Thomas & Anor v Arthur Hughes Pty Limited & Ors [2015] NSWSC 1027

Supreme Court New South Wales

Medium Neutral Citation: Thomas & Anor v Arthur Hughes Pty Limited & Ors [2015] NSWSC 1027 Hearing dates: 4 and 5 December 2014 Decision date: 29 July 2015 Jurisdiction: Equity Division Before: White J Decision: Parties to bring in short minutes of order in accordance with reasons. Catchwords: CORPORATIONS – directors' duties – claim by liquidator of a company that one of its directors breached their duty to act in good faith not for an improper purpose – company transferred shares and securities and provided loans to companies controlled by the director – another director and major shareholder was not consulted in relation to the transfers – transfers were purportedly part of a family "succession plan" designed to minimise tax liability – held that the transactions were not in the interests of the company as a whole or of its shareholders and were entered in breach of directors' duties

EQUITABLE REMEDIES – constructive trusts – rescission – company entered share sale agreements and loans in breach of directors' duties – consideration of requirement that contracts entered in breach of directors' duties must be rescinded before a constructive trust may be imposed over the subject matter of the contracts – consideration of whether rescission in equity operates as an act of the parties or as an order of the Court – held, ordering that the contracts be rescinded, that the property transferred and the fruits of that property are held on constructive trust

EQUITABLE REMEDIES – accessorial liability – honest participation in breach of directors' duties – Barnes v Addy knowing receipt – director of company procured transfers of the company's property in breach of directors' duties – director did not act dishonestly – the director's son, who procured her breaches of directors' duties, also did not act dishonestly – companies controlled by the director received the property with full knowledge of the breaches – held that the director and her son are personally liable to compensate the company and the corporate accessories are liable as constructive trustees to re-transfer the property and account for any profit – issues of equitable compensation reserved for further consideration Legislation Cited: Civil Procedure Act 2005 (NSW) Corporations Act 2001 (Cth) Income Tax Assessment Act 1936 (Cth) Income Tax Assessment Act 1997 (Cth) Cases Cited: Barnes v Addy (1874) LR 9 Ch App 244 Belmont Finance Corporation Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 Daly v Sydney Stock Exchange Limited (1986) 160 CLR 371 Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296 Hancock Family Memorial Foundation Ltd v Porteous [2000] WASCA 29; (2000) 22 WAR 198 Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266; (2014) 87 NSWLR 609 Re Ledir Enterprises Pty Ltd [2013] NSWSC 1332; (2013) 96 ACSR 1 Robins v Incentive Dynamics Pty Ltd (in liq) [2003] NSWCA 71; (2003) 175 FLR 286 Texts Cited: J D Heydon, M J Leeming & P G Turner, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies, 5th ed 2015 LexisNexis William Gummow, "Knowing Assistance" (2013) 87 ALJ 311 Category: Principal judgment Parties: Hugh Charles Thomas as liquidator of Anne Lewis Pty Limited (In Liquidation) (1st Plaintiff Anne Lewis Pty Limited (In Liquidation) (2nd Plaintiff) Arthur Hughes Pty Limited (1st Defendant) Speakman Hughes Pty Limited (2nd Defendant) Telfer Hughes Pty Limited (3rd Defendant) Melvie Hughes Pty limited (4th Defendant) Gypson Hughes Pty Limited (5th Defendant) Bathurst Hughes Pty Limited (6th Defendant) Pamela Lewis (7th Defendant) David Lewis (8th Defendant) Daniel Lewis (9th Defendant) Representation: Counsel: S Loughnan (Plaintiffs) 1st – 6th, and 9th Defendants – unrepresented G Waugh (7th Defendant) In person (8th Defendant)