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Natural Extracts Pty Ltd v Stotter

Natural Extracts Pty Ltd v Stotter

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Case Copied 16 May 1997 71 min read

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EQUITY - FIDUCIARY DUTY - CONSTRUCTIVE TRUSTS - resignation of director to work on substantially same project as that for which company was formed - conflict of fiduciary duty and personal interest - use of corporate opportunity and knowledge obtained as director - whether constructive trust arose - effect of subsequent expansion of business activity discussed

CORPORATIONS - rectification of register - rectification ordered where shares transferred for the purpose of winding up company not employed for that purpose but to secure control of company for purpose of litigation.

Phipps v Boardman [1967] 2 AC 46, referred to.
Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134n, referred to.
Queensland Mines Ltd v Hudson (1975-76) ACLC 40-266; (1978) 51 ALJR 399, considered.
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, considered.
Chan v Zacharia (1983-84) 154 CLR 178, considered.
Warman International Ltd v Dwyer (1994-95) 182 CLR 544, considered.
In re Jarvis (deceased) [1958] 1 WL 815, considered.
Clegg v Edmondson (1857) 8 DEGM and G 787, considered.
Timber Engineering Co Pty Ltd v Anderson [1908] 2 NSWLR 488, distinguished.
Canadian Aeroservice Ltd v O’Malley (1973) 40 DLR (3D) 371, applied.
Brady v Stapleton (1952) 88 CLR 322, distinguished.

NATURAL EXTRACTS PTY LTD & ANOR v GLENDON MICHAEL STOTTER & ORS
NG 3192 of 1992

G G JAY INVESTMENTS PTY LIMITED & ANOR v DOVEKA PTY LIMITED & ORS
NG 3238 of 1992

HILL J
SYDNEY
16 MAY 1997

IN THE FEDERAL COURT OF AUSTRALIA )
  )
NEW SOUTH WALES DISTRICT REGISTRY )
  )
GENERAL DIVISION                  )

NG 3192 OF 1992

BETWEEN:NATURAL EXTRACTS PTY LTD
First Applicant

DOVEKA PTY LTD

Second Applicant

AND:GLENDON MICHAEL STOTTER
First Respondent

ALAN JAMES GALLAGHER

Second Respondent

POOLMANS PTY LTD
Third Respondent

MAIN CAMP TEA TREE OIL LTD
Fourth Respondent

LAND & ASSETS FINANCE PTY LTD
Fifth Respondent

GAIL DAWN STOTTER
Sixth Respondent

GG JAY INVESTMENTS PTY LTD
Seventh Respondent

LAND & ASSETS DEVELOPMENTS PTY LTD

Eighth Respondent

STOTTER MANAGEMENT SERVICES PTY LTD
Ninth Respondent

AMALGAMATED LAND AND ASSETS FINANCE PTY LTD (FORMERLY LAND AND ASSETS FINANCE (NO.2) PTY LTD)
Tenth Respondent

MAIN CAMP MARKETING PTY LTD
Eleventh Respondent

NATURAL OIL GAS & MINING PTY LTD
Twelfth Respondent

SUMMERLAND LANDS PTY LTD
Thirteenth Respondent

CORPORATE AND COMMERCIAL CUSTODIAN PTY LTD
Fourteenth Respondent

MAIN CAMP TEA TREE OIL (NO 2) LTD
Fifteenth Respondent

MAIN CAMP TEA TREE OIL (NO 3) LTD

Sixteenth Respondent

PROJECT & GENERAL FINANCE PTY LTD

Seventeenth Respondent

MAIN CAMP ENTERPRISES LIMITED

Eighteenth Respondent

WAN DAN HOLDINGS LTD
Nineteenth Respondent

AND: GLENDON MICHAEL STOTTER
First Cross-Claimant

GG JAY INVESTMENTS PTY LTD

Second Cross-Claimant

AND: DOVEKA PTY LTD
First Cross-Respondent

THE TRIAD HEALTH PRODUCTS GROUP OF COMPANIES PTY LTD
Second Cross-Respondent

JOHN STEPHEN BAX
Third Cross-Respondent

THE FOOD IMPROVERS PTY LTD
Fourth Cross-Respondent

FREDERICK THEODORE GULSON
Fifth Cross-Respondent

NG 3238 OF 1992

BETWEEN:G G JAY INVESTMENTS PTY LTD
First Applicant

STUART INVESTMENTS (NSW) PTY LTD

Second Applicant

AND:DOVEKA PTY LIMITED
First Respondent

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: [1997] FCA 471
Decision Date: 16 MAY 1997

CaseChat Overview and Summary

Natural Extracts and Doveka commenced proceedings against Glendon Michael Stotter and others, alleging breaches of fiduciary duty and seeking orders that property be held upon trust, an accounting for profits and an injunction. A cross-claim was filed by Stotter and others against the applicants and others. The applicants also commenced proceedings against Doveka and others, seeking rectification of Doveka's share register. A cross-claim was filed by Doveka and others against the applicants and others. The court considered whether a constructive trust should be imposed in light of the fiduciary duties breached by Stotter and others, and if so, what assets should be held upon trust. The court found that Stotter had breached his fiduciary duties by taking corporate opportunities for himself, using his position as a director of Natural Extracts to pursue his own interests and concealing this from his co-directors and shareholders. The court held that a constructive trust should be imposed over the assets acquired by Stotter and others in breach of their fiduciary duties. However, the court determined that the constructive trust should only apply to one half of the shares in Main Star Holdings Pty Ltd, held by Main Star 1 Investments Pty Ltd, to reflect the fact that the corporate opportunity taken by Stotter through his corporate vehicles was a 50% interest only in the joint venture with O'Leary. The court also ordered an accounting of any profit accrued to Stotter or companies not being those in the Main Camp group, and a lien over the shares in Main Star Holdings Pty Ltd to secure any allowance to the Stotter interests.

Orders