FWV Stanke Holdings Pty Ltd v O'Meara; Von Stanke v O'Meara - [2007] SASC 413

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
FWV STANKE HOLDINGS PTY LTD v O'MEARA; VON STANKE v O'MEARA
[2007] SASC 413
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Anderson and The Honourable Justice White)
23 November 2007
CORPORATIONS - MEMBERSHIP, RIGHTS AND REMEDIES - MEMBERS' REMEDIES AND INTERNAL DISPUTES - PROCEEDINGS ON BEHALF OF COMPANY BY MEMBER - STATUTORY DERIVATIVE ACTION
A judge granted the respondent permission to intervene in proceedings to take over the defence of a company and to file a contribution notice - appeal by the company and an intervener - whether respondent satisfied criteria under s 237(2) of the Corporations Act 2001 (Cth) - whether probable company itself will not bring proceedings or properly take responsibility for the proceedings - whether respondent acting in good faith - whether serious question to be tried - whether in best interests of the company.
Held: save for a variation of the orders so as to require the respondent to provide security for the potential costs liability of the company to other parties, the s 237(2) criteria were properly held to have been established - appeals dismissed.
The judge ordered that cross-appellant be entitled to reimbursement of the costs incurred by her on behalf of the company but only to the extent of the company's own recovery of costs - whether unfair to cross-appellant.
Held: the judge correctly refused to order a full costs indemnity at this early stage - the question of whether such an order is appropriate should be deferred until conclusion of trial - cross appeal allowed so as to permit respondent to apply for a costs indemnity once outcome of contribution proceedings and costs incurred are known.

PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - PRODUCTION AND INSPECTION - GROUNDS FOR RESISTING PRODUCTION - OTHER GROUNDS
The judge dismissed an application that the respondent disclose an extensive range of documents - the appellant sought an extension of time to appeal against this order.
Held: judge correctly concluded that the extensive range of documents sought went well beyond the legitimate interests of the appellant - the appellant did not identify with sufficient precision the documents required - application for an extension of time to seek permission to appeal against the disclosure order refused.

PROCEDURE - COSTS
The judge at first instance ordered the cross-respondents to pay the costs of cross-appellant in fixed proportions - whether they should have been ordered to bear the liability jointly and severally.
Held: the capacity of a party to satisfy a costs liability is not relevant to the type of costs order made - no reason to interfere in the exercise of the judge's discretion - cross-appeal dismissed.
Corporations Act 2001 (Cth) s 180, s 181, s 182, s 232, s 236, s 237; Supreme Court Civil Rules 2006 (SA) r 136, r 138, r 139, r 281, referred to.
Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 1007; (2004) 211 ALR 457; Fiduciary Ltd and Others v Morningstar Research Pty Ltd and Others [2005] NSWSC 442; (2005) 53 ACSR 732; Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859; Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313; Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509; Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500; Chahwan v Euphoric Pty Ltd [2006] NSWSC 1002; House v The King [1936] HCA 40; (1936) 55 CLR 499, applied.
Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589, discussed.
Duke Group Ltd (in liq) v Pilmer [1999] SASC 97; (1999) 73 SASR 64; O'Meara v FWV Stanke Holdings Pty Ltd (No 2) [2007] SASC 294; O'Meara v FWV Stanke Holdings Pty Ltd (No 3) [2007] SASC 305; John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A'Asia) Pty Ltd (1991) 6 ACSR 63; Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121; Charlton v Baber and Others [2003] NSWSC 745; (2004) 47 ACSR 31; Goozee v Graphic World Group Holdings Pty Ltd and Others [2002] NSWSC 640; (2002) 42 ACSR 534; Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256; Tesco Supermarkets Ltd v Nattrass [1972] AC 153; K & S Corporation Ltd v Sportingbet Australia Pty Ltd [2003] SASC 96; (2003) 86 SASR 312; Director General, Department of Education and Training v M T [2006] NSWSC 270; (2006) 67 NSWLR 237; J C Houghton & Co v Nothard, Lowe & Wills Ltd [1928] AC 1; Gluckstein v Barnes [1900] AC 240; Belmont Finance Corporation Ltd v Williams Furniture Ltd and Others [1979] Ch D 250; Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; (1990) 169 CLR 332; Zavodnyik v Alex Constructions Pty Ltd [2005] NSWCA 438; (2005) 67 NSWLR 457; Devries v Australian National Railways Commission [1992] HCA 41; (1993) 177 CLR 472; Fox v Percy [2003] HCA 41; (1993) 177 CLR 472, considered.

WORDS AND PHRASES CONSIDERED/DEFINED
"financial capacity to conduct litigation", "probable company itself will not bring proceedings or take responsibility", "good faith", "serious question to be tried", "best interests of company", "honest belief as to good cause of action", "collateral purpose", "disclosure of documents"

FWV STANKE HOLDINGS PTY LTD v O'MEARA; VON STANKE v O'MEARA
[2007] SASC 413
Full Court: Doyle CJ, Anderson and White JJ

DOYLE CJ: I agree with the orders proposed by White J, and with his reasons for making those orders. There is nothing that I wish to add.
ANDERSON J: I agree with the reasons of White J and with the orders he proposes.
WHITE J: A judge of this Court granted leave to the respondent (Mrs O’Meara) to intervene in oppression proceedings brought under s 232 of the Corporations Act 2001 (Cth).[1] The judge made orders permitting Mrs O’Meara to conduct the defence of one defendant, and to file a contribution notice on that defendant’s behalf. That decision (and decisions incidental to or consequential upon it) have given rise to two appeals and a cross-appeal.
[1] O’Meara v FWV Stanke Holdings Pty Ltd (No 3) [2007] SASC 305.
For the reasons which follow, my opinion is that, subject to one matter, both appeals should be dismissed. The cross-appeal should be allowed in part, but the balance dismissed.
The judge heard evidence and argument on Mrs O’Meara’s application between 8 and 10 August 2007, and delivered her decision on 17 August 2007. This was necessary because the hearing of the oppression proceedings in which Mrs O’Meara sought leave to intervene was to commence on 15 November 2007. Because of the imminence of that trial, the judge said that she had decided to deliver her decision promptly even though that meant abridgement of her reasons.
The trial of the oppression action has since been adjourned to May 2008. Nevertheless, it is also desirable for this Court’s decision on appeal to be delivered quickly. The oppression action is being managed, along with other matters involving many of the same litigants, by Sulan J. It is desirable for Sulan J and the parties that the appeals be resolved as soon as possible so that proper preparation and arrangements can be made for trial. In those circumstances I also consider it appropriate to shorten the reasons which might otherwise have been provided. Amongst other things, this means that I will address only the principal submissions of the parties.
Background Circumstances
This litigation and other litigation involving members of the Von Stanke family arises out of the arrangements for the catching and processing of lobster at Carpenter Rocks. A description and history of those arrangements is contained in the reasons of Anderson J published this day in relation to another Von Stanke appeal.[2] I adopt that description and history.
[2] Frederick John Von Stanke as Executor of the Estate of Frederick William Von Stanke v O'Meara & Ors [2007] SASC 410.
For present purposes, it is sufficient to note that from 1948 three Von Stanke brothers, Fred, Bob and Jack, carried on a business catching and processing lobster at Carpenter Rocks. Initially they operated in partnership. In 1965 they incorporated two companies to conduct their business: H Stanke & Sons Pty Ltd (HSS) and Cape Banks Processing Company Pty Ltd (CBP). These two companies continue to conduct the business and do so in partnership.
Also in 1965, Fred, Bob and Jack each incorporated companies to hold their respective interests in HSS and CBP. Fred established FWV Stanke Holdings Pty Limited (FWV); Bob established RCV Stanke Estates Pty Ltd (RCV); and Jack established JHV Properties Pty Ltd (JHV). FWV, RCV and JHV have only ever owned their respective family interests in HSS and CBP; they have never traded.
Fred, Bob and Jack, all now deceased, were the original directors of HSS and CBP. The present directors of HSS and CBP are some of their sons. The equal division of share ownership amongst the families of Fred Bob and Jack continues. The present value of HSS assets is estimated to be about $25.5m. Thus the value of the shareholdings of FWV, RCV and JHV in HSS is approximately $8.5m each. The value of the shareholdings in CBP is not presently known.
Fred and his wife Gwen (also now deceased) had two children: Frederick John Von Stanke (John) and Mrs O’Meara. John is the executor of his parents’ estates. Neither estate has yet been administered. John and Mrs O’Meara are currently in dispute about the extent of their respective entitlements under their parents’ wills.
John and Mrs O’Meara each own one of four shares in FWV. Until their deaths, Fred and Gwen owned one share each. Through the wills of Fred and Gwen, those shares will pass to John and Mrs O’Meara. However, John as executor controls the voting rights attached to those shares until the estates are administered.
JHV’s Oppression Action
JHV brings the oppression action in respect of which Mrs O’Meara was granted leave to intervene.
