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High Court Bulletin

Produced by the Legal Research Officer,
High Court of Australia Library

[2019] HCAB 8 (25 October 2019)

A record of recent High Court of Australia cases: decided, reserved for judgment, awaiting hearing in the Court’s original jurisdiction, granted special leave to appeal, refused special leave to appeal and not proceeding or vacated

1: Summary of New Entries
2: Cases Handed Down
3: Cases Reserved
4: Original Jurisdiction
5: Section 40 Removal
6: Special Leave Granted
7: Cases Not Proceeding or Vacated
8: Special Leave Refused

1: Summary of New Entries

2: Cases Handed Down

Case	Title
Connective Services Pty Ltd v Slea Pty Ltd	Companies
BVD17 v Minister for Immigration and Border Protection	Immigration
Commissioner of Taxation of the Commonwealth of Australia v Sharpcan Pty Ltd	Income Tax
Mann v Paterson Constructions Pty Ltd	Restitution
The Queen v A2; The Queen v Magennis; The Queen v Vaziri	Statutes

3: Cases Reserved

Case	Title
Australian Securities and Investments Commission v King & Anor	Corporations Law
Grech v The Queen; Kadir v The Queen	Evidence
CNY17 v Minister for Immigration and Border Protection & Anor	Migration Law
Comptroller-General of Customs v Pharm-A-Care Laboratories Pty Ltd	Taxation
Franz Boensch as trustee of the Boensch Trust v Pascoe	Trusts

4: Original Jurisdiction

5: Section 40 Removal

6: Special Leave Granted

Case	Title
CXXXVIII v Commonwealth of Australia & Ors	Administrative Law
Coughlan v The Queen	Criminal Law
Hsiao v Fazarri	Family Law
ABT17 v Minister for Immigration and Border Protection & Anor	Migration Law
Lewis v The Australian Capital Territory	Tort Law
Berry & Anor v CCL Secure Pty Ltd	Trade Practices

7: Cases Not Proceeding or Vacated

8: Special Leave Refused

2: Cases Handed Down

The following cases were handed down by the High Court of Australia during the October 2019 sittings.

Companies

Connective Services Pty Ltd & Anor v Slea Pty Ltd & Ors

M203/2018: [2019] HCA 33

Judgment delivered: 9 October 2019

Coram: Kiefel CJ, Gageler, Keane, Gordon, Edelman JJ

Catchwords:

Companies – Shares – Implied prohibition against financial assistance by company to acquire shares in company – Meaning of "financial assistance" – Where s 260A(1) of Corporations Act 2001 (Cth) provides that company may financially assist a person to acquire shares in the company only if giving the assistance does not materially prejudice the interests of the company or its shareholders, or the company's ability to pay its creditors – Where appellant companies' constitutions contained pre-emption clause which provided that, before a shareholder could transfer shares of a particular class, those shares must first be offered to existing shareholders of that class in proportion to the number of shares of that class already held by that shareholder – Where sole shareholder of one shareholder company entered into agreements for sale of shares – Where appellant companies claimed that agreements breached pre-emptive rights provisions – Where injunction sought under s 1324 of Corporations Act to restrain appellant companies from prosecuting proceedings in relation to pre-emptive rights on basis…

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: [2019] HCAB 8
Decision Date

CaseChat Overview and Summary

Connective Services Pty Ltd and Connective Capital Pty Ltd (appellants) sought an injunction to restrain Slea Pty Ltd and its sole shareholder (respondents) from prosecuting proceedings in relation to an alleged breach of a pre-emption clause in the appellants' constitutions. The appellants argued that the respondents' funding of legal proceedings to compel the sale of shares was financial assistance, which was prohibited unless it did not materially prejudice the interests of the company or its shareholders, or the company's ability to pay its creditors. The appellants contended that the funding of the legal proceedings was financial assistance and that the proceedings should be enjoined. The High Court held that the funding of legal proceedings to compel one shareholder to offer shares to other shareholders was not financial assistance for the purposes of section 260A(1) of the Corporations Act 2001 (Cth). The appeal was dismissed, and the appellants were ordered to pay the costs of the first and second respondents.

The legal issues in this case were whether the funding of legal proceedings to compel one shareholder to offer shares to other shareholders was financial assistance for the purposes of section 260A(1) of the Corporations Act 2001 (Cth), and if so, whether the companies should be enjoined from continuing legal proceedings at their expense to vindicate an alleged breach of pre-emptive rights. The court had to consider the meaning of "financial assistance" and whether the funding of legal proceedings to enforce a pre-emption clause in a company's constitution amounted to financial assistance.

The court's reasoning was based on the interpretation of the relevant statutory provisions and the principles of statutory construction. The court held that the funding of legal proceedings to compel one shareholder to offer shares to other shareholders was not financial assistance for the purposes of section 260A(1) of the Corporations Act 2001 (Cth). The court found that the pre-emption clause in the appellants' constitutions did not create a right to be offered an opportunity to purchase shares before they were offered to other shareholders, and therefore, the funding of legal proceedings to enforce the pre-emption clause was not financial assistance within the meaning of section 260A(1) of the Act.

The court further held that even if the funding of legal proceedings to enforce the pre-emption clause was financial assistance, it did not materially prejudice the interests of the company or its shareholders, or the company's ability to pay its creditors. The court found that the funding of legal proceedings to enforce the pre-emption clause was necessary to protect the appellants' rights and interests as shareholders and that it did not result in any material prejudice to the company or its shareholders.

Therefore, the court dismissed the appeal and held that the appellants were not entitled to an injunction to restrain the respondents from prosecuting proceedings in relation to the alleged breach of the pre-emption clause in the appellants' constitutions. The appellants were ordered to pay the costs of the first and second respondents.

This case highlights the importance of understanding the scope of the prohibition on financial assistance in section 260A(1) of the Corporations Act 2001 (Cth) and the need for companies to carefully consider the implications of funding legal proceedings to enforce pre-emption clauses in their constitutions. It also underscores the importance of statutory interpretation and the principles of statutory construction in resolving disputes under the Corporations Act 2001 (Cth).

Orders