Case: Fiduciary Ltd v Morningstar Research Pty Ltd (2005) 53 ACSR 732
Outcome: cited
As set out above, a person referred to in s 236(1)(a) may apply to the court for leave to bring proceedings. On such application, the court must grant leave if the criteria set out in s 237(2) are satisfied. The prevailing view is that failure to satisfy any one of these criteria means that leave must be refused: see Jeans v Deangrove Pty Ltd [2001] NSWSC 84 at [9] per Santow J; Goozee v Graphic World Holdings Pty Ltd [2002] NSWSC 640 ; (2002) 42 ACSR 534 at [27] per Barrett J; Herbert v Redemption Investments Ltd [2002] QSC 340 at [25] per Mackenzie J; Maher v Honeysett [2005] NSWSC 859 at [12] per Brereton J; compare Fiduciary Ltd v Morningstar Research Pty Ltd (2005) 53 ACSR 732 at [16], where Austin J found it unnecessary to decide the point. 61 The applicants bear the onus of satisfying the Court, on the balance of probabilities, that the criteria identified in s 237(2) have been met: Swansson v RA Pratt Properties Pty Ltd (2002) 42 ACSR 313 at [24]-[26] per Palmer J; Fiduciary v Morningstar 53 ACSR at [15] per Austin J; Re Varsity Queensland Pty Ltd [2006] QSC 356 at [9] per Mullins J. 64 In relation to the second criterion that the applicants are acting in good faith it is established that there are at least two interrelated factors to which the court will have regard, namely: &#8226; whether the applicants have an honest belief of a good cause of action with reasonable prospects of success; and &#8226; whether the applicants have a collateral purpose that would amount to an abuse of process. See Swansson 42 ACSR at [36] per Palmer J; Goozee 42 ACSR at [56] per Barrett J; Herbert [2002] QSC at [27] per Mackenzie J; Fiduciary v Morningstar 53 ACSR at [21] per Austin J; Maher v Honeysett [2005] NSWSC 859 at [28] per Brereton J. 67 I accept that more than "bald assertion" is required in order to establish an applicant's honest belief: Swansson 42 ACSR at [36] per Palmer J; Fiduciary Ltd 53 ACSR at [22] per Austin J. In fact, in the present case no applicant has deposed that he or she honestly believes that a good cause of action exists and has a reasonable prospect of success. The applicants' solicitor, Mr Maitland, has not sought to give hearsay evidence as to the existence of such an honest belief. 72 In Fiduciary v Morningstar 53 ACSR at [51], Austin J held that: ... there is a balance to be struck between the prejudice that the company will suffer if claims are pressed unsuccessfully on its behalf and there is an adverse costs order, and the advantage that it will gain, indirectly for the benefit of its shareholders, if the claims are successful... 73 This issue is to a certain extent connected to the strength or otherwise of the case the applicants wish to advance on behalf of the Company. The applicants have accepted that they will bear the costs of the proceedings if unsuccessful. This puts the balance of the consideration of what is in the best interests of the Company in favour of the applicants. 74 I was concerned that whether the applicants could sufficiently demonstrate that the Company would be entitled to some monetary compensation, and not just nominal damages, could impact upon this criterion. After all, if there were no monetary advantage to the Company even if successful, this would need to be considered in the context of determining whether the proceedings would be in the best interests of the Company. In the course of submissions a great deal of time was spent on the issue of whether or not the applicants proved that the sale was for an undervalue. Objections were made to evidence (including expert evidence) sought to be adduced by the applicants on this issue.