Connective Services Pty Ltd v Slea Pty Ltd [2019] HCA 33

Connective Services Pty Ltd v Slea Pty Ltd [2019] HCA 33

The Court found that the Connective companies, by instituting legal proceedings at their expense to enforce pre-emptive rights in favour of Millsave and Mr Haron, provided financial assistance in acquiring shares or units of shares, which was materially prejudicial to the interests of the company and its shareholders. The companies failed to discharge their statutory onus to negate material prejudice, thereby contravening s 260A(1) of the Corporations Act. An injunction restraining the proceedings was thus warranted.

Parties
Appellant: Connective Services Pty Ltd; Respondent: Slea Pty Ltd; Respondent: Minerva Financial Group Pty Ltd; Respondent: Millsave Holdings Pty Ltd; Respondent: Mr Haron
Jurisdiction
Australia
Judgment Date
09 October 2019
Procedural Posture
Appeal / Final Judgment
Legal Topics
Financial Assistance, Pre Emptive Rights, Company Constitution, Material Prejudice
Corporate Law Financial Assistance Pre Emptive Rights Company Constitution Material Prejudice

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Parties

Connective Services Pty Ltd

Appellant

Slea Pty Ltd

Respondent

Minerva Financial Group Pty Ltd

Respondent

Millsave Holdings Pty Ltd

Respondent

Mr Haron

Respondent

Procedural Posture

Appeal / Final Judgment

Legal Issues

  1. 1 Whether the funding by a company of legal proceedings directed at compelling one shareholder to offer shares to other shareholders is financial assistance under s 260A(1) of the Corporations Act 2001 (Cth)
  2. 2 Whether the companies should be enjoined from continuing legal proceedings at their expense to vindicate alleged breach of pre-emptive rights

Ratio Decidendi

The Court found that the Connective companies, by instituting legal proceedings at their expense to enforce pre-emptive rights in favour of Millsave and Mr Haron, provided financial assistance in acquiring shares or units of shares, which was materially prejudicial to the interests of the company and its shareholders. The companies failed to discharge their statutory onus to negate material prejudice, thereby contravening s 260A(1) of the Corporations Act. An injunction restraining the proceedings was thus warranted.