application of Mr and Mrs thompson for leave to bring derivative proceeding
70 Introduction: Part 2F.1A of the Corporations Act 2001 deals with proceedings on behalf of the company by members and others. Section 236(1) provides that a person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings if the person is a member, former member, or person entitled to be registered as a member of the company or of the related body corporate or an officer or former officer of the company and the person is acting with leave granted under s 237.
71 In this case, Mr and Mrs Thompson are members of the company in that they hold shares in it and also are officers of the company in that they are directors of it. They now apply for leave under s 237 to bring a proceeding in the name of the company.
72 Section 237(2) provides that the Court must grant the application for leave if it is satisfied that:
(a) it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and
(b) the applicant is acting in good faith; and
(c) it is in the best interests of the company that the applicant be granted leave; and
(d) if the applicant is applying for leave to bring proceedings - there is a serious question to be tried; and
(e) either:
(i) at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or
(ii) it is appropriate to grant leave even though subparagraph (i) is not satisfied.
73 Section 237(3) provides that a rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that:
(a) the proceedings are:
(i) by the company against a third party; or
(ii) by a third party against the company; and
(b) the company has decided:
(i) not to bring the proceedings; or
(ii) not to defend the proceedings; or
(iii) to discontinue, settle or compromise the proceedings; and
(c) all of the directors who participated in that decision:
(i) acted in good faith for a proper purpose; and
(ii) did not have a material personal interest in the decision; and
(iii) informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and
(iv) rationally believed that the decision was in the best interests of the company.
74 It is accepted that the onus is on the applicant for leave to establish the requirements of s 237(2) to the Court's satisfaction, because the application is for final, not interlocutory relief: see Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583 (Swansson) at [24].
75 It is also well understood that if any of the prescribed conditions are not satisfied then the Court must refuse the application: Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 170 FLR 451.
76 In the context of this claim, where Mr and Mrs Thompson on behalf of the company propose that the company should maintain proceedings against both the State parties and NAB, the elements of s 237 must be established in relation to each of these proposed causes of action.
77 Section 237(2)(a): By this provision the Court must be satisfied that it is probable that the company will not itself bring the proceedings or properly take responsibility for them or for the steps in them.
78 It is accepted that a test of probability applies to assessment of this criterion as the text of the paragraph suggests: see Ragless v IPA Holdings Pty Ltd (in liq) [2008] SASC 90; (2008) 65 ACSR 700 at [26].
79 The company is currently controlled by the receiver. Whether or not it is probable that it will not itself bring the proceedings depends on the attitude of the receivers.
80 On behalf of Mr and Mrs Thompson it is submitted that the receivers are not neutral but rather are partners or employees of a firm of accountants (Ferrier Hodgson) that has had significant prior dealings with the company in the following respects:
They conducted the "independent business review" of the company, reference to which has been made above in relation to the findings of Le Miere J in the Supreme Court proceeding.
During the conduct of the independent business review the company supplied Ferrier Hodgson with information that was commercially sensitive and confidential.
The firm was obliged to keep confidential information.
As partners or employees of the firm, the receivers are likewise obliged to keep the information confidential.
However, the receivers threaten to misuse the confidential information.
81 Further, on behalf of Mr and Mrs Thompson it is submitted that:
NAB can not be considered to be an arms length creditor rather, because of the conduct of the independent business review, it is closely associated with the company;
that the appointment of the receivers by NAB is in dispute because of the alleged unconscionable dealings and the allegation that the receivers have aided and abetted or otherwise been knowingly concerned in the breach by NAB of relevant provisions of the TP Act;
the appointment of the receivers constitutes a threatened or actual breach of confidence on the part of Ferrier Hodgson and to allow the receivership to continue risks further breaches of the TP Act.
82 Mr and Mrs Thompson also say that on 16 February 2011 they provided the receivers with the minute of proposed statement of claim concerning the State parties, but in the three weeks following up to the commencement of the hearing of the notice of motion had not received any contact from the receivers concerning its prosecution. On the contrary, they have continued to dispute the company's claims against the State parties.
83 Additionally, the applicants say that it is absurd to contemplate a receiver instituting proceedings against the debenture holder claiming damages for misleading, deceptive or unconscionable conduct in breach of the TP Act.
