Showtime Management Australia Pty Ltd v Showtime Presents Pty Ltd

Supreme Court of NSW|2008-06-05|Before: Austin J

CITATION : Showtime Management Australia Pty Ltd v Showtime Presents Pty Ltd [2008] NSWSC 618

DECISION : Leave granted to bring proceedings on behalf of the first defendant company, nunc pro tunc.

CATCHWORDS : CORPORATIONS - statutory derivative action - allegation of breach of fiduciary duty said to be continuing after termination of company's business - whether court satisfied under s 237(2) with respect to good faith, best interests of the company and serious question to be tried - relevant considerations

LEGISLATION CITED : Corporations Act 2001 (Cth), ss 236, 237

Chahwan v Euphoric Pty Ltd [2008] NSWCA 52 Chan v Zacharia (1984) 154 CLR 178 Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1 Mesenberg v Cord Industrial Recruiters (1996) 19 ACSR 483 Ragless v IPA Holdings Pty Ltd (in liq) [2008] SASC 90 CASES CITED : Re Nerang Investments Pty Ltd (1985) 9 ACLR 646 Showtime Management Australia Pty Ltd v Showtime Presents Pty Ltd [2008] NSWSC 594 South Johnstone Mill Ltd v Dennis and Scales (2007) 64 ACSR 447 Swansson v R A Pratt Properties Pty Ltd (2002) 42 ACSR 313; [2002] NSWSC 583 United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 Williams v Spautz (1992) 174 CLR 509

Showtime Management Australia Pty Ltd (First Plaintiff/First Cross Defendant/First Respondent) John Edward Van Grinsven (Second Plaintiff/Second Cross Defendant/Second Respondent) PARTIES : Showtime Presents Pty Ltd (First Defendant) RockCity Event Marketing Pty Ltd (Second Defendant/First Cross Claimant) Peter Douglas Anderson (Third Defendant/Second Cross Claimant/Applicant)

COUNSEL : G A Sirtes (Respondents) A G Bell SC with J A Soars (Applicant)

SOLICITORS : Henry Davis York (Respondents) Nicholas Weston Lawyers (Applicant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

1443/08 SHOWTIME MANAGEMENT AUSTRALIA PTY LTD & ANOR V SHOWTIME PRESENTS PTY LTD & ORS JUDGMENT 1 HIS HONOUR: In my reasons for judgment on an interlocutory application, delivered on 13 June 2008 (Showtime Management Australia Pty Ltd v Showtime Presents Pty Ltd [2008] NSWSC 594), I described the background facts of the case as follows:

"1. The first defendant, Showtime Presents Pty Ltd ('the Company'), has been described in submissions as a joint venture company for the Van Grinsven and Anderson interests. The Company is trustee of the Showtime Presents Unit Trust ('the Trust'). The directors and sole equal shareholders of the Company are the second plaintiff/second cross-defendant, Mr Van Grinsven, and the third defendant/second cross-claimant, Mr Anderson. Half of the units in the Trust are owned by Showtime Management Aus Pty Ltd ('SMA'), the first plaintiff/first cross-defendant. Mr Van Grinsven is the director of SMA, and the sole shareholder is his wife. The other half of the units in the Trust is owned by RockCity Event Management Pty Ltd ('REM'), the second defendant/first cross-claimant. The sole director and shareholder of REM is Mr Anderson.

"2. The Company conducted and promoted entertainment events in Australia and abroad, and in particular, tribute concerts for a rock band known as 'Queen'. Its Queen tribute show was marketed in Australia as 'Queen - It's a Kinda Magic', which is referred to in the evidence as 'QIAKM'. The Company has also produced another Queen tribute show called 'Champions of the World' ('CW'). Mr Van Grinsven brought to the business his production and presentation skills and contacts with the cast, and Mr Anderson brought to the business his skills and contacts in promotion and in the accounting aspects of the production. Unfortunately, the relationship between Mr Van Grinsven and Mr Anderson has broken down.

"3. In these proceedings the plaintiffs seek orders for the winding up of the Company on the 'just and equitable' ground. REM and Mr Anderson have brought a cross-claim against the plaintiffs, seeking relief of various kinds on grounds including grounds relating to oppression under the Corporations Act, misappropriation of intellectual property, breach of fiduciary duty and breach of statutory provisions reflecting the general law fiduciary duties of company directors and officers, and accessory liability for breach of fiduciary duty. Mr Anderson has made an application under s 237 of the Corporations Act for leave to bring proceedings on behalf of the Company against each of the plaintiffs for breach of fiduciary and statutory duties and accessory liability." 2 My judgment of 13 June dealt with an interlocutory application to vary some interim orders so as to clarify them and bring the profits of QIAKM's South African tour of May and June 2008 into Australia to be preserved pending determination of the proceedings. The present judgment deals with the application of Mr Anderson and REM under s 237 of the Corporations Act, made in para 2 of their amended interlocutory process filed on 17 April 2008, for an order that Mr Anderson have leave, nunc pro tunc, to pursue on behalf of the Company the causes of action identified in paras 35 to 45 of the cross-claim, and the claims for relief identified in paras 26 to 38 of the prayers for relief in the cross-claim. The application under s 237 of the Corporations Act was heard concurrently with the application for variation of the interlocutory orders. Facts 3 The account of the facts set out below is taken from the evidence of Mr Van Grinsven and Mr Anderson, and from correspondence and documents. The evidence of Mr Van Grinsven and Mr Anderson differs on various points. It is unnecessary, in my view, to resolve any of those differences of evidence for the purposes of the present application, and I shall not do so.

Early dealings between the parties 4 Mr Van Grinsven has been in the entertainment industry for over 22 years, and has worked as a booking management agent, performer and promoter since about 1995, principally in Australia and New Zealand. He has managed such shows as "ABBAsolutely FABBAulous", "Spiced Girls", "Bee Gees Night Fever", "Rocketman -the Elton John Show" and "Elton Joel". Mr Anderson has raised some questions about the quality of Mr Van Grinsven's experience that I need not resolve. 5 Mr Van Grinsven gave evidence that it takes about three months from the commencement of creating a show to the first performance, and during that time he undertakes such tasks as casting, costuming, choreography, set design, sourcing plant and equipment and performance materials, managing direction and performance rehearsals, and negotiating with venues, theatres, overseas promoters and agents. He said he typically spends about $50,000 to set up a new show. This suggests the possibility that the development of a show may give rise to some intellectual property rights. 6 He formed SMA in September 1998. His evidence is that SMA owns all aspects of every show he produces. He says he came up with the concept of QIAKM in about 2000 and in that year he put out a casting call for vocalists, musicians and performers and commenced working on rehearsals and costumes and on creating sets and artworks, and acquiring equipment and props. QIAKM performances commenced in late 2001. The show had successful tours in New Zealand, Western Australia and northern Queensland. 7 Mr Anderson has a Bachelor of Commerce degree and has been the managing director of REM for at least 27 years. REM has five employees. He has promoted Newcastle as a destination for major national and international attractions, working closely with all major Australian-based promoters and overseeing touring attractions to theatres and outdoor winery stages in the Hunter region, including shows by Cher, Elton John, Sting, Bob Dylan and k.d. lang. 8 In late 2002 or early 2003 Mr Anderson approached Mr Van Grinsven, proposing that they should work together to " take [QIAKM] out of club land into major theatres and arenas in Australia" (according to Mr Van Grinsven's first affidavit; Mr Anderson's first affidavit is to similar effect). Mr Van Grinsven said he was attracted by that suggestion because his skills lay in creating and managing acts and promoting in regional markets, and not in promoting in major cities or in the financial aspects of the industry. 9 There were further discussions in Newcastle in June 2003. Mr Anderson has given some detailed evidence in his first affidavit as to what was said, but I need not explore that evidence further on the present occasion. Mr Anderson prepared a short "Initial Letter of Agreement", purporting to be between REM and SMA, and it was signed by Mr Van Grinsven on 17 July 2003. Under the agreement, which was to operate from July to September 2003, REM agreed to be the sole presenter and promoter of a series of concerts in Queensland, New South Wales, Victoria and Tasmania featuring QIAKM, and SMA agreed to deliver the act to the venues nominated by REM, and to supply all production requirements. SMA agreed to ensure that the act would undertake no additional performances in Australia during the period covered by the agreement. REM agreed to make all financial arrangements including advance marketing and venue deposits or payments. Profits were to be shared on an equal basis. 10 According to Mr Anderson, his staff prepared draft budgets for the shows, which included an amount of $1750 per performance as being the performance fee payable to REM to offset its administration costs. He said that draft budgets were provided to Mr Van Grinsven and he gave verbal approval to them on the telephone. 11 Mr Van Grinsven said in his first affidavit that after the joint venture agreement was signed, he effectively handed over control of the accounting and other financial aspects in relation to QIAKM production to Mr Anderson, with whom he had a good relationship at the time. He said that at Mr Anderson's suggestion, he intensively reworked the show to bring it up to a suitable production level for the larger venues, solely at the expense of SMA. Mr Anderson also gave evidence about this, to the effect that when he first saw the QIAKM show in Auckland, he was very critical of it, telling Mr Van Grinsven that it was a very poor show and "not of the standard we could proudly present". He said that later, he saw the first QIAKM show under the Initial Letter of Agreement, performed in Toowoomba, and while the quality of the vocals was better, sound and lighting still left a lot to be desired, and he spoke to Mr Van Grinsven about that problem. They agreed on a method of fixing the problem by hiring equipment from a Sydney-based supplier, but that took a further $5,000 from the bottom line per show. There are differences between the parties about the extent of Mr Anderson's contribution, which I need not resolve. 12 From July to September 2003 QIAKM was performed under the joint venture in various large Australian cities and towns, and receipts from those performances were banked into REM. Mr Van Grinsven received weekly reports and full show settlements. He invoiced all his costs and expenses and REM retained a management fee, and the profits were split 50/50. Mr Van Grinsven said he expressed concern that REM's management fee, $2200 per show, was too high, but his relationship with Mr Anderson remained good. Mr Anderson said REM's fee per show was $1750 at that time.

