Let me tell the story of a recent NSW Supreme Court case involving Indian mining magnates (A&MJ), Wollongong Coal (WC), fiduciaryduty breaches, and the Property pictured.
Facts:
* A&MJ and other WC directors voted for a shelf company (Shelf) purchasing Property for $5m, and spending c$3-4m on a new build
* A&MJ had significant influence over the Indian-inspired design: car turntable, $100k entertainment equipment, 2 kitchens, etc
* years later, in financial bother, WC sought to get back some of its money, so it sold Shelf via debt-for-equity swap at c$3.75m
Why buy the Property?
A&MJ argued it was for foreign Indian executives to use when visiting and for Wollongong public policy benefits [GUEST HOUSE INTENTION]
Court disagreed and found A&MJ got residence “rent-free on an exclusive, indefinite and continuous basis” [EXCLUSIVE RESIDENCE INTENTION (ERI)]
As a result of ERI, A&MJ should not have voted on the resolutions and should have declared the conflict.
This resulted in breaches of fiduciary duties (improper use of position, conflict of interest, act in good faith and proper purpose) and ss181(1) and 182(1) Corporations Act
A&MJ were ordered to pay equitable compensation = $10.15m – $3.75m (or $6.4m) + $5.7m interest + costs.
What else does the case deal with?
- Barnes v Addy
- Constructive Trusts
- Knowledge of the other directors and their alleged culpability / vicarious liability
- The s 1317’s of the Corps Act
