SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Pesec v Consolidated Builders Limited |
Citation: | [2019] ACTSC 142 |
Hearing Date: | 28 May 2019 |
DecisionDate: | 5 June 2019 |
Before: | McWilliam AsJ |
Decision: | [59] |
Catchwords: | PRACTICE AND PROCEDURE – PRELIMINARY DISCOVERY – Application for discovery to identify right to claim relief and potential defences – whether an arguable cause of action exists |
Legislation Cited: | Corporations Act 2001 (Cth) ss 1317H, 1317K, 180, 181, 182, 185, 236, 237 Court Procedures Act 2004 (ACT) Pt 5A Court Procedures Rules 2006 (ACT) r 651 |
Cases Cited: | Adler v ASIC [2003] NSWCA 131; 46 ACSR 504 Barnes v Addy (1874) LR 9 Ch App 244 Waller v Waller [2009] WASCA 61 |
Parties: | Anthony Pesec (Plaintiff) Consolidated Builders Limited (ACN 008 654 411) (Defendant) |
Representation: | Counsel R Markham (Plaintiff) M O’Meara (Defendant) |
| Solicitors Adero Law (Plaintiff) Clayton Utz (Defendant) | |
File Number: | SC 181 of 2019 |
McWilliam AsJ
Mr Anthony Pesec, the plaintiff, is a shareholder of Consolidated Builders Limited, the defendant (Company). The Company was formed by a group of Canberra based builders and property developers and is in the business of purchasing, subdividing, developing and managing land assets.
The plaintiff has concerns about a series of 11 options to purchase shares in the Company, which were granted to the managing director of the defendant, Mr Josip Zivko, over the period 1 July 2000 to 30 July 2017, some of which have been exercised. The options have been defined in chronological order in the present application as Option 1, Option 2 and so forth and I will use the same terminology for convenience.
The concerns are that:
(a) Mr Zivko received a substantial body of shares at below market value and without the requisite consent or approval of the shareholders (as set out in the Company’s articles of association and constitution);
(b) When viewed as part of Mr Zivko’s remuneration as managing director, the share options amounted to a total remuneration over the years that was unreasonable having regard to the Company’s assets and revenue; and
(c) Mr Zivko has otherwise caused the issuing of shares or the exercising of options to parties related to him…
Continue reading Pesec v Consolidated Builders Ltd
Sign in free to access the full text
- AGLC
- Pesec v Consolidated Builders Ltd [2019] ACTSC 142
- Case
- [2019] ACTSC 142
- Decision Date
CaseChat Overview and Summary
The court considered that the plaintiff had demonstrated an arguable cause of action by showing that he had made reasonable enquiries and had not been provided with sufficient information by the company. The court also accepted that the documents sought were necessary to complete those enquiries. The court noted that Consolidated Builders Ltd had established a subcommittee to investigate the plaintiff's allegations and that the plaintiff's concerns were known to the company. However, the company had declined to provide the documents sought by the plaintiff. The court held that the plaintiff had satisfied the criteria for exercising the court's discretion under rule 651(5) of the Rules, which required the plaintiff to show that the documents were necessary to determine whether to bring proceedings, that the plaintiff had made reasonable enquiries without success, and that the documents were held by the company, which was the potential defendant in the proposed proceedings.
The court made an order granting the plaintiff's application for preliminary discovery of certain documents from Consolidated Builders Ltd. The orders required the company to provide the documents within 14 days of the order and to provide an undertaking as to costs. The court also noted that the company was not entitled to seek costs of the application from the plaintiff.
Orders
Orders of the court
[59]
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
The plaintiff is considering seeking the leave of the Court to bring one or a number of derivative actions on behalf of the Company under ss 236 and 237 of the Corporations Act 2001 (Cth) (Corporations Act), against either the managing director or the board of directors of the Company. He claims that, having made reasonable enquiries, he cannot obtain sufficient information to decide whether to commence the proceedings he has in contemplation. The plaintiff’s concerns are known to the Company, who on 11 January 2019 resolved to establish a subcommittee to investigate the allegations of the plaintiff. The subcommittee comprises three members, being Mr Noel McCann (a director of the Company since 2007), and two shareholders: Mr John Harris and Mr Ross Barrett OAM. All three committee members are said to be independent of both the plaintiff and Mr Zivko. The evidence discloses that Mr McCann is one of the directors whose conduct the plaintiff questions, due to him being a director during the relevant period. The committee is yet to reach any final conclusions as to the concerns raised by the plaintiff, and says that it will be some months before it will do so. To date it has also declined to provide the documents sought by the plaintiff so that he can complete his own enquiries. Accordingly, by Originating Application dated 12 April 2019, the plaintiff seeks orders pursuant to r 651 of the Court Procedures Rules 2006 (ACT) (Rules) requiring the Company to give preliminary discovery of certain documents. The documents sought in the application were in broader terms than what was ultimately sought after the plaintiff’s legal representative provided further clarification at the hearing. As pressed, for each Option or at the time when an Option was exercised, the plaintiff now seeks: On the evidence before the Court, Options 1-6 have each been exercised by the managing director, over the period 2002–2010. Option 7 was exercised in 2015. Option 8 was not exercised, and it is unclear whether Options 9 and 10 have been exercised. Option 11 has not yet been exercised, but does not expire until 31 December 2019. Rule 651 of the Rules is in the following terms: In exercising the Court’s discretion under r 651(5) of the Rules in the present case, the parties generally agreed that the plaintiff must show: The plaintiff bears the onus of satisfying the Court of these matters: Morton v Nylex Ltd [2007] NSWSC 562 at [33], cited in Hall v Commonwealth [2018] ACTSC 79 (Hall) at [22]. Consideration has been given to who is the ‘potential defendant’ in the present case. The documents are sought from the Company itself, although as will be seen, the plaintiff is considering litigation against the managing director and other directors. I am nevertheless satisfied that documents are being sought from an appropriate party because in an application for leave to commence proceedings on behalf of the Company under s 237 of the Corporations Act, the Company would be named as the respondent to that application. Accordingly, in the first instance, the Company will be the ‘potential defendant’, even though, if leave is granted by the Court, the Company will become the moving party in any subsequent action against the managing director or the board of directors.