Further contact after the expiry of the initial joint venture 13 According to both Mr Van Grinsven and Mr Anderson, after September 2003 the parties went their separate ways. Mr Van Grinsven said that on behalf of SMA he entered into separate joint ventures, on different terms, with REM to promote shows called "Debbie Does Dallas The Musical" and "The Pink Floyd Experience". He said that SMA booked QIAKM with other promoters around Australia, not under the joint venture agreement and without any involvement from REM. He said SMA entered into some joint venture agreements with others for QIAKM performances. Mr Anderson said that in 2005 his staff made a record of where the show was performed during 2004. 14 Mr Anderson gave evidence that in December 2003 or January 2004 he noticed that there were QIAKM performances in clubs, and he telephoned Mr Van Grinsven to advise him to reconsider his strategy. In April 2004 Mr Van Grinsven called him to say he had been right about the club performances and to suggest that they look together at doing some more national dates. REM organised some dates for QIAKM shows in 2004 on a show-by-show basis or for group shows. Draft budgets were prepared for each show or group of shows and were approved orally by Mr Van Grinsven. For the 2004 tour, REM's management fee was $2200 per show and was included in the agreed budgets. 15 Mr Anderson said that in July 2004 he suggested to Mr Van Grinsven that they "increase the geography of QIAKM" by entering overseas markets, and Mr Van Grinsven agreed. Mr Anderson contacted some REM contacts and introduced Mr Van Grinsven. Through those contacts, six dates were set up in Canada and some dates were arranged in Singapore. According to Mr Anderson, a draft budget was prepared for each show or group of shows and they were approved by Mr Van Grinsven orally. Profits of the overseas shows were split three ways, between REM, SMA and the overseas promoters. QIAKM's Canadian tour was in September 2004 and the Singapore tour was in January 2005. 16 Mr Anderson said he made arrangements for Peter Freestone, former personal assistant to the late Freddie Mercury of the original QUEEN, to see QIAKM in Singapore, and paid Mr Freestone's airfare. Subsequently Mr Freestone agreed with Mr Anderson and Mr Van Grinsven to lend his name and likeness to publicity to promote the QIAKM show.

Negotiation of the joint venture agreement 17 In about March 2005 Mr Van Grinsven and Mr Anderson had discussions about taking the show to Canada again. According to Mr Anderson, he told Mr Van Grinsven that he had decided not to do all the work that would be necessary to organise another Canadian tour unless he had a proprietary stake in the business that he was helping to build, and that he claimed that the show was a thousand times better than the show Mr Van Grinsven had brought to him. He said he wanted the ownership of the Queen show (meaning QIAKM) to be shared on a 50-50 basis moving forward. He claimed that Mr Van Grinsven agreed. Mr Van Grinsven has not confirmed this evidence and presumably denies it. 18 On 20 April 2005 Mr Anderson sent an e-mail to his accountant, Mr Davidson, copied to Mr Van Grinsven, for advice on structuring their business, one of the terms of which was to be that QIAKM would be developed to a tangible asset that could be sold (Ex A1, page 60). Mr Anderson gave evidence of a meeting he and Mr Van Grinsven had with Mr Davidson on 21 April 2005. He claimed that Mr Davidson said, when outlining a proposal for a corporate and trust structure, that the company would own the act on behalf of the trust. He said Mr Van Grinsven agreed to the structuring proposal. They chose the name "Showtime Presents Pty Ltd". 19 According to Mr Anderson, he and Mr Van Grinsven had a further discussion that day, apparently by telephone, about the functions of their respective companies in the business, about the fee that REM would charge for managing the show, and about the minimum working capital to be retained in the business. He said Mr Van Grinsven authorised him to call Mr Davidson and formalise what they had agreed as a directors' minute. 20 One of the matters that Mr Anderson said they discussed was the following: Anderson: "Just so we are all on the same page here, I am confirming that the intellectual property to Queen It's a Kinda Magic will vest with the new business structure." Van Grinsven: "Yes, that's right." Mr Van Grinsven has not confirmed this evidence and presumably denies it. 21 Mr Anderson said he contacted Melissa Rumble, from Mr Davidson's office, and instructed her to prepare a directors' minute. The evidence (at Ex A1, page 61) includes a minute of the directors of the Company purportedly held on 22 April 2005, recording attendance by Mr Anderson and Mr Van Grinsven and signed by Mr Anderson, containing the following: "It was noted the directors formed this business structure to undertake the development and promotion of the show 'It's a Queens Kinda Magic'. Performances to occur in Australia as well as Overseas. The directors and unit holders agreed:- 1) The show would be managed by Rockcity Event Marketing Pty Ltd and; 2) The intellectual property would vest with this business structure." The remainder of the minute dealt with the REM management fee and retention of minimum working capital. 22 Another version of this minute, almost identical with the one exhibited to Mr Anderson's affidavit, was tendered at the hearing and became Ex A3. The only difference in typescript between Ex A3 and Ex A1 page 61 is that in the typescript of Ex A3 there is typed provision for the signature of the chairman. More importantly, whereas Ex A1 page 61 is a copy document bearing only Mr Anderson's signature, Ex A3 bears Mr Anderson's original signature in blue ink and another signature in black ink, which appears to resemble Mr Van Grinsven's signature on the agreement of 17 July 2003 (though I do not, for the purposes of the present application, make a finding that the signature is Mr Van Grinsven's). 23 Showtime Presents Pty Ltd was incorporated on 22 April 2005, and according to Mr Anderson, the trust deed to set up Showtime Presents Unit Trust was signed shortly afterwards by Mr Van Grinsven and Mr Anderson, as directors of the Company and on behalf of their respective companies, SMA and REM.

