The decision concerns an application to prevent funds paid into a solicitors’ trust account by a company from being paid out to the second defendant. Ordinary principles were applied by the Court: the plaintiff must establish a serious question to be tried and the balance of convenience and balance of justice favour granting relief rather than withholding relief: .
The plaintiff held 26.6% of shares with an option to increase to 50%. The second defendant (the CEO and a director of the company) and his wife held 68% of the shares.
The plaintiff relied upon s 233(1)(c), (i) and (j) of the Corporations Act 2001 (Cth) and alleged breaches of directors’ duties (ss180, 181 and 182).
The company was in immediate need of the funds in the trust account. The second defendant also had an immediate need for a portion of the funds to complete a purchase of a property in the name of CFM with whom the company had a service agreement entirely unrelated to the purchase of the property. The payments were justified by the second defendant as being payments in advance, though the Court held that CFM was not entitled to such payments in advance: . The Board of the company passed a resolution purporting to ratify the payment. The second defendant alleged that in bringing the application the plaintiff was attempting to take some form of commercial advantage of the second defendant’s situation, but no evidence was in support of this and on that basis the Court rejected this argument.
The second defendant’s need for funds was purely as a result of his own actions and was unrelated to the company’s business.
The injunction was granted with the usual undertakings by the plaintiff.
Relevant paragraphs of Ford
[7.427], [10.071], [11.275], [11.450], [11.460], [11.490], [20.170], [27.094], [27.550]