Supreme Court New South Wales Medium Neutral Citation: In the matter of RUS Holdings (Australia) Pty Limited [2012] NSWSC 1075 Hearing dates: 24 August 2012 Decision date: 24 August 2012 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Plaintiffs authorised on an interim basis and subject to specified conditions to institute and prosecute proceedings in the name of and on behalf of the First and Second Defendants. Details consequential orders made. Catchwords: CORPORATIONS - Jurisdiction of court to grant leave to bring derivative proceedings under Corporations Act 2001 (Cth) s 237 nunc pro tunc - Whether absence of leave is a matter which goes to jurisdiction - Whether leave should be granted under Corporations Act 2001 (Cth) ss 236 and 237 - Satisfaction of court as to whether a serious question to be tried exists. Legislation Cited: - Corporations Act 2001 (Cth) ss 232, 233, 236-237, 236, 237, 241, 459G Cases Cited: - Berowra Holdings Pty Ltd v Gordon [2006] HCA 32; (2006) 225 CLR 364 - David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 - Emanuele v Australian Securities Commission [1997] HCA 20; (1997) 188 CLR 114 - Maher v Honeysett and Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 - Re Testro Brothers Consolidated Ltd [1965] VR 18 - South Johnstone Mill Ltd v Dennis [2007] FCA 1448; (2007) 163 FCR 343; 163 FCR 343; 64 ACSR 447 Category: Interlocutory applications Parties: Vincent Martin (First Plaintiff) Valzan Pty Limited (Second Plaintiff) RUS Holdings (Australia) Pty Limited (First Defendant) RUS Mining Pty Limited (Second Defendant) Hebei Jikai Industrial Group Co Limited (Third Defendant) Representation: Counsel: M. Condon (Plaintiff) D. Pritchard SC (Third Defendant) Solicitors: Crisp Lawyers (Plaintiff) Wang & Associates (Third Defendant) File Number(s): 12/262277 Judgment - EX TEMPORE 1By Originating Process filed on 22 August 2012, Mr Vincent Martin and Valdan Pty Ltd, a company in which he has an interest, seek orders under ss 232, 233, 236 and 237 of the Corporations Act 2001 (Cth) in respect of alleged oppressive conduct relating to the affairs of RUS Holdings (Australia) Pty Ltd ("Company"). The alleged oppressive conduct includes a failure by the company to apply to set aside a statutory demand issued by Australia Mining Machinery Group Pty Ltd ("AMM"). Relevantly, the Plaintiffs seek, at a final hearing, orders under ss 236 and 237 of the Corporations Act giving leave to the Plaintiffs forthwith to bring proceedings on behalf of the Company to set aside the statutory demand, and leave to bring proceedings on behalf of another entity, RUS Mining Services Pty Ltd ("RUS Mining") to bring proceedings to set aside a further statutory demand issued by AMM addressed to that entity. 2The application for leave to bring proceedings to set aside the statutory demands raises a significant practical issue. An application to set aside a statutory demand under s 459G of the Corporations Act may only be made within 21 days after the statutory demand was served, excluding the day of service, and the court has no power to extend the time for service of an application under that section: David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265. 3I will , with Counsel's consent, elaborate briefly in this judgment on an issue which arose in the course of submissions. Mr Pritchard SC, who appears for the Third Defendant, Hebei Jikai Industrial Group Co Limited ("HJI"), which is the majority shareholder in the Company, pointed in submissions to the possibility that the Plaintiffs could commence applications to set aside the statutory demands in the companies' names without first obtaining leave under s 237 of the Corporations Act, and the Court could later grant such leave, nunc pro tunc, at a final hearing. The Court may grant leave to bring derivative proceedings under s 237 of the Corporations Act nunc pro tunc: Maher v Honeysett and Maher Electrical Contractors [2005] NSWSC 859; South Johnstone Mill Ltd v Dennis [2007] 163 FCR 343; FCA 1448; (2007) 64 ACSR 447 at [56]. Generally, the absence of leave granted prior to the commencement of proceedings is not a matter which goes to jurisdiction, but is an irregularity capable of correction by the Court: Re Testro Bros Consolidated Ltd [1965] VR 18 at 33-34; Emanuele v Australian Securities Commission [1997] HCA 20; (1997) 188 CLR 114 per Dawson J at 125, per Toohey J at 129, per Kirby J at 152-158; Berowra Holdings Pty Ltd v Gordon [2006] HCA 32; (2006) 225 CLR 364 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ at [33]-[34], per Kirby J at [86]. There may be a more difficult question whether those principles will assist, given the strictness of the time limit in s 459G of the Corporations Act, so that an application to set aside a statutory demand brought within the 21 day period without such leave would be effective when such leave were later granted. I do not consider it is necessary to resolve that question for the purposes of this application since there is another course available to the Court that will appropriately preserve the respective parties' positions pending a final hearing. 