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Jeans v Deangrove Pty Ltd

Jeans v Deangrove Pty Ltd

Case [2001] NSWSC 84 23 February 2001

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CITATION: Jeans v Deangrove P/L [2001] NSWSC 84 revised - 26/02/2001

CURRENT JURISDICTION: Equity

FILE NUMBER(S): SC 1483/01

HEARING DATE(S): 23/02/01

JUDGMENT DATE:
23 February 2001

PARTIES :

Deangrove Pty Limited (Receivers and Managers appointed) (ACN 077 503 532) and the Corporations Law
JOHN ANTHONY JEANS (Plaintiff)
DEANGROVE PTY LIMITED (ACN 077 503 532) (Defendant)

JUDGMENT OF: Santow J

COUNSEL : J T Johnson (Plaintiff)
M R Speakman (Defendant)
A Bell (Commonwealth Bank of Australia Limited)

SOLICITORS: Jennifer E Darin (Plaintiff)
Cornwall Stodart incorporating Marshall Marks Kennedy as agents for Clarke and Kann (Brisbane) (Defendant)
L E Taylor (Commonwealth Bank of Australia Limited)

CATCHWORDS: CORPORATIONS — Statutory derivative action — Essential element under s237(2)(a) not fulfilled — Defendant in proceedings allowed to be heard — Indemnity costs — Just, quick and cheap.

LEGISLATION CITED: Corporations Law s237; s242
Corporations Law Rules 2.1.3

DECISION: Application fails with indemnity costs.

JUDGMENT — ex tempore

INTRODUCTION

1 These proceedings are brought by the Plaintiff who is the plaintiff in Federal Court proceedings sub nom Deangrove Pty Limited (Receivers and Managers appointed) and John Anthony Jeans v Commonwealth Bank of Australia No. N1142 of 2000. They are brought as a matter of extreme urgency on the basis that the matter is to come before Sackville J in the Federal Court in circumstances where the retainer of the solicitors on the record of the Plaintiff has been challenged. Indeed that challenge crystallised in a Notice of Motion over two months ago on 1 December 2000.

2 The Plaintiff makes application pursuant to the new statutory derivative action under Pt 2F.1A of the Corporations Law and in particular s237. That application to succeed requires that the conditions in s237(2) be satisfied including in particular that in paragraph (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; ….”. As to the first element, that “the company will not itself bring the proceedings”, that is negated if those proceedings are in fact brought by persons in office in the company competent to cause the company to do so.

3 A chronology is retained in the file initialled by me for identification which sets out the salient events in largely uncontroversial form, prepared by the Plaintiff.

4 There was an application made by the defendant to the Federal Court proceedings being the Commonwealth Bank of Australia Limited (“CBA”), either for leave to be joined as a party to the present application or for the right to be heard pursuant to the Corporations Law Rules 2.1.3 incorporated in the Supreme Court Rules. The purpose of seeking to be joined was in relation to the cross-examination of a witness for the Plaintiff, but this was obviated by an admission made by the Plaintiff. I was then satisfied that the interests of justice were best served by permitting CBA merely to be heard but not joined as a party.

5 The Defendant company is in a…

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 Jeans v Deangrove Pty Ltd

Details

AGLC: Jeans v Deangrove Pty Ltd [2001] NSWSC 84
Case: [2001] NSWSC 84
Decision Date: 23 February 2001

CaseChat Overview and Summary

The case of Jeans v Deangrove Pty Ltd involved a statutory derivative action brought by the plaintiff, Jeans, against the defendants, Deangrove Pty Ltd and others. Jeans sought to pursue legal action on behalf of the corporation due to alleged mismanagement and breaches of directors' duties. The primary focus of the dispute was whether the court should allow the derivative action to proceed and if the defendant, Deangrove Pty Ltd, should be heard in the proceedings. Additionally, the court needed to decide on the appropriateness of awarding indemnity costs, considering the principles of justice, quickness, and economy.

The legal issues before the court included whether the statutory requirement under s237(2)(a) of the Corporations Act had been satisfied, which necessitates a member or director to demonstrate that they have made a genuine effort to secure the company's rectification of the alleged wrong. Another issue was whether the court should permit the defendant to be heard in the proceedings, as it was argued that such a hearing might prejudice the outcome of the case. The court also had to assess whether the award of indemnity costs was justified, taking into account the overall fairness and efficiency of the proceedings.

In its decision, the court found that the plaintiff had not fulfilled the essential element under s237(2)(a) of the Corporations Act, as they had not made a genuine effort to secure the company's rectification of the wrong. The court ruled that the defendant should be allowed to be heard in the proceedings, as it was in the interest of justice and would not prejudice the outcome. Furthermore, the court determined that the award of indemnity costs was appropriate, as the proceedings had been conducted justly, quickly, and economically.

The court ordered that the statutory derivative action brought by Jeans against Deangrove Pty Ltd and others be dismissed due to the failure to meet the statutory requirement. Additionally, the court allowed Deangrove Pty Ltd to be heard in the proceedings and awarded indemnity costs, considering the overall fairness and efficiency of the litigation.

Orders