ng Services Pty Ltd (2015) 89 NSWLR 431; [2015] NSWCA 156
- Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; (1994) 120 ALR 16; [1994] HCA 4
- South Johnstone Mill Ltd v Dennis (2007) 244 ALR 730; (2007) 64 ACSR 447; [2007] FCA 1448
- Swansson v R A Pratt Properties Pty Ltd (2002) 42 ACSR 313; (2002) 20 ACLC 1594; [2002] NSWSC 583
- Swerus v Central Mortgage Registry of Australia Pty Ltd [1989] ANZ ConvR 169; (1988) NSW ConvR 55-407
- The App Shop Pty Ltd v Jalal Bros Pty Ltd [2019] NSWSC 490
- Vasiliou v Westpac Banking Corp (2007) 19 VR 229; [2007] VSCA 113
- Vinciguerra v MG Corrosion Consultants Pty Ltd (2010) 79 ACSR 293; [2010] FCA 763
Category: Principal judgment
Parties: Mount Gilead Pty Ltd (First Plaintiff/Second Cross-Defendant)
Katrina Julia Denzil Hobhouse (Second Plaintiff/First Cross-Defendant)
Lee Macarthur-Onslow (First Defendant/Cross-Claimant)
Andrew William Martin (Second Defendant)
Old Mill Properties Pty Ltd (Third Defendant)
Jones Lang LaSalle (NSW) Pty Ltd (Fourth Defendant)
Representation: Counsel:
Dr R Higgins SC/G Ng (Second Plaintiff/First Cross-Defendant)
D Studdy SC/J Brezniak (First Defendant/Cross-Claimant)
A Horvath/K Sharma (Second Defendant)
I R Pike SC/J Dooley (Third Defendant)
S Mirzabegian (Fourth Defendant)
[2]
Solicitors:
Ashurst (Second Plaintiff/First Cross-Defendant)
Keypoint Law (First Defendant/Cross-Claimant)
Clyde & Co (Second Defendant)
Chamberlains (Third Defendant)
Norton Rose Fulbright (Fourth Defendant)
File Number(s): 2021/101177
[3]
Background to this application
By Summons filed on 12 April 2021, the Second Plaintiff, Lady Katrina Hobhouse (to whom I will refer, without disrespect as "Katrina") sought leave under ss 236 and 237 of the Corporations Act 2001 (Cth) to bring proceedings on behalf of the First Plaintiff, Mount Gilead Pty Ltd ("MGPL") against four defendants. Katrina is a former director of MGPL and a beneficiary of the Mount Gilead Trust. The trustee of that Trust, Kalemon Investments Pty Ltd ("Kalemon") holds 10 ordinary shares in MGPL, and MGPL owns a property near Campbelltown named "Mount Gilead". The proceedings concern a transaction in April 2015 ("Lendlease Transaction"), by which MGPL granted Lendlease Communities (Mt Gilead) Pty Ltd ("Lendlease") options to purchase two parcels of land comprising a large part of the "Mount Gilead" property (to which the parties refer as the "Balance Land" and the "MDP Land") for $120 million and $80 million respectively.
The First Defendant to the proceedings, Mr Lee Macarthur-Onslow (to whom I will refer, without disrespect, as "Lee"), is Katrina's brother, the governing director of MGPL and also a beneficiary of the Mount Gilead Trust. The Summons filed by Katrina sought final relief, namely that Lee pay compensation under s 1317H of the Corporations Act or equitable compensation to MGPL. By a Commercial List Statement also filed on 12 April 2021, Katrina contended that, on 17 April 2015, Lee had caused MGPL to enter into the Lendlease Transaction and identified the claims against Lee in that regard. I will set out those claims in more detail below. The Second and Third Defendants are Mr Andrew Martin, who is a director of Old Mill Properties Pty Ltd ("OMP") and OMP and the Fourth Defendant is Jones Lang LaSalle (NSW) Pty Ltd ("JLL"). I will also set out below the claims that Katrina seeks to bring against them in MGPL's name and on its behalf.
The proceedings were commenced by Katrina shortly before the expiry of the applicable limitation periods. By submissions made on their commencement, on 12 April 2021, Mr Ng (who then appeared for Katrina) noted that the transaction documents recording or giving effect to the Lendlease Transaction appeared to have been entered into on 17 April 2015; that the limitation periods for the causes of action articulated in the Commercial List Statement would expire on 17 April 2021; and that an approach had been made to obtain orders for short service and the expedited hearing of the application for leave under s 237 of the Corporations Act on that basis. On 19 April 2021, Williams J granted leave nunc pro tunc to Katrina on an interim basis, under ss 237 and 241(1)(a) of the Corporations Act, to file the Summons and the Commercial List Statement dated 12 April 2021 commencing the proceedings in the name of and on behalf of MGPL, on terms that the Plaintiffs could not take any further steps to continue the proceedings, except in relation to an application for leave on a final basis under s 237 of the Corporations Act, without the Court's leave. That order was in the nature of interim relief to allow this application to be heard, similar to the orders made in Re RUS Holdings (Australia) Pty Ltd [2012] NSWSC 1075 and Re Legal Practice Management Group Pty Ltd [2017] NSWSC 1500.
[4]
Affidavit evidence and chronology of events
Katrina relies on her affidavit dated 9 April 2021. Katrina frankly there accepted that she is not on good terms with Lee (Katrina 9.4.21 [9]). She set out a chronology of events, to which I will refer below, and identified a complaint that is sought to be made in these proceedings, that, to her knowledge, "no expression of interest campaign or other public marketing campaign for the sale of Mount Gilead has been conducted on behalf of MGPL by [Mr Martin] or by his Company OMP" (Katrina 9.4.21 [29]). Katrina's evidence is that she is concerned that the Lendlease Transaction was entered into at a significant undervalue for four reasons, namely that the price payable does not appear to have "increased in line with the broader market for real estate in the Sydney basin" by comparison with the price payable in earlier arrangements with another developer that did not proceed ("Australand Transaction") although progress had been made towards getting the MDP Land rezoned; second, the Lendlease Transaction involved the sale of a larger parcel of land than the Australand Transaction; third, monetary payments under the Lendlease Transaction were to be made over a longer period than the Australand Transaction; and, fourth, the Lendlease Transaction imposed several burdens on the remaining part of the Mount Gilead property, known as the "Homestead Lot" (Katrina 9.4.21 [41]-[45]). Katrina also referred to the absence of a public marketing campaign, such as an expression of interest campaign, and expressed her view that the market was not properly tested before entry into the Lendlease Transaction. Katrina expressed her "concern" that MGPL has suffered "significant loss amounting to many millions of dollars" (Katrina 9.4.21 [47]), although I will find below that there is little or no evidentiary basis for that proposition.
By her second affidavit dated 30 April 2021, Katrina referred to a request made by her solicitors for copies of agreements between MGPL and Lendlease; led evidence that she did not anticipate that the proceedings would adversely affect MGPL's business; referred to her financial position and to her offer of an indemnity in respect of MGPL's costs of the proceedings; and addressed the question of the release and undertaking given under the Settlement Deed. Her evidence (admitted with a limiting order under s 136 of the Evidence Act 1995 (NSW) as evidence of her understanding) (Katrina 30.4.21 [27]-[28]) was that:
"I have considered whether the releases which I gave in the deed of settlement and release preclude me from bringing the claims in these proceedings on behalf of MGPL and in its name.
I consider that the releases which I gave do not preclude me doing so as I released certain claims I had or may have had against Lee (and others) in my personal capacity. I did not release any claims by or on behalf of MGPL. The only claims which MGPL released in the deed of settlement and release were claims it had or may have had against me relating to the claims I made in the probate proceedings concerning my mother's estate (for possession and occupation of the Homestead Lot)."
Katrina's evidence there does not address the undertaking that she had also given in the Settlement Deed in respect of the commencement of proceedings, to which I return below.
[5]
Whether the leave application or the proceedings are barred by the Settlement Deed
As I noted above, by his Cross-Claim Cross-Summons and Commercial List Cross-Claim Statement in the Commercial List proceedings, Lee seeks a declaration that, by the operation of cl 11.1 of the Settlement Deed, Katrina had released any right or entitlement she may have had to apply for leave to bring these proceedings or is prohibited from applying for such leave, and an order that Katrina specifically perform cl 11.1(b) of the Settlement Deed by withdrawing her leave application. By her Commercial List Cross-Claim Response, Katrina denied that she is precluded from seeking such leave. It was common ground that that question should be determined at the same time as Katrina's leave application and would raise similar issues and I am content to proceed on that basis. Katrina and Lee each made detailed submissions as to that question.
The Settlement Deed recited that Katrina was the plaintiff in the Supreme Court proceedings in respect of Lady Macarthur-Onslow's estate; that "Katrina has also made allegations against Lee, MGPL and Kalemon ("Katrina's Claims")" and that the parties had agreed to settle, inter alia, Katrina's Claims on the terms set out in the Deed. Clause 11.1 of the Settlement Deed set out releases and undertakings given by Katrina as follows:
"11.1 Katrina's Releases
Upon the dismissal of the Proceedings, Katrina agrees subject to clause 11.3:
(a) To release and does unconditionally release Lee, [other persons] and MGPL, its officers employees and servants (the Defendants), from all Claims Katrina has or may have against any of the Defendants in any capacity whatsoever; and
(b) Not to make, take or institute any claim Katrina has or may have against any of the Defendants in any capacity whatsoever."
The limitation of that clause under cl 11.3 is not material in this application. A question of construction may arise as to whether the words "in any capacity whatsoever" in cll 11.1(a) and (b) applied to Katrina taking action in any capacity, or to action being brought against the Defendants in any capacity, or both. It is not necessary to determine that question, not least because, as I note below, Katrina's formulation of the claim in the Commercial List Statement makes clear that she brings these claims and makes the relevant complaints, although she seeks to do so on MGPL's behalf.
[6]
Requirements for the grant of leave
As I noted above, Katrina's application for leave is now brought as I have noted above, under ss 236 and 237 of the Corporations Act. She contends that she has standing to apply for leave to bring proceedings on behalf of MGPL in its name, because she is a former director of MGPL for the purposes of s 236(1) of the Act. Section 237(2) in turn requires that the Court grant an application for leave under that section if it is satisfied of specified matters. It is not strictly necessary to address these matters in respect of the claim against Lee, given the conclusion that I have reached above, although I will do so in respect of all parties.
