Gillespie v Gillespie

Court of Appeal (NSW)|2025-02-10|Before: Gleeson JA, Mitchelmore JA, Ball JA, Black J

Additional background facts

Prior to 2002, GCN (as trustee) carried on its business from two properties in Lilyfield. One of the properties was sold in 2002. It is RG's case that by 2004 it was evident that GCN required or could benefit from additional space for its business. Ainley was incorporated in about July 2004 and became the trustee of the Gillespie Property Unit Trust (GPUT) apparently in the expectation that it would acquire the Land to be used in connection with GCN's business, which Ainley did in April 2005 for approximately $4.2 million. Prior to 30 June 2004, GCN lent Ainley $210,600, which it appears was used to pay the deposit for the Land. GCN gave a guarantee of a loan obtained by Ainley from the National Australia Bank (NAB) to buy the Land, which was secured by an existing mortgage given by GCN over the remaining Lilyfield property. After improvements were made to the Land, GCN moved part of its business there. Ainley serviced the loan from NAB from money it received from GCN in the form of loans and trust distributions (it, together with other companies in which one or more of the Principal Beneficiaries had an interest were also named as beneficiaries in the Trust Deed). Ainley transferred the Land to JPD in late 2012. At that time, the Land was valued at $3.4 million "for stamp duty purposes". At least $2,337,916 of the purchase price was funded by GCN.
The remaining land in Lilyfield was compulsorily acquired in 2017. GCN conducted its business from the Land from that time until July 2020, when the business was closed down. On 30 March 2021, RG commenced proceedings against GCN and a number of other parties including HG, PG, Ainley and JPD, alleging that GCN had breached various duties it owed as trustee of the Trust. Those proceedings are yet to be determined. In April 2024, RG learned that JPD was proposing to sell the Land for between $20 million and $24 million. He commenced proceedings in the name of GCN on 17 June 2024.

History of ss 236 and 237 of the Act

The statutory derivative action now found in ss 236 and 237 of the Act, including the requirement of good faith, was introduced by the Corporate Law Economic Reform Program Act 1999 (Cth) (CLERP Act). The action was introduced to replace the proper plaintiff rule established by Foss v Harbottle (1843) 2 Hare 461; 67 ER 189, and its exceptions.
According to the proper plaintiff rule, and subject to its later developed exceptions, the company is the proper plaintiff to take proceedings to enforce its rights or to seek relief in respect of any wrong done to it, and an individual member of the company has no standing to do so. This rule was apt to cause injustice where the alleged wrongdoers were insiders of the company, such as directors, who have control over whether the company will take proceedings, because it would allow the wrongdoers to protect themselves by refusing to pursue the company's rights against themselves. Moreover, the exceptions to the rule were uncertain in scope and difficult to prove: see Austin & Black's Annotations to the Corporations Act [2F.236].
The history of the various reports of law advisory bodies that ultimately resulted in the statutory derivative action is summarised in Oates v Consolidated Capital Services Pty Ltd (2009) 76 NSWLR 69; [2009] NSWCA 183 at [126]-[134] (Campbell JA, Spigelman CJ agreeing, Allsop P agreeing subject to one reservation at [3] which is not presently relevant).
According to the Explanatory Memorandum (EM) to the CLERP Bill 1998 (at [6.32]), the five criteria found in s 237(2) are aimed at preventing potentially vexatious or unmeritorious actions that would be detrimental to the company on whose behalf the action was taken. The EM states (at [6.33]): "[t]he criteria seeks to strike a balance between the need to provide a real avenue for applicants to seek redress on behalf of a company where it fails to do so and the need to prevent actions proceeding which have little likelihood of success.
Regarding the good faith criterion, the EM states: [6.36] In assessing whether an applicant is acting in good faith, the Court could be expected to have regard to whether: • there was any complicity by the applicant in the matters complained of; and • the application is being made in pursuit of an interest other than that of the company. [6.37] The good faith requirement is designed to prevent proceedings being used to further the purposes of the applicant, rather than the company as a whole.
The Second Reading Speech which accompanied the CLERP Bill does not provide any further relevant detail regarding the good faith requirement.

