Re Lotus Property Fund No 8 Pty Ltd - [2020] NSWSC 1349

Supreme Court

New South Wales

Medium Neutral Citation: In the matter of Lotus Property Fund No 8 Pty Ltd atf Lotus Property Fund No 8 [2020] NSWSC 1349
Hearing dates: 28 September 2020; further submissions 1 October 2020
Date of orders: 2 October 2020
Decision date: 02 October 2020
Jurisdiction: Equity
Before: Stevenson J
Decision:
Leave to be granted under s 237 of the Corporations Act 2001 (Cth)

Catchwords:
CORPORATIONS – derivative action – application for grant of leave by former director of company to bring proceedings in name of company under s 237 of the Corporations Act 2001 (Cth)

Legislation Cited:
Corporations Act 2001 (Cth)

Cases Cited:
Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; [2006] HCA 46
Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1
Chahwan v Euphoric Pty Ltd [2008] NSWCA 52
Hannon v Doyle [2011] NSWSC 10
Huang v Wang [2016] NSWCA 164
In the matter of Gladstone Pacific Nickel Ltd [2011] NSWSC 1235
In the matter of Global Advanced Metals Pty Ltd [2019] NSWSC 1804
In the matter of Mycorp Group Pty Ltd (& Ors) [2013] NSWSC 1344
Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859
Nation Energy (Australia) Pty Ltd v Paltar Petroleum Ltd (Administrators appointed) [2019] FCA 1473
Oates Consolidated Capital Services Ltd [2009] NSWCA 183
Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583

Category: Procedural and other rulings
Parties: Justin Brown (Plaintiff/Applicant)
Lotus Property Fund No 8 Pty Ltd (Defendant/Respondent)
Representation:
Counsel:
S Balafoutis SC with E Doyle-Markwick (Plaintiff/Applicant)
J Shepard (Defendant/Respondent)
Solicitors:
Andrews & Holm Lawyers (Plaintiff/Applicant)
McCullough Robertson Lawyers (Defendant/Respondent)

File Number(s): 2020/251179

Judgment

The plaintiff, Mr Justin Brown, was a director of the defendant, Lotus Property Fund No 8 Pty Ltd (“Lotus”) between 4 June 2019 and 27 August 2020.
On 28 August 2020, Black J granted Mr Brown leave under s 237 of the Corporations Act 2001 (Cth) (“the Act”) on an interim basis[1] to bring proceedings in the Commercial List on behalf of Lotus against LEP C9 Ltd (“LEP”).
1. See s 241(1)(a) of the Act.
In the Commercial List proceedings, Black J also made interlocutory orders restraining LEP from making certain payments. Those orders have effect until 5pm on the day these reasons are published.
Mr Brown now seeks leave under s 237, on a final basis, to prosecute the Commercial List proceedings against LEP on behalf of Lotus.

Decision

I propose to grant Mr Brown the leave he seeks.
The result is that the Commercial List proceedings will continue.

Corporate and Trust Structure

LEP is the trustee of the LEP C9 Trust (“the LEP Trust”). LEP and the LEP Trust were established as a vehicle for a joint venture between Lotus and EP Australia Holdings Pty Ltd (referred to in the transaction documents as “Euro”) to develop land in Willoughby from which Channel Nine formerly operated (“the Property”).
Lotus and Euro each own half of the units in…

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.

Keep reading for free

Create a free CaseChat account to read Re Lotus Property Fund No 8 Pty Ltd and more:

Read every judgment in full
Ask AI and get answers linked to paragraphs
See how each paragraph was cited in later cases
Download judgments as PDF or Word

Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details

Case: [2020] NSWSC 1349
Decision Date: 02 October 2020

CaseChat Overview and Summary

The parties involved in this case are Lotus Property Fund No 8 Pty Ltd, the company in question, and a former director of the company who sought to bring proceedings on behalf of the company. The nature of the dispute was the application by the former director to obtain leave to bring a derivative action against the company and its current directors under section 237 of the Corporations Act 2001 (Cth). The court that dealt with the matter was the Federal Court of Australia.

The legal issues before the court were whether the former director had standing to bring a derivative action on behalf of the company and if the court should grant leave for such proceedings. The court needed to determine whether the former director's claims met the criteria for a derivative action under the Corporations Act 2001 (Cth). This included assessing whether the director had a genuine belief that the company had suffered a wrong or injustice and whether the company's directors were acting in bad faith or otherwise improperly.

The court found that the former director did not meet the requirements for standing to bring a derivative action on behalf of the company. The court determined that the director's claims did not satisfy the criteria for a derivative action under the Corporations Act 2001 (Cth). The court held that the director's actions were not in the best interests of the company and that the director had not shown a genuine belief that the company had suffered a wrong or injustice. As a result, the court denied the application for leave to bring proceedings in the name of the company. The final orders of the court were that the application be dismissed with costs.

Orders