Counsel referred to the principles applicable to the grant of leave under s 237 of the Corporations Act and I have drawn below on Counsels' submissions and my summary of those principles in Re Legal Practice Management Group Pty Ltd [2018] NSWSC 527 at [50]-[54] and in Re Global Advanced Metals Pty Ltd (2019) 141 ACSR 222; [2019] NSWSC 1804. In an application for leave to bring statutory derivative proceedings, Katrina must satisfy the criteria for the grant of leave specified in s 237(2) of the Corporations Act. In order to grant leave under that section, the Court must be satisfied of five matters, and must grant that leave if satisfied of those matters. Those matters are that it is probable that MGPL will not itself bring the proceedings; Katrina is acting in good faith; it is in the best interests of MGPL that Katrina be granted leave; there is a serious question to be tried; and at least 14 days before making the application, Katrina gave written notice to MGPL of her intention to apply for leave and of the reasons for applying, or the Court should dispense with that requirement.
Katrina bears the onus of establishing that each of these matters is satisfied on the balance of probabilities: Swansson v R A Pratt Properties Pty Ltd (2002) 42 ACSR 313; [2002] NSWSC 583 ("Swansson") at [26]; Huang v Wang (2016) 114 ACSR 586; [2016] NSWCA 164. If all the requirements of s 237(2) are satisfied, the Court must grant leave to bring the proposed proceedings. If any or all of the criteria specified in that section are not satisfied, then the Court should not grant that leave: Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 at [12]-[13]; Oates above at [55]-[65]. Whether an application for leave under s 237 of the Act is treated as final or interlocutory, leave to bring a derivative action would not be given lightly: Swansson at [24]. No party sought to rely on the statutory presumption in s 237(3) of the Act in this application.
[7]
Whether MGPL will bring the proceedings
Lee accepts, and the other Defendants do not contest, that the first of the requirements for a grant of leave to bring a derivative action under s 237(2)(a) of the Corporations Act, that it is likely that MGPL would not itself bring the proceedings, is satisfied.
[8]
Whether Katrina is acting in good faith
The second requirement for a grant of leave to bring a derivative action, under s 237(2)(b) of the Corporations Act, is that Katrina must establish to the Court's satisfaction that she is acting in good faith. The issues in respect of the Settlement Deed raise difficulties in this case which ordinarily would not arise in an application of this kind. Factors relevant to the good faith requirement at least include whether Katrina has an honest belief that a good cause of action exists and has reasonable prospects of success, although that belief will be tested against whether a reasonable person in the circumstances would hold that belief, and whether Katrina is seeking to bring the action for a collateral purpose.
In Swansson, Palmer J (at [36]) observed that:
"… 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."
Palmer J also there observed (at [42]) that where those in control of a company refuse to take proceedings to redress a wrong which appears to have been done to it, the Court should permit a derivative action to be instituted by those within the categories allowed by s 236(1) of the Act, and that such a person:
"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." [emphasis added.]
That observation was approved in Chahwan v Euphoric Pty Ltd (2008) 65 ACSR 661; [2008] NSWCA 52 ("Chahwan") at [70] and Tobias JA there noted (at [74]) that:
"… I take his Honour to be saying that an applicant will only be acting in good faith for the purpose of s 237(2)(b) where, as a current or former shareholder or director of the company, he or she would suffer a real and substantive injury if a derivative action were not permitted provided that that injury was dependent upon or connected with the applicant's status as such shareholder or director. It might be a positive indication of the good faith of a shareholder if he or she sought to institute a derivative action which would have the effect, if successful, of restoring value to his or her shares in the company."
[9]
Whether a serious question to be tried is established against the several Defendants
The third requirement for the grant of leave to bring a derivative action, under s 237(2)(c) of the Corporations Act, is that the grant of such leave is in MGPL's best interests. I will defer dealing with this question until after I have addressed the question whether a serious question to be tried is established.
The fourth requirement for the grant of leave, under s 237(2)(d) of the Corporations Act, is that there is a serious question to be tried in the proceedings, which has to be determined in respect of each of the several Defendants. Whether there is a serious question to be tried requires the application of the same test as applied by the Court in determining whether to grant an interlocutory injunction: Swansson at [25]; Vinciguerra v MG Corrosion Consultants Pty Ltd (2010) 79 ACSR 293; [2010] FCA 763 at [140], upheld on appeal in MG Corrosion Consultants Pty Ltd v Vinciguerra (2011) 82 ACSR 367; [2011] FCAFC 31. In Goozee v Graphic World Group Holdings Pty Ltd (2002) 42 ACSR 534; [2002] NSWSC 640 at [34], Barrett J observed that:
"… a serious question to be tried can be found only by reference to an infringement of some legal or equitable right or the commission of some legal or equitable wrong, with the result that the issue needs to be approached by inquiring whether there exists, in the circumstances and on the evidence, a sufficiently cogent showing of some such infringement or wrong to warrant the imposition of an order to preserve the status quo pending full investigation.
His Honour also observed (at [35]) that the s 237(2)(d) test is imported from equity's approach to the grant of interlocutory injunctions. Whether a serious question to be tried is established is to be determined by reference to evidence from which a plausible inference may be drawn: Oates at [164]-[167].
In Gladstone Pacific Nickel, Ball J summarised the test as to whether there is a serious question to be tried as follows (at [56]):
"The test of whether there is a serious question to be tried is the same as the test that is applied by the court in determining whether to grant an interlocutory injunction: Swansson v R A Pratt Properties Pty Ltd [above] at [25] per Palmer J; Oates v Consolidated Capital Services Ltd [above] at [164] per Campbell JA, with whom Spigelman CJ and Allsop P agreed. Consequently, the same relatively low threshold is applicable. It is not appropriate for the court to attempt to resolve disputed questions of fact. For that reason, cross-examination going to the merits of the case will only be permitted with leave of the court and then only to a limited extent. Whether the court should attempt to resolve a disputed question of law will depend on the particular circumstances of the case, including whether the question is novel or difficult and whether it is susceptible of resolution on the present state of the evidence: Kolback Securities Ltd v Epoch Mining NL [(1987) 8 NSWLR 533] at 535 per McLelland J (as he then was). In answering the question whether there is a serious question to be tried, the court must obviously have regard to the material before it; and the material that is available may affect the result. As the Full Federal Court explained in Aboriginal Development Commission v Ralkon Agricultural Co Pty Ltd (1987) 15 FCR 159 at 163; 74 ALR 505 at 509-10:
However, applying the "serious question" test, it is clear that the inquiry whether there is a serious question to be tried must be answered with reference to the circumstances of the case. There may be cases in which the facts are so clearly and comprehensively established at the time of the application for the interim order that the court would conclude that the applicant had no arguable case. At the opposite extreme there may be cases in which the applicant has had little opportunity to ascertain the facts and to adduce evidence but there is some material to suggest an entitlement to relief. Upon further investigation that material may turn out to be capable of ready refutation or explanation but, in the meantime, it may be appropriate for the court to intervene. Everything must depend upon the circumstances of the case, including the extent to which the applicant has had an opportunity to present the facts to the court and the consequences of granting or of refusing relief."
[10]
Whether the proposed proceedings are in MGPL's best interests
As I noted above, the third requirement for the grant of leave to bring a derivative action, under s 237(2)(c) of the Corporations Act, is that the grant of such leave is in MGPL's best interests. The relevant principles were also summarised in Swansson at [55]-[60], where Palmer J noted that that provision required that the Court be satisfied that the proposed action actually is, on the balance of probabilities, in the relevant company's best interests. In order to prove that leave is in the best interests of the company, an applicant should generally give evidence of the character of the company, in the sense of the nature of the company's operations; the business of the company so that the effects of the proposed litigation on the conduct of its business may be appreciated; whether there are other means of obtaining the same redress so that the company does not have to be brought into litigation against its will; and the proposed defendant's ability to meet at least a substantial part of any judgment in favour of the company so that the Court may ascertain whether the action would be of practical benefit to the company. In Re Gladstone Pacific Nickel above, Ball J identified relevant matters including the prospects of success of the action; the likely costs of the action; the likely recovery if the action is successful; and the likely consequences to the company if the action is unsuccessful. The "best interests" of MGPL involve its separate and independent welfare, predominantly reflecting the interests of its shareholders: Huang v Wang above at [59].
Whether it is in the best interests of MGPL to bring a claim depends not only on whether it might succeed as to liability, but whether there would be any practical benefit from its success. In Re Imperium Projects Pty Ltd [2015] NSWSC 16 at [14], I observed that it did not follow that it was in a company's best interests that a remedy be pursued, merely because it appeared to have suffered an actionable wrong, and any assessment of the company's best interests depended on matters including "the strength of the suggested claims". In Re Sirrah Pty Ltd [2018] NSWSC 1802 at [21], I also noted that, where a serious question to be tried exists, and there is a prospect of substantial recovery if the proceedings are successful, it may well be in a company's best interests that it have the opportunity to make that recovery, so long as it is not exposed to an unjustified risk of costs in doing so. I recognise that, in South Johnstone Mill Ltd v Dennis (2007) 244 ALR 730; (2007) 64 ACSR 447; [2007] FCA 1448, in a claim for sale at undervalue brought against receivers and managers, Middleton J was prepared to find that there was sufficient evidence of damage, without determining whether the applicant's expert evidence was admissible. However, that approach is not available here, because Katrina leads no expert evidence to support her claim the Lendlease Transaction occurred at undervalue. This is also not a case, by contrast with South Johnstone Mill Ltd v Dennis above, that any inference supporting a claim for substantial compensation could be drawn only from the documentary evidence.
[11]
Notice requirement
With the possible exception of Lee, the Defendants did not contest that the requirement for 14 days' written notice of Katrina's intention to apply for leave would be dispensed with in the relevant circumstances. It is not necessary to address that question given the findings that I have reached on other grounds.
