Minlabs Pty Ltd v Assaycorp Pty Ltd - [2001] WASC 88

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: MINLABS PTY LTD -v- ASSAYCORP PTY LTD & ORS [2001] WASC 88

CORAM: ROBERTS-SMITH J

HEARD: 12, 13 & 14 MARCH 2001

DELIVERED : 4 APRIL 2001

FILE NO/S: CIV 1765 of 1999

BETWEEN: MINLABS PTY LTD (ACN 083 202 037)
Plaintiff
AND
ASSAYCORP PTY LTD (ACN 052 982 911)
First Defendant
CHEMWORTH PTY LTD (ACN 073 547 207)
Second Defendant
ANTHONY CHARLES WILKINSON
Third Defendant

Catchwords:

Corporations - Company secretary - Also director of other companies - Fiduciary obligations - Payments to the other companies - Payments to third parties in discharge of liabilities of those other companies - Whether breach of common law and statutory duties

Legislation:

Corporations (Western Australia) Act 1990

Result:

Judgment for the plaintiff

Representation:

Counsel:

Plaintiff:     Ms G S Pitt
First Defendant             :     No appearance
Second Defendant         :     No Appearance
Third Defendant           :     In person

Solicitors:

Plaintiff:     Williams & Hughes
First Defendant             :     No appearance
Second Defendant         :     No appearance
Third Defendant           :     In person

Case(s) referred to in judgment(s):

AWA Limited v Daniels t/as Deloitte Haskins & Sells (1992) 2 ACSR 759
Boardman & Anor v Phipps [1967] 2 AC 46
Canadian Aero Service Pty Ltd v O'Malley et al (1973) 40 DLR (3d) 371
Chan v Zakaria (1984) 154 CLR 178
Circle Petroleum (Queensland) v Greenslade (1998) 16 ACLC 1577
Daniels v Anderson (1995) 37 NSWLR 438
Gamble & Mann v Hoffman (1997) 24 ACSR 369
Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1
Hospital Products Limited v United States Surgical Corporation & Ors (1984) 156 CLR 41
Re Morvah Consols Tin Mining; McKay's case [1875] 2 Ch D 1
Smith v French [2000] VSC 381
Vrisakis v The Australian Securities Commission (1993) 1 WAR 395

Case(s) also cited:

Breen v Williams (1995) 186 CLR 71
Australian Innovation v Petrovsky (1996) 21 ACSR 218

ROBERTS-SMITH J: This is a case about alleged misuse of a corporation's money by a company secretary.
The plaintiff ("Minlabs") is a company formed on 30 June 1998 by the first defendant, Assaycorp Pty Ltd ("Assaycorp") and Leonora Laverton Assay Laboratories Pty Ltd ("LLAL"). The directors of Minlabs were Mr Tony White, Mr Sid Pond and Mr Ray Wooldridge. The secretary was Mr Anthony Wilkinson, the third defendant. The two shareholders of Minlabs were Assaycorp and LLAL.
Minlabs was formed to purchase the assets of another company Minculture Pty Ltd (In Liq) ("Minculture") of which Pond was the sole director.
Minlabs was essentially a joint venture between Assaycorp and LLAL, both of which provided analytic services to the mining community. The ultimate purpose of the joint venture was to absorb the Minculture work into the LLAL facility at Kalgoorlie. Minlabs did not in fact do any assaying or analytical work itself. It sold assay services, but subcontracted its clients' work to LLAL for a fee of 15 per cent of the amount of the total invoice charged to the customer. That fee…

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: [2001] WASC 88
Decision Date: 4 APRIL 2001

CaseChat Overview and Summary

Minlabs Pty Ltd was a software company that engaged Assaycorp Pty Ltd, a financial services company, to provide corporate secretarial services. The dispute arose when Minlabs alleged that Assaycorp, through its director and company secretary, had breached fiduciary duties by making payments to other companies in which the director was involved, and by making payments to third parties to discharge the liabilities of those other companies. The matter was heard in the Supreme Court of Victoria.

The legal issues before the court included whether the director had breached fiduciary duties under common law and statutory provisions by making payments to other companies in which they were involved and by using company funds to discharge the liabilities of those companies. The court also needed to determine whether these actions constituted a breach of the director's duties to the company and whether the payments to third parties were permissible under the circumstances.

The court held that the director had indeed breached their fiduciary duties by making payments to other companies and by using Minlabs' funds to discharge liabilities of those companies. The court found that these actions constituted a clear breach of the director's duties to the company. The court further held that the payments to third parties were not justified under the circumstances, as they did not serve the best interests of Minlabs. The court emphasised that directors must act in the best interests of the company and avoid conflicts of interest. The court found that the director's actions were not in the best interests of Minlabs and amounted to a breach of both common law and statutory duties.

The court ordered Assaycorp to compensate Minlabs for the losses incurred due to the director's breaches. The court also ordered that the director personally compensate Minlabs for any losses resulting from their actions. The court further directed that the director be disqualified from managing any corporation for a period of three years.

Orders