Sirrah Pty Limited [2021] NSWSC 413

Coffee and a Case Note

“Give that $30m back to the Co and wind it up!”
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Some Ps were executors of a shareholder’s estate: [2]
The Co conducted a retirement village business which was sold in 2017 for $25m: [3]
Over time money was dissipated to a director, WH, and WH’s related entity, HHC, who used some money for buying a Balinese property: [4]
The litigation was complex but, crucially, the Ps sought repayment of the Co’s money, and for the Co to be wound up pursuant to s461(k) or s233: [5]
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In 1997 the Co entered into an agreement with HHC that would cause the Co to pay management fees to HHC: [82]
Over time WH caused the Co to pay millions in management fees to HHC though, after a time, not pursuant to the 1997 agreement. The Ps alleged this was a breach of duty: [83]
The Court accepted the fees were not reasonably based: [95]
In causing the Co to pay above market fees to a related entity, WH breached their duty of care and diligence and the “no conflict” rule: [96]
In 2016 a further agreement was reached for the Co to pay HHC higher fees in the sum of $70K per month: [97]
Causing the Co to enter into this agreement was a further breach of WH’s duties: [101]
WH causing the Co to continue to pay management fees after the sale of the business was a further breach: [106], [107]
From 2012 to 2019 the Co lent large sums to WH and HHC on apparently uncommercial terms without all loans being in writing: [110]
The Court found there was a breach of WH’s “no conflict” duty as there was a conflict of interest between the Co’s interest in keeping the money, and WH’s and HHC’s interests in having the benefit of the loans: [129]
WH racked up $1.8m on the Co credit card for personal expenses. This was rightly treated as a loan to be repaid: [142], [143]
WH caused payments to be made to HHC and related entities relating to a scooter business venture with no adequate agreement in place: [146]
These debts were being chased by a prov liq appointed in 2019. Any shortfall would be payable by WH: [147]
The Court considered “knowing receipt” and accessorial liability in the context of money WH caused the Co to pay to HHC: [151], [152]
The Court found HHC liable as WH’s alter ego and had full knowledge of WH’s breach of duty from which it profited: [155]
In respect of all debts including overpaid fees and loans no board resolution or shareholder resolution was sought or made that might have cured the “no conflict” rule.
The Court found that the history of the matter, and the litigation between the parties, justified a winding up order: [167]
WH had to repay the Co $17m plus interest. HHC had to pay the Co $15m plus interest. The Co was wound up: [173]