84 At the hearing of the notice of motion, NAB and the receivers applied for an order that an affidavit filed or to be filed by the receivers but shown to the Court should be made the subject of a confidentiality order under s 50 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and in effect not be disclosed to the applicants. I refused that application and indicated that the affidavit should be disclosed in the proceedings to the applicants. That was then done.
85 The subject matter of the affidavit was that the receivers had commenced proceedings in the name of the company in the Supreme Court of Western Australia seeking judicial review of certain decisions of the Environment Protection Authority concerning the issue of works approvals and licences pertaining to the operation of the cattle feedlot business at material times. However, as the receivers explained, pending further information relating to that possible cause of action, they had elected not to serve the originating process. They explained that the originating process had been filed to meet any time limit and avoid any delay claims that might subsequently be raised if such a cause of action were to be commenced later.
86 Primarily, though, the receivers submit that the applicants, Mr and Mrs Thompson, have been uncooperative to the extent that they have been refused access to the company's books and records and through their solicitors have failed to articulate the basis upon which a claim for relief could be advanced against the State parties.
87 The State parties also rely on the uncooperative conduct of Mr and Mrs Thompson towards the receivers. The affidavit of Mr Weaver, dated 24 February 2011, at [24][31] provides something of the flavour of that. Mr Weaver was required for crossexamination on his affidavit. Again, he, albeit politely, confirmed the difficulty the receivers had experienced in obtaining information, documents and generally the cooperation of the applicants in the receivership.
88 In my view, the fact that the receivers have commenced the judicial review proceedings in the Supreme Court of Western Australia as upholding action indicates considerable good faith on their part. It leads me to not be satisfied that it is probable that the company will not itself bring the proceedings, or properly take responsibility for them or for the steps in them should there appear to be a good case for proceeding against the State parties, principally in respect of the declaration of invalidity points but even more generally.
89 As discussed further below, there are real difficulties with the proposed causes of action against the officers of the State that are framed in trade practices and negligence terms and which also include allegations of bad faith. One would not expect the receivers to institute such proceedings except on sound legal advice given in light of all the factual circumstances. Without the support and cooperation of the applicants, that is a difficult thing to do, for which the receivers cannot presently be criticised.
90 As to the probability that the company through the receivers will bring the proposed proceeding for the company against NAB, it perhaps fairly goes without saying that in the ordinary course of events, it is unlikely that the receivers would ever turn on their appointors. That comment really ought only be applied as a generality in respect of the formal issues that might arise in confirmation proceedings under s 418A of the Corporations Act. What the applicants wish to agitate through the company in the derivative proceeding is that the company engaged in sharp trading practices to the extent that their conduct may be considered misleading or deceptive at material points and was otherwise unconscionable, and that by way of remedy they are entitled to dislodge the receivers from their appointment and thereby recover control of the company.
91 It may well be that the general statement that receivers cannot usually be expected to turn on their appointors would require some qualification where a claim of this nature is made. One would expect, that in accordance with their legal and ethical duties, if receivers in the course of a receivership observed what appeared to be misleading or deceptive conduct or unconscionable behaviour in contravention of statutory trade practices provisions, they would in fact ignore it.
92 The trouble in this case, however, is that to some extent the factual allegations made by the applicants on behalf of the company seek to entwine the receivers with the appointor.
93 I think in all the circumstances I am satisfied that it is probable that the company will not itself bring the proceedings or properly take responsibility for them or for steps in them, in relation to the proceedings proposed against NAB, that would also see the receivers formally joined in the proceeding - having regard to my earlier strike out orders in the current proceedings maintained by the applicants against the receivers.
94 Section 237(2)(b): By this provision, the Court must be satisfied that the applicant is acting in good faith. The parties accept that there are two aspects to this criterion. First, whether the applicant honestly believes a good cause of action exists and has a reasonable prospect of success; and secondly, whether the applicant is bringing the derivative action for such collateral purpose as would amount to an abuse of process: Swansson at [36].