4The court has power to make an interim order in an application for leave brought under ss 236-237 of the Corporation Act. I would understand that power, in an appropriate case, to extend to an interim order authorising the taking of a step which is necessary to preserve the status quo pending the determination of a substantive application for leave under ss 236 and 237 of the Corporations Act. In the unusual situation where there is a time period for the commencement of an application to set aside the statutory demand that cannot be extended by the Court, it seems to me that the commencement of proceedings to set aside that demand is such a step. 5In the present case, HJI appears in the proceedings. The Second and Third Defendants, the Company and RUS Mining, do not appear, because the Shareholders' Agreement provides that legal proceedings cannot be commenced without the consent of a specified percentage of shareholders which has not yet been obtained. The Plaintiffs and HJI together hold 85 per cent of the shares in the Company, which in turn holds the entirety of the shareholding in RUS Mining. The Plaintiffs and HJI have, sensibly, reached agreement between them without admissions as to a regime which will allow the matter to proceed in an orderly way, without the need for an urgent determination whether leave should be granted on an interlocutory basis. I will make orders, by consent and without admissions, as between the Plaintiffs and HJI to implement that regime. 6The fact that the Plaintiffs and HJI hold the substantial majority of the shares in the Company and the substantial majority of the indirect economic interests in RUS Mining supports the view that those orders can properly be made so far as they affect those entities. However, it is nonetheless necessary that I be satisfied that I can make those orders, to the extent there remains a minority interest in the Company. 7On the evidence before me, and on an interlocutory basis, I am satisfied that a serious question to be tried exists as to whether an order should be made under ss 236 and 237 of the Corporations Act to authorise the commencement of proceedings to set aside the statutory demands, in that a serious question to be tried exists as to the Plaintiffs' ability to satisfy each of the five requirements specified under s 237 of the Corporations Act for the grant of such leave. That is, of course, an observation in a somewhat tentative way, addressed to the threshold whether a serious question to be tried is established, and says nothing as to the outcome of such an application at a final hearing. I am comfortably satisfied that the balance of convenience supports the grant of an interim order to permit the commencement of proceedings to set aside the statutory demands. The balance of convenience favours that course because the commencement of those proceedings does not ultimately prejudice the interests of any party, where the application for leave will be determined, on the timetable proposed by the parties, before any determination of a substantive application to set aside the statutory demands. On the other hand, a failure to grant such leave on an interim basis would arguably prevent the application being brought to set aside the statutory demands (subject to the question whether leave could later be granted nun pro tunc which I noted above), and give rise to a presumption of insolvency as against the companies, which would have significant adverse impacts upon the companies and those interested in them if that presumption was not warranted. For these reasons, I consider that I can properly make the interim order that is contemplated by the parties' consent orders, so far as it may affect the interests of the companies and, indirectly, any minority interests in those companies. 8Accordingly, I will make the following orders. By consent and without admissions as between the Plaintiffs and the Third Defendant and upon the usual undertaking as to damages given to the court by the Plaintiffs by their counsel, the Court orders: 1. Pending hearing and determination on a final basis of the Plaintiffs' application ("the Application") for leave to institute and prosecute proceedings in the name of and on behalf of the First and Second Defendants to set aside statutory demands issued by Australia Mining Machinery Group Pty Ltd dated 5 August 2012 and addressed to the First and Second Defendants, the Plaintiffs be authorised on an interim basis under s 241 of the Corporations Act to institute and prosecute such proceedings in the name of and on behalf of the First and Second Defendants. 2. The Defendants serve any evidence in opposition to the Application on or before 7 September 2012. 3. The Plaintiffs serve any evidence in reply on or before 14 September 2012. 4. The Application be tentatively returnable for hearing on 19 September 2012. 5. Upon request, the Plaintiffs shall provide to the Third Defendant copies of all documents filed and/or served in the proceedings to set aside the statutory demands and any correspondence with the Defendant in those proceedings. 6. Liberty to apply on 48 hours notice or such shorter period as a judge of the court may allow, specifying the orders which are sought. 7. The Court makes the usual order for hearing. 8. These orders may be entered forthwith. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 September 2012