Blakeney v Blakeney

ex tempore Judgment

1. HER HONOUR: This is an application by David Ter Wisscha and his company, D&JT Holdings Pty Ltd, for leave to bring a derivative action in the name of Ter Wisscha Holdings Pty Ltd. In that suit, it is proposed to seek relief against: 1. Flemington Unloading Services Pty Ltd, a company wholly owned by Ter Wisscha Holdings; 2. the directors of Flemington other than David, being David's parents, Ernst and Donna Ter Wisscha and brother, Daniel Ter Wisscha; and 3. D&RTW Pty Ltd, being Daniel's company and a 50% shareholder in Flemington (where David's company owns the other 50%).
2. Without any disrespect to the parties, I will use their first names. As to the relief to be sought in the derivative suit, David and his company wish to seek interlocutory relief restraining Flemington and its directors from dealing with its assets other than in the ordinary course of business, without David's consent, which consent will be required for any dealing of $5,000 or more. As final relief, David and his company wish to seek declarations that Flemington's directors have acted in their own interests rather than in the interests of members as a whole, relief from oppression and winding up Flemington on just and equitable grounds pursuant to sections 461(1)(e), (f) or (k) of the Corporations Act 2001 (Cth). The application is opposed, essentially, by Daniel and his company.
3. In support of the application, David relied on three affidavits by himself and an affidavit by his solicitor, Nicholas Hallasso. In opposing the application, three affidavits were read by Daniel together with an affidavit by Donna and Daniel's sister, Amy. There was no cross-examination.

FACTS

1. In 1990, Ernst and Donna started a business providing unloading services at Sydney Markets at Flemington. In 2004, Flemington was incorporated to run the business. Today, Flemington employs about 50 staff and earns gross profit each week of some $60,000. It appears to be a profitable company which is up to date with its statutory obligations.
2. In 2018, it was proposed that David and Daniel would effectively take over their parents' business. To that end, David's company, Daniel's company and Ter Wisscha Holdings was incorporated. David and Daniel's companies were each allotted 50% of shares in Ter Wisscha Holdings; David and Daniel were both appointed directors. Ter Wisscha Holdings acquired all of the shares in Flemington by way of an interest-free loan from Flemington to Ter Wisscha Holdings, to be repaid over seven years. Ter Wisscha Holdings does not carry on any business other than holding shares in Flemington: its only asset is its shares in Flemington; its only income is the dividends from Flemington. Therefore, the value of Flemington's shares determines the value of Ter Wisscha Holdings.
3. By August 2020, relations between David and the rest of his family had become strained. David may have been unhappy with his parents' decision to involve younger brother Daniel in the business, including by appointing him as a director of Flemington. A draft shareholders agreement for Ter Wisscha Holdings was then being circulated, about which David expressed concerns and was unwilling to sign (and has not signed). On 7 August 2020, having been forwarded the current draft by Daniel, David emailed Daniel: As a final resort [I'll] ask you to make an end to this conflict which has started. This email either ends it or starts it. … I understand legality situations probably better than most which really confuses me as the threats are made towards me which would only end up hurting them and the business as the grounds and authority you and they have will financially ruin their retirement and yours. … You threaten me, multiple times, but yet I havent threatened you … …Now its up to you, I will give you my word this email is deleted no one but you or me will see it if the following conditions are met,
4. Daniel suggested a meeting. David declined. After this, David says he was no longer welcome at the markets and became excluded from the management of the business. David points to these emails as indicating animosity between himself and his brother for some time, rather than the more recent emails relied on by Daniel as indicating a lack of good faith in bringing this application: see [9].
5. In September 2020, Daniel was appointed as a director of Flemington. Relations did not improve. Donna said that, in October 2020, David's Flemington credit card was cancelled due to his unauthorised spending. In early December 2020, David told Amy that he was "going to financially ruin mum and dad". In late December 2020, "following a significant amount of unexplained withdrawals by David", Donna restricted his access to the online banking system. On 24 December 2020, David sent an email to Donna and Daniel threatening legal action if his access was not restored.
6. On 5 January 2021, when Donna says David refused to pay Flemington's employees out of his funds notwithstanding that he had withdrawn funds from Flemington's bank account, David sent an email to Donna saying, "I'm sorry but [you are] leaving me with no choice. The business can't operate anymore and I don't see any other option but to issue a wind up order with the courts. This business cannot continue the way it is." David sent a further email to the directors threatening to appoint an administrator if they did not take steps to deal with Daniel appropriately.
7. Donna said that she, Ernst and Daniel felt that they had no option but to terminate David's employment at Flemington. Flemington's solicitor circulated a notice of meeting. On 7 January 2021, David sent an email to Donna with the subject "No choice left", writing: Court it is. [Flemington] is a subsidiary company of Terwisscha holdings. Either they force the buy out or it's wound up I don't care. I'm winding the company up next week and appointing an administrator. I could have paid daniel but he refuses offer so now it will cost you.
8. On 13 January 2021, David sent an email to Donna: I've wasted to much time. I'm putting the company into administration tomorrow, winding it up. daniel has had every opportunity to walk away with money. The fact that all other directors act for their own benefit can't continue. You have ignored the very rules you should be enforcing, all to benefit yourselves. I welcome the wind up and whatever the administrator determines what you all perceive as fraud. …
9. On 17 January 2021, David sent an email to Donna with a link to an article titled "Never Push a Person to the point where they have nothing to lose". Donna responded: Any actions we have needed to take are as a result of your behaviour. Daniel has had no choice but to make the decisions he has made, with the advice of his solicitor. This conflict was initiated by you. We have tried to help resolve it but you completely wiped us out of your life. We have at all times behaved in the best interest of the business and the shareholders. As I mentioned to you the other day, I am more than happy to help and support you if you are prepared to acknowledge and accept that this situation has gone beyond what you are able to cope with. My concern is not only with the business issues but with your personal problems. Everything has escalated out of control and I would do whatever I can to help you. Is there anything I can do to help you.
10. David responded: You can help yourself and retract my termination of employment and pay me my weekly wage as you do for all others. If not, you can deal with fairwork and the administrator. …