As already noted, JHV was incorporated in 1965 to represent Jack’s interest in the business. Jack had three children: Ian, Peter and Keryn. Peter and Keryn are the current directors of, and have control over, JHV. Peter and Keryn left Carpenter Rocks in 1990 and 1998 respectively. Ian was also a director of JHV until his removal on 20 October 1999. Ian still resides at Carpenter Rocks and skippers a boat using one of the nine fishing licences (and pots allocated to that licence) owned by HSS. He is still a director of HSS and CBP, but is not recognised by JHV as representing its interests on the boards of those companies.
JHV seeks declarations that the affairs of HSS and CBP are being conducted in a manner which is oppressive to it. Further, JHV seeks a declaration that the nine fishing licences and the pot allocations linked to those licences presently held in the name of HSS are the legal and beneficial property of HSS. Those licences and pot allocations are currently being used by the directors of HSS, their children, and by Mrs O’Meara’s husband. JHV seeks an account of the profits derived from the use of those licences and pots. Finally, JHV seeks orders requiring its shares in HSS and CBP to be purchased by either FWV and RCV or, in the alternative, by HSS and CBP themselves, as well as consequential relief. The defendants to JHV’s action are HSS, CBP, FWV, RCV, and the directors of HSS and CBP comprising Ian (Jack’s son), John (Fred’s son) and Christopher, Robert and Martin (Bob’s sons).
JHV contends that HSS and CBP are acting in an oppressive manner in the following respects. First, in the period 1 July 2004 to May 2005, HSS used its pot allocations as security for financial facilities provided by a bank to its directors, their wives and/or children, without any corresponding benefit to HSS or CBP. Secondly, over a period which is unspecified in JHV’s pleading, HSS allocated the fishing licences held by it to boats operated by its directors or their children (including one operated by Mrs O’Meara’s husband). JHV alleges that HSS does not receive any benefit from those allocations except that the catch from each boat must be sold to “Stanke Ociana Seafoods”, the business operated by HSS and CBP. Thirdly, JHV complains of the failure of HSS and CBP to provide it with specified information concerning the fishing licences, directors’ remuneration, audited accounts and other matters. Finally, JHV complains that neither HSS nor CBP has, since 1991, declared any dividend to its shareholders. JHV claims that HSS and CBP instead provide remuneration and non-cash benefits to its directors and/or their children.
The joint defence filed by HSS, CBP and the director defendants admits a number of the particular factual allegations of JHV. The substantive defence is that HSS and CBP have, in the matters relevant to JHV’s complaints, acted in accordance with a “conventional understanding”.
FWV and RCV have filed a separate joint defence. Apart from dealing with some factual allegations, FWV and RCV do not, for the most part, address JHV’s allegations. FWV and RCV take the view that those allegations do not concern them. They submit that JHV has not pleaded any proper basis for an entitlement to relief against them.
Mrs O’Meara’s application indicated that if granted leave she would cause FWV to amend its defence so as generally to admit JHV’s allegations. In addition, she would have FWV file contribution proceedings seeking orders similar to those sought by JHV.
The Conventional Understanding
Central to the defence of HSS, CBP and their directors is the allegation of a “conventional understanding”, said to explain and justify the conduct of HSS and CBP in relation to their shareholders. It is alleged that this understanding enabled Fred, Bob and Jack and, in turn, their children, to develop the fishing and processing business into the present substantial operation. Further, it enabled the development of Carpenter Rocks from a scrub block with minimal improvements to a vibrant community now supporting approximately 100 residents.
The conventional understanding is described in the defence of HSS, CBP and their directors to the action of JVH in the following terms:
The conventional understanding … may be broadly stated as follows:
(a)within the governing body of the Family Business management decisions would be reached by mutual consensus between the founding brothers and thereafter the representatives of each of their families selected by the governing body of the Family Business;
(b)the rights to, and succession of, management of the Family Business would be reserved to such of their children as were chosen by the governing body of the Family Business;
(c)the benefits of the Family Business would be made available in kind to the Carpenter Rocks Community such that for so long as the Family Business continued to be carried on at Carpenter Rocks:
(1) the Family Business would provide support to the Carpenter Rocks Community in the form of rent-free accommodation at Carpenter Rocks, employment and business opportunities through the use of fishing entitlements at Carpenter Rocks, welfare to the aged and infirmed and, to the extent that it was able, financial assistance related to these matters;
and reciprocally,
(2) the members of the Carpenter Rocks Community would provide support to the Family Business, in the form of human resources, labour and management services at Carpenter Rocks and, on an as needs basis and to the extent that the individuals were able, financial support.
In this pleading the “governing body” is defined as the boards of directors of HSS and CBP (the composition of which has relevantly been the same). The “Family Business” is the business of catching and processing lobster at Carpenter Rocks by members of the Von Stanke family. The “Carpenter Rocks Community” comprises the members of the Von Stanke family who reside permanently at Carpenter Rocks, and certain long term employees in the Family Business.
Various features of the conventional understanding are pleaded elsewhere in the defence. Amongst other things, it is claimed that only boat skippers actively involved in the Family Business operations who are male lineal descendants of Fred, Bob and Jack are eligible for appointment as directors of HSS and CBP.
HSS and CBP acknowledge that they have never provided benefits to their legal owners in monetary form such as profit shares, dividends or capital payments. Instead, they allege that they have provided benefits to the Carpenter Rocks community. Such benefits included, for a time, the acquisition of fishing boats for use by family members; the acquisition of fishing licences and pot allocations made available to family members on an ongoing basis; the development of houses to provide accommodation for family members and employees; and the development of infrastructure to support the fishing operations. It is implicit in the defence of HSS and CBP that they accept that they have traded profitably and, but for the actions taken under the conventional understanding, would have had profits to distribute. It also seems to be accepted that the fishing licences and pots in the name of HSS produce a substantial income.
As I understand it, the defendants claim that the conventional understanding commenced in or about 1948 and will continue as long as the Von Stanke fishing business operates at Carpenter Rocks.
HSS, CBP and their directors contend that HSS and CBP have acted according to the conventional understanding by providing benefits in kind to the Carpenter Rocks community rather than dividends or other payments. Consequently, they have not oppressed any shareholder and have not breached any directors’ duties.
Statutory Provisions
Section 236 of the Corporations Act 2001 (Cth) provides that, subject to the grant of leave by the Court, a member of a company (amongst others) may bring proceedings on behalf of a company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for the proceedings, or for a particular step in those proceedings. Section 237 provides for the grant of leave by a court. Subsection (2) provides:
The Court must grant the application if it is satisfied that:
(a)     it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and
(b)     the applicant is acting in good faith; and
(c)     it is in the best interests of the company that the applicant be granted leave; and
(d)     if the applicant is applying for leave to bring proceedings--there is a serious question to be tried; and
(e)     either:
(i)at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or
(ii)it is appropriate to grant leave even though subparagraph (i) is not satisfied.
The effect of s 237(2) is that the Court must grant leave if satisfied that all five criteria specified in sub-paragraphs (a)-(e) have been established. At first instance and on appeal, the parties proceeded on the basis that if any one of those criteria was not established, the Court would refuse leave. This is in accord with authority.[3] I will proceed on the same basis.
[3] Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 1007; (2004) 211 ALR 457 at [31]; Fiduciary Ltd and Others v Morningstar Research Pty Ltd and Others [2005] NSWSC 442 at [16]; (2005) 53 ACSR 732 at 735; Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [12].

Section 237(3) establishes a rebuttable presumption that the grant of leave will not be in the best interests of the company if certain factual matters are established. As none of the appellants sought to invoke that presumption, it can be ignored for present purposes.
The Decisions and the Appeals
FWV, the sole defendant to Mrs O’Meara’s application, opposed the grant of leave.
It was accepted in the proceedings at first instance that John is the controlling mind of FWV. The opposition to Mrs O’Meara’s application can therefore be assumed to have been on his instructions. In addition, the judge granted John permission to intervene in the hearing, both in his capacity as a shareholder of FWV, and separately in his capacity as executor of his parents’ estates. In both capacities John opposed Mrs O’Meara’s application.
Immediately before the commencement of the hearing of Mrs O’Meara’s application, the judge dismissed an application by FWV that Mrs O’Meara disclose certain documents. FWV seeks permission to appeal against that decision and also an extension of time in which to do so.
In the substantive hearing, the judge was satisfied that Mrs O’Meara had established each of the criteria in s 237(2) and granted leave. Appeals are brought against that decision by FWV and by John in his capacity as a shareholder in FWV. FWV contends that the judge should have found that s 237(2)(a) to (d) inclusive had not been established. John, as a shareholder, contends that the judge should have found that s 237(2)(b) to (d) inclusive had not been established. John, in his capacity as executor of his parents’ estates, intervened to support the submissions of the appellants.
Mrs O’Meara cross appeals against the orders of the judge concerning the costs of her application and the costs of her representation of FWV pursuant to the grant of leave.
Document Disclosure Appeal
In an interlocutory application heard before the substantive hearing, FWV sought an order that Mrs O’Meara produce certain documents. The number and range of documents sought was extensive: all documents concerning opinions provided by Mr O’Bryan SC and Lipman Karas to Mrs O’Meara in relation to the application and JHV’s oppression action; all documents concerning the admissions to JHV’s claim which Mrs O’Meara proposed FWV should make; all documents of whatever kind in Mrs O’Meara’s possession concerning the oppression action of JHV; Mrs O’Meara’s taxation returns for the previous three years; all documents concerning Mrs O’Meara’s assets and liabilities; the file of Lipman Karas; and details of the financial arrangements with Mr O’Bryan SC and Lipman Karas for the provision of their advice. Lipman Karas act as solicitors for Mrs O’Meara in a number of matters concerning the affairs of the Von Stanke family. Mr O’Bryan is the senior counsel retained by Lipman Karas on behalf of Mrs O’Meara.
