Bolton v Keybridge Capital Limited [2026] FCA 404

1. The parties are agreed that leave is required to appeal the dismissal of the application for leave to bring a derivative action under s 236 and s 237 of the Act: Federal Court of Australia Act 1976 (Cth), s 24(1A); cf, Vinciguerra v MG Corrosion Consultants Pty Ltd [2010] FCA 763; (2010) 79 ACSR 293 at [15] (Gilmour J). The principles governing the grant of leave are well‑established. There are two considerations: first, whether the primary judgment is attended with sufficient doubt as to warrant reconsideration on appeal; and second, whether substantial injustice would result if leave were refused, assuming the decision is wrong: Decor Corporation Pty Ltd & Anor v Dart Industries Inc [1991] FCA 844; (1991) 33 FCR 397 at 398-399 (Sheppard, Burchett and Heerey JJ).
2. Where, as here, the primary judgment is not discretionary but involves an "evaluative task" concerning questions upon which reasonable minds can differ, it is not enough that the court may have a preference for a different view; there must be an error in the primary judge's approach or findings: Urban v Junior Academy ELC Pty Ltd [2019] VSCA 247 at [12] (Whelan, Emerton JJA and Kennedy AJA), citing Chief Commissioner of State Revenue v Metricon Qld Pty Ltd [2017] NSWCA 11; (2017) 224 LGERA 236 at [77] (Barrett AJA, with whom Macfarlan and Ward JJA agreed) and Perera v GetSwift Ltd [2018] FCAFC 202; (2018) 363 ALR 394 at [241] (Middleton, Murphy and Beach JJ). Further, leave to appeal must be refused if Mr Bolton fails to establish that both the finding by the primary judge with respect to good faith, and that with respect to the best interests of the company, are attended by sufficient doubt as to warrant reconsideration on appeal.

1. In finding that Mr Bolton was not acting in good faith, the primary judge focused on the period of "hiatus and inaction" with respect to the proposed claim between mid-2020 (when the $5 million was returned to Keybridge) and mid-2024 (when Keybridge wrote to Mr Catalano stating that it disputed his claim that the company had no interest in the shares in 20 Cashews held by Kirant): RJ at [67].
2. The primary judge accepted that prior to mid-2020, Kirant and Mr Catalano appeared to conduct themselves on the basis that Keybridge did have, or would have, an interest in the business: RJ at [63]. Her Honour also acknowledged Mr Bolton's contention that Mr Catalano introduced a confidentiality requirement after the arrangement was originally struck: RJ at [20] and [63]. But "whatever the 'true' initial position" was, the primary judge found that from mid-2020, Keybridge and Mr Bolton "conducted themselves in public on the basis that the investment had, regrettably, not worked out, and Keybridge's funds had been returned to it", and in the period leading up to the refund, it was "on the basis that the anticipated investment had not been finalised and was subject to further negotiations": RJ at [64].
3. The primary judge rejected as "difficult - if not impossible - to reconcile" those public statements with Mr Bolton's account that he assumed until March 2024, that the investment was in place for the benefit of Keybridge and was entirely unaware of Mr Catalano's position: RJ at [65]. Her Honour also was not persuaded that the period of inaction, and the timing of the derivative claim, could be explained (as Mr Bolton contended) by the reluctance of Keybridge to take action against a sitting director (Mr Catalano), who controlled over 10% of the shares in the company: RJ at [67].
4. Finally, the primary judge rejected the submission that Mr Bolton had demonstrated good faith by not acceding to threats by Mr Catalano (as Mr Bolton characterised them) to withdraw support at board level, if the issue of the interest in Rural Press was not resolved in his favour. That was because there was no evidence Mr Bolton took further steps to pursue Keybridge's interests in the face of those threats before he lost Mr Catalano's support and was ejected from the board: RJ at [69]-[70].

Why does Mr Bolton contend that the findings are in error?

1. By the draft notice of appeal, Mr Bolton contends that the primary judge erred in concluding that, for the purposes of s 237(2)(b), Mr Bolton was not acting in good faith in applying for leave under s 237(1) of the Act, and failing to conclude that he was acting in good faith in applying for such leave. The substance of his complaint as developed during written and oral submissions is that:

(a) The primary judge's findings on good faith was grounded in a narrative of the events underlying the proposed claim (which Mr Bolton characterises as going to its merits) and the primary judge erred in failing to explain how that "assessment of the merits" was relevant to the criterion in s 237(2)(b) of the Act, particularly given the primary judge made clear that her Honour was not expressing a conclusion that Mr Bolton was acting in bad faith; and

(b) The primary judge identified, but failed to make an express finding, in relation to the two interrelated factors the Court will have regard to in dealing with the question of good faith under s 237(2)(b) of the Act: whether the applicants have an honest belief of a good cause of action with reasonable prospects of success and whether the applicants have a collateral purpose that would amount to an abuse of process: South Johnstone Mill Ltd v Dennis and Scales [2007] FCA 1448; (2007) 163 FCR 343 at [64] (Middleton J), relevantly citing Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 at [36] (Palmer J).