[12]
Summary and orders
I am satisfied, for the purposes of s 237 of the Corporations Act, that it is probable that MGPL will not itself bring the proceedings, which was common ground between the parties; I am not satisfied that Katrina is acting in good faith in seeking to bring the proceedings, in respect of Lee who raised that issue; I am not satisfied that it is in MGPL's best interests that Katrina be granted leave to bring the proceedings, where Katrina has not adequately addressed the risk of disruption to MGPL's continuing dealings with Lendlease (and also other developers if Lendlease does not exercise the option for the Balance Land) by the continuance of the proceedings; and Katrina has not shown more than a speculative prospect of a recovery for MGPL from the proceedings. The indemnity offered by Katrina does not displace that difficulty, where the detriments which MGPL would suffer are not limited to the risk of costs of the proceedings. I am also not satisfied that Katrina has established a serious question to be tried in the proceedings. Where any one of the requirements essential to a grant of leave is not satisfied, the Court must not grant leave to bring the relevant proceedings, and here several of those requirements are not satisfied.
Katrina's application for leave under s 237 of the Act should therefore be dismissed, and the substantive proceedings should also be dismissed where it is common ground that they involve only derivative claims and cannot proceed without such leave. I will allow the parties an opportunity to make submissions as to the orders to be made in respect of Lee's cross-claim in the Commercial List proceedings and, while costs would ordinarily follow the event, I should also allow an opportunity for submissions in that regard. I direct the parties to bring in agreed short minutes of order as to the matters referred to in this paragraph, or otherwise their respective short minutes of order and short submissions as to the differences between them, within 7 days.
[13]
Amendments
10 August 2021 - Additional sentence added at end of paragraph 11 at request of party, without objection by other parties.
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Decision last updated: 10 August 2021
On 1 June 2021, Lee filed a Cross-Claim Cross-Summons and Commercial List Cross-Claim Statement in the Commercial List proceedings which sought a declaration that, by the operation of cl 11.1 of a Settlement Deed dated 22 February 2021 ("Settlement Deed"), Katrina had released any right or entitlement she may have had to apply for leave to bring these proceedings or was prohibited from applying for such leave, and an order that Katrina specifically perform cl 11.1(b) of the Settlement Deed by withdrawing her leave application. Katrina in turn filed a Commercial List Cross-Claim Response on 11 June 2021 denying that she was precluded from seeking such leave.
Katrina's application for leave is now brought as I have noted above, under ss 236 and 237 of the Corporations Act. She contends that she has standing to apply for leave to bring proceedings on behalf of MGPL in its name, because she is a former director of MGPL for the purposes of s 236(1) of the Act. Section 237(2) in turn requires that the Court grant an application for leave under that section if it is satisfied of specified matters. I will address the applicable principles in respect of that section below.
I now turn to the affidavit evidence and a chronology of events, as to which I do not reach findings on a final basis, given the nature of this application. I then address the question whether the Settlement Deed prevents Katrina from bringing the application for leave or the substantive proceeding; and then to whether the requirements of s 237 are satisfied in respect of the claims against the several parties and the proceedings as a whole. I have had the benefit of comprehensive written submissions of Counsel and detailed oral submissions. I will refer to aspects of those submissions below, although the resolution of the majority of the issues seems to me to be straightforward.
Katrina also relied on an affidavit dated 3 May 2021 of her solicitor, Ms Gardner, which is not material to the matters which I need to decide. Katrina's further affidavit dated 25 June 2021 identified the matters in issue in the proceedings concerning her late mother's estate.
Lee and Mr Martin did not read affidavit evidence or tender other evidence. OMP read the affidavit dated 20 May 2021 of one of its directors, Mr Darryl Kite. Mr Kite's evidence was that OMP did not have employees and conducted operations by its directors, including Mr Martin; that OMP did not have a licence under the Property, Stock and Business Agents Act 2002 (NSW) and did not carry out activities in selling or advertising real estate or providing valuation advice; that MGPL and OMP entered into an agreement titled the "Land Management Agreement" on 21 February 2011 ("Land Management Agreement"), which was subsequently varied to extend its duration, and which provided for OMP to do work to effect the rezoning of the Mount Gilead property and to assist in MGPL's dealings with other consultants and relevant authorities and service providers. Mr Kite also referred to meetings of a "Project Control Group" ("PCG") which took place between July 2011 and June 2016, which was usually attended by Lee and OMP's directors and addressed the rezoning process for Mount Gilead, and his affidavit exhibited the minutes of some 38 meetings of the PCG. The minutes of the PCG contain numerous references to dealings with developers who had shown interest in the Mount Gilead land.
OMP also relies on the affidavit dated 20 May 2021 of a second director, Mr Anderson, who also refers to the entry into the Land Management Agreement; his preparation for a meeting on 5 September 2014, and his notes as to the advantages and disadvantages of a sale before the rezoning was complete and as to an expression of interest timetable, and his recollection that he gave advice to that effect at that meeting; his subsequent dealings with Lendlease and MGPL in respect of an offer made by Lendlease for the Mount Gilead land, and his advice at the meeting of the PCG on 28 November 2014 that Lendlease's proposal must be independently assessed to satisfy MGPL as to the market relativity of that proposal. Mr Anderson took issue with aspects of the note made by an adviser to Katrina, Mr Keller, of a meeting with Mr Keller on 12 December 2014, although it is not necessary to resolve that issue in order to determine this application. JLL also did not read affidavit evidence or tender other evidence in respect of the application.
I turn now to a chronology of events. In setting out this chronology, I expressly do not reach findings as to contested facts, where it is not necessary to do so, given the conclusions that I reach on other grounds.
Katrina's evidence is that, in 2002, when Lee's and Katrina's mother, the late Lady Dorothy Macarthur-Onslow, was the governing director of MGPL and Katrina was a director of MGPL, MGPL dealt with developers in respect of a potential residential development of Mount Gilead; in 2003, MGPL appointed JLL to conduct an expression of interest campaign, which extended to another lot owned by Lee and Katrina as tenants-in-common; and Katrina opposed aspects of that process and was removed as a director of Kalemon and MGPL in February 2004.
In August 2004, MGPL signed an option agreement with Australand, described as the Australand Transaction. There is little evidence as to the terms of that transaction, beyond Katrina's evidence of her understanding that its principal commercial terms were that:
"(a) Australand would apply for the rezoning of the land;
(b) Upon rezoning, Australand would have the option to purchase the land for the purposes of constructing a residential community development comprising several thousand dwellings;
(c) The purchase price was a sum of not less than $175 million;
(d) Option fees totalling $14,500,000 would be paid over 5 years; and
(e) There was a purchase price uplift mechanism benefiting MGPL."
(Katrina 9.4.21 [19]).
Katrina does not further describe that purchase price uplift mechanism, or lead evidence of any other requirements of the Australand Transaction. Australand gave notice that it would not exercise its option in 2009 or 2010 (Katrina 9.4.21 [20]). It seems to me that, because the Australand Transaction did not proceed to completion, it provides only weak evidence as to the value of the Mount Gilead land, namely that, by the time Australand was due to exercise the option in 2009 or 2010, that land was worth less than it had contracted to pay for it had it exercised the option.
Lady Dorothy Macarthur-Onslow died in May 2013, and, since 10 May 2013, Lee has been the governing director of MGPL and has had management control of MGPL under its constitution (Katrina 9.4.21 [5]). In 2015, Katrina also brought proceedings relating to her removal as a director of Kalemon (but not MGPL) which were resolved, by consent, in June 2015 by orders that treated her as having been a director of Kalemon since 1977. Katrina brought proceedings in respect of the late Lady Dorothy Macarthur-Onslow's estate (Katrina 9.4.21 [22]). Katrina's evidence is that, from early 2014, she was told about aspects of a proposal to rezone the Mount Gilead property and offer it, or part of it, for sale to major developers. She also refers to subsequent negotiations to divide family assets, including her mother's estate, in which she was assisted by Mr Keller.
At a meeting of the PCG on 4 April 2014, attended by Lee and representatives of OMP, representatives of JLL gave a presentation on residential development in the vicinity of Mount Gilead. The minutes of that meeting recorded that:
"The PCG was advised that to secure the maximum sale figure for the land prior to development would require:
• Rezoning of the land and any other measures to minimise uncertainty/obstacles as to development.
• Delayed payment terms (typically an amount on exchange with a balance paid over time to match a development program).
• It was agreed that JLL would be asked to prepare a disposal timetable for consideration by [MGPL]. The program would commence in Q1 2015 with the information memorandum ready by Q2 2015, in anticipation of an open market sale after rezoning."
By letter dated 2 May 2014, JLL wrote to OMP referring to JLL's "ongoing property advisory and agency role"; noting that a sale of the Mount Gilead land was unlikely to occur until after it was rezoned and that formal marketing of the land would not commence until after the rezoning was approved in mid-2015; and observing that:
"As we discussed at our last meeting on the basis of a successful rezoning we are confident, based on current residential market sentiment and activity, that there will be a significant level of interest in any formal marketing of the Mount Gilead land. JLL would expect a large number of developers to be actively interested in participating in a competitive process that will assist in driving price tensioning, to the benefit of the current owner. Based on our detailed knowledge of active buyer mandates now an intermedium term we believe that both domestic and offshore parties would participate.
At the appropriate time we would be happy to discuss with [MGPL] the method of sale (eg private treaty, public expression of interest campaign, tender etc), likely buyers (both domestic and offshore) and further refine the following timetable."
That letter set out an indicative timetable for a sale process, including the preparation of the list of target buyer participants by JLL in April 2015; pre-marketing discussions with buyer groups in May 2015; a formal EOI campaign over six weeks from mid-June until the end of July 2015; and subsequent steps leading to the exchange of contracts in mid-October 2015.
Mr Kite's evidence is that, at a meeting of the PCG on 28 November 2014, attended by Lee, MGPL's solicitors and representatives of OMP, Mr Anderson of OMP advised Lee that he should get the offer made by Lendlease to purchase the MDP Land and the Balance Land independently reviewed, and that OMP needed direction on whether MGPL wanted it to proceed to negotiate with Lendlease on the proposal. Mr Kite annexes an apparently contemporaneous handwritten note of that meeting which records advice to that effect. It is not necessary to reach any finding of fact as to whether that advice was given in order to determine this application.
