Cody v Live Board Holdings Ltd - [2014] NSWSC 78

Supreme Court

New South Wales

Medium Neutral Citation: Cody v Live Board Holdings Limited [2014] NSWSC 78
Hearing dates: 18 December 2013
Decision date: 17 February 2014
Jurisdiction: Equity Division - Corporations List
Before: Brereton J
Decision:
Application for declaration that company had power and authority to make share issue refused.

Catchwords: CORPORATIONS - share capital - shares - where declaration sought that company had power and authority to make share issue - where shareholders' agreement and company constitution included provisions regulating the issue of shares - whether agreement and constitution complied with - effect of non-compliance - declaration refused
Legislation Cited: (CTH) Corporations Act 2001, s124(1)(a), s125, s233, s254A(1), s254E
Cases Cited: MYT Engineering Pty Ltd v Mulcon Pty Ltd (1999) 195 CLR 636
Re Duomatic Ltd [1969] 2 Ch 365
Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285
Category: Principal judgment
Parties: Pierce Patrick Cody (first plaintiff)
Finola Anne Burke (second plaintiff)
Richard Charles Ochojski (third plaintiff)
Live Board Holdings Limited (first defendant)
Pier Blue Pty Ltd (second defendant)
Solitair Capital Pty Ltd (third defendant)
Cody Investments Pty Ltd (fourth defendant)
Ross McCreath (fifth defendant)
Ed St John (sixth defendant)
Randal Leeb-Du Toit (seventh defendant)
Avapple Nominees Pty Ltd (eighth defendant)
PJ Inge Executive superannuation Fund Pty Ltd (ninth defendant)
Wilnix Super Pty Ltd (tenth defendant)
Paul Adam Shipley (eleventh defendant)
Catherine May Kenny (twelfth defendant)
Robert Mactier (thirteenth defendant)
Anna Houssels (fourteenth defendant)
Bruce Michael Mann (fifteenth defendant)
Representation: Counsel:
Mr C R Newlinds SC w B Kremer (plaintiffs)
Ms M Bateman (second defendant)
Solicitors:
Whittens & McKeough (plaintiffs)
Phontos Legal (second defendant)

File Number(s): 2013/ 359378

Judgment

On 29 August 2013, the board of the first defendant company Live Board Holdings Limited (LBH), which then comprised the plaintiffs Pierce Patrick Cody, Finola Anne Burke and Richard Charles Ochojski, together with Mr Costa Koulis who was and is the sole shareholder in and director of the second defendant Pier Blue Pty Ltd ("Pier Blue"), resolved to proceed with a capital raising, and on 3 September 2013, LBH issued 5,226,550 preference shares to the new shareholders in exchange for funds subscribed, and 3,323,324 ordinary shares to existing shareholders pursuant to anti-dilution provisions ("the 3 September share issue"). In this way, LBH raised approximately $1 million, of which approximately $748,000 remains in its bank account. Mr Koulis, who has since ceased to be a director of LBH, has asserted on a number of occasions that the 3 September share issue was invalid and that the board did not have power to issue those shares, apparently on the basis that provisions of LBH's constitution, and/or a shareholders' agreement between its shareholders dated 12 December 2012, have not been complied with; or that the issue was not bona fide for the purposes of the company as a whole, or was oppressive. As the LBH board currently wishes to issue further shares, to raise additional capital in the order of about $5 million, in order to launch its business of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2014] NSWSC 78
Decision Date: 17 February 2014

CaseChat Overview and Summary

The case of Cody v Live Board Holdings Ltd involved a dispute regarding the issuance of shares by a company, Live Board Holdings Ltd. The plaintiff sought a declaration that the company had the power and authority to make a share issue. The dispute was rooted in the provisions of the company's constitution and a shareholders' agreement that regulated the issuance of shares. The court was required to determine whether these documents complied with certain legal requirements and what the effect of any non-compliance was on the company's authority to issue shares.

The central legal issue was whether the company's constitution and the shareholders' agreement were in compliance with relevant corporate laws, particularly concerning the authority to issue shares. The court had to examine the specific provisions of both documents and determine if they met the legal standards required for such a declaration. Additionally, the court had to consider the implications of any non-compliance and how it affected the company's ability to proceed with the share issuance.

The court held that the provisions in the shareholders' agreement and the company's constitution did not comply with the necessary legal standards. Consequently, the company lacked the power and authority to make the proposed share issue. The court found that the non-compliance meant the agreement and constitution did not validly restrict the company's ability to issue shares. Therefore, the court refused to make the declaration sought by the plaintiff.

The final orders of the court were that Live Board Holdings Ltd was not authorised to issue the shares as proposed, and the plaintiff's application for a declaration was dismissed. The court's decision emphasised the importance of compliance with corporate laws when drafting documents that regulate share issuances.

Orders