These proceedings

1. On 19 January 2021, these proceedings were commenced by Daniel's company under section 233 of the Corporations Act against David and his company, seeking to buy out the shares which David's company holds in Ter Wisscha Holdings due to a breakdown of relations between the parties and a deadlock. Daniel's company also sought the removal of David as a director of Ter Wisscha Holdings and Flemington.
2. On 17 February 2021, David filed an affidavit indicating that he intended to bring an application to wind up Flemington. David also notified Flemington's customers that, due to banking difficulties, Flemington required payments to be made to David's company instead. This is pointed to by both parties as a reason why the relief sought should either be granted or refused.
3. Following the publication of David's letter, on 18 February 2021, Flemington filed an interlocutory process seeking to restrain David and his company from contacting Flemington's customers or taking any further funds from the company's bank accounts. That became the First Cross-Claim, by which Flemington seeks relief from David and his company, including for suggested breach of his obligations as a director of Flemington.
4. I have been taken to a series of emails in February 2021 which show the worsening relationships between the parties. It appears that David wanted to be paid various monies which he considered that he was owed whilst his family members disputed his entitlements and were not willing to pay. On 8 March 2021, David sent an email to his solicitors regarding proposed legal action against Ernst, Donna and David, "I wish to act immediately and aggressive and if I have to wind the company up."
5. A large body of evidence has since been filed, mostly going to the subject matter of the principal claims. A number of allegations and counter allegations have been made, which it is not necessary for me to recite. The Originating Process and First Cross-Claim are listed for hearing in December 2021.
6. On 29 July 2021, David and his company filed this application seeking leave to bring a derivative suit. David explains the delay in filing this application as referable to his efforts to broker a peace between family members. That may be so.
7. David has offered an indemnity in respect of any costs order made against Ter Wisscha Holdings in the derivative suit. David does not have any assets in his own name other than the matrimonial home. He believes the house is worth about $2 million and has borrowings of some $1.3 million against the property. He is presently involved in family law proceedings such that the precise portion of his interest in the property remains to be resolved. David believes that he may ultimately be entitled to at least $360,000 to $400,000 for his interest in the matrimonial home, although of course it may well be higher or lower. There is no evidence as to David's other obligations which he may need to meet such as legal fees in relation to the family law proceedings or any other demands upon his resources. In short, the evidence is that he may have access to funds at some point in some quantum.
8. David has also offered that any costs orders made against Ter Wisscha Holdings be taken from his entitlement to be paid out for his shares in Ter Wisscha Holdings. That may be something of value; it is difficult to ascertain, including because an application to appoint a liquidator to Flemington may itself reduce the value of the shares in that company and thus the ability for any such offset to be undertaken.
9. Flemington has a valuable asset, being a porter's licence issued by Sydney Markets to only a few companies. Flemington also has hire agreements, which provides its workforce with 36 forklifts. Daniel said the forklifts are the lifeblood of Flemington's business, without which Flemington simply cannot function. I was taken to clauses in the porter's licence and hire agreements which indicate that, on the appointment of a liquidator, these contractual relationships either terminate automatically or at the option of the counterparty to those contracts. Daniel said without the porter's licence, there would be no value in Flemington's business. Daniel is concerned that even an application to appoint a liquidator to Flemington may cause commercial harm to the business. He understands from conversations with various suppliers and customers that they are concerned about the dispute which is being litigated in these proceedings and may take their business elsewhere.
10. Daniel said Ter Wisscha Holdings has no funds in its bank account. Appointment of a liquidator will destroy the value of Flemington's business and thus the value of Ter Wisscha Holdings' shares in Flemington. It is likely that a liquidator appointed to Flemington would seek to recover Flemington's loan to Ter Wisscha Holdings, which it would be unable to pay from its own resources as its assets are its shares in Flemington, which it would not be able to realise.
11. Daniel said the simple answer to their dispute is that the shares which David's company owns in Ter Wisscha Holdings should be bought out, with the question of the value of those shares to be addressed by the Court, at which time David can raise any issues about Flemington and Ter Wisscha Holdings that he sees fit. This solution would not involve the liquidation of Flemington while, in contrast, placing Flemington in liquidation would impair, if not entirely destroy, the value of Flemington's shares and thus the value of Ter Wisscha Holdings and the shares held in that company by David's company and Daniel's company. Daniel does not see this as being in anyone's interests, especially not in the interests of Ter Wisscha Holdings.

