Solicitors:
Kells The Lawyers (Sydney) (plaintiff)
Emmaus Legal (first and second defendants)
Margiotta Solicitors (third and fourth defendants)
File Number(s): 2017/127395
[2]
Judgment (EX TEMPORE)
The company Bakers Extra Pty Limited was incorporated on 27 June 2007 and at least at all material times has had two equal shareholders, the plaintiff Van Hung Le (to whom for the sake of convenience and without intending any disrespect I shall refer by his anglicised name by which he is known, "Henry"), and the first defendant Ban Le (to whom on a similar basis I shall refer as "Ban"). They were and are also the two sole directors of Bakers Extra. The company has conducted with considerable success the business of producing baked goods - in particular, cakes - for supply to third party manufacturers and to major retail chains such as Woolworths and IGA. In particular, it has developed a substantial business with Woolworths.
The second defendant David Digiaro has been an employee of the company since December 2012, or thereabouts, with particular responsibilities in the areas of research, development, customer relations and production. At least on the defendants' case, his input has contributed significantly to the increase in the company's business, from a turnover of about $10 million per annum to a present turnover in the order of $24 million per annum, over the period of his employment.
The fourth defendant Buonissimo Proprietary Limited was incorporated on 22 April 2016, and is also engaged in the production of baked goods. It will be necessary in due course to say something more about its shareholding. The third defendant Michael Digiaro was the sole director and secretary of Buonissimo until 5 May 2017, and indirectly a shareholder until sometime in March 2017. He is the brother of David Digiaro. Once again for convenience, and without intending the slightest disrespect, I shall refer to the Digiaro brothers as David and Michael respectively.
A further relevant character, though less closely involved in the relevant events, is Ban's brother, Khai Ly.
On 20 May 2016, or thereabouts, Bakers Extra received from Woolworths a product brief or request to tender for the supply to Woolworths of a range of five-inch layer cakes. There is no doubt that this invitation to tender was submitted to Bakers Extra and received by David in his capacity as an employee of Bakers Extra.
Henry says that the concept of five-inch layer cakes was one developed by him, and that he produced a number which were taken by Ban and David to market to Woolworths. Michael says that it was he who developed the products that were marketed to Woolworths. For reasons to which I shall come, the identity of the progenitor of the five-inch layer cakes does not much matter. What is clear is that on 7 July 2016, Woolworths sent by email to David at Bakers Extra a letter dated 6 July 2016 addressed to David at Bakers Extra awarding to Bakers Extra a contract for the supply of 12 types of five-inch layer cakes.
That email was sent by the relevant person at Woolworths to David on 7 July at 2.01pm. At 2.20pm, David forwarded it to Michael, to Khai and to Ban. Of them, at least Khai and Michael had nothing to do with Bakers Extra. At 2.34pm, David replied to Elizabeth at Woolworths, from his Bakers Extra email account and over his signature block as "technical and innovation manager" at Bakers Extra, and bearing the logo of Bakers Extra, thanking Elizabeth for the email awarding the contract, and continuing, "I have noticed that the business has been awarded to Bakers Extra where these products actually are supposed to be for Buonissimo Bakery Australia. Are you able to amend this and resend?".
Elizabeth replied at 2.43pm on the same day, "I've made the changes". The attached letter was now addressed to David Digiaro at Buonissimo Bakery Australia, and the "own brand supply agreement" in the schedule to it had similarly been amended. At 4.19pm, David forwarded the revised letter to Ban, Khai and Michael, stating "Hi all, please see attached updated award letter with correct company. Please disregard the previous email".
The plaintiff's case is that the first defendant Ban, in breach of his fiduciary duties as a director, and the second defendant David, in breach of his duties as an employee, thereby diverted to Buonissimo a corporate opportunity which they were bound to exploit, if at all, for their company and employer, Bakers Extra.