The judge dismissed the application entirely.[4] The judge did so because, in the main, she considered the documents sought to be irrelevant to, or unnecessary for, a proper defence to Mrs O’Meara’s application for leave to intervene. The entitlement to disclosure of documents is subject to an exercise of discretion by the Court.[5] The wide range of documents sought also made the exercise of the discretion to order disclosure inappropriate.
[4] O’Meara v FWV Stanke Holdings Pty Ltd (No 2) [2007] SASC 294.
[5] Supreme Court Civil Rules 2006 (SA) rr 136, 138 and 139.
As its notice of appeal was filed more than 21 days after the judge’s decision concerning disclosure, FWV sought an extension of time in which to apply for permission to appeal against the judge’s order. FWV’s written outline of submissions (of some 23 pages) did not address this ground of appeal at all. At the hearing, Mr Sullivan QC, who appeared with Mr Livesey QC for FWV, submitted that the appeal against the judge’s refusal to order disclosure was a free-standing ground of appeal. If successful, it would require the substantive appeal to be allowed. Mrs O’Meara’s application would have to be remitted to another judge for a fresh hearing given the likely relevance of the documents to the cross-examination and assessment of the credit of Mrs O’Meara.
No evidence was presented to this Court to explain why the application for permission to appeal was lodged outside the prescribed 21-day period. The delay was only one day but it should have been explained. Further, the submissions concerning this ground of appeal were developed only slightly in oral argument.
In my opinion, it has not been shown that the judge’s decision was incorrect. On the contrary, the very width of the disclosure order sought made it almost inevitable that the Court’s discretion would be exercised adversely to FWV. It is plain that the application sought documents going well beyond the legitimate interests of FWV. The position may have been different if FWV had been more discriminating in its requests. When a party makes a broad-ranging claim for disclosure of documents of the kind made by FWV in the circumstances of this case, a judge should not have to sift through the application with a view to identifying what should or should not be disclosed. It is appropriate for the party seeking disclosure to identify the documents with precision and within reasonable bounds.
In my opinion, the application for an extension of time to seek permission to appeal against the judge’s disclosure order should be refused.
Section 237(2)(a): Was it probable that FWV would not itself bring the proceedings, or properly take responsibility for them, or for the steps in them?
The judge said that this criterion was not seriously disputed. FWV contended that the judge had erred in this respect. It submitted the judge failed to consider separately the two issues: the adequacy of FWV’s conduct of the defence to the oppression action, and the appropriateness of FWV bringing contribution proceedings alleging that (like JHV) it had been oppressed by HSS and CBP. FWV acknowledged that it did not intend to bring contribution proceedings, but submitted that its defence of the oppression action had otherwise been, and would continue to be, “proper”.
I do not accept this submission. Although the judge stated that this criterion was not seriously in dispute, she did address the submission which FWV had made. Further, the judge focussed on the proposed FWV defence to JHV’s oppression action and not on the claim which Mrs O’Meara proposed FWV should bring in the contribution proceedings.[6]
[6] O’Meara v FWV Stanke Holdings Pty Ltd (No 3) [2007] SASC 305 at [11].
In any event, for the purpose of this criterion I do not consider it appropriate to focus principally upon the conduct of FWV’s defence to JHV’s action in the way suggested by FWV’s counsel. The criterion concerning FWV’s best interests will be addressed later. However, if (as I consider the judge correctly held) it is in FWV’s best interests to bring contribution proceedings of the kind proposed by Mrs O’Meara, FWV’s acknowledgement that it did not intend to bring such proceedings makes it inevitable that s 237(2)(a) is established. The defence of FWV and the pursuit of contribution proceedings go hand in hand. It would be impractical for FWV on John’s instructions to defend JHV’s claim and simultaneously, on Mrs O’Meara’s instructions, to bring contribution proceedings. It was open to FWV on John’s instructions to defend JHV’s claim but provide for the contingency that that defence may fail. This could have been achieved by advancing a claim for relief in contribution proceedings to be pursued in the event that the defence to JHV’s claim is unsuccessful. Mr Vickery QC, who appeared with Mr Duggan for John in his capacity as a shareholder of FWV, acknowledged that this course was open. However, FWV has not indicated any willingness to adopt such a course of action. On the other hand, it is not reasonable to suppose that FWV, on Mrs O’Meara’s instructions, should pursue FWV’s current defence and, if that fails, the contribution proceedings. As the judge noted, since Mrs O’Meara contends that HSS and CBP have acted oppressively, it would be repugnant for her to have FWV decline to say so.
The judge referred to John’s conflict of interest. John is a director of the two companies alleged to be oppressing JHV. He is also one of the beneficiaries of the conventional understanding. John has the use of one of the fishing licences of HSS and its associated pot allocations. He has a personal interest in the continuation of the status quo. This is demonstrated by the fact that he is one of the parties to the joint defence to the JHV oppression action. In my opinion, the judge correctly concluded that this conflict alone raised the prospect that FWV, while controlled by John, would not take proper responsibility for the proceedings. It is true that Mrs O’Meara is to a certain extent also subject to a conflict of interest. She and her husband presently use another HSS fishing licence and associated pot allocations. However, this conflict of interest is quite different from that affecting John. It has not so far deterred Mrs O’Meara from pursuing action which would negate the conventional understanding.
FWV submitted that its joint defence with RCV is a proper defence prepared and filed in accordance with the pleading rules. It was not necessary or appropriate for it to plead to most of the factual allegations of JHV because they do not concern it. It seems that FWV and RCV were joined to the oppression action only because JHV sought an order that they, or their nominees, purchase its shares. I accept that this is so, but do not regard it as decisive. Taking proper responsibility for the proceedings involves more than preparing and filing a defence which accords with the pleading rules. It involves the taking of steps which are in the interests of the company, including the proper pursuit of action within the proceedings for the promotion or defence of the company’s interests.
In my opinion, it has not be shown that the judge erred in concluding that s 237(2)(a) was satisfied.
Section 237(2)(b) : Is Mrs O’Meara acting in good faith?
At first instance and on appeal, the parties proceeded on the basis that this criterion is to be considered having regard to the two inter-related factors identified by Palmer J in Swansson v RA Pratt Properties Pty Ltd.[7] First, whether Mrs O’Meara honestly believes that a good cause of action exists with reasonable prospects of success. Secondly, whether she is seeking to intervene for a collateral purpose that would amount to an abuse of process.
[7] [2002] NSWSC 583 at [36]; (2002) 42 ACSR 313 at 320. See also Fiduciary Ltd and Others v Morningstar Research Pty Ltd and Others [2005] NSWSC 442 at [21]; (2005) 53 ACSR 732 at 737; Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 1007; (2004) 211 ALR 457 at [22]; Charlton v Baber and Others [2003] NSWSC 745; (2004) 47 ACSR 31 at [40]; Goozee v Graphic World Group Holdings Pty Ltdand Others [2002] NSWSC 640 at [56]; (2002) 42 ACSR 534 at 546; Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [28]-[30].
The appellants submitted that Mrs O’Meara fails according to both factors.
Honest Belief About a Good Cause of Action
Mrs O’Meara’s evidence-in-chief to support her application was provided by affidavit. She was cross examined by three senior counsel for about one day. The judge concluded that she was an honest witness and that while her grasp of the issues in the litigation was not sophisticated, it was nevertheless adequate.
To prove her belief in the existence of a good cause of action, Mrs O’Meara exhibited to her affidavit a substantial opinion provided to her by her solicitors, Lipman Karas. That opinion expressed the view, with no absence of confidence, that HSS and CBP were oppressing FWV; that FWV was unlikely to take action to remedy the situation; and that Mrs O’Meara should seek leave to pursue a derivative action in the name of FWV.
In her affidavit, Mrs O’Meara stated that from that advice, she believed that FWV was in a similar position to JHV; that JHV had good prospects of success; that the only viable position for FWV was to support JHV and seek a similar relief in its own right; that FWV was unlikely to adopt such an attitude; and that it was in FWV’s best interests that she be granted leave to take over FWV’s defence of the JHV action and cause FWV to support JHV so as to seek similar relief.
The judge was satisfied that Mrs O’Meara honestly believed that FWV had a good cause of action. Insofar as that conclusion was based on the judge’s assessment of Mrs O’Meara’s credibility, it cannot be impeached on this appeal. The undisputed fact that HSS and CBP have not paid any dividends to their shareholders for many years, despite trading profitably, provides support by itself for the judge’s conclusion. To say that is not to express any opinion about Mrs O’Meara’s prospects of success or to conclude that the justification of HSS and CBP by reference to the conventional understanding may not succeed. It is simply to accept that the assertions of oppression by reference to ss 180, 181 and 182 of the Corporations Act have at least some plausibility.
