Proctor : December 2018
32 PROCTOR | December 2018 High Court and Federal Court casenotes High Court Company law – voluntary administration – deed of company arrangement In Mighty River International Limited v Hughes; Mighty River International Limited v Mineral Resources Limited  HCA 38 (orders 19 June 2018; reasons 12 September 2018) the High Court upheld the validity of a deed of company arrangement implementing a moratorium on claims, requiring further investigations by the administrators and a report to creditors on possible amendments to the deed in six months’ time, and preventing distribution of property of the company. Mesa Minerals went into voluntary administration and administrators were appointed. At the second meeting of creditors, a majority of creditors voted to enter into a deed of company arrangement with the features above. Mighty River, a creditor, began proceedings claiming that the deed was void. It argued that the deed was inconsistent with the purpose of Part 5.3A of the Corporations Act 2001 (Cth); that it invalidly sought to sidestep the requirements of s439A(6) of that Act, which allows for a court to extend the period within which to hold a second meeting of creditors; that it did not comply with an alleged requirement in s444A(4) (b) to distribute at least some company property; and that certain required opinions had not been formed under the Act. At first instance, the Master upheld the deed. An appeal to the Court of Appeal was dismissed. A majority of the High Court held that the deed was valid. It had been executed in compliance with Part 5.3A and was consistent with and aimed to fulfil the purposes of that part, noting the intended flexibility of possible deeds of company arrangement. It was not simply an extension of time; rather, the deed was an otherwise valid instrument that incidentally extended time for investigations pending possible variations. The moratorium was valid and accorded with the purposes of Part 5.3A. The deed also did not need to specify property to be available for the purposes of s444A, and the administrators had formed and expressed the opinions required by ss438A(b) and 439A(4). Kiefel CJ and Edelman J jointly; Gageler J separately concurring; Nettle and Gordon JJ jointly dissenting. Appeal from the Court of Appeal (WA) dismissed. Equity – doctrine of part performance In Pipikos v Trayans  HCA 39 (12 September 2018) the High Court considered the requirements of the equitable doctrine of part performance and whether those requirements should be relaxed. The respondent and her then husband purchased a property (the Clark Road property) and made improvements. The respondent was the sole registered proprietor. The respondent and her husband later jointly purchased a second property with the appellant (also the respondent’s brother) and his wife, financed by both couples and a bank loan. The appellant and his wife jointly held a half-share in the property, with the other half in the name alone of the respondent’s husband. The couples then bought a third property (the Penfield Road property), financed in part by bank loan. The appellant and his wife paid the deposit and the balance. Each couple held a half share in the property. In these proceedings, the appellant alleged that he and the respondent’s husband had agreed that the appellant would acquire half of the Clark Road property (not including the improvements), to be paid largely by the appellant funding the share of the respondent and her husband in the Penfield Road property. The only evidence of the agreement was a handwritten note signed by the respondent. That note did not meet the requirements for contracts of sale for land in the Law of Property Act 1936 (SA). The appellant argued that he was entitled to specific performance through the doctrine of part performance. Under existing authority, where a person has partly performed a bargain made and the acts relied upon to show part performance are unequivocally and by their own nature referable to the alleged agreement, the other party may be prevented from resiling from the bargain. The appellant argued for a relaxation of the requirement for acts to be unequivocally referable to the agreement asserted by the applicant. He urged an approach akin to equitable estoppel, focussed on “whether a contracting party has knowingly been induced or allowed by the counterparty to alter his or her position on the faith of the contract”. After review of the authorities, the court unanimously rejected the argument, affirming the requirement of unequivocal referability. In this case, the bargain did not meet that requirement (which the appellant conceded in the High Court). Kiefel CJ, Bell, Gageler and Keane JJ jointly; Nettle and Gordon JJ jointly concurring; Edelman J separately concurring. Appeal from the Full Court of the Supreme Court (SA) dismissed. Equity – breach of fiduciary duty – account of profits In Ancient Order of Foresters in Victoria Friendly Society Limited v Lifeplan Australia Friendly Society Limited  HCA 43 (10 October 2018) the High Court considered the necessary causal nexus for an account of profits following a breach of fiduciary duties. Lifeplan operated a funeral products business through a subsidiary Funeral Plan Management (FPM). Foresters ran a similar business, though with a smaller market share. Mr Woff and Mr Corby were employed by Lifeplan in management positions. While still employed at Lifeplan, Woff and Corby approached Foresters with a plan to divert business from FPM to Foresters. They created a five-year business concept plan to carry this through, based on the “wholesale plundering of the confidential information and business records of Lifeplan”. Lifeplan and FPM brought proceedings for breach of fiduciary duty and contravention of the Corporations Act 2001 (Cth). They sought an account of profits. The primary judge found against Woff and Corby on the breaches and found that Foresters had knowingly assisted in some, but not all actions. The judge also found that Foresters would not have proceeded absent the business plan. When considering account of profits, the primary judge held that the confidential information had not itself been used to generate profit for Foresters and did not order an account of profits against it. On appeal, the Full Court held that was too narrow a view of the causation required and ordered Foresters also to account for profits. Foresters appealed to the High Court; Lifeplan cross-appealed against the finding of quantum. Foresters argued that the account of profits should be limited to the profits from the direct results of the acts amounting to knowing assistance. The High Court held that the profits of those acts could not be separated from the general scheme. The liability to account extended to “any benefit” arising “as a result of” the knowing participation. On the cross- appeal, once causation was found, it was for the appellants to show why amounts should not be included in the account of profits. In this case, there was no reason to restrict Foresters’ obligation to disgorge less than the entire capital value of the business it acquired. Kiefel CJ, Keane and Edelman JJ; Gageler J separately concurring; Nettle J concurring separately on the appeal but dissenting on the cross-appeal. Appeal from the Full Federal Court dismissed; cross-appeal allowed. Andrew Yuile is a Victorian barrister, phone 03 9225 7222, email email@example.com . The full version of these judgments can be found at austlii.edu.au .