The business relationship under the joint venture 24 Mr Van Grinsven gave evidence that after the formation of the Company and the Trust, nothing in the nature of his working relationship with Mr Anderson changed. Mr Anderson continued to run the promotion and financial aspects of the production of QIAKM and Mr Van Grinsven looked after the production and the cast. Mr Van Grinsven said he did not have access to the Company bank accounts but did not need access until the parties fell out in August 2007, as he received weekly updates about the standing of the accounts. 25 There is some detailed evidence in Mr Van Grinsven's first affidavit concerning the respective contributions of SMA and REM to the production of QIAKM during the period from 2005 to August 2007. For present purposes it is sufficient to provide a brief summary. SMA attended to the production and the cast, including paying show production costs and employing cast members. SMA invoiced the Company for these expenses. It also invoiced the Company for a performance fee that included, according to Mr Van Grinsven, payment for the use of SMA's show in the sum of $440 per performance. REM negotiated venue contracts and marketing and promotion on behalf of the Company, and it attended to accounting matters. REM invoiced the Company for management fees and out-of-pocket expenses. Decisions about shows, marketing and strategy were made by Mr Van Grinsven and Mr Anderson jointly and Mr Van Grinsven received weekly reports and full show entitlements. Mr Anderson's evidence about these matters is broadly consistent with, while being more detailed than, Mr Van Grinsven's evidence, although Mr Anderson's evidence tends to downplay the role of Mr Van Grinsven in management and places some emphasis on his own contribution to the business through contacts, for example with Vibe Tribe (see Mr Anderson's first affidavit, paras 30-31). 26 On 6 April 2006 Mr Anderson arranged for the business name "Queen - It's a Kinda Magic" to be registered in New South Wales as the business name of the Company. He gave evidence that he did so with the concurrence of Mr Van Grinsven. 27 In April 2006 Mr Anderson and Mr Van Grinsven were negotiating with an international booking agent, IMG Media. They intended the Company to retain IMG as European and Asian booking agent for QIAKM performances. According to Mr Anderson, IMG required the Company to provide it with a "letter of comfort" concerning the Company's rights with respect to QIAKM. Mr Anderson said he prepared a draft letter based on some e-mails from IMG and he telephoned Mr Van Grinsven and read out the draft, and Mr Van Grinsven agreed to it. He then signed the letter, which is dated 12 April 2006, and sent it to IMG. The letter was addressed, "To whom it may concern" and was on the Company's letterhead. It said that the Company created and owned all exclusive worldwide rights to "the Production" (defined as QIAKM), including the name "Queen It's a Kinda Magic", the website, set design, lighting design, sound design, choreographed movement, cast direction, Peter Freestone's endorsement, and all marketing and merchandising images. 28 The Company entered into an agreement with IMG on 18 May 2006. The agreement stated that the Company as the producer "has and will continue to have at all material times all the necessary rights to present the Show [QIAKM] in the Territory during the Term". 29 The Company applied for and obtained Export Development Grants to assist in funding the export of its business for the years 2004-5 (grant of $50,896 received), 2005-6 (grant of $150,000 received) and 2006-7 (grant of $150,000 received). In applications for the Grants it described its business as "Entertainment Services" and said that its total income for taxation purposes in 2005-6 was $2,465,752, and in 2006-7 $2,431,380. Gross revenue and profits made by the Company during Australian performances of the QIAKM act at theatres is set out in a spreadsheet at tab 9 of Ex A2. 30 Mr Anderson said that in about April or May 2006 he had a conversation with Mr Van Grinsven in which they agreed to look into the question of trademark protection for the QIAKM name. Mr Van Grinsven had already been in touch with Nicholas Weston. It is not clear from the e-mail correspondence exhibited to Mr Anderson's first affidavit whether Mr Weston's retainer was ever signed at that stage. Mr Weston received further instructions, from Mr Anderson on behalf of the Company, in August 2007 in the circumstances recounted below. 31 According to Mr Van Grinsven, the "Champions of the World" show ("CW") was developed by him after a key cast member of QIAKM sustained an injury and he realised it was necessary for QIAKM to have a complete cast of understudies. Mr Van Grinsven put out a casting call and the cast of CW was formed. The cast members are understudies for QIAKM and Mr Van Grinsven said he has also created a show, "Champions of the World", which was performed from 2004 until December 2007. He said SMA has not invoiced the Company for the creation of CW, and that the performance fee charged by SMA for CW was made up solely of artists' fees. Until August 2007 SMA and REM carried out broadly similar functions for CW as they did for QIAKM, although (according to Mr Van Grinsven) REM did no more than to pay SMA's accounts. All funds were banked in the Company's bank account. 32 Mr Anderson gave a strikingly different account of the development of CW. He claimed that around June 2005 he was concerned that, at a time when the Company had substantial financial exposure because of a proposed tour of Canada, an accident to a cast member could jeopardise the entire tour. He said he was also concerned to prevent potential competition in the club market. Mr Anderson said he had a conversation with Mr Van Grinsven who said he was too busy to establish a B cast to play the club market, and that he agreed that Mr Anderson could approach another person, Daniel Stoddart, and build a band around him. It is unnecessary to resolve this conflict of evidence for the present purposes.

Deterioration of the relationship 33 From July 2006 a series of events occurred that led to increasing tension between the parties and the eventual breakdown of their business relationship in August 2007. The problems that arose were about the following matters: · a breach of copyright claim against the Company by a German company, Mayqueen; · disagreements about REM's management fee; · an argument about strategy for 2007; · the promotion of other shows by Mr Van Grinsven, unconnected with QIAKM, under the auspices of the Company. I shall briefly consider the evidence on each of these matters, in turn. 34 On 27 July 2006 a firm of German copyright lawyers wrote to QIAKM at the Company's address (apparently copied to IMG Artists), alleging that a song on the QIAKM homepage, "We are the champions", was recorded by their client Mayqueen GbR, claiming that the Company was in violation of copyright law, demanding cessation by a stipulated date, and demanding €50,000 by way of damages or accounting for profit. Mr Anderson wrote to Mr Van Grinsven about this on 9 August 2006, asking him to provide evidence of the origin of the Company's QIAKM track, and alleging that Mr Van Grinsven had always said that all tracks used in the show were recorded by him. He also gave evidence of a conversation with Mr Van Grinsven in which Mr Van Grinsven told him that the sound engineer with whom he had dealt with no longer in the industry. On 21 August 2006 the German lawyers wrote again, asserting that although their client's recording had been removed from the QIAKM website, there was a QIAKM promotional DVD which contained the recording. The letter reiterated the demand for damages, and required that various steps be taken to desist from using the DVD. Mr Weston was retained to act for the Company. There is in evidence some correspondence from the German lawyers to him. Apparently there was a negotiated settlement of the Mayqueen claim, but the settlement terms are not in evidence. 35 The parties are at odds as to the significance of the Mayqueen issue. Mr Van Grinsven said in his first affidavit that QIAKM had been using some copy that he had supplied, which was owned by a third party. He said this did not come to his attention until the third party, Mayqueen, asserted their ownership of the material. Then, he said, "we agreed and no longer use it". Later correspondence indicates that Mr Anderson regarded this incident as destroying his trust in Mr Van Grinsven. 36 The Company used IMG as its international agent to procure work for QIAKM and co-promote some of its shows. IMG arranged a number of performances in Europe for a fee based on a substantial percentage of gross takings. Mr Anderson said that after paying agency fees for performances in Hamburg and Lisbon, there was little money left to pay the Company's administrative costs. He claimed that in November 2006 he reached arrangement with Mr Van Grinsven under which REM would delay claiming its normal management fees in respect of the Hamburg and Lisbon performances until the Company had sufficient liquidity. Apparently this is one of the grounds for REM's claim for unpaid management fees in the amended cross-claim. 37 Mr Van Grinsven also gave evidence about this renegotiation of REM's fees. He said that in about November 2006, QIAKM was performing in Hamburg, and the show was running at a loss because of the REM management fee. He said that he "realised that the only party making a profit from the joint venture was REM". He said he had a conversation with Mr Anderson in which he complained that the management fee was too high and suggested a nominal fee of $440, to match the fee that, according to him, SMA charged per performance for the use of the show. When Mr Anderson protested that his staff had put lots of hours into the projects, Mr Van Grinsven suggested that such work should be invoiced at an hourly rate at cost price and Mr Anderson said, "That sounds fair". 38 It is unnecessary to resolve this inconsistent evidence for present purposes. However, it appears that from 1 November 2006 the fee paid to REM was reduced to $440 per show and REM invoiced the Company for expenses. Another source of argument about money was that according to Mr Anderson's evidence, Mr Van Grinsven borrowed $50,000 from the Company and did not repay it. 39 Other difficulties emerged between the parties early in 2007, reflected in an e-mail exchange between Mr Anderson and Mr Van Grinsven on 27-28 February 2007, exhibited to Mr Van Grinsven's first affidavit (Ex R1, pages 147-153). The full context is not clear but it appears there was a disagreement about the strategy for 2007 and Mr Van Grinsven's general complaint was that Mr Anderson and REM had "all the say" and that he was doing a lot of work on bookings and yet all decisions were being made by Mr Anderson. On 28 February 2007 Mr Van Grinsven sent an e-mail to Mr Anderson headed "Partnership Dissolve" saying that he felt the partnership was not working and "we need to look at timeline [sic} to finish it". 40 Further trouble developed between the parties in 2006/7 because Mr Van Grinsven promoted other shows, unconnected with QIAKM, under the auspices of the Company. As I understand Mr Van Grinsven's evidence, he said that after the formation of the Company, SMA continued to operate its core business of creating, selling and marketing tribute shows, and he said Mr Anderson participated in other tours under individually negotiated joint ventures. But he said that some other shows were managed through the Company in a fashion similar to the management of QIAKM after the Company's formation. The implication is that he thought this was permissible as part of the joint venture arrangements, but Mr Anderson's evidence is to different effect. He contended that the Company was formed to produce QIAKM, and (later) CW, and that Mr Van Grinsven had no authority to produce other shows under the auspices of the Company. 41 This difference between the venturers came to a head in August 2007, when Mr Anderson complained because he saw a website for an event in Canada which said that the Company was presenting "Hotel California the Eagles Experience", a show not connected with QIAKM. This resulted in a very heated exchange of e-mails between Mr Anderson and Mr Van Grinsven on 8 and 9 August 2007.