95 The applicants contend that where applicants are directors or shareholders it will generally be easy to show they have a legitimate interest in the welfare and good management of the company itself, warranting action to recover property or to ensure that the majority of the shareholders or of the board do not act unlawfully to the detriment of the company as a whole: Swansson at [38].
96 The applicants submit that having regard to the proposed statement of claim and their affidavit evidence and submissions they believe they have a strong case against the State parties as well as against NAB and the receivers.
97 The applicants also say that their affidavit evidence discloses they are acting in good faith in the matter as the founding directors and shareholders who have owned and operated the company since its incorporation and that they have consistently tried to advance and protect the interests of the company.
98 They deny there is any collateral purpose for instituting the proceedings.
99 NAB and the receivers recognise the above principles and also that if a wrong appears to have been done to a company, and those in control refuse to take proceedings to address it, then the Court will permit a derivative action if a real and substantive injury would be suffered. They emphasise that the injury must necessarily be dependent upon or connected with the applicants' status as a director or shareholder and the remedy afforded must be reasonably capable of addressing the injury: Swansson at [42].
100 So far as the proposed action against the State parties is concerned, NAB and the receivers submit that the applicants cannot genuinely assert that the receivers have refused to institute proceedings to address any wrong committed against the company by the State parties. Rather, it has been the lack of cooperation of the applicants with the receivers that have resulted in the receivers not being in a position to make an informed decision about any potential proceedings or the merits of them.
101 This submission does not directly address the criterion in this paragraph. The question is whether the applicants believe honestly they have a good cause of action. What, in effect, the receivers say is that they are unable properly to comment on whether or not there is a good cause of action against the State parties and whether there are reasonable prospects of success because the applicants have failed or refused to properly informed them in that respect.
102 On the face of it, it seems to me that the applicants do honestly believe they have a good cause of action and there does not appear to be some collateral purpose that would amount to an abuse of process, so far as this proposed action against the State parties is concerned.
103 There is, however, a separate question as to just how plausible the proposed cause of action is and whether it may be described as good and may be considered to have reasonable prospects of success. I will return to that issue below under the serious issues to be tried criteria.
104 So far as the proposed claim against NAB and the receivers is concerned, it is plain enough from the account of the decision of Le Miere J in the Supreme Court proceedings whereby he affirmed the validity of the appointment of the receivers, that the question of the other or foreshadowed claim of the applicants against NAB for relief on the basis of the bank's misleading, deceptive or unconscionable behaviour was not determined by that Court and indeed the Court expressly declined to deal with that issue, as I have noted earlier in striking out aspects of the current claim of the applicants against the receivers.
105 On the face of it, the applicants appear honestly to believe that they have a good cause of action against the NAB on TP Act grounds. Whether or not, however, it may be thought that they have a good cause of action which has reasonable prospects of success is another issue to which I will come.
106 So far as such a proposed action might be said to have a collateral purpose, NAB and the receivers refer to submissions or assertions by counsel for the applicants in the Supreme Court proceedings to the effect that the truth of the position of the receivers and managers will then be put to the test in practice by bringing proceedings. It is submitted that it is apparent from these comments that there is collateral purpose for instituting the proceedings, against the fifth respondents at least.
107 For my part, I have some difficulty in attributing collateral purpose, bad faith or an abuse of process to the applicants by reason of these expansive submissions or assertions made by their counsel in the Supreme Court proceedings. Their leading counsel tended to make "strong" submissions in this Court on this application. I do not consider the applicants' bona fides should be doubted on that account. It is necessary to put aside any expansive or boastful submissions or assertions of counsel in determining whether a proposed cause of action against NAB and derivatively against the receivers, relying on the alleged unconscionable behaviour of NAB, has any prospects of success.
108 I find this criteria is satisfied.
109 Section 237(2)(c): By this provision the Court must be satisfied that it is in the best interests of the company that the applicant be granted leave.
110 The parties accept it is not enough for the applicants to say that the proposed action may be, appears to be, or is likely to be, in the company's best interest. The applicants must establish, on the balance of probabilities, the fact that it is in the best interests of the company that leave be granted: Swansson at [55] and [56].
