Power v Ekstein [2010] NSWSC 137 (3 March 2010)

Last Updated: 4 March 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Power v Ekstein [2010] NSWSC 137


JURISDICTION:
Equity

FILE NUMBER(S):
2004/00181906

HEARING DATE(S):
1 December 2009

JUDGMENT DATE:
3 March 2010

PARTIES:
Kaaren Jarmila Power (Plaintiff/Applicant)
Paul George Ekstein (First Defendant/Respondent)
Elysee Pty Ltd (Second Defendant/Respondent)
Boucher & Muir Holdings Pty Ltd (Third Defendant/Respondent)
Boucher & Muir Pty Ltd (Fourth Defendant/Respondent)
H P Holdings Pty Ltd (Fifth Defendant/Respondent)
Newtown & Co Pty Ltd (Sixth Defendant/Respondent)
Paul Ward-Harvey (Seventh Defendant/Respondent)
Sydney George Frish (Eighth Defendant/Respondent)
David Victor Frish (Ninth Defendant/Respondent)
D F Holdings Pty Ltd (Tenth Defendant/Respondent)
Abdul A Azam (Eleventh Defendant/Respondent)

JUDGMENT OF:
Austin J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
D A Smallbone with D W Rayment and D Petrusanko (Plaintiff/Applicant)
B Walker SC with S J Burchett (First to Sixth Defendants/Respondents)
J M Ireland QC with J F Burn (Eighth to Eleventh Defendants/Respondents)

SOLICITORS:
Holman Webb (Plaintiff/Applicant)
Horowitz & Bilinski (First to Sixth Defendants/Respondents)
D C Balog & Associates (Eighth to Eleventh Defendants/Respondents)


CATCHWORDS:
CORPORATIONS
statutory derivative action
whether derivative claims may be added to proceedings seeking relief against oppression and raising other matters
whether companies, already joined as defendants, are required to become plaintiffs
whether a serious question to be tried
appropriate formal orders
application to limit use of companies' funds in the litigation and to require independent legal representation

LEGISLATION CITED:
Corporations Act 2001 (Cth)
s 233
236
237


CASES CITED:
AW & LM Forrest Pty Ltd v Beamish [1998] NSWSC 442; (1998) 146 FLR 450
British American Tobacco Australia Services Ltd v Blanch [2004] NSWSC 70
Cassegrain v CTK Engineering Pty Ltd (2005) 54 ACSR 249
[2005] NSWSC 495
Chahwan v Euphoric Pty Ltd trading as Clay & Michel [2008] NSWCA 52
Club Flotilla (Pacific Palms) Ltd v Isherwood (1987) 5 ACLC 1027
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688
[1998] NSWSC 138
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672
[2001] NSWCA 97
Flora trading as Flora Constructions v Budget Demolition & Excavation Pty Ltd [2008] NSWSC 386
Gerard Cassegrain & Co Pty Ltd v Cassegrain [2010] NSWSC 91
Gosford Christian School Ltd v Totonjian (2006) 201 FLR 424
[2006] NSWSC 725
Grace v Grace [2007] NSWSC 6
Harry S Bagg's Liquidation Warehouse Pty Ltd v Whittaker (1982) 44 NSWLR 421
Hawksford v Hawksford [2005] NSWSC 463
Hillig v Darkinjung Pty Ltd [2008] NSWCA 75
Massey v Wales (2003) 57 NSWLR 718
[2003] NSWCA 212
Metropolitan Petar v Mitreski [2008] NSWSC 243
Morris v Kanssen [1946] AC 459
Oceanic Life Ltd v HIH Casualty & General Insurance Ltd (1999) 10 ANZ Insurance Cases 61-438
[1999] NSWSC 292
Power v Ekstein [2000] NSWSC 905
Power v Ekstein [2009] NSWSC 130
Re a Company (No 00450 of 1988)
ex parte Johnson [1992] BCLC 701
Re a Company (No 1126 of 1992) [1994] 2 BCLC 146
Re DG Brims & Sons Pty Ltd (1995) 16 ACSR 559
Re Milgate Developments Pty Ltd [1993] BCLC 291
Sellar v Lasotav Pty Ltd [2008] FCA 1766
Swansson v RA Pratt Properties Pty Ltd (2002) 42 ACSR 313
[2002] NSWSC 583
Talisman Technologies Inc v Queensland Electronic Switching Pty Ltd [2001] QSC 324
Transmetro Corporation Ltd v Kol Tov Pty Ltd (2009) 71 ACSR 582
[2009] NSWSC 350

TEXTS CITED:


DECISION:
1. Subject to Order 2
ORDER under s 237 of the Corporations Act 2001 (Cth) that leave be granted to the plaintiff
nunc pro tunc
to bring proceedings on behalf of each of the second
third
fourth
fifth and sixth defendants ("the Defendant Companies")
by filing and prosecuting the Amended Statement of Claim in these proceedings verified by her on 17 March 2009
to the extent that the Amended Statement of Claim asserts or seeks relief in respect of a cause or causes of action of any of the Defendant Companies.
2. Subject to further order:
(a) the commencement and operation of Order 1 is suspended
(b) Order 1 will not take effect until the plaintiff files with the Court her written undertaking to the Court to pay and bear and indemnify each of the Defendant Companies against all costs
charges and expenses of and incidental to the bringing and continuation of the derivative claims for which leave is granted ("the Undertaking")
(c) Order 1 will take effect upon the filing of the Undertaking
provided that the Undertaking is filed on or before 22 March 2010.
3. Upon the plaintiff giving the usual undertaking as to damages
ORDER until further order that the first and ninth defendants and each of them be restrained
by themselves
their servants or agents
from causing or permitting:
(a) all and any funds or other property of the third
fourth
fifth and sixth defendants ("the Relevant Companies"
each a "Relevant Company") to be applied for the defence or conduct of these proceedings
including the cross-claim
otherwise than for the purposes stated in Order 4 ("the Permitted Purposes")
and
(b) the Relevant Companies to take any steps in the proceedings
otherwise than for the Permitted Purposes.
4. The Permitted Purposes are
in respect of the Relevant Companies or any Relevant Company:
(a) the defence or conduct of the proceedings to the extent that the plaintiff seeks a compulsory purchase order against a Relevant Company or Relevant Companies
or seeks relief challenging the validity of corporate actions of a Relevant Company or Relevant Companies
(b) complying with obligations in respect of discovery
(c) any purpose agreed by the plaintiff's solicitor in writing
and
(d) the defence or conduct of the proceedings with the prior leave of the Court.
5. Upon the plaintiff giving the usual undertaking as to damages
ORDER until further order that the first and ninth defendants and each of them be restrained
by themselves
their servants or agents
from causing or permitting the Relevant Companies or any Relevant Company to retain or continue to retain Claudius Bilinsky to act for them or it in the proceedings.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST


AUSTIN J

WEDNESDAY 3 MARCH 2010

2004/00181906 KAAREN JARMILA POWER V PAUL GEORGE EKSTEIN & ORS

JUDGMENT

1 HIS HONOUR: These reasons for judgment concern two interlocutory processes filed on behalf of the plaintiff (Ms Power) in matter No 6590 of 2004. By an interlocutory process filed on 23 June 2009, the plaintiff seeks leave under s 237 of the Corporations Act 2001 (Cth) to proceed in the names of the second to sixth defendants ("the Companies") in respect of certain identified claims to be made principally against the first defendant (Mr Ekstein) and the ninth defendant (Mr David Frish). The Companies are under the practical control Mr Ekstein and Mr David Frish, who are the main targets of the claims for which leave is sought.

2 By an interlocutory process filed on 25 June 2006 plaintiff seeks orders broadly having the effect of restraining the solicitor for Mr Ekstein from acting for the Companies and restraining Mr Ekstein and Mr David Frish from taking steps in the proceedings or having access to corporate funds of the purposes of their defence. She seeks to assert the principle that companies should not take an active role in shareholder disputes, and she contends that Mr Ekstein and Mr David Frish have a conflict between interest and duty in their position as "acting" directors of the Companies.

3 The principal opponent of these interlocutory applications was Mr Ekstein, the first defendant, though his submissions in opposition were also made on behalf of the second to sixth defendants, that is to say the Companies. The eighth to eleventh defendants (broadly, the Frish interests) also appeared, by counsel, to oppose the applications. I shall refer to them together as the respondents.

1. Background facts

4 During his lifetime, Otto Ekstein conducted a successful pharmaceutical business in partnership with Sydney Frish, the eighth defendant (who died in 2009), through a company called Boucher & Muir Pty Ltd (the fourth defendant). They also made real estate investments, held through HP Holdings Pty Ltd (the fifth defendant) and Newton & Co Pty Ltd (the sixth defendant).

5 Boucher & Muir carried on and continues to carry on that pharmaceutical business, trading in the Pacific region through itself and at least one subsidiary. HP Holdings and Newton & Co are companies that held real estate at relevant times, and Boucher & Muir Holdings had no activities other than holding shares in Boucher & Muir and Newton & Co.

6 Generally speaking, the Ekstein family and the Frish family had equal shareholdings in these four companies ("the Ekstein/Frish companies"), although there were some shareholders from outside the families. The Ekstein/Frish companies used a corporate structure apparently designed to avoid death duties and facilitate income-splitting, by creating A and B classes of shares, which separated the rights of control (including the rights to direct the payment of dividends and to receive notice of and participate in meetings) from the rights to receive any declared dividends or surplus on winding up. The founders brought members of their respective families into the companies as minority holders of A class shares and, more widely, as holders of B class shares. The shareholdings in each class were divided equally between the two families, except for the employee shares in Boucher & Muir, and except also for the fact that in the case of Newton & Co, all of the B class shares were held by Boucher & Muir Holdings. Benefits were generally extracted from the companies by way of salary or fringe benefits and dividends were less frequently declared.

7 Otto Ekstein established an inter vivos discretionary family trust, the Otto Ekstein Family Trust, which held shares and other property. He was trustee, and his son Paul Ekstein became trustee after he died. Otto Ekstein also had a private company, Elysee Pty Ltd ("Elysee", the second defendant), which owns real estate and some cash. It has only one class of shares, and nearly all of the shares (1200 out of 1261) are held by or for the trustee upon the terms of the family trust. Minority holdings are held by various members of the Ekstein family including the plaintiff.

8 Otto Ekstein died on 13 May 1992. From that time his son Paul, the first defendant, has largely managed his interests with respect to Elysee and the jointly owned companies, initially with some input from the plaintiff, who is his stepsister. The estate of Otto Ekstein was substantial and the administration of the estate was delayed by a Family Provision Act claim by a former wife, and other matters.

9 Mr Ekstein and the plaintiff had a falling out in 1997, which has led to a protracted and bitter dispute between them as to the distribution of the property of the family trust and the estate of their late father and stepfather.

2. The plaintiff's "quasi-partnership" submissions

10 In her written submissions the plaintiff says that the basic problem for her has been that Paul Ekstein and David Frish seem to assume that it is open to them to go on running the empire in the same way that their fathers did, but without regard to the interests of the plaintiff (whom Otto Ekstein intended to benefit). The plaintiff's case is said to be that since the deaths of their fathers, Paul Ekstein and David Frish have taken the view that shareholders are not entitled to anything more than to enjoy the privileges of membership at the discretion of the controlling shareholders. She says that Paul Ekstein, David Frish and (until his death in 2009) Sydney Frish have, since the death of Otto Ekstein, run the Companies as their own, not providing information to the plaintiff, and taking nearly all of the income and much of the capital. She says they have set out to deprive her of any effective benefit from the Companies.

11 According to the submissions of the plaintiff, there was a quasi-partnership relationship between Otto Ekstein and Sydney Frish, as regards the Frish/Ekstein companies (that is, the third to sixth defendants). She alleges that the Frish/Ekstein companies formed and conducted subject to a common understanding and expectation of the founders that they would control the companies during their joint lives and be able to direct the destination of their respective interests afterwards. There is a dispute as to whether a partnership agreement dated 23 August 1984 in relation to the non-real estate trading companies has been abrogated or survives in the nature of a shareholders agreement reflecting the alleged common understanding and conferring buyout rights.

3. The 1998 proceedings

12 When he died Otto Ekstein was trustee of the family trust. After his death, his son Paul became trustee. The executor of Otto's estate was Paul Ward-Harvey, who is now the seventh defendant in the present proceedings. The family trust had been amended to permit the powers of the trustee to be exercised by will. In his will, Otto Ekstein purported to make testamentary gifts of property held by the family trust. The residuary clause was expressed to include property owned by the trust. By that clause Ms Power was to receive an undivided one half share of residue.