Breakdown of the relationship 42 According to Mr Anderson, in a telephone conversation in the first week of August 2007 he arranged with Mr Van Grinsven to have a directors' meeting in Melbourne on 18 or 19 August while QIAKM was playing there. On 15 August he sent Mr Van Grinsven an agenda for the meeting, but by e-mail on the same day Mr Van Grinsven advised that he would not be attending, and then there were further heated e-mails. 43 Mr Anderson sent an e-mail to Mr Van Grinsven on 16 August 2007, which was in a sense the culmination of that heated e-mail exchange (Ex R1, pages 154-157). The e-mail explained the need to inject substantial additional capital into the Company for a proposed US tour and a planned international tour in 2008. It continued by claiming that Mr Van Grinsven was advertising other shows under the banner of "Showtime Presents", and consequently the Company was receiving settlement funds and accounts in respect of those shows. The e-mail said: "Showtime Presents Pty Ltd has its own separate legal identity and has never given permission to any third party to use its name or trade off its reputation." The e-mail suggested that in order to rectify confusion in the marketplace it was necessary to change the name of "Showtime Presents Pty Ltd" to an unassociated name, and suggested "QIAKM Pty Ltd". 44 The e-mail of 16 August was followed by a long letter from Mr Anderson to Mr Van Grinsven on the letterhead of the Company, dated 20 August 2007 (Ex R1, page 158-161). The letter was said to be written for "two grave reasons". One was the "alarming" receipt of settlement funds by the Company from "unassociated" shows with accounts shown in the name of the Company. According to the letter, the problem had been "actioned" by the Company changing its name to "Queen Its a Kinda Magic Pty Ltd". In fact a change of name had not and has not occurred. 45 The second reason for the letter was said to be "the extremely serious and damaging issues to do with the collapse of the staging in Europe of the presentation of QIAKM". The letter recorded that intellectual property rights concerning QIAKM had been represented to be the property of SMA, and that those rights had been transferred to the Company. However, according to the letter, "in very damaging and embarrassing circumstances" copyright was subsequently shown to be held by Mayqueen. The letter referred to the duties of a company director to act honestly and with due care, and invited Mr Van Grinsven to provide a formal response within 7 days as to why he should continue to act as a director of the Company. The letter also sought information, within 7 days, about the employment status of the cast. 46 On the same day as he wrote to Mr Van Grinsven, 20 August 2007, Mr Anderson wrote to Mr Weston on the Company's letterhead, instructing him to register the name "Queen It's a Kinda Magic" as a trademark of the Company, "to ensure all intellectual property is held by [the Company]". Mr Weston responded on 22 August 2007 in a letter addressed to both Mr Anderson and Mr Van Grinsven, seeking instructions to object to certain competing applications. 47 After some shorter e-mail exchanges, Mr Van Grinsven responded to Mr Anderson's letter of 20 August, by e-mail dated 23 August (Ex R1, page 176-7). He said he would not agree to change the Company's name to QIAKM Pty Ltd, although he offered to consider alternative names. He complained that since 7 August 2007 he had not received the weekly financial statements for the Company that had been sent to him regularly for the preceding 12 years, and he asked for the weekly updates to be resumed. He demanded that Mr Anderson cease sending out correspondence on the Company's letterhead unless he approved it in advance. He said he was obtaining legal advice as to the contents of the letter of 20 August and would give a formal response later. 48 On 27 August Henry Davis York, acting for Mr Van Grinsven, replied on his instructions to Mr Anderson's letter of 20 August (Ex R1, pages 181-3). The letter asserted that there had been only two occasions when funds for other shows were incorrectly transferred (in fact to the Canadian company, Showtime Management BC Ltd), that the matter had been completely resolved and the money correctly transferred to SMA, and that no damage had resulted. The letter said that Mr Van Grinsven would consent to a change of name of the Company. 49 As to Mr Anderson's claim that the intellectual property rights to the QIAKM production had been transferred to the Company, the letter denied that any agreement had been entered into for such a transfer, and asserted that under the joint venture arrangements, REM was the presenter and promoter while SMA delivered the QIAKM production and all associated production requirements. The letter denied that the breach of Mayqueen's copyright material had cause irreversible damage, and asserted that the matter had been satisfactorily resolved. The letter claimed that the breach of copyright was an honest mistake on the part of Mr Van Grinsven, and denied any dishonest breach of the Corporations Act. The letter provided information about employees, asserting that they were contractors to SMA. 50 The letter of 27 August is significant because it appears to have represented a kind of joinder of issue between the parties on the question whether there were intellectual property rights with respect to QIAKM that were assigned by SMA to the Company when it was formed. 51 In later correspondence the solicitors contemplated a new joint venture agreement, which was drafted by Mr Weston but not executed. Stumbling blocks included that the draft provided for the assignment of copyright and trademarks to the Company (see Ex R1, pages 217, 219-219A). There were also demands by Henry Davis York that Mr Van Grinsven be given access to the Company's financial information and that weekly financial reports be reinstated, leading to a letter of 14 November 2007 threatening an application to the court (Ex R1, pages 176,188, 220, 221-2). Mr Van Grinsven received some profit and loss spreadsheets and bank statements for the Company on 16 November 2007 (Ex R1, page 227-261), but the negotiations for a new joint venture agreement did not bear fruit. 52 In my reasons for judgment of 13 June 2008 I have dealt with correspondence between the parties about the planning of QIAKM performances, including performances in South Africa (paras [7]ff).

