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Power v Ekstein

Power v Ekstein

Case [2010] NSWSC 137 3 March 2010

Corporate Law & Governance

Derivative Claims

Oppression

Serious Question to be Tried

Funds Limitation

Independent Legal Representation

Corporate Law & Governance

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CITATION: Power v Ekstein [2010] NSWSC 137

HEARING DATE(S): 1 December 2009

JUDGMENT DATE :
3 March 2010

JURISDICTION: Equity

JUDGMENT OF: Austin J

DECISION: 1. Subject to Order 2
ORDER under s 237 of the Corporations Act 2001 (Cth) that leave be granted to the plaintiff
nunc pro tunc
to bring proceedings on behalf of each of the second
third
fourth
fifth and sixth defendants ("the Defendant Companies")
by filing and prosecuting the Amended Statement of Claim in these proceedings verified by her on 17 March 2009
to the extent that the Amended Statement of Claim asserts or seeks relief in respect of a cause or causes of action of any of the Defendant Companies.
2. Subject to further order:
(a) the commencement and operation of Order 1 is suspended
(b) Order 1 will not take effect until the plaintiff files with the Court her written undertaking to the Court to pay and bear and indemnify each of the Defendant Companies against all costs
charges and expenses of and incidental to the bringing and continuation of the derivative claims for which leave is granted ("the Undertaking")
(c) Order 1 will take effect upon the filing of the Undertaking
provided that the Undertaking is filed on or before 22 March 2010.
3. Upon the plaintiff giving the usual undertaking as to damages
ORDER until further order that the first and ninth defendants and each of them be restrained
by themselves
their servants or agents
from causing or permitting:
(a) all and any funds or other property of the third
fourth
fifth and sixth defendants ("the Relevant Companies"
each a "Relevant Company") to be applied for the defence or conduct of these proceedings
including the cross-claim
otherwise than for the purposes stated in Order 4 ("the Permitted Purposes")
and
(b) the Relevant Companies to take any steps in the proceedings
otherwise than for the Permitted Purposes.
4. The Permitted Purposes are
in respect of the Relevant Companies or any Relevant Company:
(a) the defence or conduct of the proceedings to the extent that the plaintiff seeks a compulsory purchase order against a Relevant Company or Relevant Companies
or seeks relief challenging the validity of corporate actions of a Relevant Company or Relevant Companies
(b) complying with obligations in respect of discovery
(c) any purpose agreed by the plaintiff's solicitor in writing
and
(d) the defence or conduct of the proceedings with the prior leave of the Court.
5. Upon the plaintiff giving the usual undertaking as to damages
ORDER until further order that the first and ninth defendants and each of them be restrained
by themselves
their servants or agents
from causing or permitting the Relevant Companies or any Relevant Company to retain or continue to retain Claudius Bilinsky to act for them or it in the proceedings.

CATCHWORDS: CORPORATIONS - statutory derivative action - whether derivative claims may be added to proceedings seeking relief against oppression and raising other matters - whether companies, already joined as defendants, are required to…

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 Power v Ekstein

Details

AGLC: Power v Ekstein [2010] NSWSC 137
Case: [2010] NSWSC 137
Decision Date: 3 March 2010

CaseChat Overview and Summary

The matter before the court involved a dispute between shareholders of two companies, Power and Ekstein. The plaintiff sought to add derivative claims to existing proceedings against the two companies, which were already seeking relief against oppression and raised other matters. The plaintiff also sought to require the companies, already joined as defendants, to become plaintiffs. The court was required to determine whether the derivative claims could be added to the existing proceedings and whether the companies, already joined as defendants, were required to become plaintiffs. The court also had to consider whether there was a serious question to be tried in relation to the derivative claims and whether the plaintiff had shown that it was appropriate to make formal orders to limit the use of the companies' funds in the litigation and to require independent legal representation.

The court found that the derivative claims could be added to the existing proceedings, as they were closely related to the other matters being litigated. However, the court held that the companies, already joined as defendants, were not required to become plaintiffs. The court found that there was a serious question to be tried in relation to the derivative claims, and that it was appropriate to make formal orders to limit the use of the companies' funds in the litigation and to require independent legal representation. The court considered the potential prejudice to the companies if they were required to bear the costs of the litigation, and the potential for conflicts of interest if the companies were required to instruct their own lawyers.

The court made formal orders limiting the use of the companies' funds in the litigation and requiring independent legal representation for the companies. The court found that the plaintiff had not shown that it was appropriate to make any other formal orders, such as requiring the companies to become plaintiffs or limiting the use of their funds in other ways. The court considered the potential prejudice to the companies if they were required to bear the costs of the litigation, and the potential for conflicts of interest if the companies were required to instruct their own lawyers.

The court's final orders included the addition of derivative claims to the existing proceedings, the limitation of the use of the companies' funds in the litigation, and the requirement for independent legal representation for the companies. The court did not require the companies to become plaintiffs or make any other formal orders. The court's decision provides guidance on the appropriate scope of derivative claims in statutory derivative actions and the factors that should be considered when making formal orders in such proceedings.

Orders