Relevant case law

Black J's conclusion that RG could not establish that he was acting in good faith because of the long period of time between RG holding the office of director and secretary of GCN and the commencement of the proceedings and the lack of any apparent connection between his holding office and the relief claimed rests on a series of cases starting with the decision of Palmer J in Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; 42 ACSR 313. In that case, the applicant, who was a director and shareholder of RA Pratt Properties Pty Ltd (RAPP), sought leave to bring proceedings against a former director, her ex‑husband, in respect of a payment of at least $420,580 that her ex-husband, while still a director of the company, had caused the company to make to two other companies of which she and her ex-husband were directors and shareholders. The other director of RAPP was the applicant's brother and the other shareholders were the applicant's brother and mother. They both opposed the company commencing the proposed proceedings on the basis that the payment was made as part of a complicated family arrangement that had been made several years earlier.
In refusing leave, Palmer J said in relation to the good faith requirement: [35] At this early stage in the development of the law on the statutory derivative action created by Pt 2F.1A it would be unwise to endeavour to state compendiously the considerations to which the Courts will have regard in determining whether applicants in all categories defined by s.236(1) are acting in good faith. The law will develop incrementally as different factual circumstances come before the Courts. [36] Nevertheless, in my opinion, there are at least two interrelated factors to which the Courts will always have regard in determining whether the good faith requirement of s.237(2)(b) is satisfied. The first is whether the applicant honestly believes that a good cause of action exists and has a reasonable prospect of success. Clearly, whether the applicant honestly holds such a belief would not simply be a matter of bald assertion: the applicant may be disbelieved if no reasonable person in the circumstances could hold that belief. The second factor is whether the applicant is seeking to bring the derivative suit for such a collateral purpose as would amount to an abuse of process.
In relation to the second of these requirements, his Honour explained (at [38]) that where the applicant is a current officer or shareholder seeking to recover property, good faith will be relatively easy to establish. However, his Honour expressed the view that where the applicant is a former officer or shareholder with nothing obvious to gain directly by the success of the derivative action "the Court will scrutinise with particular care the purpose for which the derivative action is said to be brought" (at [39]). His Honour gave as an example a creditor who happened to be a former shareholder who may seek by a derivative action to place the company in a financial position to repay a debt. In that case, the applicant may not be acting in good faith "because he or she is, in reality, seeking to vindicate his or her interest as a creditor and not whatever interest he or she may have as a former shareholder" (at [40]). Similarly, an action sought to be instituted by a former shareholder with a history of grievances against the existing shareholder "may be easier to characterise as brought for the purpose of satisfying nothing more than the applicant's private vendetta" (at [41]).
Summarising the position, Palmer J said this (at [42]): If a wrong appears to have been done to a company and those in control refuse to take proceedings to redress it, the Court should permit a derivative action to be instituted only by those within the categories allowed by s.236(1) who would suffer a real and substantive injury if the action were not permitted. The injury must be necessarily dependent upon or connected with the applicant's status as a current or former shareholder or director and the remedy afforded by the derivative action must be reasonably capable of redressing the injury.
In Swansson, Palmer J was not prepared to conclude the applicant was acting in good faith because he was not satisfied that she had not received her share of the payments made to the two companies controlled by her and her ex-husband as part of their divorce settlement and therefore could not be satisfied that she was acting in good faith in seeking to recover the payments on behalf of the company.
The comments of Palmer J in relation to the good faith requirements were quoted with approval by Tobias JA (with whom Beazley and Bell JJA agreed) in Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52; 227 FLR 43. The facts of that case are not important for present purposes. The principal question in that case was whether Part 2F.1A of the Act (containing ss 236 and 237) applied to a company in liquidation. The Court held that it did not. However, it also considered the question whether the applicant was acting in good faith in bringing the action. In relation to that question Tobias JA, after quoting extensively from the judgment of Palmer J in Swansson and summarising the effect of what Palmer J had said, continued: [81] I would therefore reject the appellant's submissions on the question of good faith when assessed against the two grounds identified by Palmer J in Swansson: namely, whether the applicant honestly believes that a good cause of action exists and has a reasonable prospect of success and whether the applicant is seeking to bring the derivative action for a collateral purpose that would amount to an abuse of process. In any event, the expression "acting in good faith" in s 237(2)(b) of the Act need not be confined, as the appellant submitted it should, to those two grounds. In particular, it extends