Reale v Duncan Reale Pty Ltd [2005] NSWSC 174 | Case summary

1190/05 MARIA RITA REALE v DUNCAN REALE PTY LIMITED & ANOR JUDGMENT 1 HIS HONOUR: These are proceedings arising from a marriage between a wife named Reale and a husband named Duncan and from companies through which they conducted a business. The wife and husband beneficially own one share each in, and are directors of, Duncan Reale Pty Ltd, the defendant company ("Duncan Reale"). Duncan Reale owns Cameda Investments Pty Limited ("Cameda"), of which both wife and husband are directors. Cameda owns Box IT (Australia) Pty Ltd ("Box IT"), which conducts the principal business. The husband is the sole director of Box IT. 2 The husband and wife have fallen out. Proceedings have been commenced in the Family Court of Australia in Brisbane in which orders as to property settlement are sought, including orders relating to the companies. There is an interlocutory application in the Family Court, but it is not returnable until 9 March 2005. This includes applications for injunctive relief against the wife relating to the affairs of the companies. 3 In the meantime, Box IT has gone into voluntary administration and there are doubts as to its solvency. Prior to the marital breakdown, the wife participated fully in the affairs of the companies. Though not a director of Box IT, she was its financial controller and a director of its controlling shareholder, Cameda. The evidence shows that decisions relating to the companies, including Box IT, were not taken without her assent. Since the marital breakdown she has been excluded from the conduct of the companies. 4 The originating process by the wife in these proceedings makes applications in two areas. The first is an application under s 237 of the Corporations Act 2001 (Cth) ("the CA") for leave to commence proceedings in the name of Duncan Reale against Cameda (and the husband) for relief arising from oppression. If that leave is granted, Duncan Reale will seek appointment of an interim receiver or provisional liquidator of Cameda. The other application relates to the registration of shares in Duncan Reale in the name of a new trustee for the wife, whom the wife has appointed. 5 The husband seeks the dismissal or stay of these proceedings on the ground that all these matters must or ought to be left to the Family Court. Initially both sides seemed to take the view that this turned on whether or not the proceedings are a matrimonial cause within the meaning of s 4 of the Family Law Act 1975 (Cth). Reference was made to cases such as the decision of Waddell J in Reynolds v Reynolds [1977] 2 NSWLR 295. This view completely ignored the provisions of the Jurisdiction of Courts (Cross Vesting) Act 1987 (Cth) ("the CVA"). The CVA by s 4(1) invests this Court with all the jurisdiction of the Family Court (with limited exceptions). That this Court has jurisdiction, even if the proceedings constitute a matrimonial cause or matrimonial causes, is undoubted. The only real question is whether it ought exercise the jurisdiction it has concurrently with the Family Court. If it should not, it may transfer the proceedings to the Family Court (s 5(1) of the CVA), stay the proceedings or simply decline to exercise its jurisdiction. 6 In general terms, where the real issues are between husband and wife only, this Court should leave the exercise of jurisdiction to the Family Court, including any interlocutory matters. However, there are features which take the present case out of the ordinary, at least in relation to the s 237 application. The voluntary administration of Box IT has supervened. The interests of Cameda, its parent, need to be attended to in relation to the voluntary administration (which encompasses the question as to whether Box IT should go on trading and whether anyone, including Cameda, will furnish it with funds). These matters must be dealt with in February the only possibly relevant application to the Family Court is not even returnable until March. I should add that it is far from clear that any relevant application would be dealt with on the first return date. Furthermore, some doubt has been cast as to whether procedural requirements of the Family Court have been fulfilled which would permit those matters to be dealt with by way of interlocutory application in that Court at that time. Also, the voluntary administration involves the interests of other people, including creditors and employees of Box IT. 7 In these circumstances, it seems to me that a case is made out for the exercise of jurisdiction by this Court, in so far as that appears necessary. So far as the vesting of the Duncan Reale shares in a new trustee is concerned, I do not see any urgency at the moment. That question can, at least at present, abide the attention of the Family Court. I shall not, however, stay or dismiss the claims in that regard - I simply decline to exercise jurisdiction and grant any relief in relation to them at present. 8 So far as concerns the s 237 application, the situation appears to me to be different. To the degree that a case for leave is made out, it is my view that the urgency of the situation in Cameda, by reason of the voluntary administration of Box IT, justifies immediate action by this Court. If oppression proceedings are instituted on behalf of Duncan Reale, an application can be made for a receiver or provisional liquidator, who can take steps or make decisions as appropriate on behalf of Cameda and in its interests. I do not propose to deal with that interlocutory application but I do propose, if a case for leave be made out, to grant leave for commencement of proceedings so that the Corporations List Judge may deal with that application as appropriate as the situation in the voluntary administration develops. 9 Has then a case for leave been made out? There is no dispute that the plaintiff is a person authorised by s 236 of the CA to bring an application under s 237. Section 237(2) provides: "(2) The Court must grant the application if it is satisfied that:

(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." 10 As to (a), it is clear that the company will not itself bring the proceedings. As to (b), it is not seriously contended that the plaintiff is not acting in good faith and I find that she is. Paragraph (d) requires that there is a serious question to be tried. This is contested. If I find that there is, it seems to me that it is reasonably clear in terms of par (c) that it is in the best interests of the company that the plaintiff be granted leave. 11 It is plain that the expression "serious question to be tried" was adopted by the legislature out of the jurisprudence relating to applications for interlocutory injunctive relief and should be assessed in much the same way as in proceedings of that sort, albeit the proceedings for leave are juristically final proceedings: see per Barrett J in Goozee v Graphic World Group Holdings Pty Ltd (2002) 170 FLR 451 at [33] and [34] and per Palmer J in Swansson v R A Pratt Properties Pty Ltd (2002) 42 ACSR 313 at [24] and [25]. Both Judges emphasised that leave should not lightly be granted because of the consequences to the company. Barrett J found that a serious question to be tried in proposed oppression proceedings had not been established where there was general evidence about the affairs of a group of companies, but not sufficient specifics concerning the proposed defendant. 12 Here it is submitted that, in effect, there is no evidence of deadlock or relevant deadlock in Cameda, because there is no specific evidence of disagreement over decisions relating to that company. I regard this approach as totally unrealistic where the evidence shows the complete exclusion of the plaintiff from the affairs of all the companies and that the husband and wife will not speak to each other and cannot deal with each other about the affairs of the companies. In these circumstances, I am of the view that there are serious questions to be tried as to the deadlock of Cameda and oppression in relation to its affairs. 13 In these circumstances, I propose to grant leave to the plaintiff to file an originating process on behalf of Duncan Reale containing prayers 1, 2, 4, 5 and 6 in the proposed originating process attached to the originating process in these proceedings. I decline to grant leave to include prayer 3. In respect of that claim, I find that the matters in s 237(2)(c) and (d) are not made out in the requisite way. 14 I shall grant leave to make the originating process and the proposed interlocutory process returnable before the Corporations List Judge. The interlocutory application may be moved before his Honour as necessary. If it appears that urgent action is necessary on behalf of the company in a time frame to which the Family Court is not responding, it will be open to his Honour to grant that relief if deemed appropriate. Whether the principal proceedings are to be tried in this Court or the substance of them dealt with in proceedings in the Family Court, is a question that can await another day. 15 The costs of the proceedings to date are reserved.

Reale v Duncan Reale Pty Ltd

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