Plaintiff v SULAKHAN SINGH DHILLON & ORS

1. Mr Bath has filed and relies upon the following materials:

(a) Originating Process dated 22 August 2025;

(b) affidavits of Mr Bath sworn 22 August 2025 (First Bath Affidavit)[2] and 17 December 2025 (Second Bath Affidavit);[3]

(c) interlocutory process dated 17 December 2025;

(d) submissions dated 12 March 2026; and

(e) draft proposed orders.

1. The defendants have filed and rely upon the following materials:

(a) affidavit of Mr Dhillon sworn 25 February 2026 (Dhillon Affidavit);[4]

(b) affidavit of Ellno Niranjanee Ratnayake sworn 4 March 2026;[5] and

(c) submissions dated 11 March 2026.

1. The following facts have been drawn from the affidavits and filed documents.
2. On 22 November 2018, the Company was incorporated with Mr Bath as director.
3. On 28 February 2019, Mr Dhillon was appointed as director.
4. The Company's primary business involved installing residential fences.
5. On 30 November 2019, Mr Bath and Mr Dhillon entered into a contract of sale as original contracting parties for the purchase of 5 Silver Wattle Crescent, Mickleham, described in certificate title volume 10492 folio 693 (Property) for the price of $1,175,000 (Contract). Mr Bath says that the intention was that the Property be used by the Company for its business and also to be developed into a childcare and medical centre.
6. Mr Bath deposes that the Company paid the deposit, but due to the financier not being willing to extend finance to the Company, the purchase was completed in the names of Mr Bath and Mr Dhillon, and their wives, Mrs Bath and Mrs Sran. He claims that the Company made mortgage payments after settlement. Mr Dhillon disputes the extent of the Company's (net) contributions towards the Property.
7. From around May 2020, Mr and Mrs Bath have resided in the property. Mr Dhillon claims they have not paid rent as agreed.
8. On or around 28 May 2021, Mr Bath, Mrs Bath, Mr Dhillon and Mrs Sran were registered as joint proprietors of the Property.
9. In around February 2023, the business and personal relationship between Mr Bath and Mr Dhillon broke down.
10. According to Mr Dhillon, in around April 2023, Mr Bath and Mr Dhillon, by agreement, decided to wind down the operations of the Company due to the strained relationship between the directors.
11. On 16 December 2024, Mr Dhillon and Mrs Sran commenced proceedings in VCAT against Mr Bath and Mrs Bath seeking orders under s 225 of the Property Law Act 1958 (Vic) for the sale of the Property and for an accounting in respect of unpaid rent (VCAT Proceeding).
12. On 26 August 2025, Mr Bath filed the Originating Process in which he raised four claims, respectively:

(a) against Mr Dhillon for breach of his directors' duties;

(b) against Mrs Sran and Blue Star for accessory liability in respect of Mr Dhillon's breaches of duty;

(c) that the Property is held on a constructive, or alternatively resulting trust for the Company; and

(d) that Mr Dhillon's conduct was conduct of the Company's affairs that was contrary to the members' interests or oppressive to, unfairly prejudicial to, or unfairly discriminatory against Mr Bath.

1. On 2 February 2026, Connock J made orders that the Interlocutory Process be referred to an Associate Judge for hearing and determination pursuant to r 77.05 of the Rules and, if required, also pursuant to r 16.1(3) of the Supreme Court (Corporations) Rules 2023 (Vic).

(1) A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:

(a) the person is:

(i) a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or

(ii) an officer or former officer of the company; and

(b) the person is acting with leave granted under section 237.

(2) Proceedings brought on behalf of a company must be brought in the company's name.

(3) The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished.

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

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

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

(b) the applicant is acting in good faith; and

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

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

(e) either:

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

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

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

(i) by the company against a third party; or

(ii) by a third party against the company; and

(i) not to bring the proceedings; or

(ii) not to defend the proceedings; or

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

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

(i) acted in good faith for a proper purpose; and

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

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

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

1. The principles governing the grant of leave under s 237(2) of the Act are as follows:

(a) an application for leave is an application for final and not interlocutory relief;[6]

(b) the onus lies on the applicant to satisfy each of the five requirements in s 237(2) of the Act on the balance of probabilities.[7] The five requirements are not mutually exclusive.[8] If the five requirements are established, the Court must grant leave. Otherwise the court must refuse leave.[9] Hence, the grant of leave is not discretionary;

