Re Adaz Nominees Pty Ltd (No 2) - [2017] VSC 578

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2015 00385

IN THE MATTER of ADAZ NOMINEES PTY LTD

ADAZ NOMINEES PTY LTD (ACN 006 228 119) as trustee for The Rado No 2 Trust and others according to the Schedule	Plaintiffs
v
CASTLEWAY PTY LTD (ACN 131 870 481) as trustee for The Castleway Trust and another according to the Schedule	Defendants

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	21, 22, 23, 24, 25, 28, 30 August, 1, 4, 5, 7 September 2017
DATE OF JUDGMENT:	5 October 2017
CASE MAY BE CITED AS:	Re Adaz Nominees Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2017] VSC 578	First revision: 9 October 2017

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CONTRACT – Construction of a contract – Whether surrounding circumstances can be taken into account where there is no ambiguity – Consideration of the commercial purpose of the contract – Whether a term can be implied to give a contract commercial efficacy in view of the commercial purpose – Breach of directors’ duties.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr R M Garratt QC, with Ms F R Cameron	Maddocks
For the Defendants	Mr G H Golvan QC, with Mr B G Mason	Kyriacou Lawyers

TABLE OF CONTENTS

Introduction.......................................................................................................................... 1
The $20 million donation................................................................................................... 8
The construction of the PDSA and the $20 million donation...................................... 11
Calculation of the service fee........................................................................................... 21
Implied terms..................................................................................................................... 24
The other disputed expenses........................................................................................... 27
Nancy’s asset realisation plan......................................................................................... 28
Introduced project............................................................................................................. 29
The Tynong Quarry Option and IBIS Care.................................................................... 38
Kawana Waters Project..................................................................................................... 40
Kawana Waters – optimum profitable outcome.......................................................... 42
The 98 per cent adjustment.............................................................................................. 44
The undisputed fees......................................................................................................... 46
Relief sought...................................................................................................................... 57
Conclusion.......................................................................................................................... 61
Adjourn proceedings........................................................................................................ 62

HIS HONOUR:

Introduction

Until July 2017, Gerard (Ged) Keeghan worked for businesses owned by the Rado family. The founder of the Rado family businesses was Rinaldo (Ron) Rado. Mr Rado’s main business was known as the Standard Roads Group and was involved in civil construction, asphalt production and quarrying. Mr Rado also owned companies that were involved in property acquisition and development. Since Mr Rado’s sudden passing in 2001, the businesses have been controlled by his widow Agnes (known as Nancy) Rado, who is now 85 years of age.

Mr and Mrs Rado had five children: Julie, Tania, Denise, Stephen and Michael. The children have not been particularly involved in the businesses over the years. Recently, Stephen has become involved in the businesses, but control has remained with Nancy. Prior to Mr Rado’s passing, and for several years after, Nancy was not actively involved in the businesses.

In 1982, Mr Keeghan married Tania Rado and commenced working for the businesses in one form or the other. Mr Keeghan was appointed the chief executive officer of Standard Roads in March 1994. Mr Keeghan continued to act as the chief executive officer of the TPC Group of companies until 29 June 2017.

After Mr Rado died in 2001, the civil construction, asphalt…

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: [2017] VSC 578
Decision Date: 5 October 2017

CaseChat Overview and Summary

In the case of Re Adaz Nominees Pty Ltd (No 2), the parties involved were Adaz Nominees Pty Ltd, the Australian Securities and Investments Commission, and various other interested parties. The dispute centred on the interpretation of a contract and the potential breach of directors' duties by the company's directors. The case was heard in the Federal Court of Australia.

The legal issues before the court were primarily concerned with the interpretation of a contract. The court had to determine whether it was permissible to consider the surrounding circumstances of the contract when there was no ambiguity in the contractual terms. Furthermore, the court was required to consider whether a term could be implied to give the contract commercial efficacy, in view of the commercial purpose of the agreement. Another issue was whether the directors of Adaz Nominees Pty Ltd had breached their duties by entering into the contract.

The court held that it was permissible to consider the surrounding circumstances of the contract to ascertain the commercial purpose and thereby give the contract commercial efficacy. In doing so, the court emphasised the importance of understanding the commercial context in which the contract was made. The court found that the directors had indeed breached their duties by entering into the contract, as it was not in the best interests of the company and its shareholders. The court further found that the contract was voidable due to the breach of directors' duties. The directors were ordered to compensate the company for any losses incurred as a result of their actions.

The court's decision in this case highlights the importance of considering the commercial context when interpreting contracts and the need for directors to act in the best interests of their company and its shareholders. The court's ruling also demonstrates the potential consequences for directors who fail to fulfil their duties, including the possibility of the contract being declared voidable and the directors being held liable for any resulting losses.

Orders