CONSIDERATION

1. David's company is a member and David is an officer of Ter Wisscha Holdings and thus both have standing to seek leave to bring proceedings on behalf of the company: section 236(1)(a)(i) and (ii), Corporations Act. Section 237(2) of the Corporations Act provides that the Court must grant leave if it is satisfied that: (a) it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and (b) the applicant is acting in good faith; and (c) it is in the best interests of the company that the applicant be granted leave; and (d) if the applicant is applying for leave to bring proceedings - there is a serious question to be tried; and (e) either: (i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or (ii) it is appropriate to grant leave even though subparagraph (i) is not satisfied.
2. It will be immediately noted that each of the five requirements of section 237(2) must be satisfied before the Court is obliged to grant leave. The plaintiff bears the onus of establishing each of these matters on the balance of probabilities: In the matter of Boutique Ettalong Beach Pty Ltd [2020] NSWSC 244 at [5] per Gleeson JA; Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 at [26]. Further, if all the requirements of section 237(2) are satisfied, the Court must grant leave to bring the proposed proceedings. On the other hand, if any of the requirements of section 237(2) are not satisfied, then the Court should not grant leave: Oates v Consolidated Capital Services Ltd (2009) 76 NSWLR 69; [2009] NSWCA 183 at [64]-[65]; Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 65 ACSR 661 at [117].
3. Leave to bring proceedings must not be given lightly, given the possibly serious consequences to the company if the application is allowed and the company is thereby compelled to engage in litigation as a plaintiff against its will: Swansson at [24], [26].
4. In this case, Daniel agrees that the first and fifth requirements are satisfied. Accordingly, the Court must determine whether the remaining requirements are met, although it is convenient to address these requirements out-of-order.

Serious question to be tried

1. The fourth criterion is whether there is a serious question to be tried in the derivative suit. David submitted that there is here a serious question to be tried by reference to legal and equitable wrongs and Ter Wisscha Holdings ought to be permitted to ventilate its claim: Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534 per Barrett J at [34].
2. Daniel submitted that the fact that the winding up of Flemington was proffered by David as providing the Court with "another option to consider" when determining the substantive proceeding highlights that the derivative suit is devoid of any real independent substance. The claim was also said to be misconceived. As sole shareholder of Flemington, it was not possible for Ter Wisscha Holdings to be the object of unfair discrimination: Goozee at [39]. Further, the dispute between the family members did not involve Ter Wisscha Holdings, which was a holding company only. The dispute was already the subject of substantive proceeding and there was no separate serious question to be tried that could be resolved satisfactorily by the winding up of Flemington. David's allegations were said to be controverted by objective documentation.
3. Whether there is a serious question to be tried in a proposed derivative suit entails a relatively low threshold which does not involve consideration of the underlying merits of the proposed litigation: Mount Gilead Pty Ltd & Hobhouse v L Macarthur-Onslow [2021] NSWSC 948 at [65]. Whilst Daniel does not accept that subsection (d) is satisfied, and indeed took me to various matters that suggest that Daniel may have obvious answers to some of David's allegations, having regard to David's affidavits and the draft pleading, I am nonetheless satisfied that there is a serious question to be tried in the proposed second cross-claim. I consider that this requirement has been satisfied.

