“You can’t bring your derivative suit; an oppression claim does that job!”
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Ps, shareholders in a Co that produced fire collars and similar products for the building industry, sought leave to bring derivative proceedings on behalf of the Co.
The relevant IP for the Co was held in a unit trust with TCo as trustee.
Each of the Ps and the Ds were shareholders in Co and TCo, and unitholders in the trust: [2]
The Ds were directors of Co and TCo.
The relationship between the parties began to deteriorate from around 2014, when P1’s employment by the Co was terminated. From around this time the Ps wanted to sell their shares: [3]
First, the Ps said the Ds caused an improper capital raising by TCo, who then purchased and licensed back some of the Co’s assets. The Ps said this arrangement was on uncommercial terms with the impact of diluting the Ps’ interests: [6]
Second, the Ps said the Ds founded NewCo, and caused the Co to supply NewCo with products NewCo would then sell overseas at a profit. The Ps say the Ds caused the Co to provide services to NewCo on terms not beneficial to the Co: [7]
The Ps wanted leave to bring a suit chasing the Ds including for breaching their contract with the Co and breaching their duties to the Co. They brought additional claims including pursuant to s233 of the CA: [8]
The Ps said their derivative claims were “strong”, and would be pursued at no cost to the Co as the Ps would fund and indemnify the Co for any costs order. The Court noted the oppression claim would be brought in any case: [14]
The real debate surrounded whether the derivative suit was in the best interests of the Co: [15]
For leave to be granted the Court must be satisfied it *is* in the Co’s best interests that leave be granted; not that it could be or is likely to be: [17]
The Court noted it needed to consider whether the Ps could obtain relief from means other than forcing the Co to litigate against its will: [19]
While not determinative the Ps’ Statement of Claim revealed the dispute was really one between shareholders, and another means of achieving a similar result to the derivative suit is the oppression proceedings: [20]
The Court noted authority that the alleged breaches of duty could be accounted for in the valuation of the Ps’ shares in any buyout relief that might be available in the oppression claim: [22]
The Court did not grant the Ps leave to bring a derivative suit: [24]
The Court considered it was not in the best interest of the Co for a derivative suit to be brought where similar relief could be obtained by Ps by other means, and without involving the Co in litigation. It was not shown by Ps that the oppression relief would be inadequate: [23]

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