FEDERAL COURT OF AUSTRALIA
Henry v Western Downs Group Limited
[2018] FCA 1168
File number: QUD 280 of 2017 Judge: RARES J Date of judgment: 13 July 2018 Catchwords: CORPORATIONS – native title – Corporations Act 2001 (Cth) s 237 – derivative action – whether leave should be granted to applicant native title holders to bring proceeding on behalf of respondent company – where company established as charitable trustee to distribute benefits of Indigenous Land Use Agreement to native title claim groups including the applicants – whether probable company would not bring proceedings under s 237(2)(a) – where applicants alleged directors of company committed or were knowingly concerned in breach of fiduciary duty by misappropriating trust moneys – whether applicants acting in good faith under s 237(2)(b) – whether in best interests of company as trustee that applicants be granted leave under s 237(2)(c) Legislation: Charities and Not-for-profits Commission Act 2012 (Cth)
Corporations Act 2001 (Cth) s 237
Income Tax Assessment Act 1997 (Cth)
Native Title Act 1993 (Cth) ss 80, 85A
Cases cited: Barnes v Addy (1874) LR 9 Ch App 244
Burrabugga v Queensland (2016) 236 FCR 160
Farah Constructions Pty Limited v Say-Dee Pty Limited (2007) 230 CLR 89
Huang v Wang (2016) 114 ACSR 586
Lewis Securities Ltd (In Liq) v Carter (2018) 355 ALR 703
LNC Industries Limited v BMW (Australia) Limited (1983) 151 CLR 575
Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9
Date of hearing: 13 July 2018 Registry: Queensland Division: General Division National Practice Area: Native Title Category: Catchwords Number of paragraphs: 46 Counsel for the Applicants: Mr R Perry QC Solicitor for the Applicants: Trevor Hauff Lawyers Solicitor for the Second Respondent: Mr E O’Sullivan of O’Sullivans Law Firm Solicitor for the Fifth Respondent: Ms S Nutley of McMahon Clarke Counsel for the Sixth Respondent: Mr PG Jeffery Solicitor for the Sixth Respondent: Fraser Power Lawyer Counsel for the Intervener: Ms S Robb Solicitor for the Intervener: Crown Law ORDERS
QUD 280 of 2017 BETWEEN: BEATRICE MAUD HENRY
First Applicant
ELIZABETH JOHNSTON
Second Applicant
GREGORY EMMERSON (and others named in the Schedule)
Third Applicant
AND: WESTERN DOWNS GROUP LIMITED (ACN 166 757 384)
First Respondent
RUSSELL DOCTOR
Second Respondent
JASON JARRO (and others named in the Schedule)
Third Respondent
ATTORNEY-GENERAL FOR THE STATE OF QUEENSLAND
Intervener
JUDGE:
RARES J
DATE OF ORDER:
13 JULY 2018
THE COURT ORDERS THAT:
1.The Attorney-General for the State of Queensland be granted leave to intervene in the proceeding for the purposes of making submissions pursuant to r 9.12 of the Federal Court Rules 2011.
2.The applicants on the amended originating application have leave to substitute Elizabeth Johnston, who acts on her own behalf and on behalf of the Kambuwal Family Group, for Matthew Queary as an applicant in the proceeding.
3.All parties have leave to inspect and, in accordance with the usual practice of the Registry, to make copies of any documents produced on subpoena unless there is…
Continue reading Henry v Western Downs Group Limited
Sign in free to access the full text
- AGLC
- Henry v Western Downs Group Limited [2018] FCA 1168
- Case
- [2018] FCA 1168
- Decision Date
CaseChat Overview and Summary
The primary legal issue for the court to decide was whether the applicants met the conditions set out in section 237(2) of the Corporations Act 2001 (Cth) for leave to be granted. Specifically, the court had to determine whether it was probable that Western Downs would not bring the proceedings, whether the applicants were acting in good faith, and whether it was in the best interests of Western Downs that the applicants be granted leave to bring the proceedings.