13 The 1998 proceedings were commenced by the plaintiff against Mr Ekstein and Mr Ward-Harvey, the latter specifically in his capacity as executor. Her pleaded claim was very detailed but her principal contentions were that the trust instrument had been varied to permit the exercise of powers by will, and by his will Otto Ekstein had determined the distribution date and the persons to be entitled to the trust. In the alternative, she submitted that the will was evidence of the wishes of Otto Ekstein with respect to the affairs of the trust and therefore was binding on the trustee pursuant to clause 25 of the trust instrument. Mr Ekstein opposed the relief sought by his stepsister, contending (inter alia) that the amendment to the trust instrument was void for uncertainty. The executor filed a cross-claim seeking declarations as to the proper construction of the will.

14 Judgment was delivered by Windeyer J on 14 September 2000: Power v Ekstein [2000] NSWSC 905. His Honour held, as a matter of construction of the will, that it did not operate as a determination that the distribution date under the trust was the date of death of the testator, or as a determination of the beneficiaries entitled as at the date of distribution. He said (at [27]):

"Insofar as he attempted by will to direct disposition of trust assets as part of his own assets that attempt by the testator failed."

He held that the executor was bound to distribute the estate assets in accordance with the terms of the will. However, he gave effect to clause 25 of the trust instrument, according to which upon the death of Otto Ekstein the trustee was required, as far as possible, to give effect to Otto Ekstein's wishes in regard to the affairs and management of the trust as evidenced by his will. He held that this provision was a clear and valid direction binding upon the trustee ([29]).

15 His Honour subsequently ordered the trustee to prepare a scheme to give effect to the deceased's wishes, and ordered him not to make any partition or distribution of the trust assets until after 28 days of giving notice of the scheme to the plaintiff. There was subsequently a lengthy period during which the trustee consulted with the executor and the plaintiff, and eventually he formulated a scheme and gave 28 days notice of it. The scheme dealt simultaneously with the distribution of the estate and the trust property, and took effect on 30 June 2003. Pursuant to the scheme, on 7 July 2003 Ms Power received the major share of the trust and the estate, being money and property to a total value of over $4 million. The trust was wound up on 21 January 2004.

16 Windeyer J had granted the plaintiff liberty to apply for an order for accounts, but she did not exercise the liberty to apply. On the other hand she complained in written submissions for the hearing before me that she had not received Mr Ekstein's accounts as trustee of the family trust, even as late as December 2009.

17 According to the submissions of the respondents, the plaintiff accepted the benefit of her distribution from the estate and the trust pursuant to the scheme, although she refused to admit that it satisfied her entitlements. In the written submissions made on behalf of the plaintiff, her position was explained a little differently:

"Having waited 11 years to get any part of her inheritance, she, by her solicitor, said that she was taking what she was getting under protest and on account of her entitlements and that a proper scheme ought to be formulated."

18 The written submissions for the plaintiffs also say:

"Prior to this there had already been much correspondence between solicitors by which Mrs Power sought to find out information to help her understand the affairs of the estate and the trust and various proposals that were being made to her and by which she complained about various inadequacies in what was being proposed. She received many evasive replies and little real co-operation, although rather more from Mr Ward-Harvey than from Mr Ekstein."

19 Windeyer J noted in his judgment that there were "numerous other claims" that were not addressed in argument, and he found it unnecessary to consider those clams (at [13]). The respondents to the present applications drew my attention to some of the claims made by the plaintiff in the 1998 proceedings, as follows:

(a) she alleged that

(i) Mr Ekstein had acted in bad faith in exercising his power of appointment (para 30 of the statement of claim);

(ii) he had failed to render accounts of the trust to her for several years (para 33);

(iii) he had made distributions of trust property in breach of trust (para 37);

(b) she sought orders for

(i) his removal as trustee (order 1);

(ii) an account of his dealings and transactions as trustee and payment by him of money found to be due on the taking of those accounts (order 2);

(iii) an injunction against payment to him of trust income, his fees and expenses (order 4);

(iv) the winding up and getting in of the assets of the companies and partnerships in which the estate or trust owned shares, and their administration with formal valuations under the will (order 10);

(v) the trustee personally pay the costs of all parties (order 13).

(c) she also sought a declaration as to her entitlements to specific benefits of the trust and the estate of her stepfather (order 7).

20 By her amended statement claim in the 1998 proceedings the plaintiff sought, in addition, orders that the trustee provide a list of assets, access to them, and all information relevant to their values, and dispose of them as declared or directed (order 12A).

4. The present proceedings

21 The plaintiff was not, in fact, satisfied with the distribution she received on 7 July 2003 under Mr Ekstein's scheme. She commenced the present proceedings on 6 December 2004, by originating process against the first to sixth defendants. Her statement of claim was filed on 15 March 2005. A useful summary description of the plaintiff's case as presented in her unamended statement of claim may be found in the judgment of White J in Power v Ekstein [2009] NSWSC 130 (11 March 2009), his Honour's judgment acceding to her application for leave to amend:

"7 It appears from the inventory of property prepared for probate purposes that the assets of the estate included a property at John Street, Avalon, money in various accounts, listed shares, certain loans, a half interest in the partnership between Mr [Otto] Ekstein and Mr Stanley [semble, Sydney] Frish, and shares in private companies. The shares held by the deceased in private companies included 100 "A" class shares and two "B" class shares in Boucher & Muir Holdings Pty Ltd, four ordinary shares in Elysee Pty Ltd, 56 "A" class shares and 112 "B" class shares in HP Holdings Pty Ltd, and 50 "A" class shares in Newton & Co Pty Ltd. Elysee is the second defendant. Boucher & Muir Holdings is the third defendant. Boucher & Muir Pty Ltd is the fourth defendant. HP Holdings and Newton & Co are the fifth and sixth defendants.

8 It appears that the plaintiff was named as a beneficiary of the trust. She also alleges that she is a member of Elysee, HP Holdings, Boucher & Muir and Newton & Co. She alleges that she is, or, in the alternative, was, until about 1 April 2004, a member of Boucher & Muir Holdings.

9 The plaintiff's allegations in the statement of claim (before amendment) include that the distribution of various assets from the estate and the trust to the plaintiffs on or about 7 July 2003 did not implement the wishes of Otto Ekstein. The plaintiffs allegations include the following.

10 First, she alleges that no adjustment was made to compensate for distributions of income which had been made from time to time by Paul Ekstein where the plaintiff did not receive 50 percent of the total amount distributed. The plaintiff pleads that the effect of clause 13(c) of the will was that Paul Ekstein was directed to distribute the assets and income of the trust in accordance with the provisions referred to in clause 10 of the will (the reference to clause 11 appears to be a mistake) so that the plaintiff should receive a half share of the income.

11 Secondly, the plaintiff alleges that the distribution made on 7 July 2003 purportedly required the plaintiff to surrender her entitlements in respect of a trust property at 148 Milson Road, Cremorne, which, it is said, was contrary to the wishes of Otto Ekstein, presumably because clause 9(c) of the will expressed Otto Ekstein’s intention that the plaintiff have the rights described in that clause in relation to flat 2 of that property. A summary sheet was tendered before me, which was said to have been drawn up by Paul Ekstein in conjunction with Mr Ward-Harvey. It was common ground that this document set out the basis for the distribution of trust and estate assets. The document provided for the plaintiff not to receive an interest in the Milson Road property, for which it was said she would receive compensation valued at $59,000.

12 Thirdly, the plaintiff alleges that the distribution failed to bring into account income from time to time derived from the property at 148 Milson Road, Cremorne.

13 Fourthly, the plaintiff alleges that the distribution failed to bring to account income from time to time of a trust property at 11 Samora Avenue, Cremorne. As part of the distribution, the Samora Avenue property was transferred to the plaintiff. In the summary document referred to above, a value of $1,400,000 was attributed to that property.

14 Fifthly, the plaintiff alleges that the Samora Avenue Cremorne property was overvalued when the distribution was formulated.

15 Sixthly, the plaintiff alleges that Paul Ekstein and Mr Ward-Harvey failed to obtain a formal valuation of a trust property at 2 Highbridge Road, Killara. In the summary of the distribution of trust and estate assets, the Killara property was to be retained for Paul Ekstein and Helen Ekstein and Paul Ekstein’s children as part of their one-half share of property to be received by them under clause 10(a)(ii). The summary sheet attributed a value of $675,000 to that property. The plaintiff alleges that this was an undervalue.

16 Seventhly, the plaintiff alleges that the distribution of assets did not implement the wishes of Otto Ekstein because it failed to deal with a life interest of Sonja Ekstein (Otto Ekstein’s third wife) in clause 9(a) of the will. The plaintiff alleges that Sonja Ekstein’s life interest was discharged by orders made under the Family Provision Act 1982 (NSW) by which she obtained an annuity in lieu of that life interest. The plaintiff alleges that the life interest was property which ought to have been dealt with in accordance with the wishes expressed in clause 10 of the will.

17 Eighthly, the plaintiff alleges that Paul Ekstein has failed generally to account for income of the trust since the death of the late Otto Ekstein.

18 Ninthly, she alleges that certain shares in Elysee were trust property and that in valuing these shares, Paul Ekstein failed to make adjustments or credits impartially and at full value in favour of Elysee for his or his firm’s occupation of a portion of premises at 8 Burton Street, Kirribilli owned by Elysee. It appears from the summary sheet that in the distribution, the shares in Elysee were trust assets retained for, or distributed to, Helen Ekstein, Paul Ekstein and his children. The summary sheet attributed a value of $2,601,603 to the shares in that company. The plaintiff alleges that this is an undervalue because account was not taken, or not properly taken, of the value of Paul Ekstein’s occupation of part of the property. The plaintiff says that had the assets of Elysee been valued attributing a market rental to that occupation, a higher value would have been attributed to the shares in Elysee.

19 Tenthly, the plaintiff alleges that in valuing the shares in Elysee, Paul Ekstein failed to obtain formal valuations of the assets of that company and did not value the shares in the company upon a notional winding-up basis. The plaintiff says that Otto Ekstein’s wishes expressed in his will included the wish in clause 10(c)(i) which, read with clause 10(e), required a formal valuation of trust and estate assets.

20 Eleventhly, the plaintiff complains that shares held by Mr Ward-Harvey for the estate in the private companies, other than Elysee, namely, Boucher & Muir Holdings, Boucher & Muir, HP Holdings and Newton & Co, were distributed in specie instead of being valued. That distribution is said to be contrary to the wishes of Otto Ekstein expressed in clause 10(c)(ii) of the will which, it is said, provides that the half share to be distributed to the plaintiff should so far as possible exclude the assets of the trust, but include the John Street, Avalon property, such that a balancing amount be paid. It is alleged that Paul Ekstein asserted that the value of the shares in those companies was nominal but failed to provide information as to the true financial position of those companies and failed to obtain or seek any dividends or other return in respect of the shares, notwithstanding that he is a director of those companies and intimately acquainted with their affairs.

21 Twelfthly, the plaintiff alleges that in making the distribution of 7 July 2003, Paul Ekstein failed to bring into account the share in Boucher & Muir Holdings which it is alleged was and is trust property.

22 The statement of claim also alleges that Paul Ekstein has failed to account for his dealings with trust property. It is alleged that he has taken a profit from his position as trustee in that in his capacity as trustee, he has at all times held a controlling interest in the shares in Elysee, but has occupied or permitted a law firm in which he is interested to occupy a portion of premises owned by Elysee in Burton Street, Kirribilli without paying a proper market rental.

23 The plaintiff also complains about what she characterises as an expropriation, or attempted expropriation, of her shares in Boucher & Muir Holdings in favour of Paul Ekstein. It is alleged that on 29 March 2004, the directors of Boucher & Muir Holdings, including Paul Ekstein, purportedly resolved pursuant to Article 12 of that company’s Articles of Association, that shares of the plaintiff, Helen Ekstein and Misha David Ekstein be compulsorily transferred to Paul Ekstein, and that shares of various members of the Frish family be compulsorily transferred to Mr David Frish. It is alleged that the Articles did not authorise such a resolution, or that the resolution was a fraud on the power conferred by Article 12, and that the resolution involved breaches of fiduciary duty, a fraud on the minority, or oppression.

24 The plaintiff also alleges that Paul Ekstein breached his duty as trustee from 1993 in failing to obtain any return to the estate or to the beneficiaries of the trust in respect of the shares which formed part of the estate or which were trust property in Boucher & Muir Holdings, Boucher & Muir, HP Holdings and Newton & Co. The plaintiff alleges that he permitted the affairs of those companies to be carried on in a manner contrary to the interests of the members as a whole. She alleges that the affairs of those companies have been carried on in a manner oppressive to, unfairly prejudicial to, or unfairly discriminatory against the plaintiff. She alleges that she has not been provided with reasonable information as to the financial position and conduct of the affairs of Elysee, Boucher & Muir Holdings, HP Holdings and Newton & Co and complains that Paul Ekstein has not provided an account as trustee of the Otto Ekstein Family Trust.

