There are two parties, which are involved in this case. These two parties are Fame who is the appellant of this case. On the other hand, another party is the Australian Securities Commission (ASC) who acts as third respondent of the case (Lowry, 2012). This case mainly raises queries on the meaning and effects of the ss 995 and 998 of Corporations Law. Jeffries is a public company having its shares is listed on Stock Exchange.
The appellant Fame holds all time-shares of the company. Mr JF O’ Halloran who holds the position of Chairman of Directors of the company is engaged in the activity of controlling the business. He has discharged from his duty on April 1995. Along with the ordinary shares, the capital of the company constitutes of convertible preference shares. The appellant of the case Fame holds preference shares of the company in 1995. 4 February 1999 is expected to be the conversion date.
On this date, the preference shares are converted into ordinary shares. Along with this, Articles of Association of the company provides facility of earlier conversion on certain special circumstances. If the Jeffries Company failed to pay a specified amount of dividend to the shareholders, then the holder of the shares has an opportunity to accelerate the process of conversion of shares either for all parties or for some other parties (Latimer, 2012). In this case, the number of shares that are required to be allotted in place of conversion process is determining on the basis of a formula.
This formula assumes for present purpose which states that weighted average price of shares, which constitutes any of the elements of fully paid ordinary shares, which are traded in Stock Exchange within twenty days immediately before the date of conversion. There is an inverse relationship between the selling price of trading period and allotment of shares.
It implies that if the selling price of ordinary shares remains lower during the period of twenty days, higher the number of shares that are allotted to the holder of the preference share at the time of conversion. On the date of Thursday 27 April 1995, Mr O' Halloran come to know that the intentions of the directors were the announcement the conversion on Friday 28 April 1995 and no dividends have been paid for the conversion of preference shares for the period which is ending on Sunday 30 April 1995. This situation has a potential of accelerating the process of conversion of shares.
Fame- Appellant for the case Australian Securities and Investment Commission- respondent to the case Case related to interpretation of section 995 and 998 of corporation law The appellant owned preference shares which had the option to be converted to ordinary shares An attempt was made in this case to make the market price appear lower in order to gain more securities.
The cause of action
The director Mr O' Halloran stated that he was under immense pressure of cash generation in order to meet financial requirements and therefore he was not able to place the order of selling the share. It was held by the lower court that non of such situation have arose and the director intentionally entered into such act to lower down the price of the shares It was assumed by the court that all the transactions were pre-decided by the appellant.
Duties of directors
At common law the directors have the duty to act in the best interest of the company for a roper purpose They must not misuse their position in the company to make personal interest at the cost of the company. These duties exist at both common law and statues
Decision of the court
The court in this case provided that section 994 of the corporation law is very wide in relation to misleading and deceptive conduct The court refused to grant a special leave and the appeal of the appellant had been refused
Relevance of the decision
After this case the existing corporation law of Australia had been enacted by the parliament in form of the Corporations Act 2001 (Cth) and the Australian Securities and Investment Commission Act 2001 (Cth) Section 52 of the CA has been developed in the light of this case in relation to misleading and deceptive conduct.