Cooper v Myrtace Consulting Pty Ltd

Case [2014] FCA 480

FEDERAL COURT OF AUSTRALIA

Cooper v Myrtace Consulting Pty Ltd [2014] FCA 480

Citation: Cooper v Myrtace Consulting Pty Ltd [2014] FCA 480
Parties: WARWICK COOPER v MYRTACE CONSULTING PTY LTD
File number(s): VID 1316 of 2013
Judge(s): DAVIES J
Date of judgment: 14 May 2014
Catchwords: CORPORATIONS – application to bring a derivative action on behalf of the company – whether action is in the best interests of the company – applicant unable to provide meaningful indemnity for costs – whether there is a serious question to be tried
Legislation: Corporations Act 2001 (Cth) ss 232, 236, 237, 461(1)(k)
Cases cited:

Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57
Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618
Chan v Zacharia (1984) 154 CLR 178
Charlton v Baber (2003) 47 ACSR 31; [2003] NSWSC 745
Carpenter v Pioneer Park Pty Ltd (2004) 211 ALR 457; [2004] NSWSC 1007
Fiduciary Ltd v Morningstar ResearchPty Ltd (2005) 53 ACSR 732; [2005] NSWSC 442
Gaertner v Dharah Gibinj Aboriginal Medical Service Aboriginal Corp [2013] FCA 1330
Goozee v Graphic World Group Holdings Pty Ltd (2002) 42 ACSR 534; [2002] NSWSC 640
Kokotovich Constructions Pty Ltd v Wallington (1995) 17 ACSR 478
In the matter of Fishinthenet Investments Pty Ltd and Coastal Waters Seafood Pty Ltd [2014] NSWSC 260
Maher v Honeysett and Maher Electrical ContractorsPty Ltd [2005] NSWSC 859
MG Corrosion Consultants Pty Ltd v Vinciguerra (2011) 82 ACSR 367; [2011] FCAFC 31
Peninsular and Oriental Steam Navigation Company v Johnson (1938) 60 CLR 189
Power v Ekstein (2010) 77 ACSR 302; [2010] NSWSC 137
Robash Pty Ltd v Gladstone Pacific Nickel Pty Ltd (2011) 86 ACSR 432; [2011] NSWSC 1235
South Johnstone Mill Ltd v Dennis (2007) 163 FCR 343; [2007] FCA 1448
Swansson v R A Pratt Properties Pty Ltd (2002) 42 ACSR 313; [2002] NSWSC 583
Wood v Links Golf Tasmania Pty Ltd (No 2) [2013] FCA 14

H A J Ford and W A Lee, Principles of the Law of Trusts (Thomson Lawbook Co, loose-leaf service, vol 2)

Date of hearing: 14 May 2014
Place: Melbourne
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 46
Counsel for the Applicant: Mr S Wotherspoon
Solicitor for the Applicant: Jayne Gregory Lawyers
Counsel for the Respondent: Mr P Collinson SC and Mr Weinstock
Solicitor for the Respondent: Boettcher Law

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 1316 of 2013
BETWEEN:

WARWICK COOPER
Applicant
AND:

MYRTACE CONSULTING PTY LTD
Respondent

JUDGE:

DAVIES J

DATE OF ORDER:

14 MAY 2014

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The applicant’s application for leave to bring proceedings pursuant to s 237 of the Corporations Act 2001 (Cth) be dismissed.

2.The applicant pay the respondent’s costs of the application.

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


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

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Cooper v Myrtace Consulting Pty Ltd [2014] FCA 480
Case
[2014] FCA 480
Decision Date

CaseChat Overview and Summary

The matter of Cooper v Myrtace Consulting Pty Ltd involved Mr Cooper seeking leave to bring proceedings against Myrtace Consulting Pty Ltd, a company under the sole directorship of Mr Ambrose. Mr Cooper's application, grounded on sections of the Corporations Act 2001 (Cth), aimed to hold Mr Ambrose personally accountable for alleged corporate misconduct. The legal issues centred on whether Mr Cooper could satisfy all criteria under section 237 of the Act to warrant leave for such proceedings, particularly focusing on whether there was a serious question to be tried and if it was in the public interest.

The Court examined the statutory criteria outlined in section 237, assessing if Mr Cooper had substantiated the necessity for leave to pursue his claims. The argument for leave was largely based on allegations of corporate misconduct, including failure to lodge tax returns and maintain financial records, and a general assertion that the company had miscarried under Mr Ambrose’s direction. Despite these allegations, the Court noted the absence of formal claims or pleadings pertaining to these issues and underscored its limited discretion to grant leave based solely on unpleaded matters. The Court found that Mr Cooper had not sufficiently met the burden of proof for all criteria under section 237, especially regarding the public interest aspect, ultimately leading to the dismissal of the application.

In conclusion, the Court determined that Mr Cooper's application for leave to bring proceedings against Myrtace Consulting Pty Ltd should be dismissed as he failed to meet the statutory requirements. The Court also ordered that Mr Cooper pay the respondent's costs associated with the application, reinforcing the necessity for stringent adherence to procedural criteria when seeking to pierce the corporate veil for personal accountability.

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

At the outset it was submitted for Mr Cooper that there were some matters, including those termed “rule of law” matters, which dictated the outcome that leave should be granted. It was submitted that company directors are subject to important common law, equitable and statutory duties and there was evidence that the company had not lodged income tax returns, did not keep written financial records in compliance with s 286 of the Act and had failed to produce any regulatory documents, such as tax file declarations for company employees or evidence indicating compliance with its superannuation or PAYG obligations, when requested. In these circumstances, it was submitted, there was clear evidence the company, under the sole directorship of Mr Ambrose, had miscarried and that Mr Ambrose should not be able to rely upon the corporate form to avoid scrutiny over his actions as director. There is, however, no pleading or claim based upon these matters and the Court has no discretion to consider such matters as a basis for justifying a grant of leave in circumstances where the Court is not otherwise satisfied that the criteria in s 237 of the Act are met.Conclusion As Mr Cooper has not discharged the burden of satisfying all five criteria in s 237 in relation to the proposed claims, notably the criterion in s 237(2)(c), the application must be dismissed. The orders will be:1. The applicant’s application for leave to bring proceedings pursuant to s 237 of the Corporations Act 2001 (Cth) be dismissed.2. The applicant pay the respondent’s costs of the application.

Ratio Decidendi

Legal Principle Established

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