Health Management Systems (Australia) Pty Ltd v Transport for NSW (No 2)

[2023] NSWSC 291

Supreme Court

New South Wales

Medium Neutral Citation:

Health Management Systems (Australia) Pty Ltd v Transport for NSW (No 2) [2023] NSWSC 291

Hearing dates:

17 March 2023

Decision date:

29 March 2023

Jurisdiction:

Equity - Commercial List

Before:

Ball J

Decision:

Proceedings be dismissed with costs

Catchwords:

CIVIL PROCEDURE — Summary disposal — Dismissal of proceedings — Want of due despatch

CORPORATIONS — Statutory derivative action — Application to bring proceedings on behalf of company — Where leave sought by member or former member of company — Where earlier judgment did not permit applicant to act

Legislation Cited:

Corporations Act 2001 (Cth)

Cases Cited:

Collis v Bank of Queensland Ltd [2021] VSC 724

Health Management Systems (Australia) Pty Ltd v Transport for NSW [2022] NSWSC 1516

Worldwide Enterprises Pty Ltd v Silberman [2010] VSCA 17; (2010) 26 VR 595

Category:

Procedural rulings

Parties:

Health Management Systems (Australia) Pty Ltd
(Plaintiff)
Transport for NSW (Defendant)

Representation:

Counsel:
G Guorgi (Director of Plaintiff)
F Roughley (Defendant)

Solicitors:
G Guorgi (Director of Plaintiff)
Herbert Smith Freehills (Defendant)

File Number(s):

2022/25517

Publication restriction:

None

JUDGMENT

1. On 9 November 2022, I delivered a judgment in this matter in which I dismissed an application by the plaintiff, Health Management Systems (Australia) Pty Ltd (HMS), to carry on these proceedings by Mr George Guorgi: Health Management Systems (Australia) Pty Ltd v Transport for NSW [2022] NSWSC 1516. Mr Guorgi is the director of HMS and together with his wife holds all of the shares in that company. At the time of delivering judgment, I stood the matter over until 2 December 2022.

2. On 1 December 2022, the Court made the following orders by consent:

1   On or before 16 December 2022, the plaintiff appoint a solicitor to act for the plaintiff by filing and serving a notice of appearance.

2    If, by 16 December 2022, the plaintiff has not filed and served a notice of appearance appointing a solicitor in accordance with order 1:

a.    the proceedings be stayed until such a time as a solicitor is appointed;

b.    the defendant file and serve any application for dismissal of the proceeding by 24 February 2023.

3    The proceedings be listed for directions on 3 March 2023 together with any application for dismissal filed by the defendant in accordance with order 2(b).

3. HMS did not file a notice of appointment of a solicitor in accordance with those orders. On 24 February 2023, the defendant, Transport for NSW (TfNSW), filed a notice of motion seeking an order that the proceedings be dismissed. The notice of motion was returnable on 3 March 2023. On 2 March 2023, the motion was stood over by consent to 10 March 2023.

4. On 9 March 2023, Mr Guorgi filed an unsworn affidavit in which he indicated that he proposed to make an application “to intervene in these proceedings on behalf of HMS pursuant to the relevant provisions of sections 236 and 237 of the [Corporations Act 2001 (Cth)]”. Those sections relevantly provide:

236.   Bringing, or intervening in, proceedings on behalf of a company

(1)    A person 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 those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:

(a)   the person is:

(i)   a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or

(ii)   an officer or former officer of the company; and

(b) the person is acting with leave granted under section 237.

(2)   Proceedings brought on behalf of a company must be brought in the company's name.

…

237   Applying for and granting leave

(1)   A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.

(2)   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.

(3)   A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that:

(a)   the proceedings are:

(i)   by the company against a third party; or

(ii)   by a third party against the company; and

(b)   the company has decided:

(i)   not to bring the proceedings; or

(ii)   not to defend the proceedings; or

(iii)   to discontinue, settle or compromise the proceedings; and

(c)   all of the directors who participated in that decision:

(i)   acted in good faith for a proper purpose; and

(ii)   did not have a material personal interest in the decision; and

(iii)   informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and

(iv)   rationally believed that the decision was in the best interests of the company.

The director's belief that the decision was in the best interests of the company is a rational one unless the belief is one that no reasonable person in their position would hold.

(4)   For the purposes of subsection (3):

(a)   a person is a third party if:

(i)   the company is a public company and the person is not a related party of the company; or

(ii)   the company is not a public company and the person would not be a related party of the company if the company were a public company; and

(b)   proceedings by or against the company include any appeal from a decision made in proceedings by or against the company.

…

5. On 10 March 2023, TfNSW’s application for dismissal of the proceedings was listed for hearing on 17 March 2023. Mr Guorgi did not file any formal application under s 237 of the Corporations Act. However, TfNSW was content to proceed on the basis that an application under that section was before the Court. This judgment concerns that application and TfNSW’s application for summary dismissal.

6. It is clear from Mr Guorgi’s unsworn affidavit, and from oral submissions made by Mr Guorgi on 17 March 2023, that HMS does not intend to appoint a solicitor. Mr Guorgi’s evidence is that it cannot afford to do so. However, he led no objective evidence concerning its or his own financial position. It follows that HMS is not in a position to pursue the proceedings and that the proceedings should be dismissed unless Mr Guorgi succeeds in his application under s 237 of the Corporations Act.

