27 The fundamental problem in the way of the Plaintiffs' submissions however is this. The statutory derivative action, as is clear from its antecedents in terms of a number of different reform proposals culminating in CLERPA, was intended to be remedial. That is borne out by the Explanatory Memorandum introducing these amendments. At para 15 it enumerates a number of difficulties associated with the common law action and clearly indicates that the legislation, with appropriate checks and balances, is seen as ameliorative (paras 16-17). To deny its remedial effect to those whose rights had accrued prior to the introduction of the legislation would be to frustrate its remedial purpose; a purpose which the court is enjoined by s109H of the Corporations Law to have regard in interpreting a provision of that Law.
28 Indeed such indication as can be found in the Corporations Law tends against the interpretation the Plaintiffs put. In particular s1472 in dealing with the also abolished right of intervention expressly provides that a person may apply for leave to intervene, and intervene, "in proceedings started before commencement". It would be anomalous if the common law right of intervention on its face abolished by s236(3) were somehow instead to exist concurrently for those with that accrued right. It would be equally anomalous for the common law derivative action to be maintained in relation to accrued rights, yet the right of intervention removed.
29 Indeed the very distinction between substantive and procedural is, as the High Court recently recognised, a particularly difficult one though one still needing to be made: see John Pfeiffer Pty Limited v Rogerson [2000] HCA 36 (21 June 2000, unreported) paras 97-8. The whole history of the law in the development of actions on the case is, as the late Professor Maitland observed, one of substantive law secreted in the interstices of procedure. Representative actions and the rule in Foss v Harbottle and its exceptions as Gummow J observed in Scarel Pty Ltd v City Loan and Credit Pty Limited (1988) 17 FCR 344 at 349, "were the product of equity procedures". This is so, though now tending to be viewed in their developed state as common law rules whether or not conferring quasi substantive rights.
30 The Plaintiffs strenuously argue that whilst the derivative action may be viewed as procedural, its removal, like the denial of a right of action under a limitation statute, is substantive. In that regard they may have found some support in John Pfeiffer. But such a view ignores the fact that what is really happening is the substitution of what the various law reform bodies thought was an improved procedural right for that which had been removed. So regarded, it is by no means self-evident that its removal can be viewed in isolation from what is substituted and considered to be substantive with the interpretative consequence that it is not retroactive in relation to accrued rights.
31 It follows that while the matter cannot be said to be free from doubt, I consider the better view to be that the statutory derivative action has displaced any potential recourse to the fifth (or other) exception in the rule in Foss v Harbottle for the Plaintiffs, notwithstanding that the right to invoke it may have accrued.
32 The Defendant then argues that the four Plaintiffs should not be granted the leave they seek as they do not satisfy the requirements for it under s237 of the Corporations Law. And it is argued even if they did, it could not avail the Plaintiffs in seeking to come within Pt 20 r4. This, the Defendant says, is because the form of the action conferred by statute represents a fundamental difference from the common law. Section 236(2) now provides that the proceedings brought on behalf of the company must be brought "in the company's name". In contrast to the previous common law position, no longer is the company to be joined as defendant. Thus it is contended that the shareholders' proceeding under the statutory derivative action is to be equated for all purposes to a proceeding brought by the company, so precluding application of Pt 20 r4 and inexorably forcing the Plaintiffs back to Pt 8 and in particular r11(3).
33 As to the first argument, s237(2) makes clear that the Court must grant the application if it is satisfied as to each of the matters in paras (a) through (e).
34 The critical hurdle is that in (a), namely that "it is probable that the company will not itself bring the proceedings …. ."
35 Given that I would not give the dispensation from the Rules that the Plaintiffs seek were their application to proceed under Pt 8, it is clear that the company KBF will not bring the proceedings itself since, as the Plaintiffs concede, such proceedings would be a futility. It thus follows that I may safely conclude that it is probable that the company will not itself bring the proceedings and thus para (a) would be satisfied. I am equally satisfied that paras (b), (c) and (d) would be satisfied noting that the Defendant has fairly not put in issue that there is a serious question to be tried. Paragraph (e) is a procedural requirement and if otherwise I were to grant the application it presents no impediment.
