Braga v Braga Consolidated Pty Ltd [2002] NSWSC 603

New South Wales Supreme Court

CITATION : Braga v Braga Consolidated Pty Ltd [2002] NSWSC 603 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2678/02 HEARING DATE(S) : 6 and 7 June 2002 JUDGMENT DATE : 7 June 2002

Gina Gordana Braga (P) PARTIES : Braga Consolidated Pty Limited (D1) Divna Vracarevic (D2) JUDGMENT OF : Hamilton J

COUNSEL : M B Evans (P) No appearances (D1 & 2) SOLICITORS : John McEncroe & Company (P) No appearances (D1 & 2) CATCHWORDS : CORPORATIONS [20] - Constitution and legal capacity - External litigation - In general - Action by member and officer against third parties - Application for leave to bring - Fulfilment of statutory requirements. LEGISLATION CITED : Corporations Act 2001 (Cth) ss 236 & 237 Cadwallader v Bajko [2001] NSWSC 1193 CASES CITED : Foss v Harbottle (1843) 2 Hare 461; 67 ER 189 Karam v Australia and New Zealand Banking Group Limited (2000) 34 ACSR 545 Shumyip Properties v Chatswood Investment & Development [2002] NSWSC 13 DECISION : Leave to member and officer to bring proceedings against third parties granted.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HAMILTON J

FRIDAY, 7 JUNE 2002

2678/02 GINA GORDANA BRAGA v BRAGA CONSOLIDATED PTY LIMITED & ANOR JUDGMENT 1 HIS HONOUR: This is an application made on an originating process filed on 14 May 2002 for orders under s 237 of the Corporations Act 2001 (Cth) ("the CA") granting leave to the plaintiff Gina Gordana Braga to bring certain actions in the name of the first defendant Braga Consolidated Pty Limited. One of those actions is against the second defendant, Divna Vracarevic, who is a director and shareholder of the company. The other proceedings sought to be brought are against persons who are not officers or shareholders of the company, but are persons who are said to have obtained moneys from the company by improper means. 2 Section 237(1) of the CA provides that a member or officer of a company may apply to the Court for leave to bring proceedings on behalf of the company. The section goes on to provide: "(2) 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) 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. (3) 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. The director's belief that the decision was in the best interests of the company is a rational one unless the belief is one that no reasonable person in their position would hold.