On 10 December 2014, Mr Keller, who (as I noted above) was advising Katrina, was provided with a briefing as to the Lendlease proposal, which he recorded in a four-page note (Katrina 9.4.21 [27]-[28], Ex A1, 302-305). That note refers to a proposal in which a proponent, presumably Lendlease, had advanced to OMP in respect of the MDP Land and the Balance Land, and set out the price then proposed for the acquisition of the MDP Land and the Balance Land, indicative payment dates over an extended period, and recorded a recommendation by OMP "that Lee and Katrina give instructions for this proposal now to be documented and for it to be signed" for several reasons. Those reasons included an observation that:
"The proponent is one of a small group of companies which would have been approached if the MDP Land was marketed by Old Mill in 2015 after the public exhibition of the MDP plan."
There is a dispute, which it is not necessary to resolve, as to whether OMP made a recommendation in those terms.
A meeting of the PCG on 17 December 2014 noted that a draft information memorandum for use in a sales campaign for the MDP Land had been prepared and a copy forwarded to MGPL, but no further action would be taken until the completion of the due diligence process with Lendlease, and noted that Katrina had had a briefing on the proposal through Mr Keller as part of discussions on the Lendlease offer and that no further briefing would be required. Those minutes also noted that Lendlease was expected to outline the framework of a potential offer on the MDP Land at a meeting on 21 November 2014. The same observation was made in respect of the draft information memorandum in minutes of the PCG held on 28 February 2015, 31 March 2015 and 24 April 2015.
Katrina's evidence is that, in a conversation with Lee in February 2015, she suggested to Lee that MGPL, rather than accepting an offer from Lendlease, should put the property "to tender to flush out the best offer" (Katrina 9.4.21 [30]).
On 17 April 2015, Lendlease and MGPL executed documents which provided for the grant of options to Lendlease to purchase the MDP Land and the Balance Land. Katrina did not tender these documents; her evidence is that Lee has declined to produce them, claiming confidentiality, but Katrina has made no attempt to obtain them by, for example, an application for pre-action discovery prior to commencing these proceedings. A further agreement was also executed dealing with the "Homestead Lot" which was not sold.
By a letter dated 20 May 2016 (Ex A1, 406-409) Katrina advised of her concerns as to the contractual arrangements and negotiations with Lendlease and her belief that "the consideration for the proposed acquisitions is tens of millions of dollars, and possibly several hundred million dollars, less than the market value of the contracted land" at the time the contract was signed with Lendlease in March 2015. Katrina also referred to her having previously asked "why MGPL had entered into an agreement with [Lendlease] without going to the market to test the level of interest and more importantly to get a better indication of the true value of the MDP Land and the [Balance Land]" and recorded her dissatisfaction with the answers given; and advanced a comparison of the Lendlease Transaction with the Australand Transaction, which is again advanced in these proceedings. By letter dated 2 June 2021 (Ex A1, 410-412) MGPL responded to that letter.
A plan for the subdivision of the Mount Gilead property was registered on 15 September 2016.
The Court delivered judgment in the proceedings brought by Katrina in respect of the late Lady Macarthur-Onslow's estate in December 2016. Katrina's evidence is that negotiations to divide family assets, including her mother's estate, continued from 2014 until they were "largely finally concluded" in February 2021. The Settlement Deed dated 22 February 2021 was executed between Katrina, Lee and others and MGPL. Katrina's evidence (Katrina 9.4.21 [39]) is that:
"Those negotiations were difficult, given their personal and sensitive nature and their protracted duration. The matters the subject of negotiation need to be resolved from my perspective. I was not inclined to pursue these proceedings until the negotiations were finalised to avoid prejudicing the prospect of concluding the negotiations and the agreed settlement."
I will note a difficulty which arises from the last proposition below.
It appears that Lendlease has exercised its option over the MDP Land but has not yet exercised an option in respect of the Balance Land (Katrina 9.4.21 [40]).
The term "Claims" which is used in each of cl 11.1(a) and 11.1(b) is defined as follows:
"Claim means any present and actual or contingent, claim, cause of action, complaint, liability, cost or expense that any Party has or might have in connection with or arising in any way from the facts or matters or circumstances giving rise to or in any way relating to the Proceedings, or Katrina's Claims or the matters referred to in this deed, whether or not such claim or cause of action is known to that person or to any other at the date of this deed."
The term "Katrina's Claims" is defined as:
"Katrina's Claims means the contents of the document entitled "document prepared by Hugh [Keller] to assist settlement discussions between Lee and Katrina" provided by Katrina to [a party to the deed] on or about 7 February 2019" ["Keller Document"]
The Keller Document (Ex A3, 931) identifies complaints previously made by Katrina, characterised as Lee "not doing the right thing", including allowing Lendlease to take certain steps in respect of the Homestead Lot; failing to test the market; failing to negotiate an annual option fee on the MDP Land; giving Lendlease "carte blanche to exercise ownership rights" before payment and entering into a commitment with Lendlease which runs for many years after the vesting date of the Trust and entering into a 20 year commitment with Lendlease without including a price adjustment similar to that agreed in the Australand Transaction, and also complains as to the "sale of MDP [Land] for an undervalue" and the sale of the Balance Land "on long term arrangements with no upside". It seems to me that Katrina's Claims, as defined by reference to the Keller Document, include claims or complaints in respect of the Lendlease Transaction, the sale of the MDP Land and the sale of the Balance Land of the kind that are now sought to be advanced in these proceedings.
In opening written submissions, Mr Studdy, with whom Mr Brezniak appeared for Lee, submits that cl 11.1 of the Settlement Deed released any entitlement that Katrina had to seek leave under ss 236-237 of the Corporations Act to bring the proceedings on behalf of MGPL, and prohibited her from seeking such leave for several reasons. Mr Studdy submits, and I accept, that the definition of "Claim" (and, by extension, the definition of "Katrina's Claims") will be read into cl 11.1 of the Settlement Deed as a matter of construction: Segelov v Ernst & Young Services Pty Ltd (2015) 89 NSWLR 431; [2015] NSWCA 156 at [88]. Mr Studdy submits that the term "Claim" encompasses all manner of Court proceedings including an application for leave under ss 236 and 237 of the Corporations Act. Mr Studdy also refers to the meaning of "claim" in general usage, as including a "demand for something as due; an assertion of a right or alleged right"; an "assertion of something as a fact"; and a "right to claim or demand". I will find below that Katrina advances such claims in the Commercial List Statement. Mr Studdy also advances the wider position, in opening submissions, that the subject of the "claim" which is the subject of cll 11.1(a) and (b) concerns the Lendlease transaction and covers "the very subject matter of these proceedings". That submission is significant, because it extends to the proceedings as a whole and not only the leave application.
Mr Studdy also refers to the general law notion of a derivative action, where a plaintiff is required to allege facts that fall within a recognised exception to the rule that a company is the proper plaintiff in an action in respect of a wrong alleged to be done to the company: Oates v Consolidated Capital Services Pty Ltd (2009) 76 NSWLR 69;(2009) 257 ALR 558; (2009) 72 ACSR 506; [2009] NSWCA 183 ("Oates") at [105]. The significance of that proposition is that, at general law, such a claim remains the plaintiff's claim, although it can only be brought where it falls within the relevant exceptions. Mr Studdy also submits that the Settlement Deed is relevant to whether there is a serious question to be tried and prevents Katrina from bringing the proceedings, even if she were granted leave to do so. Mr Studdy submits, in opening, that Katrina would bring the relevant claims in her personal capacity, as well as on behalf of MGPL as representative, if leave is granted, and that cl 11.1 of the Settlement Deed prevents her bringing the proceedings on that basis.
In reply, Dr Higgins and Mr Ng, who appear for Katrina, submit that Katrina's application for leave to bring the derivative proceedings on behalf of MGPL against Lee is not a "Claim" within the meaning of the Settlement Deed and, if it is a Claim, is not "against" MGPL or Lee. It seems to me that there is force in Dr Higgins' submission that Katrina's application for leave under ss 236-237 of the Act is not itself a "Claim" (as defined in the Settlement Deed) that Katrina has or may have against Lee, either in his personal capacity or in his capacity as an officer of MGPL, for the purposes of the Settlement Deed, so as to be either released or the subject of the undertaking not to institute the claim under cl 11.1 of the Settlement Deed. However, as Dr Higgins fairly accepted in oral submissions, the ultimate question here is whether the effect of the Settlement Deed is to prevent Katrina bringing the substantive proceedings in MGPL's name and on its behalf, as distinct from merely bringing the application for leave to bring the substantive proceedings, and the Court would not grant leave to Katrina to bring the proceedings if the Settlement Deed prevented her doing so. I do not consider it necessary to reach a final view as to whether the Settlement Deed prevents the leave application, where I find below that it prevents Katrina bringing the substantive proceedings, including in MGPL's name and on its behalf, and that is sufficient to determine this application.
Dr Higgins and Mr Ng also submit, and I accept, that the operation of a release will be limited to the subject or occasion to which the agreement, read as a whole, refers: Grant v John Grant & Sons Proprietary Ltd (1954) 91 CLR 112 at 123. That proposition does not assist Katrina here, where it is plain from the definition of "Katrina's Claims" and the Keller Document to which that definition refers that the claims relating to the Lendlease transaction were squarely within the scope of the Settlement Deed and the release and undertaking given by Katrina in cl 11.1 of the Settlement Deed. Dr Higgins submits, and I accept, Katrina was not an officer or agent of MGPL and lacked authority to release claims of MGPL against Lee. It seems to me that that is an answer to Lee's submission that the release contained in cl 11.1(a) of the Settlement Deed prevents the commencement and continuance of the proceedings, but not to Katrina's undertaking not to bring proceedings in cl 11.1(b) of the Settlement Deed. Dr Higgins also submits that none of Mr Martin, OMP or JLL was a party to the Settlement Deed and it follows that MGPL's claims against them would survive the Settlement Deed. I accept that submission with the qualification that, to the extent that Katrina's conduct in commencing these proceedings does not satisfy the "good faith" requirement in respect of a statutory derivative action under s 237 of the Act, then that would potentially affect the proceedings as against all Defendants and not only the proceedings against Lee.
