Brunninghausen v Glavanics

Judgment Background 1The Applicants, Mr and Mrs McLaughlin, seek leave to bring a cross-claim in these proceedings in the name of a company in liquidation, Dungowan Manly Pty Ltd ("Company"). I should first set out certain background facts, which I understand to be common ground, to which I referred in an earlier judgment dated 25 June 2014 ([2014] NSWSC 856) ("my earlier judgment"). . 2The Company was the owner of a company title home unit situated in Manly and, under the Company's articles of association, a shareholder's holding of a specific class of shares in the Company conferred a right to occupy a specific unit within the block. Mr and Mrs McLaughlin purchased a share entitling them to occupy the then unit 4 in the building in 1996. A proposal to renovate and redevelop the building and to convert it from company to strata title was put to the Company's members in September 2006 and the Company struck a special levy in 2007 to partly fund that proposal, which was also funded by borrowed monies. That proposal was opposed by Mr and Mrs McLaughlin. Several proceedings were brought by Mr and Mrs McLaughlin against the Company in the period from 2006 in respect of issues in relation to the proposed redevelopment. Broadly, Mr and Mrs McLaughlin alleged that the Company's conduct was oppressive to them and sought relief under s 232 of the Corporations Act 2001 (Cth) and also alleged breaches of the Company's articles of association in respect of several matters. Mr and Mrs McLaughlin were successful, albeit on relatively narrow grounds, in proceedings at first instance in which judgment was delivered by Ward J (as her Honour then was) in February 2010 (McLaughlin v Dungowan Manly Pty Ltd [2010] NSWSC 187). 3In the meantime, the development and conversion of the property to strata title was completed. The Company and its shareholders subsequently sought to implement arrangements by which shares in the Company would be surrendered by its shareholders in exchange for transfer of strata title units to them. By motion filed on 29 January 2010, Mr and Mrs McLaughlin sought orders restraining the Company from entering into share surrender agreements to implement those arrangements. In a judgment dated 18 February 2010 ([2010] NSWSC 89), Ward J did not grant the relief sought but noted that each shareholder who exchanged their share in the Company for an individual strata title unit would be required to undertake to contribute any shortfall as between the Company's assets and the amount it owed to Mr and Mrs McLaughlin in respect of the proceedings. In about June 2010, share surrender agreements were entered into by the Company and shareholders except Mr and Mrs McLaughlin and strata title units were subsequently transferred to shareholders other than Mr and Mrs McLaughlin. The circumstances in which Mr and Mrs McLaughlin did not enter, or did not have the opportunity to enter, such an agreement will be in issue in a substantive hearing of these proceedings. 4Clause 7 of the share surrender agreements provided that, save as provided in that clause and cl 8, the liability of the relevant shareholder and the Company was to be determined on the basis of a reconciliation of assets and liabilities of the Company as at 28 February 2010. Clauses 8 and 9 of the share surrender agreements in turn provided: "8. Notwithstanding clause 7, the Company may from time to time perform a further reconciliation, taking account only of the matters referred to in clause 9 or monies owing to or becoming owing between the parties to proceedings number 4924 of 2006 in the Supreme Court of New South Wales (McLaughlin v Dungowan Manly Pty Ltd) in consequence of the judgment pronounced therein on 26 February 2010 (including any revision thereof at first instance, or reversal thereof on appeal, and including in respect of any order for costs therein at first instance or on appeal), and if on any such further reconciliation: (a) a balance is owing in favour the Company [sic], the Company shall distribute the same to persons who were the members and liable to pay and who paid the levy struck by the Company on 16 January 2010 in the proportions in which they were obliged to pay that levy; (b) A balance is owed by the Company, the Shareholder shall pay to the Company the proportion thereof which corresponds with the proportion of the levy struck by the Company on 16 January 2010 which the Shareholder was obliged to pay; (c) Any party liable to make payment on another on the said reconciliation shall make payment within 14 days of receiving notice to do so. For the purpose of making a reconciliation in accordance with this clause or the preceding clause, the Company may take and act upon professional advice as to the quantum of any item to be taken into account in the reconciliation. 9. This Agreement does not displace or otherwise affect: ... (c) Any debt or liability of the Company or any Shareholder the subject of any action in any proceeding to bring which on behalf of the Company leave is granted in the action for any debt or liability which may arise from any judgment in the action, including any judgment on appeal; (d) Any obligation of the Shareholder to contribute to the Company's costs and expenses of the action or any appeal of the costs and expenses of compliance of any judgment in the action or on appeal or its costs and expenses of any proceeding (including any appeal) to bring which leave is granted in the action, by way of levy or otherwise under the Company's constitution." 5The Company appealed the decision against it at first instance, and Mr and Mrs McLaughlin brought a cross-appeal. The Court of Appeal dismissed the appeal and allowed the cross-appeal (Dungowan Manly Pty Ltd v McLaughlin [2012] NSWCA 180; (2012) 90 ACSR 62). In a second judgment, the Court of Appeal ordered judgment in the amount of $632,038.95 in favour of Mr and Mrs McLaughlin, on a basis agreed between the parties, apparently reflecting the difference between the value of their shares in the Company in late 2006 if no breach had occurred and the estimated value of their shares at the date of the hearing (Dungowan Manly Pty Ltd v McLaughlin (No 2) [2012] NSWCA 258). 6On 18 December 2012, the Company's then directors placed the Company in voluntary administration. On 19 February 2013, the administrators issued a special levy notice to shareholders to enable the Company to meet liabilities owing to Mr and Mrs McLaughlin in respect of the judgment debt and costs arising from the Court of Appeal's judgment. The total amount of the special levy was $1,274,499.61, which included an amount of $1 million to be paid to Mr and Mrs McLaughlin in respect of their judgment and estimated costs and an amount of approximately $274,500 to meet payment of the administrators' remuneration, costs, fees and expenses. The letter sent by the administrators' solicitors to shareholders containing notice of that levy referred to the terms of the Company's articles of association that provided for a levy on holders of shares in the Company and to the Company's power to undertake a reconciliation and require amounts to be paid by shareholders under cll 8 and 9 of the share surrender agreements. A second special levy notice was issued on 15 April 2013 claiming additional amounts, as a result of an increase in the level of costs claimed by the former solicitors for Mr and Mrs McLaughlin, Turner Freeman, in respect of the conduct of the proceedings. The total amount of the second special levy was $254,201. The validity of those levies was contested by the Company's chairman and only one shareholder paid the levy. The Company was thereafter placed in liquidation and Mr Shepard and Mr Farnsworth were appointed as its joint and several liquidators. Mr Shepard subsequently resigned as liquidator and Mr Farnsworth continues in that position. 7Mr and Mrs McLaughlin's former solicitors subsequently issued bankruptcy notices to them in respect of costs payable to them in respect of the conduct of the proceedings and bankruptcy proceedings against them were or are pending in the Federal Circuit Court of Australia. The matters raised in these proceedings 8By Originating Process filed on 5 July 2013, the liquidator and the Company applied for directions in this Court under ss 479(3) and 511 of the Corporations Act in respect of competing claims, including a claim by Mr and Mrs McLaughlin, over unit 6 which is presently registered in the name of the Company. Mr and Mrs McLaughlin, who were then represented by new solicitors, filed a Cross-Claim and, after those solicitors ceased to act, applied for leave to file an Amended Cross-Claim. 