(c) while it has been said that leave should not be granted 'lightly', this may mean no more than that the Court must be satisfied of each of the five requirements;[10]

(d) the requirement that it is probable the company will not itself bring the proceedings is usually apparent where the defendant in the proposed proceeding is in control of or supported by the board.[11] The issue is also usually clear cut in cases where the board is deadlocked. The issue is less clear cut in other cases, and where there is no definitive refusal to take proceedings after a specific request to do so has been made;[12]

(e) the requirement of good faith is usually satisfied where the proceedings 'are genuinely brought to vindicate a right that the claimant honestly believes he or she had'.[13] Proof of good faith may be established by inferences to be drawn from objective evidence. Sworn statements as to an applicant's state of mind are generally of limited probative value. They may be disbelieved if no reasonable person in the deponent's circumstances would hold that belief;[14]

(f) two features of the good faith enquiry are the interrelated matters of: first, the applicant's honest belief that the action exists and has reasonable prospects of success, and second, whether the applicant has a collateral purpose that would amount to an abuse of process.[15] The good faith enquiry is not limited to these matters.

(g) the requirement that the action is in the best interests of the company is directed to a company's separate and independent welfare.[16] It requires satisfaction of a 'high threshold',[17] albeit on the balance of probabilities. That requirement may be contrasted with other tests that might have been used such as 'may be, appears to be, or is likely to be'.[18] Where the company is solvent, it will predominantly reflect the interests of the shareholders.[19] The requirement recognises the serious nature of an order requiring a company to engage in litigation against its will or that of its board;[20]

(h) in considering the 'best interests of the company', the Court is required to take into account all relevant circumstances.[21] It is generally necessary for some evidence to be given as to the nature of the company's operations and its business, as well as whether there are other means of achieving redress.[22] Relevant circumstances include the cost and funding of the proposed proceedings, the existence of an indemnity in favour of the company in respect of the costs of the proceedings,[23] the likely recovery of the proceeding if it is successful,[24] and whether the proceeding is likely to be of any practical benefit to the company.[25] There is a divergence in the authorities on the question of whether a consideration of prospects of success is relevant to an evaluation of what is in the best interests of the company;[26]

(i) the requirement that the proposed proceeding raises a serious question to be tried involves the same test as is used for an interlocutory injunction.[27] In the context of interlocutory injunctions, it has been held that what is sufficient depends upon 'the nature of the rights [the applicant] asserts and the practical consequences likely to flow from the order he seeks'.[28] The threshold for a grant of leave is relatively low. The application for leave 'is not the occasion to conduct a trial of the merits'.[29] Save for determining whether there is a serious question to be tried, the Court is not required to resolve factual disputes;[30] and

(j) while the five requirements are mandatory, leave may be granted on terms.[31]

1. The first requirement is whether it is probable that the company will not itself bring the proceedings, or properly take responsibility for them or for the steps in them.
2. There is no dispute that this requirement is satisfied on the facts. It is plainly satisfied on the facts of the present case where the board is deadlocked.

1. Mr Bath deposes that he is acting in good faith. While not irrelevant, this assertion is of limited probative value. The assertion of good faith is tested against the question of whether a reasonable person in his circumstances would hold that belief, and whether there is a collateral purpose in bringing the proceedings.
2. Mr Bath deposes the primary purpose of the proceeding is to protect and enforce the rights of the Company. He says any benefits that flow to him personally as a result of the proceeding will be indirectly as a shareholder.
3. Mr Dhillon says that the proposed proceedings are not brought on their merit, but as a tactic to delay the sale of the Property. He also says Mr Bath is acting out of pure personal interest in relation to his ongoing rent free occupation of the Property, and rent free use of it as a childcare business by his wife.
4. The fact the proposed proceedings might put into issue matters that are before VCAT and further the contention that the issues in VCAT are part of a single justiciable federal controversy, that would then be required to be litigated in a court exercising federal jurisdiction,[32] does not of itself impugn Mr Bath's motives in seeking leave. These matters may be characterised as the consequence of the proposed proceedings without necessarily impugning his motivation for bringing them.
5. I am not satisfied on the (untested) evidence before me that Mr Bath has a collateral purpose as alleged by Mr Dhillon. While Mr Bath's use of a property without paying rent raises questions, such property which on his own case is beneficially owned by the (deadlocked) Company, it is not sufficient to dispel the objective evidence to the effect that he seeks to bring proceedings to vindicate rights which he considers are available to the Company. The proposed proceedings concern both the allegation of breach of directors' duties and the allegation concerning beneficial ownership of the Property. The claims and the particulars of them appear to be sufficiently articulated so as to give support to Mr Bath's assertion of good faith. Animosity between Mr Bath and Mr Dhillon does not compel the conclusion that there has been a failure to act in good faith by Mr Bath in bringing these proceedings. It is an unfortunate feature of litigation of the type before the court.
6. I am satisfied on the evidence that Mr Bath is acting in good faith.

