Promaco Conventions Pty Ltd v Dedline Printing Pty Ltd - [2007] FCA 586

FEDERAL COURT OF AUSTRALIA
Promaco Conventions Pty Ltd v Dedline Printing Pty Ltd [2007] FCA 586
CORPORATIONS – statutory derivative action ‑ application for leave under s 237 of the Corporations Act 2001 (Cth) to bring an action in the name of a company – company in liquidation ‑ whether Pt 2F.1A of the Act has application when company in liquidation – whether in the best interests of company that leave be granted
Corporations Act 2001 (Cth) ss 6(1), 236, 236(3), 237, 237(2), 237(3)(c)
Corporate Law Economic Reform Program Bill 1998 (Cth), Explanatory Memorandum
Federal Court Rules O 80
BL & GY International Co Ltd v Hypec Electronics Pty Ltd (2001) 164 FLR 268
Roach v Winnote Pty Ltd (in liq) [2001] NSWSC 822
Brightwell v RFB Holdings Pty Ltd (in liq) (2003) 171 FLR 464
Carpenter v Pioneer Park Pty Ltd (in liq) (2004) 211 ALR 457
Fresh Start Australia Pty Ltd (ACN 076 853 944); Scuteri v Lofthouse and Cauchi as liquidators of Fresh Start Australia Pty Ltd (in liq) (2007) 59 ACSR 327
Newcastle City Council v GIO General Limited (1997) 191 CLR 85
Ferguson v Wallbridge [1935] 3 DLR 66
Fargro Limited v Godfroy [1986] 1 WLR 1134
Scarel Pty Ltd v City Loan & Credit Corporation Pty Ltd (1988) 17 FCR 344
Christianos v Aloridge Pty Ltd (1995) 59 FCR 273
Foss v Harbottle (1843) 67 ER 189
Cape Bretton Company v Fenn (1881) 17 Ch D 198
Cadima Express Pty Limited v Deputy Commissioner of Taxation (2000) 157 FLR 424
Australian Securities and Investments Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485
Swansson v R A Pratt Properties Pty Ltd (2002) 42 ACSR 313
Corporate Law Economic Reform Program Proposal Paper No 3, “Directors Duties and Corporate Governance”
PROMACO CONVENTIONS PTY LTD (ACN 008 784 585) and MICHELLE ANNE AINSWORTH and BRONWEN JANE BREW and SHAREN MARGARET COOPER ON BEHALF OF THE PRINTING PLACE PTY LTD (IN LIQ) (ACN 097 673 295) v DEDLINE PRINTING PTY LTD (ACN 092 178 099) AND DEBRA LYN RIPLEY
WAD 385 OF 2005
SIOPIS J
24 APRIL 2007
PERTH

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

WAD 385 OF 2005

BETWEEN:

PROMACO CONVENTIONS PTY LTD (ACN 008 784 585)
First Plaintiff

MICHELLE ANNE AINSWORTH and BRONWEN JANE BREW and SHAREN MARGARET COOPER ON BEHALF OF THE PRINTING PLACE PTY LTD (IN LIQ) (ACN 097 673 295)
Second Plaintiffs

AND:

DEDLINE PRINTING PTY LTD (ACN 092 178 099)
First Defendant

DEBRA LYN RIPLEY
Second Defendant

JUDGE:

SIOPIS J

DATE OF ORDER:

24 APRIL 2007

WHERE MADE:

PERTH

THE COURT ORDERS THAT:
1.The second plaintiffs’ application dated 15 December 2005 be dismissed.
2.The second plaintiffs pay the second defendant’s costs.

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

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

WAD 385 OF 2005

BETWEEN:

PROMACO CONVENTIONS PTY LTD (ACN 008 784 585)
First Plaintiff

MICHELLE ANNE AINSWORTH…

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: [2007] FCA 586
Decision Date: 24 April 2007

CaseChat Overview and Summary

Promaco Conventions Pty Ltd, the applicant, sought leave under section 236 of the Corporations Act 2001 to bring proceedings on behalf of a company against Dedline Printing Pty Ltd, the respondent. The application was brought before the Federal Court of Australia. The crux of the matter was whether the applicant, Mrs Ripley, was entitled to bring proceedings on behalf of Promaco Conventions Pty Ltd under the statutory provisions of the Corporations Act. This hinged on whether the conditions for granting leave under section 237 of the Act were satisfied, particularly whether it was in the best interests of the company for Mrs Ripley to be granted leave.

The court examined whether the decision of the company's directors not to proceed with the litigation was made in good faith, for a proper purpose, and without any material personal interest. The court also considered whether the directors had informed themselves about the subject matter to the extent reasonably appropriate and whether their belief that the decision was in the best interests of the company was rational. The court found that the directors had indeed acted in accordance with these requirements, and thus a rebuttable presumption arose that granting leave to Mrs Ripley was not in the best interests of the company. The applicant failed to rebut this presumption.

The Federal Court dismissed the application, ruling that it was not in the best interests of Promaco Conventions Pty Ltd for Mrs Ripley to be granted leave to bring proceedings. Consequently, the applicant was ordered to pay the costs of the second defendant, Dedline Printing Pty Ltd.

Orders

Orders of the court

1. The second plaintiffs’ application dated 15 December 2005 be dismissed.

2. The second plaintiffs pay the second defendant’s costs.

Background

Background to the litigation

I granted Mrs Ripley a certificate under O 80 of the Federal Court Rules in respect of the second day of the adjourned hearing of this application.Statutory background Section 236 of the Act provides:(1)A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:(a)the person is:(i) a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or(ii) an officer or former officer of the company; and(b)the person is acting with leave granted under section 237.(2)Proceedings brought on behalf of a company must be brought in the company’s name.(3)The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished. The relevant provisions of s 237 of the Act provide:(1)A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.(2)The Court must grant the application if it is satisfied that:(a)it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and(b)the applicant is acting in good faith; and(c)it is in the best interests of the company that the applicant be granted leave; and(d)if the applicant is applying for leave to bring proceedings – there is a serious question to be tried; and(e)either:(i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or(ii) it is appropriate to grant leave even though subparagraph (i) is not satisfied.(3)A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that:(a)the proceedings are:(i) by the company against a third party; or(ii) by a third party against the company; and(b)the company has decided:(i) not to bring the proceedings; or(ii) not to defend the proceedings; or(iii) to discontinue, settle or compromise the proceedings; and(c)all of the directors who participated in that decision:(i) acted in good faith for a proper purpose; and(ii) did not have a material personal interest in the decision; and(iii) informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and(iv) rationally believed that the decision was in the best interests of the company.The director’s belief that the decision was in the best interests of the company is a rational one unless the belief is one that no reasonable person in their position would hold.(4)For the purposes of subsection (3):(a)a person is a third party if:(i) the company is a public company and the person is not a related party of the company; or(ii) the company is not a public company and the person would not be a related party of the company if the company were a public company; and(b)proceedings by or against the company include any appeal from a decision made in proceedings by or against the company.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

SIOPIS J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: SIOPIS J

Full text does not contain this section.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 385 OF 2005

JUDGE:	SIOPIS J
DATE OF ORDER:	24 APRIL 2007
WHERE MADE:	PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 385 OF 2005