Carr v Resource Equities Limited

Case [2010] NSWCA 286

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Carr v Resource Equities Limited [2010] NSWCA 286
This decision has been amended. Please see the end of the judgment for a list of the amendments.

FILE NUMBER(S):
2010/ 012481

HEARING DATE(S):
6 October 2010

JUDGMENT DATE:
2 November 2010

PARTIES:
Leon Phillip Carr (First appellant)
Nigel Charles Purves (Second appellant)
Resources Equity Limited (First respondent)
Richard John Thomas (Second respondent)

JUDGMENT OF:
Spigelman CJ Macfarlan JA Sackville AJA   

LOWER COURT JURISDICTION:
Supreme Court

LOWER COURT FILE NUMBER(S):
50205/2007

LOWER COURT JUDICIAL OFFICER:
McDougall J

LOWER COURT DATE OF DECISION:
15 December 2009

LOWER COURT MEDIUM NEUTRAL CITATION:
[2009] NSWSC 1385

COUNSEL:
A Martin SC (Appellants)
R Newlinds SC / J Giles (First respondent)
D Studdy SC / N Furlan (Second respondent)

SOLICITORS:
NRG Legal (Appellants)
Blakiston & Crabb (First respondent)
Piper Alderman (Second respondent)

CATCHWORDS:
CORPORATIONS
directors and other officers
directors’ fees
whether directors had performed work which warranted additional fees
overpayments
CORPORATIONS
directors and other officers
whether transaction entered in good faith and for proper purpose
conflicts of interest and duty
business judgment rule s 182(2) Corporations Act
CORPORATIONS
directors and other officers
issue of shares
whether shares improperly issued to allow directors to maintain control of company
legal costs of directors in defending action should not have been borne by the company
exoneration, s 1318 Corporations Act

CORPORATIONS
directors and other officers
directors’ duties
breaches of ss 180, 181 and 182 Corporations Act and common law duties
causation of loss
contribution between directors 
EQUITY
general principles
rules and maxims of equity
equitable contribution
clean hands doctrine
comparative moral culpability

LEGISLATION CITED:
Corporations Act 2001 (Cth)
Pooled Development Funds Act 1992 (Cth)

CASES CITED:
Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342
BP Petroleum Development Ltd v Esso Petroleum Co Ltd [1987] SLT 345
Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282
Callow v Rupchev [2009] NSWCA 148
Dering v Earl of Winchelsea (1787) 1 Cox 318; (1787) 29 ER 1184
Segenhoe Ltd v Akins (1990) 29 NSWLR 569
Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 82 ALR 530
Snook v London & West Riding Investments Ltd [1967] 2 QB 786
Western Ventures Pty Ltd v Resource Equities Ltd [2005] WASC 53; (2005) 53 ACSR 568

TEXTS CITED:

DECISION:
Appeal dismissed with costs.

JUDGMENT:

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

2010/00012481

SPIGELMAN CJ
MACFARLAN JA
SACKVILLE AJA

Tuesday 2 November 2010

Leon Phillip Carr v Resource Equities Limited

Judgment

  1. SPIGELMAN CJ:  The appellants (Messrs Carr and Purves) were directors of the first respondent, Resource Equities Limited (“REL”), as was the second respondent (Mr Thomas).  Mr Carr was a director of REL from 31 January 2001 to 2 November 2004, but acted as a director of REL until 22 March 2005.  Mr Purves was a director of REL from 19 May 2003 until 2 November 2004, but acted as a director…

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AGLC
Carr v Resource Equities Limited [2010] NSWCA 286
Case
[2010] NSWCA 286
Decision Date

CaseChat Overview and Summary

In *Carr v Resource Equities Limited*, the appellants, former directors of Resource Equities Limited (REL), appealed a decision of McDougall J. The dispute concerned allegations that the directors had breached their duties to the company, including claims regarding directors' fees, the improper issue of shares to maintain control, and the company bearing their legal costs. The appeal focused on the issue of contribution between the directors.

The court was required to determine whether the appellants had established that Mr Thomas, another director, had breached his duties to REL, whether any such breach caused loss to REL, and whether it would be equitable to order contribution in the circumstances. The appellants sought to rely on findings of breach made against themselves by the primary judge to establish a breach by Mr Thomas.

The court rejected the appellants' case for contribution. It found that the appellants had not established a breach of duty by Mr Thomas, nor had they demonstrated that any conceivable breach by him caused a loss to REL. Furthermore, the court considered it inequitable to make such an order given the circumstances. The court noted that the appellants' case at trial had primarily focused on their own innocence rather than establishing a breach by Mr Thomas, leading to a lack of detailed findings of fact specifically directed to Mr Thomas's conduct and the evidence available to him. The court also highlighted that many of the findings of fact relied upon by the appellants were influenced by findings of their own impropriety, such as the "Fox transaction" being both improvident and motivated by self-interest.

The appeal was dismissed with costs.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

SPIGELMAN CJ
As I have indicated above, the appellants did not abandon their appeal from the finding by McDougall J that each had breached their duties. The oral submissions in this Court focused only on the issue of contribution. There is an obvious inconsistency between the proposition that neither of the appellants was in breach of their duty and the detailed analysis propounded in oral submissions in this Court asserting a breach on the part of Mr Thomas. There comes a time when attempting to maintain contradictory submissions in the alternative stretches credulity too far. This is such a time.Contribution: conclusion The appellants’ case for contribution should be rejected for three alternative reasons. First, the appellants have not established that Mr Thomas breached his duties to REL. Secondly, the appellants have not established that any conceivable breach of duty by Mr Thomas caused a loss to REL. Thirdly, it would, in all the circumstances, be inequitable to make any such order. With respect to breach of duty, the case run by the appellants at trial was not primarily directed to establishing a breach of duty by Mr Thomas. The principal case which the appellants sought to establish at trial, including by cross-examination of Mr Thomas, was their own innocence of any breach of duty. No doubt for this reason his Honour was not called upon to make detailed findings of fact that would ordinarily be required in order to establish a breach of duty on the part of Mr Thomas himself, although his Honour clearly directed his attention to that issue, as was appropriate. It is also for that reason that the appellants find themselves in this Court relying on findings made in the context of the conduct of the appellants themselves, which included a significant overlay of their own improper conduct. Many of the findings of fact on which they rely are not directed solely to the question of care and diligence but are influenced significantly by his Honour’s findings of impropriety. To give only one example of this interconnection I repeat the following sentence from par [188] of his Honour’s judgment, where his Honour said:“The transaction was plainly improvident, as it was plainly motivated by self-interest.”It is not, in this context, appropriate to make a finding that the Fox transaction should have been regarded by Mr Thomas as also “plainly improvident”. By reason of the limited scope of the evidence at trial directed to the issue of any alleged breach by Mr Thomas, the appellants were reduced to seeking to adopt his Honour’s findings of breach made against themselves. As a result there were no submissions of the kind usually made in such a case, based on facts pertinent to the person accused of negligence. For example, there was no reference to what Mr Thomas was told about the technology or about the state of negotiations with Westpac. There was evidence that he was briefed on both matters, but no evidence about the content of the briefing, let alone about whether he could or should have made further inquiries.

Ratio Decidendi

Legal Principle Established

Established by: SPIGELMAN CJ

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