Are the primary judge's findings on good faith attended by sufficient doubt as to warrant reconsideration on appeal?

1. I am not satisfied that the findings made by the primary judge on the question of good faith are attended by sufficient doubt as to warrant reconsideration on appeal. That is for the following reasons.
2. The primary judge was clear at the outset of the reasons that the narrative "is primarily relevant to the question of whether the Court should be satisfied that Mr Bolton is acting in good faith": RJ at [12]. That explanation is consistent with how her Honour dealt with the narrative in addressing the criterion in s 237(2)(b) of the Act. That is, to examine the adequacy of the explanation as to why the underlying dispute was not raised between mid-2020 and mid-2024, given the apparent inconsistency between the existence of a dispute and the public statements by Keybridge to the effect that the investment had not worked out and the money had been returned: RJ at [63]-[68]. The primary judge was not satisfied by the explanation given as to the events detailed in the narrative and, consequently, that Mr Bolton was acting in good faith. That conclusion had nothing to do with an "assessment of the merits" of the derivative action which her Honour characterised as "weak" but, nonetheless raising a serious question to be tried: RJ at [84(3)].
3. It follows that I do not accept that the primary judge failed to explain how the narrative was relevant to good faith. Nor do I accept that the "natural corollary" of the statement in the reasons, "I am not expressing a conclusion that Mr Bolton is acting in bad faith", was that Mr Bolton was acting in good faith or her Honour failed to properly consider s 237(2)(b) by failing to arrive at a conclusion on the topic: RJ at [68]. The reasons were sufficient to disclose the process of reasoning with respect to the narrative leading to the primary judge's conclusion that "Mr Bolton has not met his onus of satisfying the Court that he is acting in good faith": RJ at [68] (emphasis in the original); cf, DL v the Queen [2018] HCA 26; (2018) 266 CLR 1 at [32]- [33] (Kiefel CJ, Keane and Edelman JJ), [82] (Bell J) and [130]-[131] (Nettle J); see also, Bzezinski v Shaw (in his capacity as receiver and manager of Kalimpa Park Pty Ltd (recs and mgrs apptd) (ACN 615 703 547) [2022] VSCA 173; (2022) 407 ALR 547 at [67] (Kyrou, McLeish and Walker JJA). As that statement in the reasons makes clear, the primary judge was cognisant that Mr Bolton bore the onus of establishing good faith and was careful to draw a distinction between a failure to discharge that onus and a positive finding of bad faith. The latter was not a necessary precondition to her Honour concluding that Mr Bolton had not discharged his onus and, as such, not satisfied the good faith criterion in s 237(2)(b) of the Act.
4. The primary judge's approach in evaluating good faith by reference to the narrative was consistent with the authorities. As the New South Wales Court of Appeal outlined in Gillespie v Gillespie [2025] NSWCA 24; (2025) 422 ALR 224 - "the term 'good faith' is not defined by the Act, and it is not a term of art": at [29] (Gleeson, Mitchelmore and Ball JJA). What "amounts to good faith is context and fact-dependent": Gillespie at [29]; see also, Bzezinski at [64]. There is an obvious tension between the proposed claim and the events revealed by the narrative including, relevantly, the public statements by Keybridge (many of which Mr Bolton expressly authorised) to the effect that its $5 million investment was subject to "incomplete negotiations", as well as the fact the $5 million was returned to Keybridge in July 2020: RJ at [24]-[31]. That tension takes on a heightened significance when one considers the position Mr Bolton held in Keybridge at the time, and that he did not seek to bring the derivative action until after he was removed from the board. Given those matters, and in accordance with the context and fact-dependent inquiry to which the authorities refer, it was open to her Honour to consider good faith by reference to the adequacy of Mr Bolton's explanation for the timing of his application to bring the derivative action.
5. Finally, contrary to the submission advanced by Mr Bolton, the primary judge was not required to make findings with respect to the interrelated factors identified in South Johnstone and Swansson, only to consider them: Bzezinski at [68]. I am satisfied that her Honour did so. The reasons reveal that the primary judge turned her mind to whether Mr Bolton was "acting in bad faith or [was] proceeding with the present application despite subjectively believing the causes of action not to be sound": RJ at [68]. That statement reflects a consideration of the interrelated factors because it makes plain that the primary judge appreciated that in dealing with s 237(2)(b) of the Act, her Honour was to have regard to whether Mr Bolton had an honest belief in the cause of action, or was acting for a collateral purpose that may amount to an abuse of process: cf, South Johnstone at [64].