Purported termination of the joint venture 53 On 26 November 2007 Mr Weston wrote to Henry Davis York alleging breaches of fiduciary and contractual duties of good faith said to be owed by Mr Van Grinsven to the Company, and alleging that SMA dishonestly assisted Mr Van Grinsven's breaches of duty. The letter foreshadowed a claim for recovery of profits, compensation or damages and asserted that any profit from performances of QIAKM and CW was held on a constructive trust for the Company. The letter complained that Mr Van Grinsven was taking for himself lucrative engagements, which he was obliged to obtain for the Company. The letter turned to the subject of "Termination" and asserted Mr Anderson and REM were entitled to elect to terminate the joint venture agreement for breach, and then said: "We therefore put you on notice that our client does so elect to terminate the joint venture agreement, having regard to your client's words and conduct." The letter then proceeded to set out a without prejudice offer to resolve the dispute between the parties. 54 On 3 December 2007 Henry Davis York responded, denying that Mr Weston's client had any entitlement to terminate, asserting that the letter of 26 November constituted repudiation of the joint venture agreement, and purporting to provide notice of termination of the agreement. The letter asserted that neither Mr Anderson nor the Company had any further authority to represent Mr Van Grinsven's and SMA's Queen tribute band shows (Ex R1, page 267). 55 On 15 January 2008 Henry Davis York wrote to Mr Weston asserting that as the joint venture had been terminated, the joint venture had no authority to continue to promote or present any future Queen tribute band productions (Ex R1, page 273). The letter alleged that Mr Anderson had agreed to deliver Queen shows in South Africa in May 2008 without Mr Van Grinsven's consent, and asserted that as the joint venture had been terminated, Mr Van Grinsven did not agree to those shows being conducted by the joint venture, but that he was prepared to negotiate for the delivery of the South African shows on the basis of arrangements entirely separate from the joint venture. 56 The letter of 15 January 2008 addressed the question of intellectual property rights in consequence of termination of the joint venture. It asserted that neither the Company nor Mr Anderson had any intellectual property rights relating to Queen tribute band shows, and that Mr Anderson was precluded from using information or intellectual property in relation to the Queen shows on an ongoing basis. The letter proposed an undertaking by Mr Anderson not to operate a Queen tribute band show for two years, and proposed an appointment of a receiver to the Company. 57 Mr Weston responded to the letter 15 January by a facsimile dated 18 January 2008. Apart from denials of various matters, the letter contended that the relationship between the parties was not merely contractual, but was reflected in a corporate and trust structure that had not been terminated. The letter asserted that the intellectual property rights to operate the QIAKM and CW tribute acts were the main trust assets. It contended that the trust had the exclusive right to operate the QIAKM and CW tribute acts and that Mr Van Grinsven could not do so for his own benefit. 58 There was also correspondence in December/January about the Company's cash assets. On 21 December 2007 Henry Davis York wrote to Mr Weston alleging that the Company had substantial cash assets in excess of $500,000 and demanding a copy of a current bank statement for the Company's account and an undertaking that Mr Anderson would make no payments out of the account other than for existing Showtime accounts from third parties in the usual course of business. Although it appears that the demanded bank statement was not provided, on 14 January 2008 Henry Davis York wrote again alleging that Mr Anderson had made unauthorised transfers of Showtime funds to REM, in excess of $45,000, as "management fees". The letter demanded that Mr Anderson repay those amounts and undertake to make no payments out of the Showtime account other than to third parties in the usual course of business (Ex R1, page 271-2). 59 SMA and Mr Van Grinsven commenced the present proceedings by originating process filed on 2 February 2008. The procedural and general history of the dispute thereafter is traced in my judgment of 13 June 2008, paras [17]-[38]. The amended cross-claim 60 Broadly speaking, the amended cross-claim seeks remedies based on contract, the "oppression" provisions of the Corporations Act, the fiduciary duties of joint venturers, the fiduciary and statutory duties of company directors to their company, liability for knowing assistance in a breach of fiduciary duty, and unconscionable conduct under the Trade Practices Act. Some relief is sought on behalf of either or both of Mr Anderson and REM, and some relief is sought on behalf of the Company. Some relief is sought against Mr Van Grinsven and SMA, and to a limited extent relief is sought against the Company. 61 The first substantive part of the amended cross-claim deals with the ownership of intellectual property rights and goodwill in respect of the QIAKM and CW acts under the joint venture arrangements (paras 6-22). It makes allegations about the content of the joint venture agreement made between the parties on 21 April 2005, and then pleads the steps taken by the parties pursuant to the joint venture agreement. The pleading contends (para 13) that pursuant to the joint venture agreement Mr Van Grinsven and/or SMA assigned to the Company as trustee for the Trust all of the rights in respect of the QIAKM act, including accrued goodwill and intellectual property rights. In the alternative, it is pleaded that the rights to the QIAKM act were exclusively licensed to the Company as trustee for the Trust on a perpetual, ongoing and irrevocable basis (para 14). It is pleaded that from about April 2005, the Company as trustee funded further development of the QIAKM act and promoted and managed it, and accordingly acquired goodwill in respect of it (paras 15 and 16). 62 As regards the CW act, it is contended that in about June 2005 Mr Van Grinsven and SMA agreed that the Company as trustee would form a new cast to conduct that act, and thereafter the Company funded the formation, promotion and management of the CW act and acquired goodwill and intellectual property rights in connection with it (paras 17-20), or an exclusive, perpetual, ongoing and irrevocable licence with respect to the CW act (para 21). 63 It is pleaded that in the result, as at 26 November 2007 all rights to both the CW act and the QIAKM act, including intellectual property rights and goodwill, had accrued or vested in the Company as trustee of the Trust (para 22). Note that paras 6-22 are directed to establishing ownership of goodwill and intellectual property rights but not to plead any cause of action. 64 Paras 23-28 deal with allegations of breach of the joint venture agreement. It is pleaded that as of 26 November 2007, Mr Van Grinsven and SMA were in repudiatory breach of the joint venture agreement in various particularised ways. The pleading then deals with various matters relevant to breach and termination of the agreement, and alleges that since about late August 2007 Mr Van Grinsven and SMA have been promoting QIAKM and/or CW or a very similar act for their own benefit without authorisation from the Company (para 27). 65 Paras 29-34 deal with allegations about fiduciary duties of the joint venturers. They plead that Mr Van Grinsven and SMA owed and continue to owe to Mr Anderson and REM various fiduciary duties arising out of the joint venture agreement, and that their duties continued following termination of the joint venture agreement. It is pleaded that the conduct of Mr Van Grinsven and SMA constituted breach of these duties, and in the alternative in the case of SMA, that it was knowingly concerned and involved in Mr Van Grinsven's breach of duties. Consequently it is contended that they are liable to account for any profits received from assets of the joint venture or to pay equitable compensation. 66 Paras 35-45 deal with allegations of breach of fiduciary and statutory duties owed by Mr Van Grinsven to the Company. It is pleaded that Mr Van Grinsven and SMA owed the Company fiduciary duties in relation to the joint venture (para 35), and that those duties continued pending realisation of the joint venture property (para 36). It is alleged that Mr Van Grinsven and SMA are in breach of those duties and that in the case of SMA, it was knowingly concerned in Mr Van Grinsven's breach (paras 37-38). Consequently Mr Van Grinsven and SMA are said to be liable to account or pay equitable compensation. A further or alternative pleading is made against Mr Van Grinsven, that he owed and continues to owe to the Company various specified statutory and general law duties of an officer, and that he has breached those duties (paras 41 and 42), and that SMA is involved in Mr Van Grinsven's contravention of his statutory duties under s 181 and 182, and consequently they are liable to pay compensation to the Company under s 1317H and should be restrained under s 1324 from continuing their breaches of the statutory provisions (paras 43-45). 67 The remainder of the amended cross-claim pleads the case of Mr Anderson and REM for remedies under the "oppression" provisions of the Corporations Act, and their case in equitable estoppel and/or unconscionability at general law and under s 51AA of the Trade Practices Act, and unconscionable conduct under s 51AC of that Act, and REM's claim for management fees. It is unnecessary to deal in detail with these matters. 68 By the amended interlocutory process filed on 17 April 2008, para 2, Mr Anderson seeks leave under s 237 to pursue on behalf of the Company the causes of action identified in paras 35 to 45 of the amended cross-claim. On my reading of the pleading, these are the appropriate paragraphs in respect of which to seek leave under s 237. As I have said, paras 6-22 do not themselves plead any cause of action, but they are relevant to the causes of action pleaded in paras 35 to 45. 69 The amended cross-claim seeks the following declaratory and substantive relief (apart from interest and costs) against Mr Van Grinsven and SMA for the benefit of Mr Anderson and REM : (A1) declarations that SMA and/or Mr Van Grinsven were in repudiatory breach of the joint venture agreement as at 26 November 2007 and that the joint venture agreement was validly terminated by Mr Anderson and REM on or about that date (paras 5 and 6); (A2) a declaration that Mr Van Grinsven and SMA breached their fiduciary duties to their joint venture partners and that they are accordingly liable to account for profits (para 8); (A3) a declaration that Mr Van Grinsven and SMA have engaged in unconscionable conduct contrary to s 51AA or s 51AC of the Trade Practices Act 1974 (Cth) (para 18); (A4) an injunction to restrain Mr Van Grinsven from promoting or conducting the QIAKM or CW acts or similar acts or diverting any business opportunities in relation to Queen tribute acts away from the Company (para 12); (A5) a order under the "oppression" provisions of the Corporations Act (s 233) requiring Mr Van Grinsven or SMA to purchase Mr Anderson's shares in the Company or the units held by REM in the Showtime Presents Unit Trust, or as an alternative, that a receiver be appointed to the Company (paras 13-14); (A6) an order under s 233 restraining SMA and its officers from continuing to engage in oppressive conduct (para 15); (A7) an order for an account of profits (para 19); (A8) further or alternatively, damages (para 20); (A9) further or alternatively, equitable compensation (para 21); (A10) other relief, including under s 87 of the Trade Practices Act (para 22). 