In the matter of Alexandria Landfill Pty Limited (No 2) [2016] NSWSC 1671

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Alexandria Landfill Pty Limited (No 2) [2016] NSWSC 1671 Hearing dates: Tuesday, 1 November 2016 Date of orders: 28 November 2016 Decision date: 28 November 2016 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Refer [21] Catchwords: CORPORATIONS – members' rights and remedies – dividend – meaning of "declare" in company's constitution – construction of terms of Shareholders Agreement

COSTS – apportionment – where result not involve acceptance of either party's position – where plaintiff substantially succeeded – where severable issue belatedly abandoned by plaintiff – allocation of costs should reflect relative responsibility of parties Legislation Cited: (CTH) Corporations Act 2001, s 254T, s 254V Cases Cited: In the matter of Alexandria Landfill Pty Limited [2016] NSWSC 1503 Category: Costs Parties: BB Retail Capital Pty Limited (plaintiff) Alexandria Landfill Pty Limited (first defendant) Ian Raymond Malouf (second defendant) Representation: Counsel: J R Williams (plaintiff) C J Birch SC (defendants)

Solicitors: Gilbert + Tobin (plaintiff) Pigott Stinson Lawyers (defendants) File Number(s): 2015/048739

Judgment 1. In the principal judgment, delivered on 25 October 2016, I summarised my conclusions as follows: [1] [99] The preference shares are entitled to participate pari passu with the other shares in any dividend. The entitlement of the preference shareholders is to participate pari passu with other shares in any dividend, and, to the extent that such dividend is insufficient to provide an 11% return, to have it topped up to 11%. While if the payment cannot be made by dividend it can be accrued as a loan, once there has been an accrual to a preference shareholders' loan account in respect of such a payment, that loan is a separate and additional entitlement to any dividend, and could not be extinguished by a dividend. No dividend can be paid, consistently with the rights of the preference shareholders, unless the amounts accrued on loan account in respect of the 11% minimum cash distribution are first repaid to them. [100] While clause 7.1(b) of ALF's constitution uses the language of "declaration", the power is not one to declare a dividend in the s 254V(2) sense, but – consistently with conventional practice in respect of interim dividends – to make a decision to pay an interim dividend, which is revocable until the dividend is paid, and in respect of which no debt arises until the time for payment arrives. The impugned resolution was not an exercise of a power to "declare" a dividend within s 254V(2), and did not create an enforceable right to payment, let alone to immediate payment. Nor did the impugned resolution fix the amount and time for payment of a dividend, within s 254V(1). However, the impugned resolution was not a mere statement of intent or policy, but a purported partial and incomplete exercise of power under clause 7.1(b). As such, it was a nullity. [101] Were it not a nullity, the impugned dividend resolution at least evinces an intention to pay a dividend in which the preference shareholders will not share pari passu, and without first repaying their accrued loans, but to purport to do so by declaring a dividend in their favour. In each of those respects, it would be inconsistent with the rights of the preference shareholders. For the same reasons, it is oppressive of the preference shareholders. [102] Alternatively, if there were a valid decision that made a dividend payable, the outstanding accrued loans would be immediately repayable. [103] For the foregoing reasons, the plaintiff is entitled to a declaration to the effect that the impugned resolution is void. Prima facie, the second defendant should pay the plaintiff's costs. However, I will if desired afford an opportunity for argument on that issue. In addition, it may be that as a result of these reasons additional declarations may be appropriate to quell further potential disputes. 1. I directed that the plaintiff bring in short minutes on a date to be fixed to give effect to the judgment. Short minutes were brought in on 1 November 2016. To a very large extent they are uncontroversial, and one aspect of controversy evaporated during the argument when the defendants decided not to press for a declaration as to the construction of clause 7.4 of the Terms of Issue in the event of a winding up. The remaining issues requiring resolution are: 1. Whether there should be a declaration (and a consequential injunction) to the effect that ALF may only declare and pay a dividend once it has first paid any loan liability to holders of preference shares accrued pursuant to clause 8.2(b) of the Shareholders Agreement, or whether the words "declare and" should be omitted, so that the relief refers only to payment and not to declaration of a dividend; and 2. Costs.