9In my earlier judgment, I held that the relief sought in prayers 7 - 11 of Mr and Mrs McLaughlin's proposed Amended Cross-Claim was properly arguable, although the pleading was not ideal, and subject to the fact that the Company's rights could only be pursued by means of a derivative action. I indicated that, subject to the joinder of the proposed Cross-Defendants, Mr and Mrs McLaughlin could amend their Cross-Claim by adding a claim referred to in prayers 7 - 11 of the proposed Amended Cross-Claim and associated pleadings of material facts. I also held that several other paragraphs of the relief sought in that proposed Amended Cross-Claim were not in proper form or were not seriously arguable. On 2 July 2014, I made directions that contemplated that Mr and Mrs McLaughlin could take further steps, including filing an interlocutory process seeking leave to file their Further Amended Cross-Claim (addressing the matters I had noted above) and seeking leave to bring the relevant part of that Amended Cross-Claim as a derivative action and to proceed, in the first instance, as a test case against one or more of the Company's shareholders. 10By Interlocutory Process filed on 16 July 2014, Mr and Mrs McLaughlin sought leave to file an Amended Cross-Claim; leave to bring that Amended Cross-Claim as a derivative action in the name of the Company (although, strictly, only parts of the Amended Cross-Claim required such leave); an order that the Amended Cross-Claim be brought as a test case against two shareholders who signed share surrender agreements, one being a company and the other being natural persons who are joint shareholders; and an order dispensing with any requirement that the Company be represented by a solicitor arising under the Corporations Act. While no such requirement arises under that Act, a requirement of that kind does arise under the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), and I assume that Mr and Mrs McLaughlin's application is directed to that requirement. 11On 7 August 2014, I made further directions as to service of the proposed Amended Cross-Claim on each respondent to the interlocutory application and other directions as to the preparation of the matter for hearing of the application for leave to bring the derivative claim. Orders for service by post were also made in respect of several parties. Four parties, Loafer Pty Ltd ("Loafer"), Garmen Pty Ltd ("Garmen") and Mr and Mrs Brown, who are the proposed Cross-Defendants against whom Mr and Mrs McLaughlin seek to proceed by way of test cases, initially appeared in the proceedings, although Mr and Mrs Brown now submit to the orders of the Court save as to costs. 12Mr and Mrs McLaughlin, who (as I noted above) are now not legally represented in the proceedings, submit that their proposed Amended Cross-Claim should be permitted and the orders and declarations sought should be granted. In this application, the only question is whether leave should be granted for a derivative action and the manner in which the matter should proceed to a final hearing. Mr and Mrs McLaughlin refer to the judgments of Ward J at first instance and of the Court of Appeal in their proceedings against the Company and to the unsatisfied judgment in their favour and to the terms of the share surrender agreements, to which I have referred above. They submit that objections previously raised by the chairman of the Company, and the principal of Loafer and Garmen, to the payment of levies were not well-founded and that they are not aware of any other shareholder disputing liability to the levy, although I interpolate that (as I noted above) only one other shareholder has paid the levy. They point to the very real hardship which they face as a result of bankruptcy proceedings brought by their former solicitors in respect of their costs of the earlier proceedings, which have not been met by the Company where it has not been placed in funds by its shareholders to do so. 13Mr and Mrs McLaughlin's application for leave to amend the Cross-Claim and bring a derivative claim is opposed by Loafer and Garmen which are, as I noted above, two of the shareholders in the Company and are associated with its chairman, and are the Third and Eighteenth Cross-Defendants to the proposed Amended Cross-Claim. I will refer to the thorough submissions made by Ms Nolan, who appeared for Loafer and Garmen, in respect of the application below. Mr Philips, who appeared for Mr and Mrs McLaughlin's former solicitors, Turner Freeman (who are now an adverse interest to them in respect of the claim to unit 6 and the bankruptcy proceedings), indicated that the firm did not consent to or oppose their application for leave to being the derivative proceedings. 14At the hearing of the application on 23 October 2014, Mr and Mrs McLaughlin read numerous affidavits, including their own affidavits. In particular, Mrs McLaughlin's affidavit sworn 23 August 2013 sets out the history of Mr and Mrs McLaughlins' acquisition of a share conferring the right to occupy unit in the property, the development of the property, and the subsequent litigation, including referring to the judgment in the Court of Appeal. Numerous objections were taken to the admissibility of Mr and Mrs McLaughlin's evidence and I ruled on those objections. Mr and Mrs McLaughlin also read several further affidavits in relation to the question of service of proceedings on shareholders. 15Mrs and Mrs McLaughlin also read the liquidator's affidavits dated 22 January 2013 and 1 July 2014. The liquidator's affidavit dated 1 July 2014 described the special levy issued by the liquidators on 19 February 2013 as a levy under the share surrender agreements, and noted that the amount claimed included Mr and Mrs McLaughlin's judgment debt, and also included an allowance for the legal costs, an amount referable to trade creditors and an amount referable to remuneration, costs, fees and expenses (Farnsworth 1.7.2014 [5]). That affidavit also set out the attempts that the liquidators had subsequently made to enforce the special levies, including by the issue of creditors' statutory demands to parties including Garmen and Loafer, and the subsequent withdrawal of those statutory demands when the liquidators were not in funds to defend applications to set them aside. The liquidator also explained why he considered that he was unable to fund separate proceedings brought against the individual shareholders, if each of them sought to defend proceedings on the basis of matters raised by the principal of Garmen and Loafer in opposition to the levies. Mrs and Mrs McLaughlin also read the affidavit of a solicitor with Turner Freeman, Mr Gray, dated 16 June 2014, and also tendered exhibits to those affidavits and other documents. 16Turner Freeman in turn relied on Mr Gray's further affidavit dated 2 September 2013. Loafer and Garmen relied on the affidavit of their solicitor, Mr O'Brien, dated 15 October 2014 which annexed correspondence between the legal representatives for the liquidator on the one hand and Loafer and Garmen on the other as to a possible further reconciliation of the amounts claimed by the Company, to which I will refer below. 17The application was the subject of written and detailed oral submissions by the parties before me on 23 October 2014. After hearing the application on that date, I deferred my judgment at the parties' request to allow them, and particularly Loafer and Garmen and the liquidator, to continue discussions as to the proper quantum of levies upon shareholders under the Share Surrender Agreements, and listed the matter for further directions on 25 November 2014. 18The liquidator read his further affidavit dated 21 November 2014 at the directions hearing on 25 November. That affidavit set out steps taken by the liquidator since the hearing of the application on 23 October to undertake a reconciliation of amounts payable under the share surrender agreements and set out the result of that reconciliation, on two bases, one of which treated unit 6 as an asset of the Company and the other of which treated it as an asset of Mr and Mrs McLaughlin, on the basis that the Company held it on trust for them. That is, as I will note below, a matter to be determined at the further hearing of the proceedings. That affidavit indicated that, on 20 November 2014, the liquidator had emailed and posted an updated reconciliation of the levy to shareholders under the share surrender agreements, taking into account discussions between his legal representatives and those of Loafer and Garmen. That reconciliation involved a calculation of a net asset surplus under cl 7 of the share surrender agreement, reconciling the Company's assets and liabilities at 30 June 2010, because it was apparently not possible to reconcile those assets and liabilities as at 28 February 2010 as contemplated by that clause. The liquidator then reconciled the Company's obligations relating to Mr and Mrs McLaughlin under cl 8 of the share surrender agreements, on a basis alternatively including and excluding unit 6, and allocated those amounts among shareholders, excluding Mr and Mrs McLaughlin. 