111 In Swansson, at [57]]60], Palmer J said what is required in this regard is evidence:
of the character of the company for the purposes of considering the effect of the proposed litigation will have on the company;
of the business of the company so that the effects of the proposed litigation on its proper conduct may be appreciated;
enabling the Court to form a conclusion whether the substance of the redress which the applicants seek is available by a means which does not require the company to be involved in litigation against its will; and
of the ability of the proposed defendant to meet at least a substantial part of any judgment in favour of the company.
112 The parties also agree if the redress sought is available by other means in that the applicants can achieve the desired results and proceedings in their own name then it will not be in the best interest of the company to be involved in the litigation: Talisman Technologies Inc v Queensland Electronic Switching Pty Ltd [2001] QSC 324.
113 As to the latter proposition, the applicants contend that this should be treated with caution as it appears to place an additional criterion on those already found in s 237.
114 However, the applicants also contend that, in any event, the evidence demonstrates the company has a substantial damages claim in its own right against, at the very least, the State and that the company needs to apply to obtain remedies against NAB and the receivers, if not the firm to which the receivers belong, in view of their actions.
115 The applicants say another point should be made, where the evidence demonstrates serious issues concerning the validity of the appointment of a receiver. They say this is a matter where the company has a wide scope of action through Mr and Mrs Thompson as directors. Mr and Mrs Thompson indeed can bring claims on behalf of the company without leave of the Court, provided they indemnify the company for any liability in costs: see Deangrove Pty Ltd v Commonwealth Bank of Australia [2001] FCA 173; (2001) 108 FCR 77 at [40]; and Newhart Developments Ltd v Cooperative Commercial Bank Ltd [1978] 1 QV 814 at 821.
116 However, the grant of leave under s 237 would avoid the need for Mr and Mrs Thompson to indemnify the company.
117 The applicants also say the company has reasonable prospects of avoiding an order for security for costs given that:
the grant of an order for security depends upon the circumstances of the case.
the company is able to press strong claims against the State, NAB and the receivers and an order for security for costs will be considered oppressive.
the conduct of the State, NAB and the receivers precipitated a significant reduction in the company's means to meet any order for security for costs, a factor recognised in Octocane Pty Ltd v SRJ Property Development [1999] SASC 231; (1999) 74 SASR 471 at 479.
118 The applicants also say there should be evidence as to the ability of a defendant to meet a substantial part of any judgment in favour of the company in the proposed derivative action so that the Court may ascertain whether the action would be of any practical benefit to the company: Swansson at [60].
119 NAB and the receivers again complain, in relation to the proposed action against the State parties that the receiver has been denied access to the company's books and records and so has been impeded in forming a view about the merits of the potential claims. Until they have been afforded that opportunity it cannot be said to be in the best interests of the company to involve it in litigation against its will.
120 These respondents also contend that the applicants have not advanced any evidence that it is in the best interests of the company to embroil it in litigation when:
it is no longer trading as a going concern.
it does not have the funds to support any lengthy litigation.
the redress sought can be pursued by the applicants in their own right.
121 The respondents note that the applicants have instituted proceedings against the State parties, and that the allegations are substantially similar or the same as those in the proposed statement of claim that will be filed in the derivative action.
122 So far as the NAB claim is concerned, these respondents say the applicants in their own right have instituted proceedings against NAB and the receivers and the allegations are also substantially the same as those in the minute of proposed statement of claim in the derivative action.
123 The respondents also contend that the allegations of misleading and deceptive conduct and unconscionable conduct asserted are more appropriately dealt with in the ambit of that claim (although refuted by NAB) rather than in a derivative action on behalf of the company.
124 In the event, I am not satisfied that it is in the best interests of the company that the applicant be granted the leave it seeks.
125 The points made on behalf of the respondents, which were amply developed by Mr Weaver when he was crossexamined by counsel for the applicants at the hearing, is that the company no longer is a going concern, it lacks any funds to support any lengthy litigation but the applicants have in their own right commenced proceedings seeking virtually the same relief.
126 While, from the applicants' point of view, there are real benefits - if funding for an action were available - in the company take any action - because the applicants will then not be themselves obliged to fund complicated proceedings - the reality is the applicants have commenced their own proceedings, these issues, if they are to be pressed, will be resolved in that way.
