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5.4 Governance--remedies

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Queensland University of Technology

Remedies against Directors G ENERAL LAW Monetary  Account of profits: Furs Limited v Tomkies; Regal (Hastings) Ltd v Gulliver o Where director maderdndisclosed profit arising from conflict of interest o Recovering from 3 parties—must show that knowingly involved in breach of fiduciary duty: Barnes v Addy; Green v Bestobell Industries  ↔ CA—persons involved in a contravention also liable: ss181(2), 182(2), 183(2)  Equitable compensation o Court has inherent power to award equitable compensation: Tavistock Holdings Pty Ltd v Saulsman o Must show loss caused by the breach  Exemplary damages not available for breach of fiduciary duty: Harris v Digital Pulse Pty Ltd Other  Action of director in breach of duty voidable at instance of company: Whitehouse v Carlton Hotels  Rescission: Transvaal Lands Co v New Belgium (Transvaal) Land Co o If undisclosed interest in contract—put parties they were in position beforehand o Voidable—will not be granted where  innocent 3 parties involved  delay or waiver  irrevocably affirm  Injunctions: Pacifica Shipping Company v Anderson (director hadn’t yet taken opportunity in breach of duty—threatened breach  injunction) o Where threatened or continuing breach  Constructive trust o Over property acquired as consequence of breach of duty: Cook v Deeks; Furs Ltd v Tomkies; Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd C ORPORATIONS A CT Civil Penalty Court makes declaration of contravention if breach of civil penalty provision, including ss180-183, s588G: s1317E(1) Application for Orders: s1317J  The only entities able to apply for orders are— o ASIC—declaration of contravention | pecuniary penalty | compensation: s1317J(1) | disqualification: s206C(1) o Corporation—for compensation only: s1317J(2)  Noone else may apply: s1317J(5) Orders available after declaration  Pecuniary penalty order up to $200,000 if the contravention— (s1317G(1)) o Materially prejudices the interests of the corporation or its members o Materially prejudices the corporation’s ability to pay its creditors o Is serious  Compensation order for— o Damage resulting from the contravention: s1317H(1) Andrew Trotter LWB334 Corporate Law o Account of profits: s1317H(2) o Diminution of value of property: s1317H(3)  Disqualification if court is satisfied that justified: s206C o Considering conduct in relation to management, business or property of any corporation | anything else relevant: s206C(2) o On application from ASIC: Criminal penalties: s184, sch 3  If breach reckless or intentionally— o Dishonest—in breach of s181 duty of good faith: s184(1) o to gain benefit or cause detriment in ss182-3 misuse of position: s184(2) (misuse of position) s184(3) (misuse of information)  No criminal sanction for s180 (Duty of care & diligence) Statutory injunctions & damages Injunction (s1324(1)) (1) Where a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute: (a) a contravention of this Act; or (b) attempting to contravene this Act; or (c) aiding, abetting, counselling or procuring a person to contravene this Act; or (d) inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene this Act; or (e) being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or (f) conspiring with others to contravene this Act; the Court may,  on the application o of ASIC, or o of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate,  restraining the first‑mentioned person from engaging in the conduct and,  if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing. Available against  Director in breach of duties: s1324(1)(a) o Attempts to breach duties: s1324(1)(b)  Person involved in a breach of duty: s1324(1)(c)-(f) (= s79→181(2),182(2),183(2)) Eligibility to Apply  ASIC  person whose interests have been, are, or would be affected— o = more than the mere interests of members of the public  Need not show proprietary right or special injury o Shareholders—uncertain  Yes—within court’s discretion: Airpeak Pty Ltd v Jetstream Aircraft Ltd  Could interfere with running of the company—but court has discretion to refuse  No: Mesenberg v Cord Industrial Recruiters o Creditor or member for contravention of insolvent trading provisions: s1324(1A)(a) (if the insolvency of the company is an element of the contravention) Andrew Trotter LWB334 Corporate Law o Member if contravention of s256B(1)(a) [fair and reasonable test for share capital reduction]: s1324(1A)(c) Interim Injunctions: s1324(4) Interim injunction may be granted: s1324(4)  May be awarded even if no— (s1324(6)) o intent to continue conduct o Previously engaged in conduct o Imminent danger Damages (s
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