These proceedings were commenced by Summons and Commercial List Statement filed on 12 April 2021.
Mount Gilead Pty Limited (MGPL) is named as the first plaintiff.
Lady Katrina Hobhouse is the second plaintiff.
Mr Lee Macarthur-Onslow is the first defendant.
Lady Hobhouse and Mr Macarthur-Onslow are siblings and beneficiaries of a trust known as the Mount Gilead Trust. They are also directors of Kalemon Pty Limited, which is the trustee of the Mount Gilead Trust and the owner of all of the shares in MGPL.
Mr Macarthur-Onslow is governing director of MGPL. Under MGPL's Constitution, that position confers on him complete management control of MGPL.
Lady Hobhouse is a former director of MGPL.
The proceedings arise out of transactions that Mr Macarthur-Onslow allegedly caused MGPL to enter into on 17 April 2015. Lady Hobhouse understands, based on the documents available to her and caveats lodged by Lendlease Communities (Mt Gilead) Pty Ltd (Lendlease), that MGPL granted Lendlease options to purchase two parcels of land owned by MGPL. Lady Hobhouse understands that Lendlease has exercised its option over one of those parcels but is yet to do so in respect of the other parcel.
In the Commercial List Statement, the plaintiffs allege that the price at which Lendlease was given the option to purchase each parcel of land pursuant to these transactions represented a significant undervalue.
The plaintiffs allege that, in causing MGPL to enter into the transactions, Mr Macarthur-Onslow breached his duties of care and skill under s 180 of the Corporations Act 2001 (Cth) and at general law. In the Summons, MGPL claims an order that Mr Macarthur-Onslow pay compensation pursuant to s 1317H of the Corporations Act or equitable compensation to MGPL.
The plaintiffs also allege that each of the second to fourth defendants breached a contractual or common law duty owed to MGPL to exercise reasonable skill and care in discharging their retainers to advise MGPL in respect of the Lendlease transactions to which I have referred. It is pleaded in the Commercial List Statement that MGPL suffered loss and damage as result of those alleged breaches and the final relief claimed in the Summons includes damages.
The only relief sought by Lady Hobhouse, as second plaintiff in the proceedings, is a grant of leave pursuant to s 237 of the Corporations Act to bring the proceedings on behalf of MGPL.
The information available to Lady Hobhouse suggests that the relevant transactions were entered into on 17 April 2015. On that basis, Lady Hobhouse considers that MGPL first suffered the loss said to have resulted from the alleged breaches of duty on that date it is likely that the limitation periods for the causes of action pleaded will expire on 17 April 2021. On the basis of that evidence, I accept that there is a real risk that limitation periods applicable to the claims pleaded in the Summons and Commercial List Statement expire on 17 April 2021.
It is in those circumstances that Lady Hobhouse sought an order pursuant to ss 236-237 and s 241 of the Corporation Act granting her leave nunc pro tunc on an interim basis to file the Summons and Commercial List Statement on terms that she is not to take any other steps in the proceedings without leave of the Court save for those steps necessary for the purpose of her application for leave being heard and determined on a final basis.
The application for leave on an interim basis was listed for hearing on 16 April 2021. Written submissions on behalf of Lady Hobhouse prepared by Ms Wong of senior counsel and Mr Ng of counsel were served prior to the hearing.
By the commencement of the hearing, the terms of orders granting leave to the second plaintiff on an interim basis had been agreed between the second plaintiff and the first and fourth defendants.
The second and third defendants had been served with the pleadings and the affidavit of Lady Hobhouse affirmed on 9 April 2021 and the exhibit to that affidavit in the manner permitted by orders made by Black J on 13 April 2021. The second and third defendants had also been notified of the plaintiff's intention to move for leave on an interim basis in the first instance and of the listing of that application for hearing at 2pm on 16 April 2021. [1]
There was no appearance on behalf the second and third defendants at the hearing and neither they nor their legal representatives had communicated to Lady Hobhouse's legal representatives their position in respect of the application for leave on an interim basis.
