Connective Services Pty Ltd v Slea Pty Ltd [2019] HCA 33

HIGH COURT OF AUSTRALIA

KIEFEL CJ, GAGELER, KEANE, GORDON AND EDELMAN JJ

CONNECTIVE SERVICES PTY LTD & ANOR APPELLANTS

AND

SLEA PTY LTD & ORS RESPONDENTS

Connective Services Pty Ltd v Slea Pty Ltd [2019] HCA 33 9 October 2019 M203/2018

ORDER

1. Appeal dismissed.

2. The appellants pay the costs of the first and second respondents.

On appeal from the Supreme Court of Victoria

Representation

D F Jackson QC with D G Guidolin for the appellants (instructed by Quinn Emanuel Urquhart & Sullivan)

J T Gleeson SC with K E Foley and G C Kozminsky for the first and second respondents (instructed by Arnold Bloch Leibler)

Submitting appearances for the third and fourth respondents

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Connective Services Pty Ltd v Slea Pty Ltd

Companies – Shares – Implied prohibition against financial assistance by company to acquire shares in company – Meaning of "financial assistance" – Where s 260A(1) of Corporations Act 2001 (Cth) provides that company may financially assist a person to acquire shares in the company only if giving the assistance does not materially prejudice the interests of the company or its shareholders, or the company's ability to pay its creditors – Where appellant companies' constitutions contained pre-emption clause which provided that, before a shareholder could transfer shares of a particular class, those shares must first be offered to existing shareholders of that class in proportion to the number of shares of that class already held by that shareholder – Where sole shareholder of one shareholder company entered into agreements for sale of shares – Where appellant companies claimed that agreements breached pre-emptive rights provisions – Where injunction sought under s 1324 of Corporations Act to restrain appellant companies from prosecuting proceedings in relation to pre‑emptive rights on basis that proceedings contravened the prohibition against financial assistance in s 260A(1) – Whether funding by company of legal proceedings directed at compelling one shareholder to offer shares to other shareholders is financial assistance – Whether the companies should be enjoined from continuing legal proceedings at their expense to vindicate alleged breach of pre-emptive rights.