70 After seeking leave under s 237 (para 26), the amended cross-claim seeks the following relief against Mr Van Grinsven and SMA for the benefit of the Company, in addition to interest and costs: (B1) a declaration that the Company owns all of the goodwill and intellectual property rights with respect to QIAKM and CW (as particularised in para 22 of the amended cross-claim) (para 27, and also para 3); (B2) a declaration that Mr Van Grinsven and SMA are estopped from denying the Company's ownership of such rights (para 28, and also para 4); (B3) a declaration that Mr Van Grinsven breached his fiduciary duty to the Company as a director, and his statutory duties to the Company as an officer under s 181 and 182 of the Corporations Act (para 29, and also para 7); (B4) a declaration that SMA was involved in Mr Van Grinsven's contraventions of his fiduciary and statutory duties as a director and officer of the Company (para 30); (B5) a declaration that there is a constructive trust over any profits or benefits or business opportunities received by Mr Van Grinsven and/or SMA in relation to the QIAKM or CW acts by way of diverted business opportunities of the Company in breach of their fiduciary duties (para 31, and also para 9); (B6) an injunction to restrain Mr Van Grinsven from promoting or conducting the QIAKM or CW acts or similar acts or diverting any business opportunities in relation to Queen tribute acts away from the Company (para 32); (B7) a compensation order under s 1317H of the Corporations Act (para 33); (B8) an order for damages or, alternatively, an account of profits (para 34); (B9) further or alternatively, equitable compensation (para 35). 71 The amended interlocutory process seeks leave to pursue on behalf of the Company the claims for relief identified in paras 26 to 38 of the prayers for relief in the cross-claim. Note that orders B1 and B2 relate to the ownership of goodwill and intellectual property rights. Presumably those declarations are intended to be prefatory to the substantive claims for relief for breach of fiduciary duty. 72 The amended cross-claim also seeks the following relief against Mr Van Grinsven and SMA for the benefit of the Company: (C1) a declaration that REM is entitled to receive a management fee up to the date of termination of the joint venture agreement, and Mr Van Grinsven and SMA are liable to contribute to any shortfall in the Company's ability to pay that fee (paras 10 and 11); (C2) an order that the Company pay REM the balance of its management fee, and that Mr Van Grinsven and SMA contribute to any shortfall in payment on the part of the Company (paras 16 and 17). Statutory derivative action 73 Section 236 of the Corporations Act 2001 (Cth) permits a person to bring proceedings on behalf of a company if, inter alia, the person is a member or officer of the company, and is acting with leave granted under s 237. Mr Anderson qualifies both as a member and an officer of the Company. 74 Under s 237(1) such a person may apply to the court for leave to bring proceedings. Section 237(2) provides that 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) there is a serious question to be tried; and (e) either the applicant has given at least 14 days written notice to the company of the intention to apply for leave and the reasons for applying, or it is appropriate to grant leave even without such notice. 75 In the present case requirement (a) is plainly satisfied. Mr Van Grinsven and Mr Anderson are equal shareholders and co-directors of the Company and they are completely at loggerheads. Mr Van Grinsven opposes the proceedings and the s 237 application and on his behalf, his solicitors have refused a formal request that the plaintiffs consent to the bringing of the derivative action. 76 The serving of the amended interlocutory process and amended cross-claim are adequate written notice to the Company (given that it comprises only Mr Anderson and Mr Van Grinsven) of Mr Anderson's intention to apply for leave and the reasons for applying. The issues in the application relate to whether requirements (b), (c) and (d) have been satisfied. Good faith 77 It is for the applicant for leave to establish affirmatively to the satisfaction of the court that he or she is acting in good faith: Chahwan v Euphoric Pty Ltd [2008] NSWCA 52, at [69] per Tobias JA (with whom Beazley and Bell JJA agreed). There are two interrelated factors to which the courts will have regard in determining whether the good faith requirement of s 237(2)(b) is satisfied: whether the appellant honestly believes that a good cause of action exists and has a reasonable prospect of success; and whether he or she is seeking to bring the derivative action for such a collateral purpose as would amount to an abuse of process: Swansson v R A Pratt Properties Pty Ltd (2002) 42 ACSR 313; [2002] NSWSC 583, at [36] per Palmer J. The concept of abuse of process involves using the derivative proceedings as a means to obtain some advantage for which the action was not designed or some collateral advantage beyond what the law offers: Williams v Spautz (1992) 174 CLR 509 at 526. 78 However, the expression "good faith" in this context should not be restrictively construed: Chahwan, at [69]. It extends beyond conduct that would constitute an abuse of process: Chahwan, at [81]. An applicant is acting in good faith only if he or she would suffer a real and substantive injury if the derivative action were not permitted, and the injury is dependent on or connected with the applicant's status as a shareholder or director or one of the other persons permitted to seek leave: Chahwan, at [74]. 79 Although Mr Anderson bears the onus of establishing good faith, and has not directly given evidence about his motives or purposes (and has not been asked any questions about these matters in cross-examination), my view is that good faith is clearly established here. It is not a requirement that the applicant deposes to his belief, as long as the court is satisfied that the applicant is acting in good faith on the evidence presented: South Johnstone Mill Ltd v Dennis and Scales (2007) 64 ACSR 447, at [69] per Middleton J. 80 The relationship between Mr Van Grinsven and Mr Anderson with respect to the joint venture broke down over a period of time up to about August 2007. As I have indicated, towards the end of that month correspondence was exchanged that implied serious disagreement on several fronts. There were deep and apparently bitter disagreements about the following matters: ownership of intellectual property rights to QIAKM and CW; Mr Anderson's allegation that Mr Van Grinsven was wrongly using the Company in connection with events he was producing unrelated to QIAKM and CW; Mr Anderson's concern about breach of copyright over the Mayqueen incident and his consequent lack of trust in Mr Van Grinsven; Mr Van Grinsven's allegation of overcharging against Mr Anderson and REM. An impartial observer reading the correspondence up to the end of August would conclude that the commencement of legal proceedings by either or both parties was practically inevitable. 81 If, for the purpose of framing Mr Anderson's complaints in legal terms, one reflects on the nature of the disagreements, and on the relationship between the parties, one is drawn to the conclusion that his complaints are partly about wrongs said to have been done to him as a joint venturer with Mr Van Grinsven, and partly about wrongs said to have been done to the company. In the former category there are alleged wrongs in the nature of breach of contract including denial of contractual entitlements, alleged breaches of fiduciary duty by one joint venturer to another, and alleged unconscionable conduct. In the latter category there is Mr Van Grinsven's denial of the alleged intellectual property rights of the Company, and his diversion of the Company's business opportunity in relation to the South African tour to another corporate entity and perhaps indirectly to himself. 82 That such claims by or on behalf of the Company emerge rationally from an analysis of the relationship of the parties and the ingredients of their dispute points to the conclusion that an applicant who seeks to assert those claims is likely to be acting in good faith. A further indication pointing to the same conclusion is that Mr Anderson's allegation that Mr Van Grinsven committed breaches of fiduciary duties owing by him to the Company was made as early as 26 November 2007, in Mr Weston's letter to Henry Davis York. 83 It was submitted on behalf of Mr Van Grinsven that, in circumstances where he and Mr Anderson are unable to work together, the Company no longer trades, and its utility as a promotional vehicle is nil, the appropriate course is to wind the Company up and appoint a liquidator, and in the meantime, to appoint a provisional liquidator. This proposition is not obviously true, as the Company's business is conducted by it as trustee for the Trust and the originating process does not on its face seek orders for the winding up of the Trust. Additionally, it is not clear from the evidence whether the Company's utility as a promotional vehicle has been eliminated at this stage. The answer to that question seems to depend on whether it has any rights over QIAKM, which according to the evidence is a profitable act, and if it has, whether it could exploit those rights without co-operation from Mr Van Grinsven. 84 In his written submissions counsel for Mr Van Grinsven contended that Mr Anderson has not filed any grounds opposing the winding up order sought by Mr Van Grinsven, and that the winding up application appears to be unopposed. But in fact the notice of appearance for the second and third defendants sets out the grounds upon which the application for winding up is opposed: it is contended in the notice of appearance that it is not appropriate for an order for just and equitable winding up to be made in the circumstances, and that further grounds of opposition are contained in the affidavits filed on behalf of Mr Anderson and REM. 85 It was submitted for Mr Van Grinsven that the orders sought in the amended cross-claim largely concern claims by Mr Anderson and REM against Mr Van Grinsven and the Company. That is untrue. By orders 1, 2, 5, 6, 8, 11, 13, 15, 17, 18, 20, 21, 22, 23 and 24 Mr Anderson and REM seek declaratory and other orders against Mr Van Grinsven and SMA but not against the Company. Orders 3, 4, 7, 9, 12, 19, 20, 21, 27-37 seek declaratory and other relief against Mr Van Grinsven and SMA to vindicate rights of the Company. It is only in orders 10 and 16 that REM seeks declaratory and other relief against the Company, to establish an entitlement to management fees, and by order 14 Mr Anderson and REM seek (as an alternative to other relief) an order appointing a receiver to the Company. I regard the claims in the cross-claim against the Company adjectival to the principal case. The personal claims against Mr Van Grinsven and SMA on the oppression ground, for breach of the fiduciary duty of joint venturers, and for breach of contract, are central to the dispute, but equally central are the claims on behalf of the Company to ownership of intellectual property and improper diversion of business opportunities in breach of the fiduciary duty of a director. 