Nece Pty Ltd v Ritek Incorporation - [1997] FCA 504

CATCHWORDS

Corporations Law - whether solicitors have authority to act for a party and, if not, whether the lack of authority can (and should) be made good by an order under s 1322 - whether a director may maintain proceedings as derivative proceedings

Corporations Law s 459G, s 260, s 1322(4), s 459J, s 459S, s 1322(6)

David Grant Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 269
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
Healy‑Hutchinson v Brayhead Ltd [1968] 1 QB 549
Re Qintex Ltd (No. 2) (1990) 2 ACSR 479
Daimler Company Ltd v Continental Tyre & Rubber Company (Great Britain) Ltd [1916] 2 AC 307
Foss v Harbottle (1843) 2 Hare 461
Scarel Pty Ltd v City Loan & Credit Pty Ltd (1988) 17 FCR 344
Wallersteiner v Moir (No. 2) [1975] 1 QB 373
North Sydney Brick & Tile Co Ltd v Darvall (1989) 17 NSWLR 327
Omega Estates Pty Ltd v Ganke (1962) 80 WN (NSW) 1218

NECE PTY LIMITED v RITEK INCORPORATION
No. NG 3791 OF 1996

RITEK INCORPORATION v NECE PTY LIMITED & ANOR
No. NG 3055 OF 1997

CORAM:      Lehane J
PLACE:        Sydney
DATE:          11 June 1997

IN THE FEDERAL COURT OF AUSTRALIA      )
NEW SOUTH WALES DISTRICT REGISTRY     )            No. NG 3791 of 1996
GENERAL DIVISION  )            No. NG 3055 of 1997

IN THE MATTER OF NECE PTY LIMITED
(A.C.N. 065 081 067)

MATTER NO. NG 3791 OF 1996

BETWEEN:               NECE PTY LIMITED
  A.C.N. 065 081 067)
  Applicant
                  AND:  RITEK INCORPORATION
  Respondent
MATTER NO. NG 3055 OF 1997

BETWEEN: RITEK INCORPORATION
Applicant

AND:  NECE PTY LIMITED
  (A.C.N. 065 081 067)
  First Respondent

PHILIP GRAHAM SIDNEY
Second Respondent

CORAM: Lehane J
PLACE: Sydney
DATE: 11 June 1997

MINUTE OF ORDERS

THE COURT ORDERS THAT:

The applicant file and serve short minutes of orders appropriate to give effect to these reasons for judgment.

NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA      )
NEW SOUTH WALES DISTRICT REGISTRY     )            No. NG 3791 of 1996
GENERAL DIVISION  )            No. NG 3055 of 1997

IN THE MATTER OF NECE PTY LIMITED
(A.C.N. 065 081 067)

MATTER NO. NG 3791 OF 1996

BETWEEN:               NECE PTY LIMITED
  (A.C.N. 065 081 067)
  Applicant
                  AND:  RITEK INCORPORATION
  Respondent
MATTER NO. NG 3055 OF 1997

BETWEEN: RITEK INCORPORATION
Applicant

AND:  NECE PTY LIMITED
  (A.C.N. 065 081 067)
  First Respondent

PHILIP GRAHAM SIDNEY
Second Respondent

CORAM: Lehane J
PLACE: Sydney

DATE: 11 June 1997

REASONS FOR JUDGMENT

LEHANE J

There are before the Court a number of motions in two separate proceedings. The first, which I shall call the statutory demand proceedings, is a proceeding in which Nece Pty Limited (Nece) purports to apply, under s 459G of the Corporations Law (the Law), to set aside a statutory demand served on it by Ritek Incorporation (Ritek). The reason for my use of the word “purports” will shortly become…

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: [1997] FCA 504
Decision Date: 11 JUNE 1997

CaseChat Overview and Summary

The case of Nece Pty Ltd v Ritek Incorporation involved two separate proceedings brought before the Federal Court of Australia by Ritek Incorporation against Nece Pty Limited and Phillip Graham Sidney, the managing director of Nece. The first proceeding was a statutory demand proceeding where Ritek sought to set aside a statutory demand served on Nece. The second proceeding was an oppression action where Ritek sought to wind up Nece on the grounds of oppression. The primary legal issues in both proceedings were whether Gilbert & Tobin, the solicitors acting on behalf of Nece, had the authority to represent Nece and if not, whether the lack of authority could be remedied by an order under s 1322 of the Corporations Law. Additionally, in the statutory demand proceeding, there was an issue of whether Sidney could maintain the proceeding as derivative proceedings.

In determining the authority of Sidney to instruct solicitors, the court found that there was no evidence of express or ostensible authority. The court also found that there was insufficient evidence to establish implied authority of Sidney to instruct solicitors to take proceedings in response to Ritek's winding-up application. The court further held that Sidney could not maintain the statutory demand proceedings as derivative proceedings.

Regarding the orders under s 1322 of the Corporations Law, the court found that the lack of authority was not essentially a procedural matter and that there was a contravention of Nece's constitution due to the deadlock between the 50% shareholders. The court held that the orders sought under s 1322(4) should not be made as there was no substantial injustice caused to Ritek in the oppression action and the consequences of the failure to commence authorised proceedings within the prescribed time in the statutory demand proceeding were already established.

The court reserved the question of costs until the conclusion of both proceedings and directed the applicant to file and serve short minutes of orders appropriate to give effect to its conclusions.

Orders