Mali, in the matter of Head Quarters (WA) Pty Ltd v Head Quarters (WA) Pty Ltd as trustee for the Three Flights Up Unit Trust [2016] FCA 171

Mali, in the matter of Head Quarters (WA) Pty Ltd v Head Quarters (WA) Pty Ltd as trustee for the Three Flights Up Unit Trust [2016] FCA 171

Mr Mali was granted leave under s 237 of the Corporations Act 2001 (Cth) to commence proceedings in the name of the company because he satisfied all statutory criteria: it was probable the company would not bring proceedings; he was acting in good faith; it was in the best interests of the company (in light of reasonable prospects of success and his undertaking to indemnify costs); there was a serious question to be tried; and notice requirements were sufficiently met or excused. The pleadings and evidence supported an arguable case of breach of fiduciary and statutory duties by a director in diverting a business opportunity, justifying the grant of leave.

Parties
Applicant: Deepesh Mali; First Respondent: Head Quarters (WA) Pty Ltd as trustee for the Three Flights Up Unit Trust; Second Respondent: Shahyaz Yezdi Mubarakai; Third Respondent: Jerestine Shahyaz Mubarakai
Jurisdiction
Australia
Judgment Date
01 March 2016
Procedural Posture
Application for Leave to Bring Proceedings on Behalf of a Company / Leave Application Determined on the Papers
Outcome
Leave granted to applicant to bring proceedings in company's name against third respondent and Victoria Ventures Pty Ltd as trustee for the Victoria Ventures Unit Trust; respondents restrained from terminating the unit trust or holding unit meetings pending determination; costs reserved.
Legal Topics
Fiduciary Duties of Directors, Derivative Actions, Leave to Bring Proceedings on Behalf of a Company, Breach of Director's Duties, Improper Use of Position/information, Remedies for Breach of Fiduciary Duty
Corporations Law Fiduciary Duties of Directors Derivative Actions Leave to Bring Proceedings on Behalf of a Company Breach of Director's Duties Improper Use of Position/information Remedies for Breach of Fiduciary Duty

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Parties

Deepesh Mali

Applicant

Head Quarters (WA) Pty Ltd as trustee for the Three Flights Up Unit Trust

First Respondent

Shahyaz Yezdi Mubarakai

Second Respondent

Jerestine Shahyaz Mubarakai

Third Respondent

Procedural Posture

Application for Leave to Bring Proceedings on Behalf of a Company / Leave Application Determined on the Papers

Legal Issues

  1. 1 Whether the applicant (Mr Mali) should have leave under s 237 of the Corporations Act 2001 (Cth) to commence proceedings in the name of the company
  2. 2 Whether the statutory criteria in s 237 of the Corporations Act 2001 (Cth) are satisfied

Ratio Decidendi

Mr Mali was granted leave under s 237 of the Corporations Act 2001 (Cth) to commence proceedings in the name of the company because he satisfied all statutory criteria: it was probable the company would not bring proceedings; he was acting in good faith; it was in the best interests of the company (in light of reasonable prospects of success and his undertaking to indemnify costs); there was a serious question to be tried; and notice requirements were sufficiently met or excused. The pleadings and evidence supported an arguable case of breach of fiduciary and statutory duties by a director in diverting a business opportunity, justifying the grant of leave.

Court Disposition

Leave granted to applicant to bring proceedings in company's name against third respondent and Victoria Ventures Pty Ltd as trustee for the Victoria Ventures Unit Trust; respondents restrained from terminating the unit trust or holding unit meetings pending determination; costs reserved.

Orders

  • Pursuant to s 237 of the Corporations Act 2001 (Cth), the applicant has leave to commence proceedings in the name of Head Quarters (WA) Pty Ltd as trustee for the Three Flights Up Unit Trust against the third respondent and Victoria Ventures Pty Ltd as trustee for the Victoria Ventures Unit Trust in respect of the...
  • The respondents are restrained from (a) terminating the Three Flights Up Unit Trust, and (b) calling, convening or holding any further meetings of the Three Flights Up Unit Trust, until the proceedings are determined or leave is granted under s 240 of the Corporations Act 2001 (Cth).