The New South Wales Supreme Court has delivered its judgment in Dexus Capital Investment Services Pty Ltd v Australia Pacific Airports Corporation Limited [2026] NSWSC 600. The case was one of the more significant shareholder disputes in recent times, offering a number of practical takeaways for directors, fund managers, trustees, general counsel, advisers and anyone involved in the ownership, management and transactions concerning closely held assets.
Hammerschlag CJ in Eq found that Dexus committed a "material Irremediable Breach" of the Australia Pacific Airports Corporation Limited (APAC) Shareholders' Deed by disclosing the company's most commercially sensitive information as part of an attempted sale process and then concealing the extent of what had occurred.
The result is emphatic. The Default Notice issued by the APAC Board is valid and effective. Dexus, together with all affiliated entities in the Dexus Bloc, must sell their shareholding to the remaining shareholders at fair market value.
Gilbert + Tobin acted for IFM Investors, the second largest shareholder in APAC.
The dispute centred on a transaction through which Dexus sought to sell a 9.7% stake in APAC, the owner and operator of Melbourne and Launceston Airports. In doing so, Dexus gave over 130 individuals across more than 40 organisations access to a virtual data room containing APAC's most commercially sensitive information. It did all of this without telling APAC or the other shareholders and in breach of the confidentiality regime under the Shareholders’ Deed.
Key takeaways
The decision is a prescient case study in what can go wrong in large transactions when commercial considerations are not adequately balanced against contractual compliance and good governance. The key takeaways are:
- Comply strictly with your contractual obligations. Before embarking on a sale process, review the shareholders' deed and ensure every step, including the form and process of confidentiality protections, complies with its express requirements. Make sure your commercial and legal advisers are also clear on the requirements and have records to support the position taken.
- Tailor confidentiality protections to the specific requirements of the governing documents. Do not assume that a ‘standard market practice’ will suffice.
- Manage conflicts proactively. Fund managers, trustees and nominee directors must have thorough and carefully documented conflict management protocols, particularly in sale processes. They should be reviewed and updated regularly. Pay close attention where directors are nominated to a managed Board.
- Implement a rigorous and well-documented decision-making process. When boards exercise powers with significant consequences, the process must be careful, independent and thoroughly documented.
- Be candid when issues arise. Concealing or minimising a breach will almost certainly make matters worse.
After all that, the judgment is a reminder that in tightly held corporate structures, trust between stakeholders is paramount and once lost, it may be impossible to recover.
Know your contractual obligations before you start a sale process
The most obvious lesson is also the most fundamental: if you are going to sell shares in a privately held vehicle, read the shareholders' deed first.
The Shareholders' Deed imposed strict confidentiality requirements. Information could only be disclosed to a prospective purchaser that had entered into a confidentiality deed with the other shareholders – not just the selling shareholder – in a form to their reasonable satisfaction and enforceable by them. Dexus did not follow that process. Instead, it said it relied on a purported template deed poll that it claimed had been agreed by the shareholders years earlier, yet no record of any such agreement could be found.
The Court found that Dexus' approach did not comply with the requirements of the Shareholders' Deed, including the cooperation, and pre-agreement, with the shareholders that the deed contemplated. Dexus also entered into side letters amending the deed poll without telling the other shareholders, did not require confidentiality deeds from advisers to buyers and some parties accessed the data room without any confidentiality agreements in place at all.
The lesson is straightforward. Any share sale transaction must be carefully evaluated for compliance with the governing agreements. There is no substitute for reading, understanding and following the contractual machinery, however cumbersome or inconvenient it may seem in the heat of a transaction. ‘Commercial’ or ‘standard market approaches do not obviate the need to comply with the governing arrangements.
Don’t rely on your external commercial or legal advisers here – in-house counsel play a critical role. Legal counsel must be willing to identify risks clearly and interrogate convenient assumptions in commercial transactions, even when the answer is unwelcome.
Tailor your confidentiality protections
Dexus asserted that the confidentiality protections it had put in place were adequate and substantially equivalent to what the Shareholders' Deed required. The Court disagreed.
Many of the deeds poll unilaterally used by Dexus did not limit dissemination to a specified group of identified people, did not require APAC's consent for onward disclosure, and permitted disclosure to ‘related bodies corporate’. There was also no mechanism for APAC itself to request the destruction of material, only for Dexus to do so. The ‘watering down effect’ of the side letters was, the Court found, ‘not trivial’.