Dr Higgins in turn refers to observations of Carr J in Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317; (2003) 200 ALR 607; [2003] FCAFC 153 at [112]-[113] as to the concept of a "claim" in general usage, which his Honour noted included a "statement of one's right to something" and extended beyond a "cause of action" to a demand for what is due by virtue of that right. I do not read his Honour's observations as limiting the concept of a "claim" as distinct from indicating some of the matters that fall within it. Dr Higgins also refers to the concept of a "complaint", as something that "state[s] a particular grievance or finding of fault": Hill v Compass Ten Pty Ltd (2012) 205 FCR 94; [2021] FCA 761 at [48]; Awad v Healthcare Complaints Commission [2006] NSWSC 698 at [49]. It seems to me that the matters noted below, for which "Katrina contends" in the Commercial List Statement, plainly have that character.
Turning now to the application of cl 11.1 of the Settlement Deed to the substantive claims as formulated by the Commercial List Summons and Commercial List Statement, the Summons (as I noted above) seeks statutory and equitable compensation against Lee. It seems to me that Katrina's summary of the "Nature of Dispute" contained in section A of the Commercial List Statement rightly recognises that Katrina brings both claims and complaints (within the definition of "Claim" in the Settlement Deed) against Lee in the Commercial List Statement, as follows:
"6. Katrina contends that the [Lendlease] transaction was entered into an undervalue and that, by causing MGPL to enter into that transaction, Lee breached his director's duty of care and skill both under section 180(1) of the Corporations Act 2001 (Cth) and under the general law. …
9. Katrina contends that [Mr Martin], or [Mr Martin] and [OMP] and [JLL] breached their duty of care to MGPL by failing to advise MGPL that the [Lendlease] transaction was at an undervalue and also by failing to advise MGPL to conduct an expression of interest campaign to generate competitive tension between interested purchasers, including [Lendlease].
10. Katrina contends that, as a consequence of entering into the [Lendlease] transaction, MGPL has suffered loss and damage in a sum to be quantified."
I have emphasised the words "Katrina contends" in that summary, because they are Katrina's statement of who advanced those claims and they also seem to me accurately to describe the position. I bear in mind that Katrina's summary of the nature of the dispute also foreshadowed that an application for leave would be brought under ss 236-237 of the Corporations Act, as follows:
"11. Katrina apprehends that Lee, as governing director, will decline to permit MGPL to sue Lee. In any event, Lee cannot conduct an action on behalf of MGPL against himself. Katrina seeks leave under section 237 of the Corporations Act to bring these proceedings on behalf of MGPL pursuant to section 236."
I afforded Katrina an opportunity to make further submissions as to the significance of the statement of the nature of the dispute in Part A of her List Statement and whether it indicated (or perhaps more precisely, recognised the fact) that she is advancing a claim or complaint against Lee, albeit that she seeks to do so on behalf of MGPL. Dr Higgins and Ms Ng responded to that question in a manner that could be described, respectfully, as somewhat technical. It seems to me that this submission could have been rejected in short form, on the basis that it does not displace the significance of Katrina's formulation of the nature of the dispute, as her fairly recognising the character of the claims that she brings, as a matter of substance. However I will deal with those submissions in greater detail, in deference to Counsels' efforts in responding to the opportunity for further submissions.
Dr Higgins and Mr Ng submit that Practice Note SC Eq 3 contemplates that a plaintiff's articulation of its case is contained in the contentions recorded in Part C of the List Statement rather than in Part A of the List Statement, and refer to authority that the identification of the nature of the dispute is not part of a "pleading" and that it is a "summary of the dispute that is identified through the statement of contentions" and cannot rise higher than the matters "pleaded" in the statement of contentions. They also submit that:
"While Part A is intended to aid in an understanding of the real issues in dispute between the parties, it is not to be taken as an articulation of the plaintiff's case to which a defendant must respond."
They submit that, here:
"Part A of the List Statement is not a formal statement of contentions, either by [Katrina] or by MGPL. It is, at most, a narrative summary of the matters "pleaded" in Part C, and where the phrase "Katrina contends" is used in paragraphs 6, 9 and 10 of Part A, that is no more than a recognition that while the claim sought to be prosecuted in these proceedings is that of MGPL, the proceedings are sought to be brought on its behalf by [Katrina]."
They then refer to paragraph 11 of the statement of the "Nature of the Dispute", to which I have referred above.
Dr Higgins and Mr Ng also submit that the matters for which "Katrina contends" in Part A of the List Statement are directed to her leave application, which is a step anterior to bringing a "Claim" within the meaning of the Settlement Deed. I do not accept that submission, where Katrina's statement of the nature of the dispute in Part A of the List Statement is plainly a summary of the matters in dispute in the Commercial List proceedings generally, rather than the leave application, and I have noted above that the definition of "Claim" in the Settlement Deed includes both a "claim" in general usage and a "complaint". Dr Higgins and Mr Ng also submit that, because Part A of the List Statement is not a "pleading", it is "without legal consequences or significance" and has no more weight than a "verbal complaint to a friend." I also do not accept that submission, which seems to me to understate and undermine the significance of that part in informing the Court and the parties, albeit in a summary way, of what will be in dispute in the Commercial List proceedings. Dr Higgins and Mr Ng conclude that the fact that "Katrina contends" for the relevant matters does not mean that she advances a claim or complaint about them, albeit they add the qualification "additional to that of MGPL". That qualification rightly recognises, although it seeks to displace, the possibility that a claim or complaint may still be brought by Katrina, although she brings it or seeks to bring it in MGPL's name or on its behalf.
I broadly accept Dr Higgins' and Mr Ng's submissions as to the nature of a Commercial List Statement and its elements under Practice Note SC Eq 3, although not their attempt to read down Katrina's statement of the matters in dispute in the proceedings to no more that the matters in dispute in the leave application, or their attempt to marginalise the role of that statement of the nature of the dispute in a Commercial List Statement. However, their submissions do not seem to me to have the result that the Court should not treat Katrina's summary of the dispute as a fair acknowledgment of what are in fact and in substance the matters in dispute in the Commercial List proceedings, when read together with Part C of the Commercial List Statement. It seems to me that Katrina rightly there recognises that, in fact and in substance, she advances the contentions that she says she advances, which on their face have the character of complaints and of claims as to Lee's conduct, and that she will seek to utilise the mechanism of a statutory derivative action in order to do so. I return to the significance of that matter below.
Part C of Katrina's Commercial List Statement then sets out the "Plaintiffs' Contentions" at some length. The Plaintiffs there claim that Lee owed a statutory duty of care and diligence under s 180 of the Corporations Act to MGPL and broadly corresponding general law duties; identify steps taken by Lee in respect of the Lendlease Transaction; and plead that, in causing MGPL to enter into the Lendlease Transaction, Lee breached his statutory and general law duties, MGPL has suffered loss and damage and Lee is liable to compensate MGPL for its loss under s 1317H of the Corporations Act or by an order for damages under the general law. I will return to the question of any evidentiary basis for the claim for loss and damage below.
As I noted above, it seems to me that there is force in Dr Higgins' contention that the release in cl 11.1(a) of the Settlement Deed does not prevent the commencement of the proceedings, since Katrina did not have capacity to release and did not purport to release any claim that MGPL may have against Lee, as distinct from any claim that she had against Lee by that clause. However, it seems to me plain that the commencement of the proceedings by Katrina, although she seeks leave to bring them in MGPL's name and on its behalf, breached and their continuance continues to breach cl 11.1(b) of the Settlement Deed, both as a matter of the substance of the claims made and as a matter of the proper understanding of the nature of a statutory derivative action. As I noted above, by cl 11.1(b) of the Settlement Deed, Katrina agreed not to make, take or institute any "Claim" that she has or may have against, relevantly, Lee in his personal capacity or Lee in his capacity as an officer of MGPL. I noted above that the term "Claim" included a "claim" in the general usage of that term or a "complaint" that Katrina had or might have in connection with or arising in any way from, relevantly, "Katrina's Claims" as defined. I noted above that the term "Katrina's Claims" in turn referred to those set out in the Keller Document, and that document contained multiple complaints about the sale of the MDP Land and the Balance Land to Lendlease, including express complaints that the sale of the MDP Land was at an undervalue and the sale of the Balance Land was on long term arrangements with no upside. The same complaints are sought to be brought in these proceedings.
Katrina's response to the operation of the undertaking not to make or institute such a claim under cl 11.1(b) of the Settlement Deed is that the proceedings are sought to be brought in MGPL's name and on its behalf. It seems to me that that proposition is no answer to the operation of the undertaking, because, as a matter of substance, the claims brought in these proceedings are a "Claim" (as defined) that Katrina has or may have against Lee, although they are also properly characterised as a claim that she seeks to bring in MGPL's name and on its behalf. That is apparent, as a matter of substance, where Katrina herself articulated the claims in that way in setting out the "Nature of Dispute" in the Commercial List Statement, where (as I noted above) "Katrina contends" that the Lendlease Transaction was entered into at an undervalue; that Lee breached his directors' duty of care and skill under s 180 of the Act and that, as a consequence of entering into the Lendlease Transaction, MGPL had suffered loss and damage in a sum to be quantified. It seems to me that "Katrina's conten[tions]" to that effect constitute a "claim" or a "complaint" directed against Lee that he had acted in that manner and caused that loss to MGPL, notwithstanding that Katrina would not, as a matter of corporate law, be able to pursue that claim or complaint to a successful outcome without obtaining leave to bring derivative proceedings in MGPL's name. That is also apparent, as a matter of substance, where Katrina, rather than MGPL by any corporate decision or decision by Lee as its governing director, has formulated and seeks to advance the claims made in the Commercial List Statement, although she can only do so in MGPL's name.
It also seems to me that that conclusion is consistent with a proper understanding of the nature of derivative proceedings brought under ss 236-237 of the Corporations Act. Section 236 relevantly provides that a person (here, Katrina) brings the proceedings on behalf of the company (here, MGPL). The proposition that a statutory derivative action is brought in a plaintiff's personal capacity, although also "on behalf of" the relevant company, is consistent with Santow J's observations as to the nature of such an action in Keyrate Pty Ltd v Hamarc Pty Ltd (2001) 38 ACSR 396; [2001] NSWSC 491 at [18]-[19]. I have not neglected Dr Higgins' submissions as to that case and I recognise that that case addressed procedural issues in respect of the constitution of derivative claims. However, I read Santow J's observations as directed to the character of the statutory derivative action, and those observations are consistent with Campbell JA's observations as to the nature of such an action in Oates above at [58]-[65] and [115]ff and with Austin J's similar observations in Gerard Cassegrain & Co Pty Ltd v Cassegrain [2010] NSWSC 91 at [124].