Whether grant of leave in best interests of company

1. In answering the question of whether it is in the best interests of the Company that leave be granted, it is necessary to briefly summarise the claims Mr Bath seeks leave to cause the Company to bring. He claims that Mr Dhillon breached his fiduciary duties and 'embarked on a scheme designed to divert the Company's assets and business undertakings to Blue Star' by:

(a) procuring the registration of Blue Star in around June 2023, a company which conducts 'business specialising in the construction and erection of fences';

(b) facilitating a transfer of the Company's business phone number to his personal WhatsApp facility;

(c) diverting the Company's customers to Blue Star;

(d) instructing the Company's customers not to cooperate with Brodie Debt Collection Services to recover outstanding debts owed;

(e) creating entries in the Company's books with purported loans on no proper factual basis;

(f) abandoning his role in the Company; and

(g) asserting personal rights of ownership in relation to the Company's assets.

1. The claims are set out in the proposed statement of claim (PSOC). Those claims are:

(a) against Mr Dhillon for breach of director's duties;

(b) against Blue Star for accessory liability in respect of Mr Dhillon's breaches of duty;

(c) that the Property is held on a common intention constructive, or alternatively resulting trust for the Company; and

(d) that Mr Dhillon's conduct was conduct of the Company's affairs that was contrary to the members' interests and oppressive to, unfairly prejudicial to, or unfairly discriminatory against Mr Bath.

1. The relief sought in the PSOC on behalf of the Company includes:

(a) an order under 1317H of the Act requiring Mr Dhillon to compensate the Company for his contraventions of ss 181 and 182 of the Act;

(b) further or in the alternative, in respect of the breaches of fiduciary duties, orders and directions for an account of profits, alternatively, orders for repayment of damages or equitable compensation;

(c) similar orders against Blue Star and Mrs Sran; and

(d) a declaration that the Property is held by its registered proprietors on a constructive or resulting trust for the Company.

1. In Fiduciary Ltd v Morningstar Research Pty Ltd,[33] Austin J discussed the question of 'best interests of a company' that was a joint venture vehicle in circumstances where there was an allegation that one of the joint venturers had caused the company loss:

It seems to me that, where the company in question is a joint-venture vehicle and one of the venturers alleges that the other has acted unlawfully causing the company loss, it will usually be appropriate to allow the complaining venturer to bring proceedings in the company's name against the other venturer and its representatives on the board, even though there are no other shareholding interests than those of the litigants and the effect of success of the litigation will be indirectly to benefit the complaining venturer proportionately to its shareholding.

1. The benefit to the Company in bringing the proceedings is that it will have the opportunity to recover compensation or damages in respect of claims that would not otherwise be prosecuted by it. Similarly, the Company will have the opportunity to prosecute its claim to beneficial ownership of the Property.
2. Further, it is desirable in the present case that the personal claim (by Mr Bath in respect of oppression), and the proposed Company claim, be litigated together because there is substantial overlap in the substratum of facts relevant to both proceedings.[34] Despite this, the personal causes of action and those available to the Company are different, such that it could not necessarily be said that the personal claims (in respect of oppression) would provide Mr Bath with another means of achieving redress.
3. It is difficult to assess the extent of the benefit to the company in litigating the claims in respect of breach of directors' duties, but that is not unusual at an early stage of proceedings in respect of diversion of corporate opportunity. I consider the prosecution of these matters through litigation with attendant obligations of disclosure and discovery, which would itself be of significant benefit to the Company. Having regard to the particulars of breach of duty that have been given (and verified in the affidavits of Mr Bath), I am satisfied that the claims are more than speculative.
4. A significant matter that bears upon the question of the best interest of the Company is that Mr Bath will, of necessity (because the Company is deadlocked), fund the litigation himself on behalf of the Company. Further, because he is personally a party to the proceeding, he will be amenable to a costs order in the event that it is unsuccessful. Despite this, I would require, as a condition of the grant of leave, that Mr Bath undertake to pay the Company's costs of bringing the proceedings and indemnify it in respect of adverse costs orders.
5. In the premises, I am satisfied it is in the best interests of the Company that Mr Bath be granted leave to bring the claims set out in the PSOC.

