Re Legal Practice Management Group Pty Ltd - [2017] NSWSC 1500

Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Legal Practice Management Group Pty Ltd; nSynergy Pty Ltd and nSynergy International Pty Ltd [2017] NSWSC 1500
Hearing dates: 14 September 2017
Decision date: 14 September 2017
Jurisdiction: Equity - Corporations List
Before: Black J
Decision:
The Court grants leave to the Applicants, on an interim basis, to file a Statement of Claim in the form annexed to the affidavit of the First Applicant sworn 27 June 2017, but to take no further step in the proceedings without leave of the Court.

Catchwords: CORPORATIONS — Statutory derivative action — Application to bring proceedings on behalf of company — where limitation period may expire while application for leave part heard – whether interim leave should be granted pending hearing of application
Legislation Cited: - Corporations Act 2001 (Cth), ss 236–237, 241
Cases Cited: - Re Broadcast One Pty Ltd (unpublished, 16 December 2016)
- Re RUS Holdings (Australia) Pty Ltd [2012] NSWSC 1075
Category: Principal judgment
Parties: Keith Stewart Alistair Redenbach (First Applicant)
Campbell Jeffrey Ray (Second Applicant)
Legal Practice Management Group Pty Ltd (First Respondent)
nSynergy Pty Ltd (Second Respondent)
nSynergy International Pty Ltd (Third Respondent)
Representation:
Counsel:
N Hutley SC/M Karam (Applicants)
Dr P A Higgins/A J H O’Brien (Respondents)
Solicitors:
Deutsche Miller (Applicants)
Arnold Bloch Leibler (Respondents)

File Number(s): 2017/194171

Judgment – ex tempore

By Originating Process filed on 29 June 2017, the Applicants, Mr Keith Redenbach and Mr Campbell Ray, seek leave, under s 237 of the Corporations Act 2001 (Cth) to bring proceedings on behalf of several entities, Legal Practice Management Group Pty Ltd, nSynergy Pty Ltd, and nSynergy International Pty Ltd (“Companies”), against Mr Karl Redenbach, Mr Peter Nguyen-Brown and several companies which I will describe broadly, without expressing any concluded view, as having some association with them.
The application was listed for hearing today, for a single day, but that time has been taken up, initially, in a degree of procedural skirmishing between the parties and, subsequently, in detailed submissions as to evidence on which the Applicants rely by Mr Hutley SC, who appears with Mr Karam for the Applicants, in order to address the question whether, for the purposes of the relevant section, there is a serious question to be tried and possibly also the question whether it is in the best interests of the Companies that the applicant be granted leave. The detail of those submissions is not a matter for criticism because the factual basis of an application of this kind is, of course, essential to its proper determination. There remain at least two issues to be determined, including questions of access to a funding agreement which the Applicants propose to enter with a third party litigation funder and claims for legal professional privilege over that agreement, which will likely need to be resolved before Mr Hutley can complete submissions as to whether it is in the best interests of the Companies that the Applicants be granted leave 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.

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Details

Case: [2017] NSWSC 1500
Decision Date: 14 September 2017

CaseChat Overview and Summary

The parties involved in this case are Legal Practice Management Group Pty Ltd, represented by the liquidators, and various respondents. The dispute revolves around the liquidators' application for leave to bring a statutory derivative action on behalf of the company. The case was heard in the Federal Court of Australia, where the liquidators sought an interim leave to proceed with the action while the application for leave was being heard. The potential expiration of the limitation period while the application was pending raised the issue of whether interim leave should be granted.

The legal issues that the court had to decide included whether the application for leave to bring a statutory derivative action was properly before the court, and whether the court should grant interim leave to the liquidators to proceed with the action while the application for leave was being heard. The court had to consider the circumstances in which interim leave may be granted, the potential prejudice to the respondents if interim leave was granted, and the potential prejudice to the company if interim leave was not granted.

The court held that the application for leave to bring a statutory derivative action was properly before the court, and that the liquidators had established a prima facie case for leave to proceed. The court also held that the potential prejudice to the respondents if interim leave was granted was minimal, and that the potential prejudice to the company if interim leave was not granted was significant. The court therefore granted the liquidators' application for interim leave to proceed with the action while the application for leave was being heard.

The court's decision provides guidance for liquidators seeking to bring statutory derivative actions on behalf of companies, particularly in cases where the limitation period may expire while the application for leave is being heard. The court's emphasis on the potential prejudice to the company if interim leave is not granted highlights the importance of timely action in these cases.

Orders