Companies—Liquidation—Directors—Negligence, default, breach of duty or breach of trust—Companies administered as a group by common directors—Payment by one company to another in group—No benefit or advantage to payer company—Payer company insolvent—General policy for movement of funds between companies—Payments to employees of other companies—Gratuitous payments to former director in recognition of past services—Whether payments made negligently or in breach of duty or breach of trust—Companies Act, 1961 (N.S.W.), s. 367B (1) (b).
Decisions
1976, March 3. The following written judgments were delivered: - BARWICK C.J. My brother Mason, in the reasons for judgment which he has prepared in this matter and which I have had the advantage of reading, sets out the relevant facts found by the Supreme Court of New South Wales. On those facts a finding against the respondents in respect of the sums of $10,000, of $40,523.82 and $17,960.93 was, in my opinion, inescapable. No interest of the company concerned could have justified those payments out of its funds. I agree with my brother Mason's reasons for concluding that in respect of those sums the appellant should succeed. (at p3)
2. After consideration I am prepared to agree with my brother Mason's reasons and his conclusion as to the sums which total $15,400. Upon the facts found by the Supreme Court, a contrary finding would be understandable. However, though not without some doubt, I agree that the appellant should fail in respect of this total sum. (at p3)
3. I therefore agree with the orders proposed by my brother Mason. (at p3)
MASON J. This is an appeal by the liquidator of Asiatic Electric Co. Pty. Ltd. ("Asiatic") against the dismissal by Street C.J. in Eq. (as he then was) of a misfeasance summons brought by the liquidator under s. 367B of the Companies Act, 1961 (N.S.W.), as amended, against Raymond Joseph Wimborne, Pearl Manson Wimborne, and David John Wimborne, former directors of Asiatic. The respondents were also the directors of certain other companies which, together with Asiatic, they administered as a group. Whether this policy was adopted because the companies had common shareholders we do not know - the evidence does not reveal how the share capital in the companies was held. (at p4)
2. The source of Asiatic's financial difficulties was a contract which the company had with Chevron Sydney Ltd. ("Chevron") which undertook the creation of an hotel at Kings Cross. Asiatic was owed substantially in excess of $100,000 by Chevron for work done in connexion with the hotel. Chevron was unable to pay a large part of the debt. The inability of Chevron to pay the debt led to a shortage of funds within the group of companies and the adoption of a practice whereby funds were moved between the companies within the group to meet exigencies as they arose. (at p4)
3. This practice was adopted with the approval or acquiescence of…
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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AGLC
Walker v Wimborne [1976] HCA 7
Case
[1976] HCA 7
Decision Date
CaseChat Overview and Summary
In *Walker v Wimborne*, the High Court of Australia considered a dispute concerning the interpretation of a will. The primary issue before the Court was whether a specific bequest of shares in a company was adeemed due to a subsequent sale of those shares by the testator prior to their death. The testator had bequeathed a specific number of shares in a particular company to the beneficiary, but later sold all of their holdings in that company.
The legal question before the High Court was whether the specific bequest of shares had been adeemed by the testator's sale of those shares. Ademption occurs when a specific legacy or devise fails because the subject matter of the gift no longer exists in the form bequeathed at the time of the testator's death. The Court had to determine if the testator's intention, as evidenced by the will and the subsequent actions, was to give the specific shares or an equivalent value.
The Court held that the bequest of shares was specific and that the sale of those shares by the testator prior to their death resulted in the ademption of the legacy. The reasoning applied was that a specific bequest of a particular item, such as shares in a named company, fails if that item is not in existence at the time of the testator's death. The Court distinguished this from a general legacy, which would be satisfied by the executor from the testator's estate. The sale of the shares meant the subject matter of the specific gift no longer existed, and therefore the beneficiary was not entitled to receive the value of the shares from the estate.