36 I turn now to the second argument, namely that the form of statutory derivative action takes these proceedings outside the potential application of Pt 20 r4, being brought "in the company's name" and thus a joinder governed exclusively by Pt 8.
37 It would be to confuse form with substance to treat proceedings required by statute to be brought by individual shareholders "in the company's name" as undifferentiated from proceedings brought by the company without such intervention of the shareholders. Firstly, s237(2)(a), to which I have earlier made reference, presupposes that the company "will not itself bring the proceedings" thus assuming that difference. Like a beneficiary who obtains leave to sue in the name of the trustee following the appointment of a receiver where the trustee refuses to take action, the shareholders under the statutory derivative action are not for all purposes to be equated to the company; compare Jacob's "Law of Trusts in Australia", by R P Meagher and W M C Gummow (Butterworths, 1997) at 690. They may for example be directly liable for costs, as they are parties, albeit in a derivative capacity.
38 That consequence and the distinctness of the statutory derivative action from direct action by the company is further reflected in s242 of the Corporations Law. Under it, the Court may make orders about the costs of the persons who applied for or were granted leave under s237. That indeed reflects some parallel with the position under the common law. There the costs of the derivative action were not automatically to be mulcted upon the company, though that may be an appropriate order; see the discussion in Ford's "Principles of corporations Law" at 11.320. Indeed historically, when unincorporated associations were set up to trade in the eighteenth century under deeds of settlement, the position was quite closely analogous to that of beneficiaries seeking indemnity from the trust property for similar costs for shareholders had an interest in a quasi trust. See the "Law of Costs" Morgan and Wurtzberg (Stevens & Sons, 1882) at 124 and 278-9. The deed of settlement company, denied the advantages of incorporation sought to use trust concepts for equivalent effect as is explained in "Gower's Principles of Company Law", 6th edition (Sweet & Maxwell, 1997) at 29. The development of limited liability under incorporation was not allowed by courts of equity to frustrate shareholders acting in the name of the company. But this was subject to proper safeguards recognising the distinction between the company suing of its own motion as against being "joined" through a representative action.
39 Accordingly, it follows that if the Plaintiffs get leave under s237 to bring the statutory derivative action, they are, in the words of Pt 20 r4(4) in the situation of the plaintiff who "is or becomes entitled to sue in any capacity" and may seek amendment to the pleadings to reflect that capacity. The position is no different from an executor who may have already sued qua beneficiary and who then seeks to sue as administrator or executor on behalf of the estate; compare Bowler v John Mowlem & Co Limited [1954] All ER 556.
40 I am thus satisfied that Pt 20 r4 would apply were I to grant leave pursuant to s237 of the Corporations Law and indeed the same result would follow were I to have done so pursuant to the fifth exception to the rule in Foss v Harbottle.
41 There remains one further matter, namely the effect of such an order under Pt 20 r4 on the Limitation Act 1969 (NSW). It was not seriously disputed that were I otherwise entitled to make such an order, there is no doubt that under present authority the effect of so doing would be to preclude a defence under the Limitation Act save such defence as could be raised were the amendment made as of 22 April 1997. This is on one of two bases. First, it is because the limitation statute, though substantive rather than procedural in effect (see John Pfeiffer at paras 97-102) yields to the effect of the Rules by reason of s6 of the later Supreme Court Act 1970. That would not have been so had I simply given dispensation from the Rules. Second, it is to the Rules that recourse must be had to determine when, for the purposes of a limitation statute, action is taken to be brought.
42 Part 20 r4, when applicable to a qualifying amendment, has the consequence (in the absence of order to the contrary) that action is taken to have been brought at the date of filing the statement of claim. I should add that no basis for an order to the contrary is made out, for the justice of the case clearly favours the Plaintiffs. Similarly, though joinder might have been effected under Pt 8, were it not a futility, there is good reason in the justice of the case for not treating it as precluding application of Pt 20 r4 in these circumstances.