Super 1000 v Pacific General Securities;Bonic v Pacific General Securities [2008] NSWSC 1222

Reported Decision : 221 FLR 427

New South Wales Supreme Court

CITATION : Super 1000 v Pacific General Securities;Bonic v Pacific General Securities [2008] NSWSC 1222

HEARING DATE(S) : 27-30/11/07, 17/12/07 and written submissions received 31/01/08, 6/02/08 and 20/03/08

JUDGMENT DATE : 26 November 2008

JURISDICTION : Equity

JUDGMENT OF : White J

DECISION : Further submissions invited from the parties.

CATCHWORDS : TRADE PRACTICES – misleading and deceptive conduct – statement of opinion made on reasonable grounds – no question of principle - CORPORATIONS – directors' duties – one company to a joint venture borrowed money on mortgage security – mortgagee company was controlled by a director of the other joint venture company – the capacity of the mortgagor company to reimburse the other joint venturer for expenses incurred was thereby prejudiced – the director stood to profit personally through his controlling interest in the mortgagee to the detriment of the joint venture company of which he was a director – equitable compensation ordered against director - TORT – intentionally inducing breach of contract – term of debentures that no other lenders were to take priority – company subsequently lent money on mortgage security – directors had relied upon legal advice as to the lawfulness of their actions – bona fide belief that this was not a breach of contract – no damage proven - REAL PROPERTY – registered mortgage – indefeasibility – whether fraud exception to indefeasibility arises – no intention to cheat where legal advice relied upon - ESTOPPEL – conventional estoppel – whether relationship conducted on the basis of a mutual assumption – no relevant transaction between debenture holder and mortgagee – mortgagee did not cause the debenture holders to adopt the assumption - CORPORATIONS – directors' duties – term of debentures that no other lenders were to take priority – money lent on mortgage security – capacity of company to repay debentures was thereby prejudiced – director was the controlling mind of the mortgagee company – the director stood to profit personally through his controlling interest in the mortgagee to the detriment of the debenture holders – shareholders must act bona fide for the benefit of the company as a whole and not unfairly prejudice a third party in order to ratify a breach of directors' duties – debenture holders needed to be considered given the company's financial situation – no consent to breach of fiduciary duty - REAL PROPERTY – registered mortgage – indefeasibility – whether in personam exception to indefeasibility arises – mortgagee knowingly received property transferred in breach of a director's fiduciary duty – mortgagee without registration would have been personally liable as a constructive trustee under the first limb of Barnes v Addy – in personam exception to indefeasibility does not extend to cases of a constructive trust under the first limb of Barnes v Addy at least in relation to proprietary claims