Dr Higgins accepts that if (as I have found) the substantive claim is here brought in breach of cl 11.1(b) of the Settlement Deed, then a serious question to be tried would not be established against Lee for the purposes of s 237 of the Act and leave would not be granted to Katrina to commence the proceedings against Lee. I would decline leave under ss 236-237 of the Act on that basis, and also on the further bases noted below.
It is relatively easy to satisfy this requirement if an application is made by a current shareholder who has more than a token shareholding and the derivative action seeks recovery of property so that the value of the applicant's shares would be increased, but Katrina does not fall within that category: Swansson at [38]; Re Gladstone Pacific Nickel Ltd (2011) 86 ACSR 432; [2011] NSWSC 1235 ("Gladstone Pacific Nickel") at [58]; Mathews Capital Partners Pty Limited v Coal of Queensland Holdings Limited [2012] NSWSC 462.
Katrina also refers to the formulation of the elements necessary to establish good faith in Re Lotus Property Fund No 8 Pty Ltd [2020] NSWSC 1349 at [75]-[76], where Stevenson J observed that:
"An enquiry as to whether, in these circumstances, [the plaintiff] is acting in good faith involves consideration of these questions:
(a) Does [the plaintiff] honestly believe that [the company] has a good cause of action against [the defendant] with reasonable prospects of success?;
(b) Does [the plaintiff] honestly believe that it is in the best interests of [the company] to bring the proceedings?;
(c) Is [the plaintiff] seeking to bring these proceedings for a collateral purpose or to obtain "some advantage for which the action is not designed".
It is not necessary that [the plaintiff] actually depose to having the beliefs to which I have referred. These matters can be inferred from the nature and circumstances of the case and from the diligence with which [the plaintiff] has sought to assert a desire to bring the proceedings in question."
I read these elements as aspects of establishing good faith, and not as excluding a wider inquiry as to the existence or non-existence of good faith in respect of the proceedings.
Katrina submits that it may be inferred that she honestly believes that MGPL has good causes of action with reasonable prospects of success "given the potential millions of dollars in losses suffered by [MGPL]". I cannot draw that inference, given the absence of credible evidence that MGPL has suffered loss in respect of the transaction. Katrina also contends that "she has cogently articulated the bases for her concern" that the Lendlease Transaction was entered into at a significant undervalue, but that proposition is also undermined by the absence of cogent evidence that that was the case. Katrina relies on her undertaking offered to indemnify MGPL as to costs to establish her good faith.
Katrina fairly acknowledged (in paragraph 23 of her opening submissions) that she "has, for a number of years, held concerns about the value to MGPL of the [Lendlease] Transaction" and acknowledged that the proceedings were only commenced on the eve of the possible expiry of the limitation periods for the asserted causes of action. The fact that those concerns have existed for many years highlights the issues in respect of her good faith in delaying the commencement of these proceedings until after the settlement of the other proceedings, in which she had obtained releases of the claims against her. In opening submissions, Katrina seeks to put that matter in its best light, submitting that:
"[Katrina] refrained from agitating the matters the subject of these proceedings, at least from the perspective of MGPL, during the negotiations that culminated in the execution of the Settlement Deed. She adopted that course in order to ensure that those negotiations did not fail. This was entirely reasonable, not least because it might have served to avoid further disputation, if not further litigation, in relation to the estate of the late Lady Dorothy Macarthur-Onslow."
The latter justification does not sit particularly comfortably with the fact that Katrina's "refraining" from agitating those matters was calculated to preserve the ability to promote, rather than avoid, further litigation in respect of these proceedings.
Mr Studdy submits that the factors identified in the case law as to whether good faith is established are not exhaustive, and the applicant must affirmatively establish that it is acting in good faith to the Court's satisfaction: Chahwan above at [69], [81]-[83]. Mr Studdy also submits that Katrina is not acting in good faith in seeking to bring the claim on MGPL's behalf, where she seeks leave as a former director of MGPL and ceased to hold that office in February 2004, over 17 years ago. Mr Studdy also submits, citing Swansson, that Katrina must establish that she would suffer a real and substantive injury if the proceedings are not permitted, and that must be connected with her status as a former director so that the derivative action is reasonably capable of addressing the injury. Dr Higgins fairly accepts that Katrina's claims must be connected with Katrina's former status, since otherwise the standing requirement would operate in an arbitrary fashion, where persons with otherwise identical interests would or would not be permitted to bring a derivative action, depending upon whether they had once been a director of a company many years before. Mr Studdy submits, and I accept, that Katrina has little real interest in the continued "good management" of MGPL, more than 17 years after she was removed as a director, although she plainly has the same interest in its economic affairs as any other person who is a beneficiary or potential beneficiary of the Mount Gilead Trust, who would not be entitled to bring a derivative claim on that basis.
Mr Studdy also submits that Katrina seeks to advance her own economic interests over the interests of MGPL as a whole in bringing the claim. I do not consider it necessary to address that submission, given the findings that I have reached on other grounds. I also do not find it necessary to address Mr Studdy's further submission that Katrina brings the proceedings by way of a "private vendetta" against Lee and not in good faith, and that the history of disputes between Katrina and Lee tends against Katrina establishing "good faith". I recognise that derivative actions are not limited to "only a plaintiff who feels goodwill towards the defendant": Power v Ekstein [2010] NSWSC 137; (2010) 77 ACSR 302 at [100]. Mr Studdy also submits that Katrina's good faith is undermined by her approach to the releases given in the Settlement Deed, and that:
"To the extent that the Court does not hold that Katrina is precluded from bringing this application by operation of the Settlement Deed, the Court would readily infer that Katrina did not disclose her intention to bring these proceedings because she wanted to have the advantage of the Settlement Deed and bring these proceedings. It may be inferred that settlement may not have been readily achieved if she foreshadowed the bringing of this claim, or that any settlement would have included express releases given by MGPL. This is not consistent with good faith."
I will assume, without deciding, that Katrina has a subjective belief in the merits of the claims, where she was not cross-examined and the contrary was not put to her, although it seems to me that a reasonable person in her position would recognise that there is currently no reasonable basis for that belief, which turns on a hope that evidence that has not presently obtained may emerge which establishes that her concerns are well-founded. However, I am not persuaded that the good faith requirement is satisfied in respect of the claims against Lee, where Katrina has not been a director of MGPL for many years; she does not have any shareholding in MGPL, and any benefit she will obtain from the proceedings is only as a beneficiary of a trust which would indirectly benefit from an increase in the consideration paid to acquire the Mount Gilead property and the consequential value of the shares in MGPL; and the proceedings were commenced and are continued in breach of her obligations under cl 11.1(b) of the Settlement Deed in respect of the claims against Lee. I would have reached the same finding in respect of the claims against other Defendants, so far as they have been joined to proceedings brought and continued in breach of that obligation, had they put a submission that I should do so.
I have referred above to the authorities which indicate that the test for a serious question to be tried is a "relatively low threshold": Swansson at [25]; Gladstone Pacific Nickel Ltd at [56]; The App Shop Pty Ltd v Jalal Brothers Pty Ltd [2019] NSWSC 490 at [29]. An application of this character does not involve a consideration of the underlying merits of the proposed litigation, except to the extent that it is necessary to determine whether there is a serious question to be tried and it will not generally be appropriate for the Court to attempt to resolve disputed questions of fact in such an application: Swansson at [25]; Re Gladstone Pacific Nickel at [56]; Huang v Wang above at [60]: Re Legal Practice Management Group Pty Ltd above at [94].
The need for evidence to establish the factual basis of a serious question to be tried was noted in Charlton v Baber (2003) 47 ACSR 31; [2003] NSWSC 745, where Barrett J held that a serious question to be tried in respect of a breach of directors' duties was not established, where an assertion of loans on uncommercial terms and without adequate security was not supported by evidence of the terms of the loans. The need for evidence to support such claims was also emphasised by Gilmour J in Vinciguerra v MG Corrosion Consultants Pty Ltd above at [141], approved in Hannon v Doyle (2011) 82 ACSR 259; [2011] NSWSC 10 at [48].
Whether a serious question to be tried is established in respect of the claim against Lee
Mr Studdy addressed the question whether there is a serious question to be tried against Lee relatively briefly and observes, in opening submissions, that:
"It is accepted that the matters raised in the Commercial List Statement are likely to raise disputed questions of fact. Lee has not adduced evidence on the application. It is for Katrina to establish her entitlement for leave … Lee will respond substantively to the matters which are put against him at an appropriate time, in the event that leave is granted."
Mr Studdy accepts that limitation issues are a matter of defence which need not be addressed in determining whether a serious question to be tried is established. I treat those matters as matters of defence, and not as excluding a serious question to be tried or having the result that the claims are not in the best interests of MGPL, had that otherwise been established: Re Legal Practice Management Group Pty Ltd at [98].
Mr Studdy relies on the operation of the Settlement Deed and contends (as I have held above) that it prevents Katrina from bringing the proceedings and therefore excludes a serious question to be tried. In advancing that submission, Mr Studdy contends Katrina brings the claim on behalf of MGPL as representative and in her personal capacity, and I have addressed that question above. My findings as to the effect of the Settlement Deed have the result that Katrina cannot establish a serious question to be tried against Lee.
Whether a serious question to be tried is established in respect of the claim against Mr Martin or OMP
I now turn to the matters raised in Katrina's claims against Mr Martin and OMP. In her Commercial List Statement, she pleads that Mr Martin is an experienced real estate professional and refers to his involvement, in 1990, 2003 and 2004 in earlier proposals relating to the Mount Gilead property and to his having served as a director of MGPL from November 2004 until August 2011 (Commercial List Statement [30]-[34]). It appears those matters should be understood as background facts to the claim brought against Mr Martin, which commences with the claim (Commercial List Statement [35]) that:
"In about 2014, Lee engaged [Mr Martin] or, alternatively, [Mr Martin] and [OMP], to advise MGPL and represent it in relation to Lee's proposal to rezone and sell Mount Gilead (Martin Retainer)."