The defendants say that Bakers Extra, and Henry in particular, consented to that course. By later in 2016, Henry had become suspicious about a bakery business conducted by Michael, and David's involvement with it. But unbeknownst to him at that stage, on 18 September 2016 Ban had sent to Michael, Khai and David an email which, as well as advising that he had transferred a sum of money to enable David to order some additional material, continued: "Michael, please check Buonissimo's bank account. David, make sure your PC is locked when you are not at your desk so no one can access to your emails." David replied to Ban, Michael and Khai: "I now keep my computer with me at all times, to avoid any concerns." Some evidence was given in the course of cross‑examination of David, to suggest that this was a prudent precaution, because production employees might chance upon his computer and material in it, which they could then use with an alternative employer. I must say that this seems to me, at this stage, an improbable explanation.
On 18 November 2016, Henry took possession of Ban's laptop computer, which was a company asset, and had it examined. This produced an exchange of texts between Ban and Henry, on 18 November 2016. Ban essentially said that he regarded it as theft, to which Henry responded that he would be back to talk to him. Ban said that the police were on the way, and Henry then responded:
"I know everything that what you done. So the company called Buonissimo mean anything to you. I got private investigators followed you and David for a long time, you can police the lawyers and barristers have advised that your computer belongs to Bakers Extra, and I have every right to take it."
To that, Ban replied: "If you want to see anything on my computer, I am more than happy to show you, you don't need to do this at all. Yes, I know about Buonissimo, so what?" Henry responded, "Good." Ban continued, "Have we lost any business, You are one who cause us to lose the Muffin business. That mean you stole $29,000 as well…". The text then seems to pick up the text which Henry had sent Ban. This exchange of communications is significant, because if, as the defendants contend, there had been a conversation between Ban, David and Henry, in April or May of 2016, which referred to, contemplated, and consented to the establishment of Buonissimo, and to its tendering for the five-inch tier cakes, then one might have expected Ban's response to the question about Buonissimo to involve some assertion that Henry knew about it too, as he had been told of it, and consented to it, in May of that year. It is also significant in the reference to "Have we lost any business…", because that indicates that Ban was aware of just what Henry's concern and complaint was, and the response to it was simply to the effect that no business had been lost - not that Henry had consented to it.
A further dispute between Ban and Henry emerged in April of 2017 over the purchase, import and payment of some ovens. That resulted in an exchange of text messages on 28 April 2017. At 12.52pm that day, Ban sent a text message to Henry and three other employees who might be regarded as loyal to or affiliated with Henry, in the following terms: "U guys better don't turn up for work as I said, I will not authorise any payments. As soon as I see Ban, Bakers Extra is finished. I will tell to talk to Kerry and Buonissimo to take over our products."
Such an email indicates that at least the possibility was in the mind of Ban that lines of product being manufactured by Bakers Extra might be appropriated by Buonissimo. There followed later that day further emails in which Ban proposed that in light of the dispute over the ovens "and many other previous similar situations, I see no other option than to dissolve our partnership and go our separate ways. I will start the process and engage a lawyer and suggest you do the same".
The further exchanges included a statement by Ban:
"You have been taking advantage of me for the last 12 years, and I have said nothing. You don't appreciate then, I will take it away from you ... you better get yourself a lawyer to prepare for a lengthy court battle. Don't mess around with me."
On 28 April 2017, Henry commenced these proceedings by originating process seeking a search order, which order was made that day by Slattery J. The search order was executed on 1 May 2017. His Honour granted a limited leave pursuant to (CTH) Corporations Act 2001, s 237, to permit Henry to bring the proceedings to that extent on behalf of the company.
On 5 May 2017, there was an exchange of emails concerning the employment of David, which would ultimately culminate in his dismissal. Henry convened a meeting for the purpose of dealing with that issue. At 11.03am he sent an email to Ban, asserting that it had come to his attention that David had been diverting business opportunities from Bakers Extra to Buonissimo and that this would be a breach of his duties as an employee, that he had lost all faith in David and as a director could no longer trust him, and continued:
"Although I do not see how he will be able to provide a satisfactory explanation of his conduct, I propose to arrange a meeting with David in order to provide him with an opportunity to do so..."
