Hanwood Pastoral Co Pty Limited v Kelly (No 2)

Hanwood Pastoral Co Pty Limited brought proceedings against Mr Kelly, alleging that Mr Kelly breached his duties as a director of Hanwood. The Court was asked to make declarations and orders for compensation, as well as orders for the reinstatement of Mr Kelly as a director of Hanwood. The case was before Justice Halley in the Federal Court. The Court was required to decide several legal issues, including whether Mr Kelly caused Hanwood to enter into an uncommercial consultancy agreement for the sale of its property, thereby contravening section 182(1)(b) of the Corporations Act 2001 (Cth). The Court also needed to determine if Mr Kelly was unlawfully removed as a director of Hanwood in contravention of section 182(1)(a) of the Act, and if Mr Kelly failed to discharge his duties in good faith and in the best interests of Hanwood, as required by section 181(1) of the Act. Additionally, the Court considered whether Mr Kelly caused Hanwood to make payments out of the sale proceeds in contravention of section 182(1)(b) of the Act, and if he improperly used his position to cause such payments in contravention of the same section.

Justice Halley dismissed the application, finding that Mr Kelly had not discharged the onus of proving his case on the balance of probabilities. The Court highlighted the difficulty in making findings due to the relative dearth of books and records relating to the sale of the property and the disbursement of the sale proceeds, as well as the conflicting claims by Mr Kelly and Mr Renton regarding the possession of those records. The Court further found that the evidence did not establish that Mr Kelly had acted dishonestly in relation to the matters alleged. The Court also found that Mr Kelly had failed to prove his case regarding the alleged unlawful removal of his position as a director of Hanwood.

The Court dismissed the further amended originating process and ordered that if the parties could not agree on orders for costs by 18 August 2022, they should file and serve proposed orders for the payment of fixed sum costs, together with an outline of written submissions and any supporting evidence, not exceeding four pages in length. The fixed sum costs orders would then be determined on the papers and without a further oral hearing.