25 This is but a summary of the claims made in the statement of claim. It is not exhaustive of the complaints made, but is sufficient for present purposes. No application is made to strike out any part of the existing pleading.”

22 It will be seen from White J's description that the gist of the original statement of claim was that Otto Ekstein's wishes were not met by the scheme of distribution made on 7 July 2003, because the plaintiff's share of the distribution was less than 50%, having regard to a number a detailed matters that are listed. It will also be seen that some of the allegations made in the 1998 proceedings against Mr Ekstein are repeated.

23 After the filing of the statement of claim, the proceedings moved rather slowly, although there was some interlocutory activity, including in particular a contested application by the plaintiff for discovery. In October 2007 the Registrar made an order dismissing the proceedings for want of prosecution. They were reinstated by Nicholas J after the plaintiff appealed against the Registrar's decision, outlining a substantially new case she proposed to make on the basis of discovered documents. Subsequently the plaintiff made an application for leave to amend her statement of claim in substantial ways, and White J granted leave subject to certain qualifications.

24 It appears that the application for leave to amend was stimulated, or at least in part, by documents received by the plaintiff in discovery on subpoena. In written submissions on the plaintiff's behalf at the hearing before me, counsel referred to a letter from Mr Ward-Harvey to Mr Ekstein requesting assistance in the matter of valuation of private company shares for the purposes the scheme of distribution. Mr Ekstein replied on 27 November 2002, addressing the proposed scheme of distribution and suggesting a meeting to prepare terms that were to be put to the Court (in the event, the Court was not asked to approve the scheme of distribution). Mr Ekstein commented that under the contemplated proposals, the sum to be paid to the plaintiff "would not include any premium for transfer of the private company shares but would include the transfer of half of those shares in specie to Kaaren". Mr Ekstein continued:

"The result of such orders would be that Kaaren would ... have a small minority interest in various ongoing private companies without the power to control, influence, or direct either the dividend policy of those companies or their winding up. It appears that Kaaren and her advisers do not appreciate this."

The plaintiff contends that such an outcome, which in fact is what happened, is inconsistent with the wishes of Otto Ekstein, to which which Mr Ekstein as trustee was obliged to give effect as far as possible by virtue of clause 25 of the trust instrument.

25 The amendments permitted by White J joined five additional defendants:

Mr Ward-Harvey as executor of the estate of the late Otto Ekstein as seventh defendant;

Sydney Frish as eighth defendant (Mr Frish is now deceased but there has not yet been any application to substitute his estate);

David Frish, some of Sydney Frish, as ninth defendant;

DF Holdings Pty Ltd, family company of David Frish, as tenth defendant;

Abdul Azam, an employee of the trading company and recipient as such an employee bonus shares, as eleventh defendant.

26 White J gave a general description of the proposed amendments:

“26 .... To put it very generally, relief is sought against Mr Sydney Frish and Mr David Frish for alleged breaches of fiduciary duty arising from their acting as directors of Boucher & Muir, Boucher & Muir Holdings, Newton & Co and HP Holdings. Leave is sought pursuant to s 237 of the Corporations Act 2001 (Cth) for the plaintiff to have leave to proceed in the name of the companies against them and against Paul Ekstein, or alternatively such relief is sought pursuant to s 233(1)(g) of the Corporations Act. Other relief under s 233 is sought in relation to the alleged oppressive conduct of the affairs of the companies, including orders for the compulsory purchase of shares. DF Holdings and Mr Azam are sought to be joined as defendants because the plaintiff contends that Paul Ekstein, Sydney Frish and David Frish have included their names as shareholders of Boucher & Muir when, according to the plaintiff, they are not shareholders. The plaintiff seeks rectification of the register.

27 The plaintiff alleges that Mr Ward-Harvey breached his duty as executor and seeks an order that the administration of the estate be conducted under the direction of the Court (although it appears to be common ground that the assets of the estate have all been distributed). An account is also sought against both Paul Ekstein and Mr Ward-Harvey upon a wilful default basis. An inquiry is sought for the payment by Mr Ward-Harvey of equitable compensation in respect of alleged breaches of duty as an executor. The alleged breaches of duty include Mr Ward-Harvey’s participation in a scheme for distribution of assets of the estate and the trust, but that is not the only alleged breach of duty.

28 Other amendments affecting the existing defendants include further allegations in relation to the operation of clause 25 of the trust deed and the will, in particular in relation to the distribution in specie of shares in Boucher & Muir Holdings, Boucher & Muir, HP Holdings and Newton & Co. The existing defendants complain that although the plaintiff does not in terms allege that such distribution of the shares in specie was fraudulent, that is the substance of her complaint. They say that the allegation is not sufficiently pleaded. Other allegations are pleaded in more elaborate detail.”

27 The amended statement of claim, filed on 17 May 2009, is a document running to more than 100 pages. In their written submissions, the respondents draw attention to some aspects of the claims that they say are new claims:

(a) the amended pleading claims, for the first time, that the executor and trustee were required by the will to have regard to a partnership agreement dated 23 August 1984 between Otto Ekstein and Sydney Frish (paras 19.1-19.5, 30.1);

(b) it claims for the first time that the executor and trustee were required to have the estate and trust shares in private companies valued (para 32D.10, paras 30.7-30.12);

(c) it claims for the first time that the will required the plaintiff and other beneficiaries holding shares in the family companies or the Frish/Ekstein companies to elect to surrender them or disposal under the will or compensate the estate of their value as a condition of benefiting under the will (para 21.12), and the executor and trustee were required, but failed, to cause them to make the election (paras 21.13 and 30.13);

(d) it claims for the first time that the will entitled her to the income of both trust and estate assets (paras 21.14-21.15);

(e) it claims that Mr Ekstein was in breach of trust in joining with Mr Ward-Harvey in formulating the scheme of distribution:

(i) on the basis of allegedly inaccurate values for the assets of the partnership, the trust and the estate, particularly of:

Elysee Pty Ltd by reason of the alleged lack of market rent for its office and unauthorised directors' or management fees paid to Mr Ekstein (paras 32D.10 & 13); and

Boucher & Muir, without adding back payments made since 1992 (para 32D.15);

(ii) without valuing, but distributing in specie, the estate's B class shares in the third to sixth defendants;

(f) it claims the plaintiff did not receive recorded trust distributions since 1994 (paras 34.1-34.4);

(g) it makes similar allegations of breach of trust against Mr Ward-Harvey in joining the scheme of distribution (paras 34.5-34.6) and failing to account to the administration of the State (paras 36.1-36.3);

(h) it complains of certain distributions to other beneficiaries upon termination of the trust, and distributions of shares in Elysee (paras 50.1-50.2);

(i) it claims irregularities in the conduct of the affairs of each of the corporate defendants since at least 1992, and in some cases much earlier, including the holding of members or will directors' meetings and appointment of directors (paras 55.1ff).

28 I have set out this catalogue because it gives sufficient detail to convey the flavour of the new allegations, which appear to operate over a vast evidentiary landscape. I have not recorded the critical observations made by the respondent about the scope of the extensions, which appear to me to be an attempt to re-litigate White J's decision to grant leave.

29 It is also worthwhile to set out briefly a summary, taken from the respondent's submissions, of the relief now claimed in the amended statement of claim, namely orders as follows:

(a) for the administration of the estate and trust by the Court, accounting and payment of compensation for alleged breaches of trust, including overturning the scheme of distribution and termination of the trust (orders 1-6.3 and 6.5-6);

(b) for the beneficiaries, including the plaintiff, to be put to their election whether to take under the will in respect of their and her shares in each of the defendant companies (order 6.4);

(c) in respect of Elysee:

(i) a declaration that Elysee has had no directors since 1992 (order 6.7);

(ii) leave under either s 233(1)(g) or 237 to bring proceedings on its behalf against Mr Ekstein for breach of ss 180, 181 and 182 in relation to the occupation of part of its building by his law firm "otherwise than for a fair rental" and for taking fees and for breach of fiduciary duty, presumably on the same grounds (order 7);

(iii) orders under s 233 and 242 for indemnity and compensation of Elysee by Mr Ekstein on the same grounds (orders 7.1 and 2);

(iv) payment of damages to the plaintiff under s 1324 (order 8);

(v) compulsory purchase by all the defendants of her shares in Elysee and Boucher & Muir Holdings under s 233 (order 12);

(vi) winding up under s 233 or s 461 (order 14);

(d) in respect of Boucher & Muir Holdings:

(i) declarations that the company has had no directors, and as to its directors, since 1992 (orders 8.1-8.4);

(ii) winding up under s 233 or 461 (orders 8.5 and 14);

(iii) leave under s 233 or 237 to bring proceedings on its behalf against Mr Ekstein, Mr Sydney Frish and Mr David Frish, and also Boucher & Muir, for:

breach of ss 180, 181 and 182 by participating in the proposal to compulsorily acquire B class shares, and

compulsory purchase of shares in Boucher & Muir under s 233, or

the winding up of Boucher & Muir;

(iv) leave under s 233 or 237 to bring proceedings on its behalf against Mr Ekstein, Mr Sydney Frish, Mr David Frish and Newton & Co for compulsory purchase of the shares in Newton & Co under s 233, or winding up of Newton & Co;

(v) indemnities for costs of such proceedings under s 233 and 242;

(vi) compulsory purchase by all the defendants of the plaintiff's shares in Boucher & Muir Holdings under s 233 (order 12);

(vii) compulsory purchase by Boucher & Muir Holdings with the other defendants of the plaintiff's shares in Elysee (order 12);

(e) in respect of Boucher & Muir:

(i) declarations that the company has no directors, and as to its directors since 1992 (orders 20-23);

(ii) declarations as to the share structure of the company, negating the class D and E shares and setting aside the issues to DF Holdings and Abdul Azam (orders 24-5);

(iii) declarations of invalidity of dividends paid since 1992 (order 26);

(iv) compulsory purchase of the plaintiff's shares by Mr Ekstein, Mr Sydney Frish and Mr David Frish under s 233 (order 27);

(v) winding up under s 233 or 461 (order 28);

(vi) leave to sue on its behalf under s 233 or 237 in proceedings against Mr Ekstein, Mr Sydney Frish, Mr David Frish and DF Holdings (order 29);

(vii) an inquiry as to all dividends and payments to the directors and DF Holdings since 1992 (order 30) and payment of compensation in equity under s 233, 1317H or 1324 (orders 31-7);

(viii) indemnities for costs of leave proceedings under s 233 or 242 (order 38);

(ix) compulsory purchase by it with the other defendants of the plaintiff's shares in Elysee and Boucher & Muir Holdings (order 12);

(f) in respect of HP Holdings Pty Ltd:

(i) declarations as to the directorships since 1994 and current lack of directors (orders 48-51);

(ii) declarations as to shareholdings of the plaintiff, Mr Ekstein and the estate with rectification of its register (orders 52-4);

(iii) winding up under s 233 or 461 (order 55);

(iv) compulsory purchase of the plaintiff's shares by Mr Ekstein, Mr Sydney Frish, and Mr David Frish under s 233 (order 56)

(v) payment to it of $1,306,468 or damages under s 1324 by Mr Ekstein, Mr Sydney Frish and Mr David Frish (orders 57-58);

(vi) leave to bring proceedings on its behalf against Mr Ekstein, Mr Sydney Frish and Mr David Frish for

equitable compensation of $1,306,468, or

compensation under s 1317H of $1,254,468 (order 59);

(vii) indemnities for costs of leave proceedings under s 233 or s 242 (order 60);

(viii) compulsory purchase by it with the other defendants of the plaintiff's shares in Elysee and Boucher & Muir Holdings (order 12);

(g) in respect of Newton & Co:

(i) declarations re directorships and lack of directors (orders 39-42);

(ii) winding up under s 233 or 461 (order 43);

(iii) order for payment by Mr Ekstein and Mr David Frish of $1.5 million or damages to it under s 233 or 1324 (order 44);

(iv) leave to bring proceedings on its behalf against Mr Ekstein, Mr David Frish and DF Holdings:

to account for the payment to DF Holdings of $1 million, and

for compensation of $1.5 million in equity under s 1317H;

(v) indemnities for costs of leave proceedings under s 233 or 242 (order 47);

(vi) compulsory purchase by it with the other defendants of the plaintiff's shares in Elysee and Boucher & Muir Holdings (order 12).