19Mr Golledge, who appeared for the liquidator, indicated that the liquidator remained hopeful that one or more shareholders might indicate agreement to the calculation of the amount payable under the share surrender agreements but indicated that such an agreement had not yet been reached. Mr Golledge also noted that that the liquidator considered that he had undertaken a reconciliation as contemplated by the share surrender agreements and that he may take a further step, of an administrative character, to issue further demands to shareholders in the amount allocated to them on the basis of that reconciliation. 20Prior to the directions hearing on 25 November 2014, the liquidator helpfully circulated draft directions, at the Court's invitation, which would bring the proceedings to hearing in February or March 2015. The parties subsequently also indicated their estimate of hearing dates, on different contingencies depending on whether, and the extent of, leave was given to Mr and Mrs McLaughlin to bring a derivative claim. The parties also accepted, at the directions hearing on 25 November 2014, that it was now appropriate to determine Mr and Mrs McLaughlin's application for leave to proceed in the Company's name at this point rather than further deferring the matter. The Court's role in the application 21I should briefly note that Ms Nolan made helpful submissions as to the circumstances in which the Court should intervene to assist Mr and Mrs McLaughlin to remedy the deficiencies which she contended existed in their proposed pleading. She drew attention to the decisions of the Court in McMurtrie v Commonwealth of Australia [2006] NSWCA 148; Rajski v Scitec Corporation Pty Ltd (Court of Appeal (NSW), 16 June 1986, unrep) and Minogue v Human Rights and Equal Opportunity Commission [1999] FCA 85; (1999) 84 FCR 438 at [28] and to several other authorities. Ms Nolan submitted that: "While [the] above authorities, among others, support the proposition that unrepresented litigants should generally be afforded greater latitude in the conduct of proceedings, they also make clear that it is not the function of the Court to give judicial advice to a litigant in person. It is respectfully submitted that the assistance and explanation that the Court has already extended the McLaughlins to date with respect to the form of their proposed pleadings satisfies the obligations of a presiding judicial officer where a party does not have legal representation. For these reasons and those which follow, the Court should not attempt further nor is there any utility in it formulating a viable case for the claimants in this case." 22It does not seem to me that there is any substantial controversy as to the principles to which Ms Nolan refers, although I would not wholly accept her formulation of their consequences. It has never been the role of the Court to formulate a "viable case" for Mr and Mrs McLaughlin. It has, however, been necessary to draw to their attention the fact that, for example, any claim under the share surrender agreements would involve the assertion of a right of the Company; that any attempt to assert a right of the Company would need to either be brought by the liquidator or, where he lacks funds to bring such a claim, by Mr and Mrs McLaughlin in the form of a derivative action; that, if they seek to bring such a derivative action, they would need leave for it in the Court's inherent jurisdiction; and that, if they seek such leave, they would need to serve any application for it upon the persons affected by such an application. It seems to me that those matters needed to be drawn to Mr and Mrs McLaughlin's attention, as there were steps that were open to them if they wished to pursue their application, lest the proceedings miscarry because they were simply not aware of the steps that might be taken to pursue them. I would add that I do not regard drawing matters of that kind to the attention of Mr and Mrs McLaughlin as matters that are unique to any obligation to draw relevant matters to the attention of a self-represented litigant. I would take the same course in a specialist corporations list if a legal practitioner appeared and did not seem to be aware of a matter such as, for example, the need for leave to bring proceedings against a company in administration or liquidation. 23I also do not consider that the limits of the Court's role in assisting self-represented litigants require the Court to either accept or reject Mr and Mrs McLaughlin's pleading as a whole, rather than permitting some parts of it to proceed and withholding leave for other parts of it. That also does not involve the application of a different standard to Mr or Mrs McLaughlin or self-represented litigants generally than the standard which the Court would apply in respect of litigants generally, so far as it is obliged to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings under s 56 of the Civil Procedure Act 2005 (NSW). Applicable legal principles 24The Court has a well-established power to grant leave to bring derivative proceedings although a company is in liquidation, in its inherent jurisdiction, upon the application of a creditor. Ms Nolan referred to the Court of Appeal's decision in Chahwan v Euphoric Pty Ltd (trading as Clay & Michel) [2008] NSWCA 52; (2008) 245 ALR 780, where the Court unanimously held that the statutory derivative action under Pt 2F.1A of the Corporations Act is not available in that jurisdiction although the inherent jurisdiction is available in that situation. She drew attention to the observations of Barrett J (as his Honour then was) in Carpenter v Pioneer Park Pty Ltd [2008] NSWSC 551; (2008) 71 NSWLR 577 at [23] - [36] concerning the scope of the derivative action. His Honour helpfully summarised the criteria to be applied (at [34]) as follows: "1 The question whether the proceedings proposed to be pursued have some solid foundation, in that they exhibit such a degree of merit as to be neither vexatious nor oppressive and to present reasonable prospects of success. 2 The attitude of the liquidator to the question whether the proceedings should be pursued. 3 The question whether 'practical considerations support the initiation of the proceedings', with particular reference to financial protection of the liquidator and the estate of the company by means of indemnity and, if indicated, security." 25I also addressed the relevant principles in Re Staway Pty Ltd (in liquidation) (receivers and managers appointed) [2013] NSWSC 819 where I summarised those principles (at [24]-[25]) as follows: "The general principle is that proceedings in the name of a company in liquidation should be conducted by the liquidator: Scarel Pty Ltd v City Loan and Credit Corporation Pty Ltd (No 2) (1988) 17 FCR 344; (1988) 12 ACLR 730 at [733]; Hu v PS Securities Pty Ltd above at [35]. However, the power to grant leave to a creditor or contributory of a company in liquidation to use a company's name as a plaintiff is available in the Court's inherent jurisdiction and under s 511 of the Corporations Act: Hu v PS Securities Pty Ltd above at [25]-[29]. Where a company is in liquidation, that power is available to the exclusion of the statutory derivative action under Part 2F.1A of the Corporations Act: Chahwan v Euphoric Pty Ltd [2008] NSWCA 52 at [124]-[125]; (2008) 65 ACSR 661. In Aliprandi v Griffith Vintners Pty Ltd (1991) 6 ACSR 250, McLelland J observed that the Court's inherent power to order that a creditor or contributory of a company in liquidation be authorised to use the company's name as plaintiff "is of respectable antiquity and is sanctioned by high authority". His Honour noted that that jurisdiction was based on the principle that allows a person to obtain orders in chancery against his or her trustee to be allowed to use the trustee's name to recover trust property: Cape Breton Co v Fenn (1881) 17 Ch D 198 at 207. In Carpenter v Pioneer Park Pty Ltd [2008] NSWSC 551; (2008) 71 NSWLR 577 at [25], Barrett J noted that the power to authorise derivative proceedings by a beneficiary in the name of a trustee was available "in special circumstances", which could involve a failure, excusable or inexcusable, by the trustee in the performance of the duty they owed to the beneficiary to protect the trust property or protect the interests of the beneficiary of the trust estate. His Honour also identified (at [34]) three matters which should be taken into account in an application for such leave, namely: "1. The question whether the proceedings proposed to be pursued have some solid foundation, in that they exhibit such a degree of merit as to be neither vexatious or oppressive and to present reasonable prospects of success. 2. The attitude of the liquidator to the question whether the proceedings should be pursued. 