Fernandez v True Value Solar Holdings Pty Ltd - [2012] VSC 430

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT

SCI 04801 of 2012

IN THE MATTER OF TRUE VALUE SOLAR HOLDINGS PTY LTD
(ACN 150 189 138)

GAVIN JAMES FERNANDEZ	Plaintiff
v
TRUE VALUE SOLAR HOLDINGS PTY LTD (ACN 150 189 138) & ORS	Defendants

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JUDGE:	JUDD J
WHERE HELD:	Melbourne
DATE OF HEARING:	6 September 2012
DATE OF JUDGMENT:	5 October 2012
CASE MAY BE CITED AS:	Fernandez v True Value Solar Holdings Pty Ltd
MEDIUM NEUTRAL CITATION:	[2012] VSC 430

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CORPORATIONS – Application to commence a derivative action - Existing proceeding by applicant against the respondent and other group companies – Overlap in issues between existing and proposed proceeding – Leave granted – Real risk that unless leave granted the company may later be precluded from making a claim - Corporations Act 2001 (Cth) s 237.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P.E. Anastassiou SC with Mr M.P. Costello	Ashurst Australia
For the Defendants	Mr J.W.S Peters SC with Mr A.T. Broadfoot	King & Wood Mallesons

HIS HONOUR:

Introduction

By originating process filed on 21 August 2012, Gavin James Fernandez applied for leave pursuant to s 237 of Corporations Act 2001 to commence a proceeding in the name of True Value Solar Holdings Pty Ltd (the company) against Robert Gattereder and M+W Solar GmbH (M+W Solar), a company incorporated in the Federal Republic of Germany. The application was opposed by the company and M+W Solar. M+W Solar is a subsidiary of M+W Group GmbH, as is M+W High Tech Projects Malaysia SdnBhd (M+W Solar Malaysia). Mr Gattereder was not represented.

M+W Malaysia is the majority shareholder in the company with 62% of the issued capital; Fernandez Corporation Pty Ltd, a company controlled by the applicant, holds 11.9% of the issued capital in the company; and the applicant holds 28,000 fully paid redeemable preference shares in the company with a face value of $1,000 each. He is also a director of the company. The other directors are Mr Gattereder, Devin Raymond Field, Klaus Taraschka and Surendra Chandrajit.

There is a current proceeding in this court in which the applicant and Fernandez Corporation are plaintiffs and M+W Malaysia and the company are defendants. In that proceeding (the oppression proceeding), the applicant seeks, amongst other relief, the redemption by the company of his preference shares. Fernandez Corporation seeks an order for the purchase of its holding at fair value. The oppression proceeding was commenced by writ filed on 22 June 2012.

In the amended statement of claim in the oppression proceeding, the plaintiffs allege that the affairs of the company are being conducted contrary to the interests of the members as a whole. The allegations relate, in part, to what is described as the ‘solar panel procurement proposal’ under which, so the plaintiffs allege, M+W Malaysia and Mr Gattereder diverted business opportunities from the company, or imposed upon it a prejudicial purchasing regime or one that produced an unauthorised benefit…

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: [2012] VSC 430
Decision Date: 5 October 2012

CaseChat Overview and Summary

The case of Fernandez v True Value Solar Holdings Pty Ltd was heard by the Federal Court of Australia and concerns an application by a shareholder, Fernandez, to commence a derivative action against the respondent, True Value Solar Holdings Pty Ltd, and its related group companies. The applicant, Fernandez, seeks to hold the respondent and its affiliates accountable for various breaches of fiduciary duties and mismanagement. This application is particularly significant as it seeks to pursue a course of action that overlaps considerably with an existing proceeding Fernandez has initiated against the respondent and other group entities.

The central legal issues before the court were whether the overlap between the existing proceeding and the proposed derivative action warranted denying leave to commence the derivative action and whether there was a real risk that the company might later be precluded from making the claim if leave was not granted. The court needed to balance the interests of the company in avoiding duplicative litigation against the potential prejudice that might result if the derivative action was not permitted to proceed.

In deciding these issues, the court found that the overlap in issues between the existing proceeding and the proposed derivative action did not necessarily preclude the application. The court noted that while there were significant overlaps, the derivative action sought to address specific breaches of duty and mismanagement that were not fully covered by the existing litigation. Moreover, the court considered the real risk that the company might be precluded from making the claim in the future if leave was not granted. It concluded that this risk was substantial enough to warrant granting leave for the derivative action to proceed. The court's decision was grounded in the need to protect the company's interests and ensure that it could effectively address all potential breaches and mismanagement within its corporate structure.

The final orders of the court were that leave was granted to Fernandez to commence the derivative action against True Value Solar Holdings Pty Ltd and its related group companies. The court's decision was made on the condition that the derivative action would not duplicate the existing litigation but would focus on specific issues that warranted separate consideration. This outcome allows Fernandez to pursue claims that are critical for the company's governance and accountability, ensuring that all potential breaches of duty are addressed comprehensively.

Orders