In view of the evidence of service on the second and third defendants, the hearing proceeded in their absence. The affidavit of Lady Hobhouse affirmed on 9 April 2021 was read and exhibit "KH" to that affidavit was tendered. I indicated that, on the basis of that evidence and the written submissions served on behalf of Lady Hobhouse prior to the hearing, I was satisfied that it was appropriate to make orders granting leave on an interim basis substantially in the terms agreed as between Lady Hobhouse and the first and fourth defendants with some minor amendments that I raised with counsel for those parties during the hearing. I made those orders on the basis that my reasons would be published subsequently. These are my reasons.
As Black J identified in Re Legal Practice Management Group Pty Ltd [2017] NSWSC 1500 at [6], the Court has power under s 241(1)(a) of the Corporations Act to make an order on an interim basis permitting the commencement of proceedings in the name of and on behalf of a company.
As a former director of MGPL, Lady Hobhouse is a person to whom leave may be granted to bring these proceedings on behalf of MGPL: ss 236(1)(a)(ii) and 237(1) of the Corporations Act.
Section 237(2) identifies the matters that are relevant to the grant of leave, including on an interim basis: Re Legal Practice Management Group Pty Ltd (supra) at [7]. I have been greatly assisted by the detailed yet succinct written submissions of Ms Wong SC and Mr Ng, who appeared for Lady Hobhouse, in addressing each of these matters in the short time available to consider and determine this application.
In relation to s 237(2)(a), I accept the submission that, having regard to Lady Hobhouse's evidence concerning Mr Macarthur-Onslow's management control over MGPL, it is probable that MGPL will not bring or take over the prosecution of these proceedings itself against Mr Macarthur-Onslow and the second to fourth defendants who allegedly advised MGPL in relation to the relevant transactions. I also accept the submission that, because any proceedings that MGPL might pursue against the advisers alone may be met with cross-claims by those advisers against Mr Macarthur-Onslow as a concurrent wrongdoer, Mr Macarthur-Onslow would not be in a position to make a disinterested decision in the best interests of MGPL as to whether to pursue such proceedings against those advisers. I infer that his interest in not being a cross-defendant to such a cross-claim renders it improbable that he would cause MGPL to commence proceedings against the second to fourth defendants.
The matters in s 237(2)(b)-(d) - whether Lady Hobhouse is acting in good faith, whether it is in the best in interests of MGPL to grant leave, and whether there is a serious question to be tried - are relatively narrow in scope in the context of this application for a grant of leave on an interim basis: Re Legal Practice Management Group Pty Ltd (supra) at [7].
All that Lady Hobhouse seeks to do in applying for interim leave is to preserve the claims in the Summons and Commercial List Statement on behalf of MGPL against the risk of expiry of the limitation periods, pending a determination of the leave application on a final basis. The pleadings articulate in a cogent manner the alleged role of each of the defendants, the nature and source of the duties allegedly owed by each of the defendants to MGPL, conduct alleged to constitute a breach of those duties (including the factual matters relied in support of the allegation that the transactions were at an undervalue) and the nature of the loss of that MGPL is alleged to have suffered as a result of those alleged breaches. Lady Hobhouse gives some evidence of each of those matters in her affidavit affirmed on 9 April 2021.
Having regard to the matters pleaded and the contents of Lady Hobhouse's affidavit, no person in her position would wish to risk the limitation periods expiring before there had been a final determination of her application for leave to bring the proceedings on behalf of MGPL. I am therefore satisfied that Lady Hobhouse is acting in good faith in seeking to preserve the proceedings against the risk of expiry of limitation periods, pending a determination of the leave application on its merits on a final basis.
I am also satisfied that it is in the best interests of MGPL that Lady Hobhouse be granted leave nunc pro tunc to commence the proceedings in the name of and on behalf of MGPL, but to take no further steps in the proceedings save in connection with the hearing of her application for leave on a final basis. MGPL will suffer no detriment by the grant of leave on an interim basis in the event that Lady Hobhouse's application for leave on a final basis is unsuccessful. By contrast, MGPL risks the causes of action pleaded becoming time barred if leave is not granted on an interim basis. Without expressing any view about the merits or prospects of success of those causes of action, the loss of the ability to pursue them merely by reason of limitation periods expiring would not be in MGPL's best interests.