3. The question whether 'practical considerations support the initiation of the proceedings', with particular reference to the financial protection of the liquidator and the estate of the company by means of indemnity and, if indicated, security." That test was also adopted by Ward J in Hu v PS Securities Pty Ltd above at [38]ff." 26Ms Nolan also referred to my summary of those principles in Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 64; (2014) 97 ACSR 581 at [9] as follows: "It was common ground between the parties that the Court has an inherent jurisdiction to permit proceedings to be taken in the name of a company in liquidation upon the application of a creditor or contributory and it was also common ground between the parties, and I accept, that relevant factors in such an application include whether the proceedings proposed to be pursued have some solid foundation, in that they exhibit such a degree of merit as to be neither vexatious nor oppressive and to present reasonable prospects of success; the liquidator's attitude to the question whether the proceedings should be pursued; and whether "practical considerations support the initiation of the proceedings", with particular reference to financial protection of the liquidator and the company's estate by means of indemnity and, if indicated, security: Aliprandi v Griffith Vintners Pty Ltd (in liq) (1991) 6 ACSR 250 at 252; Brightwell v RFB Holdings Pty Ltd (in liq) [2003] NSWSC 7; (2003) 44 ACSR 186 at [45]; Carpenter v Pioneer Park Pty Ltd [2008] NSWSC 551; (2008) 66 ACSR 564 at [34]; Hu v PS Securities Pty Ltd as trustee of the Joseph Family Trust [2011] NSWSC 303 at [38]; Staway Pty Ltd (in liq) (recs and mgrs apptd) [2013] NSWSC 819 at [25]. It also appeared to be common ground that these matters are not exhaustive, since the grant of leave in the Court's inherent jurisdiction requires the exercise of the Court's discretion to which other matters might also be relevant." Whether the proposed Amended Cross-Claim has some solid foundation 27Ms Nolan addressed her outline of submissions as to whether reasonable prospects of success are shown by reference to the proposed Amended Cross-Claim as a whole and referred to "significant deficiencies in the pleading". She submitted that: "Of those claims, which may be perceived to have any merit, the allegations are generally vague and imprecise and are properly to be regarded as sufficiently embarrassing such that they will undoubtedly prejudice and delay the fair trial of the proposed proceedings." Ms Nolan also submitted that it was "clear" that there would be little utility in the Court granting further leave to Mr and Mrs McLaughlin to re-plead their claim in proper form. It seems to me that this question should be determined, not by reference to the Cross-Claim as a whole, but by reference to the discrete claims that are pursued in it. I now turn to that question. Claims in respect of Lot 6 28Mr and Mrs McLaughlin's proposed Amended Cross-Claim seeks relief in 14 prayers for relief. The first five prayers for relief reflect relief brought in their initial Cross-Claim filed at a time that solicitors were acting for them in the proceedings and raise the question of their claim to an interest in lot 6 in the unit block that was previously held in company title and is now held in strata title. Paragraphs 1 - 18 and 50 - 55 of the proposed Amended Cross-Claim in turn support the relief sought by Mr and Mrs McLaughlin in respect of their claim to the unit in prayers 1 - 5. In her written outline of submissions, Ms Nolan accepts that the relief sought by Mr and Mrs McLaughlin in these paragraphs (and prayer 9, relating to liability for costs of the company during the voluntary administration) are personal claims that do not require leave to bring a derivative action. The question as to ownership of the unit raised by these prayers for relief is also raised by an application for directions brought by the liquidator and it is plain from correspondence that has been led in evidence that at least the liquidator and his legal representatives have formed the view that that claim by Mr and Mrs McLaughlin is likely to be well-founded. There is no difficulty with their bringing that claim, although it does not require leave to bring a derivative action. Claims in respect of the share surrender agreements 29Paragraphs 6 - 10 of the relief sought in the proposed Amended Cross-Claim seek orders corresponding to paragraphs 7 - 11 of Mr and Mrs McLaughlin's proposed Cross-Claim addressed in my earlier judgment. Although these paragraphs are not as clear as they would be if drafted by a legally qualified person, all parties recognised that they are directed, at least in part, to the issue whether shareholders are obliged to pay levies made by the administrator under the share surrender agreements to which I referred above. Paragraphs 19 - 32 plead the appointment of administrators to the Company and circumstances leading into the entry into the share surrender agreements and paragraphs 33 - 49 deal with attempts made by the administrators (now liquidators) of the Company to call in levies issued under the share surrender agreements. 30I addressed the proposed relief sought by Mr and Mrs McLaughlin in these paragraphs in my earlier judgment and observed (at [36]-[37]) that: "I understand these paragraphs to be directed to the obligations of the Company's shareholders or former shareholders in respect of damages and costs in the proceedings under the share surrender agreements to which I have referred above and under the Company's articles of association. Mr and Mrs McLaughlin in turn propose to plead material facts supporting this relief, including shareholders' entry into the share surrender agreements that are alleged to have accepted liability for the Company's debts and the observations of Ward J in her judgment delivered on 18 February 2010 to which I have also referred above. They also plead the judgment delivered by the Court of Appeal and the order for payment of damages in favour of them and plead that the Company has continued to breach their rights by, inter alia, failing to enforce the judgment and order in their favour. It seems to me that these propositions are seriously arguable, in the light of the facts that I set out above, and neither the liquidator nor Turner Freeman [Mr and Mrs McLaughlin's former solicitors] contended to the contrary. The liquidator criticises the form of the pleading generally. Turner Freeman also contends that the proposed Amended Cross-Claim is embarrassing, implicitly, within the meaning of r 14.28 of the Uniform Civil Procedure Rules and decisions such as Shelton v National Roads & Motorists Assn Ltd [2004] FCA 1393; (2004) 51 ACSR 278 at [18] and McGuirk v University of New South Wales [2009] NSWSC 1424 at [30], [33]. However, it does not seem to me that either the relief sought in paragraphs 7-11 of the proposed Amended Cross-Claim or the associated pleading of material facts gives rise to any real difficulty in this regard. The propositions that (1) the shareholders agreed to pay a levy necessary to meet the judgment and costs ordered against the Company under the share surrender agreements; (2) the Court proceeded on that basis in declining to restrain entry into the share surrender agreements; (3) the Company (by its administrators) has raised that levy; and (4) shareholders failed to pay it, are not complex and the pleading adequately identifies them. It does not seem to me that any shareholders who are joined as party to the proceedings would have any real difficulty in understanding the case they have to meet." 31Ms Nolan submitted that prayers 5, 7 and 8 relating to orders that shareholders pay Mr and Mrs McLaughlin's costs and are liable for those costs and pay those costs within a specified period are directed at shareholders and directors but do not identify the basis of relief. It does not seem to me to be necessary for the claims for relief sought to identify the basis for the relief sought where that basis emerges from the pleading. Where leave is granted to Mr and Mrs McLaughlin to proceed in respect of their claims under the share surrender agreements, the basis of the relief sought will readily emerge from the proposed Amended Cross-Claim. 