The plaintiffs previously commenced proceedings against the defendants to enforce a share sale and loan agreements entered into with the fourth defendant (PRWI) and fifth defendant (Grintara) in 2005. Claims were also made against the first and second defendants (Wielands) for breach of their statutory and fiduciary duties as directors, oppression, and conducting the affairs of the second plaintiff (PPT) in a manner contrary to the interests of the members as a whole.
Specific performance was ordered by Brereton J on 18 June 2009. Liberty to apply was also granted “in the event of any difficulty arising in the implementation of the foregoing orders”. It was therefore unnecessary for Brereton J to deal with the allegations made against the Wielands.
The defendants failed to comply with the orders for specific performance, and as Grintara was now in liquidation, it appeared that the specific performance could not be completed.
The issue before Brereton J was whether it was open to the court to further consider the plaintiffs’ claim for relief against the first and second defendants.
Brereton J identified the following principles:
- Liberty to apply does not authorise the grant of different relief against different parties: .
- When a decree of specific performance is made and the defendant fails or refuses to complete the contract, the court may grant further relief by rescinding the order and substituting alternative relief: .
- Once an order for specific performance is made the future exercise of the contractual rights of the parties, including the working out of the order for specific performance, is under the control of the court: .
- A court may engage in further consideration, unless the proceedings have been disposed of by final order, which may depend on the circumstances of the case: .
Brereton J held that there was an implied reservation of further consideration in this case, at least so long as the decree of specific performance remained unimplemented, on the basis that:
- There was a specific performance order with the implicit notion that the order would remain under the control of the court;
- There was a manifestly strong case against the Wielands personally in relation to which no orders were made, expressly because of the decree of specific performance;
- No defence of impossibility or hardship was raised in the substantive proceedings in relation to the claim for specific performance;
- The relief now sought in substitution for the decree of specific performance was sought in the statement of claim: .
Therefore since the order for specific performance remained unperformed, there had not been a final disposal of the personal claims against the Wielands such as to attract the doctrine of res judicata. It was therefore open to the court to rescind the decree and substitute other orders, including orders in relation to the personal claims against the Wielands: .
Brereton J held that the Wielands breached their duties as directors under 181(1) and 182(1) of the Corporations Act 2001 (Cth), as well as their fiduciary duties as directors, by exercising their powers as directors other than in good faith for the best interests of the company and improperly to gain advantage for themselves and the other defendants, to the detriment of the PPT, by:
- Executing a fixed and floating charge over the assets of PPT in favour of the defendant companies;
- Procuring the transfer of the business of PPT to a new company owned by the Wielands; and
- Physically relocating the business of PPT and causing it to default under its licence and incur a contingent liability to the first plaintiff: , .
Grintara and PRWI were held to have been “involved” in the contraventions of ss 181(1) and 182(2) within the meaning of s 79 of the Act, as they were participants in and beneficiaries of the contraventions: , .
Relevant paragraphs of Ford:
[8.010], [8.015], [8.020], [8.063], [8.065], [8.070], [8.080], [8.090], [8.095], [11.460], [16.080].