The appellants challenged Mrs O’Meara’s claim of reliance upon the Lipman Karas opinion. They pointed to passages in the opinion which indicated that it could not have been seen by Mrs O’Meara before she swore her affidavit or that it had been prepared simultaneously with the affidavit, and thus Mrs O’Meara could not have relied upon it. On a literal reading, there is force in some of those submissions: the opinion bears the same date on which Mrs O’Meara swore her affidavit; paragraphs in the opinion refer to the affidavit as though it had already been sworn; and the opinion uses some of the same text as the affidavit.
While the judge made no findings about these features, I do not consider that they detract from her conclusion. Mrs O’Meara lives at Carpenter Rocks and the office of Lipman Karas is in Adelaide. Presumably, Mrs O’Meara had to travel to Adelaide to swear her affidavit. It would not be at all surprising if the affidavit and the opinion in final form were prepared and presented to Mrs O’Meara at the same time. Similarly, it would not be unexpected for the same text to be used in both documents for convenience. This may well explain the features referred to by the appellants.
The appellants also critiqued the quality of the opinion. Amongst other things, it was said that it lacked balance; failed to address all relevant issues; and misstated the law.
The judge did not address these criticisms. Again, in my opinion, this does not detract from her conclusion. Even if there are shortcomings in the opinion, it supports the view that FWV has a good cause of action and that Mrs O’Meara honestly believes in that cause of action.
Collateral Purpose
The appellants submitted that Mrs O’Meara did not satisfy the good faith criterion because she has a collateral purpose (or purposes) for the intervention such as to amount to an abuse of the Court’s process.
The appellants referred to the Explanatory Memorandum provided to the House of Representatives when the Corporate Law Economic Reform Bill 1998 was introduced. That Explanatory Memorandum indicated that the requirement of good faith in s 237(2)(b) was designed to prevent proceedings being used to further the purposes of the applicant, rather than the company as a whole.
Mrs O’Meara described her financial interest in FWV as her most valuable asset. She said that by making the application, she is “seeking to ensure that the interests of FWV are preserved and that it conducts itself in the proceedings in a manner which is most conducive to its economic interests as opposed to the economic interests of its directors or [the directors of HSS and CBP]”. Later in her affidavit, Mrs O’Meara said that she is seeking “to restore value to FWV’s shareholding in [HSS and CBP]”. In particular, if granted leave to intervene she would cause FWV to amend its defence to support generally the allegations and orders sought by JHV; to make its own allegations of oppression; and to bring its own claims for relief against HSS, CBP and their directors.
In cross-examination, Mrs O’Meara was asked a number of questions about her purpose. Her answers formed the basis of the submission to the judge and to this Court that her purpose is collateral. The relevant passages of cross-examination appear below:
Mr Bathurst QC
Q.Why do you want to say that FWV has been dealt with unfairly by HSS?
A.Because they don’t seem to be going anywhere. They are the same now as they were in 1996.
Q.They’re the same now as they were in 1996. Where do you think they should be going?
A.We should be – I don’t know, we should have been growing, the company should have been growing not shrinking. We should have been improving and enhancing Carpenter Rocks and the community.
Q.So what you’re really worried about is that the directors aren’t using the money to properly enhance what’s happening to Carpenter Rocks, is that the position?
A.Yes, that’s what I’m saying.
Q.So your concern is not so much that dividends aren’t being paid or profits aren’t being distributed, but rather the money could be better spent on Carpenter Rocks?
A.On the community of Carpenter Rocks, yes. The whole of the community.
Her Honour:
Q.As opposed to?
A.To selective bits.
Mr Bathurst QC:
Q.So you think the money should be expended for the whole community?
A.Yes.
Q.Is that right?
A.Yes, that’s right.
…
Q.Is it your object in bringing these proceedings to ultimately receive money for yourself from the liquidation of both HSS and FWV?
A.Only as an absolutely last resort.
Q.So what your object is, is to ensure that the benefits which are being distributed to some people, get distributed to more people in the community; is that the position?
A.Yes, to improve and enhance our community.
The cross-examination by Ms Nelson QC included the following:
Q.Have you not since 2005 had the view that you personally would like to see some unbundling of this corporate structure in a way that gives you some actual cash?
A.No.
Q.No?
A.No.
Q.Some benefit in your own name?
A.Yes.
Q.What is that?
A.Perhaps some of the land so that it could be improved and enhanced.
Q.What else?
A.A guarantee that we can keep the use of the fishing licence.
Q.Keep the use of the fishing licence?
A.Yes.
…
Q.Is it the position that you want to own the licence in your own name?
A.If that was possible yes.
Q.Is that one of your purposes in this litigation to see if you could secure that licence in your name?
A.No, it would give me the security to know that we’ve got an income.
Q.Can I put it this way: one of your purposes in these proceedings would be to ensure that you and your husband would have the permanent use of a licence … Is that one of your objects?
A.Yes, sense of security, yes.
Q.And that sense of security would be to arrange somehow in these current proceedings to have that fishing licence for the exclusive use of your husband or yourself; is that right?
A.Yes.
The appellants submitted that these passages showed that Mrs O’Meara’s purpose was to improve her own financial position rather than that of FWV. Further, Mrs O’Meara’s “somewhat nebulous” purpose of benefiting the wider community of Carpenter Rocks was far removed from any legitimate corporate purpose of FWV. (It is not necessary to consider whether there is any tension between the latter submission and the provision of benefits to the Carpenter Rocks community under the conventional understanding said to justify the conduct of HSS and CBP). It was submitted that these were Mrs O’Meara’s real purposes, none of which can be achieved through the present litigation. Insofar as Mrs O’Meara seeks a personal benefit, that cannot be achieved because Mrs O’Meara’s only interest is that of a shareholder in FWV. The oppression action she proposes is against HSS and CBP, not FWV. Insofar as Mrs O’Meara seeks benefits for the community of Carpenter Rocks, that cannot be achieved through these proceedings.

The judge accepted that benefit to the wider community is not a purpose which will benefit FWV and therefore (implicitly) cannot be achieved through these proceedings. The judge also accepted that the personal benefits sought by Mrs O’Meara could not be achieved through the course of action which she proposes in the litigation. The judge looked, however, to the “immediate result” of success by FWV. She considered that to be the benefit to FWV in obtaining a share of the profits of HSS and CBP which it does not presently receive. It is implicit in the judge’s reasons that she accepted that as Mrs O’Meara’s dominant purpose. The judge concluded that such a purpose is not a collateral purpose as explained in Williams v Spautz.[8]
[8] [1992] HCA 34; (1992) 174 CLR 509 at 526-27 per Mason CJ, Dawson, Toohey and McHugh JJ.
The appellants submitted that these reasons failed to give full effect to the evidence outlined above of Mrs O’Meara.
One difficulty facing this submission is that Mrs O’Meara may have more than one purpose. A somewhat generalised long term objective of obtaining benefits for the whole community, or at least for persons beyond the directors and their immediate families, is not necessarily inconsistent with the purpose of seeking a flow of benefits from HSS and CBP to their legal owners. The immediate purpose of benefiting FWV could be a means to achieving the more generalised goal. In my opinion, the appellants tended to take an overly literal view of Mrs O’Meara’s evidence and overlooked the possible interrelationship of her purposes. The cross-examination did not, on my reading, attempt to distinguish between Mrs O’Meara’s purpose and her motivation for intervening in the oppression proceedings. There is a distinction. As pointed out by Palmer J in Swansson v RA Pratt Properties Pty Ltd,[9] a derivative action sought to be instituted by a current shareholder for the purpose of restoring value to his or her shares in the company would not be an abuse of process even if the applicant is motivated by intense personal animosity, even malice, towards the defendant. The same may be true of an applicant with more altruistic or high-minded motives.
[9] [2002] NSWSC 583 at [41]; (2002) 42 ACSR 313 at 321.
The judge considered Mrs O’Meara to be an honest witness and therefore must have accepted as truthful the statement in her affidavit as to purpose. That being so, and bearing in mind the matters to which I have just referred, I do not consider that it has been shown that the judge erred in concluding that Mrs O’Meara’s purpose is not collateral so as to constitute an abuse of process.
Complicity
The Explanatory Memorandum to s 237 stated that in assessing good faith, the Court could be expected to consider whether the applicant was complicit in the matters about which the complaint is made.
The appellants submitted that Mrs O’Meara had been complicit in the very conduct of HSS and CBP said to constitute the oppression of JHV and FWV. That complicity arose from both her receipt and retention of benefits from HSS and CBP. The appellants cited a number of benefits said to have been received by Mrs O’Meara and members of her immediate family. This included the provision of accommodation to her as a child in the house provided by HSS to her parents; financial support from HSS and CBP to her mother after her father’s death; and more significantly, the ongoing provision to her husband of a fishing licence and lobster pot allocations, and for a time, a fishing boat. It was submitted that these were the sole means by which Mrs O’Meara and her husband had derived their income since 1984. The appellants referred in addition to the provision from time to time of accommodation to Mrs O’Meara, her husband and their children.