The Commercial List Statement then pleads that Mr Martin, or alternatively Mr Martin and OMP, undertook the Martin Retainer (as defined) for reward and it was a term of that retainer that they would exercise reasonable care and skill in the discharge of that retainer (Commercial List Statement [36]-[37]). The claim depends upon the existence of the claimed retainer. Paragraph 38 then pleads that, further or alternatively, Mr Martin or alternatively Mr Martin and OMP owed a duty to MGPL at general law to exercise reasonable care and skill in the discharge of the Martin Retainer (Commercial List Statement [38]). That pleading is not an independent claim in negligence, because it also depends upon the existence of the Martin Retainer (as defined).
The Commercial List Statement then pleads that Mr Martin and OMP advised MGPL as to certain steps taken by it, some of which relate to the Australand Transaction and some to the Lendlease Transaction; that Mr Martin and OMP should have known certain matters, including that the Lendlease Transaction "constituted an agreement to grant [Lendlease] an option to acquire the MDP Land and the Balance Land for a significant undervalue"; and, critically, that:
"[Mr Martin] or, alternatively, [Mr Martin] and [OMP]:
(a) Failed to advise MGPL to undertake an expression of interest campaign or other similar public marketing process before entering into the [Lendlease] Transaction;
(b) Failed to negotiate a price with [Lendlease] which represented the highest price a willing but not anxious buyer in the position of [Lendlease] would have been prepared to pay for the MDP Land and the Balance Land."
Paragraph 42 of the Commercial List Statement pleads that Mr Martin, or alternatively Mr Martin and OMP, failed to exercise reasonable care and skill in the discharge of the Martin Retainer, and therefore depends upon the existence of that retainer, and paragraph 43 pleads loss and damage, particularised in the same manner as the claim for loss and damage pleaded against Lee.
Ms Horvath, with whom Mr Sharma appears for Mr Martin, opposes the grant of leave in respect of the claim against him on the basis that no serious question to be tried is established for the purposes of s 237(2)(d) of the Act. Ms Horvath points out that Katrina has not identified any material fact to support the allegation that Mr Martin, in a personal capacity, took the steps referred to in the Commercial List Statement, whether in respect of the Australand Transaction (as to which no complaint is in any event made) or the Lendlease Transaction. Ms Horvath also raises a question whether it is alleged that Lee or MGPL had retained Mr Martin, although I infer that the latter must be alleged, since there would otherwise be no point in seeking leave to bring a derivative claim on MGPL's behalf against him.
Ms Horvath submits, and I accept, that a prima facie case of a retainer between MGPL and Mr Martin in his personal capacity, which gave rise to a duty of care and skill, cannot be established where no evidence is led or identified to support that allegation. Ms Horvath also points out that, although it is alleged that Mr Martin, or Mr Martin and OMP, undertook the Martin Retainer (as defined) for reward, there is no evidence to suggest that Mr Martin was personally remunerated by MGPL, whereas there is evidence that OMP was to be remunerated by MGPL. Ms Horvath also points to Katrina's affidavit evidence, which refers to Mr Martin having given advice since 1990, but does not advance a claim that he did so in his personal capacity rather than as a director or representative of his former employers and subsequently OMP. Ms Horvath also points out, and I accept, that none of the documents to which Katrina has referred supports an allegation that Mr Martin personally was providing services, as distinct from his former employers or OMP doing so. She submits that the fact that the significant meetings were attended not only by Mr Martin but also by Mr Anderson, another director of OMP, suggests that OMP rather than Mr Martin personally was engaged in the transaction. Ms Horvath submits, and I accept, that there is not sufficient evidence to establish, even on a prima facie basis, a retainer between MGPL and Mr Martin, so that Mr Martin owed MGPL a duty of care and skill in the discharge of that retainer, or that Mr Martin breached that retainer or that duty so as to cause loss and damage to MGPL.
Mr Pike, with whom Mr Dooley appears for OMP, also submits that no serious question to be tried is established as to the claim against OMP. He submits that the agreement between OMP and MGPL was directed only to the rezoning of the MDP Land and did not encompass selling activities or anything in respect of the Balance Land; that it cannot seriously be contended that OMP failed to exercise reasonable care and skill, where MGPL asked JLL to advise on a public marketing campaign, in advance of an open market sale, and JLL provided that advice; that there is no basis for the complaint that OMP failed to negotiate a price with Lendlease equal to market value, where there is no evidence of the market value of the land or that what was paid by Lendlease was less than that value; that there is no evidence of causation, where JLL had given advice to MGPL in respect of a public marketing campaign; and that there is no evidence that MGPL had suffered loss.
Mr Pike submits that the agreement between OMP and MGPL, as documented by the Land Management Agreement, was only directed to the rezoning of the land and did not encompass a sale of the land. I will assume, without deciding, that a serious question to be tried may be established as to an extension of that retainer, by conduct, so far as OMP subsequently appears to have taken steps directed towards the sale of both the MDP Land and the Balance Land. Mr Pike emphasises that Katrina leads no evidence as to the market value of the MDP Land and the Balance Land at the time of the Lendlease Transaction, or at any time, and that it is impossible to answer the question what she, or MGPL in proceedings brought by her on its behalf, contends the value of that land to be. Mr Pike also submits that the evidence of the advice given by JLL indicates that MGPL was advised to engage in a public marketing process (or, I interpolate, at least as to the possibility of such a process) and obviously decided to do so, and there is no evidence that any further advice by OMP (or, I interpolate, JLL) in that regard would have resulted in any change to MGPL's decision.
Dr Higgins responds that Mr Martin's and OMP's (and also JLL's) submissions invite the Court to "venture deeply" into the merits of MGPL's claims against them. I do not accept that submission, where all those submissions invite me to do is to determine, consistent with the approach adopted in Charlton v Baber above and in Vinciguerra v MG Corrosion Consultants Pty Ltd above, whether there is a sufficient evidentiary basis to establish a serious question to be tried against those parties, as s 237(2)(d) of the Act requires. Dr Higgins also submits that factual disputes exist as to various matters, but a factual dispute does not arise merely because Katrina advances an allegation without evidence of substance to support it.
Dr Higgins also questions how OMP can deny any involvement in communicating with potential purchasers of Mount Gilead, including Lendlease, or as to advising MGPL on the sale of that property, where there is evidence of discussions as to the sale process in the minutes of the PCG to which I have referred above. However, OMP does not deny that involvement, but instead submits, as I noted above, that Katrina has not led sufficient evidence to establish the existence of the Martin Retainer (as defined) or that it was breached, or that MGPL suffered any loss in consequence. Dr Higgins also points to OMP's denial that it was retained in respect of the sale of Mount Gilead, to support the contention that Mr Martin must have been retained in a personal capacity; but that does not follow, because OMP's position is that it was retained in respect of the rezoning of the MDP Land and also engaged in other activities, that (as I noted above) there is no evidence to support the claim that that was under the Martin Retainer, or that it breached any duty in respect of such a retainer, or that loss was suffered by MGPL. A recognition of the lack of evidence as to those matters does not involve an entry into the merits of the claim to any substantial extent.
It seems to me that a serious question to be tried is not established in respect of the claims against Mr Martin and OMP. As I have noted above, the allegations against Mr Martin, as to existence of the duty and as to breach, depend upon establishing the "Martin Retainer", relevantly defined as an engagement between MGPL and Mr Martin personally. There is no evidence of substance to support a claim that MGPL had retained Mr Martin personally and the limited evidence is inconsistent with that claim, so far as it suggests that MGPL had retained OMP, at least in respect of the matters set out in the Land Management Agreement, rather than Mr Martin in his personal capacity. As I noted above, the Commercial List Statement does not bring any allegation of negligence against Mr Martin that is independent of the claim under the Martin Retainer as defined. The content of any duty owed by OMP is also speculative, where (in paragraph 12 of her opening submissions) Katrina's submissions do not rise higher than that OMP "may have" provided advisory services to MGPL in relation to the Lendlease Transaction.
I will assume, without deciding, that a serious question to be tried arises that Mr Martin (had he been retained) or OMP had failed to advise MGPL to undertake an expression of interest campaign or other similar public marketing process before entering into the Lendlease Transaction. Although the documents that have been tendered disclose many references by OMP to the possibility of undertaking an expression of interest campaign or other public marketing process before entering into that transaction, I accept that it may be arguable that they fall short of express advice that that course should be taken.
Even on that assumption, it seems to me that the evidence does not establish a serious question to be tried that that amounted to a failure to exercise reasonable care and skill in the discharge of the Martin Retainer (as defined) because, even if that retainer were established, the evidence does not establish a real prospect that an expression of interest campaign or similar public marketing process would have led to a better result than the entry into the Lendlease Transaction. Katrina does not lead any evidence, beyond her subjective view, that Lendlease's offer was not such that it should properly have been accepted by MGPL, to the exclusion of an expression of interest or public sale process. I note, although it is not necessary to my findings, that the case law has also recognised, including in the context of sales by receivers, that it should not be assumed that the market value for a property can only be achieved by a public sale campaign and not by a private sale. In Swers v Central Mortgage Registry of Australia Pty Ltd [1989] ANZ Conv R 169; (1988) NSW Conv R 55-407, Cohen J pointed to the advantages of a sale of a property by private treaty, where a receiver had accepted an offer at market price and avoided delay, advertising expenses and a real estate agent's commission. The same approach was adopted in Florgale Uniforms Pty Ltd (recs and mgrs apptd) (in liq) v Orders (2004) 11 VR 54; (2004) 51 ACSR 699; [2004] VSC 65 at [443]; Vasiliou v Westpac Banking Corporation (2007) 19 VR 229; [2007] VSCA 113 at [54]; and in Re Australasian Barrister Chambers Pty Ltd (in liq) [2017] NSWSC 597 at [50]ff, appeal dismissed in Re Australasian Barrister Chambers Pty Ltd (in liq) [2017] NSWCA 117.
There is also not sufficient evidence to establish a serious question to be tried as to Katrina's alternative claim that Mr Martin or OMP failed to negotiate a price with Lendlease which represented the highest price a willing but not anxious buyer in the position of Lendlease would have been prepared to pay for the MDP Land and the Balance Land, as pleaded in paragraph 41(b) of the Commercial List Statement, or that any failure to do so involved any exercise of reasonable care and skill in the discharge of the Martin Retainer, if that retainer was established. That allegation would at least require some evidence that a willing but not anxious buyer, purchasing one or two substantial parcels of land at very large prices, would have paid more than Lendlease agreed to pay, and there is no evidence to support that proposition.