30 Generally speaking, the relief sought by the plaintiff can be subdivided into four categories:

(a) general equitable remedies in respect of the trust and the estate, such as orders concerning accounting and payment of compensation for breach of trust, and election;

(b) remedies under the statutory oppression provisions, such as a compulsory buyout of the plaintiff's shareholdings, indemnity, compensation, damages or winding up;

(c) remedies for the various defendant companies against Mr Ekstein and others in respect of claims asserted by the plaintiff derivatively on behalf of the companies, subject to the granting of leave;

(d) remedies to reflect the plaintiff's contention that the companies do not have any validly appointed directors, and have not had directors for some time.

5. The application for leave to bring derivative claims

31 As noted at the beginning of this judgment, one of the applications before me is the plaintiff's application for leave under s 237 to permit her to pursue derivative claims on behalf of the four defendant companies. The derivative claims are in fact pleaded in the amended statement of claim. In his reasons for judgment on the application for leave to amend, White J expressed the opinion that if the plaintiff decided to seek leave under s 237, she should do so by interlocutory application prior to the hearing. His Honour said it was at least strongly arguable that the Court in oppression proceedings may make an order under s 233(1)(g) authorising a member to institute and prosecute specified proceedings in the name of and on behalf of the company. By using that provision, it is possible to the court to "short-circuit" the procedure for derivative actions by using that provision and hence avoiding the need for a fresh application under s 237: White J, at [77], citing Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672 at 695-6; [2001] NSWCA 97. White J continued (at [78]):

"Accordingly, the plaintiff may not need leave to pursue her present claim. However, if leave is to be sought pursuant to s 237 of the Corporations Act that application should be dealt with in advance of the hearing" (see also at [80], [88]).

32 The plaintiff's application filed on 23 June 2009 seeks orders granting her leave under s 237 to bring proceedings on behalf of Elysee, Boucher & Muir Holdings, Boucher & Muir, Newton & Co and HP Holdings, for relief against Mr Ekstein and in some cases the estate of Sydney Frish, Mr David Frish and DF Holdings. The proposed orders identify the relief to be sought on behalf of each company but there is no pleading of facts constituting the causes of action to be sought. Presumably the derivative claims are to be those set out in the amended statement of claim.

33 The plaintiff is shareholder of each of the five Companies and as such she has standing to apply the leave of s 236(1). The respondents submitted that if leave is granted, s 236(2) will require the proceedings to be brought in the name of the relevant company, and therefore the plaintiff will be left in the position of both is suing and sitting on behalf of the same companies in the same proceedings. But that is not so. When proceedings are already constituted and the company is a defendant, and derivative claims are to be added to the proceedings, the weight of authority indicates that the company may remain as a defendant. In Gerard Cassegrain & Co Pty Ltd v Cassegrain [2010] NSWSC 91 I considered a similar argument and said (at [120]-[121]):

"Section 236(2) says that proceedings brought on behalf of a company must be brought in the company's name. But s 236(1) applies not only to a case where a person wishes to bring proceedings on behalf of a company, but also where the person wishes to intervene in proceedings in which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings. Here Denis does not seek leave to bring proceedings on behalf of the Company, because the oppression proceedings are already under way. Being already the plaintiff in the oppression proceedings, in which the Company is a party, he seeks to make a further intervention for the purpose of taking responsibility on behalf of the Company for certain particular steps, namely those concerning bringing and prosecuting the derivative claims. Since this is not a case where leave is sought to bring proceedings on behalf of the company, s 236(2) does not apply to require the Company to become a plaintiff.

"My conclusion on this point is supported by authority. In Metyor v Queensland Electronic Switching Pty Ltd (2002) 42 ACSR 398; [2002] QCA 269, McPherson JA (with whom Williams JA and Wilson J agreed) said (at [15]):

'Joining the company as defendant was always the procedure adopted in actions for fraud on the minority under the general law, and its use was recently sanctioned by Santow J in granting leave under s 237 of the Act in Keyrate Pty Ltd v Hamarc Pty Ltd [2001] NSWSC 491; (2001) 38 ACSR 396 at 398-400. As his Honour there pointed out, it has the advantage previously noticed of producing a judgment that is binding on the company. I would respectfully adopt his Honour's reasoning, and, if the plaintiffs are otherwise entitled to succeed on this application, they should be at liberty to take proceedings on behalf of JV Co by joining it as co-defendant in the action rather than as co-plaintiff. The practice, as Mr Bathurst QC suggested in his submissions for the plaintiffs, is analogous to the procedure by which a beneficiary may bring proceedings in his own name for administration of a trust upon his joining the trustee as a party to proceedings: see Ramage v Waclaw (1988) 12 NSWLR 84 at 91, where the principles are discussed. There is no reason why it should not apply to proceedings under ss 236 and 237 of the Act, which are not in terms confined to authorising proceedings to be brought on behalf of the company as plaintiff. Indeed s 236(1)(a) enables a person to 'intervene' in proceedings on behalf of a company, which is an expression that is capable of referring to an appearance on either side of the record.'

34 The interlocutory process in the present case seeks leave to "bring proceedings", but plainly what is intended is to secure leave to permit the plaintiff to proceed in the manner set out in the amended statement of claim; that is, the plaintiff wishes to be able to combine the derivative claims with claims based upon oppression, equitable principles and other matters. That is, she seeks to make a "further intervention" by asserting the derivative claims in existing proceedings.

35 The Court is required to grant the application for leave it is satisfied of the matters set out in s 237(2). There is no issue about the requirement in s 237(2)(a), as the respondents admitted that the Companies probably will not themselves bring the contemplated proceedings. As to s 237(2)(e)(i), that is, the question whether the plaintiff gave written notice to the respondents at least 14 days before making the application of her intention to apply for leave and the reasons for applying, in submissions the respondents denied that this requirement had been satisfied. But I am satisfied by the plaintiff's evidence, which indicates that notice of intention was given to the Companies by letters from the plaintiff's solicitor enclosing a copy of a draft version of the amended statement of claim (affidavit of Mr Allsop made on 24 July 2008, and Ex RJBA-4).

36 There are, however, issues about whether:

the plaintiff is acting in good faith (s 237(2)(b));

it is in the best interests of the company that the plaintiff be granted leave (s 237(2)(c));

there is a serious question to be tried (s 237(2)(d)).

37 The interlocutory process filed on 23 June 2009 proposes six orders granting leave under s 237, one each for the five Companies and an additional one for Boucher & Muir Holdings. It is appropriate to begin by considering s 237(2)(d), in its application to each of the six proposed claims, and to give an account of the nature of each of the claims in that context. Having done so, I shall consider the "good faith" and "best interests of the company" criteria.

6. Serious question to be tried

38 As a preliminary matter, I should make some observations about the relevance of White J's decision in Power v Ekstein [2009] NSWSC 130 to the present application. His Honour a heard a fully argued contested interlocutory application by the plaintiff for leave to amend her statement of claim. The proposed amendments included the amendments that would plead the plaintiff's derivative claims on behalf of the Companies. White J decided, in substantial reasons for judgment, that leave should be granted, subject to a small number of amendments. In my view his Honour's decision implies a finding by this Court, binding on the parties, that the proposed amendments were fairly arguable. However, that does not mean that the defendants are estopped from arguing in the present application that s 237(2)(d) has not been satisfied. The issue to be addressed on an application for leave to amend is not quite the same as the "serious question to be tried" criterion set down by the statute. For one thing, the Court's decision as to whether there is a serious question to be tried as to the derivative claims must be based on evidence, though only to the interlocutory standard, and not merely on a reading of the amended pleading. Moreover, White J's decision relates only to the amendments, not to allegations already contained in the statement of claim.

6.1 Elysee

39 This is a claim proposed to be brought by the company against Mr Ekstein for:

(a) the return of the sum of $591,293 paid to him as directors' fees and management fees allegedly without company authority or in breach of duty; and

(b) compensation at a commercial rate for the occupation by his law firm of premises at Kirribilli owned by the Company.

40 The respondents contend that the benefit of a derivative claim for Elysee would go primarily to Mr Ekstein, the intended defendant, who has 97% of the shares compared with 1% held by the plaintiff. But as I understand the facts, most of the shares in Elysee held on the trusts of a family trust. It has not been established that the plaintiff's interest would be merely trivial.

41 The sum of $591,293 is the total of items tabulated in the amended statement of claim, para 75.6. According to written submissions, the source of the figures in respect of management fees and directors' fees for the year 2000 is the report of Mr Dalton of May 2001 resulting from inspection of financial records made available by Mr Ekstein on that occasion only. Directors' fees are taken from financial statements and tax returns of the company that were produced on discovery and are exhibited at Ex RJBA 2. According to written submissions, the plaintiff's allegation is that while purporting to act as sole director, Mr Ekstein caused the company to pay to himself the sum of $591,293 as directors' and management fees, without having any resolution of a general meeting pursuant to article 65 of the company's constitution.

42 In para 67 of the defence to the amended statement of claim filed on behalf of the first to sixth respondents ("Defence"), it is contended that the $591,233 in management and directors fees was either not paid to Mr Ekstein at all, or else was paid on account of legal services incorrectly recorded in the financial statements. According to the defence, the legal services were rendered by Mr Ekstein and his firm in relation to the management of the company's property portfolio. Those are matters to be asserted and proven at the trial. They do not stand in the way of a conclusion that the plaintiff's evidence points to a serious question to be tried. On the contrary, the concession that the company's financial statements incorrectly recorded the nature of some of the payments is support at an evidentiary level for the contention that there is a serious question to be considered at a proper final hearing.

43 In their submissions the respondents draw attention to the long period of time over which irregularities are said to have occurred and the fact that the plaintiff was a director for some of that time. But it appears to me from the plaintiff's evidence that the claim relates to a period of time when Mr Ekstein was sole director. Further, the fact that the payments extended over a long period of time does not of itself prevent the claim from satisfying s 237(2)(d). If the submission is meant to invoke a defence of acquiescence or laches, that would be a matter to be proved at the trial. The evidence before me now does not appear to establish all the ingredients of those defences.

44 The respondents raise the question whether the claim for recovery of directors' and management fees is statute barred under s 1317K. If an applicant seeks to assert a claim on the company's behalf which is plainly statute barred, there will be no serious question to be tried and the Court will not grant leave. In the present case, however, the application of s 1317K is not clear and will depend on how the plaintiff puts her case at the trial. Section 1317K applies only to a declaration of contravention, a pecuniary penalty order or a compensation order. If the claim seeks recovery of the money paid on the basis that the payment was unauthorised and contrary to the corporate constitution, the claim is not for compensation or otherwise within s 1317K. Moreover, to the extent that the plaintiff's pleading seeks to make out an oppression case under Part 2F.1 of the Corporations Act, the fact that any direct claim in respect of part of the oppressive or unfair conduct would be statute barred should not, in my view, prevent that material from being pleaded in order to show a course of conduct on which the Part 2F.1 claim rests.

45 As to the law firm's occupation of part of the company's premises, the plaintiff's allegation is that Mr Ekstein caused the company to permit him and his firm to occupy the premises without paying rent, or in the alternative without paying a proper commercial rate. The written submissions specify the evidence relied upon for those matters.

46 In his Defence, Mr Ekstein denies the plaintiff's allegations regarding occupation of the company's premises (paras 43 and 164), on various alternative grounds. One ground is to deny that the law firm's occupation was without paying a proper market rental, and another is to claim that under clauses 14 and 15 of the trust deed for the family trust he is entitled to benefit from the occupation of the company's premises. On the materials before me now, the matters raised by way of defence are not so obvious and beyond contention that I would conclude that the plaintiff's allegations are without any seriously arguable foundation.

47 The respondents submit that the plaintiff has not identified what she alleges a proper commercial rental would be, and has introduced no evidence to support that claim. It seems to me that this is a matter upon which particulars can be requested, but the absence of a specific figure does not prevent the Court from concluding, on the evidence currently tendered, that s 237(2)(d) has been satisfied.

48 In my opinion the evidence on the application satisfies a requirement that there be a serious question to be tried with respect to the Elysee claim.

6.2 Boucher & Muir Holdings (the Boucher & Muir claim)

49 The plaintiff holds about 17% of the B class shares in this company. There are 200 A class shares, held by Mr Ekstein and Mr David Frish. Boucher & Muir Holdings presently owns, and has owned since 1969, 2000 of the total of 4232 B class shares in Boucher & Muir (Ex RJBA 3), and also holds all of the B class shares in Newton & Co.

50 This is a claim proposed to be brought on behalf of Boucher & Muir Holdings against Boucher & Muir, Mr Ekstein, the estate of Sydney Frish, and David Frish. As pleaded in the amended statement of claim, the relief sought was either compulsory purchase of Boucher & Muir Holdings' shares in Boucher & Muir under the oppression remedy, or the winding up of Boucher & Muir under s 233 or s 461. In written submissions on behalf of the plaintiff, counsel informed the Court that in view of some observations by White J in his judgment of 11 March 2009 (at [66]), the claim would be confined to seeking a compulsory purchase order of Boucher & Muir Holdings' shares in Boucher & Muir, and no winding up order would be sought in this claim.