The appellants also referred to Mrs O’Meara’s proposed defence for FWV and the contribution notice. These did not provide for the surrender or disgorgement by her and her husband of the benefits derived from, in particular, the use of the valuable fishing licence and associated pot allocations. The appellants also cited this conduct in submitting that it was “unconscionable” for Mrs O’Meara to assert now that it is inappropriate for HSS and CBP to act in accord with the conventional understanding. Reference was made to the equitable maxims that a person who seeks equity must do equity, and that a person who comes to equity must do so with clean hands.
The judge rejected these submissions. First, the judge said that it was not clear that all of the alleged benefits had been provided by HSS and CBP. The appellants did not dispute that finding. It seems that some of the benefits arising from the use of land were provided by Fred as the legal owner of the land, and since his death, by his estate. An assertion by HSS and CBP that they have a beneficial interest in the land is being agitated in other proceedings in this Court.
Secondly, the judge concluded that there was insufficient evidence to indicate whether the benefits to Mrs O’Meara and her husband had been provided on anything other than a commercial basis. The appellants challenged that conclusion. In my opinion, there is force in this submission, but for reasons which will become apparent, it is not necessary to address it in detail.
Thirdly, the judge considered that even if Mrs O’Meara and her husband had received benefits from HSS and CBP, it did not indicate that Mrs O’Meara had been “complicit” in the misuse of their assets. Finally, the judge did not consider that Mrs O’Meara was seeking to advantage FWV or herself “beyond its or her just deserts”.
It is doubtful that Mrs O’Meara’s retention of benefits is very significant. It is hardly conceivable that an order requiring the directors of HSS, CBP, and their children to account for the profits derived from the use of the licences and pot allocations would not extend also to Mrs O’Meara and her husband. That is so with or without any pleading on the topic by Mrs O’Meara.
On appeal, Mr O’Bryan SC who appeared with Mr Lipman for Mrs O’Meara, said that she accepts that in the event that an order for an account of profits is made in respect of the use of assets belonging to HSS and CBP, she and her husband will have to do likewise. It seems that this is the first acknowledgement of this kind by Mrs O’Meara. However, the fact that it has been made belatedly does not detract from the judge’s conclusion about Mrs O’Meara’s good faith. As I have said, even without the acknowledgement, it was almost inconceivable that orders for an account of profits would be made without requiring Mrs O’Meara and her husband to account in a similar way.
There remains to be considered Mrs O’Meara’s and her husband’s conduct in receiving benefits from HSS and CBP. In my opinion, it is a difficult to characterise this conduct as complicity of a kind indicating a lack of good faith. Apart from receiving benefits, Mrs O’Meara has not otherwise been responsible for the arrangements by which those benefits were provided. On the defendant’s case, the conventional understanding upon which HSS and CBP have been acting commenced before Mrs O’Meara’s birth. HSS and CBP began operating the family business when Mrs O’Meara was about 12 years old. Mrs O’Meara has never been a director of HSS or CBP and, as contended by the defendants, is forever excluded from being so. There is a sense in which her receipt of benefits in the past has been passive. It seems that from at least 2005 Mrs O’Meara has been agitating in various ways about the conduct of John in relation to her parents’ estates and in relation to FWV. It would be curious, in my opinion, if, while being denied the prospect of any dividend or income from FWV despite its valuable shareholding in HSS, Mrs O’Meara’s receipt and use of a benefit from HSS to produce an income had the effect that she is not acting in good faith in the present proceedings.
Although these reasons differ in some respects from those of the judge, my opinion is that her conclusion about Mrs O’Meara’s alleged complicity has not been shown to be in error.
Delay
The appellants submitted that the judge failed to address their submissions concerning the timing of Mrs O’Meara’s application for leave to intervene. They submitted that the timing indicated a lack of good faith either by itself or in combination with the other matters already mentioned. JHV instituted its oppression action on 8 December 2005. Mrs O’Meara applied for leave to intervene on 3 July 2007, only four months before the JHV hearing was scheduled to commence.
The appellants submitted that Mrs O’Meara’s delay was “inordinate” and would inevitably disrupt the hearing of the JHV application. This reflected adversely on Mrs O’Meara’s bona fides. One submission, relying on Batistatos v Roads and Traffic Authority of New South Wales,[10] even suggested that such a delay amounted to an abuse of process.
[10] [2006] HCA 27 at [15]; (2006) 226 CLR 256 at 267.
The appellants are incorrect in contending that the judge did not consider the submission concerning delay. The judge stated:
As to her honest belief, counsel for the executors pointed to the fact that this application was lodged long after the principal proceedings were instituted and not long before trial. That is so, but it does not cause me to doubt the plaintiff’s good faith.[11]
[11] O’Meara v FWV Stanke Holdings Pty Ltd (No 3) [2007] SASC 305 at [15].
The appellants criticised the failure of Mrs O’Meara to provide any explanation for the delay. It is a little surprising that Mrs O’Meara’s affidavit did not address this topic. However, in her oral evidence, Mrs O’Meara did provide two explanations. First, she said that she only became aware of all of the relevant facts in the middle of 2007. I infer that Mrs O’Meara was then referring not only to the underlying facts regarding the conduct of HSS and CBP but also to the legal implications of those facts. Secondly, Mrs O’Meara said that she had been hoping that John would take action to pursue FWV’s interests in the oppression action. As the judge found Mrs O’Meara to be an honest witness, it may be inferred that the judge accepted these explanations for the application not having been filed until July 2007.
Finally, I note that it was never put to Mrs O’Meara that she had deliberately delayed bringing the application; or that she brought it so as to disrupt the hearing of JHV’s oppression action; or that she had some other ulterior purpose associated with the timing of the application.
Accordingly, I reject the appellants’ submissions concerning the alleged delay by Mrs O’Meara.
The Combination of Circumstances
So far, I have considered the individual aspects of the appellants’ good faith submissions separately. The appellants also submitted that these matters should be considered in combination. Even considered in that way, I do not consider that it has been shown that the judge erred in finding that Mrs O’Meara was acting in good faith.
Section 237(2)(d): Is there a serious question to be tried?
It is convenient to consider this criterion before the best interests criterion in s 237(2)(c). It was common ground that the serious question to be tried requirement involves the same “relatively low threshold” applicable to an application for an interlocutory injunction.[12] This criterion is relevant to the contribution proceedings which Mrs O’Meara proposes FWV should bring.
[12] Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583 at [25]; (2002) 42 ACSR 313 at 318. See also Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 1007 at [17]; (2004) 211 ALR 457 at 464.
The appellants repeated on appeal the principal submissions made to the judge. First, the conduct of HSS and CBP relevant to the complaint has been carried out with the full knowledge and acquiescence of John. As the operative mind of FWV, his knowledge and acquiescence is attributed to it. FWV cannot, therefore, now complain about the conduct of HSS and CBP. Secondly, and in any event, there is insufficient evidence that FWV has been oppressed.
The Attribution of John’s Knowledge and Acquiescence to FWV
The appellants submitted that on Mrs O’Meara’s own case, John has acquiesced in, or consented to, each of the decisions of HSS and CBP about which she would have FWV complain. Relying on the so-called “organic” theory of attribution of knowledge to a company, FWV submitted that the knowledge and acquiescence of John must be attributed to it. Reference was made to Tesco Supermarkets Ltd v Nattrass[13] and Hamilton v Whitehead.[14] There was no evidence that FWV ever did anything except acquiesce in, or consent to, the conduct of HSS and CBP. Thus, as oppression can only be done against a person’s will, any claim of oppression by FWV must fail. Reference was made to John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A’Asia) Pty Ltd.[15] It was submitted that Mrs O’Meara is unable to invoke the fraud exception to attribution of knowledge as it is only applicable when principles of agency are invoked to attribute knowledge. Here, John’s role in FWV makes those principles inapplicable. Reference on this point was made to Duke Group Ltd (in liq) v Pilmer[16] and K & S Corporation Ltd v Sportingbet Australia Pty Ltd.[17] This was said to provide HSS and CBP with a complete defence to the contribution proceedings proposed by Mrs O’Meara for FWV.
[13] [1972] AC 153 at 170-71 per Lord Reid.
[14] [1988] HCA 65; (1988) 166 CLR 121.
[15] (1991) 6 ACSR 63 at 66.
[16] [1999] SASC 97 at [607]-[658]; (1999) 73 SASR 64 at 188-99.
[17] [2003] SASC 96 at [99]-[111]; (2003) 86 SASR 312 at 337-40.
I agree with the judge at first instance that it cannot be said at this stage that a claim of oppression would inevitably be resolved against FWV. Furthermore, the issues raised by FWV should be dealt with at trial rather than on an application of the current kind. Much may turn on an examination of the precise role exercised by John in relation to FWV. He has never been the sole director of FWV: his father and mother were co-directors until their deaths in 1995 and 2001 respectively; and since December 1999, his son and daughter-in-law have been co-directors. Even though the latter may act according to John’s directions so that he is effectively the sole decision-maker, it does not necessarily follow that his knowledge is now, or has always been, the knowledge of FWV. The attribution of the knowledge of a person who is the directing mind and will of a company varies according to the circumstances. Authority indicates that the purpose for attributing knowledge is an important consideration.[18] Cases involving agency may not be the only circumstances in which the so-called fraud exception is applicable.[19] There may also be an issue as to whether the apparent inaction of FWV at relevant times constitutes consent to, or acquiescence in, the conduct of HSS and CBP.
