JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: EDENHAM PTY LTD -v- MEARES [2016] WASC 301
CORAM: LE MIERE J
HEARD: 16 DECEMBER 2015
DELIVERED : 22 SEPTEMBER 2016
FILE NO/S: CIV 2715 of 2013
BETWEEN: EDENHAM PTY LTD
Plaintiff
AND
ALEX GOLDSMITH MEARES
First DefendantKERRY ANNE MEARES
Second DefendantPREMIER HOLDINGS PTY LTD
Third Defendant(BY ORIGINAL ACTION)
PREMIER HOLDINGS PTY LTD
Plaintiff by CounterclaimAND
EDENHAM PTY LTD
First Defendant by CounterclaimPETER FRANK HARDING
Second Defendant by CounterclaimKRIS GOLDSMITH MEARES
Third Defendant by CounterclaimBSO DEVELOPMENT CONSULTANTS PTY LTD
Fourth Defendant by Counterclaim(BY COUNTERCLAIM)
Catchwords:
Procedure - Application for summary judgment - Whether high degree of certainty about outcome of proceeding - Where defendant provides answer to case - Application refused - Turn on own facts
Fiduciary duties and director's duties - Equity and Corporations Law - Circumstances in which duties arise - Serious question to be tried - Defences to plaintiff's claim - Whether consent - Whether conduct permitted by trust deed - Whether claim time barred or subject to laches - Whether s 1318 of Corporations Act operates - Whether equitable setoff can occur - Whether plaintiff came to court with unclean hands - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 179, s 180, s 181, s 182, s 183, s 191, s 1317, s 1317A, s 1317K, s 1318
Limitation Act 2005 (WA), s 13
Rules of the Supreme Court 1971 (WA), O 14 r 1, o 14 r 3
Result:
Time to apply for summary judgment extended
Application for summary judgment refused
Category: B
Representation:
Original Action
Counsel:
Plaintiff: Mr P J Hannan
First Defendant : Mr M R B Hemery
Second Defendant : Mr M R B Hemery
Third Defendant : Mr M R B Hemery
Solicitors:
Plaintiff: McAuliffe Legal
First Defendant : Hotchkin Hanly Lawyers
Second Defendant : Hotchkin Hanly Lawyers
Third Defendant : Hotchkin Hanly Lawyers
Counterclaim
Counsel:
Plaintiff by Counterclaim : Mr M R B Hemery
First Defendant by Counterclaim : Mr P J Hannan
Second Defendant by Counterclaim : Mr P J Hannan
Third Defendant by Counterclaim : Mr P J Hannan
Fourth Defendant by Counterclaim : Mr P J Hannan
Solicitors:
Plaintiff by Counterclaim : Hotchkin Hanly Lawyers
First Defendant by Counterclaim : McAuliffe Legal
Second Defendant by Counterclaim : McAuliffe Legal
Third Defendant by Counterclaim : McAuliffe Legal
Fourth Defendant by Counterclaim : McAuliffe Legal
Case(s) referred to in judgment(s):
AAS v Benham [1891] 2 Ch 244
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Birtchnell v Equity Trustees Executors & Agency Co Ltd [1929] HCA 25; (1929) 42 CLR 384
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672
Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27
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- Case
- [2016] WASC 301
- Decision Date
CaseChat Overview and Summary
The court considered the application for summary judgment and found that there was not a high degree of certainty about the outcome of the proceeding. The court held that the case turned on its own facts and that serious questions needed to be tried. The court noted that the defences raised by Meares, including whether there was consent, whether the conduct was permitted by the trust deed, whether the claim was time-barred or subject to laches, and whether equitable setoff could occur, required consideration of the facts of the case. Additionally, the court found that there was a serious question to be tried as to whether the plaintiff came to court with unclean hands.
The court refused the application for summary judgment and ordered that the case proceed to trial. The court found that the case involved complex issues of fiduciary duties and director's duties, which required a full hearing of the evidence and arguments from both parties. The court held that the case could not be decided on the basis of the written submissions alone and that a trial was necessary to determine the validity of the defences raised by Meares.
