Background
WAM Active Limited, Keybridge Capital Limited’s largest shareholder, brought derivative proceedings on Keybridge’s behalf against managing director Nicholas Bolton, non-executive directors Frank Catalano and John Patton, and Crotto Del Nino S.R.L. The dispute arose from Keybridge’s highly profitable Magellan options transaction. An investment of about $1.3 million produced approximately $16.5 million in profit, but also led to arrangements under which Bolton was to receive $4.75 million, initially discussed as a discretionary management bonus and later presented as a restraint fee.
Brereton J found that no binding agreement was made at the board meeting on 6 December 2023. Patton’s contemporaneous handwritten notes, rather than minutes prepared later, provided the best evidence of that meeting. The directors discussed a possible management bonus pool of 20–30% of net profits, principally for Bolton, but did not contract to pay him a restraint fee. On 29 February 2024, however, Keybridge made an unwritten agreement to pay Bolton $4.75 million after the two-year standstill period in exchange for his promise to Keybridge to honour promises already made to Magellan.
WAM pleaded an unsecured $4.75 million loan to Crotto in July 2024, but the Court’s findings were different. Keybridge paid approximately $4.95 million in two tranches on 2 and 3 July 2024, comprising the $4.75 million restraint liability and a $200,000 discretionary bonus. The money went into an Italian notary’s account and was dispersed on 8 July. It was not paid to Crotto: Bolton did not then own or control Crotto, there was no evidence Crotto requested the loan, and the funds were placed at Bolton’s disposal to complete his acquisition of Crotto. As the Court summarised: “In summary, Keybridge advanced $4.95m to Mr Bolton on 2 July 2024.”
The Court’s Holding
The Court held that Bolton, Catalano and Patton contravened ss 181(1)(a), 181(1)(b) and 182(1) of the Corporations Act 2001 (Cth), and breached their fiduciary duties, through the 29 February restraint agreement, the July advance and the subsequent formalisation of those arrangements. The $4.75 million fee was not a commercially justified price for Bolton’s promise to comply with his existing Magellan obligations; it was a restructuring of the proposed bonus after the directors appreciated that a bonus of that magnitude could not be justified. The loan also gave Bolton early access to that payment while Keybridge was presumed insolvent, facing winding-up proceedings and required to borrow money itself.
The loan was not wholly undocumented forever. There was no written agreement when the money was lent, and it remained undocumented at Keybridge’s 19 August 2024 announcement. But a written loan agreement and restraint of conduct deed were signed on 30 September 2024. Keybridge was lender; Bolton and Crotto were identified as borrowers; the agreement stated a $4.95 million loan and 10% annual interest. The Court described the agreement as poorly drafted and identified ambiguities concerning interest and offsetting, but proceeded on the basis that both agreements operated according to their terms because neither had been rescinded. Crotto’s execution retrospectively ratified the loan arrangements, but did not retrospectively make it knowingly concerned in the directors’ July contraventions. The case against Crotto therefore failed.
On the Court’s analysis, the restraint liability fell due and was automatically offset against loan amounts on about 10 December 2025, when the standstill period expired. Bolton was paid $4.75 million and at least the $4.75 million principal was repaid; the Court recorded uncertainty about interest and a competing position that $733,684.93 remained unpaid. Keybridge was relevantly out of pocket $4.75 million from 2 July 2024, while its loss crystallised on 10 December 2025. Bolton, Catalano and Patton were ordered to compensate Keybridge $4.75 million plus pre-judgment interest from 2 July 2024. Neither director was excused under ss 1317S or 1318. Because the voidable arrangements were not rescinded and the loan was discharged through the restraint-fee offset, tracing into Bolton’s Crotto shares or quota was unavailable. The remaining claims were dismissed.
Key Takeaways
- Later minutes did not displace the contemporaneous handwritten evidence of what the board actually decided.
- Recharacterising an unjustifiable bonus as a restraint fee did not make the payment commercially defensible.
- Retrospective ratification bound Crotto to the loan but did not supply retrospective knowledge for accessorial liability.
- Compensation focused on the $4.75 million restraint component, not the entire $4.95 million advance.
Why It Matters
The judgment demonstrates that directors cannot validate a substantial related-party benefit merely by changing its legal label or documenting it later. It also carefully separates personal compensation from proprietary relief: unrescinded, voidable arrangements that were left to operate could not support tracing after the loan’s repayment or discharge.
Bolton’s application to stay or adjourn the trial pending a proposed High Court special-leave application concerning a costs indemnity was refused. Bolton, Catalano and Patton must pay 90% of WAM’s derivative-action costs, reflecting the unsuccessful case against Crotto, while WAM must pay Crotto’s costs. Both costs orders are provisional and will solidify after 14 days unless a party notifies the judge’s associate that it wishes to be heard.