32Ms Nolan also submitted that there is no basis in law for the Company to assert the relief claimed in prayers 6 and 10 of the proposed Amended Cross-Claim, namely, an order that damages be paid by the members of the Company or directors of the Company and that members pay the costs of the liquidators and creditors of the Company "save to the extent to which the shareholders have so promised under the [s]hare [s]urrender [a]greement". Ms Nolan submitted that such a claim would be a suit for the enforcement of the obligations of shareholders under the share surrender agreements, which might be maintainable by the Company. I accept that, as I noted in my earlier judgment, the formulation of the relief sought is not what might be expected of an experienced Counsel or experienced litigation solicitor, but Mr and Mrs McLaughlin are neither. It is apparent that Ms Nolan, for Loafer and Garmen, has a clear understanding of the basis on which such relief might be granted and it seems to me that other shareholders in the Company will have no particular difficulty in appreciating that matter. In these circumstances, it seems to me that the criticisms made by Ms Nolan of prayers 6 and 10 relate to matters of form rather than substance. The Court should have no difficulty in formulating appropriate relief, if Mr and Mrs McLaughlin are otherwise successful in a derivative claim brought by the Company under the share surrender agreements, and it seems to me that it is not consistent with the just, quick and cheap resolution of the proceedings for Mr and Mrs McLaughlin to be required to replead this relief, where the basis on which it might be granted is readily apparent and understood by Loafer and Garmen, and would similarly be understood by other shareholders. 33Mr Golledge pointed out that, notwithstanding that leave was granted to Mr and Mrs McLaughlin, they would not have the power to make the relevant reconciliation, which would need to be made by, and may need to be the subject of evidence by, the liquidator. Mr Golledge also noted that, on one possible construction of the share surrender agreements, Mr and Mrs McLaughlin may need to lead no further evidence than the fact of that reconciliation, apart from formal evidence. At the hearing before me on 23 October and again at the further directions hearing on 25 November 2014, Ms Nolan contended that the earlier levy issued by the liquidators had been made under the Company's articles of association and not under the share surrender agreements. Mr Golledge also proceeded on that basis at one point in his submissions on 23 October 2014. However, as Mrs McLaughlin pointed out, and as I have noted above, the letter dated 19 February 2013 from the then administrator's solicitors to shareholders (Mrs McLaughlin 23.8.13, Annexure "J") appears to constitute a levy both under the Company's articles of association and the share surrender agreements, so far as it refers not only to the directors' power to make a levy under cl 4 of the Company's articles of association, but also to the Company's power to perform a further reconciliation under cl 7 of the share surrender agreements. Mr Farnsworth' s affidavit dated 1 July 2014 also described the special levy issued by the liquidators on 19 February 2013 as a levy under the share surrender agreements. Following Mrs McLaughlin's submissions, Mr Golledge properly qualified his submissions made on 23 October to recognise the possibility that the earlier levy made by the administrators was made both under the articles of association and under the share surrender agreements. 34At the directions hearing on 25 November, Ms Nolan also submitted that a levy had not yet been struck under the share surrender agreements and that would be the next logical step in any recovery process, prior to Mr and Mrs McLaughlin being granted leave with respect to enforcement of the debts that would arise from a levy. That submission was contrary to the position on the face of the correspondence to which I have referred above, and to that ultimately accepted by the liquidator, that the earlier levies had arguably been made under both the share surrender agreements and the articles of association. Ms Nolan also submitted at the directions hearing on 25 November 2014 that "something new" had emerged in discussions between the liquidator and shareholders since the previous hearing, namely, that there had not previously been a reconciliation under cl 7 of the share surrender agreements so as to give rise to a reconciliation under cl 8 of the share surrender agreements. The premise of that submission was that a reconciliation under cl 7 of the share surrender agreements was a necessary prerequisite to a reconciliation under cl 8 of the share surrender agreements. It is necessary to address this submission here, at least at a preliminary level and without forming any final view, since the claim under the share surrender agreements would arguably not have solid foundation if that were a correct construction of cll 7 and 8 of the share surrender agreements and no such reconciliation had been undertaken. 35The essential premise of Ms Nolan's submission was that a reconciliation under cl 7 of the share surrender agreements was a precondition to a reconciliation under cl 8 of the share surrender agreements. It is by no means clear to me that that reading of those clauses is correct, since the introductory words "notwithstanding clause 7" in cl 8 arguably contemplate that the reconciliation in cl 8 may be undertaken separately and the further words "taking account only of" the specified matters arguably indicate that such a reconciliation would be based solely on those matters. The language "further reconciliation" in cl 8 of the share surrender agreements is arguably apt to describe an additional or alternative reconciliation to that contemplated by cl 7 of the share surrender agreements, without necessarily requiring that both reconciliations take place at once or in immediate succession. That construction of the clause is arguably consistent with its language and commercially sensible, since otherwise the Company would have left itself exposed to the risk that it could not promptly cause its shareholders to place it in funds to meet a judgment against it, if there was any delay or difficulty in performing the separate reconciliation contemplated by cl 7 of the share surrender agreements. 36It therefore seems to me that it is seriously arguable that a reconciliation under cl 8 can be made independently of a reconciliation under cl 7 of the share surrender agreements, and Ms Nolan's submission that the administrators had not undertaken a reconciliation under cl 7 of the share surrender agreements at the time of their earlier levies does not have the consequence that Mr and Mrs McLaughlin's claim is not seriously arguable. 37Paragraphs 6-10 of the relief sought and paragraphs 19 - 49 of the supporting pleading therefore have some solid foundation, in the sense that they present reasonable prospects of success, such that leave to bring them as a derivative proceedings could be granted. Other relief sought by Mr and Mrs McLaughlin 38Paragraphs 11 - 14 of the relief sought in Mr and Mrs McLaughlin's proposed Amended Cross-Claim in turn seek declarations that the directors of the Company had breached their statutory, fiduciary duties and are personally liable; that the directors breached a duty to creditors, in particular to Mr and Mrs McLaughlin; an order that the directors pay damages for "this breach"' and an order for "appropriate compensation for injury, significant harm, extreme hardship, distress and anguish". Paragraphs 56 - 104 of the pleading plead facts relevant to the breach of duty claim. 39Without any disrespect to Mr and Mrs McLaughlin, it is possible to deal with this application briefly, particularly where I had already identified deficiencies in this pleading in my earlier judgment. This claim cannot proceed as a personal claim by Mr and Mrs McLaughlin because the directors of the Company do not, in the ordinary course, owe statutory or fiduciary duties to a shareholder of the Company and no facts are pleaded by Mr and Mrs McLaughlin that would establish any special circumstances giving rise to such a duty, within the limited exception to that proposition recognised in cases such as Brunninghausen v Glavanics [1999] NSWCA 199; (1999) 46 NSWLR 538. Although the Company had a limited scope of activity, so far as it was the owner of a company title unit block, it had a significant number of shareholders and it is difficult to see, even if the relevant facts had been adequately pleaded, that a special duty could have arisen to require the directors to act in the interests of Mr and Mrs McLaughlin, rather than in the interests of the corporate entity which were not identical with their interests, or the interests of the shareholders as a whole. 40This claim cannot proceed as a derivative action, brought by Mr and Mrs McLaughlin on behalf of the Company, since the material facts necessary to establish any breach of fiduciary duty to the Company are not established nor are those fiduciary duties properly pleaded, so as to allow the Court to be satisfied that the claim has a solid foundation or that it would be in the Company's interests to bring it. The proposition that directors breached a duty to creditors, in particular Mr and Mrs McLaughlin, could not succeed, and leave should not be granted to proceed with it, because, even if it were assumed that the Company were in a position of insolvency or near insolvency throughout the whole of the period (as distinct from after the delivery of the Court of Appeal's judgment against it), Australian law does not recognise a duty owed directly to creditors, as distinct from a duty owed to the Company to take into account the interests of creditors in an appropriate case: Spies v R [2000] HCA 43; (2000) 201 CLR 603. 