Good faith

1. The second requirement is that the applicant is acting in good faith. As Palmer J explained in Swansson, this requirement has at least two elements. At [36]: … there are at least two interrelated factors to which the Courts will always have regard in determining whether the good faith requirement of s 237(2)(b) is satisfied. The first is whether the applicant honestly believes that a good cause of action exists and has a reasonable prospect of success. Clearly, whether the applicant honestly holds such a belief would not simply be a matter of bald assertion: the applicant may be disbelieved if no reasonable person in the circumstances could hold that belief. The second factor is whether the applicant is seeking to bring the derivative suit for such a collateral purpose as would amount to an abuse of process.
2. In South Johnstone Mill Ltd v Dennis (2007) 163 FCR 343; [2007] FCA 1448 at [69], Middleton J observed that the fact that the applicant is willing, as a condition of leave, to indemnify the company for costs and any adverse costs order may demonstrate good faith. The existence of an adequate and viable indemnity becomes critical where, if the derivative suit fails, the company ought to be indemnified in real terms from the consequences of any loss, in particular by costs orders being made against the company in favour of the defendants.
3. While David accepted that there has been a family rift, he submitted that the application is not an abuse of process nor should the animosity between the parties preclude a grant of leave: Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 per Brereton J at [45]; Swansson at [41]. David did not wish to bring a derivative suit to satisfy a personal vendetta. David has proffered an indemnity.
4. Daniel submitted that the winding up order sought in the derivative suit was fuelled by an ulterior motive of personal spite or seeking to undermine the relief that may be granted against him and his company. Nor could seeking a winding up order against Flemington be seen to redress a wrong committed by Flemington against Ter Wisscha Holdings, such that the failure by Ter Wisscha Holdings to commence winding up proceedings would cause a real and substantive injury to David's company or to David: Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52; (2008) 245 ALR 780 at [73]-[74]. The reflective loss principle was said to make clear that loss caused by the directors of Flemington is a loss of Flemington; there is no separate claim by Ter Wisscha Holdings for loss of value of its shares by reason of that conduct: Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204 at 222-223; Johnson v Gore Wood & Co (a firm) [2002] 1 AC 1 at 35-36 per Lord Bingham and at 61-62 and 66-67 per Lord Millett; Central Coast Council v Norcross Pictorial Calendars Pty Ltd [2021] NSWCA 75 at [103] ff per Bathurst CJ (Macfarlan and Gleeson JJA agreeing).
5. I have some reservations as to whether this condition has been satisfied here. David's emails, to which I have referred, may reasonably be construed as indicating that David wishes to appoint a liquidator to Flemington in order to damage the other directors and the other shareholder in Ter Wisscha Holdings. An indemnity has been offered, although it may not have much substance, this being a matter which is not really David's fault. The timing of the application for leave, the emails, the fact that appointing a liquidator to Flemington appears counter-intuitive with the only apparent benefit being to assist in David's defence to the oppression suit, his defence to Flemington's cross-claim and to recover money from Flemington, has the result that I am not satisfied on the balance of probabilities that the applicant is acting in good faith. This should not be taken to mean that I have found that David is acting in bad faith, but simply that he has failed to establish an essential prerequisite of section 237 such that leave should not be granted. It is thus not strictly necessary for me to consider the remaining requirement, but I will do so as it concerns me the most.

