Wording of 2018 shareholder vote left payout to board discretion, not obligation
The Full Federal Court has ruled that a 2018 shareholder resolution did not oblige Total Tools to hand a former director millions in shares.
In Butler v Total Tools Holdings Pty Ltd [2026] FCAFC 114, released 3 September 2026, the court dismissed an appeal by Michael Butler, a former chairman and non-executive director of the tool retailer, against Total Tools Holdings Pty Ltd.
Total Tools recruited Butler and fellow director Stephen Heath in 2016 to help prepare the business for a sale or stock market listing. In 2018, shareholders unanimously passed a resolution authorising the board to grant each man an equity-based instrument, equivalent to 30 shares for Butler, upon the closing of a trade sale or public listing. Butler resigned as chairman and director on 1 April 2019, before Mitre 10 Australia, a Metcash subsidiary, bought 70 percent of Total Tools for $57 million on 1 September 2020. Both sides agreed that the sale satisfied the resolution's condition. Total Tools refused to issue the shares, and Butler sued, seeking an order compelling the allotment and, at one stage, damages exceeding $7 million. He dropped the damages claim before trial.
The dispute turned on one word: "authorised." The resolution said the board was "authorised to create and allot" the instrument to Butler. The court agreed with the trial judge that this language gave directors a discretion to act, not a binding obligation. It rejected Butler's argument, based on selected dictionary definitions, that "authorised" meant the board was compelled to issue the shares once a trade sale closed.
The court also confirmed the resolution drew its legal force from the shareholders' agreement, not the company's constitution. Under the constitution, the power to issue shares or other securities rested solely with the board. The shareholders' agreement separately required a special resolution before the board could create or issue any new equity, which was what the 2018 vote provided. The court rejected Butler's claim that shareholders held a "sovereign" power under the constitution to have shares issued directly to him, finding it misread the division of authority between the board and the shareholders.
The trial judge had also found that Butler lost his standing to enforce the constitution once he left the board and, having never held shares in Total Tools, was not a party to it; the Full Court said it did not need to revisit that point given its other findings. The court dismissed the appeal and ordered Butler to pay Total Tools' costs of the appeal.