86 Counsel for Mr Van Grinsven also submitted that the proposed derivative suit by Mr Anderson seeks to delay the winding up of the Company. If that is meant to be an assertion about Mr Anderson's motive in seeking to bring the derivative action, my answer is that I have detected no evidence of such a motive, and on the contrary, the alleged rights of the Company (at any rate, its rights against Mr Van Grinsven for breach of his fiduciary duty as a director) were asserted well before the winding up proceedings began. Counsel's submission that "no suggestion of any such claim being pursued was made prior to the commencement of the winding up proceedings" is wrong, in light of Mr Weston's letter to Henry Davis York of 26 November 2007. I am surprised that such a submission would be made, given the terms of that letter. 87 It was submitted for Mr Van Grinsven that it was unclear why Mr Anderson had not sought to have a provisional liquidator appointed over the Company. He relied upon Re Nerang Investments Pty Ltd (1985) 9 ACLR 646 for the proposition that where there is an application on the just and equitable ground to wind up a company that is a quasi-partnership, and there is a strong possibility that the affairs of the company are being (or would be) conducted for the benefit of one member's interest to the prejudice of another (as is Mr Anderson's claim), the court will appoint a provisional liquidator to address the situation. There was no application for the appointment of a provisional liquidator presented for adjudication at the hearing on 4 and 5 June 2008 and I am not in a position to say whether, if such an application were made, it would succeed. But in circumstances where he opposes the winding up and where, as I have said, it is not self-evident that winding up is the best way forward, I cannot accept a submission that Mr Anderson should have applied for the appointment of a provisional liquidator rather than, as he has done, for leave to constitute a derivative action, or that his failure to seek the appointment of a provisional liquidator is a sign of bad faith. 88 Counsel for Mr Van Grinsven contended, relying on some observations of Tobias JA in Chahwan's case, cited above, that there are two aspects of the amended cross-claim that suggest that Mr Anderson is in reality seeking to further his own personal interests rather than the interests of the Company as a whole. First, reference was made to para 16, which seeks an order that the Company paid to REM the balance of the management fee owing, specifying the method of calculation, and para 65, in which it is alleged that REM is entitled to be paid by the Company $686,681.92 by way of deferred management fees. Counsel submitted that it is therefore in Mr Anderson's interests, given that he owns REM, to promote a claim which (if it succeeds) will lead to money being paid to the Company by Mr Van Grinsven and/or SMA, so as to put the Company in funds to discharge its alleged debt to REM. 89 In assessing this submission, it is necessary to bear in mind a distinction explained by Palmer J in Swansson v Pratt at [40], and by Tobias JA in Chahwan at [75]. Their Honours were considering a more difficult hypothetical case than the present one, a case where a creditor who was formerly a shareholder seeks to bring a derivative action that will put the company in funds to pay the debt claimed by the creditor. They distinguished between two situations. The first is where the derivative action is commenced and maintained in order to achieve the purpose for which it is designed, namely to recover property for the company, where there is no abuse of process and consequently no lack of good faith simply because the success of the derivative action places the company in a financial position to repay the debt. The second is where the creditor, in making the application for leave to bring a derivative action, is in reality seeking to vindicate his or her interests as a creditor and not whatever interest he or she may have as a former shareholder. 90 Telling these two situations apart will often be difficult. But where, as here, the applicant for leave is an existing shareholder and director of the company, and the gist of the derivative action is both to prevent the cross-defendants' wrongdoing and to make them accountable for it, the task is somewhat easier. Unless there is some evidence to point to the conclusion that recovery of the shareholder/director's debt is the predominant consideration, the court conclusion is likely to be that the derivative action, if allowed, will be directed towards obtaining the advantage to the company for which such litigation is designed, even though success in the action may put the company in funds to pay the applicant's claim, and success by the applicant in concurrent proceedings (or in pursuing personal claims concurrently with derivative claims) will establish entitlement to the debt. In my view that is the situation in the present case. Mr Anderson's proposed derivative action is in the former rather than the latter category. 91 The second matter to which counsel for Mr Van Grinsven drew attention is that in paras 46-52 of the amended cross-claim Mr Anderson pursues oppression proceedings, seeking an order that Mr Van Grinsven or SMA purchase his shares in the Company or REM's units in the Trust. Counsel submitted that it is in Mr Anderson's best interest to expand the coffers of the Company by pursuing a derivative suit aimed at enlarging the company's value, and hence the value of his 50% shareholding. 92 In Chahwan, Tobias JA said (at [83]): " As I have already observed, it must be kept well in mind that the onus lies upon the applicant to satisfy the court that, in applying to it for leave to bring the relevant proceedings, he or she is acting in good faith. If such an applicant is in reality seeking to further his or her own personal interests other than as a current or former shareholder of the company, rather than the interests of the company as a whole, then my view that onus will not have been discharged." 93 For present purposes, the qualifying words used by his Honour, "other than as a current or former shareholder of the company", are important. Here Mr Anderson seeks relief under the "oppression" provisions as a member of the Company (s 234(a)), and he seeks leave to bring derivative proceedings as a member and officer (s 236(1)(a)). Nothing prevents him from making those two claims concurrently, although success in one claim might affect the remedial outcome in the other. If he succeeds in making out one of the grounds stipulated in s 232, the court may make an order for his benefit, such as an order requiring Mr Van Grinsven and/or SMA to buy his shareholding or REM's unit holding at an assessed value. That value will be affected by whether the Company succeeds in recovering profits made directly or indirectly by Mr Van Grinsven or SMA through the exploitation of business opportunities belonging to the Company. But in my view all of this emerges from the assertion by Mr Anderson of rights that come to him as a member. The claim for a remedy under the oppression provisions is not incompatible with pursuing the derivative action in the interests of the company as a whole. 94 Counsel for Mr Van Grinsven and SMA complained that the derivative claims to be brought against his clients were replicated by the various personal claims to be pursued by Mr Anderson and REM. He said this would raise "the serious spectre of double dipping". He acknowledged that double dipping can often be accommodated by carefully crafted orders, but he contended that the existence of co-terminous claims pointed out the collateral purpose for pursuing the derivative suit. I disagree with this submission. Inevitably there is a substantial amount of overlapping in the evidence when derivative and personal claims are brought by a member of a company that is essentially a quasi-partnership. In my view this overlapping does not itself indicate a collateral purpose, or even bear on the question whether a collateral purpose is present. Evidentiary overlapping provides the justification for the derivative and personal claims being prosecuted in the same proceedings. But precisely because of this overlapping, the court will be particularly alert to any risk of "double dipping", and it seems to me highly unlikely that it would allow such an unjust outcome, especially when the court has the assistance of able counsel. No case was cited in which this had occurred. Best interests of the company 95 As Palmer J pointed out in Swansson v Pratt, at [55], the requirement of s 237(2)(c) is for the court to be satisfied, not that the proposed derivative action may be, or appears to be, or is likely to be, in the best interests of the company but, rather, that it is in the company's best interests. His Honour set out some matters upon which the applicant is normally required to adduce evidence: (i) the character of the company (for example, whether it is a large public listed company or a closely-held family company); (ii) the business of the company, so that the effects of the proposed litigation on that business may be appreciated; (iii) whether the substance of the redress which the applicant seeks to achieve is available by a means which does not require the company to be brought into litigation against its will; (iv) the ability of the defendant to meet at least a substantial part of any judgment in favour of the company, so the court may ascertain whether the action would be of any practical benefit to the company. 96 As to (i), the Company is the corporate vehicle for a joint venture or quasi-partnership between the Van Grinsven interests and the Anderson interests. In Swansson v Pratt, at [57], Palmer J remarked that where the company is a joint venture company in which the venturers are deadlocked, the proposed derivative action may be for the purpose of vindicating one side's position rather than the other's in a way which will not achieve a useful result. In my opinion that description does not apply to the present case. While, no doubt, success in the derivative action would vindicate Mr Anderson's position against Mr Van Grinsven, the immediate purpose of the derivative action is to assert rights of the company with respect to goodwill and intellectual property associated with QIAKM and CW and to recover the unauthorised profits of exploitation of the Company's business opportunities. 97 As to (ii), there is an issue as to the effects of the proposed derivative action on the proper conduct of the Company's business. According to the evidence of Mr Van Grinsven, the Company cannot produce the QIAKM and CW shows without his co-operation. However, assuming that to be correct, it does not follow that the Company will be unable to operate if the derivative action is successful. The derivative action might lead, for example, to a negotiated buy-out of Mr Anderson's interests by Mr Van Grinsven or to the sale of the business to a third party, with the co-operation of Mr Van Grinsven. There is also the prospect that Mr Anderson's concurrent oppression proceedings may lead to some form of relief that will re-establish the company's business. On balance, it seems to me more likely than not that the company's interests will be best served by establishing its rights and putting it in a position to negotiate a favourable outcome, one-way or another, for itself as a separate entity. 