Judge finds Humfrey breached duty of trust to company
A Supreme Court judge has ordered the two Geraldton directors of a joint development holding company to negotiate a shares buyout after finding one of them had misused the company’s funds and property without permission from the other.
Justice Rene Le Miere delivered his 68-page ruling in Perth on Friday (Nov 28) at the end of a civil court trial involving developers Barry Humfrey and Craig Patterson, who each hold a 50 per cent share in Skybow Holdings Pty Ltd.
This company was behind the Seacrest Estate in Geraldton and was also looking at a potential development at Back Beach and another on the Abrolhos Islands.
Justice Le Miere upheld a claim by Mr Patterson that Mr Humfrey had engaged in unfair and prejudicial conduct while managing Skybow funds and property.
This arose from Mr Humfrey causing his own company Kenesta to draw more than $500,000 in loan funds from Skybow without permission of the other director, Mr Patterson, and his company Rodale Nominees.
Justice Le Miere said Mr Humfrey attempted to justify his actions by saying Kenesta required funding and had done a lot of work for Skybow for which it should be compensated.
“The loans did not benefit Skybow. To the contrary, the loans deprived Skybow of working funds and put Skybow at risk of not recovering the funds it loaned to Kenesta. The loans were unsecured,” he said.
Justice Le Miere said this was a breach of Mr Humfrey’s duty of trust to Skybow.
“Mr Humfrey exercised his powers and discharged his duties without the required care and diligence, failed to exercise his powers and discharge his duties in good faith in the best interests of Skybow and for a proper purpose, and he acted improperly by using his position to gain an advantage for himself and Kenesta,” he said.
Justice Le Miere said it was not feasible for Skybow to continue with its present shareholding because of a “complete breakdown” in the relationship between Mr Humfrey and Mr Patterson.
He directed payments which had not been authorised should be treated as loans to Kenesta and have interest added, with the total being set off against the purchase price of shares as determined by a registrar.
Justice Le Miere said Mr Humfrey should be given the opportunity to buy Mr Patterson’s shares.
If he was unable or unwilling to do so within 28 days of the purchase price being determined, then Mr Patterson would be given the same opportunity.
