Supreme Court New South Wales Medium Neutral Citation: Pierce Patrick Cody v Live Board Holdings Limited ACN 117801242 [2014] NSWSC 820 Hearing dates: Wednesday, 18 June 2014 Decision date: 18 June 2014 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Leave for statutory derivative action not granted Catchwords: CORPORATIONS - members rights and remedies - application for leave to bring proceedings under s 236 - whether it is probable that the company will not itself bring the proceedings - held, it is - whether there is a serious question to be tried Legislation Cited: (Cth) Corporations Act 2001, s 237 1317 Cases Cited: Cody v Live Board Holdings Limited [2014] NSWSC 78 Category: Interlocutory applications Parties: Pier Blue Pty Ltd (ACN 117 792 426) (first applicant) Costa Koulis (second applicant) Live Board Holdings Limited (ACN 117 801 242) (first respondent) Pierce Patrick Cody (second respondent) Finola Anne Burke (third respondent) Richard Charles Ochojski (fourth respondent) Solitaire Capital Pty Ltd (fifth respondent) Cody Investments Pty Limited (sixth respondent) Ross McCreath (seventh respondent) Ed St John (eighth respondent) Randal Leed-Du Toit (ninth respondent) Avapple Nominees Pty Limited (tenth respondent) P.J. Inge Executive Superannuation Fund Pty Ltd (eleventh respondent) Wilnix Super Pty Ltd (twelfth respondent) Paul Adam Shipley (thirteenth respondent) Catherine May Kenny (fourteenth respondent) Robert Mactier (fifteenth respondent) Anna Houssels (sixteenth respondent) Bruce Michael Mann (seventeenth respondent) Representation: Counsel: G Preston (applicants) Solicitors: Shine Lawyers (applicants) File Number(s): 2013/359378 Judgment 1HIS HONOUR: Pursuant to paragraph 7 of an interlocutory process filed by way of cross-claim on 6 December 2013, the applicants Pier Blue Pty Limited and Costa Koulis seek the following relief: (a)Pursuant to (Cth) Corporations Act 2001, s 237, leave be granted to the first applicant to bring proceedings on behalf of LBHL against Pierce Patrick Cody, Finola Anne Burke and or Richard Charles Ochojski; (b)Declare that Pierce Patrick Cody, Finola Anne Burke and or Richard Charles Ochojski have breached their duties to LBHL pursuant to Corporations Act, ss 180, 181 and 182, and in breach of their fiduciary duty to LBHL; (c)Pursuant to Corporations Act, s 1317, Finola Anne Burke and or Richard Charles Ochojski compensate LBHL arising from their breaches of Corporations Act, ss 180, 181 and 182, or alternatively, pay equitable compensation or account to LBHL arising from their breach of fiduciary duty; (d)Pierce Patrick Cody pay damages to LBHL for breach of the agreement between LBHL and Pierce Patrick Cody. 2Before the court today is only the application for the order in paragraph (a) namely, for leave pursuant to Corporations Act 2001, s 237, for Pier Blue to bring proceedings on behalf of the respondent LBHL against its directors Pierce Patrick Cody, Finola Anne Burke and Richard Charles Ochojski. 3Pier Blue is a shareholder in LBHL and thus has standing to apply for leave pursuant to s 237. 4The preconditions to a grant of leave under s 237 are set out in subsection (2) and include (a), that it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or the steps in them; and (d), that if the applicant is applying for leave to bring proceedings, there is a serious question to be tried. 5It may well be that there are serious questions to be tried for the relief claimed in paragraphs 7(b), (c) and (d) of the interlocutory process; however, the precise form that the relevant causes of action will take has not been sufficiently articulated in the form of a draft pleading or otherwise to enable the Court to conclude that there is such a serious question to be tried. Leave under s 237 is granted not to bring proceedings generally, but to bring specific proceedings, and for that purpose it is necessary to know the cause of action relied on and the material facts asserted to constitute that cause of action. As I say, it may well be that there are ample serious questions to be tried; but, as presently minded, I would not be inclined to grant leave pursuant to s 237 until I have seen a draft pleading articulating those causes of action. 6But the more fundamental problem at this stage is paragraph (a) of s 237(2). As a result of the judgment I delivered on 17 February 2014, Cody v Live Board Holdings Limited [2014] NSWSC 78, it appears to follow that the share issue by which the present first applicant ceased to be the controlling shareholder was invalid. In any event, that is the present applicant's contention, and the correspondence put before the court seems to indicate that the present directors of the company concede that to be so. In other words, Pier Blue is, or is entitled to be, the controlling shareholder of the company. 7The existing directors -Mr Cody, Ms Burke and Mr Ochojski - have indicated that they propose to resign as directors, and have invited Mr Koulis to nominate replacement directors. In other words, it seems to me that it is probable that Mr Koulis could sufficiently gain control of the company, that it would itself bring misfeasance proceedings against the former directors, either through their resignation, as they have foreshadowed, or through his using his control to remove them. 8In those circumstances, I am entirely unable to be satisfied that it is probable that the company will not itself bring the proceedings. To the contrary, it seems to me likely that Mr Koulis can bring about a situation in which the company will itself bring the proceedings. 9In those circumstances, at least on the present material, I am not disposed to grant leave pursuant to s 237 for a statutory derivative action, since it seems to me that no good reason has been established why the company itself will not bring the proceedings. 10I will not at this stage formally dismiss the claim for relief in paragraph 7(a), lest it be desired to renew it at a later stage, but I am not at this stage prepared to grant that relief. ********** 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: 12 December 2014