MANGRAVITI v TRIDEN CORPORATION LIMITED SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL MASON P, MEAGHER JA and SHELLER JA 16 March 1998 [1998] NSWCA 136 Mason P. Application is made, pursuant to s 46(4) of the Supreme Court Act to discharge the order of Beazley J made on 23 February 1998. Her Honour effectively refused an application for a stay. The claimant accepts that this Court in the exercise of that jurisdiction does not look at the matter de novo, but treats it as if it were an appeal from a discretionary judgment: Australian Consolidated Press Limited v Baltinos Court of Appeal unreported, 18 September 1995. The application for a stay arises out of the dismissal by Brownie J of proceedings brought by a minority shareholder of Triden Corporation Limited, which sought various categories of relief against that company based upon the conduct of the persons in control of the company, and the company's dealings with a subsidiary, Triden Constructions Pty Limited. Various grounds of appeal are taken in the notice of appeal, but the argument before Beazley J and before us centred on two. I should indicate that the stay is sought in relation to the costs order, which was the only monetary order flowing from the dismissal of the proceedings below. The costs which the claimant was ordered to pay on an indemnity basis have been assessed, and allowing for a minor offset with respect to some interlocutory proceedings costs, stand at something over $350,000. Her Honour proceeded on the basis that for all practical purposes the appeal would be rendered nugatory unless a stay were granted. She did this on the basis of the admitted insolvency of the claimant. The matter which moved her Honour was in essence the view she formed as to the strength of the appeal. She looked at the appeal with reference to the two grounds upon which counsel for the claimant, Mr Brereton, had focused attention. The first concerned the omission of the trial judge to consider whether the claimant had a viable case for which he should be given authority to commence proceedings for orders under s 592 of the Corporations Law against the directors of the subsidiary company. The essential case sought to be made was that those directors had borrowed money from the holdingcompany by way of an inter-company loan transaction at a time when the borrowing company did not have reasonable prospects of repaying it. Section 592 allows an order to be made against the directors of the insolvent debtor if certain matters are made out. Brownie J did not deal with the matter in the primary judgment, although he noted the terms of s 592. However, his Honour returned to it in a supplementary judgment pursuant to an application by way of motion for reconsideration. The reason given for rejecting a case based upon s 592 was that it had never been pleaded. His Honour noted that the matter had been addressed in the written submissions put before him, but he also noted that objection had been taken by the defendants to such a case, and that application had not been made to amend the pleadings accordingly. In a passage at p 2 of the reasons for judgment given 2 UNREPORTED JUDGMENTS on 20 September 1996, which I shall not set out, his Honour gave the reasons, and they are essentially discretionary reasons, for refusing to permit the case to be litigated, having been not foreshadowed in the pleadings. The second ground of appeal sought to be pressed was ground six, which contended that Brownie J had erred in failing to hold that the substratum of Triden Corporation Limited had failed, and that for that reason it was just and equitable to wind up that company. His Honour gave three reasons for refusing such relief in his principal judgment. The first was that the defendant had not come to meet that case, the second was that the defendanthad previously offered to buy back the plaintiffs" shares, and the third was that the plaintiffs had never put to a meeting of members of the defendant a resolution that the defendant company be wound up. His Honour considered that each of those responses seemed to be a sufficient answer to the application for a winding up order on that ground. Before us counsel for the claimant sought leave to adduce further evidence pursuant to s 75A(7) of the Supreme Court Act, that evidence consisting of the amended statement of claim and the written submissions that were before his Honour at the time the judgment was reserved. Counsel for the opponent objects to the reception of this additional evidence. I do not consider it necessary to rule upon that application. The essential substance of the pleading below has not been in issue, nor has the grounds recorded in the trial judge's reasons for refusing to rule upon the two matters of which complaint is now made. Beazley JA considered that the matter to which her attention was taken, being the two grounds to which our attention was taken, did not convince her that either ground was particularly strong. She took those matters into account in refusing the stay. Given the limited nature of the application to this Court and the basis upon which it must properly be addressed, I can see no error in what her Honour did. Indeed, were the matter mine to decide afresh, I would agree with what her Honour said, having regard to theadmitted fact that s 592 was not pleaded, and to the admitted fact that the claimant owned a very small parcel of shares in the opponent company, being a parcel of shares for which a buy back offer had been made. On the former point, I note that s 592 subs (2) provides the directors of the insolvent company with individually focused defences, and it seems to me that that alone is a reason why it would be essential that any case based upon that should have been pleaded, and it was not. The highest the pleading went was to focus upon the insolvency of the subsidiary company, and the propriety of the conduct of the directors of the holding company. As regards the grounds upon which Brownie J refused to order the winding up of the company, I put to one side the question of whether the defendant was entitled to say it had not come to court to meet the case, although I do note that, by concession of counsel, it was never part of the pleading that winding up on the failure of substratum ground was a ground of relief. To my mind his Honour was entitled, without error, to conclude that a previous buy back offer addressed to a small minority shareholder was a discretionary basis for refusing the relief that was belatedly sought. I do not consider anything has been advanced to show that her Honour erred in the application of the principles concerning a stay, as laid down by this Court in Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685. The passage to which we were taken, atp 695, does not on my URJ MANGRAVITI v TRIDEN CORPORATION LIMITED (Mason P) 3 reading indicate that prospects of success are irrelevant, and her Honour was entitled to take into account her conclusion, with which I respectfully agree, that the prospects of challenging an essentially discretionary judgment on the part of Brownie J were very slight. I would refuse the application with costs. Meagher JA. Yes, I likewise. Sheller JA. I agree with the President, and I would refuse the application with costs. Mason P. That is the order of the Court. Orders accordingly.