Ban was invited to attend the meeting. Neither he nor David ultimately did so, but there was an exchange of text messages in which Ban asserted that advice should be obtained from an employment lawyer first, and that if Henry insisted on proceeding, then he would be responsible for the financial consequences if David took action against the company. Notably, there was no response to the effect that this was all something that Henry had already agreed to in May of 2016.
I have referred to these documents in some detail because, in circumstances where the defendants set up a case of informed consent to the diversion of a corporate opportunity and to prove it rely on conversations which they say they had with Henry in April or May of 2016, which conversations are denied by Henry, the best guide to where on the probabilities the truth lies is to be found in communications between the parties of which there is a record, and in which one might have expected the issue to be touched upon. The absence of any reference in those communications to any alleged consent, in circumstances where one might have expected that it would have been raised as a response, is telling in judging at this stage where the balance of probabilities lies.
It is also relevant, as I have foreshadowed, to make some observations about the constitution or shareholding of Buonissimo. At all material times, there has been one shareholder only in Buonissimo, namely a company called DMBK Holdings Pty Ltd. Until relatively recently, that is to say 13 March of this year, that company had three shareholders: AMDD Investments Pty Ltd, KL & BL Investments Pty Ltd, and Digiaro Investments Pty Ltd. On or about 13 March, Digiaro Investments transferred its shareholding to KL & BL Investments. AMDD Investments has as its sole director, secretary and shareholder, one Amanda Milovic, who is David's wife. KL & BL Investments has as its sole director, secretary and shareholder one Andrew Mien Tuan Le, who is Ban's nephew. It might be observed that KL and BL correspond with the initials of Khai Le and Ban Le. In the name of AMDD Investments, the letters AM correspond with the initials of Amanda Milovic, and DD with those of David Digiaro. The former third shareholder Digiaro Investments Pty Ltd has, and has had at all material times, as its directors and shareholders, Michael and his wife Mirella Di Maggio. The letters which denote the name of the sole shareholder in Buonissimo, DMBK, correspond with David, Michael, Ban and Khai.
It is notable that save for David, Michael and Ban, none of those with an apparent legal interest or role in Buonissimo or its immediate or ultimate shareholders have any background in the baking industry, and that Ban has admittedly been involved in management of Buonissimo.
[3]
The applications, submissions and principles
Before the Court presently are two applications. The plaintiff by interlocutory process filed on 7 August 2017 seeks leave pursuant to Corporations Act, s 237, to bring proceedings on behalf of and in the name of Bakers Extra pursuant to s 236. By interlocutory process filed on 12 May 2017, the third and fourth defendants Michael and Buonissimo apply for an order setting aside the search order made by Slattery J on 28 April 2017 as against them. That process also seeks to set aside a notice to produce given by the plaintiff to the fourth defendant dated 9 May 2017, which the plaintiff does not at this stage seek to sustain.
The action which the plaintiff seeks leave to bring under s 236 is, in short, a claim for equitable or statutory compensation for breaches of fiduciary and statutory duties said to have been owed to the company by Ban as a director and David as an employee, in respect of which the fourth defendant Buonissimo is said to have been the knowing recipient and the third defendant Michael to have been at least a knowing assistant. The breaches, as I have foreshadowed, are founded on the diversion of the opportunity to supply to Woolworths the line of five-inch layer cakes referred to in the product brief of 20 May and the contract of 6 July 2016. The plaintiff estimates that the profits from that line of business would be in the order of $20,000 per week, which corresponds to about $1 million per year.
Although the defendants have from time to time suggested that Bakers Extra was at full capacity and could not have availed itself of that corporate opportunity, there are two significant matters which tell against that proposition. The first is that while the defendants have produced evidence that employees were working long hours and the factory was working perhaps around the clock, that does not exclude the possibility that for any particular line of business, additional capacity could not have been gained by employing additional casual labour. There is some evidence, as was conceded in cross‑examination, that that was a course adopted by Bakers Extra from time to time. The second, which is also the matter which makes more or less irrelevant whether the five-inch cake concept was Henry's or David's or Michael's innovation, is that the opportunity to tender for the business came to David in his capacity as an employee of Bakers Extra. That much is uncontroversial. And in those circumstances, he and Ban were bound to exploit it, if at all, for their company and their employer. The company's lack of capacity to avail itself of such an opportunity does not permit an officer or employee to take it elsewhere, at least in the absence of informed consent. A very well established line of authority in the area of fiduciary duty makes clear that the prophylactic purpose of the doctrine is achieved by preventing those who owe such obligations from taking advantage of them if they come to them in the course of their office or employment, even if their company or employee cannot exploit them.