I am satisfied that the pleadings and evidence of Lady Hobhouse to which I have referred above establish a serious question to be tried, noting that it is of course open to the Court when determining the leave application on a final basis to reach a different view. At the hearing of the leave application on a final basis, the Court will have an opportunity to review the pleadings and existing evidence, together with any further evidence adduced on the hearing of the leave application, in greater depth than has been possible in the very short time available to determine the leave application on an interim basis.
Nothing that I have said above should be taken as determining that the limitation periods applicable to the causes of action pleaded in the Summons and Commercial List Statement in fact expire on 17 April 2021 rather than some earlier or later date. A grant of leave to commence the proceedings on an interim basis (or, indeed, on a final basis) will not preclude the defendants from raising any limitation defences available to them, as Lady Hobhouse's submissions properly acknowledged, citing Redenbach v Legal Practice Management Group Pty Ltd (2018) 125 ACSR 513; [2018] NSWSC 527 at [98].
As the submissions on behalf of Lady Hobhouse acknowledged, MGPL was not given written notice of her intention to apply for leave 14 days prior to the application being made: s 237(2)(e)(i). Lady Hobhouse deposes that she was involved in difficult and sensitive negotiations with Mr Macarthur-Onslow from 2014 until February 2021 concerning the division of assets of their family, including the estate of their late mother. She says that she was "not inclined to pursue these proceedings until the negotiations were finalised to avoid prejudicing the prospect of concluding the negotiations and agreed settlement".
It was submitted that the Court should infer that, since February 2021, Lady Hobhouse's legal representatives have sought to diligently gather the information required to plead the claims now pleaded in the Commercial List Statement and that there was insufficient time to prepare those claims in a proper level of detail so as to be able to notify MGPL of the substance of the leave application to be made 14 days prior to the filing of the Summons on 12 April 2021 including the leave application in prayer 3.
I consider that it is appropriate to draw that inference having regard to the detailed manner in which the pleadings have been prepared as noted above, and the time that is typically taken to produce pleadings in that manner concerning events that span several years. I am therefore satisfied that the failure to notify MGPL of the leave application at least 14 days in advance should not preclude MGPL from having the leave application determined on a final basis, and that it is appropriate to grant leave on the interim basis now sought, notwithstanding the failure to comply with s 237(2)(e)(i). Whether it is appropriate to grant leave on a final basis notwithstanding non-compliance with that section is a matter that will need to be considered and determined on the final hearing of the leave application.
For all of those reasons, I made the following orders and directions on 16 April 2021:
1. The Court grants leave nunc pro tunc to the second plaintiff, under ss 237 and 241(1)(a) of the Corporations Act 2001 (Cth), on an interim basis, to file the Summons and the Commercial List Statement both dated 12 April 2021 commencing these proceedings in the name of and on behalf of the first plaintiff.
2. The second plaintiff to file and serve any further evidence upon which she proposes to rely at the hearing, on a final basis, of the application for leave pursuant to s 237 of the Corporations Act 2001 (Cth) to bring the proceedings on behalf of the first plaintiff (Application) by 30 April 2021.
3. The defendants to file and serve any evidence upon which they propose to rely at the hearing of the Application on a final basis by 14 May 2021.
4. The second plaintiff to file and serve by 21 May 2021:
1. any evidence in reply on which she proposes to rely at the hearing of the Application on a final basis; and
2. an outline of submissions in respect of the Application.
1. The defendants to file and serve outlines of submissions in respect of the Application by 28 May 2021.
2. List the Application for hearing, on a final basis, on 8 June 2021.
3. The plaintiffs are not to take any further steps to continue the proceedings, except in relation to the Application, without leave of the Court.
4. Costs of the application for interim leave are reserved.
5. Direct the plaintiffs to notify the second and third defendants of these orders.
[2]
Endnote
Affidavit of Nicole Angela Gardner sworn on 16 April 2021, filed in court on the date and read at the hearing on that date.
[3]
Amendments
21 April 2021 - Typographical error in matter name
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Decision last updated: 21 April 2021