Downer EDI Limited v Gillies [2012] NSWCA 333

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Downer EDI Limited v Gillies [2012] NSWCA 333 Hearing dates: 24 and 25 May 2012 Decision date: 18 October 2012 Before: Allsop P at [1] Macfarlan JA at [150] Meagher JA at [151] Decision: 1. Appeal allowed in part.

2. Set aside the orders of the Supreme Court made on 9 September 2011.

3. Within 14 days the appellant file agreed orders disposing of the appeal, or in lieu of any agreement, the appellant and the respondent file draft short minutes that each contends should be made together with submissions of no more than three pages in support thereof, including as to costs in the Supreme Court and in the Court of Appeal. Catchwords: EMPLOYMENT LAW - contract - executive of public company - contract provided for bonus and other payments in event of termination - no bonuses payable in case of termination for serious misconduct - company terminated employment under contract - later discovery of misconduct - principle in Shepherd v Felt and Textiles of Australia Ltd - no bonuses payable

CORPORATIONS - duties and liabilities of officers - fiduciary and related statutory duties - chief executive officer - payments out of accrued bonus pool and company treasury facility - payments repaid shortly thereafter - no tax withheld from payments - payments not declared as related party loans - short periods in which CEO was overpaid from bonus pool - no overall net loss to company - CEO and others acting honestly - company exposed to risk of regulatory or taxation irregularities - misconduct Legislation Cited: Corporations Act 2001 (Cth), ss 180, 181, 182, 211, 213, 228, 229, Ch 2E Income Tax Assessment Act 1936 (Cth) Pt IVA Cases Cited: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Australian Securities and Investments Commission v Rich [2009] NSWSC 1229 Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287 Australian Securities and Investments Commission v Nealey [2011] FCA 717 Bell v Lever Brothers Ltd [1932] AC 161 Blyth Chemicals Ltd v Bushnell [1933] HCA 8; 49 CLR 66 Boston Deep Sea Fishing and Ice Co v Ansell (1888) 39 Ch D 339 Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; 117 FCR 424 British and Beningtons Ltd v North Western Cachar Tea Co Ltd [1923] AC 48 Cavenagh v William Evans Ltd [2012] EWCA Civ 697 Cohen & Co v Ockerby & Co Ltd [1917] HCA 58; 24 CLR 288 Commonwealth Homes and Investment Co Ltd v MacKellar [1939] HCA 34; 63 CLR 351 Concut Pty Ltd v Worrell [2000] HCA 64; 176 ALR 693 Doyle v Australian Securities and Investments Commission [2005] HCA 78; 227 CLR 18 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 Gillies v Downer EDI Ltd [2011] NSWSC 1055 Hodgson v Amcor Ltd [2012] VSC 94 Hoyt's Pty Ltd v Spencer [1919] HCA 64; 27 CLR 133 Jones v Dunkel [1959] HCA 8; 101 CLR 298 Khoury v Government Insurance Office (NSW) [1984] HCA 55; 165 CLR 622 Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; 182 CLR 26 Malik v Bank of Credit and Commerce International SA (in liq) [1998] AC 20 Pearce v Foster (1886) 17 QBD 536 Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; 157 CLR 17 R v Byrnes [1995] HCA 1; 183 CLR 501 Sanders v Snell [1998] HCA 64; 196 CLR 329 Shepherd v Felt and Textiles of Australia Ltd [1931] HCA 21; 45 CLR 359 State Rail Authority (NSW) v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574 Stocznia Gdynia SA v Gearbulk Holdings Ltd [2010] QB 27 Southern Cross Assurance Co Ltd v Australian Provincial Assurance Association Ltd (1935) 53 CLR 618 Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; 166 CLR 245 Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 Upper Hunter District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 Vines v Australian Securities and Investments Commission [2007] NSWCA 75; 62 ACSR 1 Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522 Zhu v Treasurer of New South Wales (2004) 218 CLR 530 Texts Cited: P Finn, Fiduciary Obligations (Sydney: Law Book Co, 1977) Category: Principal judgment Parties: Downer EDI Ltd (Appellant) Stephen John Gillies (Respondent) Representation: D F Jackson QC, J C Giles (Appellant) D L Williams SC, R C Beasley SC (Respondent) Corrs Chambers Westgarth (Appellant) DibbsBarker (Respondent) File Number(s): 2007/265271 Decision under appeal Court or tribunal: Supreme Court Citation: [2011] NSWSC 1055 Date of Decision: 9 September 2011 Before: Rothman J File Number(s): 2007/265271