41The claim that the directors pay damages for "this breach" also cannot proceed, whether as a personal claim or as a claim brought by the Company as a derivative claim, since the matters necessary to establish any such breach (as distinct from a breach of the share surrender agreements) are not adequately pleaded. The claim for "appropriate compensation for injury, significant harm, extreme hardship, distress and anguish" cannot be permitted to proceed, because the basis for a claim for damages, other than in respect of any breach by shareholders of its obligations owed to the Company under the share surrender agreements, has not been established, even putting aside any question as to whether these heads of damages would properly be recoverable in a claim for breach of contract or fiduciary duty. 42Ms Nolan also submitted that, even if these claims for relief and the associated pleading were properly maintainable, the claims largely relate to events in 2007 and 2008 and are now statute-barred. It is not necessary to determine that submission since I would not grant leave for this relief or the associated pleadings for the reasons noted above. I note, however, that it may be arguable that the limitations period would run from the date of any damage suffered by Mr and Mrs McLaughlin, which may have occurred at the date the Company failed to meet its obligations in respect of the judgment delivered by the Court of Appeal. 43Ms Nolan also pointed to a further reason not to grant leave for the claims under paragraphs 11 - 14 of the relief of the proposed Amended Cross-Claim, namely, that those claims had been raised at first instance before Ward J, who had granted leave for a subset of them to be brought, and that Mr and Mrs McLaughlin did not then choose to proceed with them, and that Mr and Mrs McLaughlin again chose not to pursue those claims when the matter was before the Court of Appeal and consented to the grant of leave for them to be brought being rescinded. This matter is recorded in paragraph 15 of the Court of Appeal's judgment, where Macfarlan JA observed that: "The primary judge also granted leave to the McLaughlins to commence in the name of the Company a derivative suit against its directors for breach of statutory duties in connection with the redevelopment. Whilst initially resisting the Company's challenge on appeal to this grant of leave, the McLaughlins indicated on the hearing of the appeal that, because such a suit would be expensive and unlikely to return any significant benefit to them personally, they consented to rescission of the grant of leave." I am also not satisfied that the Court should now grant leave to bring claims for breach of directors' duties that Mr and Mrs McLaughlin elected not to press in the course of the proceedings before the Court of Appeal, where other parties would potentially now be deprived of that Court's determination of whether those proceedings should be permitted. 44Leave should therefore not be granted in respect of the prayers for relief sought in prayers 11 - 14 of the proposed Amended Cross-Claim and paragraphs 56 - 104 of the pleading. The liquidator's attitude to the question whether the proceedings should be pursued 45The liquidator's position is that he is unfunded and unable to pursue the proceedings from his own resources. The liquidator does not oppose the application for leave to proceed so far as it is confined, as it will be given the views I have expressed above, to an action by the Company to enforce the share surrender agreements. The liquidator's evidence, in his affidavit dated 1 July 2014, was that: "Given that I am presently unfunded and given that none of the shareholders have taken any active interest in the proceedings to positively assert claims on behalf the company that it owns the strata unit, I presently neither object nor oppose any application for leave that might be made by the McLaughlins to bring a derivative suit in the company's name to enforce rights of the company under the share surrender agreements provided that appropriate safeguards are provided that any fund recovered by the McLaughlins from shareholders is distributed in the order of priorities as set out in section 556 of the Corporations Act. Alternatively, any grant of leave should be on condition that in the event any monies recovered from the shareholders under the share surrender agreements, such funds should be paid to the liquidators and only be dispersed subject to further order of the court." (Farnsworth 1.7.14 [39]) 46At the hearing before me on 23 October 2014, Mr Golledge identified several conditions which he submitted ought to be imposed on the grant of leave to Mr and Mrs McLaughlin. The first of those conditions was that, prior to filing an Amended Cross Claim, Mr and Mrs McLaughlin provide a written indemnity in favour of the Company pursuant to which they agree to indemnify the Company and the liquidators for and in respect of all costs that the Company incurs, including pursuant to court order, by reason of the bringing, maintenance and conduct of the derivative claims; that they may not consent to the withdrawal, settlement or compromise of those claims except with the liquidator's consent or in accordance with an order of the Court; and that they must direct that any amount payable in respect of those claims by reason of any judgment in respect of those claims is to be paid to the liquidator of the Company to be dealt with in accordance with further order of the Court. I will deal with the question of indemnity below. I will, for the reasons indicated below, require that a somewhat narrower indemnity be given by Mr and Mrs McLaughlin as a condition of the grant of leave and I accept that the other conditions proposed by the liquidator are appropriate since any recovery made in respect of the derivative claims is the Company's property and not that of Mr and Mrs McLaughlin personally. Whether other practical considerations support the initiation of the proceedings and issues as to indemnity 47Ms Nolan also submitted that the facts that Mr and Mrs McLaughlin are unrepresented and the subject of bankruptcy proceedings by their former solicitors suggests that they are without the means to meet any adverse costs order made against the Company while conducting proceedings in its name. Ms Nolan properly pointed out that Mr and Mrs McLaughlin have not addressed how they would seek to indemnify the Company to protect its assets were leave to be granted and that no offer of security for costs is made by them. 48Ms Nolan rightly points to several decisions that have recognised the importance of an adequate indemnity as a very significant matter relevant to the exercise of the discretion whether to grant leave. In Scarel Pty Ltd v City Loan & Credit Corporation Pty Ltd (Supreme Court (NSW), Bryson J, 10 December 1987, unrep), Bryson J treated the absence of an adequate indemnity in respect of the Company's exposure as to costs as the most significant matter relevant to the exercise of his Honour's discretion whether to grant such leave. In Cadima Express Pty Ltd (in liq) v Deputy Commissioner of Taxation [1999] NSWSC 1143; (1999) 33 ACSR 527 at [49], Austin J observed that: "The Court will wish to be satisfied that the assets of the company in liquidation are not put at risk by the proceedings and that the liquidator is not exposed to personal liability without proper protection, and may also properly have regard to the risks which the litigation poses for the other party, given that the plaintiff is a company in liquidation, the assets of which are to be protected." In Carpenter v Pioneer Park Pty Ltd above at [57], Barrett J also recognised the importance of such an indemnity and I also noted the significance of that matter in Re Colorado Products Pty Ltd above at [10]ff, and also noted that an adequate indemnity in favour of the relevant company may well operate to the indirect benefit of the defendants to a derivative claim by a company in liquidation, by allowing a resource from which their costs may be met. 49I have had regard to the fact that, in this case, several factors arguably weighed against declining leave on the basis that no such indemnity is offered. The first is that, so far as the issues have emerged in a preliminary application of this kind, the claim that Mr and Mrs McLaughlin seek to bring on behalf of the Company appears to have merit, and the liquidator's Counsel recognised that matter in the course of submissions. The second is that, to the extent that an order for indemnity is directed to protecting the interests of creditors, Mr and Mrs McLaughlin are plainly very substantial creditors of the Company so far as they have a very substantial unsatisfied judgment