In the matter of Alexandria Landfill Pty Limited

Alexandria Landfill Pty Limited was a company that had issued preference shares with a shareholder agreement that entitled the holders to a minimum cash distribution, with the ability to accrue the distribution as a loan pending the accrual of sufficient income to declare a dividend. The terms of the issue also referred to the right of the preference shareholders to participate pari passu with other shares. The sole director resolved to pay a dividend to the ordinary shareholders, leading to a dispute between the preference shareholders and the company. The dispute was heard by the Supreme Court of New South Wales.

The court was required to determine several legal issues, including whether the preference shareholders were entitled to participate pari passu in any dividend, whether the pari passu rights were additional to the minimum cash distribution, whether the dividend resolution created an immediate enforceable liability, a deferred liability, a statement of intention, or a nullity, and whether the resolution was inconsistent with the rights of, or oppressive to, the preference shareholders or contrary to the interests of the company as a whole. The court was also required to determine whether the loans accrued in respect of past minimum cash distributions had become due and payable to the preference shareholders.

The court found that the preference shareholders were entitled to participate pari passu in any dividend, and that the pari passu rights were additional to the minimum cash distribution. The court held that the dividend resolution created a deferred liability, and that the resolution was inconsistent with the rights of the preference shareholders and contrary to the interests of the company as a whole. The court also found that the loans accrued in respect of past minimum cash distributions had become due and payable to the preference shareholders.

The court made orders declaring that the dividend resolution was invalid and of no effect, and that the preference shareholders were entitled to receive the amount of the dividend that would have been payable to them had the resolution not been passed. The court also ordered that the preference shareholders were entitled to interest on the amount of the dividend from the date on which it should have been paid until the date of the judgment.