51 According to her written submissions, the plaintiff's allegation is that Boucher & Muir has persistently discriminated against Boucher & Muir Holdings, which is a shareholder holding nearly half the shares of Boucher & Muir, over a long period of time. Therefore the plaintiff seeks leave under s 237 to assert on behalf of Boucher & Muir Holdings an oppression claim under Part 2F.1 against Boucher & Muir and the persons who are acting as directors of Boucher & Muir. There is also an application for leave under s 237 for the plaintiff to assert Boucher & Muir's rights against its directors for unauthorised payments and breach of statutory and fiduciary duties, arising out of the same facts. That is considered below.

52 The plaintiff says this discrimination has included non-payment of dividends, unauthorised payment of dividends, unauthorised payments to persons purporting to be directors, and to associated persons, and failure to comply with constitutional requirements for the holding of annual general meetings and election of directors.

53 As to dividends, article 5 of Boucher & Muir's constitution (as adopted by a special resolution on 4 April 1967: Ex RJBA 2, page 327) divides the capital of the company into A class shares and B class shares. Article 21(89(a)) (as adopted by the same resolution) says that the A shares have voting rights but do not entitle the holders to any bonuses or dividends declared by the company in general meeting; but the holders of A class shares are entitled to declare in general meeting separate dividends or bonuses of equal or unequal amounts in respect of each B class share. Article 21(89(b)) says that the holders of B class shares are not entitled to receive notice of or attend meetings other than class rights meetings, but (subject to article 21(89(a)) the B class shares entitle the holders to any dividends and bonuses declared by the company in general meeting. In other words, all B class shareholders are entitled rateably to any dividends that are paid, unless the A class shareholders resolve in general meeting to pay an unequal dividend.

54 The plaintiff alleges that during the period from 31 December 1994 until after 30 June 2005, payments purportedly made by way of dividend totalling at least $5.8 million were made by Boucher & Muir. She claims that none of that sum was paid by Boucher & Muir to Boucher & Muir Holdings by way of dividend or otherwise. In her written submissions she refers to documentary evidence to support that allegation, comprising financial statements and minutes, a company search and the register of members. She further claims that at least $2.7 million was paid in purported dividends to persons who were not holders of B class shares and were therefore not entitled to receive dividends, namely Robert Whaites and DF Holdings. The evidence she identifies for these assertions is a set of minutes of general meetings and financial statements of Boucher & Muir.

55 As to unauthorised payments to persons purporting to be directors of Boucher & Muir, the plaintiff says that according to financial statements of Boucher & Muir, at least $429,608 was paid to such persons during the financial years ended 30 June 1999 to 2001 as "director's emoluments" (referring to Ex RJBA 2, Volume 2, pages 342, 364). She notes that directors' remuneration is required to be determined by the company in general meeting according to article 14(64(e)) of Boucher & Muir's constitution. She contends that there have been no general meetings of Boucher & Muir and therefore there can have been no resolutions to approve these payments.

56 Additionally, according to Boucher & Muir's 2002 tax return, a further amount of $190,490 was paid to "associated persons" in the year ended 30 June 2002 (Ex RJBA 2, page 401). Further oppressive conduct is pleaded in relation to Boucher & Muir in paras 72.1 to 72.121 of the amended statement of claim.

57 There is also an allegation that Boucher & Muir has not had directors since 31 December 1993. According to the plaintiff's submissions, this is because article 39 of its constitution provides for the company to hold an annual general meeting by 31 December each year, and article 17(73(a)) provides for one third of the directors to retire by rotation at the "ordinary general meeting" to be held every year. The plaintiff asserts that no general meeting of Boucher & Muir has been held since at least 28 October 1993, and in her submissions she sets out the evidence upon which she relies.

58 I have a technical difficulty with this submission. Boucher & Muir's constitution is in evidence at Ex RJBA 2, page 297-327. I have located article 17(73(a)) but I have not been able to locate article 39. But it seems to me that the proposition asserted by the plaintiff is nevertheless correct. The company was formed under the Companies Act 1936 (NSW), and its articles of association excluded certain provisions of Table A of the second schedule to the 1936 Act, while allowing others to operate (see articles 1 and 2). Article 61 of Table A to the 1936 Act says that general meetings are to be held once at least in every calendar year, and article 62 says that such meetings are to be called "ordinary meetings".

59 Some documents are in evidence at Ex RJBA 3 that on their face, appear to be copies of minutes of annual general meetings of various companies. Under the heading "Officers", the minutes each contain the statement, "All present officers of the Company, viz Directors and Secretaries, continue in office." The plaintiff submits, having regard to her own evidence of the lack of meetings, and the absence of any signature on the documents, that the minutes are fictitious. She also relies on a letter from Mr Ward-Harvey dated 15 May 2007 that he had no record of having received in notices of meetings of shareholders.

60 In the case of Boucher & Muir Holdings, the respondents rely in the Defence on article 1/66 of that company, which provides that if, then the retiring director is deemed to have been re-elected. But that provision does not apply unless there is an actual meeting, a retirement and an offering for re-election. In the case of Boucher & Muir, actually Holdings and Elysee, which use Table A to the 1936 Act, article 76 is substantially to the same effect; Newton & Co has its own article 86, to the same effect. It seems to me that these articles do not overcome the problem.

61 More generally, the plaintiff alleges that the directors of Boucher & Muir Holdings (Mr Ekstein, David Frish and, until his death, Sydney Frish) have not allowed it to operate as a genuine holding company seeking a return for shareholders from their investments, but rather they have used it as a vehicle to cement their personal control of Boucher & Muir and Newton & Co. The plaintiff submits that the directors have done nothing to cause Boucher & Muir Holdings to assert its voice in the affairs of Boucher & Muir, or to pass on to its own members financial reporting and other information in respect of Boucher & Muir, to which Boucher & Muir Holdings is entitled as an A class shareholder to receive.

62 The respondents submit that the amended statement of claim does not disclose a basis for any claim by Boucher & Muir Holdings against Boucher & Muir and its directors. As to dividends, the respondents draw attention to the amended article 21(89(a)), which allows unequal dividends to be paid in a fashion that excludes some B class shareholders. It seems to me that the respondents may be able to make out, at the final hearing, that they exercised the special power conferred by this article to declare unequal dividends, but they may well have to strictly prove that the power was properly exercised in general meeting as stipulated by the article, for the special power permits the A class shareholders to take away the entitlement that the B class shareholders would otherwise have to equal distribution of a dividend declared by the company, but only by following a stated procedure. Additionally, the plaintiff will raise an issue as to whether, if it is shown that the A class shareholders exercised the power to pay an unequal dividend, their decision constituted a fraud on the power in equity. At this stage all I need to decide is whether there is a serious question to be tried about the plaintiff's contentions about dividends, and my conclusion is that there is.

63 Much the same can be said about the answers given in the Defence to various other allegations made in the amended statement of claim, concerning unauthorised payment of dividends, and unauthorised payments to persons claiming to be directors and to associated persons.

64 It is less clear to me that there is a serious question to be tried about whether Boucher & Muir has been without any director since 1993. It seems likely on the evidence that the only persons entitled to receive notice of and attend general meetings of the company, namely the A class shareholders who were also the directors of Boucher & Muir, have continued to meet as directors to transact the business of the company from 1993 to date. Arguably, by doing so, they informally caused themselves to be reappointed, or unanimously assented to their reappointment, so that the absence of formally convened general meetings and resolutions for re-election would not be fatal to their status. But the correct analysis depends upon proper findings of fact of the kind that would occur at final hearing, and in the meantime my view on balance is that there is a serious question to be tried as to the plaintiff's allegations.

6.3 The Boucher & Muir Holdings (the Newton & Co claim)

65 This is a claim proposed to be brought on behalf of Boucher & Muir Holdings against Newton & Co, Mr Ekstein, the estate of Sydney Frish and David Frish, for compulsory purchase of Boucher & Muir Holdings' shares in Newton & Co under the oppression remedy. Alternative relief by way of a winding up of Newton & Co under s 233 or s 461 is pleaded but, consistently with withdrawal that relief in relation to the other Boucher & Muir Holdings claim, I assume winding up will not be sought on this occasion.

66 Boucher & Muir Holdings is and was at all material times the holder of all issued B class shares in Newton & Co. Under the constitution of Newton & Co, as amended by special resolution on 29 April 1971 (Ex RJBA 2, page 668), the capital of the company is divided into A class and B class shares. The A class shares have voting rights but no entitlement to any share or participation in profits, dividends or bonuses, or surplus assets on winding up; while the B class shares entitle the holders rateably to all dividends and bonuses and surplus on winding up.

67 According to the plaintiff's submissions, the main complaints to be put on behalf of Boucher & Muir Holdings are that:

(a) the main object of the company, to acquire and carry on a real estate agency business, has ceased to be pursued consequent upon the sale of the land owned by the company at Castle Hill and Naremburn;

(b) no other permitted objects are being pursued, and the company is now simply a vehicle for holding cash and manipulating the affairs of the group, in the interests of the controlling persons;

(c) the sum of $1 million was appropriated for the benefit of DF Holdings for a term deposit held by Newton & Co;

(d) the sum of $500,000 was recorded in the financial statements of Newton & Co as lent to the estate of Otto Ekstein when no such loan was made to the estate; and

(e) no dividends have been paid to Boucher & Muir Holdings since at least 28 October 1993.

68 Causing a company to act outside its objects clause, if it has one, is unlikely of itself to provide a ground for relief under Part 2F.1, especially bearing in mind that a company formed under Australian corporations legislation has all the powers of a natural person: s 124. The position of directors who cause or allow their company to do so is considered in RP Austin, HAJ Ford and IM Ramsay, Company Directors: Principles of Law and Corporate Governance (2005). But acting outside the company's stated objects may be part of a case of oppression or unfair prejudice, for example if there is additional evidence of that the statement of objects have a special role and importance in the governance of the particular company.

69 Non-payment of dividends over an extended time may well be an important ingredient of an oppression case, especially where the person complaining is the only shareholder entitled to any dividends that might be declared. Undoubtedly there will be additional facts at the final hearing, relating to whether Boucher & Muir had a policy of not paying dividends but providing access to earnings in other ways, those noted above there is evidence of very large dividend payments over time. As things stand, however, there is a serious question to be tried as to whether non-payment of dividends provides a ground for Boucher & Muir Holdings to seek relief against Boucher & Muir and the persons acting as its directors, under Part 2F.1.

70 I shall consider the $1 million and $500,000 payments later, in the context of the derivative claims proposed to be made by Newton & Co and HP Holdings. My conclusion is, for the reasons there given, but there is a serious question to be tried as to whether these matters occurred and provided grounds for relief under Part 2F.1.

6.4 Boucher & Muir

71 This is a claim to be brought on behalf of Boucher & Muir against Mr Ekstein, David Frish, the estate of Sydney Frish and DF Holdings, in respect of purported dividends, "directors' emoluments" and payments to associated persons. These matters have already been referred to in considering the claim to be brought on behalf of Boucher & Muir Holdings against Boucher & Muir and others.

72 The claim on behalf of Boucher & Muir Holdings is a claim by the plaintiff for leave to cause that company, as a shareholder of Boucher & Muir, to take proceedings under Part 2F.1 seeking compulsory purchase of its shareholding in Boucher & Muir by the defendants to those proceedings (that is, Boucher & Muir and the persons acting as directors of that company). The claim on behalf of Boucher & Muir is a claim by the plaintiff for leave to cause that company to take proceedings against the persons acting as its directors in respect of allegedly unlawful payments, and also against a third-party recipient of such payments. The principal allegations against the persons acting as directors of Boucher & Muir, namely Mr Ekstein, David Frish and the estate of Sydney Frish, is that they caused unauthorised payments to be made because of the absence of general meetings to approve the payments, and they acted in breach of their fiduciary duties and their statutory duties under ss 180-182. Additionally it is alleged that, to the extent that they exercised their power to pay unequal dividends, they perpetrated a fraud on the power sounding an equitable compensation.