against it. On the other hand, the proposed cross-defendants in the proceedings may ultimately also become creditors of the Company if Mr and Mrs McLaughlin are unsuccessful in their claim. In the present case, the Company is arguably in its present impecunious position because shareholders have not in fact met the levies that the liquidator has issued on the Company's behalf. The same factors that might lead the Court to decline an order for security for costs in favour of shareholders, in that situation, might arguably have the result that their interests are of lesser weight so far as any requirement for an indemnity is concerned in this case. I have also had regard to the fact that Mr and Mrs McLaughlin are one of numerous shareholders in the Company, and the effect of an indemnity would be require them to bear the full risk of the cost of unsuccessful proceedings to enforce the Company's rights where other shareholders who have not paid the levies under the share surrender agreements would not be required to do so. 50Nonetheless, the authorities have emphasised the importance of an indemnity in matters of this kind, and it seems to me that the matters to which I have referred are not sufficient to displace the need for such an indemnity to protect the Company's creditors and shareholders who may have orders for costs made in their favour if the proceedings fail. It seems to me that the grant of leave to Mr and Mrs McLaughlin should be conditional on their indemnifying the Company against any adverse costs orders against it. Mr and Mrs McLaughlin should not, however, be ordered to provide any security for such an indemnity, where that course would be inconsistent with the manner in which natural persons are typically treated in security for costs applications; where their present exposure to bankruptcy proceedings appears to result, in a significant part, from shareholders' not having paid the levies under the share surrender agreements; and where such an order and would potentially stultify the proceedings. 51Ms Nolan submits that, absent security, the grant of leave to proceed to Mr and Mrs McLaughlin would potentially generate other applications, including by way of security for costs against the Company. I do not accept that submission. It seems to me that an application for security for costs against the Company would face the very substantial obstacle that there is an apparently strong case that the Company's present impecuniosity is the result of shareholders' failure to meet levies issued by the Company under the share surrender agreements. That fact would have significant weight in a security for costs application, particularly where Mr and Mrs McLaughlin are not controlling shareholders of the Company and a substantial majority of shareholders in the Company are the potential defendants in the proceedings. I should not assume that any shareholder, properly advised and conscious of its and its advisers' obligations under s 56 of the Civil Procedure Act, is likely to bring a security for costs application against the Company in that situation. 52The liquidator also sought an order that an indemnity extend to his costs of the proceedings. I am not satisfied that such an order should be made. First, the liquidator initiated the proceedings, and Mr Golledge properly acknowledged in submissions that he could not identify any basis on which the liquidator's position was made worse by the relatively narrow cross-claim that Mr and Mrs McLaughlin will be permitted to bring in the Company's name. It seems to me that that concession was correct, since there is no reason to think that costs would be ordered against the liquidator personally in respect of a cross-claim that he has not brought; if the liquidator has a right to exercise a lien or indemnity against lot 6, on the basis that it is an asset of the Company, it is not apparent that he would be disadvantaged if a costs order were made against the Company in respect of that cross-claim, which would rank beneath his right to such a lien, and if the liquidator does not have such a right, because that unit is held on trust for Mr and Mrs McLaughlin, his position is also not made worse if costs are ordered against the Company in respect of that cross-claim, because of the ranking of his claim to indemnity and because the Company presently has no substantial assets other than unit 6 against which it could be satisfied. It might be added that, in that situation, the liquidator also gains the prospect of benefiting from successful proceedings brought by Mr and Mrs McLaughlin, which he is not himself funded to bring, so far as any recovery increases the Company's estate. 53Ms Nolan refers to other practical considerations that she submits militate against the grant of leave. She submits that such leave will cause delay; generate wasted costs; create unfair prejudice by reason of the need for judicial intervention to manage proceedings brought by leave in a company's name without the assistance of a solicitor; and create concerns of case management, including the fact that the time of the Court is a publicly funded resource that will be burdened by the involvement of litigants domiciled interstate, who appear predominantly by telephone, in the proceedings. I do not accept that these matters warrant the refusal of leave. It does not seem to me that there is likely to be significant delay, and the liquidator has submitted directions (which I will substantially make below) which will have the result that the proceedings will be set down for a hearing, including the hearing of other issues raised by the liquidator and Turner Freeman, in March 2015. I will address the issue raised by Ms Nolan in respect of the fact that Mr and Mrs McLaughlin are not represented by a solicitor below. The proposition that the Court will be burdened by the conduct of proceedings by litigants domiciled interstate, who appear by telephone, should be given little weight. This list often hears proceedings in which litigants, or their representatives, are domiciled interstate and appear at directions hearings by telephone. 54Ms Nolan also submitted that any funds that Mr and Mrs McLaughlin are prepared to offer for security of the Company's costs would be better used to fund the Company's liquidators to conduct the reconciliation contemplated under the share surrender agreements "and engender the support of the shareholders for such a reconciliation". That submission depends on the premise that Mr and Mrs McLaughlin should be required to give security for the Company's costs which I have not accepted above. As I understand the relevant evidence, the liquidator or Mr and Mrs McLaughlin may well take the view that he has already conducted such a reconciliation, since he has issued the relevant levies, albeit discussions with shareholders in respect of the content of such a reconciliation are continuing as I noted above. Ms Nolan also submits that Mr and Mrs McLaughlin are not properly placed to perform that reconciliation. While that is plainly correct, it does not seem to me necessary for them to do so, to the extent that the Company can rely upon any reconciliation already undertaken by the liquidator and any further reconciliation which he undertakes prior to the hearing. 55Ms Nolan also submits that the Court could direct the liquidators to prepare a reconciliation under the share surrender agreements under s 477(6) of the Corporations Act. I do not propose to make such a direction, which seems to me an unwarranted intrusion on the liquidator's judgment as to the steps that he should undertake. As I noted above, the liquidator has in any event now filed evidence of a further reconciliation that he has undertaken. Ms Nolan also referred to ongoing discussions between Loafer and Garmen and the liquidators over settling claims under the share surrender agreements by payment of an amount of money, and she refers to correspondence annexed to Mr O'Brien's affidavit dated 15 October 2014 in that regard. It is, of course, open to the liquidator to settle claims against shareholders under the share surrender agreement consistent with his statutory duties, and the grant of leave to Mr and Mrs McLaughlin to bring such proceedings on behalf of the Company does not affect the liquidators' powers in that regard. It seems to me that the fact of such discussions is not a reason not to grant such leave. Orders for test case 56There was reference to the possibility of a "test case" in earlier directions hearings before me. Mr and Mrs McLaughlin have led evidence of service upon at least some of the shareholders of the Company, although several of the affidavits on which Mr and Mrs McLaughlin relied in respect of service are not in admissible form, and others did not establish the service of the relevant documents upon the parties who have been the subject of attempts at service. In these circumstances, it does not seem