CIP Group Pty Ltd v So

Case [2022] FCA 1490

FEDERAL COURT OF AUSTRALIA

CIP Group Pty Ltd v So [2022] FCA 1490

File number: QUD 93 of 2022
Judgment of: DERRINGTON J
Date of judgment: 16 December 2022
Catchwords: CORPORATIONS – oppression proceedings – application for leave to bring concurrent derivative claims – whether proposed derivative claims can be agitated in oppression action – scope of the decision in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd considered
Legislation:

Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law)

Corporations Act 2001 (Cth)
Cases cited:

Anderson v Canaccord Genuity Financial Ltd (2022) 161 ACSR 1

Atlasview Ltd v Brightview Ltd [2004] BCC 542

Blakeney v Blakeney (2016) 113 ACSR 398

Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd (2017) 123 ACSR 19

Campbell v Backoffıce Investments Pty Ltd (2008) 66 ACSR 359

Charlton v Baber (2003) 47 ACSR 31

Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373

Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89

Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd  (2001) 37 ACSR 672

Fiduciary Ltd v Morningstar Research Pty Ltd (2005) 53 ACSR 732

Gamlestaden Fastigheter AB v Baltic Partners Ltd [2007] 4 All ER 164

LPD Holdings (Aust) Pty Ltd v Phillips (2013) 281 FLR 227

Maher v Honeysett and Maher Electrical Contractors [2005] NSWSC 859

McMillan v Coolah Home Base Pty Ltd (No 4) [2022] NSWSC 584

Metyor Inc (formerly Talisman Technologies Inc) v Queensland Electronic Switching Pty Ltd [2003] 1 Qd R 186

MG Corrosion Consultants Pty Ltd v Vinciguerra (2011) 82 ACSR 367

Oliana Foods Pty Ltd v Culinary Co Pty Ltd (in liq) [2020] VSC 693

Re Chime Corporation Ltd (2004) 7 HKCFAR 546

Re Gladstone Pacific Nickel Ltd (2011) 86 ACSR 432

Re JGS Investment Holdings Pty Ltd (2014) 32 ACLC 14-063

Re Orico Australia Pty Ltd [2019] VSC 313

Re Ter Wisscha Holdings Pty Ltd [2021] NSWSC 1447

Spies v R (2000) 201 CLR 603

Swansson v RA Pratt Properties Pty Ltd (2002) 42 ACSR 313

Talisman Technologies Inc v Queensland Electronic Switching Pty Ltd [2001] QSC 324

Taxa Australia Pty Ltd v Wang [2016] NSWSC 1913

Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd (No 7) (2015) 107 ACSR 575

Walker v Wimborne (1976) 137 CLR 1
Division: General Division
Registry: Queensland
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Number of paragraphs: 100
Date of hearing: 15 November 2022
Counsel for the Applicants: Mr M Hodge KC with Mr M Taylor
Solicitor for the Applicants: Bartley Cohen
Counsel for the First, Fourteenth to Seventeenth Respondents: Mr P Dunning KC with Mr W LeMass
Solicitor for the First, Fourteenth to Seventeenth Respondents: Colin Biggers & Paisley
Counsel for the Second to Twelfth Respondents: The Second to Twelfth Respondents did not appear

ORDERS

QUD 93 of 2022
BETWEEN:

CIP GROUP PTY LTD ACN 610 483 577

First Applicant

CIP 1 PTY LTD ACN 611 408 710

Second Applicant

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Details
AGLC
CIP Group Pty Ltd v So [2022] FCA 1490
Case
[2022] FCA 1490
Decision Date

CaseChat Overview and Summary

The present case involves an application by the Clancy interests for leave nunc pro tunc to bring derivative claims on behalf of operating companies against Mr So and Ultimate. The companies involved in the proceedings are property developers who have undertaken various developments over the years, including the Carver’s Reach Estate project. The relationship between Mr Clancy and Mr So was characterised as a quasi-partnership, with each party taking on specific roles within the companies. The application for leave seeks to bring the derivative claims in the context of an existing oppression action, a matter that requires consideration of the scope and application of the decision in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd.

The central legal issue before the court was whether the proposed derivative claims could be agitated in the oppression action and, if so, what the scope of the decision in Fexuto should be in this context. The applicants argued that it was in the best interests of the companies for the derivative claims to be brought in the oppression action, while the respondents opposed the application, asserting that the derivative claims should be brought separately. The court had to determine whether the derivative claims could be considered concurrently with the oppression action and whether the decision in Fexuto applied to this situation.

The court found that the applicants had established that it was in the best interests of the companies for the derivative claims to be brought in the oppression action. The court noted that the decision in Fexuto provided guidance on the circumstances in which derivative claims may be brought concurrently with oppression proceedings, and concluded that those principles were applicable to the present case. The court allowed the application for leave, emphasising that the respondents had vigorously opposed the application and that there was no sustainable reason for adopting any other course. The court ordered that the respondents should pay the applicants’ costs of the application, though the question of the costs of the application was deferred to a later date.