The practical takeaway is that there is no ‘standard market practice’ when seeking to disclose confidential information. Any disclosure of confidential information must comply with the specific requirements of the governing documents. Take care to have clear visibility over every stage of the disclosure process – what is being shared, with whom, and under what protections – before a data room is opened or any information changes hands.
Manage conflicts carefully – especially where nominee directors are involved
A recurring theme in the case is the tension inherent in the role played by Dexus. It simultaneously acted as fund manager, trustee, shareholder and (nominator of) directors to the APAC Board. The Court observed that there was unresolved "tension between Dexus' entrepreneurial urges to sell APAC shares for the benefit of its constituents at the highest achievable price and its duty not to act contrary to APAC's interests by disclosing its Confidential Information so as to achieve the sales outcome".
This tension played out in stark terms. The Dexus-nominated directors sat on the APAC Board while Dexus was running a sale process that, for the large part, the Board knew effectively nothing about.
The lesson for nominee directors and the entities that appoint them is clear. Nominees can walk a tightrope – they must understand the boundaries of their role and be vigilant about when the interests of their appointing shareholder and the company diverge. Where those interests do diverge, the flow of information between the nominee and the nominating shareholder must be carefully managed. Conflict management protocols must be in place, well-documented and tested regularly – not just filed away.
Also, as was illuminated during one of many interlocutory stoushes throughout the case, a company acting as trustee (or for that matter, manager) is not treated as a distinct legal entity for each beneficiary – a trustee is one entity, regardless of the number of trusts it administers, and that company must manage any divergence of interests extremely carefully. Careful attention should also be paid to how a shareholders’ deed treats related shareholders or groups of shareholders.
Document your decision-making process – it will be scrutinised
The judgment is a powerful endorsement of the process followed by the APAC Board in reaching its decision to confirm the default and issue the Default Notice.
Dexus argued, among other things, that the directors were improperly motivated by a desire to rid APAC of the Dexus Bloc, avoid the future operation of affiliate transfer provisions and create an opportunity for the non-Dexus shareholders to buy Dexus' shares. The Court rejected these arguments comprehensively, finding that the contention was "lacking in substance and short on merit".
The Court examined the evidence and motivations of each director individually. The Court unequivocally endorsed the approach taken by the non-Dexus directors, describing them variously as "impressive", "restrained and thoughtful", "considered and convincing" and having acted with "fierce independence, impartiality and objectivity". Their conduct was found to reflect careful, independent reasoning directed squarely at the interests of the company
The Board obtained independent legal advice, considered extensive material, conducted information sessions, and ensured that each director reached their own conclusion on the merits. This meticulous approach was vital.
Critically, the Court confirmed that the Board's role under the default provisions of the Shareholders' Deed was a confirmatory one – and that its determination was not otherwise subject to review by the Court. The contractual power was largely unconstrained, provided it was exercised in good faith and for the purpose for which it was given. Effectively, the only basis on which the resolutions could be vitiated was if Dexus proved the equivalent of fraud or bad faith, a threshold Dexus fell well short of meeting.
The lesson is that when boards are exercising a contractual power with serious consequences – such as triggering a default – the process should be treated with gravity. Boards should obtain independent legal advice, document their decision-making process and allow reasonable time for consideration.
When caught, be candid
Perhaps the most striking aspect of the judgment is the Court's treatment of Dexus' conduct after its breach came to light. While the breach itself – the unauthorised disclosure of confidential information – was serious, it was Dexus' response that made it much worse.
When APAC and the other shareholders began asking questions, Dexus' approach was to obfuscate and conceal. The Court catalogued a long list of dishonest conduct, including: falsely stating that all parties had signed deeds of confidentiality when they had not; falsely stating that the company's financial model had not been placed in the data room when it had; entering into side letters, and not disclosing, but rather hiding, that fact; and asking a bidder to amend its confirmation of destruction to remove any reference to the side letter. Internal communications within Dexus, including Teams messages, told their own story – a salient reminder of the broad reach of discovery obligations.
The Court found that Dexus' conduct "irrevocably undermined the ongoing business relationship, trust and confidence between it and the other shareholders". An inadvertent disclosure, the Court observed, "is one thing. A deliberate or reckless one which is subsequently wholly or partially concealed, is another".
The lesson should not be lost on commercial clients. How a company responds to allegations of misconduct, whether in a contractual or regulatory context, is paramount. When something goes wrong, candour and transparency, while uncomfortable, are preferable to evasion and concealment.