127 As discussed further below, the proposed proceedings against the State parties either have absolutely no prospects of success or are very flimsy indeed. One would not expect the company to throw good money after bad in proceeding against the State parties. It certainly would not be in the best interests of the company to involve itself in such litigation.
128 Broadly speaking, in my view, while, as explained below, there is some basis for suggesting the arguability of aspects of the proposed claim against NAB is at a higher level than that against the State parties, the company would want to know much more about the prospects of success of the litigation before pursuing it. In other words, in my view, it plainly is not in the best interests of the company to involve itself in litigation, certainly at this point.
129 In all I am simply not satisfied that it can be said to be in the best interests of the company that the applicant be granted leave. This criterion is therefore not satisfied.
130 Section 237(2)(d): By this provision the Court must be satisfied that there is a serious question to be tried.
131 The parties accept that the test used is the same as that used for an interlocutory injunction: Goozee at [32]. The Court must determine whether the applicant is able to identify the rights to be determined at trial in respect of which final relief is sought: Ragless at [40].
132 The parties recognise that it is perhaps arguable whether the applicants must establish that there is a sufficient likelihood of success to justify the grant of leave, having regard to the discussion of what is required to obtain an interlocutory injunction in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at [65], or merely that there is a real question to be tried that is not frivolous or vexatious (as suggested by the decision in American Cyanamid Co v Ethicon Ltd [1975] AC 396 at 407).
133 The respondents make the point that a mere indication of evidence without any actual evidence is insufficient and the onus is on the applicants to provide sufficient material to the Court to enable the Court to make a determination: Vinciguerra v MG Corrosion Consultants Pty Ltd [2010] FCA 763; (2010) 79 ACSR 293 at [140][142], Gilmour J.
134 The applicants say that no matter what test is used, they satisfy the test. In short, they contend that the claims made against the State parties, NAB and the receivers involve the "principled development of the law" particularly concerning s 45(2)(b)(ii) and s 51AC of the TP Act (now CAC Act) and the Court should be careful not to stifle the development of the law by summarily throwing out court actions in respect of which there is a reasonable possibility that it will be found, in the development of the law, that a pleaded cause of action does lie. The risk of injustice to a plaintiff by summary termination of claims should firmly be borne in mind. Counsel emphasises what was said in this regard in Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 at 373374.
135 I will deal first with the question of serious issue to be tried in respect of the proposed derivative action against the State parties, the substance of which I have already referred to above in some detail in dealing with the strike out application of the State parties. In the course of dealing with that issue I outlined the nature of the causes of action pleaded against the State parties that would be pleaded in the proposed derivative action.
136 For the reasons I have already given above on the strike out application of the State parties, there is in my view no serious question to be tried on any test in relation to the proposed application of provisions of the CAC Act to the State parties.
137 So far as the derivative action would involve a claim for damages against the State respondents, based upon negligence and misfeasance in public office or lack of good faith, I consider there is insufficient evidence placed before the Court to raise a serious question to be tried. The evidence is simply that letters were written and advice given, with which the applicants now take issue.
138 A number of points should be made, first s 121(1) of the EP Act relevantly provides for immunity for certain acts in these terms:
An action in tort does not lie against -
(a) a person for anything that the person has done, in good faith, in the performance or purported performance of a function under this Act.
139 To the extent that there is a claim in tort (or otherwise) against the third respondent the immunity provision would apply to the extent that these acts were done in good faith.
140 The conspiracy claim, on its own, is singularly lacking in evidentiary foundation.
141 It is therefore incumbent upon the applicants to show some evidence that the third respondent acted otherwise than in good faith. In my view, there is virtually none. There is an argument constructed that having regard to the circumstances in which regulatory decisions were made, the third respondents' actions were other than in good faith. It seems to me that this contention is artificial, incapable of being sustained and has no chance of success if it were to go to trial.
142 It is well understood that to make allegations of bad faith, as to allege fraud, is a very serious matter and involves imputing personal fault on the part of a decisionmaker. The allegation is not to be lightly made and must be clearly alleged and proved. The circumstances in which bad faith has been found in precedent cases are few. Mere error or irrationality does not equate to bad faith. Errors of fact or law or illogicality do not demonstrate bad faith. More needs to be shown than that a decision was wrong. See generally in this regard SBBS v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCAFC 361; (2002) 194 ALR 749 at [42][48], the Full Court of this Court.
