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Swansson v RA Pratt Properties Pty Ltd

Swansson v RA Pratt Properties Pty Ltd

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Case Copied 3 July 2002 35 min read

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Reported Decision:
42 ACSR 313
(2002) 20 ACLC 1594

New South Wales

Supreme Court

CITATION: Swansson v Pratt [2002] NSWSC 583

CURRENT JURISDICTION: Equity Division

FILE NUMBER(S): SC 1150/02

HEARING DATE(S): 20 June, 2002

JUDGMENT DATE: 3 July 2002

PARTIES :

Ruth Swansson - Plaintiff
R.A. Pratt Properties Pty Ltd - First Defendant
Peter Highland - Second Defendant

JUDGMENT OF: Palmer J

COUNSEL : P.P. Strasser - Plaintiff
N.J. Kidd - Second Defendant

SOLICITORS: Mark Phillip Symonds - Plaintiff
No appearance for First Defendant
Selby Levitt - Second Defendant

CATCHWORDS: CORPORATIONS - DERIVATIVE ACTION - LEAVE TO COMMENCE - GOOD FAITH - BEST INTERESTS OF COMPANY - Shareholder applies for leave to bring derivative action against director of company - breaches of statutory duties under s.180, s.181, s.182 Corporations Act and breach of fiduciary duties under general law alleged - closely held family company - majority of shareholders do not wish action to be taken - real grievance between applicant and director arises out of dissolution of marriage and alleged concealment of property - question whether applicant seeking double recovery of property the subject of divorce settlement - whether applicant acting in good faith as required by s.237(2)(b) - principles discussed - whether proposed derivative action in the best interests of the company as required by s.237(2)(c) - principles discussed. HELD: Applicant had not adduced sufficient evidence to discharge onus of satisfying the Court that she was acting in good faith - applicant had not satisfied the Court that the derivative action was in the best interests of the company. DERIVATIVE ACTION - COSTS ORDER - Applicant seeks order under s.242 that company pay costs of derivative action - discussion of evidence required. HELD: No order justified.

LEGISLATION CITED: - Canada Business Corporations Act, 1985
- Corporate Law Economic Reform Program Act, 1999 (Cth)
- Corporations Act 2001 (Cth), s.9, s.180, s.181, s.182, s.185(a), s.236(1), s.236(3), s.237(1), s.237(2), s.242, Pt. 2F.1A, s.1317K
- Family Law Act, 1975 (Cth) - s.87, s.87(8)(a), s.87(9)(b)
- Limitation Act, 1969 (NSW) - s.23, s.55(1)(b)
- New Zealand Companies Act, 1993 - s.165

CASES CITED: - Advent Investors Pty Ltd v Goldhirsch (2001) 37 ACSR 529
- Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618
- Bellman and Western Approaches Ltd, Re (1981) 130 DLR (3d) 193
- Chapman v E-Sports Club Worldwide Ltd (2000) 35 ACSR 462
- Chemaisse and Federal Commissioner of Taxation, In the Marriage of (1988) FLC 91-915
- Dowling v Colonial Mutual Life Assurance Society (1915) 20 CLR 509
- Edwards v Halliwell [1950] 2 All ER 1064
- Foss v Harbottle (1843) 2 Hare 461
- IOC Australia Pty Ltd v Mobil Oil Australia Ltd (1975) 11 ALR 417
- Karam v ANZ Banking Group Ltd (2000) 34 ACSR 545
- Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204
- Radwan and Radwan (1986) FLC 91-755
- Ruralcorp Consulting Pty Ltd v Pynery Pty Ltd (1996) 21 ACSR 161

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: [2002] NSWSC 583
Decision Date: 3 July 2002

CaseChat Overview and Summary

The case of Swansson v RA Pratt Properties Pty Ltd involved a shareholder seeking leave to bring a derivative action against a director of a company. The shareholder alleged breaches of statutory duties under sections 180, 181, and 182 of the Corporations Act, as well as breaches of fiduciary duties under common law. The company in question was a closely held family business, and the majority of shareholders opposed the action. The underlying dispute arose from the dissolution of the applicant's marriage and allegations of property concealment.

The court was required to determine whether the applicant was acting in good faith, as mandated by section 237(2)(b) of the Corporations Act. Additionally, the court needed to assess whether the proposed derivative action was in the best interests of the company, as required by section 237(2)(c). The court examined the evidence presented to determine if the applicant had discharged the burden of proving good faith and the benefit to the company. After a thorough examination, the court found that the applicant had not provided sufficient evidence to satisfy the court that she was acting in good faith or that the derivative action was in the best interests of the company.

The applicant also sought an order for the company to pay the costs of the derivative action under section 242 of the Corporations Act. The court discussed the necessary evidence to justify such an order and concluded that no order was warranted based on the evidence presented. The court held that the applicant had not adduced sufficient evidence to satisfy the court that she was acting in good faith or that the derivative action was in the best interests of the company. Therefore, the application for leave to bring the derivative action was dismissed, and no order for costs was made.

Orders