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Maher v Honeysett & Maher Electrical Contractors Pty Ltd

Maher v Honeysett & Maher Electrical Contractors Pty Ltd

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Case Copied 25 August 2005 44 min read

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CITATION:
Maher v Honeysett & Maher Electrical Contractors [2005] NSWSC 859

HEARING DATE(S): 15/08/05

JUDGMENT DATE :

25 August 2005

JUDGMENT OF:
Brereton J

DECISION:
See Judgment at Paragraph 62

CATCHWORDS:
CORPORATIONS - statutory derivative action - application for leave under Corporations Act 2001 (Cth) s.236, 237 by member of deadlocked company to defend proceedings against company & to bring cross claim against other member and director - whether leave may be granted if applicant fails to satisfy all five criteria in s.237(2) - whether leave may be granted to defend proceedings on behalf of a company - whether leave may be granted nunc pro tunc - whether judgment as to probability of company not itself bringing proceedings to be made on current facts or deferred - whether good faith requirement satisfied in absence of sworn assertion of honest belief in cause of action - whether personal character and qualities of applicant relevant under s.237(2)(c) - whether leave should be on terms that company protected from costs - whether leave to defend on behalf of company should be granted when same issues can and will be raised by other defendant - appropriate costs order when granting leave

LEGISLATION CITED:
(CTH) Corporations Act 2001 s.236, 237

CASES CITED:
Swansson v R A Pratt Properties Pty Ltd (2002) 42 ACSR 313
Fiduciary Ltd v Morningstar Research Pty Ltd [2005] NSWSC 442
Carpenter v Pioneer Park Pty Ltd (in liq) (2004) 211 ALR 457
Goozee v Graphic World Group Holdings Pty Limited (2002) 42 ACSR 534
Charlton v Baber (2003) 47 ACSR 31
Jeans v Deangrove Pty Ltd [2001] NSWSC 84
Herbert v Redemption Investments Pty Limited [2002] QSC 340
Spokes v Grosvenor Hotel Co Limited [1897] 2 QB 124
Keyrate Pty Limited v Hamarc Pty Limited [2001] NSWSC 491 [17]
RTP Holdings Pty Ltd v Roberts (2000) 36 ACSR 170
Cf Harris v Caladine (1991) 172 CLR 84
Peters' American Delicacy Co Limited v Heath (1939) 61 CLR 457
Russell Kinsella Pty Limited (in liq) v Kinsella [1983] 2 NSWLR 452
Richard Brady Franks Limited v Price (1937) 58 CLR 112
Walker v Wimborne (1976) 137 CLR 1; 3 ACLR 529 Spies v The Queen (2000) 201 CLR 603; 173 ALR 529; 35 ACSR 500
McLean v Lake Como Venture Pty Limited [2003] QSC 562
Devereaux Holdings Pty Limited v Pelsart Resources NL (No 2) BC8500667

PARTIES:
David Maher (Plaintiff)
Honeysett & Maher Electrical Contractors Pty Ltd (First Defendant)
Mark William Honeysett (Second Defendant

FILE NUMBER(S):
SC 6055 of 2004

COUNSEL:
J W Dodd (plaintiff)
G Sirtes (defendants)

SOLICITORS:
MCG Lawyers (Plaintiff)
Morton & Harris (Defendants)

LOWER COURT JURISDICTION:

- 1 -

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

BRERETON J

25 August 2005

6055 / 04 Maher v Honeysett & Maher Electrical Contractors P/L

JUDGMENT

1 BRERETON J: The plaintiff David John Maher and the first defendant Mark William Honeysett are the only directors of and equal shareholders in the second defendant Honeysett…

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.

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Details

Case: [2005] NSWSC 859
Decision Date: 25 August 2005

CaseChat Overview and Summary

In the case, the applicant, Maher, sought leave to defend legal proceedings against a company, Honeysett & Maher Electrical Contractors Pty Ltd, on behalf of the company and to bring a cross-claim against other members and directors. The dispute arose in the Federal Circuit Court of Australia, where the primary judge denied the application for leave. The applicant argued that the court should grant leave despite not meeting all criteria under the Corporations Act 2001 (Cth) s.237(2). The court examined whether leave could be granted if the applicant failed to satisfy all five criteria, whether leave could be granted to defend proceedings on behalf of a company, whether leave could be granted nunc pro tunc, and whether judgment as to the probability of the company not bringing proceedings should be made on current facts or deferred.

The legal issues included the interpretation of s.237(2) of the Corporations Act 2001 (Cth), specifically whether leave could be granted despite not meeting all criteria, whether leave could be granted nunc pro tunc, and the relevance of the applicant's personal character and qualities. The court also considered the good faith requirement and whether it could be satisfied without a sworn assertion of honest belief in the cause of action. Additionally, the court needed to determine if leave to defend on behalf of the company should be granted when the same issues could be raised by another defendant, and the appropriate costs order when granting leave.

The Federal Circuit Court of Australia upheld the primary judge's decision to deny the application for leave. The court held that the applicant did not satisfy all criteria under s.237(2) and that leave could not be granted nunc pro tunc. The court also found that the applicant's personal character and qualities were not relevant under s.237(2)(c), and that the good faith requirement was not met without a sworn assertion of honest belief in the cause of action. Furthermore, the court determined that leave should not be granted to defend on behalf of the company when the same issues could be raised by another defendant. The court ordered that the applicant pay the costs of the respondent's application to dismiss the applicant's application for leave.

Orders