Biodiesel Producers Limited (ACN 099 165 876) v Stewart [2007] FCA 722

FEDERAL COURT OF AUSTRALIA

Biodiesel Producers Limited (ACN 099 165 876) v Stewart [2007] FCA 722

CORPORATIONS LAW – applicant a start up company with first respondent as company secretary and second respondent effectively as company managing director – incorporated for the purpose of constructing and running a biodiesel plant – sources of funding to be a Commonwealth Government grant and private investor ANZ Infrastructure Services Limited – site for the plant purchased – delays in securing development approval – delays in securing funding – delays in securing plant – dispute between Board members and first and second respondents – second respondent settled with the applicant and took no part in the litigation. CORPORATIONS LAW – purported issue of performance shares to respondents by directors under a 'circular resolution' – performance shares would convert into B Class shares upon the achievement of certain milestones. CORPORATIONS LAW – breach of fiduciary duty – failure on part of first respondent to fully inform the board of directly relevant legal advice prior to signing of the circular resolution – first respondent owed a statutory duty as an officer of the applicant ss 180(1), 181(1) and 182(1) Corporations Act 2001 (Cth) and common law and fiduciary duties – Board would not have signed the circular resolution if it had known of the advice – circular resolution rescinded. CORPORATIONS LAW – issue of performance shares which converted into B Class shares created a new class of shares – variation of class rights s 246C(5) Corporations Act – no shareholders' consent – not done in conformity with s 246B(1) Corporations Act – not done in conformity with company constitution. CORPORATIONS LAW – failure to obtain shareholders' consent – whether a procedural irregularity amenable to validation under ss 1322 or 254E Corporations Act – no application made under either section – no substantial injustice. CONTRACT – circular resolution – on proper construction performance shares issued at the time of the making of the circular resolution – performance shares were to convert in tranches at the achievement of the set milestones – milestones would be required to be achieved within a reasonable time – shares would not convert if the applicant achieved the milestones in the future. CONTRACT – Executive Service Agreement for services of the first respondent – not executed under authority of a Board resolution – conditions precedent to the agreement were not met – agreement never took effect – whether clause that applicant pay the entirety of the remuneration package for the remainder of the term of the agreement amounted to a penalty.