Drillsearch Energy Ltd v McKerlie

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.