Mount Gilead Pty Limited v Lee Macarthur-Onslow - [2021] NSWSC 396

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Mount Gilead Pty Limited v Lee Macarthur-Onslow [2021] NSWSC 396
Hearing dates: 16 April 2021
Date of orders: 16 April 2021
Decision date: 19 April 2021
Jurisdiction: Equity - Corporations List
Before: Williams J
Decision:
Grant leave to the second plaintiff nunc pro tunc on an interim basis to file the Summons and Commercial List Statement in proceeding 2021/101177.

Catchwords:
CORPORATIONS — statutory derivative action — application for leave to bring proceedings on behalf of company — potential expiry of limitation period — whether interim leave should be granted

Legislation Cited:
Corporations Act 2001 (Cth), ss 236, 237, 241

Cases Cited:
Re Legal Practice Management Group Pty Ltd [2017] NSWSC 1500

Category: Principal judgment
Parties: Mount Gilead Pty Limited (ACN 008 499 189) (First Plaintiff)
Katrina Julia Denzil Hobhouse (Second Plaintiff)
Lee Macarthur-Onslow (First Defendant)
Andrew William Martin (Second Defendant)
Old Mill Properties Pty Limited (ACN 147 936 963) (Third Defendant)
Jones Lang Lasalle (NSW) Pty Limited (ACN 002 851 025) (Fourth Defendant)
Representation:
Counsel:
Ms T Wong with Mr G Ng (Second Plaintiff)
Mr M Addison, solicitor (First Defendant)
Ms S Mirzabegian (Fourth Defendant)
Solicitors:
Ashurst (Second Plaintiff)
Keypoint Law (First Defendant)
Norton Rose Fulbright (Fourth Defendant)

File Number(s): 2021/101177
Publication restriction: N/A

Judgment

These proceedings were commenced by Summons and Commercial List Statement filed on 12 April 2021.
Mount Gilead Pty Limited (MGPL) is named as the first plaintiff.
Lady Katrina Hobhouse is the second plaintiff.
Mr Lee Macarthur-Onslow is the first defendant.
Lady Hobhouse and Mr Macarthur-Onslow are siblings and beneficiaries of a trust known as the Mount Gilead Trust. They are also directors of Kalemon Pty Limited, which is the trustee of the Mount Gilead Trust and the owner of all of the shares in MGPL.
Mr Macarthur-Onslow is governing director of MGPL. Under MGPL’s Constitution, that position confers on him complete management control of MGPL.
Lady Hobhouse is a former director of MGPL.
The proceedings arise out of transactions that Mr Macarthur-Onslow allegedly caused MGPL to enter into on 17 April 2015. Lady Hobhouse understands, based on the documents available to her and caveats lodged by Lendlease Communities (Mt Gilead) Pty Ltd (Lendlease), that MGPL granted Lendlease options to purchase two parcels of land owned by MGPL. Lady Hobhouse understands that Lendlease has exercised its option over one of those parcels but is yet to do so in respect of the other parcel.
In the Commercial List Statement, the plaintiffs allege that the price at which Lendlease was given the option to purchase each parcel of land pursuant to these transactions represented a significant undervalue.
The plaintiffs allege that, in causing MGPL to enter into the transactions, Mr Macarthur-Onslow breached his duties of care and skill under s 180 of the Corporations Act 2001 (Cth) and at general law. In the Summons, MGPL claims an order that Mr Macarthur-Onslow pay compensation pursuant to s 1317H of the Corporations Act or equitable…

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: [2021] NSWSC 396
Decision Date: 19 April 2021

CaseChat Overview and Summary

The Federal Court heard an application by Mount Gilead Pty Limited to bring a statutory derivative action on behalf of the company against Lee Macarthur-Onslow. The dispute centred on the potential expiration of the limitation period for the company to initiate legal proceedings, and the need for interim leave to proceed with the application before the period elapsed. The central legal issue before the court was whether the applicant company had demonstrated sufficient grounds to warrant the grant of interim leave to bring the derivative action, considering the impending limitation period.

The court examined the criteria for granting interim leave, which required the applicant to establish that the potential expiry of the limitation period was imminent, that the application had reasonable prospects of success, and that there were no significant countervailing considerations. The applicant argued that the limitation period was about to expire and that the proposed action had merit, as there were indications of potential breaches of duty by the respondent. The respondent contended that the application should be dismissed, citing insufficient evidence of wrongdoing and the speculative nature of the claims. The court considered these arguments, along with the urgency of the limitation issue and the merits of the proposed action.

In delivering the judgment, the court found that the applicant had adequately demonstrated the urgency of the limitation period and that the application had reasonable prospects of success. The court was satisfied that the applicant had shown sufficient evidence of potential breaches of duty and that the proposed action was not speculative. Consequently, the court granted interim leave, allowing the applicant to proceed with the statutory derivative action before the limitation period expired. The respondent's arguments were not deemed sufficient to outweigh the applicant's need to protect the company's interests. The court emphasised the importance of timely action in such circumstances and noted that the final determination of the application would depend on the further evidence presented at trial.

Orders