“Let me make the company chase the directors!”

"The directors aren't paying any rent!"

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P, a shareholder, applied to the Court for leave to sue a Co’s directors on behalf of the Co – a “derivative suit”.

“I want indemnity costs for the whole thing because your claim was so bad!”

“You’re too poor to stand in their shoes!”

“Can we get permission to appeal?”

A Co was placed into liquidation. A member was granted leave to commence a derivative action: [1]

“So are we in partnership, or not?”

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A claimed to own property and was in financial trouble. It agreed with R that A would sell the properties to R and A would help develop them and share profits: [3], [4], [143]

This arrangement fell apart because A didn’t own the properties: [6]

R did buy the properties from the mortgagee in possession and – speaking broadly – discussions progressed further on the basis A would still play a role: [8], [43]

The parties couldn’t agree on how to proceed and relations broke down: [9], [49]

A claimed to be in partnership with R, and that R breached its partnership duties to the tune of $6M: [13], [143]

A said that, among other things, the “general tenor” of the agreement and the profit share element meant it was a partnership agreement: [146]

The Court disagreed.

There was no express term that R would own the properties on behalf of the partners, or provision of liability of one partner for a co-partner’s dealings; references to “the project” were not indicia of partnership; and references to “partners” in early drafts of the document had been removed in the final version: [164 – 170]

“So we’re dissolving the partnership. What next?”

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One group. 6 pharmacies.

3 are run by partnerships between 3 pharmacists. The 4th is run by a partnership between those 3 pharmacists, and one other. The 5th and 6th are run by companies owned by companies controlled by the 3 pharmacists.

The parties were unable to work together: [18]   Negotiations with a view to an exit lead nowhere: [19]

Further, the threat of the financier – who had become aware of the disputes – calling in its loans loomed: [20]

The Court was satisfied all 6 businesses ought to be wound up on the just and equitable basis: [21], [29] 

All parties agreed, in substance: [62] 

Extensive consideration was given to the question of costs.    Without ventilating rights and wrongs, the Ps had submitted the owners couldn’t work together and dissolution would be just and equitable: [58] 

The Ds agreed.

As the Ps bore the cost of preparing the necessary evidence, the Court ordered that those costs were to borne from partnership or company assets as the case may be, with the Ds to bear their own: [61], [66]

"The liquidator personally, or the company?"

___

Judgment was handed down confirming Co A was a secured creditor of Co B (in liq): [1] 

The next question was: who pays Co A’s legal costs? Co A sought to have Co B’s liquidator, in his personal capacity, pay. 

A liquidator will be personally liable for costs in “exceptional circumstances” due to unreasonable conduct: [8] 

The Court considered the facts to form a view about reasonableness.

Early in the liquidation, the liquidator behaved as if Co A was a secured creditor including sending an email Co A described as an ‘undertaking’ to that effect: [21], [22]

Later, the liquidator pivoted from this position (apart from admitting that a nominal sum was secured): [24]

Land, which was Co B’s chief asset, was sold. The proceeds were applied to, among other things, the liquidator’s remuneration: [25]

The liquidator’s change from first accepting Co A was secured creditor and then bitterly [36] resisting that suggestion was self-interested: [46]

It was also unreasonable and unnecessary, meaning the litigation was provoked by the liquidator, such that Co A’s legal costs ought to be personal visited on him: [46]

"Stop that! Or I'll get the Court to stop you." 

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The granting of an interlocutory injunction - a binding Court order that *immediately* stops a party doing something - is often complex.

Speaking broadly and loosely, to get an interlocutory injunction you have to (i) convince the Court your claim is strong; (ii) convince the Court an injunction is more appropriate than an order for the payment of money; and (iii) give an undertaking to pay damages if the Court orders it.

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P and D entered into an agreement where D promised not to make disparaging comments about various parties.

Despite the agreement, D went ahead and made disparaging comments: [3]  P sought an interlocutory injunction to stop him.

With admirable economy, the Court found P had an strong case and that damages would not be an adequate remedy for P: [7]

The injunction was granted.

“Sue a liquidator? First, get through us.”

 ___ 

The liquidators of 2 Cos entered into a deed with a 3rd party. The deed assigned trade marks the liquidators thought the Cos owned: [38], [39]

The Ps said the liquidated Cos did not own the marks, having previously abandoned them: [64]

Common law rights in the abandoned marks arose, meaning other parties owned them: [74]

The Ps sued the liquidators alleging loss from the Cos assigning marks they didn’t own.   To sue a liquidator, you need the Court’s consent: [81]

The negligence claim failed as the Ps were found not to be vulnerable. It was in their power to clarify the ownership position for the liquidators, but chose not to: [104]

The misleading and deceptive conduct claim failed as the sale was not entered into *by the liquidators* “in trade and commerce”: [121]

Nor did the Ps establish their own reliance on the representations in the deed, instead “relying” on the 3rd party’s reliance; an intriguing proposition: [125]   Further: the Dirs of the liquidated Cos, who were also Dirs of the Ps (!) breached their duties to assist the liquidators, provided inadequate information, and engaged in “phoenix-like” conduct: [129]

For the above reasons, the claim failed. Costs followed: [130]