beyond conduct that would constitute an abuse of process. [82] As Palmer J made clear in Swansson, in my respectful view correctly, although those two factors are required to be considered when a court is determining whether the good faith requirement of s 237(2)(b) is satisfied, the issue of good faith is not confined to those factors. His Honour noted (at 320 [35]), "the law will develop incrementally as different factual circumstances come before the courts". [83] As I have already observed, it must be kept well in mind that the onus lies upon the applicant to satisfy the court that, in applying to it for leave to bring the relevant proceedings, he or she is acting in good faith. If such an applicant is in reality seeking to further his or her own personal interests other than as a current or former shareholder of the company, rather than the interests of the company as a whole, then in my view that onus will not have been discharged. Such a finding would give effect to paras 6.36 and 6.37 of the Explanatory Memorandum, which I have recorded in [72] above. It thus matters not that the conduct in question would not support a finding of abuse of process. I would therefore uphold the primary judge's finding that he was not satisfied that the appellant was acting in good faith, albeit for reasons that differ from those adopted by him.
Chahwan was referred to with apparent approval by the Victorian Court of Appeal in Connective Services Pty Ltd (ACN 107 366 496) v Slea Pty Ltd (ACN 106 752 434) [2018] VSCA 229; 130 ACSR 321. More recently, it was considered by this Court in Mount Gilead. In that case, the applicant had been a director of Mount Gilead Pty Ltd (MGPL) until 27 February 2004. The shares in MGPL were held by Kalemon Investments Pty Ltd as trustee for the Mount Gilead Trust of which the applicant together with her brother (who died before the appeal was heard) were beneficiaries. MGPL owned a property near Campbelltown named "Mount Gilead". The applicant sought relief against her brother and a number of other entities in relation to a transaction by which MGPL at a time when it was under the control of her brother, sold part of the land for what she claimed was a substantial under value. One question before the Court was whether the claim the applicant sought to advance was barred by a settlement deed that the applicant, MGPL and her brother had entered into in connection with earlier proceedings relating to the estate of the applicant's mother. The Court upheld the decision of the trial judge (Black J) who held that it was. That conclusion disposed of the appeal. However, the Court went on to consider the question whether leave ought to have been granted if the claim was not barred by the settlement deed. That raised the question whether the applicant had established that she was acting in good faith. Bell CJ (with whom Ward P and White JA agreed) held that she had not. After observing that both in the Court below and in this Court counsel for the applicant had conceded that the applicant had to establish a connection between the capacity in which she made the application (as a former officer) and the loss or damage claimed, the Chief Justice said (at [64]): While there may be room for debate as to whether there is a requirement for the demonstration of a real or substantive connection between the loss or injury and the status of the particular applicant for leave to bring a statutory derivative action for the purposes of establishing good faith (as to which, see Chahwan v Euphoric Pty Ltd (2008) 65 ACSR 661; [2008] NSWCA 52 (Chahwan) at [70]; Swansson, what is clear is that there was no such nexus in the present case.
The Chief Justice also said: [67] As a general proposition, the greater the gap in time between a person's ceasing to hold the office which entitles him or her to make an application under s 237 and the events that are sought to be made the subject of the claim brought on behalf of a company, the more difficult it will be to establish the requirement of good faith. In the present case, not only was there a lengthy gap between the Applicant ceasing to be a director and the happening of the events the subject of the putative claim, there was a further lengthy gap between those events and the making of the application for leave to bring proceedings. That gap was not explained by any lack of knowledge on the part of the Applicant of those events. On the Applicant's own evidence as recounted in para 30 of her Affidavit of 9 April 2021, the Applicant first complained to Lee about the Lendlease Transaction even before that transaction had been finalised, with the gist of her complaint that he should put the proposed transaction out "to tender to flush out the best offer". [68] To the extent that the Applicant sought to explain her delay in the present case in making the application for leave, the primary judge did not accept that explanation, concluding at PJ [58] that her refraining from agitating MGPL's claim during the negotiations which led to the Settlement Deed "was calculated to preserve the ability to promote, rather than avoid, further litigation in respect of these proceedings". There was no challenge to this factual finding. [69] It was open to the primary judge to find that the Applicant had not established that the application for leave was one made in good faith, and at least so far as the putative case against Lee was concerned, there was no error in his so finding. [70] The further reasons given below as to the Applicant's failure to satisfy the statutory requirements in relation to a serious issue to be tried in relation to loss and damage, and as to what was in the best interests of the company, discussed in the context of the appeal against OMP, apply equally to the appeal against Lee, and provide a further reason for the dismissal of the appeal as against Lee.