143 Therefore, to the extent that the proposed derivative action against the first, second and third respondents - the State parties - depends upon bad faith, in my view there is no serious issue to be tried.
144 Furthermore, in respect of the impugned behaviour of the Chief Executive Officer of the Department of Environment and Conservation, the first respondent, and Mr Byrnes, the third respondent, the immunity provision would apply in respect of other conduct.
145 The likelihood of an action against the first respondent and the third respondent personally succeeding is extremely unlikely and I do not consider there is a serious issue to be tried in respect of those proposed actions.
146 So far as the relief sought against the State of Western Australia is concerned, by way of various applications for declarations concerning the invalidity of authorities issued under the EP Act, counsel for the State does not seek to contend there is no serious action to be tried, but counsel contends that, so far as the s 237 criteria are concerned, the receivers have filed proceedings in the Supreme Court of Western Australia and plainly are prepared to take such action in that regard as may be appropriate.
147 To the extent that the proceedings proposed against the State parties rely upon the TP Act, they would in all relevant respects appear to be, in my view, misconceived as the licensing functions relied on do not constitute the carrying on of business as discussed in relation to s 2B and s 2C of the CAC Act, and there is no other relevant conduct in trade or commerce for the purpose of maintaining an action based on deceptive conduct or the like.
148 So far as the claim against the NAB and the receivers are concerned, much attention was given in the calling and crossexamination of the bank officers and the receivers in order to establish some factual basis to an allegation of deceptive or misleading conduct and unconscionable conduct.
149 In the event, one of the principal planks of the applicants' argument seems to be is that on a proper construction of the various financing facilities, it was not open to NAB to change the expiry date upon which financing had initially been granted. The applicants contend the evidence shows a "unilateral variation" by NAB of the facility obligations of the borrowers.
150 By doing the best one can with the proposed statement of claim and summarising the causes of action in the way I have above, it is at least clear that very little is pleaded or produced by way of evidence against the receivers in this action, that can support any allegations of unconscionable conduct or misleading or deceptive conduct on their part. The same point was made by Le Miere J in the Supreme Court of Western Australia proceeding. Nothing much has changed in this proceeding. The only reason the receivers need to be a party to any current or proposed action in this Court is because they need to be enjoined in the event that the applicants are successful in their trade practices claims against NAB and are entitled to an order displacing the receivers.
151 I have already upheld the submission of the receivers to strike out parts of the application as it affects the receivers in the current proceeding of the applicants and the same rulings apply to this proposed action of the company.
152 So far as the claims of the NAB acting unconscionably or in a misleading and deceptive way so far as the facilities are concerned, the constructional issues concerning the changed expiry date, while tenuous, are perhaps arguable. However, those pleas that seek to infer bad, that is to say unconscionable and reprehensible conduct, on the part of the officers of the NAB are, in my view, untenable. There is no evidentiary base to them. The arguments rather are about misconstruction of agreements and misinterpretation, not about "moral obloquy" or the like: see Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) 148 FCR 132, Full Court at [32][43]. The evidence suggestive of personal unconscientious misbehaviour by officers of the bank is slight and the claim would be very difficult to maintain at trial. One would doubt that this claim could succeed. The issue was developed to some extent by viva voce crossexamination of the relevant bank officer for the purposes of this hearing. The evidence, for example, that the officer fabricated a letter is, on any view, weak.
153 As to the constructional argument on the bank facilities and the allegation that the bank unreasonably contracted the expiry date and did so unilaterally depends not upon the evolution of some new legal principles that the Court should not unreasonably shut off by refusing leave to the derivative action, but depends ultimately on proper construction of the agreements. There is something to be argued, although on the face of it the bank has simply acted according to the letter of its contractual entitlements.
154 In summary, in my view, while the constructional arguments about the expiry date of the facility might possibly be arguable, the unconscionability case has no prospects of success. This criteria is then only partly satisfied in respect of only one cause of action.