73 The claim includes the specific payments pleaded in paras 72.70, 72.85 and 72.87 of the amended statement of claim, but the amount claimed may prove to be higher because records have not been produced in relation to certain years. Thus, para 72.70 identifies 29 dividend payments carrying imputation credits over the period from 31 December 1994 until after 30 June 2005, but there is a gap between 1994 and 1997. The dividends were paid to the estate of Otto Ekstein, Sydney Frish, Robert Whaites, DF Holdings, Paul Ekstein, and some were paid to B class shareholders other than the plaintiff, the estate of Otto Ekstein and Boucher & Muir Holdings. The total amount is in the order of $5.8 million. Para 72.85 identifies further sums totalling $429,608 alleged to be payments made by the persons acting as directors of Boucher & Muir to themselves. Para 72.87 identifies a payment of $190,490 to associated persons.

74 Just as I have concluded that there is a serious question to be tried as to the oppression claim by Boucher & Muir Holdings against Boucher & Muir and the persons acting as directors in respect of these matters, so also I have decided that there is a serious question to be tried concerning Boucher & Muir's claim against the persons acting as directors and the third party recipient with respect to unauthorised payments and breach of duty. The pleading of fraud on the power seems to me to have sufficient plausibility, at the "serious question" threshold, that the power to pay unequal dividends may not be a complete answer to the plaintiff's complaints.

75 I have reached the conclusion on the evidence before me that there is a serious question to be tried with respect to those allegations.

6.5 Newton & Co

6.6 HP Holdings

76 The plaintiff is an A class shareholder in Newton & Co, and she is an A and B class shareholder in HP Holdings. She seeks leave to claim relief in favour of Newton & Co against the persons acting as its directors, in respect of what she refers to in her submissions as "the missing $1.5 million", and against the recipient of $1 million out of that amount, namely DF Holdings.

77 In respect of HP Holdings, she wishes that company to claim relief against the persons acting as directors in respect of:

(a) $1,051,234 purportedly lent to Sydney Frish;

(b) $151,234 purportedly lent to the estate of Otto Ekstein; and

(c) $52,000 purportedly paid as management fees in 2005.

78 As to Newton & Co, the plaintiff says that its financial statements show that its real estate was, during the years 2001 to 2004, progressively sold and converted into cash. At 30 June 2004 there was a term deposit of $1,489,364 as well as other current assets (see Ex RJBA 2, page 733). It had no non-current assets and its liabilities were insignificant. According to the financial statements for the year ended 30 June 2005, by that date the term deposit had gone and there were additional current assets, namely a loan to DF Holdings of $1 million and they loan to the estate of Otto Ekstein of $500,000 (Ex RJBA 2, page 753).

79 I shall deal first with the $1 million loan to DF Holdings. There are extensive pleadings as to the $1 million loan in the amended statement of claim and in the Defence. Additionally the evidence concerning the loan is extensively reviewed in the plaintiff's written submissions.

80 The plaintiff's claim is that the loan was not within the permitted objects of the company, was not authorised, was not paid for any proper purpose, caused detriment to the company, was a fraud on the company by Mr Ekstein and Mr Frish acting as directors, and was caused by them to be paid in breach of their fiduciary obligation and statutory duties as directors. The plaintiff contends, amongst other things, that these were acts that were an intentionally dishonest or reckless misuse of position causing detriment to the company. A resulting trust is asserted against DF Holdings. There are alternative claims for money had and received and money lent.

81 The Defence confesses that the payment was made, and asserts that it was a loan duly authorised by the directors of Newton & Co on 21 June 2004 for the benefit and proper purposes of the company, on commercial terms and at interest, which has been paid in accordance with those terms. Minutes of the meeting of 21 June 2004 is in evidence. The minutes says that Boucher & Muir had for many years relied upon a trade finance facility, the collateral for which had been provided by way of properties from its associated companies and entities, but as a result of disposal of the properties held by those entities, Boucher & Muir needed alternative collateral arrangements. The directors accordingly resolved to make a loan of $1 million to DF Holdings on certain specified terms, secured by way of mortgage, and they noted that on receipt of that loan, DF Holdings has agreed to provide a specified property as security for Boucher & Muir's trade finance facility. Other evidence indicates that second mortgage security was provided, along with a guarantee by David Frish, to secure a trade finance facility at $1.7 million.

82 The minutes on their face suggest a legitimate business purpose for the transaction, but the plaintiff raises various criticisms. She notes that there is no suggestion in the minute of disclosure of conflict or informed consent by shareholders. She might have referred specifically to s 191, although contravention of that provision does not invalidate the transaction. She is critical of the adequacy of the interest rate. She is critical of the security, which is by a second mortgage that is not to be registered unless the borrower commits an unremedied and irremediable default, although lodgement of a caveat is permissible. She also makes some criticisms of bills of exchange that we used in connection with the financing, but these may not have been anything other than reasonably routine aspects of the facility arrangements.

83 All in all, the plaintiff's case about the $1 million loan seems to be rather weak. But I have concluded that there is nevertheless a serious question to be tried. I agree with the plaintiff's submission that many of the matters raised on behalf of the respondents, especially in the defence, constitute a pleaded justification as to which they will bear the onus at the trial.

84 I turn to Newton & Co's "loan" of $500,000 to the estate of Otto Ekstein. According to the Defence (para 180):

(a) Newton & Co made a payment of $500,000 to Mr Ward-Harvey on behalf of the estate of Otto Ekstein in January 2005;

(b) the payment constituted a loan to HP Holdings, which enabled HP Holdings to discharge in part its liability to the partnership between the late Otto Ekstein and the late Sydney Frish;

(c) the payment was recorded in the financial statements of Newton & Co as a loan to the estate of Otto Ekstein, but more accurately it ought to have been recorded as a loan to HP Holdings.

85 However, according to the financial statements of HP Holdings for the year ended 30 June 2005 (Ex RJBA to page 612) the loan to the company from the Ekstein & Frish Partnership stood at $757,727, unreduced from the previous year (as to which, see page 590). Further, no liability to Newton & Co was introduced into the accounts during the 2005 year. Nor does any liability to Newton & Co appear in the financial statements to 30 June 2006.

86 It seems to me that the irregularities surrounding the payment of the $500,000 are sufficient to create a serious question to be tried as to whether there was a breach of statutory or fiduciary duties on the part of the persons claiming to be directors of Newton & Co who authorised the payment. There is still doubt about the destination of the $500,000, in the absence of any proper accounting.

87 The plaintiff's submissions allege that HP Holdings had more than sufficient funds of its own to discharge its liability to the Ekstein & Frish Partnership as at 30 June 2005. The argument seems to be that some bills receivable in the sum of $796,491 as at 30 June 2004 were received in the year to 30 June 2005, and a loan to Boucher & Muir of $728,226 was repaid during the year to 30 June 2005. The submission is that the company could have used those funds, plus some cash at bank, to repay the loan from the Ekstein & Frish Partnership of $757,727. But instead, according to the 30 June 2005 balance sheet, most of that money appears to have been used to make a loan of $1,051,234 to Sydney Frish and a loan to the estate of Otto Ekstein of $151,234. Although there has been correspondence between the solicitors on these matters, the commercial reasons for these transactions are not made clear.

88 It now appears to be agreed by the parties that there was no loan to the estate of Otto Ekstein of $151,234. The defendants now allege that the payment of that amount was made to the estate of Otto Ekstein in partial discharge of HP Holdings' liability to the Ekstein & Frish Partnership, and accordingly the 2005 financial statements of HP Holdings are wrong in this respect (in addition, one would add, to their failure to record the payment of $500,000 by Newton & Co, which they say was a loan to HP Holdings which then paid it to the Ekstein & Frish Partnership).

89 The 2006 financial statements of HP Holdings reduce the non-current asset item "Loan - Otto Ekstein Estate" from $151,234 in the previous year to zero at 30 June 2006, and they reduce the non-current liability item "Loan - Ekstein & Frish Partnership" by $151,234 from $757,727 at 30 June 2005 to $606,492 at 30 June 2006. As the sum of $151,234 had been treated incorrectly in the financial statements to 31 June 2005, one would have thought the correct course of action would be to correct the 2005 financial statements. The effect of the entries I have described in the 2006 financial statements is to create the misleading impression that some transactions occurred during the year to 30 June 2006 to give rise to that result. Be that as it may, at least the entries made in the 2006 financial statements produced an outcome as at 30 June 2006 that accords with the Defence.

90 As to the so-called "loan" of $1,051,234 to Sydney Frish, Mr Ekstein's solicitor, Mr Bilinsky, said he was informed that this amount was lent in anticipation "by the directors of the termination of the various business relationships between the Frish and Ekstein families" and that "the amount of the loan was less than the director had calculated to be the Frish family's interest in the Frish/Ekstein group of companies". In my opinion there is a serious question to be tried as to whether a loan made to a director in such circumstances is authorised and consistent with the fiduciary and statutory duties of the persons acting as directors.

91 The Defence alleges that the $1,051,234 was later transferred to Mount Idar Holdings Pty Ltd, a company associated with the Sydney Frish, at call and upon the security of his and his family's interests in the company, the partnership and associated companies. It was an interest-free loan for the purposes of a proposed winding up of the company, which did not occur because it was interrupted by the commencement of the present proceedings. I find it difficult to see how these matters provide an answer to the derivative claims that the plaintiff wishes to bring on behalf of Newton & Co and HP Holdings.

92 In written submissions on behalf of the plaintiff, counsel observes that if you double $1,051,234 you get approximately $2.1 million, which is close to the combined net assets of HP Holdings and Newton & Co as at 30 June 2005. He suggests there is a reasonable inference to be drawn that the Frishs and Mr Ekstein decided that they would take the cash that was sitting in HP Holdings and Newton & Co and divide it between them. On this analysis Sydney Frish received his distribution in the form of a loan recorded in the balance sheet of HP Holdings and the payment of $500,000 to the estate was in effect a distribution to Mr Ekstein. I think that submission is speculative but not entirely without foundation. I neither accept nor reject it. I have decided a serious question to be tried has been made out as to the $1,051,234, as well as the $500,000, by the other matters to which I have referred.

93 As to the $52,000 management fee, HP Holdings paid that amount in the year to 30 June 2005, according to its profit and loss statement of the year (Ex RJBA 2, page 613). No amount was paid to management fees in the previous year. It is not easy to see how a management fee of $52,000 would be justifiable in respect of the company is only assets were cash at bank, and some bills receivable and they loan to Boucher & Muir, which were collected and paid during the year to 30 June 2005. There is very little to "manage". According to Mr Berlin city's affidavit, the fee was paid to a company associated with David Frish. Those bare facts are sufficient to raise a serious question to be tried as to whether Mr Frish and others acting as directors may have improperly used their positions as directors to gain an advantage for themselves or someone else, contrary to s 182.

6.7 Conclusions as to s 237(2)(d)

94 I have reached the conclusion, confidently on some issues and only on balance in other respects, that there is a serious question to be tried on each of the six claims that the plaintiff seeks leave to pursue on behalf of the second to sixth defendant companies.

7. Good faith

95 In an exposition applied by the Court of Appeal in Chahwan v Euphoric Pty Ltd trading as Clay & Michel [2008] NSWCA 52, Palmer J in Swansson v RA Pratt Properties Pty Ltd (2002) 42 ACSR 313; [2002] NSWSC 583 observed (at [35]) that it would be unwise to endeavour to state compendiously the considerations to which courts will have regard in determining whether applicants under s 237 are acting in good faith, and he continued (at [36]):

"Nevertheless, in my opinion, there are at least two interrelated factors to which the Court will always have regard in determining whether the good faith requirement of s 237(2)(b) is satisfied. The first is whether the applicant honestly believes that a good cause of action exists and has a reasonable prospect of success. Clearly, whether the applicant honestly holds such a belief would not simply be a matter of bald assertion: the applicant may be disbelieved if no reasonable person in the circumstances could hold that belief. The second factor is whether the applicant is seeking to bring the derivative process for such a collateral purpose as would amount to an abuse of process."

96 His Honour then explored the second factor, observing (at [38]) that "where the application is made by a current shareholder of the company who has more than a token shareholding and the derivative action seeks recovery of property so that the value of the applicant's shares would be increased, good faith will be relatively easy for the applicant to demonstrate to the court's satisfaction".

97 He then gave some examples of cases where good faith might be lacking. He said (at [41]):

"To take another example: a derivative action sought to be instituted by a current shareholder for the purpose of restoring value to his or her shares in the company would not be an abuse of process even if the applicant is spurred on by intense personal animosity, even malice, against the defendant: it is not the law that only a plaintiff who feels goodwill towards a defendant is entitled to sue: see e.g. Dowling v Colonial Mutual Life Assurance Society Ltd (1915) 20 CLR 509 at 521-2; IOC Australia Pty Ltd v Mobil Oil Australia Ltd [1905] HCA 28; (1975) 2 ACLR 122 at 131. On the other hand, an action sought to be instituted by a former shareholder with a history of grievances against the current majority of shareholders or the current board may be easier to characterise as brought for the purpose of satisfying nothing more than the applicant's private vendetta. An applicant with such a purpose would not be acting in good faith."