The parties' contentions

The fifth respondent, GCN, filed a submitting appearance. The remaining respondents submit that in relation to the question of good faith the facts of this case are indistinguishable from those of Mount Gilead with the result that the Court should conclude that the applicant has failed to establish that he is acting in good faith in bringing the claim. For those reasons, they submit that leave to appeal should be refused. In addition, if leave is granted, the respondents rely on a notice of contention by which they seek to uphold the primary judge's conclusion that leave should be refused on the ground that insofar as the applicant seeks proprietary relief, that relief is barred by s 42 of the Real Property Act 1900 (NSW) (which states that, except in the case of fraud, a registered proprietor holds its estate "absolutely free from all other estates and interests" that are not recorded on the title) and insofar as he seeks personal relief, which has not yet been pleaded that relief is statute barred.
The applicant, on the other hand, submits that Mount Gilead did not determine the issue because the decision in that case turned primarily on the construction of the settlement deed. In relation to the question of good faith, he makes two principal submissions. First, he submits that the requirement of a connection between the status by reason of which the applicant sues and the loss claimed involves a gloss on the statutory requirement and should not be accepted. Second, the applicant submits that in this case he gave evidence, which was not challenged in cross-examination, that (1) explained the delay; (2) indicated that he believed he had a good cause of action which he was bringing for the benefit of the company and therefore the Trust; and (3) confirmed that he was willing to pay the company's costs including any costs orders against it. In the light of that evidence, the Court should conclude that he was acting in good faith.
In relation to the notice of contention, he makes two submissions. First, he submits that the issues in the case are not sufficiently crystallised to be able to say that any proprietary claim is defeated by s 42. Second, he submits that the question whether his personal claims are statute barred should only be determined once the Court has before it all the evidence relating to the claim.

Nature of the appeal

The "correctness" standard of appellate review applies, given that there is a binary choice as to satisfaction of the requirements in s 237(2). That is so, even though the binary choice involves an evaluative judgment: GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; 97 ALJR 857. See also: Huang v Wang [2016] NSWCA 164; 114 ACSR 586 at [61] (Bathurst CJ, McColl JA agreeing) and at [78]-[81] Barrett AJA.