1. The primary judge found that "it is not in the best interest of Keybridge that derivative leave be granted" because "Mr Bolton has not satisfied me that the company would not be worse off, if derivative leave were granted, but the proceeding failed": RJ at [81]. In reaching that conclusion, her Honour focused on the undertaking Mr Bolton offered Keybridge in respect of any adverse costs order made against the company, should the derivative claims in the proposed proceeding not succeed: RJ at [73].
2. Mr Bolton did not put on any evidence concerning his financial position or any assets that would support the undertaking he had proffered: RJ at [79]. Her Honour noted that the evidence put on by Keybridge "included" evidence that: Mr Bolton had 3% shareholding in two companies (each of which had $100 of paid-up share capital); a lessee interest in real property in New South Wales; and had granted two security interests over his personal property: RJ at [79]. The primary judge also noted that Mr Bolton was subject to a substantial freezing order (capped at $4.75 million): RJ at [81].
3. Mr Bolton submitted below that the evidence put on by Keybridge was irrelevant, as the Court should not assume he would fail to make good on the undertaking offered and that, if he did fail to make good, Keybridge could bankrupt him. The primary judge rejected that submission: RJ at [82]. Her Honour observed that it is common, including in a derivative leave context, for the Court to examine the value of an undertaking in light of the capacity of the person giving the undertaking to make good on it: RJ at [82], relevantly citing Re Fishinthenet Investments Pty Ltd and Coastal Waters Seafood Pty Ltd [2014] NSWSC 260 at [31]- [33] (Black J); Re Carbon Copies Composites Pty Ltd [2022] NSWSC 1638 at [32]- [34] (Black J); and Re Carbon Copies Composites Pty Ltd [2022] NSWSC 1762 at [2]- [11] (Black J). The primary judge found there was an absence of evidence that the undertaking had any value because Mr Bolton was subject to the freezing order and Keybridge's inquiries had not revealed Mr Bolton held assets of any significant value in Australia, but did reveal that Mr Bolton had given security interests over the assets he had: RJ at [83].

Why does Mr Bolton contend that the finding is in error?

1. By the draft notice of appeal, Mr Bolton contends that the primary judge erred in concluding, for the purposes of s 237(2)(c) of the Act, that it was not in the best interests of justice of Keybridge that derivative leave be granted and failing to conclude that such leave was in the best interests of the company. The substance of his complaint as developed during written and oral submissions was that:

(a) The primary judge erred in finding that Mr Bolton was required to demonstrate that even if the proposed derivative proceeding was unsuccessful, Keybridge would be in no worse a financial position because the authority upon which her Honour relied - Wood v Links Golf Tasmania Pty Ltd (No 2) [2013] FCA 143 at [31] (Gordon J) - misstated the effect of the authorities relied upon in support of that proposition: Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 1007; (2004) 211 ALR 457 at [38]- [39], [45]-[47] (Barrett J); Roach v Winnote Pty Ltd [2006] NSWSC 231; (2006) 227 ALR 758 at [25]- [29] (Barrett J); and Charlton v Baber [2003] NSWSC 745; (2003) 47 ACSR 31 at [74] (Barrett J);

(b) The primary judge erred in proceeding on the basis that Mr Bolton was required to demonstrate an asset position over and above the sum of the freezing order ($4.75 million) because the assets remain Mr Bolton's, and the party that obtained the freezing order will not necessarily succeed in the relevant action or recover those assets;

(c) The primary judge erred in finding that the only evidence before the Court of Mr Bolton's financial or asset position was that summarised in the reasons because her Honour failed to take into account his shareholding in Keybridge (approximately 4.79% of the issued shares), and the public record with respect to litigation involving Mr Bolton includes a statement that by reason of the freezing orders "there is a ready pool of assets against which any award of compensation or damages which may result from [the relevant] claim may be enforced": WAM Active Limited v Keybridge Capital Limited (No 2) [2024] NSWSC 1496 at [236] (Nixon J); and

(d) The primary judge erred in failing to consider the reasons why it was in the best interests of the company that Mr Bolton be granted derivative leave to bring the proposed claim, including a proceeding to protect the best interests of members from breaches of duty by the directors, is likely to be in the best interests of the company as a whole: Re Orico Australia Pty Ltd [2019] VSC 313 at [67] (Connock J).

Is the primary judge's finding as to the best interests of Keybridge attended by sufficient doubt as to warrant reconsideration on appeal?