Whether proposed proceeding raises serious question to be tried

1. The fourth requirement is that the proposed proceeding raises a serious question to be tried. As noted above, the test is the same as is used for an interlocutory injunction and has a relatively low threshold.
2. In the First Bath Affidavit, Mr Bath deposes in a summary way to a number of the factual matters that form the basis of his allegation of breach of directors' duties. He deposes to a total breakdown of both business and personal relationship with Mr Dhillon as follows:[35]

(a) Claimed assets of the Company as his own, including a Toro Dingo and Isuzu Truck.

(b) With the Second Defendant, established the Third Defendant, being a fencing business, that competed with the Company...

(c) Diverted the telephone number of the Company on WhatsApp to himself.

(d) Utilised the goodwill, client lists and equipment of the Company in the business of the Third Defendant.

(e) Pressured the debt collector of the Company not to pursue a significant debt that was owed to the Company.

(f) Advised a creditor of the Company not to pay the Company for a completed project.

(g) Advised a major supplier of the Company that it should no longer supply the Company.

(h) Frustrated the attempts of the Company to complete its development of the Property into a childcare centre and medical centre; and

(i) In conjunction with the Second Defendant, issued VCAT Proceeding No. BP 2265/2024 in which it seeks partition and sale of the Property ('the VCAT Proceeding').

1. In the Second Bath Affidavit, Mr Bath deposes that the substance of the dispute and allegations alleged by him were described in the PSOC. He deposes that those allegations are 'true and correct and ... supported by contemporaneous documents, financial records, correspondence and dealings which [he had] seen or participated in'. In this way, Mr Bath has sought to verify the allegations in the PSOC.
2. Mr Dhillon contends that there is no serious question to be tried on the question of breach of duty 'after the Company agreed to cease trading (and the allegations are in any event denied as the Company did not have ongoing fencing contracts)'. This claim turns on Mr Dhillon's evidence that 'both parties agreed to cooperate in finalising the run-off work committed to, prior to April/May 2023'. While that evidence is not specifically denied by Mr Bath, it is inconsistent with the thrust of Mr Bath's case of diversion of corporate opportunity as pleaded and verified by him.
3. For the purpose of the application for leave, I am satisfied Mr Bath has demonstrated that the Company has a serious question to be tried in respect of the claims of breach of duty and accessory liability.
4. The pleaded case in respect of the Company's claim to a common intention constructive trust[36] in respect of the Property has significant deficiencies. First, the alleged conversation evidencing the 'common intention' was between Mr Bath and Mr Dhillon. The pleading does not refer to either the Company, one of the parties to the common intention, or Mrs Bath or Mrs Sran - the other legal owners of the Property. According to para [34] of the PSOC, Mrs Bath or Mrs Sran were registered as proprietors 'in compliance with the lender's condition for advancing funds for settlement of the Property's purchase'. The weak inference to be drawn from that allegation is that they agreed to lend their names but did not seek to hold any beneficial ownership of the property.[37]
5. Mr Dhillon raises a number of other matters which he contends demonstrate that there is no serious question to be tried with respect to the claims that the Company is the beneficial owner of the Property. While the matters raised highlight weaknesses in Mr Bath's case, I do not consider those matters either individually, or cumulatively, lead to the conclusion that there is no serious question to be tried. For example, the Company's failure to caveat is not decisive in circumstances where the directors and their wives were the legal owners. Further, the allegation of 'No significant net payments ... made by the Company towards the purchase or maintenance of the Property' is consistent with the shareholders' funding the purchase of a Company asset. I also note that there is disputed evidence as to what payment the Company made in respect of the Property and the extent to which they were reimbursed.
6. Further, the Dhillon Affidavit annexes financial statements for FY2019, FY2020, FY2021 and FY2022. Those financial statements do not record the Property as an asset in either FY2021 or FY2022, noting that Mr Bath alleges that settlement occurred on 28 May 2021. The financial statements were prepared by Smart Business Advisors Pty Ltd. They are not signed by either Mr Bath or Mr Dhillon. Mr Bath does not address the financial accounts in his material.
7. While there are significant pleading deficiencies, and significant evidentiary obstacles to overcome, I am satisfied, given the relatively low threshold, that Mr Bath has adduced sufficient evidence in respect of the beneficial ownership of the Property, such that there is a serious question to be tried. Any weaknesses in the pleading will need to be addressed before the PSOC is in a state that is ready for filing.
8. In the premises, I am satisfied there is a serious question to be tried in respect of the claims set out in the PSOC.