The court held that it was probable that Western Downs itself would not bring or properly take responsibility for the claims that the applicants wished to bring in its name, as the board of Western Downs had not effectively functioned since early 2014. The court also found that the applicants were acting in good faith and that it was in the best interests of Western Downs that the applicants be granted leave to bring the proceedings in its name. The court deferred making orders until the parties had an opportunity to address on what, if any, conditions should be imposed on the applicants in respect of how Western Downs is to prosecute the proceeding and to give the Attorney-General the opportunity to consider what, if any, steps she wishes to take in that regard.
The court ordered that the Attorney-General for the State of Queensland be granted leave to intervene in the proceeding for the purposes of making submissions, that the applicants on the amended originating application have leave to substitute Elizabeth Johnston for Matthew Queary as an applicant in the proceeding, that all parties have leave to inspect and make copies of any documents produced on subpoena, that any requirement to file any defences that have not been satisfied be stayed until further order, and that the matter be stood over for case management.
Orders
Orders of the court
1. The Attorney-General for the State of Queensland be granted leave to intervene in the proceeding for the purposes of making submissions pursuant to r 9.12 of the Federal Court Rules 2011.
2. The applicants on the amended originating application have leave to substitute Elizabeth Johnston, who acts on her own behalf and on behalf of the Kambuwal Family Group, for Matthew Queary as an applicant in the proceeding.
3. All parties have leave to inspect and, in accordance with the usual practice of the Registry, to make copies of any documents produced on subpoena unless there is currently an order prohibiting access to any particular document or documents.
4. Any requirement to file any defences that have not been satisfied be stayed until further order.
5. The matter be stood over for case management on 30 October 2018.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
Thus, the substantial questions in contest between the parties are whether, for the purposes of each of s 237(2)(a), (b) and (c), it is probable that Western Downs would not itself bring the proceedings or properly take responsibility for them or for steps in them, the applicants are acting in good faith and that it is in the best interests of Western Downs that the applicants be granted leave to bring the proceedings in its name.Consideration I have considered and read all of the evidence upon which the parties relied. That evidence is much too voluminous to summarise here, nor would such a summary be fruitful, since there was common ground that there was at least one serious question to be tried. In Huang v Wang (2016) 114 ACSR 586 at 597-598 [56]-[60], Bathurst CJ, with whom McColl JA and, with additional observations, Barrett AJA agreed, identified that if the five criteria in s 237(2) are made out, the court is required to grant leave. He said that the requirement of the best interests of the company in s 237(2)(c) required the applicant for leave to establish, on the balance of probabilities, that the action is in the best interests of the company, and that this fact that could only be determined by taking into account all relevant circumstances. Bathurst CJ said that, ordinarily, the best interests of the company were those of the shareholders: Huang 114 ACSR at 597 [59]. But, Western Downs is a company limited by guarantee and established as a charitable trust. In my view, the relevant interests of Western Downs for the purposes of s 237(2)(c) are its interests as a trustee, with a duty to distribute what Arrow had paid, in accordance with cl 7 of its constitution, to the beneficiaries or potential beneficiaries in equal shares, being the 11 groups. There is a real and serious question as to whether that in fact has occurred and whether some of the trust money has been diverted from its proper destination of benefiting some of those nominated beneficiaries. I am satisfied that it is probable that Western Downs itself will not bring or properly take responsibility for the claims that the applicants wish to bring in its name for the purposes of s 237(1)(a). It is not in dispute that the board of Western Downs has not effectively functioned since early 2014. Mr Doctor made three affidavits in one of which he said that, in May 2018, he found that it was impossible to call a meeting of directors of Western Downs because the directors who are aligned with the applicants were not prepared to attend. Moreover, Mr Doctor had explained in an earlier affidavit that he had been suffering, and later recovering from, treatment for cancer in 2017. As Mr Doctor argued, it is subject to a boardroom fight that is unlikely to be resolved, at least, in a way that would to enable the company itself to take the proceedings. On the evidence before me, it is bereft of money, despite the applicants’ allegations that four of the 11 claim groups have not received all, or much, of their equal shares of about $520,000, amounting in total to about $2 million. Much of the money allegedly unpaid to the four beneficiary groups appears on the present evidence to have been paid to, or directed towards, Mr Doctor, Mr Jarro and Ms Davis for what they, no doubt, will contend they will be able to be establish, at a hearing, were appropriate purposes.