Drillsearch Energy Ltd v McKerlie - [2009] NSWSC 517

CITATION: Drillsearch Energy Ltd v McKerlie [2009] NSWSC 517
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 09/06/09

JUDGMENT DATE :
9 June 2009

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

EX TEMPORE JUDGMENT DATE: 9 June 2009

DECISION: Proceedings permanently stayed.

CATCHWORDS: CORPORATIONS - general meetings - meeting called to consider motions for removal of five directors - company by resolution of three of those directors commences proceedings against parties including the other two - company seeks various declaratory relief and injunctions restraining holding of the general meeting - a director defendant seeks permanent stay because of disqualifying material personal interest of each director voting for initiation of proceedings - held that material personal interest existed - whether resolution invalid - whether statutory injunction lies - whether need for court to protect its processes from abuse

LEGISLATION CITED: Corporations Act 2001 (Cth), ss 195(1), 195(1A), 195(1B), 195(5), 249Q, 606, 671B, 672B, 1324, 1325A

CATEGORY: Principal judgment

CASES CITED: Cadwallader v Bajco Pty Ltd [2001] NSWSC 1193; (2001) 189 ALR 370
McGellin v Mount King Mining NL (1998) 144 FLR 288
McKerlie v Drillsearch Energy Ltd [2009] NSWSC 488

PARTIES: Drillsearch Energy Limited - Plaintiff
James David McKerlie - First Defendant
Glenluce Properties Pty Ltd - Second Defendant
Beng Kai Choo - Third Defendant
Nefco Nominees Pty Ltd - Fourth Defendant
Philip Francis Kelso - Fifth Defendant

FILE NUMBER(S): SC SAD 78/09 (FCA)

COUNSEL: Mr M Hoffman QC/Mr P C Silver - Plaintiff
Mr R G McHugh SC/Mr N M Bender - First and Second Defendants
Mr J Stoljar SC - Third Defendant
Mr M J Watts - Fifth Defendant

SOLICITORS: DMAW Lawyers - Plaintiff
Thompson Eslick - First and Second Defendants
Corrs Chambers Westgarth - Third Defendant
In person - Fifth Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

TUESDAY 9 JUNE 2009

SAD78/09 (FCA) DRILLSEARCH ENERGY LIMITED v JAMES DAVID McKERLIE & 4 ORS

JUDGMENT

1 These proceedings were commenced in the Federal Court of Australia, South Australia Registry, on 3 June 2009. By order made on 5 June 2009 by the Federal Court, the proceedings were transferred to this court which had, on 4 June 2009, delivered judgment in a separate proceeding involving the same principal parties or protagonists. That judgment concerned a general meeting of an ASX listed company which is to be held tomorrow, Wednesday 10 June 2009: see McKerlie v Drillsearch Energy Ltd [2009] NSWSC 488.

2 In the present proceedings, that company, Drillsearch Energy Limited (which I shall call “Drillsearch”), sues two of its directors, Mr McKerlie and Mr Choo, together with two companies which are shareholders, and Mr Kelso, a former director. The principal relief sought is declaratory relief.

3 In relation to all defendants, there is a claim by Drillsearch for a declaration that they have breached ss 606, 671B and 672B of the Corporations Act 2001 (Cth)…

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.

Continue reading Drillsearch Energy Ltd v McKerlie

Details

AGLC: Drillsearch Energy Ltd v McKerlie [2009] NSWSC 517
Case: [2009] NSWSC 517
Decision Date: 9 June 2009

CaseChat Overview and Summary

The case of Drillsearch Energy Ltd v McKerlie involved the company, represented by three of its directors, seeking to prevent a general meeting from being held. This meeting was intended to consider motions for the removal of five directors. The company sought various declarations and injunctions, including to restrain the meeting from proceeding. One of the directors against whom the removal motions were directed sought a permanent stay of the proceedings on the basis that the directors who had initiated the proceedings had a material personal interest, which disqualified them from voting on the resolution. The court was tasked with determining whether the directors had a material personal interest in the proceedings, whether the resolution to commence the proceedings was invalid, and whether the court could grant a statutory injunction to protect its processes from abuse.

The court held that the directors who initiated the proceedings had a material personal interest in the outcome of the dispute, as their removal from office was a direct consequence of the resolution. This disqualified them from voting on the resolution to commence the proceedings. Consequently, the resolution was invalid. The court also found that, given the invalidity of the resolution, it was not appropriate to grant a statutory injunction to protect the court's processes from abuse. The court emphasised the importance of ensuring that the resolution to commence proceedings was valid and that the directors were not using the court process to achieve an improper outcome.

The court determined that the resolution to commence the proceedings was invalid due to the disqualification of the directors who voted for it. As a result, the company's claims for relief were dismissed. The court did not grant the injunction sought by the company, as it was not appropriate to do so given the invalidity of the resolution. The court's decision underscored the importance of ensuring that resolutions to commence legal proceedings are properly authorised and that directors do not use the court process to achieve an improper outcome.

Orders