The good faith requirement

In considering the applicant's submissions and the earlier cases, it is necessary to bear in mind a number of matters.
First, an applicant under s 236 is seeking to exercise a right conferred by that provision. A condition of the exercise of that right is that the applicant obtain leave of the Court. The Court must grant leave if it is satisfied that the conditions set out in s 237(2) are met. The onus of establishing the satisfaction of those conditions is on the applicant. One of those conditions is that "the applicant is acting in good faith". It seems plain that the requirement of good faith applies both to the application for leave and to the desire to bring the underlying action. Both aspects involve the applicant "acting" in relation to the application for leave. That distinction is not clearly drawn by the authorities, but as will become apparent, the authorities appear to accept the requirement applies to both aspects of the applicant's conduct.
Second, the term "good faith" is not defined in the Act and it is not a term of art. What amounts to good faith is context and fact dependent. Generally, however, a right is exercised in good faith if it is exercised for a purpose for which the right is conferred. And generally, proceedings are brought in good faith if they are genuinely brought to vindicate a right that the claimant honestly believes he or she has.
It is apparent that the two features identified by Palmer J as ones to which the Courts will always have regard - whether the applicant honestly believes that he or she has a good cause of action and whether the proceedings would be an abuse of process - are directed primarily to the question whether the applicant is acting in good faith in seeking to advance the proceedings. On the other hand, the example given by Palmer J of a creditor who is also a former director seeking leave to bring a claim and the test proposed by Palmer J and accepted by this Court in Chahwan (that the loss or injury could be connected to the applicant's status) are primarily concerned with the question whether the application for leave is made in good faith.
Third, it follows from what has been said that the question whether the applicant is acting in good faith in making the application raises the question whether the application has been made for a purpose for which the right was granted. It seems plain from the language of ss 236 and 237 and the legislative history that the purpose of the right is to permit an applicant to seek to vindicate a right of the company that those in control of the company are not prepared to pursue themselves. It follows that if the application has some other purpose and that is the sole or principal purpose of the application, the applicant will not be acting in good faith.
Fourth, whether an application is made for the purpose for which the right was granted, or some other purpose, is a matter that can be inferred from the circumstances of the case. Those circumstances include (1) whether there is a connection between the capacity in which the applicant seeks to bring the claim and the relevant loss or injury, and (2) the length of time between when the applicant ceased to have an interest in the company as a director or shareholder and when the application is brought. If there is no connection between the capacity in which the applicant seeks to bring the claim and the relevant loss or injury, it is difficult to see how it can be said that the purpose of the action is to vindicate some right of the company. And the greater the time that has elapsed between when the applicant was a director or shareholder and when the application was made, the less interest in the company it might be expected that the applicant would have and therefore the less interest the applicant would have in vindicating the rights of the company (as opposed to some other rights). A former director who was recently removed as part of the conduct complained of is, for example, in a very different position from a person who has not been a director for a number of years and has no obvious interest in the proper management of the company.
It follows that the statements in the cases requiring a connection between the capacity in which a claim is made and the loss or injury claimed or that place emphasis on the time between when the applicant was a shareholder or officer and the time when the claim is brought should not be understood as identifying requirements of a grant of leave or even requirements to establish good faith. Rather, they are important evidentiary considerations from which purpose, or more accurately the absence of a proper purpose, may be inferred.
Fifth, particular difficulties arise where, as in this case and as was the case in Mount Gilead, the company is a corporate trustee and the rights that are sought to be exercised concern the company's rights as trustee. In those cases, the company has primary responsibility for protecting trust property and advancing the interests of the trust. If the company fails to discharge its obligations as trustee as a consequence of the actions of one or more of its directors, the company may well have a claim against those directors. And, as the primary judge recognised (at J[32]), if the company refuses to bring that claim it may well be appropriate for one or more of the persons who have standing under s 236 of the Act to seek to bring that claim on the company's behalf: see Cemcon Re Hall Constructions Pty Ltd [2009] FCA 696 at [17] (Gordon J), Vlahos v Vlahos [2016] VSC 824 at [34]-[35] (Digby J).