1. I am not satisfied that the primary judge's finding, for the purposes of s 237(2)(c) of the Act, that it was not in the best interests of Keybridge that Mr Bolton be granted derivative leave is attended by sufficient doubt as to warrant reconsideration on appeal. That is for the following reasons.
2. First, the substantive reason why the primary judge found that the grant of derivative leave was not in the best interests of the company was because there was an "absence of evidence that an undertaking given by Mr Bolton has any value": RJ at [83]. Mr Bolton does not challenge the correctness of the proposition that, in dealing with s 237(2)(c) of the Act, it was relevant for the Court to consider whether Keybridge would be prejudiced by the risk of an adverse costs order, and capacity of Mr Bolton to meet the indemnity the subject of that undertaking, was material to the assessment of risk: Power v Ekstein [2010] NSWSC 137; (2010) 77 ACSR 302 at [108] (Austin J); Fishinthenet at [31]-[33].
3. Second, the primary judge did not err in observing that Mr Bolton "has not put on any evidence that he has material assets over and above" the $4.75 million the subject of the freezing order: RJ at [81]. It was not for the primary judge to speculate as to the outcome of the proceeding in which the freezing order was made in evaluating whether the undertaking Mr Bolton offered was of value. Mr Bolton elected not to put on any evidence as to his asset or financial position. It was open to the primary judge to comment upon that election in dealing with the evidence adduced by Keybridge and considering whether the undertaking was of value and, relatedly, whether Mr Bolton had discharged his onus under s 237(2)(c) of the Act: cf, Atalanta at [18(4)].
4. Third, the primary judge did not find that the only evidence before the Court with respect to Mr Bolton's financial or asset position was that summarised in the reasons. Rather, her Honour found that Mr Bolton had not put on any such evidence and that the evidence put on by Keybridge included that to which her Honour referred: RJ at [79]. That distinction is material to Mr Bolton's complaint about the failure of the primary judge to expressly deal with his shareholding in Keybridge and, indeed, other statements "on the public record" about his "ready pool of assets". The evidence before her Honour included the existence of the two securities: the first expiring in 2041, with the collateral being 670,000 shares in Keybridge; and the second without a specified end time, with the collateral (described as commercial and collateral class) being all present and after-acquired property, with an exception in favour of Westpac Banking Corporation. The asserted failure by the primary judge to deal with the value of Mr Bolton's shareholding in Keybridge cannot sensibly be reconciled with the evidence of these securities and the property to which they are attached. As the reasons reveal, the existence of the securities contributed to Her Honour's reluctance to be persuaded that the undertaking was of value: RJ at [83].
5. Fourth, the primary judge did not err in failing to consider the reasons why it was in the best interests of Keybridge that Mr Bolton be granted derivative leave. There is no fixed test to determine best interests of a company: Orico at [65]. And while a proceeding to protect the interests of members from breaches of the duty of the directors is likely to be in the best interests of a company as a whole, this "may not invariably be the position": Orico at [67]. The substance of Mr Bolton's complaint is that (on his case) there were countervailing factors that weighed in favour of it being in the best interests of Keybridge to bring the proposed claim. But it is not enough that a different view may be reached as to this criterion on the material. It is for Mr Bolton to establish that there was an error in the primary judge's approach, or findings, with respect to s 237(2)(c) of the Act: Urban at [12]. I am not satisfied that the conclusion reached by her Honour as to the best interests of the company is attended by sufficient doubt as to warrant reconsideration on appeal simply because the primary judge undertook that evaluation by reference to the risk to Keybridge, should derivative leave be granted, rather than the potential benefits.

1. It follows that the judgment is not attended with sufficient doubt as to warrant its reconsideration on appeal. Moreover, I am not satisfied that Mr Bolton would suffer substantial injustice if leave to appeal were refused, even supposing that the decision of the primary judge to refuse leave was wrong.
2. Mr Bolton contends that he will suffer substantial prejudice if leave is refused because Kirant and Mr Catalano may raise a limitation period, should another Keybridge shareholder seek leave to bring the same or a similar action. Mr Bolton also points to the potential for an increase in the value of Keybridge shares, should derivative leave be granted and the proposed claim succeed.
3. But as Keybridge highlights, the substantial injustice to be considered is in relation to Mr Bolton, not a hypothetical shareholder who may seek to bring a derivative leave application in the future. In any event, it is still open to Mr Bolton to proceed with his proposed alternative claim against Kirant and Mr Catalano. The relief sought by Mr Bolton in his own right includes transfer of the 16.67% shares in Rural Press (or its ultimate holding company) under an alleged contract with Mr Catalano or, alternatively, an implied understanding with Keybridge relating to the alleged contract, which shares Mr Bolton says he would hold on resulting trust for the sole benefit of Keybridge.
4. Given those matters, Mr Bolton has not established that substantial injustice will result if leave to appeal is refused.

1. The application for leave to appeal is dismissed. There is no reason to depart from the usual order as to costs. Mr Bolton will pay Keybridge's costs of the application for leave to appeal.

I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Longbottom.