Best interests of the company

1. The third requirement is that it is in the best interests of the company that the applicant be granted leave. David submitted that the derivative suit would enable the Court to investigate his allegations and give the Court the option to wind up Flemington. Otherwise, Ter Wisscha Holdings' rights would be stifled. Whether a liquidator would be appointed would await a final hearing, but it was submitted that a liquidator needed to be appointed to "cleanse" the company. If it was not open to the Court to wind up Flemington, then David's only option would be to sell his interest in the company, leaving the directors to "continue with their conduct".
2. Daniel did not dispute the fact that, if it was in the best interests of the company for the derivative suit to be brought, then it was appropriate that the applicants be permitted to do so. Daniel submitted that, whilst the proposed derivative suit concerned a litany of complaints by David as to the management of the affairs of Flemington, it was striking that the only relief sought was a winding of Flemington. That was said to reflect a clear forensic choice by David. While orders might have been sought to remove or appoint new directors or compensation orders in favour of Flemington, all that was sought was a winding up of Flemington, which would bring its business to an end. If the derivative suit was successful, this would be value-destructive for Ter Wisscha Holdings. In addition to its impact on the porter's licence and forklift hire agreements, its employees would be deemed to have had their employment terminated, triggering payment of entitlements such as long service leave, payment in lieu of notice and redundancy pay: section 558, Corporations Act; In re General Rolling Stock Company (1866) LR 1 Eq 346; In re Oriental Bank Corporation (1886) 32 Ch D 366.
3. Daniel submitted that the claims sought to be brought on a derivative basis on behalf of Ter Wisscha Holdings could also be brought on a non-derivative basis, that being a powerful consideration against the grant of leave: In the matter of Gladstone Pacific Nickel Ltd [2011] NSWSC 1235; (2011) 86 ACSR 432 at [57]; Swansson at [56]ff. David could seek to bring a derivative claim in the name of Flemington for compensation pursuant to section 1317H for breach of director's against Ernst, Donna and Daniel, which would not imperil the ability of Flemington to remain as a going concern and would therefore not be contrary to Ter Wisscha Holdings' interests. As a creditor, David could seek to wind up Flemington on the basis of suggested unpaid wages. Neither of those alternatives would expose Ter Wisscha Holdings to unnecessary litigation or to the costs inherent in that litigation nor its exposure under an undertaking as to damages to support the interlocutory injunction sought. As to David's offer to meet any adverse costs order against Ter Wisscha Holdings by deducting the costs from the price that Daniel's company is to pay David's company if the derivative action is unsuccessful and the principal clam against David's company succeeds, this does not address any costs order that may be obtained by Flemington, Donna or Ernst.
4. As was noted in Blakeney v Blakeney [2016] WASCA 76; (2016) 113 ACSR 398, section 237(2)(c) requires more than satisfaction that the grant of leave may be or appears to be or is likely to be in the interests of the company. Rather the Court must be satisfied that it is in the best interests of the company. As Ball J noted in In the matter of Gladstone Pacific Nickel Ltd at [57], it must also be in the best interests of the company that the action be brought by the applicant: see likewise Power v Ekstein [2010] NSWSC 137; (2010) 77 ACSR 302 per Austin J at [107]. The nature of any indemnity is an important consideration, as are the resources of the company that will be required to be devoted to the action, the resources the company has available and the effect that the action may have on other aspects of the company's business. Finally, it is relevant whether some other remedy is available.
5. Some of these matters have not been addressed by the applicants' evidence, in particular, the prospects of success of the proposed derivative suit, the likely cost, and the likely recovery if the action is successful, or the likely consequences if it is not. Another consideration is that the only asset of Ter Wisscha Holdings is its shares in Flemington. The evidence on this application is that Flemington is currently solvent and profitable, that any winding-up order would lead to the termination of the porter's licence and at least some of the lease arrangements in respect of the forklifts. Daniel's evidence is that this will destroy the value of the Flemington business and, by extension, the value of Ter Wisscha Holdings' shares in Flemington. In addition, a liquidator of Flemington would likely seek to recover the outstanding loans owed by Ter Wisscha Holdings to Flemington, which Daniel does not believe Ter Wisscha Holdings would be able to repay from its resources as Ter Wisscha Holdings' assets are constituted by its shareholding in Flemington, and if Flemington is in liquidation, then the asset cannot be realised. I share those concerns.
6. It was submitted by Daniel that the case bore strong similarities to that of Goozee v Graphic World Group Holdings, both in terms of the corporate structure then under consideration, the motives of the applicants in seeking to bring a derivative action, and also the conclusion by Barrett J. His Honour observed that the desire to wind up the company was something of a pressure tactic to enhance the possibility of obtaining a payment of money that was thought to be owed by the company which was proposed to be wound up. His Honour considered that that was foolish where the company sought to be wound up was profitable and financially sound. His Honour concluded at [73]-[74]: 73 This question cannot be answered favourably to the plaintiffs in this case. For reasons I have stated, it cannot be concluded that the statutory remedy under s 232 is of its nature unavailable to a single shareholder. But why should it, in this case, be regarded as in the best interests of each immediate holding company that its directly and wholly-owned subsidiary be wound up? That is the sole remedy the holding company would seek in the derivative proceedings. No argument justifying, from the perspective of the interests of its immediate holding company, the winding up of each wholly-owned subsidiary has been advanced. Such a winding up might suit the plaintiffs as a means of causing cash to flow through to the ultimate holding company (Graphic) in which they hold shares. But the several liquidations the immediate holding companies sought would effectively put an end to the business of the group which, on the evidence, is trading profitably and is in a sound financial state. There is no basis on which that result can be seen as conducive to the separate interests of any of the immediate holding companies on whose behalf the plaintiffs wish to seek the winding up of each wholly-owned subsidiary. 74 Implicit in what I have just said is the proposition that, in the context of a group of companies such as the present, the "best interests" to which s 237(2)(c) directs attention are those of the particular putative plaintiff company, not those of the group. That, in my view, is the clear meaning and intent of the provision. It may be that the separate interests of a particular group company will be coloured or shaped by the wider interests of the group: Maronis Holding Ltd v Nippon Credit Australia Ltd (2001) 38 ACSR 404. It may also be that something which, in isolation, would appear harmful to the interests of the particular group company will be seen in a different light when its interests are viewed in the totality of the group context: Nicholas v Soundcraft Electronics Ltd (1993) BCLC 360. But it is to the particular company's separate interests alone, whether or not so coloured, shaped or modified, that attention must be directed. Such an approach is consistent with the definition of directors' duties by reference to the interests of the company as a whole which emerges from the decision of the High Court in Walker v Wimborne (1976) 137 CLR 1.
7. These observations are apt to the present case. There do seem to be other avenues that David can pursue without jeopardising the only asset of Ter Wisscha Holdings by putting the value of Flemington shares in jeopardy. In Taxa Australia Pty Ltd v Wang [2016] NSWSC 1913, Black J noted at [23]: … In LPD Holdings (Aust) Pty Ltd Re Phillips [2013] QSC 225; (2013) 281 FLR 227, Philip McMurdo J accepted (at [53]) that it is open to a shareholder in a company, in oppression proceedings under Pt 2F.1 of the Corporations Act, to claim relief which is in the nature of compensation to be paid to the company whose affairs are in question, although likely not to claim compensation payable to the shareholder personally. I followed that approach in Re JGS Investment Holdings Pty Ltd [2014] NSWSC 1532, in holding that a shareholder bringing an oppression claim can bring a claim for breach of general law duty and statutory duties owed to a company, without necessarily seeking a separate order for leave to bring a statutory derivative action under s 237 of the Corporations Act, although such a claim could only extend to loss which the company had suffered, and not loss which the shareholder had suffered personally.
8. It is apparent from the proposed pleading that many, if not all, of the claims that David could properly bring on the company's behalf can be addressed within the oppression suit already brought by Daniel without exposing the company to the risk of costs, noting that a valuation of shares in an oppression suit should attempt to place an oppressed party in the position they would have been had there been no oppression: ES Gordon Pty Ltd v Idameneo (No 123) Pty Ltd (1994) 15 ACSR 536 at 539-540 per Young J; Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 at 369 per Lord Denning. Having regard to each of these considerations, I am not satisfied that the requirements of section 237(2) of the Corporations Act have been established.