On an application under Corporations Act s 237 for leave to bring proceedings on behalf of, and in the name of a company, the Court's approach is now well established. [1] Section 237(2) specifies five criteria, and if, but only if, each of those criteria is established, then the Court must grant the leave sought.
In these proceedings, the defendants have not suggested that criteria A (namely that it is probable that the company will not itself bring the proceedings); D (that there is a serious question to be tried); and E (that the requisite notice has been given to the company of the intention to make the application) are not satisfied. The debate turns on criteria C (whether it is in the best interests of the company that the applicant be granted leave), and B (whether the applicant is acting in good faith).
[4]
Best interests of the company?
So far as whether it is in the best interests of the company that the applicant be granted leave is concerned, the fact that there is admittedly a serious question to be tried provides an important starting point. It means that the case is not an unarguable or hopeless one. That said, the very fact that there is a separate requirement that it be in the best interests of the company that leave be granted means that the existence of a serious question to be tried is not conclusive on that issue. However in this case, the evidence establishes not merely a serious question to be tried, but at least a good arguable case. It establishes potential damages in the order of a million dollars per annum. The plaintiff proffers an undertaking to bear the costs and indemnify the company in respect of adverse costs orders, except insofar as the court might subsequently otherwise order. Taken together, that all means that there is an apparently valuable cause of action which if prosecuted might well result in the recovery of substantial compensation by the company, and which can be prosecuted in the company's name without the slightest risk that the company will, if it is unsuccessful, have to bear the costs of doing so.
The arguments that, in that context, it is not in the best interests of the company that the applicant be granted leave, involved two main elements.
The first, which was addressed in written submissions, but not elaborated orally, was that the plaintiff had not cross-examined the defendants about their financial position, so that the court presumably could not be satisfied that the defendants would be able to satisfy any judgments against them. However, the defendants bear in that respect at least an evidentiary onus of adducing some evidence to the effect that they would not be able to satisfy a judgment if they want to raise that issue. Prima facie, as it does with undertakings as to damages, the court presumes that people have the means to satisfy judgments against them. The defendants have not sought affirmatively to suggest that they could not, and I give that matter no weight.
More elaborately, it was argued that it was not in the interests of the company that leave be granted because the continuation of the proceedings would occasion or continue considerable disruption to the company and its business, and prevent it from exploiting opportunities otherwise available, in particular but not limited to negotiating a long term preferred supplier arrangement with Woolworths, and also in connection with completing a factory with greater capacity on new premises on a property which it has acquired at Smithfield, sometimes referred to as the Dorford property. However, as it seems to me, any disruption to the company and its business has already occurred, and is attributable not merely to the pendency of these proceedings but to the falling out of the company's principals. Cessation of these proceedings will not result in a happy re‑marriage of those who are already effectively separated. The issues which may cause Woolworths to tread warily and banks to be nervous are not going to go away with the cessation of the present proceedings.
In my view, the arguability of the case, coupled with the quantum at issue, and the plaintiff's undertaking to indemnify the company, establish that it is in the best interests of the company, as a whole, that the plaintiff be granted leave to bring proceedings that will potentially result in a substantial restitution to the company of the value of the opportunity of which it has, at least arguably, been deprived.
[5]
Good faith?
