JUDGE:	Button J
WHERE HELD:	Melbourne
DATE OF HEARING:	16 September 2021
DATE OF JUDGMENT:	23 September 2021
CASE MAY BE CITED AS:	Re Woodbine Project Pty Ltd
MEDIUM NEUTRAL CITATION:	[2021] VSC 617

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CORPORATIONS – Derivative leave application – Section 237 Corporations Act 2001 (Cth) – Application to defend an existing proceeding – Allegation that the director of the company has a conflict of interest – Whether it is probable that the company will not properly take responsibility for the proceeding – Whether grant of leave is in the best interests of the company – Whether application is brought in good faith – Whether undertaking to indemnify the company’s costs required – Whether undertaking to indemnify company against adverse costs orders required – Leave granted.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	S Wartski	Q&L Lawyers
For the Defendants	P Bornstein	Oceania Lawyers and Consultants

TABLE OF CONTENTS

Background......................................................................................................................................... 1

Evidence............................................................................................................................................... 3

The companies, the plaintiffs, the funds and Mr Li................................................................... 4

The plaintiffs’ awareness of the County Court Proceeding...................................................... 6

The County Court Proceeding: further detail............................................................................... 8

Legislation and principles.............................................................................................................. 15

Section 237(2)(a): properly taking responsibility for the proceedings, or steps in them.. 16
Section 237(2)(b): acting in good faith...................................................................................... 18
Section 237(2)(c): best interests.................................................................................................. 19
Section 237(2)(d): serious question to be tried........................................................................ 21
Indemnities in respect of costs and adverse costs orders: authorities................................ 22

Consideration.................................................................................................................................... 30

Standing........................................................................................................................................ 30
Whether it is probable that Woodbine will not itself properly take responsibility for the County Court Proceeding or steps in it........................................................................................ 31
Good faith..................................................................................................................................... 33
Best interests................................................................................................................................ 34
The rebuttable presumption in s 237(3)................................................................................... 36
Written notice to Woodbine of intention to apply................................................................. 36
Whether the plaintiffs should be required to give an undertaking to meet Woodbine’s costs in the County Court Proceeding................................................................................................. 37

Access to the books and records of Woodbine........................................................................... 41

Proposed orders................................................................................................................................ 41

HER HONOUR:

Background

By an originating process dated 18 August 2021, the plaintiffs have applied under s 237 of the Corporations Act 2001 (Cth) (the Act) for orders granting them leave to intervene in proceedings in the County Court to which Woodbine Project Pty Ltd (Woodbine) is a defendant, and to take control of the conduct of Woodbine’s defence, including by making any contribution claims or cross‑claims. The proceedings in question were issued in the County Court of Melbourne[1] by Yueyue Xiu against Woodbine and Pin Li (the County Court Proceeding).
[1]County Court Proceeding No CI-20-01192.

Pursuant to leave granted on 27 August 2021, the plaintiffs filed an amended originating process by which they added an application for an order permitting them (or persons appointed by them) to inspect the books of Woodbine under s 247A(3) of the Act.

The originating process was filed…

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 Re Woodbine Project Pty Ltd

Details

AGLC: Re Woodbine Project Pty Ltd [2021] VSC 617
Case: [2021] VSC 617
Decision Date: 23 September 2021

CaseChat Overview and Summary

In the matter of Re Woodbine Project Pty Ltd, the applicant sought leave to bring a derivative action against the company’s director under section 237 of the Corporations Act 2001 (Cth). The dispute arose from allegations that the director had a conflict of interest, which the applicant argued warranted the company to pursue legal action. The Federal Court of Australia was tasked with determining whether the application met the criteria set out in the legislation for granting leave to commence a derivative action.

The central legal issues before the court were whether it was probable that the company would not properly take responsibility for the proceeding due to the director's conflict of interest, and whether the grant of leave would be in the best interests of the company. Additionally, the court needed to assess if the application was brought in good faith and whether the applicant should provide an undertaking to indemnify the company against any costs orders that might be made against the company. The court also considered the necessity of an undertaking to indemnify the company against any adverse costs orders.

The court found that the applicant had demonstrated a genuine concern regarding the director's conflict of interest and had acted in good faith. The court was satisfied that it was probable that the company would not properly take responsibility for the proceeding due to the conflict of interest. Furthermore, the court concluded that granting leave was in the best interests of the company. The court required the applicant to provide an undertaking to indemnify the company against any costs orders that might be made against the company, and also against any adverse costs orders. Based on these findings, the court granted the applicant leave to bring the derivative action.

The final orders of the court included granting the applicant leave to commence the derivative action and requiring the applicant to provide the specified undertakings to indemnify the company against costs.

Orders