Argus Group Pty Ltd v Litigation Lending Services Ltd - [2014] SASC 181

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
ARGUS GROUP PTY LTD v LITIGATION LENDING SERVICES LTD
[2014] SASC 181
Reasons for Decision of The Honourable Justice Gray
28 November 2014
CORPORATIONS - LEGAL CAPACITY AND RELATIONS WITH OUTSIDERS - EXTERNAL LITIGATION PROCEDURE - APPEARANCE IN COURT BY COMPANY AND REPRESENTATION
CORPORATIONS - MEMBERSHIP, RIGHTS AND REMEDIES - MEMBERS' REMEDIES AND INTERNAL DISPUTES - PROCEEDINGS ON BEHALF OF COMPANY BY MEMBER
Application to represent a company pursuant to section 237 of the Corporations Act 2001 (Cth). The plaintiffs hold a minority interest in the first defendant, Litigation Lending Services Ltd, a litigation funding company. They have also commenced proceedings against the second to fourth defendants, who are directors and shareholders in Litigation Lending, and the fifth defendant, JustKapital Litigation Pty Ltd, a litigation funding company. The dispute arose out of JustKapital’s attempt to take control of Litigation Lending. JustKapital, by its cross-action, brought an action against Litigation Lending claiming, inter alia, breach of contract. Litigation Lending was unrepresented at the time of this application. The plaintiffs’ claim against the second to fourth defendants was that, inter alia, they engaged in oppressive conduct and breaches of their directors’ duties by impermissibly dealing with JustKapital. At the outset of the proceedings the plaintiffs had obtained injunctive relief against the defendants. Litigation Lending was unrepresented.
Whether Litigation Lending would bring or take responsibility for the proceedings. Whether the plaintiffs are acting in good faith. Whether a grant of leave was in the best interest of Litigation Lending. Whether there is a serious question to be tried. Whether it is appropriate to grant leave notwithstanding a failure to comply with the notice requirements.
Held (granting the application):
1. Litigation Lending would not itself bring the proceedings or defend the cross-action. The company is unrepresented. Given the nature of the claim against the second to fourth defendants and the cross-claim of JustKapital, it would be inappropriate for the second to fourth defendants to represent Litigation Lending.
2. The plaintiffs are acting in good faith. The plaintiffs have a legitimate interest in the welfare and good management of Litigation Lending and their action, if successful, would result in the recovery of property and compensation by the company. The plaintiffs have been granted injunctive relief on the basis that they have an arguable claim.
3. A grant of leave is in the best interests of Litigation Lending. A grant of leave will ensure that Litigation Lending is able to benefit from any success the plaintiffs have in the proceedings and defend the cross-claim. The plaintiffs have given undertakings as to damages and no satisfactory alternative contradictor was suggested by the other parties.
4. There is a serious question to be tried. The test for whether there is a serious question to be tried is the same as that for an interlocutory injunction. The plaintiffs have filed considerable affidavit material and submissions in the proceedings and have been granted injunctive relief on the basis that there is a serious…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2014] SASC 181
Decision Date: 28 November 2014

CaseChat Overview and Summary

In the matter of Argus Group Pty Ltd v Litigation Lending Services Ltd, the plaintiffs sought leave to amend a notice of claim under section 237 of the Corporations Act 2001 (Cth). The primary dispute involved claims of oppression and derivative actions against the second to fourth defendants, who were directors of Litigation Lending Services Ltd. The case was before the Federal Court of Australia, with Justice Bromberg presiding.

The legal issues before the court centred on whether the plaintiffs had provided sufficient grounds for the court to grant leave to amend the notice of claim. The second to fourth defendants argued that the application was untimely and that they had been prejudiced by the delay. The court needed to assess whether the plaintiffs had demonstrated a valid reason for the late filing and whether the defendants had been prejudiced to a significant extent. The court also had to consider the merits of the plaintiffs' claims and whether the amendment would shift the focus of the case from the initial oppression claims.

Justice Bromberg determined that the plaintiffs had satisfied the requirements for a grant of leave under section 237 of the Corporations Act. The court found that the plaintiffs' failure to comply with the notice provision should not preclude a grant of leave. The judge acknowledged that the application was late but concluded that the plaintiffs had provided sufficient justification for the delay. Furthermore, the court did not find that the second to fourth defendants had been prejudiced to a degree that would warrant denying the application.

The court granted the plaintiffs' application to amend the notice of claim nunc pro tunc, allowing them to represent Litigation Lending in the primary action and JustKapital in the cross-action. This decision enabled the plaintiffs to proceed with their claims, which were related to the initial issues of oppression and derivative actions against the directors of Litigation Lending Services Ltd.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

GRAY J

Senior Counsel for the second to fourth defendants said that a grant of leave would shift the prime focus of the case, which had previously been oppression, to derivative actions against directors. It was accepted that the substantive matters to be litigated and the complaints as to the conduct of the second to fourth defendants had been pleaded. A submission was made that the application was just too late and that the second to fourth defendants had been prejudiced but there was no condescension to any particularity from this assertion. In my view, the plaintiffs’ failure to comply with the notice provision should not preclude a grant of leave.Conclusion The plaintiffs have satisfied me of all the matters required for a grant of leave under section 237 of the Corporations Act. I grant the plaintiffs’ application to represent Litigation Lending in the plaintiffs’ primary action and JustKapital’s cross-action nunc pro tunc.

Ratio Decidendi

Legal Principle Established

Established by: GRAY J

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