Turning then to the good faith criteria, it has often been said, that it involves two related elements: an honest belief by the applicant that a good cause of action exists and has reasonable prospects of success; and the absence of such a collateral purpose as would render the proceedings an abuse of process. [2]
So far as the first element is concerned, the findings, first, that, as is conceded, there is a serious question to be tried, and secondly, as I have found, that it is in the interests of the company as a whole that the applicant be granted leave to bring those proceedings, are very important elements in underpinning a conclusion that the applicant has the requisite honest belief in the existence of a cause of action with reasonable prospects of success. Although Henry was cross‑examined in that behalf, he made no concession to the contrary, and it practically would have required a concession of that kind to undermine the objective effect of the combination of serious question and best interests.
However, an argument was developed that the proceedings were being pursued for the collateral purpose of procuring the removal of Ban from the company. The defendants pointed, legitimately, to a course of what might be described as exclusionary conduct on the part of Henry, the effect of which has been to reduce the role, involvement and participation of Ban, if not completely to extinguish it. It may well be that legitimate complaint can be made about that conduct, and it may well be that it could found an action for oppression, or a winding up on the just and equitable ground. I do not mean to suggest that any case for that has so far been established, but such conduct typically forms the basis of such proceedings. However, just because Henry has engaged in such conduct, if he has, does not mean that he is bringing the present proceedings for an improper collateral purpose.
First, it is just not apparent how the commencement and prosecution of the proposed proceedings is calculated to achieve the exclusion of Ban from the company. Secondly, even if it did have that ultimate ulterior effect, that does not mean that the proceedings are not being prosecuted in good faith for the remedy claimed in them, namely the recovery of compensation for the benefit of the company, in respect of the opportunity of which it complains that it has been deprived. It is not enough to constitute an abuse of process on account of a collateral purpose that the proceedings are motivated by some extraneous advantage. What is necessary is that they are not being prosecuted in good faith for the remedy claimed in them. There is nothing to suggest that the plaintiff does not intend to prosecute the proceedings to the end for the purposes of securing compensation for the benefit of a company in which he is, after all, a 50% shareholder.
Arguments that proceedings of this kind are not brought in good faith may more readily be advanced when the applicant is not a substantial present shareholder in the company. But in this case, the interests of the plaintiff, and those of the company as a whole, substantially coincide in recovering compensation for the alleged breach.
For those reasons, I am satisfied that the plaintiff is acting in good faith. It follows that all the criteria referred to in s 237(2) are satisfied and the leave sought should be granted.
[6]
Set aside search order?
I turn, then, to the application of the third and fourth defendants to set aside the search order made by Slattery J on 28 April. Although the order has been executed, as it was on 1 May, the documents remain in the custody of the independent computer expert and/or independent solicitor, and the independent solicitor's reports remain sealed in the court file. The plaintiff has not yet had access to any of the material that was obtained upon execution of the order.
(NSW) Uniform Civil Procedure Rules 2005, r 25.20 provides that the Court may make a search order if three conditions are satisfied, namely, (a) that the applicant has a strong prima facie case on an accrued course of action, (b) that the potential or actual loss or damage to the applicant will be serious if the search order is not made, and (c) that there is sufficient evidence in relation to a respondent that the respondent possesses important evidentiary material, and there is a real possibility that the respondent might destroy such material or cause it to be unavailable for use in evidence in a proceeding or anticipated proceeding.
Because a search order is almost invariably made ex parte, it is open to a respondent to apply on a return of the order to have it set aside. That, of course, will not undo the search that has been done, but it may result in the return of any documents which have been obtained through the search. Such applications provide an important means of maintaining control over the abuse of ex parte applications. The most usual ground on which an ex parte order will be set aside in those circumstances if there has been a material nondisclosure to the court of a matter by the applicant who bears the obligation of making a full and frank disclosure of all material circumstances. That breach of such an obligation may result in the Court discharging the order is apparent from Thermax v Schott Industrial Glass Limited. [3] The plaintiff may also be called upon to honour its undertaking as to damages. [4] For that reason, it has been said that affidavits in support of search orders should err on the side of excessive disclosure. [5]
In this case, the application was put on a wider basis, although it included breach of the disclosure obligation. It was submitted that the conditions for an order could be seen not to have been satisfied, at least as against the third and fourth defendants.