98 As to (iii), there is an issue as to whether a satisfactory resolution of the dispute between the Van Grinsven and Anderson interests might be achieved without the derivative action - for example, by leaving it to Mr Anderson and REM to prosecute their other claims, including claims based on the statutory remedy for oppression. In my view, however, if Mr Anderson's application were denied and the litigation were left to be pursued on these other grounds, some very substantial components of the overall dispute between the parties would be excluded from the purview of the litigation: namely the issue of whether the Company has goodwill and intellectual property rights with respect to QIAKM and CW, and whether (notwithstanding termination of the joint venture) the Company is entitled to complain that Mr Van Grinsven's participation in staging the QIAKM and CW acts is an improper diversion of a corporate opportunity belonging to the Company, in breach of fiduciary duty. 99 As to (iv), there is evidence before the court that Mr Van Grinsven owns two properties at Helensvale, which were valued in late 2007 with total market values of $1.025 million and $575,000, subject to substantial mortgages. 100 Counsel for Mr Van Grinsven submitted that Mr Anderson's evidence failed to disclose why the proposed derivative action would in fact be in the best interests of the Company. In my opinion, however, the evidence does establish that this is the case. The derivative action will assert the Company's claim to goodwill and intellectual property concerning QIAKM and CW, and seek to recover profits made in exploiting the opportunity to stage these acts, leading potentially to substantial recovery for the Company and the prospect of future exploitation of the acts for the corporate benefit. Contrary to the submissions made on behalf of Mr Van Grinsven, the evidence does permit a form of cost-benefit analysis of the potential benefit to the Company of a successful derivative action, and the costs of such an action. 101 There is evidence from Mr Anderson estimating that the profits of the Johannesburg performances will be in the vicinity of $330,000, assuming that approximately two-thirds of the available tickets have been sold (Ex A7, tab 30). If the derivative action is not brought, it can be anticipated that Mr Van Grinsven will continue with other performances of QIAKM and CW. While many of those performances will be club performances with modest revenue (in this respect I agree with counsel for Mr Van Grinsven that the performances identified in para 27 of the amended cross-claim are unlikely to produce substantial net profit), if there are further overseas or local tours substantial additional revenue is possible. 102 To be balanced against this potential profit is the cost of bringing derivative proceedings. Counsel for Mr Van Grinsven stated in submissions that the cost of a 5-7 day case could exceed $400,000. However in the present case, the proceedings brought by Mr Anderson and REM in their personal capacities will cover all or most of the evidentiary ground that would need to be covered in the proposed derivative action, and in those circumstances I agree with the submission by senior counsel for Mr Anderson and REM that the additional costs of adding the derivative claims to the existing litigation will not be substantial. Moreover, Mr Anderson has undertaken to the court to indemnify the Company for any costs incurred by it in bringing the derivative action and any cost orders that may be made against it in that action. In reaching my decision I rely on that undertaking. 103 Counsel for Mr Van Grinsven submitted that, in circumstances where REM claims $686,681.92 against the Company, any money received by the Company will inure only for the benefit of Mr Anderson and REM if REM's claim is successful. But the derivative action seeks to restore to the Company what was alleged to be its goodwill and intellectual property rights with respect to QIAKM and CW, and to put it in a position to earn future profits or at least to negotiate with Mr Van Grinsven for his co-operation in future productions. Additionally it is not clear at this stage whether REM could make out its entitlement to the full amount claimed. Counsel's proposition was not put to Mr Anderson in cross-examination and senior counsel for Mr Anderson informed me that it is hotly contested. In those circumstances I am not in a position to accede to the submission. Serious question to be tried 104 There may still be some room for debate as to precise meaning of this requirement, and the extent to which the analogy with interlocutory relief is less than perfect: Ragless v IPA Holdings Pty Ltd (in liq) [2008] SASC 90 at [40], per Debelle J (with whom Sulan J and Vanstone J agreed). But it is unnecessary to explore those issues here, as the application of the criterion is, in my view, reasonably straightforward. 105 I dealt with the issue whether there is a serious question to be tried in my reasons for judgment of 13 June 2008 ([2008] NSWSC 594 at [44]-[48]), concluding that this criterion was satisfied for the purposes of interlocutory relief. I referred, in particular, to the proposition emerging from Chan v Zacharia (1984) 154 CLR 178, that a fiduciary cannot take advantage of an opportunity which has come to him in the course of or as a result of the fiduciary relationship, even after the business relationship between the parties that has given rise to fiduciary obligations has been terminated, so long as the affairs of the business relationship have not been wound up. 106 The amended cross-claim alleges a fiduciary relationship between Mr Van Grinsven and SMA, on the one hand, and Mr Anderson and REM, on the other, and that Mr Van Grinsven and SMA have breached their fiduciary duties. There is evidence that they entered into a commercial enterprise with a view to profit, that profits were to be shared, that the policy of the joint enterprise was a matter for joint decision, and in other respects the relationship was very like a partnership. These facts suggest a fiduciary relationship: United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1, at 10-12 per Mason, Brennan and Deane JJ. Whether or not the pleaded fiduciary relationship arose between the venturers, it seems likely on the facts that the venturers owed fiduciary duties to the joint venture vehicle, the Company: Mesenberg v Cord Industrial Recruiters (1996) 19 ACSR 483 at 492. 107 In my earlier judgment I also dealt with the claim by Mr Anderson and REM that the Company has goodwill and intellectual property rights with respect to QIAKM and CW ([2008] NSWSC 594 at [41]-[43]). Counsel for Mr Van Grinsven submitted that Mr Anderson had failed to point to any evidence to establish the claimed intellectual property rights, but there is some evidence, which, if accepted at the trial, may do so. In his first affidavit Mr Anderson gave evidence of conversations he claimed to have had with Mr Van Grinsven in March 2005 and in April or May 2006 relating to intellectual property rights, and to his registration of the QIAKM business name and an application for trademark registration (paras 22, 33-4, 37-8). Additionally, the minutes of the directors' meeting on 22 April 2005 (if accepted at the trial), and the "To whom it may concern" letter of 12 April 2006 (if the court finds that it was approved by Mr Van Grinsven) may also provide some evidence suggesting either the presence of some such intellectual property rights as particularised, or an estoppel against Mr Van Grinsven and SMA in respect of such a claim. 108 Counsel for Mr Van Grinsven made various submissions designed to show that there could be no copyright in respect of any aspect of QIAKM or CW, but it seems to me that the contentions particularised in para 22 of the amended cross-claim are prima facie plausible, and that a proper determination of the Company's copyright claim would depend upon the investigation of facts that are necessarily not fully presented to the court at this stage. In these circumstances the claims to ownership of goodwill and intellectual property rights raise a serious question to be tried. 109 Failure by Mr Anderson to make out his claim that the Company has goodwill and intellectual property rights in respect of QIAKM and CW would not lead to dismissal of the Company's claims in the derivative action. The pleading concerning goodwill and intellectual property in the amended cross-claim does not purport to set up any cause of action, but instead it feeds into other claims including the claims for breaches of fiduciary duties arising out of improper diversion of the Company's business opportunities (see, in particular, para 36(d)). The claim for breach of fiduciary duty does not require proof of the existence of goodwill or intellectual property rights. That claim does not require a company to show that it had a proprietary interest in the opportunity that was exploited by its fiduciary (Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1), or even that the opportunity was one that it could have exploited (Chan v Zacharia is an example of this point). Conclusions 110 For the reasons I have given, Mr Anderson has established to my satisfaction each of the five ingredients of s 237(2), and therefore I am required to grant his application for leave under s 237(1). I am satisfied that para 2 of the amended interlocutory process correctly identifies those parts of the amended cross-claim that are appropriate to be asserted by derivative action. The order should be made nunc pro tunc so as to validate the derivative claims in the amended cross-claim filed on 17 April 2008, as I am satisfied that if the issue had arisen at the time of filing of the amended cross-claim I would have granted leave to Mr Anderson then, and that there is no relevant prejudice arising from now granting leave nunc pro tunc (see the discussion in South Johnstone Mill v Dennis and Scales, at [56]-[59]). I shall accordingly make an order in terms of para 2 of the amended interlocutory process. 111 It will be necessary for Mr Anderson as applicant to ensure that the derivative claims comply with s 236(2), according to which proceedings brought on behalf of a company must be brought in the company's name. 112 This is one of those cases, unfortunately too common in Australian commercial life, where parties to a profit-making commercial venture have allowed their personal animosity and mistrust to damage the commercial operation and potentially destroy it. Rationality and the profit motive both suggest the paramount need for a negotiated solution of the dispute, so as to permit business activity to be resumed at full pace. I urge the parties to consider, before it is completely too late, whether a negotiated resolution is possible. To that end, during the hearing on 4 and 5 June I invited submissions as to whether I should make orders referring the dispute to mediation. Neither party opposed my doing so, and therefore I shall make those orders. I am sure the legal representatives of the parties will convey my comments to their clients. **********

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Trade Practices Act 1974(Cth)

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Judgment (21 paragraphs)

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Legislation Cited (2)

Cases Cited (7)