98 In this case the derivative claims are part of the expanded pleading that was the subject of the plaintiff's successful application for leave to amend before White J. A central component of the expanded allegations is that Mr Ekstein, the late Mr Frish and his son David Frish have acted in breach of their duties as persons according to access directors and in a way that has affected the value of the plaintiff's shareholdings in the Companies and has caused her loss and damage. Another central component is that the persons acting as directors have conducted the affairs of the Companies and have acted in a manner that is oppressive and unfairly prejudicial to the plaintiff and unfairly discriminatory against her. Having weighed up the evidence adduced on the application, and having heard the plaintiff give oral evidence under firm cross-examination, I am satisfied that she honestly believes that the Companies have good causes of action on the matters set out in the amended statement of claim and summarised in the written submissions made on her behalf. Senior counsel for the respondents criticised the plaintiff's evidence, complaining that she was unwilling to answer straightforward and simple questions and was acting in accordance with a strategy upon which she had been advised. But I did not find her to be evasive; rather, it seemed to me she was out of her depth when the questions related to technical, and in particular legal matters, and the evidence she gave about her strategy and other matters is consistent with belief that the companies have good causes of action.

99 The other question raised by Palmer J is whether the application, and indeed the mounting of the extensive and elaborate claims contained in the amended statement of claim, is for a collateral purpose, namely to use the Court's processes to satisfy her private vendetta against her step-brother. There are some suggestions in the evidence that the plaintiff may be conducting of vendetta. After her falling out with a step-brother, she initiated the 1998 proceedings partly in pursuit of the entirely legitimate objective of ascertaining the proper construction of the trust instrument and will and their combined operation and effect after the death of Otto Ekstein. But she included in her statement of claim and amended statement of claim in the 1998 proceedings some collateral assertions against Mr Ekstein, which amounted to allegations impropriety against him, and then those allegations were not pursued at the hearing before Windeyer J.

100 However, on the basis of the amended statement of claim and the written submissions, and the evidence tendered on the application, I have found that there is an arguable case that the Companies may have substantial claims against Mr Ekstein, David Frish and the estate of Sydney Frish. The plaintiff is seeking to restore value to the companies by maintaining the derivative claims, with the ultimate objective of establishing that the distribution to her on 7 July 2003 was insufficient to satisfy her entitlement as a beneficiary of the trust and 50% residuary shareholder in her step-father's estate, and obtaining additional recovery through compulsory sale of her shares. She may be "spurred on by intense personal animosity", to use Palmer J's words, but as he said, it is not the law that only a plaintiff who feels goodwill towards the defendant is entitled to sue. On balance, and again taking into account the cross-examination of the plaintiff on the application, I have decided that the plaintiff is acting in good faith in seeking to bring the derivative claims.

101 The respondents submit that an applicant who at the same time seeks leave to bring proceedings on behalf of a company and seeks orders for the winding up of the company cannot be acting for a proper purpose in good faith. I disagree with that submission. Bringing simultaneous proceedings to assert derivative claims and to wind the company up may or may not be indicative of bad faith and abuse of process, depending on the circumstances. In this case the application to wind up the Companies arises out of the plaintiff's assertion that those in control of the Companies have acted unfairly or oppressively for the purposes of Part 2F.1 of the Corporations Act. On the plaintiff's case, acting in breach of their duties as persons purporting to be directors forms part of the oppressive conduct of which she complains. A possible outcome of her claims would be that one or more of the Companies would establish breach of duty against Mr Ekstein, David Frish and the estate of Stanley Frish and obtain orders for compensation against them, and also grounds for relief under the oppression provisions. The result could be that the value of the Companies would be increased by recovery against the directors and then some remedies would be granted for oppression, such as a buy-out of the plaintiff's shares at a proper valuation or even the winding up of the Companies as enhanced by the success of the derivative claims.

102 The respondents also submit that if the plaintiff is successful in her claim that the scheme of distribution failed to take into account the true value of some of the property of the trust and the estate, and was therefore implemented in breach of trust, she will have a remedy on that ground and she would not require relief in the derivative claims as well. It seems to me that some of the plaintiff's complaints could be met in either of two alternative ways: by finding breaches of duty and directing that the company be compensated, hence increasing the value of the company, or by valuing the company as if it had recovered from breach of duty without going through the derivative process. But I am not sure that all of the claims can be analysed in this dual fashion and moreover, it seems to me wise to allow the alternative forms of claim to go forward to trial so that the trial judge can select the remedial course best reflecting the Court's findings of fact on a final basis.

103 The respondents submit that as a B class shareholder, without entitlement to control or benefit from the Companies or any right to vote at meetings, the plaintiff cannot point to any substantive prejudice to her or to the Companies as a whole in any of the transactions of which she complains. This submission overlooks the fact that, in those companies with A and B class shares, the B class shareholders have not only dividend rights but also the right, after repayment of the nominal value of the A class shares, to rateable distribution of any surplus on winding up.

104 I have reached the conclusion that the plaintiff has established for the purposes of s 237(2)(b) that she is acting in good faith. I see no reason to differentiate between one claim and the others for the purposes of this conclusion, given my conclusion that there is a serious question to be tried in each case.

8. The best interests of the company

105 Courts have drawn attention to the wording of s 237(2)(c), according to which the Court is to be satisfied, not that the proposed derivative action may be, appears to be, or is likely to be, in the best interests the company but, rather, that it is in its best interests; and consequently the applicant must establish on the balance of probabilities a fact that can only be determined by taking into account all relevant circumstances: Swansson at [55]-[56], Chahwan at [85].

106 The relevant circumstances include whether the substance of the redress sought in the derivative proceedings is available by other means, such as litigation by the applicant in her own name: Swansson at [59]; Talisman Technologies Inc v Queensland Electronic Switching Pty Ltd [2001] QSC 324. It is also relevant for the court to consider whether the action would be of any practical benefit to the company or would be a fruitless exercise: Swansson at [60], [68]. Here the respondents submit that the substance of the redress that the plaintiff seeks is available without derivative claims. I have considered and rejected that submission above, when dealing with good faith.

107 The inquiry set by s 237(2)(c) is not confined to whether it is in the best interests of the company that the particular proceeding should be brought on its behalf; the inquiry extends to whether it is in the best interests of the company that the proceedings should be brought on its behalf by the particular person who seeks leave. Section 237(1)(c) was held not to be satisfied in Transmetro Corporation Ltd v Kol Tov Pty Ltd (2009) 71 ACSR 582; [2009] NSWSC 350 because the proceedings for which leave was sought would seek to prove that a management agreement was terminated, but the applicant was duty-bound as a director of a relevant company to show that the management agreement was still in full force and effect. The respondents submit that there is a fundamental conflict between the plaintiff seeking to represent the Companies, and seeking to wind them up or even to force the purchase of her interests in them. I disagree, for reasons I have given when dealing with the good faith element above. The plaintiff does not seek to represent the Companies for all purposes or to control or manage them. She seeks to complain of the way in which those in control of the Companies have dealt with them and with her interests. Her complaints are reflected in the various kinds of relief she seeks, including relief under the oppression provisions and by the assertion of derivative claims.

108 One of the issues for the Court to consider is whether the company would be prejudiced by being exposed to the costs and expenses of litigation and the risk of an adverse costs order. That problem is often addressed by the Court making a conditional order, by which the granting of leave is conditional upon the applicant undertaking to the Court to pay and bear and indemnify the company against all costs, charges and expenses of and incidental to the bringing and continuation of the derivative claims for which leave is granted: see, for example, Gerard Cassegrain & Co Pty Ltd v Cassegrain [2010] NSWSC 91. In my opinion, such a condition is appropriate here, because the bringing of derivative claims is an aspect of the overall dispute between the plaintiff and Mr Ekstein, and therefore the plaintiff, rather than Companies in which she has only a minority interest, should be required to bear the costs of the litigation, including any adverse costs order that might be made if the claims are unsuccessful.

9. Representation of the Companies

109 By an interlocutory process filed on 25 June 2002, the plaintiff seeks interlocutory orders of three kinds:

(i) orders restraining the solicitor for Mr Ekstein and the Companies (Mr Bilinsky) from continuing to act in these proceedings for the Companies;

(ii) an order restraining Mr Ekstein and David Frish from applying any funds of the Companies (other than Elysee) for the defence or conduct of the proceedings - otherwise than for the purpose of complying with discovery obligations, or as agreed with the plaintiff's solicitor, or by leave of the Court;

(iii) an order restraining Mr Ekstein and David Frish from causing or permitting any further steps to be taken in these proceedings in the name of any of the Companies (other than Elysee) - save for compliance with discovery obligations, or as agreed by the plaintiff's solicitor, or with the leave of the Court.

110 The plaintiff seeks to support the application on three separate grounds:

(a) the principle that the companies should not actively participate in or bear the costs of a dispute between shareholders;

(b) the conflict of interest between Messrs Ekstein and Frish and the companies, and the consequential conflict between the duties that Mr Bilinsky owes to Mr Ekstein and the duties he owes to the companies; and

(c) the want of directors of the companies and the consequent want of authority to retain Mr Bilinsky.

9.1 A shareholders' dispute?

111 The plaintiff submits that the proceedings involve a dispute between shareholders rather than a dispute involving the Companies, and in those circumstances the costs of the proceedings should not to be borne by the Companies.

112 In Re DG Brims & Sons Pty Ltd (1995) 16 ACSR 559, Byrne J said (at 591-2):

"Many thousands of dollars of company funds have been spent on lawyers, accountants and valuers in defending these proceedings on behalf of the majority shareholders. This is unfair and infringes the basal principle that 'the powers, and the funds, of a company may be used only for the purposes of the company'. No doubt a small part of the expenditure was justifiable; for example, in discovery, and in resisting such orders as that the company purchase the shares or pay a dividend for 1991. Expenditure to protect its discrete interests or for other proper purposes of the company may be made from company resources. The essential dispute here, however, is between the shareholders; and company funds should not have been used to defend the majority shareholders."

113 These principles were approved by Young J in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688 at 733; [1998] NSWSC 138, and by White J in Cassegrain v CTK Engineering Pty Ltd (2005) 54 ACSR 249; [2005] NSWSC 495 at [90]- [91]; see also Metropolitan Petar v Mitreski [2008] NSWSC 243; Grace v Grace [2007] NSWSC 6; compare Sellar v Lasotav Pty Ltd [2008] FCA 1766. The last of these cases indicates a different approach to the other authorities. According to Foster J in Sellar (at [30]), the Court will be generally reluctant to interfere at the interlocutory stage of the payment of legal fees and expenses unless there is good reason to do so. With respect, while that may be so as a general proposition, it is not an accurate reflection of the approach in Australian and English authority where the question relates to expenditure of company funds on costs of litigation involving a dispute between shareholders.

114 As to English authority, Foster J places some reliance on Re a Company (No 1126 of 1992) [1994] 2 BCLC 146. In that case Lindsay J reviewed the English case law on the question whether a company should become involved in oppression proceedings between its shareholders, and reached a series of conclusions (at 155-6) which included the following:

there is no rule that necessarily and in all cases active participation and expenditure is improper;

the test of whether the company's participation and expenditure is proper is whether it is necessary or expedient in the interests of the company as a whole;

in considering that test the Court's starting point is a sort of rebuttable distaste for such participation and expenditure, and initial scepticism as to its necessity or expediency, and so a company that has actively participated bears a heavy onus.

115 His Lordship's "rebuttable distaste" for the expenditure of the company's funds on litigation involving a dispute between shareholders stands in contrast with the observations of Foster J. In Re Milgate Developments Pty Ltd [1993] BCLC 291 and Re a Company (No 00450 of 1988), ex parte Johnson [1992] BCLC 701, injunctions were granted to prevent shareholders or directors from causing their companies to actively defend proceedings, subject to an exception for compliance with obligations such as discovery. On balance, it seems to me that Lindsay J's statement of the principles emerging from the English cases reflects the preponderance of Australian authority and I should follow that approach in preference to the approach taken by Foster J in Sellar.

116 There is some evidence that the Companies' funds are being used in defence of the proceedings. The plaintiff's written submissions refer to a letter written by Horowitz & Bilinsky dated 22 June 2009, in which it asserted that:

"The cases are a profligate waste of the companies' resources for no proper purpose".

This is an admission that the companies' resources had been used in conducting an active defence of the proceedings, but the letter did not supply information about how much had been spent, notwithstanding that the plaintiff's solicitor had asked for that information.

