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The Commonwealth Department of Industry, Innovation and Science has published a new guideline for decommissioning offshore petroleum infrastructure in Commonwealth waters.
Beware of sections 115 and 120(1) of the Corporations Act when seeking to remove a nominee director: Shearwood (Trustee), In the matter of Allied Resource Partners Pty Ltd v Allied Resource Partners Pty Ltd  FCA 1451
On 5 February 2018, the Federal Court’s decision in Resource Capital Fund IV LP v Commissioner of Taxation shook the Australian private equity market with a dramatic shift from industry practice. A recent G+T Insight explores the importance of the decision and its implications.
This case illustrates the importance of strictly adhering to any procedure for the removal of directors to minimise the risk that removal of a director (and potentially the subsequent appointment of another director) will be invalid. The case also reminds us that directors appointed on registration of a company are appointed under sections 117 and 120(1) of the Corporations Act 2001 (Cth), and therefore may not (without careful drafting) be subject to any regime in the constitution or any shareholders’ agreement for the removal of nominee directors.
Mr Peters (a director of Allied Resource Partners Pty Ltd (Allied)) sent a Default Notice to the Allied company secretary alleging that Mr Shearwood (another Allied director) had breached the Allied Shareholder’s Agreement. Clause 15.3.1(b) of the Allied Shareholders’ Agreement provided that when a Default Notice is served, “each Director, including themselves, appointed by the Defaulting Shareholder is automatically removed”.
Mr Peters then took steps to:
In holding that the removal of Mr Shearwood (and the appointment of the new director) was invalid, Markovic J in the Federal Court of Australia found that:
In this case, the NSW Court of Appeal expressed the view that Codelfa does not impose any ‘ambiguity gateway’ before evidence of surrounding circumstances will be considered in contract construction questions (and rather, ambiguity is a conclusion that can only be reached after consideration of surrounding circumstances). However, surrounding circumstances will rarely detract from the language used in the contract.
Bathurst Central Pty Ltd (Bathurst Central) contracted to purchase property from Mr and Mrs Steele-Park (Vendors). The contract was subsequently varied to extend the completion date and immediately before the second variation, Mr Cherry and Mr Sharpe (as directors of Bathurst Central) (Guarantors) signed a guarantee in respect of all monies owing by Bathurst Central under “the Agreement”. The sale contract was never completed and the Vendors subsequently terminated the contract and sold the property to a third party.
The issue for the Court was whether the guarantee:
The Guarantors argued that various emails between the parties’ solicitors about the extension of the completion date and the guarantee were admissible on the question of construction of the guarantee, and demonstrated that Bathurst Central’s solicitors had understood that the guarantee would only cover the price of the completion date extension, and not damages for failing to complete.
Leeming JA explained that:
In finding that the emails were relevant to the process of construction of the guarantee (and that the trial judge was not correct to exclude evidence of them), Leeming JA (with whom Gleeson JA agreed) found that the emails:
However, the Court ultimately dismissed the appeal because even where evidence of surrounding circumstances was considered, that evidence could not override the clear and expansive language which indicated that “Guaranteed Money” included damages for failure to complete, including:
In this case, the Full Federal Court considered the scope and operation of an implied term of good faith and reasonableness in restricting the exercise of a franchisor’s discretion to set prices. It concluded that a requirement of reasonableness was not separate to an obligation of good faith and required a focus on behaviour in exercising the discretion rather than the outcome of the behaviour.
A number of Pizza Hut franchisees (Franchisees) claimed that the Pizza Hut franchisor YUM! Restaurants (YUM) had breached its implied obligations of good faith and reasonableness when it exercised its contractual power to set the price of pizzas down from $9.95 to $4.95 for pick up and delivery.
The trial judge agreed that YUM’s discretionary power to fix maximum prices was subject to an implied obligation that it be exercised honestly and reasonably and with reasonable cause. However, on the facts, the trial judge found that YUM had not acted “dishonestly", or in bad faith or with reckless disregard” for the Franchisees.
The Franchisees did not dispute the findings that YUM had acted honestly but argued that the maximum prices set and the methodology applied in constructing those prices, when considered objectively, were each unreasonable. In other words, the Franchisees argued that good faith and reasonableness were distinct concepts and the finding of lack of dishonesty did not dispose of the matter.
In upholding the trial judge’s conclusions finding that there was no implied obligation for YUM to ensure profitability for the Franchisees, the Full Federal Court explained: