Sassine v Mondray Pty Limited - [2011] NSWSC 297

Supreme Court

New South Wales

Medium Neutral Citation: Sassine v Mondray Pty Limited [2011] NSWSC 297
Hearing dates: 6 April 2011
Decision date: 15 April 2011
Jurisdiction: Equity Division
Before: Barrett J
Decision:
The amended notice of motion by which Charlie Sassine seeks leave under s 237 of the Corporations Act 2001 (Cth) is dismissed
The question of costs is reserved

Catchwords: CORPORATIONS - statutory derivative action - shareholder wishes to have company bring claim which he is actively causing another company to bring against the same defendant - applicant recognises that only one claim can succeed - no attempt to disengage from prior competing claim - adherence to prior competing claim until re-examination following adjournment - applicant fails to establish that he is acting in good faith and that it is in company's interests for him to be authorised to sue for it
Legislation Cited: Corporations Act 2001 (Cth), ss 236, 237
Cases Cited: Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 65 ACSR 661
McEvoy v Caplan [2010] NSWCA 115; (2010) 78 ACSR 167
Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313
Category: Interlocutory applications
Parties: Charlie Sassine - Applicant
George Sassine - Respondent
Representation: Counsel:
Mr C A Evatt/Mr S Milanovic - Applicant
Mr M R Pesman/Ms E A Weisske - Respondent
Solicitors:
Slattery Thompson Solicitors - Applicant
HWL Ebsworth Lawyers - Respondent

File Number(s): 2008/280995

Judgment

At material times before November 2010, four brothers - Charlie Sassine, John Sassine, Milaad Sassine and George Sassine - were equal shareholders in each of three companies, Mondray Pty Ltd ("Mondray"), Ray & Sons Constructions Pty Ltd ("RaySons") and Sunrays Constructions Pty Ltd ("Sunrays"). In October 2010, Milaad Sassine transferred his shares in Mondray and RaySons to George Sassine.

Charlie Sassine seeks leave under s 237 of the Corporations Act 2001 (Cth) to bring proceedings on behalf of Mondray against George Sassine. Charlie Sassine's standing in this respect comes from his being a member of Mondray: s 236(1)(a)(i).

The claims Charlie Sassine wishes to have Mondray bring against George Sassine are pleaded in a draft statement of claim which is the annexure "B" to an amended notice of motion filed on 20 July 2010. The case is, in essence, as follows:

1. In 2006, Mondray owned a property at Pennant Hills.

2. In or about September 2006, the four brothers, being all of the members and all of the directors of Mondray, agreed that Mondray should sell the property and that the proceeds should be used to reduce the indebtedness of RaySons to the National Australia Bank, which indebtedness was supported by a guarantee and charge given by Mondray to the National Australia Bank.

3. The property was sold. The net proceeds were $1,374,727.

4. George Sassine, as a director of Mondray, caused Mondray to disburse the net proceeds as follows:

(a) $335,000 to George Sassine;

(b) $502,000 to Sunrays;

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: [2011] NSWSC 297
Decision Date: 15 April 2011

CaseChat Overview and Summary

In the matter of Sassine v Mondray Pty Limited, the applicant sought to initiate a statutory derivative action on behalf of the respondent company, Mondray Pty Limited. The applicant, Sassine, was a shareholder of Mondray who wished for the company to bring a claim against a defendant that was already being pursued by another entity he was actively involved with. The case was heard in the Supreme Court of New South Wales, which had to determine whether Sassine's request should be granted despite the ongoing parallel litigation.

The primary legal issue before the court was whether Sassine, who was aware that only one claim could ultimately succeed, was acting in good faith and whether it was in the company's best interests to authorise him to proceed with the litigation. Additionally, the court had to consider whether Sassine's failure to disengage from the competing claim he was fostering constituted a breach of his fiduciary duties or undermined his claim for leave to bring the action. The court found that Sassine's adherence to the competing claim until a re-examination following an adjournment did not demonstrate the requisite good faith and the company's interests.

The Supreme Court of New South Wales ruled that Sassine had not established that he was acting in good faith or that it was in the company's interests for him to be authorised to sue on its behalf. Given these findings, the court determined that Sassine's application for leave to bring the statutory derivative action should be dismissed. Consequently, the court denied the applicant's request, emphasising the importance of shareholders acting in the best interests of the company and in good faith when seeking to initiate legal proceedings on behalf of the corporation.

Orders