[18] Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 at 506 per Lord Hoffmann.
[19] Director General, Department of Education and Training v M T [2006] NSWCA 270; (2006) 67 NSWLR 237; J C Houghton & Co v Nothard, Lowe & Wills Ltd [1928] AC 1; Gluckstein v Barnes [1900] AC 240; Belmont Finance Corporation Ltd v Williams Furniture Ltd and Others [1979] Ch D 250.
An application of the present kind does not provide a convenient occasion to address these issues in detail. As pointed out by Barrett J in Chahwan v Euphoric Pty Ltd:
On an application such as this, it is not the function of the court to probe in depth the issue of serious question to be tried. The process is essentially a screening process designed to exclude cases with insufficient prospects of success to warrant the proceedings being pursued.[20]
[20] [2006] NSWSC 1002 at [27].
In my opinion, the judge was correct in holding that there is at least a question as to whether John’s knowledge is to be attributed to FWV for relevant purposes.
FWV also submitted that Mrs O’Meara, with full knowledge, acquiesced in the very conduct of HSS and CBP which she now wishes to impugn. It is difficult to determine at this stage if there is any significance to this submission. In my opinion, it is a matter best left to the trial. As I understand it, Mrs O’Meara’s acquiescence was said to arise from her continued receipt of benefits from HSS and CBP. Whatever may previously have been the case, it seems that Mrs O’Meara has been agitating at least since 2005 about the relevant business arrangements. While the judge made no findings, and the evidence was unclear, as to whether Mrs O’Meara did have full knowledge, it does not seem that it can be said at present that Mrs O’Meara is acquiescent in the arrangements.
Adequacy of the Oppression Evidence
FWV criticised the evidence put forward in support of the oppression claims. Specifically, it was said that the statements in Mrs O’Meara’s affidavit relevant to oppression were unparticularised, unsubstantiated and conclusionary in nature. Thus it was submitted that the judge should not have attached any weight to these statements.
In my opinion, there is nothing in this submission. It overlooks many of the admissions made by HSS and CBP in response to the allegations of JHV. The contribution proceedings proposed by Mrs O’Meara for FWV rely on the same allegations made by JHV. As already indicated, the central issue in JHV’s oppression action is not whether the particular conduct said to constitute the oppression occurred, but whether it was justified under the conventional understanding. When regard is had to these pleadings, there is a sufficient basis for the oppression allegations which Mrs O’Meara proposes FWV should make.
In my opinion, the judge correctly concluded that there was a serious issue to be tried.
Section 237(2)(c): Is it in the best interests of FWV for Mrs O’Meara to be granted leave to intervene?
The judge accepted that s 237(2)(c) requires positive satisfaction that the intervention of Mrs O’Meara will serve the best interests of FWV. The authorities demonstrate that it must be a positive satisfaction, not one based merely on probability or potential.[21]
[21] Swansson v RA Pratt Properies Pty Ltd [2002] NSWSC 583 at [55]; (2002) 42 ACSR 313 at 324; Fiduciary Ltd and Others v Morningstar Research Pty Ltd [2005] NSWSC 442 at [46]; (2005) 53 ACSR 732 at 742; Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [40].
The judge concluded that intervention by Mrs O’Meara is in the best interests of FWV based on several factors. The first was a comparison of the benefits and disadvantages for FWV in the event of success or failure by JHV in its action. If JHV is successful in obtaining orders that those who have used the assets of HSS must account to it for that use, the value of JHV’s and FWV’s shareholding in HSS will increase. This will be of immediate value to JHV if it also obtains an order that its shares in HSS and CBP be acquired by FWV and RCV, or by HSS and CBP themselves. The judge accepted, however, that in the absence of any other orders in favour of FWV, the benefits to FWV will be limited to the improvement in the value of its shareholding in HSS and CBP without any change in cash flow to it. Success by JHV may also result in adverse cost orders against the defendants. FWV will be affected directly or indirectly by such orders. The judge accepted, on the other hand, that if JHV is unsuccessful, the status quo will continue and FWV will derive no income or benefit from its shareholding in HSS and CBP.
The judge was understandably reluctant to engage in any detailed assessment of the prospects of success of either JHV in its action, or of FWV if it brings the contribution proceedings proposed by Mrs O’Meara. The judge accepted, however, that both JHV and FWV have viable causes of action. In particular, it is evident that the judge accepted that whatever the previous status of the conventional understanding, there is a question about whether it can now bind members of successive generations of the Von Stanke family who have never acquiesced, or no longer acquiesce, in it.

Next, the judge was satisfied that Mrs O’Meara had the financial capacity to conduct the proceedings on behalf of FWV and to meet any adverse costs orders which might be made against it. The judge concluded that Mrs O’Meara’s intervention provided real prospects of benefit to FWV which outweighed the risks of loss.
The Conventional Understanding and Purpose of FWV
The appellants submitted that the judge overlooked the evidence concerning the purpose for the existence of FWV. That purpose, it was said, was simply to hold the one-third share in HSS and CBP originally owned by Fred and represent Fred and his family’s interests. It also ensured the continuation in successive generations of the equality which existed between Fred and his two brothers in the ownership of the family business. In short, the conduct of HSS and CBP towards FWV and the other companies had to be understood by a consideration of their respective roles in the implementation of the common understanding.
In some respects, this submission demonstrates most acutely the principal issue on Mrs O’Meara’s application: which of two shareholders with conflicting interests should be able to dictate FWV’s attitude in the litigation. HSS and CBP and the three shareholding companies appear to have been the vehicles by which the original three brothers carried on business in common. Because the founders were brothers, their business can be described as a family business, and it is not unnatural that at least some of their children should wish to continue the business in the same way. However, in the case of FWV (and it seems JHV), there is now disagreement between its shareholders about whether the company should continue to carry out its original (or similar) purpose. It suits one shareholder for it to continue in the way it has functioned in the past, but not the other. The resolution of the present application required a choice (applying the provisions of the statute) to be made between which of these two competing interests should now be able to control FWV’s approach in the JHV litigation.
Much can be said either way. However, in my opinion, several features point to the correctness of the decision made by the judge. First, the continuation of the existing arrangements in the family business has in any event been put in question by JHV’s application. Irrespective of the involvement of FWV, the Court will have to determine whether HSS and CBP have acted oppressively in relation to one of the three equal shareholders. Even though the positions of JHV and FWV in the litigation may not be identical, it indicates that FWV’s interests may be best served by a determination of the same issues of concern. Secondly, there are some unusual features about the conventional understanding. According to those who support the status quo, the conventional understanding can continue into the future indefinitely and govern the conduct of successive generations of the Von Stanke family. Control of the business is vested in a very small group who are in turn able to determine their own successors. A significant portion of the family is excluded from participation in management decisions. A significant portion may also be excluded from benefiting from the profits of the business. Depending upon their circumstances or activities, these members may also be disentitled from challenging such exclusion. As already noted, there is at least a plausible basis for the assertion that the arrangements amount to a breach of ss 180, 181 and 182 of the Corporations Act. It seems inevitable that at some time the continued lawfulness of the existing arrangements will have to be determined. It seems preferable for that to be done sooner rather than later, especially given the likely difficulties which might be experienced in unbundling the arrangements.
Accordingly, whilst the resolution of Mrs O’Meara’s application involves making a choice as to which interest should be able to decide FWV’s attitude in the JHV litigation, the balance of matters favours intervention by Mrs O’Meara.
The Utility of Mrs O’Meara’s Intervention
FWV submitted that it was not necessary for Mrs O’Meara to be granted leave to intervene at this stage. This would allow the issues which Mrs O’Meara wishes to raise to be resolved at the instigation of JHV. If JHV fails, it is likely that FWV would also fail. This would reduce FWV’s exposure to a costs liability. On the other hand, if JHV is successful it is likely that a negotiated resolution of FWV’s position would then be reached. The submission was that the Court should not be concerned about the prospect of FWV’s involvement in successive proceedings involving allegations of oppression by HSS and CBP. This submission does not sit altogether comfortably with a submission made by John in his capacity as executor of his parents’ estates. He submitted that there are significant differences between the positions of JHV and FWV, to the extent that it would be inappropriate for both to be determined in the one proceeding.
There do appear to be some differences between the positions of FWV and JHV. The most significant appears to be the possible consequences for FWV of John’s own knowledge of, and acquiescence in, the conduct of HSS and CBP. Nonetheless there are a number of issues which are essentially the same. The desirability of avoiding FWV’s involvement in a multiplicity of proceedings supports the appropriateness of determining the claims of FWV and JHV simultaneously.
There was some debate on appeal as to whether an Anshun[22] estoppel would apply in the event that a claim by FWV is not heard at the same time as that of JHV. FWV contended that no such estoppel would apply. Mrs O’Meara, referring to Tanning,[23] contended to the contrary. In my opinion, it is not necessary to determine this issue. The many common issues makes it desirable, irrespective of the possibility of any Anshun estoppel, for FWV’s claim to be determined at the same time as that of JHV. Further, if JHV and FWV are both successful, the form of the appropriate relief taking into account that success can then be determined at the one time.
