Wood v Links Golf Tasmania Pty Ltd

In Wood v Links Golf Tasmania Pty Ltd, the plaintiffs, Peter Andrew Wood and Justin Charles Hetrel, sought leave to bring an action on behalf of Links Golf Tasmania Pty Ltd (LGT) against Richard Sattler, a director of LGT, and his company, RG Sattler Nominees Pty Ltd. The dispute centred on whether Mr Sattler had misappropriated an opportunity to establish a new golf course on land adjoining LGT's existing course by procuring his company to take up the opportunity. The legal issues before the court were whether the company should be ordered to pay the costs of the proceedings and the principles to be applied in making such a decision.

The court examined the criteria for granting leave to bring a derivative action under the Corporations Act 2001 (Cth), which require that the company will probably not bring the action, the applicant is acting in good faith, it is in the best interests of the company that leave be granted, there is a serious question to be tried, and notice of the application has been given to the company. The court also considered the discretion under s 242 of the Act, which allows the court to order the company to cover the costs of proceedings brought with leave. The court reviewed previous cases and the Explanatory Memorandum to the Corporate Law Economic Reform Program Bill (1998), which suggests that in appropriate circumstances, the company should meet the costs.

The court concluded that the purpose of permitting a person to bring an action in the name of the company is to prevent conduct which involves some element of harm and that in most cases, the wrongdoer will be in control of the company. The court found that the principle adopted by Marks J in Farrow v Registrar of Building Societies should continue to apply under the statute, namely, that if the plaintiff's action "is bona fide to protect the [company] and the [company] will receive the benefit of success, there is no good reason why the expenses should be met out of the private resources of [the] shareholders." The court was not persuaded by the contention that the costs would be unreasonably run up, that LGT was short of funds, or that the action was really about a dispute between the plaintiffs and Mr Sattler and LGT.

The court ordered that LGT pay the joint plaintiffs' reasonable costs of bringing proceedings on behalf of LGT against Richard Sattler and RG Sattler Nominees Pty Ltd. The court did not make any order as to the costs of this application.