Hart Security Australia Pty Ltd v Boucousis

[2016] NSWCA 307

NSW Court of Appeal

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Interrogate

Catchwords

1. Equity
2. › Fiduciary relationships
3. › Company directors
4. › Conflict of interest and duty
5. › Sole director pursuing personal gain through share issue changing company control
6. › Whether real or substantial possibility of conflict
7. › Whether assessed by reference to director's subjective view of company's best interests
1. Equity
2. › Fiduciary relationships
3. › Company directors
4. › Conflict of interest and duty
5. › Share issue diluting existing shareholder's interest to nil
6. › Whether director required to inform existing shareholder of proposed share issue
7. › Whether director required to give shareholder opportunity to propose alternative funding
1. Corporations
2. › Directors' duties
3. › Good faith and proper purpose
4. › Whether director acted in good faith in best interests of corporation
5. › Whether subjective belief sufficient to satisfy s 181(1)
6. › Corporations Act 2001 (Cth), s 181(1)
1. Corporations
2. › Directors' duties
3. › Improper use of position and information
4. › Whether purpose to gain advantage must be established
5. › Corporations Act 2001 (Cth), ss 182(1), 183(1)

Quick Take

A sole director who pursues a transaction involving significant personal benefits (such as employment and shareholding in a new entity) in circumstances where the transaction will change control of the company and dilute the existing shareholder's interest to nil is in breach of fiduciary duty if they do not obtain the informed consent of the company's shareholder, regardless of the director's subjective belief that the transaction is in the company's best interests. However, proof of loss of a valuable commercial opportunity requires establishing on the balance of probabilities that the opportunity included a real or substantial (not speculative) prospect of agreement, even where that assessment involves hypothetical past events concerning third party conduct.