[22] Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589.
[23] Tanning Research Laboratories Inc v O’Brien [1990] HCA 8; (1990) 169 CLR 332. See also Zavodnyik v Alex Constructions Pty Ltd [2005] NSWCA 438; (2005) 67 NSWLR 457.
In summary, considerations of utility indicate that Mrs O’Meara’s intervention is in the best interests of FWV.
The Content of the Defence Proposed for FWV
The judge granted Mrs O’Meara leave to amend FWV’s defence to JHV’s action, substantially in the form which had been proposed by her. The appellants were critical of that proposed defence. It was submitted that Mrs O’Meara would have FWV make admissions to allegations not directed to it, or about which neither FWV nor Mrs O’Meara could have any knowledge. She would introduce allegations for the sole purpose of providing a spring board for the claim in FWV’s proposed contribution proceedings.
There is force in these submissions. The proposed defence does have the features which the appellants attribute to it.
It is unclear whether a submission to this effect was made to the judge. It is not addressed in her reasons.
Although the appellants’ submissions have force, they do not have the effect that this Court should hold that it is not in the best interests of FWV for Mrs O’Meara to intervene in the proceedings. At best, the submissions indicate is that it may not serve the best interests of FWV for Mrs O’Meara, once granted leave to intervene, to amend the defence of FWV in the way she proposed. The inappropriateness of the form of the defence does not, however, mean that it is not in FWV’s interests to support the claim of JHV or that it is not in FWV’s interests to bring contribution proceedings. Neither the appellants’ grounds of appeal, nor their submissions on appeal, were to the effect that even if the order permitting Mrs O’Meara’s intervention remained intact, that part of the order directed to the form of the defence which she proposed should be set aside.
Further, although the content of the proposed defence may be fairly critiqued, it does not seem likely in a practical sense that it will have adverse effects on the conduct of the trial. The admission of the matters which do not concern FWV will be of little consequence. Those admissions are, as FWV submitted, “forensically useless”. Introducing additional material into the defence upon which FWV will rely in the contribution proceedings seems unlikely to cause embarrassment in the proceedings. As the appellants submitted, the additional matters involve allegations supporting the claim proposed for FWV in the contribution proceedings. Even so, they will not have to be addressed by JHV as they do not concern it. As against the defendants, the additional allegations give notice of FWV’s claims in the contribution proceedings.
Accordingly, I do not consider that the form of the proposed defence was a reason for the judge to hold that it is not in FWV’s interests for Mrs O’Meara to be granted leave to intervene.
Mrs O’Meara’s Capacity to Conduct the Litigation
The appellants critiqued Mrs O’Meara’s capacity to understand and direct the litigation. They referred to particular passages in her cross-examination which, it was said, indicated a lack of full appreciation of the implications of the litigation. The judge specifically addressed this:
[Mrs O’Meara] is not a sophisticated woman. I gather she has lived most, if not all, of her life in Carpenter Rocks and its environs. The complexities of the litigation do not, understandably, come easily to her. But I am satisfied she understands the inter-relationship of the various companies and the nature of the claims which are made by JHV. She has a clear understanding of the position she considers FWV should be taking in response to JHV’s claim and I am satisfied that in pursuing the derivative action her motives are genuine and she plans to see the litigation through to its conclusion.[24]
[24] O’Meara v FWV Stanke Holdings Pty Ltd (No 3) [2007] SASC 305 at [17].
The judge had the advantage of seeing and hearing Mrs O’Meara. Her conclusion was very much based upon the assessment she made of Mrs O’Meara. I do not consider that the judge’s conclusion comes within the category of case in which a trial judge’s assessment, based upon the evaluation of a witness, can be disturbed by an appellate court.[25]
[25] Devries v Australian National Railways Commission [1992] HCA 41; (1993) 177 CLR 472 at 479 per Brennan, Gaudron and McHugh JJ; Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at 127 per Gleeson CJ, Gummow and Kirby JJ, at 139 per McHugh J.
Mrs O’Meara’s Financial Capacity
Mrs O’Meara’s financial position may be in a different category.
Mrs O’Meara accepted that if granted leave to intervene to conduct FWV’s defence and to institute contribution proceedings, she would, from the point of taking over the conduct, be responsible for FWV’s costs. A proviso was that if FWV is ultimately successful, it should indemnify her in respect of all costs incurred by her in conducting FWV’s litigation. Mrs O’Meara accepted that in the event that FWV is unsuccessful, she may also have to meet FWV’s liability for the costs of other parties. This is in accord with authority.[26]
[26] Carpenter v Pioneer Park Pty Ltd(in liq) [2004] NSWSC 1007 at [39]; (2004) 211 ALR 457 at 469.
Mrs O’Meara did not provide any evidence in her affidavit of her income or asset position. As already noted, Mrs O’Meara successfully resisted a pre-trial application by FWV that she produce tax returns and records relating to her assets and liabilities. In these circumstances, the appellants challenged the ability of Mrs O’Meara to meet substantial costs orders. They said they were concerned that if Mrs O’Meara could not meet her costs undertaking, FWV might be left with a substantial costs liability incurred at her instigation. Such a prospect is not in FWV’s best interests.
The judge was satisfied about Mrs O’Meara’s financial capacity:
As to the plaintiff’s capacity to pay costs there is some evidence before me. Mrs O’Meara is not a woman of straw. She has substantial assets and a 50 per cent entitlement under her parents’ estates, as yet undistributed by the executor, Mr Von Stanke. She has said in evidence that she has spoken with her bank as to taking a loan of up to $1m to cover her potential liability if the principal action is lost. I see no reason to think that she could not meet such a costs order, and there is no reason to think or indeed any evidence establishing that this amount would be insufficient.
The appellants submitted that there is no evidentiary basis for the judge’s finding that Mrs O’Meara has substantial assets. In addition, it was submitted that the finding that Mrs O’Meara has an entitlement to 50 per cent of her parents’ estates overlooks the current litigation in this Court disputing such an entitlement.
In her cross-examination, Mrs O’Meara conceded that her costs undertaking might require her to meet costs orders amounting to hundreds of thousands of dollars. She thought she probably had the capacity to meet those orders, even though it might involve making payments for the remainder of her life. Mrs O’Meara stated that she had assets in the form of a house and land. There was no evidence as to the value of this property, but Mrs O’Meara admitted it is presently encumbered to the extent of approximately $100,000. Mrs O’Meara proffered a willingness to provide a security over her house and land. Later she said that, in the event FWV is unsuccessful, without access to her share of her parents’ estates she would probably lose everything she presently owns to meet her overall costs liabilities. Mrs O’Meara acknowledged that she had already incurred a substantial costs liability for other litigation arising out of her disputes with John over her parents’ estates, and the claim by HSS and CBP of a beneficial interest in land owned by her father. She accepted that her overall costs liabilities might run into millions of dollars. Mrs O’Meara acknowledged that she would not be able to meet the potential costs liability in a lump sum and that her ability to pay would depend upon whether she and her husband could continue to use the fishing licence and associated pots presently provided by HSS and CBP. Mrs O’Meara was unable to say how much she had incurred by way of legal costs to date. She said that she had made inquiries about borrowing about $1m from a bank for the purposes of funding legal costs.
In summary, Mrs O’Meara’s assets seem to comprise ownership of a house and block of land at Carpenter Rocks of unspecified value, and presently encumbered to about $100,000. In addition, there are indications in the pleadings that Mrs O’Meara and her husband own a fishing boat, something likely to have substantial value. The actual identity of the legal owner of the boat and whether it is encumbered is unclear. Mrs O’Meara has an entitlement to a share in her parents’ estates. However, the extent of that entitlement depends upon a number of matters such as the proper construction of her parents’ wills and a determination of the claims of HSS and CBP that they have a beneficial interest in the land owned by her father’s estate. Further, it may be a considerable time before the share in her parents’ estates becomes available to Mrs O’Meara in monetary form.
While the judge’s conclusion that Mrs O’Meara has substantial assets may be correct, it does not seem that the greater part of those assets is readily realisable and therefore available to meet her potential costs liabilities. This is an important consideration because the liability for the costs of other parties, if it arises, is likely to do so in circumstances in which Mrs O’Meara will not have ready access to her assets. The evidence concerning a bank loan went no further than Mrs O’Meara saying that she had made an inquiry at a bank for that purpose. The outcome of the inquiry is not known. It is also significant that Mrs O’Meara has incurred a large but unspecified liability for costs to her solicitors Lipman Karas for other litigation conducted on her behalf.
I do not consider that the evidence supports a conclusion that Mrs O’Meara will be able to meet, in a timely way, the costs orders likely to be made if FWV is unsuccessful in the litigation.
I do not consider that it is in the best interests of FWV for Mrs O’Meara to cause it to engage in litigation without some assurance of her ability to meet these potential liabilities.
