Hassall & Ors v Speedy Gantry Hire Pty Ltd & Ors [2001] QSC 327

[2] Vacentia is the majority shareholder in Speedy and has appointed Foy and Montgomery as directors. The Hassalls and Gainguard are minority shareholders and Glen Hassall is the third director of Speedy.

[3] This long-running and much litigated dispute is essentially between the persons constituting or behind the majority and minority shareholders in Speedy. It is centred around the minority shareholders complaints that the majority shareholder and the directors it appointed have used their powers to advantage Vacentia to the detriment of Speedy and the minority shareholders. This contention is founded on allegations that Speedy advanced funds to Vacentia which it used to its advantage without paying interest and on allegations of excessive service charges paid by Speedy under a management agreement with Vacentia.

[4] A winding up application brought in 1998 was not proceeded with; there were however two subsequent applications brought by the minority interests in that year. These were consolidated and have been proceeding as an oppression action.

[5] The consolidated actions were removed from the callover list on 29 June 2001. Vacentia was ordered to file and serve amended points of defence, to give further disclosure and provide experts reports. Other orders were made against Vacentia and the other parties. The parties were also directed to report in respect of a mediation program.

[6] On 26 July the parties reported as directed indicating that the disputes reflected in the actions would be referred to mediation and a consent referral order would be lodged with the court. On that basis the matter was withdrawn from the subsequent review. Although no consent referral order has been filed the parties are agreed that the matter be mediated on 17 September 2001.

[7] The respondents oppose the present application submitting that the requirements of s 237(2)(a), (b) and (c) of the Corporations Law have not been complied with. In turning to consider the relevant provisions of the Corporations Law it may be accepted that s 236 and s 237 are a new statutory regime intended to replace the previous law as to the circumstances in which a person could bring or intervene in proceedings brought by a company.

(1) A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.

(2) The Court must grant the application if it is satisfied that:

(a) it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and

(c) it is in the best interests of the company that the applicant be granted leave; and

(d) if the applicant is applying for leave to bring proceedings - there is a serious question to be tried; and

(i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave for leave and of the reasons for applying; or

(ii) it is appropriate to grant leave even though subparagraph (i) is not satisfied.

(3) A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that:

(iii) to discontinue, settle or compromise the proceedings; and

(c) all of the directors who participated in that decision:

(ii) did not have a material personal interest in the decision; and

(iii) informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and

(iv) rationally believed that the decision was in the best interests of the company.

[9] With respect to s 237(2)(a), after it received notice of the application Speedy apparently held a directors' meeting at which it was resolved that it seek independent legal advice. It had not previously been actively involved in the actions which are on foot and its solicitor, among other things, sought material from the Hassall's solicitors for the purpose of providing the advice. The applicants refused any further time beyond that notified for investigation and brought the application. It was submitted that there is no basis for believing that the company's solicitors will not provide independent advice or that the directors will prevent the company from following it; the application is therefore submitted to be premature. The submission is not without merit but in my view is not of itself decisive.

[10] It is convenient to look next at whether it is in the best interests of Speedy that leave be granted. The conduct alleged and relied on to found the derivative proceeding is already the subject of the oppression proceeding and has long been known to the applicants. Large segments of the proposed statement of claim are lifted from the pleadings in the oppression action. The claims advanced in the proposed statement of claim can be litigated in the oppression proceeding; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 19 ACLC 856 (Fexuto) per Spiegelman CJ at 875 and Priestley JA at 929. In this context it may be noted that although sections 236 and 237 can justifiably be said as instituting a new regime to replace the existing law the statutory provisions relevant here do not relevantly differ from that of the previous law. Moreover the claims advanced in the proposed statement of claim are based on allegations of breach of fiduciary duties. If a buy out order is made in the oppression action the shares can be valued so as to take into account the consequences of the breach of fiduciary duties. In the event of a winding up being ordered an account and consequent adjustment could be ordered; see s 233(a)(j) of the Corporations Law and Fexuto (supra) at 929.

[11] Put shortly the proposed proceeding will largely duplicate and is founded essentially on the same complaints as those pursued in the oppression action, and it has not been satisfactorily demonstrated that the relief available in the oppression proceeding will not be adequate.

[12] Moreover there is no satisfactory explanation as to why this application has been brought at this stage of the litigation where the issues the applicants are seeking to pursue in the derivative proceeding have been apparent since at least the institution of the oppression proceeding. This is in the context of the applicant's proposed course adding complexity to and potentially increasing the costs of and delays to the trial of the current actions. There is evidence that Speedy will be disadvantaged if this occurs.

[13] Section 237(2)(b) requires that the court be satisfied that the applicant is acting in good faith. That issue is to be approached in the context of the history of the dispute which I have outlined above. To recapitulate the more pertinent aspects, the dispute is long running, the issues it is sought to agitate in the derivative action are the same as those being pursued in the oppression actions and have long been apparent. There is no satisfactory explanation for the delay in bringing the application for leave to bring a derivative action, particularly with a mediation to be held in the near future. It may be noted that Foy and Montgomery are not parties to the oppression action and are to become parties to the derivative action.

[14] In all the circumstances it is not unduly cynical to wonder whether the application is not designed to achieve some advantage in the forthcoming mediation. There is evidence of statements made by Gavin Hassall to the effect that the derivative proceedings would assist in obtaining the best mediated outcome with respect to the oppression proceeding which he puts in issue. Be that as it may, in the whole of the circumstances I am not satisfied that the applicants are acting in good faith.

[15] In any event I am not satisfied it is in the best interests of Speedy that leave be granted or that the applicants are acting in good faith. The application is dismissed. The application may well be premature.