Pacific Current Group Ltd v Fitzpatrick (No 2) [2025] FCA 1152
Justice Beach dismissed Pacific Current Group Ltd’s (PAC) proceedings against its former CEO, Mr Andrew McGill, concerning alleged breaches of directors’ duties during a 2014 merger with Northern Lights Capital Partners LLC. The merger involved transferring assets into a unit trust (Aurora Trust), with PAC holding 61% and Northern Lights 39%.
PAC alleged that Mr McGill and other directors breached statutory and equitable duties—particularly under s 180 of the Corporations Act 2001 (Cth)—by failing to conduct proper due diligence, withholding key financial models, and not obtaining shareholder approval. PAC pursued a “no transaction” damages claim, arguing the merger would not have occurred but for the breaches.
Justice Beach found:
- Mr McGill breached s 180 by failing to disclose risks associated with WHV Investment Management Inc., including uncertainties around dividend entitlements and flawed financial modelling.
- However, PAC’s “no transaction” scenario failed. The evidence showed that the merger would likely have proceeded, albeit potentially on renegotiated terms.
- PAC did not plead or prove an “alternative transaction” scenario, nor did it establish causation or quantifiable loss.
- As no damages flowed from the proven breach, the Court dismissed the case against Mr McGill.
- Mr McGill’s cross-claim against Mr Fitzpatrick was also dismissed, with no order as to costs.
Justice Beach emphasised the importance of precise pleadings and procedural fairness. He noted that PAC’s board, despite criticisms, demonstrated strong governance and intellectual diversity. The judgment also clarified that directors are not liable for hypothetical losses unless causation and damage are properly pleaded and proven.
PAC was ordered to pay 80% of Mr McGill’s costs, reflecting limited success on the WHV issue.
Key Points – PAC v Fitzpatrick (No 2)
- Background: PAC sued its former CEO, Mr McGill, alleging breaches of directors’ duties under s 180 of the Corporations Act 2001 (Cth) during a 2014 merger with Northern Lights Capital Partners LLC.
- WHV Issue: Mr McGill failed to disclose risks tied to WHV Investment Management Inc., including dividend uncertainties and flawed financial modelling. This breached his duty of care.
- Causation & Damages: PAC ran a “no transaction” case, arguing the merger would not have occurred but for the breaches. The Court rejected this, finding the merger would likely have proceeded—possibly with renegotiated terms.
- No Alternative Scenario: PAC did not plead or prove an “alternative transaction” case. Without causation or quantifiable loss, no damages were awarded.
- Outcome: The case against Mr McGill was dismissed. His cross-claim against Mr Fitzpatrick was also dismissed. PAC was ordered to pay 80% of Mr McGill’s costs, reflecting limited success on the WHV issue.
- Judicial Commentary: Justice Beach praised PAC’s board for its intellectual diversity and governance, and emphasised the importance of precise pleadings and procedural fairness.