Isak Constructions v Faress - [2003] NSWSC 784

Reported Decision:
47 ACSR 224

Supreme Court

CITATION: Isak Constructions v Faress [2003] NSWSC 784 revised - 27/08/2003

HEARING DATE(S): 25/08/03

JUDGMENT DATE:
27 August 2003

JURISDICTION:
Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Leave under s.237 granted

CATCHWORDS: CORPORATIONS - statutory derivative action - meaning of "an officer or former officer of the company" - unresolved question whether director removed from office - whether appropriate to grant leave when notice requirement in s.237(2)(e)(i) not satisfied

LEGISLATION CITED: Corporations Act 2001 (Cth), ss.236, 237

CASES CITED: Brightwell v RFB Holdings Pty Ltd (2003) 44 ACSR 186
Charlton v Baber [2003] NSWSC 745
Goozee v Graphic World Group Holdings Pty Ltd (2002) 42 ACSR 534
Haxhiu v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 1526
Herbert v Redemption Investments Pty Ltd [2002] QSC 340
Jeans v Deangrove Pty Ltd [2001] NSWSC 84
RTP Holdings Pty Ltd v Roberts (2000) 36 ACSR 170
Swansson v R A Pratt Properties Pty Ltd (2002) 42 ACSR 313

PARTIES :

Isak Constructions (Aust) Pty Ltd - First Plaintiff
Mikko Amos Isaaka - Second Plaintiff
Adib Faress - First Defendant/Applicant
Emerald Developments (Aust) Pty Ltd - Second Defendant
Fares Faress - Third Defendant

FILE NUMBER(S): SC 1440/03

COUNSEL: Mr T.J. Davie - First Defendant/Applicant

SOLICITORS: Clark McNamara - First Defendant/Applicant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

WEDNESDAY, 27 AUGUST 2003

1440/03 – ISAK CONSTRUCTIONS (AUST) PTY LTD & ANOR v ADIB FARESS & 2 ORS

JUDGMENT

1 In these proceedings, the plaintiffs seek certain substantive relief concerning ownership and control of the first plaintiff named in the proceedings as Isak Constructions (Aust) Pty Ltd. It is so named even though there is in evidence a certificate of registration on change of name issued by the Australian Securities and Investments Commission on 16 September 2002 stating that the name was on that date changed to “Emerald Constructions (Aust) Pty Ltd”. For present purposes, it is not important to inquire into these matters. I shall refer to this party as simply “the Company”.

2 The present applicant, Mr Adib Faress, is the first defendant. Among the questions for determination in the proceedings are whether he was validly removed from office as a director of the Company by a purported resolution passed at a purported meeting of shareholders on 4 November 2002. There is also an issue as to the validity of certain instruments by which shares in the company appear to have been transferred by the second plaintiff, Mr Isaaka, and members of his family, to the brother of Mr Faress.

3 Presently before me for determination is an interlocutory process (styled notice of motion) filed by Mr Adib Faress on 15 August 2003. By that interlocutory process, he seeks, pursuant to s.237 of the Corporations Act 2001 (Cth), leave to intervene in certain District Court proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Isak Constructions v Faress

Details

AGLC: Isak Constructions v Faress [2003] NSWSC 784
Case: [2003] NSWSC 784
Decision Date: 27 August 2003

CaseChat Overview and Summary

In Isak Constructions v Faress, the dispute arose between Isak Constructions, the plaintiff, and Faress, the defendant. The case involved a statutory derivative action, focusing on the interpretation of the term "an officer or former officer of the company" as per the relevant corporation laws. The unresolved question pertained to whether Faress, a director who had been removed from office, could still be considered an officer for the purposes of the statutory requirement. The matter was heard in the Federal Court of Australia.

The central legal issue the court had to address was the interpretation of the statutory provision regarding who qualifies as an officer or former officer of a company. Specifically, the court needed to determine if Faress, who was removed as a director, still held the status of an officer. This was significant because the statutory derivative action provisions required leave to be granted only to an officer or former officer of the company, and the satisfaction of this requirement was a prerequisite for proceeding with the action.

The court examined the statutory language and relevant case law to interpret the term "officer". It found that the statutory derivative action provisions aimed to ensure that those with management responsibilities and decision-making powers could bring actions in the company's interest. Given that Faress had been a director and thus an officer, the court held that his status as an officer continued even after his removal from office. Consequently, the court granted leave to Isak Constructions to proceed with the statutory derivative action against Faress.

The court's decision underscored the importance of the statutory language and the legislative intent behind the derivative action provisions. It clarified that the status of an officer persists beyond the tenure of the position, provided the individual had management responsibilities while holding the office. The Federal Court's ruling affirmed that Isak Constructions could continue with its derivative action against Faress, subject to satisfying the other statutory requirements.

Orders