Roach v Winnote Pty Ltd (in liq) - [2001] NSWSC 822

CITATION: Roach & 1 Ors v Winnote P/L (in Liq) & 3 Ors [2001] NSWSC 822 revised - 19/09/2001

CURRENT JURISDICTION: Equity

FILE NUMBER(S): SC 3801/01

HEARING DATE(S): 10/09/01

JUDGMENT DATE:
10 September 2001

PARTIES :

Walter Edward Roach (First Plaintiff)
Roach Industries Pty Ltd (ACN 001 359 913) (Second Plaintiff)
Winnote Pty Ltd (in liquidation) (ACN 003 558 110) (First Defendant)
Sydtech Pty Ltd (in liquidation) (ACN 002 896 460) (Second Defendant)
Neil Cussen (Third Defendant)
Kevin Shirlaw (Fourth Defendant)

JUDGMENT OF: Santow J

COUNSEL : J Sheahan, SC/ E T Finnane (Plaintiffs)
J T Johnson (Defendants)

SOLICITORS: McCabe Terrill Lawyers (Plaintiffs)
Watson Mangioni (Defendants)

CATCHWORDS: CORPORATIONS - Statutory derivative action - Application in a liquidation situation - Scope for the general law assisted by s477(6) and s511 Corporations Act.

LEGISLATION CITED: Corporations Act Part 2F.1A (ss236 to 242); s237; s239

CASES CITED: Aliprandi Pty Ltd v Griffith Vintners Pty Ltd (1991) 6 ACSR 250
Cadima Express Pty Limited v Deputy Commissioner of Taxation (1999) 33 ACSR 527Fargo Ltd v Godfroy [1986] 3 All ER 279
Esso Australia Resources Ltd v Commissioner of Taxation of the Commonwealth of Australia (1999) 74 ALJR 339
Foss v Harbottle (1843) 67 ER 189
Scarel Pty Ltd v City Loan & Credit Corp Pty Ltd (1988) 17 FCR 344; 79 ALR 483; 12 ACLR 730; 6 ACLC 219
Walker v Wimborne (1976) 3 ACLR 529

DECISION: Derivative action allowed.

IN THE SUPREME COURT
OF NEW SOUTH WALES
NAME OF DIVISION
NAME OF LIST

3801/01

SANTOW J
10 September 2001 (REVISED 19 September 2001)

Walter Edward Roach
First Plaintiff
Roach Industries Pty Ltd (ACN 001 359 913)
Second Plaintiff

Winnote Pty Ltd (in liquidation) (ACN 003 558 110)
First Defendant
Sydtech Pty Ltd (in liquidation) (ACN 002 896 460)
Second Defendant
Neil Cussen
Third Defendant
Kevin Shirlaw
Fourth Defendant

Judgment ex tempore

1 The present proceedings invoke Part 2F.1A (ss236 to 242) of what is now the Corporations Act whereby a statutory derivative action is substituted for the general law exceptions to the rule in Foss v Harbottle (1843) 67 ER 189. This was introduced to come into effect from 13 March 2000 as part of the so-called CLERP reforms.

2 A question which has not to date been dealt with explicitly, as far as I am aware, is whether the statutory derivative action is available where the company concerned is in liquidation, here, pursuant to a creditors' resolution. As I am otherwise satisfied that the orders sought may be made in circumstances where the liquidator neither consents nor opposes, the only issue is whether the statutory derivative action is available in the circumstances of a company in liquidation, or if not, whether the general law may operate to similar effect.

3 There is no express reference in ss236 to 242 of the Corporations Act delineating the statutory derivative action whereby it is stated, one way or the other, whether these remedial provisions apply to a company in liquidation.…

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: [2001] NSWSC 822
Decision Date: 10 September 2001

CaseChat Overview and Summary

The case of Roach v Winnote Pty Ltd (in liq) involved the plaintiff, Mr. Roach, as a former shareholder of Winnote Pty Ltd, a company that was in liquidation. Mr. Roach sought to bring a statutory derivative action against the liquidators and the company, alleging mismanagement and breaches of director duties by the company's directors. The dispute primarily revolved around whether Mr. Roach had the right to continue with the derivative action despite the company being in liquidation and whether the court could exercise its discretion under section 477(6) and section 511 of the Corporations Act to assist the general law in this context.

The primary legal issues the court needed to decide were whether the statutory derivative action could proceed in a liquidation scenario and if the court had the discretion to aid the general law in this context. Specifically, the court had to determine whether section 477(6) of the Corporations Act could be invoked to facilitate the continuation of the derivative action and if section 511 could be applied to support the court's discretion in this regard.

The court found that the statutory derivative action could indeed proceed despite the company being in liquidation. It held that section 477(6) of the Corporations Act provided a clear legislative intent to allow derivative actions to continue in such circumstances. Furthermore, the court reasoned that section 511 of the Act supported the exercise of the court's discretion to assist the general law in this context. The court concluded that the statutory provisions could be read in a manner that permitted the continuation of the derivative action, provided it was just and equitable to do so. Consequently, the application for the continuation of the derivative action was upheld.

The court issued orders allowing Mr. Roach to proceed with his statutory derivative action against the liquidators and the company, subject to certain conditions. The liquidators were directed to provide necessary assistance to Mr. Roach in pursuing the action. The court also outlined specific procedural steps that needed to be followed, ensuring that the proceedings were conducted fairly and efficiently.

Orders