Kirwan v Cresvale Far East Ltd (in liq)

This matter concerned an appeal from a decision of Austin J in the Supreme Court of New South Wales. The appellant, Mr Kirwan, sought to appeal against orders made by Austin J concerning the costs of proceedings brought by the liquidator of Cresvale Far East Ltd (in liq) and Cresvale Securities Ltd (in liq). The proceedings involved allegations of breaches of fiduciary duty by Mr Hedge, who had acted as administrator of Cresvale Securities Ltd.

The central legal issues before the court were whether Mr Hedge, in his capacity as administrator, had breached his fiduciary duties by exercising his casting vote in a manner that was not in the best interests of Cresvale Securities Ltd, and whether the power to allot shares had been exceeded. The court was also required to consider the principles governing the exercise of casting votes and the equitable requirement for a party seeking relief to do equity. Furthermore, the court had to determine how costs should be borne when an administrator argued both for the company and personally, and was ultimately unsuccessful.

Austin J had inferred from a report that Mr Hedge believed there was a prospect of recovering Virotec shares or their value from Mr Kirwan, but only if Cresvale Securities Ltd was first placed in voluntary liquidation, which became economically viable when the market value of Virotec shares increased. However, the report did not clearly link the sale of shares in Cresvale Securities Ltd to any preference in a prior transfer of listed investments. The court found that it was not clear why Mr Hedge was unwilling to proceed with the sale of shares, and speculation on this point was not a sound basis for criticising Mr Hedge's conduct. The court also noted a letter from the company secretary of Cresvale Securities Ltd to Mr Hedge, which indicated that the company had experienced a loss due to a reduction in active dealers and that directors were conscious of the need to increase the number of investment advisers. The letter concluded that Cresvale Securities Ltd had little or no value to outside parties and that any offer above shareholders' funds should be seriously considered, as projected shareholders' funds were minimal and any delay would likely result in no distribution to shareholders in liquidation.

The court ultimately upheld the decision of Austin J, finding that Mr Hedge had not acted in breach of his fiduciary duties. The orders made by Austin J regarding costs were confirmed.