The final orders of the court were that the application for summary judgment was refused, and the case was to proceed to trial. The court held that the case involved serious questions of fact and law that required a full hearing, and that the application for summary judgment was not appropriate in the circumstances. The parties were directed to proceed with the preparation for trial and to exchange further evidence and witness statements as necessary.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
The principles concerning the diversion of business opportunities was considered by the Court of Appeal of Western Australia in Streeter v Western Areas Exploration Pty Ltd [No 2]. The case is summarised by the authors of Ford, Austin & Ramsay's Principles of Corporations Law (online ed), as follows. The plaintiff company, Western Areas Exploration NL (WAE) was a mining exploration company. The objective of those associated with WAE was to list the company on ASX and conduct an initial public offering to raise sufficient funds to undertake an exploration program primarily for nickel, but also for gold, upon mining tenements which the company had obtained or which it might obtain. The defendants included two directors of WAE. A group of geologists calling themselves the Australian Nickel Project Consultants (ANPC) contacted the chairman of WAE with the idea of raising capital to promote the formation or acquisition of a public company listed on ASX to undertake testing and, if appropriate, the development of mining tenements for gold and nickel which ANPC had assembled. The trial judge found that the chairman of WAE referred ANPC to one of the two defendant directors to explore this opportunity on behalf of WAE, and the knowledge of the ANPC proposal by the defendants and the opportunity to promote it was a result of the referral of the ANPC personnel to one of the defendants. However, the defendants then proceeded to participate in a new arrangement whereby a new company, Western Areas NL (WANL) was incorporated, the ANPC tenements were transferred to WANL, seed capital for WANL was provided by one of the defendants, the two defendants became directors and shareholders of WANL, and an IPO was undertaken to raise capital for an exploration and development program by WANL. This new arrangement was not disclosed to WAE or its chairman until the new arrangements were a fait accompli. WANL was a very successful company and went from being a small exploration company with a total capital of $7 million to a major producer of high grade nickel sulphide concentrate with a market capitalisation of more than $900 million. The trial judge held that the objective of ANPC was, for all practical purposes, the same objective which the directors and shareholders of WAE were seeking to pursue and therefore any proposal from ANPC along the lines of that being promoted would have been of interest to WAE. The trial judge held that both defendant directors were in breach of duty in that they 'took an opportunity which they knew was of the kind being sought by the plaintiff through WANL in a manner which secured for themselves major collateral benefits, and thereafter, abandoned any thought of pursuing the same or similar projects by the plaintiff': Western Areas Exploration Pty Ltd v Streeter [No 3] [2009] WASC 213; (2009) 234 FLR 265 [315]. The defendant directors were in a position of 'the clearest conflict': [316]. The Court of Appeal of Western Australia upheld the appeals of the defendant directors. The majority, McLure P and Buss JA, made a number of crucial findings. First, the evidence did not support the finding of the trial judge that the ANPC personnel approached the chairman of WAE because he was chairman of WAE. Instead, he was approached because he was a stockbroker and the ANPC personnel were seeking seed capital and a stockbroker to assist with the development of the ANPC proposal. Therefore, the chairman of WAE obtained information about the ANPC proposal not in his capacity as a director of WAE but in his capacity as a stockbroker. Secondly, the evidence did not support the finding of the trial judge that the chairman of WAE referred ANPC to one of the two defendant directors to explore this opportunity on behalf of WAE. The ANPC personnel did not approach this defendant director in his capacity as a director of WAE but as a potential provider of seed capital. Thirdly, WAE was not acceptable to ANPC as the corporate vehicle for the ANPC proposal and this was based on sound commercial reasons. Fourthly, the trial judge appeared to regard the corporate opportunity diverted by the two defendant directors as one for WAE to be the seed capitalist for WANL or for WAE shareholders to become foundation shareholders on equal terms with the two defendant directors. However, neither was a relevant opportunity for WAE. The first (the provision of seed capital by WAE to facilitate a capital raising by, and listing of, another company) was outside WAE’s actual or intended business and the second was an opportunity for the shareholders and not WAE. Fifthly, the defendant directors were not in a position of conflict by investing in, and becoming directors of, other mining companies in Western Australia, including a start-up mining company in the market for capital with the object of listing. Sixthly, because the defendant directors did not have a duty to acquire the ANPC proposal for WAE and there was no opportunity for WAE to be the corporate vehicle, there was no conflict between the interests of the defendants the interests of WAE.