Rose v Trend Designs Pty Ltd - [2020] NSWSC 675

Supreme Court

New South Wales

Medium Neutral Citation: Rose v Trend Designs Pty Ltd [2020] NSWSC 675
Hearing dates: 26 May 2020
Decision date: 01 June 2020
Jurisdiction: Equity
Before: Robb J
Decision:
See pars [40], [43] and [50]. Parties are to consult and provide draft short minutes of order to give effect to these reasons for judgment.

Catchwords: CIVIL PROCEDURE — Pleadings — Striking out — No reasonable cause of action or defence – reflexive loss – whether shareholder can claim compensation in oppression suit quantified by reference to personal loss derived from company loss – where it is arguable that claims that would otherwise require leave to maintain a derivative action on behalf of a company under s 237 of the Corporations Act 2001 (Cth) can be maintained in an oppression suit
Legislation Cited: Corporations Act 2001 (Cth)
Cases Cited: In the matter of JGS Investment Holdings Pty Ltd [2014] NSWSC 1532
Power v Ekstein [2009] NSWSC 130
Power v Ekstein [2010] NSWSC 137; 77 ACSR 302
Category: Procedural and other rulings
Parties: Brooke Erin Rose (plaintiff / respondent)
Trend Designs Pty Ltd (first defendant / applicant)
Shannon Anthony Baranski (second defendant / applicant)
John Albert Shirlaw (third defendant / applicant)
Shepherd Management Services Pty Ltd (fourth defendant / applicant)
Representation:
Counsel: M Bennett (plaintiff / respondent)
S Wells (defendants / applicants)
Solicitors: Coleman Greig Lawyers (plaintiff / respondent)
Equius Legal (defendants / applicants)

File Number(s): 2019 / 318337

Judgment

The Court is dealing with a notice of motion filed by the defendants on 9 April 2020 that seeks orders that the amended statement of claim filed by the plaintiff on 13 March 2020 be struck out, and alternatively that a number of identified prayers for relief and paragraphs of the pleading be struck out.
The defendants seek an order that the proceedings against the fourth defendant be dismissed with costs.
The defendants seek an order vacating the orders made in the Online Court on 24 March 2020.
The proceedings relate to the affairs of the first defendant, Trend Designs Pty Ltd (the Company).
The plaintiff, Ms Brooke-Erin Rose and the second defendant, Shannon Anthony Baranski, are sister and brother. They both hold 1000 ordinary shares in the Company. In the plaintiff's case those shares are held in her capacity as executor of her late father's estate.
The third defendant, John Albert Shirlaw, is an accountant by profession. The fourth defendant, Shepherd Management Services Pty Ltd (SMS) is a company controlled by Mr Shirlaw through which, as I understand it, he provides accountancy and consultancy services.
Ms Rose was a director of the company until 14 September 2017 on which date she was removed as a director. Mr Shirlaw was appointed a director of the company on that date and a single ordinary share was issued to him.
By her amended statement of claim, Ms Rose seeks to establish that those transactions were void and seeks declarations to that effect.
Ms Rose also complains about the fact…

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 Rose v Trend Designs Pty Ltd

Details

AGLC: Rose v Trend Designs Pty Ltd [2020] NSWSC 675
Case: [2020] NSWSC 675
Decision Date: 01 June 2020

CaseChat Overview and Summary

In Rose v Trend Designs Pty Ltd, the plaintiff, Rose, sought to recover damages from the defendants, Trend Designs Pty Ltd and its directors, for reflexive loss resulting from alleged oppression of the company's shareholders. The case was heard in the Supreme Court of New South Wales. Rose argued that he could claim compensation for his personal losses derived from the company's losses, which were a result of the alleged oppressive conduct by the defendants.

The central legal issue the court had to decide was whether the plaintiff could maintain his claims for reflexive loss in the oppression suit without needing to seek leave under section 237 of the Corporations Act 2001 (Cth) to bring a derivative action on behalf of the company. The court was also required to determine whether Rose's claims, which would typically require leave under section 237, could be maintained within the context of an oppression suit.

The court held that Rose's claims for reflexive loss were not maintainable without leave under section 237. The court reasoned that while an oppression remedy allows for claims of personal loss resulting from oppressive conduct, these claims must still comply with the procedural requirements of the Corporations Act. The court found that Rose's claims, which sought compensation for his personal losses derived from the company's losses, would ordinarily require leave to be brought as a derivative action. Therefore, the court determined that the claims could not proceed without the necessary leave.

Consequently, the court struck out Rose's claims for reflexive loss as they did not have a reasonable cause of action. The court ordered that the plaintiff's claims for reflexive loss were to be dismissed.

Orders