Kidd v Kwek - [2022] FCA 1298

FEDERAL COURT OF AUSTRALIA
Kidd v Kwek [2022] FCA 1298

File number(s): VID 321 of 2021

Judgment of: MCEVOY J

Date of judgment: 19 October 2022

Date of publication of reasons: 31 October 2022

Catchwords: CORPORATIONS – application for derivative leave made under s 237(2) of the Corporations Act 2001 (Cth) – where first to third respondents initially opposed the application on grounds that the application was not made in good faith, was not in the best interests of the company, there was no serious question to be tried and notice requirement was not properly met – opposition to the application was subsequently withdrawn – determined that it is probable that the company will not bring proceedings itself, application made in good faith, in the best interests of the company, a serious question to be tried and notice requirement met – criteria in s 237(2) satisfied – leave to bring a derivative claim on behalf of the fourth respondent company granted – leave to file proposed amended originating application and concise statement granted – applicant to have the costs of the application

Legislation:
Corporations Act 2001 (Cth) ss 232, 233, 234 and 237(2)

Federal Court of Australia Act 1976 (Cth) s 37M and s 37N
Federal Court Rules 2011 (Cth) r 8.21 and r 8.23(2)

Cases cited: Swansson v RA Pratt Properties Pty Ltd (2002) 42 ACSR 313; [2020] NSWSC 583

Division: General Division

Registry: Victoria

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Number of paragraphs: 20

Date of hearing: 19 October 2022

Counsel for the applicant: Mr Sam Prendergast

Solicitor for the applicant Gordon Legal Pty Ltd

Counsel for the first to third respondents Mr Ivan Hristovski

Solicitor for the first to third respondents BSP Lawyers

Counsel for the fourth respondent The fourth respondent did not appear

ORDERS

VID 321 of 2021

BETWEEN:
MICHAEL DAVID KIDD

Applicant

AND:
JOONG LIANG KWEK

First Respondent

WAI HUANG SECK

Second Respondent

SIEW MUI CHEONG (and another named in the Schedule)

Third Respondent

ORDER MADE BY:

MCEVOY J

DATE OF ORDER:

19 OCTOBER 2022

THE COURT ORDERS THAT:
1.The applicant be granted leave to amend the originating process filed in the proceedings in the form of the amended originating application and concise statement annexed to the interlocutory application dated 1 February 2022, pursuant to r 8.21 and r 8.23(2) of the Federal Court Rules 2011 (Cth).
2.The applicant be granted leave to bring proceedings on behalf of the fourth respondent, Terrawood Pty Ltd, pursuant to s 237 of the Corporations Act 2001 (Cth) as against the first, second and third respondents.
3.The applicant have his costs of the interlocutory application dated 1 February 2022 from and including 15 July 2022 as against the first, second and third respondents.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

EX TEMPORE REASONS FOR JUDGMENT
(REVISED FROM THE TRANSCRIPT)
MCEVOY J:

Before the Court is an interlocutory application for derivative leave made under…

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 Kidd v Kwek

Details

AGLC: Kidd v Kwek [2022] FCA 1298
Case: [2022] FCA 1298
Decision Date: 19 October 2022

CaseChat Overview and Summary

The case of Kidd v Kwek involved an application for derivative leave under section 237(2) of the Corporations Act 2001 (Cth). The applicant, Kidd, sought to bring a derivative claim on behalf of the fourth respondent company, a corporation. The application was initially opposed by the first to third respondents, who argued that the application was not made in good faith, was not in the best interests of the company, did not present a serious question to be tried, and had not properly met the notice requirement. However, the opposition was subsequently withdrawn, and the court proceeded to consider the application.

The legal issues the court had to determine were whether the application satisfied the criteria set out in section 237(2) of the Corporations Act 2001 (Cth). These criteria include whether it was probable that the company would not bring the proceedings itself, whether the application was made in good faith, whether it was in the best interests of the company, whether there was a serious question to be tried, and whether the notice requirement was met. The court had to assess these issues to decide whether to grant leave for the applicant to bring the derivative claim.

In reaching its decision, the court examined the circumstances of the case and the arguments presented by the parties. The court found that it was probable that the company would not bring the proceedings itself, as it had not taken action to do so and had indicated that it would not. The court also found that the application was made in good faith, as the applicant had a genuine interest in protecting the company's assets and ensuring that its affairs were properly managed. Furthermore, the court concluded that the application was in the best interests of the company, as it would allow the company to address the alleged misconduct and prevent further harm. The court also found that there was a serious question to be tried, as the applicant had presented a credible case based on the available evidence. Finally, the court determined that the notice requirement had been met, as the relevant parties had been adequately informed of the application.

As a result, the court granted leave for the applicant to bring a derivative claim on behalf of the company. The court also granted leave to file the proposed amended originating application and concise statement, and ordered that the applicant was to have the costs of the application. The court's decision provided the applicant with the opportunity to pursue the derivative claim and seek redress for the company.

Orders