7. In my opinion, that application must fail for three reasons.

8. First, Mr Guorgi is not acting in good faith in bringing the application. It is plain that the application has been brought by Mr Guorgi in an attempt to get around my earlier judgment that Mr Guorgi not be permitted to represent HMS in this proceeding. As Matthews AsJ explained in Collis v Bank of Queensland Ltd [2021] VSC 724 at [46] where an application was made under s 237 in similar circumstances:

Further, the Plaintiffs’ reliance on a derivative action as a means to have Mr Collis represent the Companies is based on a fundamental misconception of those provisions of the Corporations Act. That Act provides a mechanism by which certain persons with an interest in a company can apply to bring a proceeding in the name of the company, usually where the company is either refusing to do so itself or is not likely to bring the action itself (or defend it, as the case may be). The Companies were already part of the County Court proceeding: they were named as defendants. They were controlled by Mr Collis as he was the sole director and shareholder of the Fourth and Fifth Defendants, and by Mr and Ms Collis in the case of the Third Defendant as they were both directors and shareholders. Therefore, Mr Collis, together with Ms Collis in respect of the Third Defendant, were in a position to cause the Companies to take whatever action they considered necessary in respect of the County Court proceeding: there was no need for recourse to a derivative action. Sections 236 and 237 of the Corporations Act do not, as set out above, provide a mechanism by which a director or shareholder who is not legally qualified can act in court proceedings on behalf of a company. [footnote deleted]

9. Second, in my opinion, the application is futile. If the application succeeded, it would still be necessary for the proceedings to be brought in the name of HMS. The question would then arise whether Mr Guorgi was entitled to represent HMS in that proceeding: see Worldwide Enterprises Pty Ltd v Silberman [2010] VSCA 17; (2010) 26 VR 595 at 600 [25] per Weinberg JA (with whom Bongiorno JA agreed). For the reasons given in my earlier judgment, Mr Guorgi would not be given leave to represent HMS.

10. Third, even if the conclusion of the previous paragraph is wrong, in my opinion, it is not in the best interests of HMS that the action be brought. The proceedings will expose HMS to what could be a very substantial costs order against it. Mr Guorgi has not agreed to indemnify HMS. The most he has said is that “I intend to make an up-front offer to meet costs, but I will be unable to continue if the costs and financial risks are too high or expose me to potential financial ruin”. He has not explained what he means by “an up-front offer to meet costs”. He does say in his unsworn affidavit that he will seek a capped costs order. However, there is no reason to believe that such an order would be made.

11. For the reasons I indicated in my earlier judgment, it is apparent that Mr Guorgi does not have the training or ability to pursue a complicated legal case of the type that he seeks to advance on behalf of HMS. It is not obvious that the claim will succeed. As I indicated in my earlier judgment, there appears to be difficulties in the way in which the case is pleaded. Notwithstanding that the claim was commenced on 28 January 2022, Mr Guorgi has made no attempt to amend the claim, although in his most recent (unsworn) affidavit he has indicated that he wishes to advance a new contractual claim as well as the claims currently pleaded in the list statement. There is a question whether the claims sought to be advanced by Mr Guorgi in HMS’s behalf are statute barred, since TfNSW notified HMS on 7 December 2015 that it was not the successful tenderer, but the proceedings, which primarily complain about the way in which the tender was conducted, were not commenced until 28 January 2022, although an attempt was made to commence them in December 2021. It is not in the best interests of HMS that it be exposed to what could be a very substantial costs order in those circumstances.

12. Following the hearing of the matter, Mr Guorgi, in correspondence with my Associate, sought leave to file an affidavit explaining concerns he has about the way in which the hearing of TfNSW’s motion was conducted. It is not entirely clear what the purpose of that affidavit would have been. It appears from Mr Guorgi’s correspondence that he seeks to reopen the hearing of the motion for two reasons. First, he submits that he did not have sufficient time to consider a court book provided to the Court by TfNSW at the time of the hearing of the notice of motion. Second, he submits that he had insufficient time to complete his oral submissions.

13. I do not accept either submission. The court book was prepared largely for the convenience of the Court. It included the pleadings, a copy of my earlier judgment, TfNSW’s motion, the evidence served in connection with the motion, relevant legislation and copies of the cases on which TfNSW intended to rely. Mr Guorgi would have been familiar with most of that material. It was not incumbent on TfNSW to provide Mr Guorgi with copies of relevant authorities before the hearing, particularly when it was Mr Guorgi who made the application under ss 236 and 237 of the Corporations Act and could be expected to have familiarised himself with the principles relevant to such an application.

14. The issue raised by Mr Guorgi’s application was not a complicated one. In my opinion, Mr Guorgi was given sufficient time to make submissions to the Court in support of his application. Most of the submissions made by him went to the merits of HMS’s case rather than the question whether leave should be granted under ss 236 and 237. It is unclear what further submissions Mr Guorgi could make.

15. In those circumstances, I refused Mr Guorgi leave to provide the Court with a further affidavit.

16. It follows that the proceedings must be dismissed with costs.

**********

Decision last updated: 29 March 2023