to me that orders can be made for a test case in any formal sense, because an order for a test case or orders in the proceedings would not bind shareholders who had not in fact been served with the interlocutory process. The determination of the issues as between Mr and Mrs McLaughlin and Loafer and Garmen on the one and hand Mr and Mrs Brown on the other may, of course, have persuasive force for other shareholders, although it will not bind them. Whether leave should be granted to Mr and Mrs McLaughlin to conduct the proceedings for the Company without the assistance of a solicitor 57As I noted above, Mr and Mrs McLaughlin seek leave to conduct the proceedings for the Company without the assistance of a solicitor. That leave may be required because UCPR r 7.1 provides that a company, within the meaning of the Corporations Act, may commence or carry on proceedings in this Court by a solicitor or by a director, and by a director only if he or she is a plaintiff. Mr and Mrs McLaughlin are neither directors of the Company nor plaintiffs in the proceedings. The Court may have regard to the difficulty which a person without legal training may have in conducting complex proceedings, and the consequential risk to the Company, other parties to the proceedings and the efficient conduct of the proceedings, in determining whether to grant such leave. 58Ms Nolan submitted that the fact that Mr and Mrs McLaughlin are unrepresented would require case management of these proceedings. In oral submissions, Ms Nolan also submitted that it would be difficult to manage proceedings of this character without the assistance of a solicitor and without a solicitor's ability to comply with rules of procedure, evidence and substantive law. Ms Nolan pointed, in particular, to disputes which had arisen in the course of the hearing before me on 23 October as to whether documents had been served, although I note that, regrettably, such disputes are not limited to circumstances where one party is represented by a solicitor and the other is not. It seems to me that submission, while plainly correct, is of limited weight, because case management is often required, and not only of cases where parties are unrepresented. There is no suggestion that Mr and Mrs McLaughlin are any less cooperative in that regard than other represented parties in other proceedings. The fact that management of the proceedings will be required, where it is brought in the Company's name without the assistance of a solicitor, is a matter to be taken into account, but balanced against the interests of justice, including the public interest in the pursuit of potentially meritorious claims, recognised by the reference to the "just" resolution of matters in dispute in s 56 of the Civil Procedure Act. 59I will, on balance, make an order granting leave for Mr and Mrs McLaughlin to conduct the proceedings without being represented by solicitors. I do so because there seems to be little practical likelihood that Mr and Mrs McLaughlin would now be able to retain solicitors to represent them in the proceedings, where they are presently facing bankruptcy proceedings initiated by the former solicitors, in circumstances that, as noted above, the shareholders have not paid the levies made by the administrators (now liquidators) and the Company has not paid the costs awarded to Mr and Mrs McLaughlin in the earlier proceedings. It does not seem to me that it would be in the interests of justice that these proceedings be stultified because of the difficulties that presently face Mr and Mrs McLaughlin, inter alia, for those reasons. I accept that, as Ms Nolan submits, that that may cause challenges in case management, but that seems to me to be a matter that the parties and the Court will have to accept, where the alternative would likely be to deprive the Company and Mr and Mrs McLaughlin of the determination of their rights on their merits. Orders and directions 60I make the following orders: 1 Grant leave to Mr and Mrs McLaughlin to file an Amended Cross Claim, limited to the relief sought in paragraphs 1-10 and the matters pleaded in paragraphs 1-55 of their draft Amended Cross-Claim and naming Loafer Pty Limited, Garmen Pty Limited, and Mr and Mrs Brown, the First Plaintiff and the Third Defendant as Cross-Defendants. 2 Subject to paragraphs 3-4 below, grant leave to Mr and Mrs McLaughlin to bring the claim for relief specified in paragraphs 6-10 of their draft Amended Cross-Claim by reason of the matters pleaded in paragraphs 19-49 of their draft Amended Cross-Claim as a derivative claim on behalf of Dungowan Manly Pty Limited (in liq) ("Company"). 3 The leave granted in paragraph 2 above is subject to the condition that Mr and Mrs McLaughlin provide to the First Plaintiff, by 4pm on 15 December 2014, a written indemnity in favour of the Company pursuant to which they agree to indemnify the Company for and in respect of all costs that the Company incurs, including pursuant to court order, by reason of the bringing, maintenance and conduct of the claims specified in paragraph 2 above, such leave to cease to have effect at that time if no such written indemnity is provided to the First Plaintiff by that time. 4 The leave granted in paragraph 2 above is subject to the further conditions that: a Mr and Mrs McLaughlin may not consent to the withdrawal, settlement or compromise of the claims subject to the leave granted in paragraph 2 above except with the consent of the First Plaintiff or in accordance with an order of the Court; and b Mr and Mrs McLaughlin must direct that any amount payable in respect of the claims subject to the leave granted in paragraph 2 above, by reason of any judgment in respect of those claims, is to be paid to the First Plaintiff to be dealt with in accordance with further order of the Court. 5 Subject to further order, grant leave to Mr and Mrs McLaughlin to appear on behalf of the Company in the proceedings without retaining a solicitor. 61I also make the following directions, substantially based upon the directions proposed by the liquidator: 1 By 15 December 2014, Mr and Mrs McLaughlin are to file and serve on all other parties to the proceedings an Amended Cross-Claim in accordance with order 1 above. 2 By 15 December 2014, Mr and Mrs McLaughlin are to file and serve on all other parties to the proceedings all further evidence on which they propose to rely in support of any claim made by them in the Amended Cross-Claim or in opposition to any of the relief sought by any other party to the proceedings which they seek to oppose. 3 By 7 February 2015 any party which is the subject of any claim for relief made in the Amended Cross-Claim (other than any party who has field a submitting appearance) is to file and serve a Notice of Defence to the Amended Cross-Claim. 4 By 7 February 2015 all other parties are to file and serve all, or all further, evidence to be relied upon in respect of either the liquidator's application and the claims by Mr and Mrs McLaughlin and Turner Freeman in respect of unit 6. 5 By 14 February 2015 all parties are to serve on each other party to the proceedings and deliver to the Associate to Black J a list identifying all affidavits and all other documents on which they propose to rely at the final hearing of the proceedings. 6 By 21 February 2015 all parties are to serve on each other party to the proceedings and deliver to the Associate to Black J a list of objections which it is intended to take to any part of the evidence to be relied upon by any other party to the proceedings which list is to include a brief statement of the grounds for each objection. 7 By 27 February 2015, the Plaintiffs, Mr and Mrs McLaughlin and Turner Freeman are to serve on each party to the proceedings and deliver to the Associate to Black J an Outline of Submissions of no more than 10 pages in length outlining the contentions of fact and law to be relied upon in support of the claims made by them. 8 By 3 March 2015, all parties party, are to serve on each party to the proceedings and deliver to the Associate to Black J an Outline of Submissions of no more than 10 pages in length outlining the contentions of fact and law to be relied upon in opposition to the claims made by any other party. 9 By 6 March 2015, all parties are to serve on each party to the proceedings and deliver to the Associate to Black J an Outline of Submissions in Reply (if any) which is to be no more than 3 pages in length. 10 The proceedings are listed for hearing on 10-13 March 2015 with an estimate of 4 days. 11 Liberty to apply is granted to all parties on 3 days' notice. Unless otherwise ordered, leave is granted to Mr and Mrs McLaughlin to attend any appearance resulting from the exercise of the liberty to apply referred to in this paragraph (but not the final hearing of the proceedings) by telephone. 12 Costs be reserved.

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: 03 December 2014