CLUNIES-ROSS v Davis [No 2] - [2022] WASC 311

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
CITATION:   CLUNIES-ROSS -v- DAVIS [No 2] [2022] WASC 311
CORAM:   MASTER SANDERSON
HEARD:   23 JUNE 2022
DELIVERED          :   13 SEPTEMBER 2022
PUBLISHED           :   13 SEPTEMBER 2022
FILE NO/S:   COR 114 of 2020
BETWEEN:   JOY DELISSA CLUNIES-ROSS
Plaintiff
AND
GAVIN JOHN DAVIS
First Defendant
SOIL SOLVER PTY LTD
Second Defendant
SUE CHRISTIANSEN
Third Defendant

Catchwords:

Corporations Act 2001 (Cth) - Application for leave to bring a derivative action - Turn on own facts

Legislation:

Corporations Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA)

Result:

Application dismissed

Representation:

Counsel:

Plaintiff	:	M Crowley
First Defendant	:	K de Kerloy
Second Defendant	:	K de Kerloy
Third Defendant	:	K de Kerloy

Solicitors:

Plaintiff	:	Cullen Macleod Lawyers
First Defendant	:	Hale Legal
Second Defendant	:	Hale Legal
Third Defendant	:	Hale Legal

Case(s) referred to in decision(s):

Hassall v Speedy Gantry Hire Pty Ltd [2001] QSC 327
Patterson v Humfrey [2014] WASC 446

MASTER SANDERSON:

By interlocutory application filed 25 March 2022, the plaintiff sought five substantive orders and two procedural orders. The substantive orders sought, as summarised in the Plaintiff's submissions, are directed to:
(a) 'authorising' the plaintiff, as a member of the second defendant, to prosecute allegations of breach of director's duty by the first defendant as a director of the second defendant under s 233(1)(g) of the Corporations Act 2001 (Cth) as already pleaded in the substituted statement of claim filed 23 December 2021;
(b) securing leave to the plaintiff, as a member of the second defendant, to prosecute the same allegations of breaches of director's duties under s 237(1) of the Act;
(c) enabling the plaintiff to inspect the second defendant's books under s 247A in circumstances where the plaintiff alleges there has been significant self-dealing with the second defendant's assets by the first defendant and a refusal or failure to produce financial reports and director reports in contravention of s 293 of the Act;
(d) requiring the first defendant and the second defendant to perform their statutory duties under s 293(1) of the Act to prepare a financial report and a director's report for each of the last three financial years and;
(e)joining another member of the second defendant, Tarau Pty Ltd, which the plaintiff says is the first defendant's alter ego as the fourth defendant.
The last three of the orders the plaintiff seeks can be dealt with quite simply. The defendants raise no objection to Tarau Pty Ltd being joined as the fourth defendant. So an order in terms of (e) was made at the hearing.
As a former director of the second defendant, the plaintiff already has the right to inspect the books and records of the second defendant pursuant to s 198F(2) of the Corporations Act 2002 (Cth) (The Act). In opposition to the plaintiff's application, the defendants relied on an affidavit of the first defendant dated 16 June 2022. In that affidavit the first defendant details the history in…

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.

Continue reading CLUNIES-ROSS v Davis [No 2]

Details

AGLC: CLUNIES-ROSS v Davis [No 2] [2022] WASC 311
Case: [2022] WASC 311
Decision Date

CaseChat Overview and Summary

In Clunies-Ross v Davis [No 2], the plaintiff, Joy Dlissa Clunies-Ross, sought leave to bring a derivative action against the first defendant, Gavin John Davis, for alleged breaches of director's duties committed while he was a director of the second defendant, Soil Solver Pty Ltd. This application arose in the context of an ongoing oppression claim brought by the plaintiff against the first and third defendants. The plaintiff's primary objective in seeking leave to bring the derivative action was to ensure that if her claims of oppression were successful, her shares would be valued at their true worth, reflecting any losses suffered by the company due to the first defendant's alleged misconduct.

The legal issues before the court were whether the plaintiff was acting in good faith and whether it was in the best interests of Soil Solver Pty Ltd to grant the plaintiff leave to bring the derivative action. The defendants argued that the plaintiff's concerns were unfounded and that the derivative action would unnecessarily complicate and delay the proceedings. They also contended that the relief available in the oppression action would adequately address the plaintiff's concerns.

Master Sanderson, in dismissing the plaintiff's application, found that the plaintiff had not demonstrated that it was in the best interests of the company to grant leave for the derivative action. The court held that the mechanisms of the court were sufficient to ensure that if the plaintiff's claims were successful, she would receive full value for her shares. The court further held that the derivative action would add unnecessary complexity and delay to the proceedings, and that the plaintiff had not shown that some of the causes of action might become statute-barred if not pursued promptly.

The court dismissed the plaintiff's application and ordered that the plaintiff pay the defendants' costs of the application, including reserved costs.

Orders