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Magafas v Carantinos

Magafas v Carantinos

Case [2006] NSWSC 1459 27 November 2006

Breach of Directors' Duties

Standing

Interlocutory Orders

Costs

Corporate Law & Governance

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CITATION: Magafas v Carantinos & Anor [2006] NSWSC 1459

HEARING DATE(S): 27 November 2006

JURISDICTION: Equity Division

JUDGMENT OF: Brereton J

EX TEMPORE JUDGMENT DATE: 11/27/2006

DECISION: Leave granted to bring statutory derivative action and to amend statement of claim. Interlocutory injunctive relief granted to preserve assets of company and ensure notice to plaintiff. Defendant to pay plaintiff’s costs.

CATCHWORDS: CORPORATIONS – statutory derivative action – application for leave under Corporations Act 2001 (Cth) ss 236, 237 by member and director of deadlocked company to bring proceedings for breach of directors duties against other director – whether questions of credit of applicant relevant to good faith requirement – held, not relevant – where same issues will be raised in proceedings as presently constituted whether or not leave is granted – COSTS – interlocutory application – where respondent puts applicant to proof of all matters – costs order in favour of applicant independent of final outcome of proceedings warranted.

LEGISLATION CITED: Corporations Act 2001 (Cth), ss 232, 237
Fair Trading Act 1995 (NSW)

CASES CITED: Carpenter v Pioneer Park Pty Limited (in liq) (2004) 211 ALR 457
Charlton v Baber (2003) 47 ACSR 31
Fiduciary Limited v Morningstar Research Pty Limited [2005] NSWSC 442
Goozee v Graphic World Group Holdings Pty Limited (2002) 42 ACSR 534
Jeans v Deangrove Pty Ltd [2001] NSWSC 84
Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859
Swansson v R A Pratt Properties Pty Ltd (2002) 42 ACSR 313

PARTIES: Anthony Magafas (first plaintiff)
Pac-Com Pty Limited (second plaintiff)
Peter Carantinos (first defendant)
Fotini Carantinos (second defendant)

FILE NUMBER(S): SC 2670/06

COUNSEL: Mr T Alexis SC (plaintiffs)
Mr I Faulkner SC w Ms E Holt (defendants)

SOLICITORS: Rockliffs, Solicitors & Attorneys (plaintiffs)
Munro Lawyers (defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Monday 27 November 2006

2670/06 Anthony Magafas v Peter Carantinos & Anor

JUDGMENT (Ex tempore)

1 HIS HONOUR: The plaintiff Anthony Magafas and the first defendant Peter Carantinos are the two directors of and equal 50% shareholders in Pac-Com Pty Limited. Pac-Com is the trustee of the Karafas Trust, a hybrid unit discretionary trust of which members of the Magafas family and members of the Carantinos family are the beneficiaries. The second defendant, Fotini Carantinos, is the wife of the first defendant.

2 Mr Magafas has commenced these proceedings against Mr and Mrs Carantinos alleging, first, that he and Mr Carantinos in the early to mid 1990s entered into a joint venture or partnership for the acquisition, development and sale of real estate; secondly, that in pursuance of that joint venture three properties were acquired (one comprising three lots at 39-43 Riverside Drive, Dulwich Hill, a second at St Peters, and a third at Katoomba; the Katoomba property has since been sold and does not require further attention in the present application, and the Dulwich Hill property has also been sold); and thirdly, that Mr Carantinos owned him fiduciary duties as a partner or…

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 Magafas v Carantinos

Details

AGLC: Magafas v Carantinos [2006] NSWSC 1459
Case: [2006] NSWSC 1459
Decision Date: 27/11/2006

CaseChat Overview and Summary

Magafas v Carantinos involved a dispute between members and directors of a company over a statutory derivative action. The applicant sought leave to bring proceedings for breaches of directors' duties against another director. The case was heard in the Federal Circuit Court of Australia. The central issue was whether questions of the applicant's credit were relevant to the good faith requirement for granting leave to bring such an action under sections 236 and 237 of the Corporations Act 2001. Additionally, the court had to consider the appropriate costs order for the interlocutory application, particularly given that the respondent had put the applicant to proof of all matters.

The court held that questions of the applicant's credit were not relevant to the good faith requirement. The primary focus was on whether the applicant had a bona fide belief that the company had suffered a wrong or injustice. The court emphasised that the same issues would be raised in the proceedings regardless of whether leave was granted. In terms of costs, the court found that the respondent's actions in requiring the applicant to prove all matters warranted a costs order in favour of the applicant, independent of the final outcome of the proceedings. The court determined that the costs should reflect the respondent's conduct during the interlocutory application.

The Federal Circuit Court granted the applicant leave to bring the proceedings and made a costs order in favour of the applicant. This decision clarified the scope of the good faith requirement in statutory derivative actions and highlighted the importance of fair conduct in interlocutory applications.

Orders