155 Section 237(2)(e): This requires written notice to the company of the intention to apply for leave and the reasons for applying. The evidence suggests this criterion has been satisfied in this case.
156 Summary of findings: In the event, I am not satisfied that each of the criteria specified in s 237(2) has been met and accordingly I would refuse the applicants leave to bring the proposed proceeding on behalf of the company against the State parties, NAB and the receivers.
157 I am not satisfied that it is probable that the company will not itself bring the proceedings for properly taking responsibility for them against the State parties, if there appear to be further grounds for doing so.
158 In relation to any such proceeding against the State parties in that regard, I accept the submissions of NAB and the receivers that until at least relatively recent times the applicants themselves, who would need assist and support an action, have not been entirely forthcoming with such support and assistance and the receivers unreasonably have been able to substantiate or particularise or plead out in a general sense, any claim that might be made in this regard.
159 However, the actions of the receivers in lodging originating process with the Supreme Court to protect the interests of the company in maintaining any proceedings against the State parties indicates to me, that if properly advised there is an appropriate proceeding, there is no reason to think that the company will not itself bring the proceedings at the instance of the receivers.
160 I generally accept that the applicants are acting in good faith in bringing the application to bring these derivative proceedings. I do not accept that this is just a testing out exercise against NAB, as these respondents suggest, although no doubt the applicants would hope that their dispute with the NAB and the receivers might be resolved in ways advantageous to them. However, I do not see the proposed derivative action as simply a stalking horse designed to help resolve the personal interests of the applicants as against NAB.
161 I am, however, not satisfied that it is in the best interests of the company that the applicants be granted leave. There are a number of reasons for this. The company is in receivership. The cattle feedlot business is not running. The business is hopelessly insolvent as things stand and there are no funds to support the action. The issues that the applicants seek to agitate may be advanced in their current proceeding in the Federal Court in which they seek to claim relief in the same terms or virtually the same terms as they propose the company should pursue in the derivative action. While there no doubt would be some advantages from their point of view in the company pursuing the derivative action, the applicants are themselves able to pursue the same issues and the same relief in the proceeding they have already commenced in this Court.
162 I am also quite unsatisfied that there are serious questions to be tried in respect of nearly all claims. While there may be questions concerning the validity of authorities granted under the EP Act, as discussed above, I consider the personal actions reliant on tort or under the TP Act/CAC Act against the State parties to be hopeless. I consider the proposed trade practices proceedings against the State of Western Australia to be utterly hopeless.
163 As noted above, to the extent that there may be the possibility of an action concerning the invalidity of authorities issued or things done under the EP Act by relevant agencies or officers, I have already indicated that there is no reason to think that the company will not pursue those if properly advised.
164 So far as the proposed proceedings against the receivers are concerned, it seems to me they are very much ruled out by the decision of Le Miere J in the Supreme Court and are otherwise hopeless, save to the extent that the receivers would need to be a party in the event that the proceedings foreshadowed against NAB, designed to undermine the validity of the appointment of the receivers, were to succeed.
165 So far as the proposed action against NAB on the grounds of misleading and deceptive conduct and unconscionable conduct are concerned, they in the end primarily rely on construction of contractual financing documents and the argument that the bank unreasonably and invalidly contracted the period - the expiry date - by which funds were to be repaid. In my view, on a proper construction of the relevant facilities documents the likelihood of the company succeeding with its constructional arguments is slim. However, on balance I would probably not rule out the contractual construction arguments on the basis that it is completely hopeless. However, I do consider the misleading and deceptive and unconscionability claims to have no reasonable prospects of success.
166 In any event, so far as that or those tenuous causes of action against the NAB are concerned, I am of the view that it is not in the best interests of the company that the derivative proceedings be permitted. As I have indicated above, the issues that the applicants wish to pursue, that would see them compensated for any contravening conduct of NAB, may be pursued through the proceedings they have commenced in their own names in this Court.
167 In all of these circumstances, all of the criteria specified in s 237(2) have not been met and therefore leave should be refused to the applicants to commence a proceeding in the name of the company on any of the bases outlined in the proposed statement of claim.
168 The applicants notice of motion should be dismissed.