However, I do not regard this consideration as fatal to Mrs O’Meara’s application. The conclusion of the judge meant that she did not have to address the question of Mrs O’Meara providing some security for the costs. That issue had been raised by Mr Vickery QC. Mrs O’Meara stated that she was prepared to provide appropriate security. I would allow the appeal so as to make the grant of leave conditional. That is, Mrs O’Meara must provide security to FWV for the amount of its potential costs liability to the other parties in the event that its action fails. The form and nature of the security should, in the absence of agreement by the parties, be determined by Sulan J.
Conclusion on Best Interests
Apart from the submissions concerning Mrs O’Meara’s capacity to meet the potential costs liability, I do not consider that the judge erred in relation to the best interests criterion. As indicated, the concerns about Mrs O’Meara’s capacity to meet any potential costs liability can be overcome by an appropriate order for security.
Conclusion on Appeals
Apart from the one matter concerning provision by Mrs O’Meara of security for FWV’s potential costs liability, I would dismiss each of the appeals of FWV and John. That conclusion makes it unnecessary to consider the matters raised by Mrs O’Meara in her notice of alternative contention.
Mrs O’Meara’s Cross-Appeal
Mrs O’Meara cross-appeals against two of the orders made by the judge. The first is the order concerning the costs of the conduct of FWV’s defence and contribution proceedings. This is a complaint about the substantive relief which was ordered. The second is the order relating to the costs of her application for leave to intervene. The cross-appeal indicates that the Court’s permission to appeal is sought in relation to the second order. Presumably this is because of r 281(b) of the 2006 Rules. As the cross-appeal is not limited to a question of costs, but includes a complaint about substantive relief, I do not consider that the permission of this Court to appeal is required.
Recovery by Mrs O’Meara of Costs Incurred on Behalf of FWV
The judge ordered that Mrs O’Meara be reimbursed from any monies recovered by FWV pursuant to any costs order made in favour of FWV in the oppression proceedings. This included reimbursement of all costs, charges and expenses incurred by Mrs O’Meara both in the conduct of the defence on behalf of FWV and in the prosecution of any contribution notice brought by her in accordance with the judge’s orders. However, Mrs O’Meara will be entitled to reimbursement of the costs incurred by her on behalf of FWV only to the extent of FWV’s own recovery of costs. That recovery is likely to be party/party costs only.
Mrs O’Meara submitted that this order is unfair because, if FWV is successful in the contribution proceedings, she will be required personally to fund the difference between the party/party costs recovered and the actual costs incurred. Mrs O’Meara submitted that the judge should instead have made an order entitling her to a full costs indemnity in the event that FWV’s contribution proceedings succeed.
In my opinion, the judge was correct to reject at this stage Mrs O’Meara’s claim to a full costs indemnity. It would have been inappropriate for the judge to have ordered, in advance of Mrs O’Meara’s actual conduct of FWV’s proceedings, that she should have such an indemnity.

Mrs O’Meara submitted, in the alternative, that the possibility of an order for a full costs indemnity should have been left open. It was submitted that, depending on the outcome of the contribution proceedings by FWV and the manner of Mrs O’Meara’s conduct of them, such an order may be appropriate. Such a possibility should not be foreclosed at this early stage. This was the course adopted by Barrett J in Carpenter v Pioneer Park Pty Ltd (in liq).[27]
[27] [2004] NSWSC 1007 at [39]; (2004) 211 ALR 457 at 469.
The judge did not provide any separate reasons for the form of the order concerning Mrs O’Meara’s entitlement to reimbursement of the costs. The judge’s orders did include a grant of liberty to both Mrs O’Meara and FWV to apply, but no party on appeal suggested that that liberty could be exercised in due course to seek an order for indemnity costs.
On appeal, the respondents to the cross-appeal submitted that the principles of appellate review of a discretion[28] should govern this aspect of the cross-appeal. I doubt that that is so, but even if it is, I am satisfied that the judge’s decision involved error. While it is understandable that the judge desired that the orders provide certainty to the parties, I respectfully consider that it is not possible to make an appropriate judgment at this stage about Mrs O’Meara’s entitlement to reimbursement of costs. The outcome of Mrs O’Meara’s intervention and the manner of her pursuit of proceedings for FWV cannot presently be known. One result may be that the contribution proceedings, pursued with economy and efficiency, will produce a substantial financial benefit for FWV. In that event, it may be unjust for Mrs O’Meara not to recover a full costs indemnity. Otherwise she personally will have expended the monies to produce a benefit shared by all shareholders of FWV. In that circumstance it would be appropriate that John and the estates should, through their shareholdings in FWV, contribute to the costs incurred by Mrs O’Meara.
[28] House v The King [1936] HCA 40; (1936) 55 CLR 499.
The converse is that FWV may succeed, but only modestly, after extensive expenditure of costs resulting from the manner of conduct of the proceedings by Mrs O’Meara. Different considerations could then apply. There may of course be a variety of other outcomes between these two extremes.
In these circumstances, an order of the kind proposed by Barrett J in Carpenter is appropriate, ie, permitting Mrs O’Meara to apply to the Court for an indemnity in respect of her costs once the outcome of the contribution proceedings, and the costs incurred in obtaining that outcome, are known. This will enable an appropriate assessment to be made when all the circumstances are known.
Costs of the Intervention Application
The judge ordered that FWV as defendant and John, in his two intervening capacities, pay Mrs O’Meara’s costs of and incidental to her application in fixed proportions. FWV is to pay two-thirds; John in his capacity as executor, one-sixth; and John in his capacity as a shareholder of FWV, one-sixth.
Mrs O’Meara submitted that FWV and John in his two capacities should have been ordered to bear the liability for Mrs O’Meara’s costs jointly and severally. The judge’s apportionment should have been used only for the purpose of determining their respective entitlements to contribution from each other.
A submission to this effect was rejected by the judge. The judge considered that the interventions of John had lengthened the hearing. That being so, the judge considered that John, in each of his two capacities, should bear responsibility for some of the costs. Similarly, the judge considered that FWV, although defending the application, should not have to bear the whole costs of the hearing. The apportionment reflected the judge’s assessment of the extent to which the interventions of John had lengthened the hearing. No complaint is made about the judge’s apportionment.
It is important to note that Mrs O’Meara’s application was not resisted by three defendants; instead it was by one defendant and two interveners.
The principal argument in support of this ground of cross-appeal was that FWV and John in his capacity as executor of his parents’ estates do not presently have the financial capacity to satisfy the costs orders. For this reason it was said that an order for joint and several liability is appropriate. Mrs O’Meara tendered an affidavit on the cross-appeal which contained some fresh evidence to support this submission. I doubt that this affidavit added much to the stock of relevant information known to the judge.
The capacity of a party to satisfy a costs liability is not usually relevant when deciding whether a costs liability should be met jointly and severally, or in some other way. Were it otherwise, joint and several liability orders would be made more often when the Court has wealthy litigants before it, and less often when the litigants are indigent. Mrs O’Meara did not advance any more principled basis to support this ground of cross-appeal.
The judge was conscious that, to the extent that FWV meets the costs order, Mrs O’Meara will ultimately be contributing to those costs. That is, she will be partly funding the defence to her own application. The structure of the costs order was partly designed to avoid that result. John will have to pay one-sixth of the costs personally, and another one-sixth in his capacity as executor. In my opinion, it cannot be said that this approach was not reasonably open.
Mr O’Bryan SC submitted on appeal that the judge should also have made an order precluding the estates from indemnifying John for the costs incurred in his capacity as executor. However, this submission was outside the grounds of cross‑appeal, and no application to amend was made.
This costs decision involved resolution by the judge of several competing considerations. It was ultimately an exercise of discretion and subject to House v The King principles on appeal. In my opinion, Mrs O’Meara has not established any basis for appellate intervention with the costs order.
Appeal Against Refusal of a Stay
FWV’s notice of appeal also contained a ground complaining of the refusal of the judge to order a stay of the operation of her orders pending the determination of its appeal. That ground of appeal was not addressed in either FWV’s written outline of submissions or in its oral submissions. In those circumstances, I would treat it as having been abandoned. Given my opinion as to the fate of the appeals, it is, in any event, unnecessary to address it.
Conclusion
For the reasons given above:
1.I would allow the appeals of FWV and John in his capacity as shareholder in FWV for the sole purpose of varying paragraph 1 of the orders made by the judge. It should now read:
Upon the plaintiff providing security for the potential costs liability of FWV to the other parties in Supreme Court Action No SCCIV-05-1565 (the Proceedings) in an amount and manner to be determined by the judge managing the Proceedings, the plaintiff be at liberty, pursuant to s 237 of the Corporations Act 2001 (Cth), to intervene in the Proceedings for the purpose of taking responsibility on behalf of FWV for its defence of the Proceedings.
2.     I would otherwise dismiss each of the appeals.
3.I would allow Mrs O’Meara’s cross-appeal for the sole purpose of setting aside paragraph 6 of the orders made by the judge and substituting:
In the event that FWV is successful in the proposed contribution proceedings, the plaintiff may apply to the trial judge in the Proceedings, or in the event of a negotiated compromise, to the judge managing the action, for an order that she be indemnified by FWV for some or all of the costs and expenses incurred by her in the conduct of the Proceedings by FWV.
4.     I would otherwise dismiss the cross-appeal.
5.     I would hear the parties as to costs.