COSTS

1. The applicants' counsel correctly conceded that it was appropriate that a costs order be made in favour of the respondents but opposed the respondents' application that any such order for costs should be payable forthwith.
2. Where a costs order relates to a discrete and separately identifiable aspect of proceedings, then the Court may in its discretion order that the costs be payable forthwith rather than await the conclusion of the proceedings. Having regard to the nature of the application and the history of the proceedings, the fact that an application for leave to bring a derivative suit could, and ordinarily would, be brought in separate proceedings, and that my judgment today would have finally determined those proceedings, I consider it appropriate to order that costs be payable forthwith as a discrete issue has now been determined. The respondents should be able to proceed to have those costs assessed now if they cannot reach agreement with the applicants as to an appropriate amount of costs.
3. I note in that regard that the only affidavit that was filed by the respondents following the filing of the interlocutory process was Daniel's affidavit of 13 September 2021 and its exhibit. The respondents' costs would obviously include the preparation of that affidavit as well as reviewing whatever evidence was relied upon by the applicants today and preparing submissions and appearing today. I expect an assessor to be able to properly determine the costs of this application rather than any other costs which may be referrable to the substantive proceedings.
4. For these reasons, I make the following orders: 1. Dismiss the Amended Interlocutory Process filed on 16 September 2021. 2. Order the applicants to pay the respondents' costs of the Amended Interlocutory Process, such costs to be payable forthwith.

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DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 November 2021