117 This is a somewhat unusual case because the issues flow in two broad rivers, which might be called the equity river and company law river. Flowing down the equity river are all the questions about the family trust and the proper construction of the will of Otto Ekstein, leading on to questions of breach of trust, an application to remove Mr Ekstein from his position as trustee, etc. I infer that the equity issues will occupy a very substantial part of the final hearing. The company law issues are essentially threefold: relating to claims for relief on the oppression ground, derivative claims asserting breaches of duty, and issues about constitutional compliance on such matters as rotation of board positions. My assessment of the case is that the company law issues, though there seem to be more of them, will take rather less time to cover, in an evidentiary sense, than the equity issues.

118 I make the broad distinction between the equity issues and the company law issues because it seems to me that the Companies have no interest in the equity issues, and so a substantial part of the final hearing will not affect them. They should not be active participants in that part of the case and their funds should not be used to conduct that part of the litigation - subject to an exception to allow them to meet their discovery obligations as parties to the proceedings.

119 The company law issues are partly in a different category. To the extent that company law claims will be asserted derivatively on their behalf, the Companies need not have any active involvement and under my orders, they will be indemnified by the plaintiff in respect of costs. What remains, broadly speaking, are the oppression claims and the claims about constitutional non-compliance. As I understand the oppression claims, relief is sought against each company except Elysee for an order, inter alia, for compulsory purchase of shares. It seems to me that an application for a compulsory purchase order against a corporate defendant brings the company's interests into play and it can no longer be said that the dispute is purely between shareholders. The company (that is, the body of members as a whole) has an interest in resisting a compulsory purchase order; ensuring that the burden of the order, if made, falls fairly on all relevant defendants; and making sure that the terms of any such order as to matters such as valuation of the shares are fair in the company's interests. Therefore it would be wrong to restrain the company from participating actively in the litigation, so far as it relates to an application against the company (or defendants including the company) for compulsory purchase of the plaintiff's shares.

120 It also seems to me that a company has a legitimate interest in responding to a challenge to the validity of its decision-making, and hence the Companies should be permitted to respond to the plaintiff's allegations about failure to comply with constitutional provisions about rotation of directors leading to an absence of directors. That argument does not just affect the directors; it affects the integrity of the company and the interests of its members as a whole, by challenging the validity of its corporate actions.

121 This brings me to the conclusion that, upon receipt of the plaintiff's usual undertaking as to damages, I should make an interlocutory order restraining those in control of the Companies (except Elysee, which is not the subject of the application) from permitting those Companies to take any steps in the proceedings, and from applying any funds of the Companies to the defence or conduct of the proceedings, except, in the case of any Company:

(a) to the extent that the plaintiff in the proceedings seeks a compulsory purchase order against that Company or seeks relief challenging the validity of corporate actions;

(b) for the purpose of complying with obligations in respect of discovery;

(c) for any purpose agreed by the plaintiff's solicitor in writing; or

(d) with the prior leave of the Court.

9.2 Conflicts?

122 The plaintiff makes submissions concerning conflicts affecting Mr Ekstein and Mr David Frish, and conflicts affecting Mr Bilinsky. As to Mr Bilinsky's position, the plaintiff invokes the conflict rule of fiduciary obligation, which obliges a solicitor to avoid any real sensible possibility of conflict between the duty to serve the interests of the client and personal interest, and also to avoid any actual conflict between the duty to serve the interests of one client and the duty to serve the interests of another client: Oceanic Life Ltd v HIH Casualty & General Insurance Ltd (1999) 10 ANZ Insurance Cases 61-438; [1999] NSWSC 292, at [40].

123 As to Mr Ekstein and Mr Frish, there would obviously be unacceptable conflicts if they were allowed to retain some influence over the Companies in their prosecution of the derivative claims, because many of the derivative claims seek relief against them personally which they have actively resisted. But the orders that I shall make under s 237 will put the Companies in the hands of the plaintiff as far as the derivative claims are concerned. I cannot see that there will be any problem of influence on the part of Mr Ekstein and Mr Frish in the conduct of the derivative claims.

124 In the written submissions on behalf of the plaintiff, counsel contends that the position of conflict of Mr Ekstein and Mr Frish as personally interested defendants and as controllers of the corporate defendants will affect the other issues in the proceedings. However, for the reasons given above, my intention is to restrain Mr Ekstein and Mr Frish from permitting the Companies to take any steps in the proceedings, and from applying the Companies' funds, except in circumstances where the interests of the members of the Companies as a whole are affected, as they would be in respect of the plaintiff's claim for compulsory purchase orders. In those latter circumstances the Companies should be permitted to defend themselves and use corporate financial resources to do so.

125 I can foresee circumstances arising where it would be undesirable for the same solicitor to act for the controllers of the Companies and the Companies themselves. For example, issues of apportionment of liability between the Company and its controllers may arise if the plaintiff makes out a case for, say, compulsory purchase orders. There may be questions of contribution and indemnity amongst defendants. It strikes me that, in the areas where I intend to allow the Companies to continue to participate as defendants in the proceedings and for their funds to be applied to the costs of doing so, it would be wise to require that the Companies be separately represented. I should make it clear that in reaching this conclusion, I do not intend to imply any criticism of Mr Bilinsky.

126 It does not seem to me to be necessary to deprive Mr Ekstein and Mr Frish of their control of the Companies pending resolution of the proceedings. The interests of the Companies will be protected by the injunction and by the requirement of separate representation.

9.3 No authority to act?

127 A solicitor cannot act for a company without instructions from a person who has authority to give them on the company's behalf. In the normal case, where the management power is vested in the board of directors, instructions are to be received from the directors or from someone with their authority to instruct. A shareholder does not, per se, have authority to instruct, though there are cases indicating that a solicitor may act upon instructions unanimously assented to by the shareholders. For these propositions, see generally Harry S Bagg's Liquidation Warehouse Pty Ltd v Whittaker (1982) 44 NSWLR 421; AW & LM Forrest Pty Ltd v Beamish [1998] NSWSC 442; (1998) 146 FLR 450; Massey v Wales (2003) 57 NSWLR 718; [2003] NSWCA 212; Hawksford v Hawksford [2005] NSWSC 463; Hillig v Darkinjung Pty Ltd [2008] NSWCA 75. The Court can by injunction restrain a solicitor from purporting to represent a company without authority, or from acting in a situation of conflict: British American Tobacco Australia Services Ltd v Blanch [2004] NSWSC 70.

128 The plaintiff contends that Mr Bilinsky has no retainer because the constitutions of the Companies require directors to hold office for three years, retiring by rotation, and there had been no annual general meetings to re-elect them since at least the early to mid-1990s. Accordingly, she submits, on the principle established by Morris v Kanssen [1946] AC 459; Club Flotilla (Pacific Palms) Ltd v Isherwood (1987) 5 ACLC 1027; Gosford Christian School Ltd v Totonjian (2006) 201 FLR 424; [2006] NSWSC 725 and Flora trading as Flora Constructions v Budget Demolition & Excavation Pty Ltd [2008] NSWSC 386, there have not been any directors of the companies since at least the early to mid-1990s. Consequently there is no one with authority to retain Mr Bilinsky to act.

129 It is unnecessary for me to make a decision on this matter, because I have reached the conclusion that Mr Bilinsky should no longer represent the Companies in the proceedings because of concerns about conflicts. However, I am far from convinced that the point is correct, for reasons given at 6.2 above.

10. Conclusions

130 I have decided that the plaintiff has succeeded in making out all six claims for leave under s 237, in accordance with her interlocutory process filed on 23 June 2009. In light of the written and oral submissions at the hearing, I would not be comfortable with making orders simply in terms of paras and 1-6 of the voluntary process, at as the orders do not, in my opinion, adequately identify the "proceedings" to be brought pursuant to believe that will be granted. This is because the paragraphs of the interlocutory process identify each of the derivative proceedings merely by the relief to be sought, without indicating the substance of the claims. Fortunately, however, in this case the derivative claims have already been pleaded in the amended statement of claim. Therefore it seems to me that the orders should be made by reference to the pleading.

131 On the application for orders under s 237, I propose to make orders under as follows:

1. Subject to Order 2, ORDER under s 237 of the Corporations Act 2001 (Cth) that leave be granted to the plaintiff, nunc pro tunc, to bring proceedings on behalf of each of the second, third, fourth, fifth and sixth defendants ("the Defendant Companies"), by filing and prosecuting the Amended Statement of Claim in these proceedings verified by her on 17 March 2009, to the extent that the Amended Statement of Claim asserts or seeks relief in respect of a cause or causes of action of any of the Defendant Companies.

2. Subject to further order:

(a) the commencement and operation of Order 1 is suspended;

(b) Order 1 will not take effect until the plaintiff files with the Court her written undertaking to the Court to pay and bear and indemnify each of the Defendant Companies against all costs, charges and expenses of and incidental to the bringing and continuation of the derivative claims for which leave is granted ("the Undertaking");

(c) Order 1 will take effect upon the filing of the Undertaking, provided that the Undertaking is filed on or before 22 March 2010.

On the application regarding representation of the Companies in the proceedings, I shall make the following orders:

3. Upon the plaintiff giving the usual undertaking as to damages, ORDER until further order that the first and ninth defendants and each of them be restrained, by themselves, their servants or agents, from causing or permitting:

(a) all and any funds or other property of the third, fourth, fifth and sixth defendants ("the Relevant Companies", each a "Relevant Company") to be applied for the defence or conduct of these proceedings, including the cross-claim, otherwise than for the purposes stated in Order 4 ("the Permitted Purposes"); and

(b) the Relevant Companies to take any steps in the proceedings, otherwise than for the Permitted Purposes.

4. The Permitted Purposes are, in respect of the Relevant Companies or any Relevant Company:

(a) the defence or conduct of the proceedings to the extent that the plaintiff seeks a compulsory purchase order against a Relevant Company or Relevant Companies, or seeks relief challenging the validity of corporate actions of a Relevant Company or Relevant Companies;

(b) complying with obligations in respect of discovery;

(c) any purpose agreed by the plaintiff's solicitor in writing; and

(d) the defence or conduct of the proceedings with the prior leave of the Court.

5. Upon the plaintiff giving the usual undertaking as to damages, ORDER until further order that the first and ninth defendants and each of them be restrained, by themselves, their servants or agents, from causing or permitting the Relevant Companies or any Relevant Company to retain or continue to retain Claudius Bilinsky to act for them or it in the proceedings.

132 As to costs, in the written submissions made on behalf of the plaintiff, counsel purported to reserve the right to seek special orders in relation to the basis on which costs are to be assessed and the time at which they are to be assessable. He did so on the basis that the motions had so far been opposed without notice of any reasonable ground of opposition.

133 The applications came before me for hearing on 1 December 2009, the hearing was fully conducted on that day and judgment was reserved. A large quantity of documentary evidence was tendered. I take the view that it is open to the Court, having reached its decision on the applications, to dispose of the applications fully, by making not only substantive orders but also orders on the question of costs.

134 In my opinion, though the respondents have failed on both applications, I do not regard the position they have taken on the applications as an unreasonable position. There were some contestable issues raised by the amended statement of claim and the applications, and additionally, the amended statement of claim did not always identify the proposed derivative claims with clarity. Having considered the substantial evidence that has been tendered, including the correspondence between solicitors, I have not detected anything in the stance taken by the respondents that would lead me to order costs against them on the indemnity basis, or to order that the plaintiff's costs of the applications are to be assessed and paid forthwith.

135 A frequently made order for costs when a party succeeds on an interlocutory application is that the successful party's costs be that party's costs in the cause. Such an order minimises the risk that interlocutory costs might become an oppressive instrument, a risk obviously present where the litigation reflects a feud amongst family members. I have reached the view that this is the appropriate order in the present case, subject to one qualification. The qualification is that, in light of counsel's submission noted above, I shall make allowance for the possibility that there might be some further documentary evidence (such as correspondence not previously tendered) that might affect the costs question. I shall give the parties the limited opportunity to tender any such evidence and make oral submissions strictly confined to that new evidence, but I do not propose to hear submissions based on matters already in evidence.

136 I shall make an order standing the proceedings into the Corporations List on, say, 22 March 2010. At the hearing there was some discussion about court-ordered mediation, and senior counsel for the Ekstein respondents told the court he was instructed to undertake to move and diligently prosecute a court-ordered mediation. It seems to me strongly desirable that a further mediation take place, and the only issue is timing. Some caution will need to be exercised on the question of timing, given that there have already been two attempts that mediation. It will also be necessary to settle a renewed timetable with a view to bringing the proceedings to trial expeditiously. The two matters are connected: once the Court has a clear idea of what steps still need to be taken to prepare the case for trial, and how long that process will take, it will have a better opportunity than I do now to select the point at which mediation is likely to be most effective.

**********

LAST UPDATED:
3 March 2010