In addition, the beneficiaries of the trust may also have a claim against the company for breach of trust arising out of the same circumstances. Moreover, the court may permit the beneficiaries of the trust to bring a derivative action on behalf of the corporate trustee against a third party where the trustee refuses to bring the claim itself: see Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109; [2004] HCA 7 at [55] (Gleeson CJ, Gummow and Hayne JJ); Gillespie v Gillespies Cranes Nominees Pty Ltd [2022] NSWSC 1184; 162 ACSR 24 at [41]-[47] (Parker J). Where, as in this case, the corporate trustee is the trustee of a family trust there is likely to be an overlap between the beneficiaries of the trust and those who control the corporate trustee. In cases of that type, it will be necessary to determine whether the applicant is seeking to advance the interests of the company or is merely seeking to advance his or her own interests as a beneficiary of the trust. The answer to that question will normally depend on the inferences to be drawn from the nature of the proposed claim and the matters referred to earlier. Unless the applicant can satisfy the court that he or she is seeking to advance the interests of the company, and not simply his or her interests as a beneficiary of the trust, the applicant will be unable to satisfy the court that he or she is acting in good faith. In those cases, the applicant is left to his or her remedies as a beneficiary of the trust.
Sixth, the elapse of time is important in two ways. The elapse in time between when the applicant was a shareholder or officer and when the application is made is important for the reason already mentioned. However, the delay between when the applicant first became aware of the conduct said to give rise to the company's claim and when the application is brought is also relevant. An unexplained delay may suggest that the application is being brought not to vindicate some right of the company but for an ulterior purpose, since if the purpose of the application was to vindicate a right of the company, it might be expected that it would be brought when the applicant first became aware of the facts relevant to the claim.
Seventh, brightline statements about whether the grant of leave to a former officer would result in the standing requirement operating in an arbitrary fashion are a distraction and best avoided (cf the submission referred to in Mount Gilead at [62]). Rather, Parliament made deliberate choices as to which categories of persons may seek leave to bring proceedings on behalf of a company, and such choices were tied to the overall purpose of the provisions, being the vindication of a company's rights. Thus, as indicated at [33] above, a connection between the capacity in which a claim is made and the loss or injury claimed, is best viewed as an important evidentiary consideration from which purpose, or more accurately the absence of a proper purpose, may be inferred.
In the present case, there are several reasons for concluding that RG is not seeking by the current application to advance the interests of GCN but rather is seeking by alternative means to advance his interests as a beneficiary of the Trust. Although RG knew of the facts giving rise to the claim at about the time they occurred, he took no steps to advance the claim until he learned that JPD was proposing to sell the Land for a large sum of money. RG explains why he delayed in bringing the action from that time. However, he gives no explanation for the lengthy delay from the time when the Land was acquired by Ainley, yet it is that acquisition that lies at the heart of RG's complaint. RG has commenced separate proceedings asserting rights as a beneficiary of the Trust. Those proceedings were commenced before the proceedings before the primary judge. That suggests that RG is principally concerned with vindicating his rights as a beneficiary of the Trust, rather than vindicating GCN's rights against errant directors. That is supported by the relief claimed in the proceedings before the primary judge. The primary relief claimed in the Statement of Claim is an order that JPD transfer the Land to GCN, which will hold it on trust for the Trust. Following the hearing before Black J, his Honour raised with the parties the effect of s 42 of the Real Property Act on the relief claimed by RG. In response, RG indicated that he proposed to amend the Statement of Claim to include a claim for equitable compensation from the defendants. However, no such claim has been pleaded and it is unclear how such a claim will be put. In particular, it is unclear whether it will be argued that the equitable compensation should be assessed by reference to the loss the Trust is said to have suffered or the loss that GCN is alleged to have suffered as a consequence of what are said to be breaches of duty by PG and JG. Those losses are not necessarily the same. Finally, and most significantly, RG has had no connection with GCN for many years. As the Chief Justice pointed out in Mount Gilead, that provides a compelling reason for thinking that RG has no concern in advancing the interests of GCN. Considering those matters, the Court cannot be satisfied that RG is seeking to vindicate the rights of GCN. Consequently, it cannot be satisfied that he is acting in good faith in seeking to bring or to continue the proceedings. There was no error by the primary judge in dismissing the application on this basis.