So far as the disclosure obligations are concerned, reference was made to two matters which it was said ought to have been disclosed. The first is that the documents sought, or at least some of them, were the subject of commercial confidentiality. In my view that does not amount to a material nondisclosure, at least in the present circumstances. In almost every case of a search order, the documents sought will relate to the internal processes of the respondent and will often be matters of commercial confidentiality. So much is so obvious as not to require specific disclosure. Moreover, the process accommodates claims for confidentiality by utilising an independent solicitor and independent computer expert and providing for any argument over privilege or confidentiality to take place on the return of the order.
Next it was submitted that it ought to have been disclosed that by reason of its contractual obligations with Woolworths - of which presumably it is said that the plaintiff ought to have been aware from his dealings with Woolworths - Buonissimo would have had to retain at least certain of the documents, the subject of the search order. As I understand the argument, Woolworths' practices and contracts are such that a supplier has to retain documentation that enables the provenance of the material or products supplied to Woolworths to be traced and ascertained in the event of any later problem arising. Even if that were so in connection with, for example, recipes for the cakes in question, I do not see how that would have related to the financial records of, for example, Buonissimo, which might have cast light on quantification of profits or loss, and even less to any communications between David, Ban and Michael which might have evidenced the diversion of the relevant corporate opportunity and the knowledge of the various participants of that diversion. I do not consider that any relevant material failure to disclose such as would warrant the setting aside of the search order on that ground has been satisfied.
Next it was submitted that there was no strong prima facie case established, at least against the third and fourth defendants. So far as the fourth defendant, Buonissimo, is concerned, that can I think quickly be dispatched. I have already referred to the shareholding arrangements in the fourth defendant which, coupled with the other evidence, points to a strong inference that underlying the apparent shareholdings, the real persons interested in the business of Buonissimo were David, Ban, Michael and Khai, the DBMK of the principal shareholders. Moreover, it is self-evident that if this were an unauthorised diversion of a corporate opportunity, then the recipient and beneficiary of the breach of duty was plainly Buonissimo, to whom the opportunity was diverted. The case based on the emails of 7 July 2016 prima facie establishes such a diversion. If, as now is apparently said, this original allocation of the contract to Bakers Extra was a mistake by Woolworths, then that is not part of the prima facie case. The emails of 7 July of themselves, coupled with the shareholding arrangements in Buonissimo, to my mind establish a strong prima facie case for the purposes of r 25.20(a) against Buonissimo.
The second element which much be established is, as I have said, that of serious potential or actual loss or damage if the search order is not made. Two things need to be noted about that. First, the requisite damage is not from the breach which founds the cause of action, but from the failure to make a search order. In other words, it invites comparison between the position if a search order is made, and if one is not made. Secondly, however, that has to be seen in the context of the purpose of a search order, which is stated in r 25.19 as being:
"Securing or preserving evidence and requiring a respondent to permit persons to enter premises for the purpose of securing the preservation of evidence, which is or may be relevant to an issue in the proceeding."
The usual consequence of not making a search order is that evidence which might otherwise be preserved and secured may be lost. In this case, the plaintiff's case depends on establishing knowledge and participation on the part of the third and fourth defendants. The fact that there must be a strong prima facie case before an order is made must therefore contemplate that despite there being such a prima facie case, further evidence may legitimately be required, the loss of which will be seriously damaging to a plaintiff's case. In this case, the evidence establishes that Michael was the addressee on behalf of Buonissimo to most communications which took place from about July 2016 onwards. The loss of evidence of communications received by and potentially sent by him might well damage the plaintiff's ability to prove its case, and the loss of what would otherwise be valuable and helpful evidence should be regarded as a serious potential or actual loss for the purposes of r 25.20(b).