The final orders of the court granted the applicants leave to bring the derivative claims on behalf of the companies against Mr So and Ultimate, subject to certain undertakings including the indemnification of the companies against any costs orders made against them in the proceeding. The applicants were also granted leave to amend their originating process to incorporate the claims for which leave had been granted. Further, the court directed that written submissions with respect to costs be filed by specified dates and that the matter be listed for a case management hearing and a hearing on the question of costs.

Orders

Orders of the court

1. On the applicants’ undertakings:

(a) to indemnify the second to thirteenth respondents (Companies) against any costs orders made against them in the proceeding;

(b) to increase the sum held by their solicitors to support that indemnity to $750,000 within 14 days of this order, and not to deal with that sum unless the parties agree or the Court otherwise orders;

the applicants have leave pursuant to ss 236 and 237 of the Corporations Act 2001 (Cth) to bring proceedings in the name of the Companies against the first and seventeenth respondents for the claims made and the relief claimed in the draft statement of claim.

2. The applicants have leave to amend their originating process filed 25 March 2022 to incorporate the claims for which leave has been granted.

3. The applicants file a statement of claim by 4:00pm on 10 February 2023.

THE COURT DIRECTS THAT:

4. The applicants file written submissions with respect to costs limited to five pages by 4:00pm on 10 February 2023.

5. The respondents file written submissions with respect to costs limited to five pages by 4:00pm on 15 February 2023.

6. The matter be listed for a case management hearing and a hearing on the question for costs at 9:00am on 17 February 2023.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

By the present application the Clancy interests seek leave nunc pro tunc to bring those claims on behalf of the operating companies pursuant to s 237 of the Act.Background As property developers, Mr Clancy and Mr So have undertaken a number of subdivisions and developments over the years. Their present and most recent development involves property within the Logan City Council local government area and is referred to as the “Carver’s Reach Estate”. The So and Clancy interests have utilised the operating companies as corporate vehicles for the purposes of undertaking this development. Each of the several companies has a differentiated role to play in the project. The participation of the thirteenth respondent in this matter is minimal, although that is irrelevant for present purposes. The second respondent, GGPG Pty Ltd (GGPG) is the trading entity and borrower of funds for the development project. The eleventh respondent, Park Ridge Development Management Pty Ltd (PRDM) is the development management entity for the project. The clear impression from the evidence is that the relationship between Mr Clancy and Mr So was more or less in the nature of a partnership, albeit conducted through corporate entities. In the written submissions made on behalf of the So interests, it was specifically asserted that the joint venture was conducted as a quasi-partnership even though neither Mr Clancy nor the applicants make any specific claim in that respect. Though there is some doubt about that characterisation, the evidence suggests that whilst Mr Clancy and Mr So were the active controlling minds of the venture, the quasi-partnership existed, if at all, between their corporate entities. For present purposes there is no need to reach a final conclusion on that issue. Mr So assumed the role of chief financial officer within GGPG and the other operational companies. Conversely, Mr Clancy’s role might properly be described as chief operations officer in that he oversaw the carrying out of development works. The Carver’s Reach Estate project, which is a staged development, has been ongoing for some time and Mr Clancy asserts that it will return profits towards its final stages. That is a somewhat uncontroversial proposition given that it is notorious that the financial results of land developments trend along such lines. For a period, the financing of the development had generally occurred through loans from external lenders who held security over the land on which the development was occurring. In November 2019, a loan agreement, which was to further finance the development, was entered into between Ultimate and GGPG for an amount of around $8 million with a term of two years and is referred to as the, “Ultimate Advance”. The other operating companies were, amongst others, guarantors of the loan. Prior to this Ultimate’s provision of finance to the project was somewhat informal. The applicants have prepared a draft statement of claim outlining the proposed derivative causes of action. In it they assert that, prior to entering into the Ultimate Advance, Mr So and Ultimate gave assurances to Mr Clancy, GGPG and the guarantors, that the loan would not be called in save in certain circumstances which, to date, have not occurred. Mr Clancy deposed to these matters in his supporting affidavits.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

The applicants have established that it is in the best interests of the operating companies that leave be given to bring the proposed derivative claims against Mr So and Ultimate. Conclusion It follows that the application for leave to commence the derivative actions against Mr So and Ultimate should be allowed. The application was vigorously opposed by Mr So and Ultimate and there is no reason why costs should not follow the event. Certainly no sustainable reason was put in the submissions for adopting any other course. The respondents should pay the applicants’ costs of the application. Post script At the delivery of the reasons for judgment the parties agreed that the question of the costs of the application be deferred to a later date and, consequently, no order was made in that regard though directions were given to facilitate the making of further submissions.

Ratio Decidendi

Legal Principle Established

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