Whether notice given or otherwise appropriate to grant leave

1. The final requirement is that, at least 14 days prior to making the application, the applicant gave written notice to the company of its intention to apply for leave and of the reasons for applying, or it is otherwise appropriate to grant leave even though s 237(2)(e)(i) of the Act is not satisfied.
2. While notice was given to Mr Dhillon's solicitor, and not the Company, the defendants did not seriously contest this issue. In those circumstances, I am satisfied it would be appropriate to grant leave even if there was a technical deficiency in service.

1. In circumstances where a company was used as the vehicle for the pursuit of commercial interests of parties who are now at odds with each other, and the plaintiff seeks to combine derivative claims with personal claims arising from substantially the same facts, it may be appropriate to require the plaintiff to indemnify the company in respect of costs it may incur.[38]
2. As was the case in Orico, Mr Bath has indicated that he will undertake to pay the Company's costs of bringing the proceeding and indemnify it in respect of adverse costs orders. The undertaking will be qualified as being subject to further order so that it can be adjusted at a later date, if appropriate.

1. Subject to Mr Bath giving a satisfactory undertaking regarding the Company's costs and any adverse costs orders, I shall grant leave to Mr Bath pursuant to s 237 of the Act to bring the claims set out in the PSOC on behalf of the Company. I will make orders in terms of the Interlocutory Process, save for orders 7, 8 and 9. I will ask the parties to confer regarding the undertakings, a precise form of order, and the question of costs. The use of the word 'substantial' in relation to the PSOC will facilitate revision of that document to address the issues raised above. My preliminary view is that costs should be reserved, but I will list that question for a short hearing if either party seeks a different order.

[6] Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313, [24] (Swansson).

[8] Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 245 ALR 780, [68] (Chahwan).

[9] Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534, [27].

[10] Fiduciary Ltd v Morningstar Research Pty Ltd [2005] NSWSC 442; (2005) 53 ACSR 732, [15].

[13] Gillespie v Gillespie [2025] NSWCA 24; (2025) 422 ALR 224, [29].

[17] Re Stirloch Constructions Pty Ltd [2024] VSC 322, [59].

[18] Swansson, 320 [55] (emphasis in original).

[19] Chahwan, [88]; cf Charlton v Baber [2003] NSWSC 745; (2003) 47 ACSR 31, [53].

[23] Re Fishinthenet Investments Pty Ltd and Coastal Waters Seafood Pty Ltd [2014] NSWSC 260, [31].

[24] Pentridge Village Pty Ltd (In Liq) v Capital Finance Australia Ltd [2018] VSC 633; (2018) 58 VR 1, [256].

[25] Ragless v IPA Holdings Pty Ltd (in liquidation) [2008] SASC 90; (2008) 65 ACSR 700, [35].

[26] Cf Huang v Wang [2016] NSWCA 164; (2016) 114 ACSR 586, [60] and Blakeney v Blakeney [2016] WASCA 76; (2016) 113 ACSR 398, [57].

[28] Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618, 62. See also Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, [71] (Gummow and Hayne JJ).

[29] Atalanta Investments Pty Ltd v Kalgoorlie Projects Pty Ltd [2025] FCA 607, [24].

[30] Ehsman v Nutectime International Pty Ltd [2006] NSWSC 887; (2006) 58 ACSR 705, [6].

[31] Carpenter v Pioneer Park Pty Ltd (in liq) [2004] NSWSC 1007; (2004) 211 ALR 457, [31].

[32] Thurin v Krongold Constructions (Aust) Pty Ltd [2022] VSCA 226; (2022) 73 VR 403, [47]-[48], [57]-[63].

[33] [2005] NSWSC 442; (2005) 53 ACSR 732, [47].

[34] Cf Re Orico Australia Pty Ltd [2019] VSC 313, [69] (Orico).

[36] See Sivritas v Sivritas [2008] VSC 580; (2008) 23 VR 349, [128]-[134] (Kyrou J).

[37] Cf Pattison v Dupla BC900462 (12 March 1996).