justice Hartnett dismissed the wife's application in full. The reasoning turned on two core factors:
- Corporate Authority and Urgency: The husband had lawful authority under the Corporations Act to change directorship due to company structure. Furthermore, the Court observed the company was in “dire financial position” and required urgent management to avoid further collapse
- .
- Breach of Responsibility by Wife: While no formal findings were made, the Court took seriously the husband's allegations that the wife:
- Failed to pay tax obligations and superannuation,
- Expended business funds for personal use,
- Redirected business income to her personal account following her removal,
- Failed to provide transparency or accounting for those funds
- .
The judge noted these serious issues would be addressed substantively at the final hearing. However, they were sufficient to justify refusing interim relief and preferring the husband's continued control.
Take-Home Lesson
In family law disputes involving business entities, directorship and control can hinge not only on family dynamics but also on fiduciary duties, corporate governance, and the ability to maintain financial stability. Courts are unlikely to reinstate a party as director if their prior management has led to mismanagement or jeopardized the value of the asset pool. Transparency, compliance with prior orders, and acting in the business’s best interest are paramount when seeking equitable relief.