Daiwa Can Company v Barokes Pty Ltd

Daiwa Can Company, a shareholder of Barokes Pty Ltd, sought leave to bring a derivative action against Barokes in the Federal Court. Daiwa Can, a Japanese company, held 90% of the shares in Barokes, an Australian company, and alleged that the remaining 10% shareholder had breached their fiduciary duties and engaged in oppressive conduct. The application for leave to bring the proceedings was made under section 237 of the Corporations Act 2001 (Cth) and was sought on a nunc pro tunc basis to overcome a procedural defect. The primary legal issue the court had to decide was whether Daiwa Can was acting in good faith in bringing the proceedings and whether it was in the best interests of Barokes that leave be granted. Additionally, the court had to determine if the proceeding involved a serious question to be tried.

The court considered the criteria set out in the case of Daniel v JG O'Connell & Co, which required the applicant to demonstrate that they were acting in good faith, that the proceeding involved a serious question to be tried, and that it was in the best interests of the company to grant leave. The court found that Daiwa Can had acted in good faith as they had made a genuine and reasonable effort to investigate the alleged breaches and had a legitimate interest in ensuring that Barokes was managed properly. The court also found that the proceeding involved a serious question to be tried as the allegations, if proven, would amount to a significant breach of fiduciary duty and oppressive conduct. Furthermore, the court determined that it was in the best interests of Barokes to grant leave as it would allow the company to address the alleged breaches and ensure proper management and governance. Consequently, the court granted Daiwa Can leave to bring the derivative action on behalf of Barokes.