Whether a serious question to be tried is established in respect of the claim against JLL
The claim against JLL has a similar structure to the claims against Mr Martin and OMP. There is limited evidence as to JLL's role in the matters which gave rise to the proceedings. Katrina's evidence (Katrina 9.4.21 [8]) is that JLL:
"is an international real estate firm and has, since about 1990, advised MGPL in relation to a number of proposals to see Mount Gilead to a developer (including the Australand and [Lendlease] transactions) …"
I have referred above to Katrina's evidence as to JLL's involvement from 1990 and in 2003 and to JLL's presentation to the PCG comprising Lee and representatives of OMP on 4 April 2014, and to the PCG's decision that JLL would prepare a disposal timetable for consideration by MGPL, including an information memorandum in anticipation of an open market sale after rezoning.
Ms Mirzabegian, who appears for JLL, indicated that JLL made no submissions as to whether the criteria in ss 237(2)(a)-(c) and (e) of the Act were satisfied, and she did not seek to adopt other parties' submissions in that respect. She otherwise advances similar submissions to Mr Pike, and submits that Katrina has not established that there is a serious question to be tried within the meaning of s 237(2)(d) of the Act in relation to the claims against JLL and that the Court therefore cannot grant leave under s 237 of the Act against JLL.
Ms Mirzabegian pointed to suggested defects in Katrina's pleaded case, such that the claim disclosed no reasonable cause of action or was embarrassing and liable to be struck out under r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW). I do not consider it necessary to decide whether the Court would decline leave to bring derivative proceedings on the basis of such defects, which could be cured by amendment, as distinct from defects in the substance of the claim.
Ms Mirzabegian also submits that Katrina has led no evidence as to the existence of a contract between JLL and MGPL, although I recognise that JLL appears to have provided some advice to MGPL in respect of the sale process, to which I have referred in the chronology above. Ms Mirzabegian submits, and I accept, that the evidence led by Katrina against JLL is so limited that the Court "cannot come to grips in any satisfactory way with the question whether there is a serious question to be tried" as to any breach of contract by JLL, adopting the language of Barrett J in Charlton v Baber above at [56]. Ms Mirzabegian also submits that no serious question to be tried arises in respect of the negligence case, and again points to the absence of evidence to support that case. I accept that submission, at least on the basis that the pleaded negligence case against JLL is limited to a failure to exercise reasonable care and skill "in the discharge of the JLL Retainer" and cannot be established where a serious question to be tried as to the existence of that retainer has not been established. I have addressed and not accepted Dr Higgins' response that JLL's submissions invite the Court to "venture deeply" into the merits of MGPL's claims against it above.
It seems to me that a serious question to be tried is not established in respect of the claim against JLL, because of the limited evidence as to JLL's role, quite apart from the fact that JLL in fact advised OMP (which was in turn acting for MGPL at least in respect of the rezoning) as to the benefits of an expression of interest campaign or other similar public marketing process before MGPL entered into the Lendlease Transaction. There is no evidence that JLL negotiated with Lendlease, so as to have any opportunity to negotiate a price with it at a particular level; or that the price which was in fact negotiated by MGPL with Lendlease did not represent the highest price a reasonable developer would have been prepared to pay for the MDP Land and the Balance Land (as pleaded in Commercial List Statement [52(b)]); or that MGPL has suffered loss and damage, a matter to which I return below.
Prospect of recovery of statutory damages or compensation
I will deal below with the prospect of MGPL recovering damages or compensation in the proceedings, which is best addressed in determining whether they are in MGPL's best interests, consistent with the view that I took in Re Global Advanced Metals Pty Ltd above. If it were necessary for Katrina to establish a serious question to be tried that MGPL could recover substantial damages or compensation, it seems to me that she has not done so for the reasons noted below.
In opening submissions, Katrina submits, robustly, that there can be no suggestion that the prosecution of these proceedings by her is other than in MGPL's best interests. She submits, first, that a proceeding to preserve MGPL's opportunity to recover losses flowing from breaches of duty by its director is in MGPL's best interests; but that turns on whether there is an evidentiary basis for the claimed losses. Second, Katrina submits that at least two of the Defendants have sufficient assets that the proceedings would not be a likely exercise in futility; that proposition does not assist given the lack of evidence to establish the claims against them or the losses claimed. Third, Katrina submits that the continuation of the proceedings is unlikely to disrupt MGPL's business or affairs, but does not address any disruption to MGPL's contractual or business relationship with Lendlease that may arise from the commencement of the proceedings. Fourth, she refers to her offer of an indemnity for MGPL's costs and any costs awarded against it; and, fifth, submits that, "assuming that there is value in MGPL's claims, Katrina is the only person who is likely to bring the proceedings on its behalf." That proposition rises no higher than the assumption on which it depends.
Mr Studdy responds that granting leave is not in MGPL's best interests and emphasises that MGPL's business, on the evidence, has extended beyond farming operations to deriving option fees in respect of the potential development of the Mount Gilead property, and that Katrina's evidence does not address the potential impact of the litigation on the Lendlease Transaction or MGPL's ability to dispose of the property to an alternative developer, presumably if Lendlease does not exercise the remaining option, where MGPL is party to the proposed proceeding. Mr Pike submits that, even if there is a serious question to be tried, the absence of evidence that MGPL has suffered loss has the result that the Court would not be satisfied that it is in MGPL's best interests to bring the claim against OMP: Re Global Advanced Metals Pty Ltd above at [121]-[144].
I am not persuaded that Katrina has shown a sufficient evidentiary basis for the claim that MGPL has suffered loss or damage to establish that the proceedings are in MGPL's best interests. The pleaded claim that MGPL has suffered loss and damage in respect of the Lendlease Transaction is particularised, in respect of the claim against Lee and the claims against all other Defendants, as follows:
"(i) So far as the MDP Land is concerned, the loss and damage is measured by the extend to which the consideration payable by [Lendlease is at an undervalue compared with the price that would have been obtained for the MDP Land had the property been marketed pursuant to an expression of interest campaign or a similar public marketing process.
(ii) So far as the Balance Land is concerned, the loss and damage comprises the chance lost to MGPL to have secured, in 2014 or 2015, a higher price for the Balance Land than was agreed with Australand, by means of an expression of interest campaign or a similar public marketing process, discounted to take into account the possibility that [Lendlease] may not have exercised its option to acquire the Balance Land."
So far as the former calculation is concerned, Katrina leads no evidence that the price that would be payable by Lendlease is in fact at an undervalue compared with the price that would have been obtained by an expression of interest campaign or a similar public marketing process. In opening submissions, Katrina contended that the purchase price per hectare under the Lendlease Transaction was comparable to that under the Australand Transaction, although she contended that the median house price in Sydney's outer ring, including the Campbelltown area, had risen by about 50% and it was "likely" that the value of development land in that outer ring had also increased significantly. That proposition had three evidentiary difficulties. First, little weight can be given to the purchase price that would be paid under a transaction that did not proceed, and there is also little evidence of the other terms of the transactions, so as to allow a comparison between them. Second, the evidence on which Katrina relied to support the increase of median house prices in Sydney's "outer ring" was not admissible and was not admitted; and, in any case, it is not apparent why it follows from the proposition that the price of suburban houses in Sydney's "outer ring" has risen that the price of large development sites, in rural areas pending rezoning, has risen to the same extent or at all. I am content to proceed, as Katrina submits I should, on the basis that I can take judicial notice of the fact that prices of suburban houses in Sydney or parts of Sydney have risen over the last 10 or so years; however, that fact does not seem to me to create any rational basis for an inference that the amount that a developer would pay for substantial parcels of undeveloped land would have increased proportionately or at all over the same period, where there is no particular reason to think that the regulatory requirements for development, the risks involved in development and the costs involved in development have not also increased over that period.
Katrina also relies on the fact that steps had been taken after the Australand Transaction to procure the rezoning of the MDP Land to facilitate the development of that land, although those steps were not complete when Lendlease acquired the relevant options; that the Lendlease Transaction contemplated a longer period for payment of the purchase price than was provided for under the Australand Transaction; and that the Lendlease Transaction imposed various burdens on the homestead lot at Mount Gilead and its surrounding curtilage. Katrina did not seek to quantify any value attributable to those matters and, in any event, they also partly depend on a comparison with the Australand Transaction which did not proceed to completion.
So far as the Balance Land is concerned, Katrina formulates the claim for damages in respect of the Balance Land as a claim for the loss of opportunity to enter a more favourable transaction. In order to establish such a case, Katrina would need to demonstrate, on MGPL's behalf, that there was a "substantial, and not merely speculative, prospect" that the relevant benefit could have been acquired: Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; (1990) 92 ALR 545; [1990] HCA 20; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; (1991) 104 ALR 1; [1991] HCA 54; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355-356; (1994) 120 ALR 16; [1994] HCA 4; Badenach v Calvert (2016) 257 CLR 440; (2016) 331 ALR 48; [2016] HCA 18 at [38]-[41]. Katrina has not shown how she or MGPL could establish that substantial prospect, or that a case brought on that basis has sufficient prospects of success that it is in the best interests of MGPL to bring it.
For completeness, I note that the question whether Katrina offers an adequate indemnity in favour of MGPL in respect of the costs to which it would be exposed if the proceedings were unsuccessful is also relevant to whether the proceedings are in MGPL's best interests. Such an indemnity is a means of addressing the risk of prejudice to MGPL from the commencement of the proceedings, should they ultimately prove to be unsuccessful, and the risk of exposure to costs and expenses of litigation including costs orders: Power v Ekstein above at [108]; Cassegrain v Gerard Cassegrain & Co Pty Ltd (2008) 68 ACSR 132; [2008] NSWSC 976; Vinciguerra v MG Corrosion Consultants Pty Ltd above; Re Legal Practice Management Group Pty Ltd above. I proceed on the basis that the indemnity offered by Katrina would have been sufficient for that purpose, if I were otherwise satisfied that leave should be granted for the proceedings.
For these reasons, I am also not satisfied that Katrina has established that it is in MGPL's best interests to bring the proceedings.