So far as the third element is concerned, there are twin requirements that there be evidence that the respondent possess important evidentiary information, and a real possibility that it might destroy it. Contrary to the submissions for the third and fourth defendants, I do not take from Slattery J's reference, in one or two lines on the eighth page of a 16 page transcript of the proceedings for the search order, to have considered that the vital question was the obtaining of evidence to support an account of profits. That was but one aspect of the search order, as the form of the order itself indicates. Michael might well, on the evidence currently available, have in his possession communications concerning the obtaining of the five-inch cakes opportunity, communications concerning the exploitation of that opportunity, communications concerning obtaining further business with Woolworths which flowed from that opportunity, and documents evidencing the provenance of the cakes including by whom they were developed, as well as documents evidencing the trading and profitability of business. The fact that he was the Buonissimo end of such communications as are in evidence is, for the purposes of r25.20(c)(1), sufficient evidence that he possesses important evidentiary information.
As for there being a real possibility that Buonissimo or Michael might destroy such material, it is important to recognise that "real possibility" does not amount to a probability, or to it being more likely than not. The rule is concerned only with possibilities, albeit real ones. In this case Michael, being the effective custodian of communications received by and on behalf of Buonissimo, evidently on his email account, has the opportunity to delete such material. Because he is the respondent to these proceedings, he has a motive or incentive to do so. He also has the means - as virtually every computer operator does - to do so. That is not to say for a moment that I am finding that he would, or is likely, to do so; but the combination of opportunity, motive, and means founds a significant basis for a real possibility of that happening. On top of that, the evidence establishes that he had knowledge of the diversion, and he was a party to the email communications about ensuring that computers were locked from time to time. That material establishes to my mind sufficient evidence of a real possibility that Michael or Buonissimo might destroy such material. I emphasise that I am not saying for a moment that I think he would do so, but that is not the question; objectively, a real possibility has been established.
It is also significant to bear in mind, so far as Michael is concerned, that the order did not extend beyond Buonissimo's premises. No search of his personal premises was authorised, and as his evidence indicates, no documents have been seized which are his personal documents as distinct from Buonissimo's documents.
For those reasons, I am not satisfied that the grounds for a search order were not made good, and do not remain made good, and I will decline to set aside the search order.
The Court therefore orders that:
1. The plaintiff Van Hung Le have leave pursuant to Corporations Act, s 237, to bring proceedings on behalf of and in the name of Bakers Extra Pty Ltd pursuant to Corporations Act, s 236, in the form of the draft statement of claim contained at annexure B to his affidavit sworn herein on 4 August 2017, subject to the amendment foreshadowed in the plaintiff's outline of submissions dated 26 September 2017, or to similar effect.
2. The third and fourth defendants' interlocutory process filed 2 May 2017 be dismissed with costs.
[Counsel addressed].
I have observed more than once that proceedings under s 237 are proceedings for final relief. The proceedings that are brought pursuant to leave are not necessarily brought in the same court, or in the same division as the s 237 proceedings. It is usually desirable that the costs of the 237 proceedings be dealt with in those proceedings and not separately. Moreover, the respondents to s 237 proceedings should not be encouraged to oppose the grant of leave by the view that an immediate costs order will not be made. The court further orders that:
1. The first and second defendants pay the plaintiff's costs of the interlocutory process filed 7 August 2017.
2. For the purposes of the costs order, I indicate that of the proceedings before the court on the hearing of the interlocutory processes, 75% should be regarded as attributable to the plaintiff's interlocutory process, and 25% to the third and fourth defendant's interlocutory process.
[7]
Endnotes
See Swansson v R.A. Pratt Properties Pty Limited [2002] NSWSC 583; Maher v Honeysett & Maher Electrical Contractors [2005] NSWSC 859; Mathews Capital Partners Pty Limited v Coal of Queensland Holdings Limited [2012] NSWSC 462; In the matter of Mycorp Group Pty Limited [2013] NSWSC 1344.
See Swansson v R.A. Pratt Properties Pty Limited (2002) NSWSC 583 at [37].
[1981] FSR 289.
Digital Equipment Corporation v Darkcrest Limited [1984] Ch 512; Columbia Pictures Industries Inc v Robinson [1987] Ch 38.
Columbia Pictures [1987] Ch 38 at 77.
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Decision last updated: 15 July 2022