Rapsey, in the matter of Australasian Mortgage Finance Limited (Administrator Appointed)

In the matter of Australasian Mortgage Finance Limited (Administrator Appointed), the dispute involved the directors of the company, who were remunerated under consulting agreements made with them or their related entities. The directors had made statements to auditors stating that they agreed to take equity in lieu of cash under these agreements. The financial statements and shareholder updates referenced this agreement. However, two of the contracts contained an express provision allowing for the agreement to receive payment in the form of shares in the company. The contracts also contained a no oral modification clause. The court was required to decide whether the consultants and the company had agreed to accept equity in lieu of cash, whether the directors failed to take any steps to procure allotment of shares, whether a modification required to be in writing, and whether any agreement to vary the consultancy agreement was supported by consideration.

The court found that there was no enforceable agreement to accept equity in lieu of cash. The directors had made statements to auditors, but these were not incorporated into the consultancy agreements. Additionally, the directors failed to take any steps to procure allotment of shares, and there was no consideration for the alleged agreement. The court held that any modification to the consultancy agreements required to be in writing, and there was no evidence of any agreement to vary the consultancy agreement supported by consideration.

The court further held that the company had not breached the consultancy agreements as there was no enforceable agreement to accept equity in lieu of cash. The consultants were estopped from relying on the alleged breach as they had failed to take any steps to procure allotment of shares. The court found that damages for breach of contract should be assessed at the time of the winding-up order, and the consultants had not suffered any loss in circumstances where the shares in the company were now worthless.

The court ordered that the administrator of the company was to take steps to procure allotment of shares to the directors in accordance with the terms of the consultancy agreements. The court also ordered that the consultants were to be paid the amounts owed to them under the consultancy agreements.