Conclusion

The question of construction raised by the appeal was of sufficient and general importance to warrant the grant of leave to appeal. The appeal itself has failed. Accordingly, it is not necessary to consider the issues raised by the respondents' notice of contention.
As to costs, there is no reason why costs should not follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.
The Court makes the following orders: 1. Grant leave to appeal. 2. Appellant to file a notice of appeal in the form contained in the White Book within 7 days. 3. Appeal dismissed. 4. Appellant to pay the respondents' costs in this Court.

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: 27 February 2025

Corporate Law Economic Reform Program Act 1999(Cth)

Hugh & Associates (Applicant) Pitcher Partners Legal NSW Pty Ltd (First to Fourth Respondents) Maddocks Lawyers (Fifth Respondent) (submitting appearance) File Number(s): 2024/366107 Publication restriction: None Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity - Corporations List Citation: [2024] NSWSC 1136 Date of Decision: 5 September 2024 Before: Black J File Number(s): 2024/223271

HEADNOTE [This headnote is not to be read as part of the judgment] Between October 1988 and June 1994, the applicant, Robert Gillespie (RG), was a director of Gillespies Cranes Nominees Pty Ltd (GCN), a company which was and is the trustee of the Gillespie Family Trust (the Trust) and which in that capacity carried on the business of hiring cranes, beams, scissor lifts and similar equipment. RG is and was a discretionary beneficiary of the Trust and along with his three brothers and mother is named in the Trust Deed as one of the "Principal Beneficiaries". By a notice of motion in existing proceedings, RG sought leave nunc pro tunc to bring statutory derivative proceedings in the name and on behalf of GCN, seeking relief against one of his three brothers, Mr Peter Gillespie (PG), his sister-in-law, Mrs Helen Gillespie (HG) (as the personal representative of the Estate of the Late John Gillespie (JG) (another of his brothers)), JPD Equipment Pty Limited (JPD) and Ainley Pty Limited (Ainley) in relation to a transaction that occurred in April 2005 by which Ainley acquired a parcel of land at Glendenning, New South Wales (the Land). Ainley transferred the Land to JPD in June 2012. JPD and Ainley were controlled PG and, until his death, JG. RG claimed that the opportunity to acquire the Land was a business opportunity of GCN, that PG and JG breached their duties as directors of GCN by directing that opportunity to Ainley and that both Ainley and JPD acquired the Land knowing of that breach of duty. Accordingly, RG claimed that GCN is entitled to declaratory and other equitable relief against each of PG, the Estate of JG, Ainley and JPD in respect of that breach of duty. The primary judge (Black J) dismissed RG's notice of motion, finding that RG was not acting in good faith in seeking to bring the proceedings. The primary issue in the application for leave to appeal was whether RG was acting in good faith. The Court held (Gleeson, Mitchelmore and Ball JJA) granting leave to appeal but dismissing the appeal: (1) The "correctness" standard of appellate review applies, given that there is a binary choice as to satisfaction of the requirements in s 237(2). That is so, even though the binary choice involves an evaluative judgment: [26]. GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; 97 ALJR 857, applied. Huang v Wang [2016] NSWCA 164; 114 ACSR 586, considered. (2) The requirement of good faith applies both to the application for leave and to the desire to bring the underlying action: [28]. (3) In order to satisfy a court that an application is being brought in good faith, it will normally be necessary for the applicant to satisfy the court that the application is being brought for a purpose for which the right to bring the application was granted. (4) The purpose of the right to bring statutory derivative proceedings is to permit an applicant to seek to vindicate a right of the company that those in control of the company are not prepared to pursue themselves. It follows that if the application has some other purpose and that is the sole or principal purpose of the application, the applicant will not be acting in good faith: [31]. (5) Whether an application is made for the purpose for which the right was granted, or some other purpose, is a matter that can be inferred from the circumstances of the case. Those circumstances include (1) whether there is a connection between the capacity in which the applicant seeks to bring the claim and the relevant loss or injury, and (2) the length of time between when the applicant ceased to have an interest in the company as a director or shareholder and when the application is brought: [32]. (6) Statements in the cases requiring a connection between the capacity in which a claim is made and the loss or injury claimed or that place emphasis on the time between when the applicant was a shareholder or officer and the time when the claim is brought should not be understood as identifying requirements of a grant of leave or even requirements to establish good faith. Rather, they are important evidentiary considerations from which purpose, or more accurately the absence of a proper purpose, may be inferred: [33]. Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; 42 ACSR 313; Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2008] NSWCA 52; 227 FLR 43; Mount Gilead Pty Ltd v Macarthur-Stanham (as executor of Estate of Late Lee Macarthur-Onslow) [2023] NSWCA 37; 168 ACSR 32, considered. (7) RG was not seeking by the application to advance the interests of GCN but rather was seeking by alternative means to advance his interests as a beneficiary of the Trust. Although RG knew of the facts giving rise to the claim at about the time they occurred, he took no steps to advance the claim until he learned that JPD was proposing to sell the Land for a large sum of money. Nor did he explain that lengthy delay. Additionally, and most significantly, RG has had no connection with GCN for many years. Consequently, the Court cannot be satisfied that RG is seeking to vindicate the rights of GCN and consequently cannot be satisfied RG is acting in good faith in seeking to bring or to continue the proceedings. There was no error by the primary judge in dismissing the application: [38].

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