In the matter of Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 64

In the matter of Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 64

Leave to conduct derivative proceedings in the name of a company in provisional liquidation requires an adequately robust indemnity protecting the company's estate against the risk of an adverse costs order. The indemnity offered by HY International was insufficient, as it did not secure costs for the entire proceedings, could be terminated unilaterally, and was not supported by sufficient assets. Therefore, leave to prosecute in the company's name was refused and the interlocutory process dismissed.

Jurisdiction
Australia
Judgment Date
12 February 2014
Procedural Posture
Interlocutory Application / Dismissal of Interlocutory Process for Leave to Continue and Prosecute Existing Proceedings in the Name of Provisional Liquidator
Outcome
Plaintiffs' interlocutory application dismissed; Plaintiffs to pay costs of the application.
Legal Topics
['provisional Liquidation' 'derivative Action' 'leave to Prosecute in Company Name' 'indemnity for Costs']
['corporations Law' 'equity'] ['provisional Liquidation' 'derivative Action' 'leave to Prosecute in Company Name' 'indemnity for Costs']

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Procedural Posture

Interlocutory Application / Dismissal of Interlocutory Process for Leave to Continue and Prosecute Existing Proceedings in the Name of Provisional Liquidator

Legal Issues

  1. 1 ['Whether the Court should grant leave under its inherent jurisdiction for HY International to continue and prosecute proceedings in the name of Colorado Products Pty Ltd (in prov liq)' 'Whether the liquidator and company are adequately protected financially by means of indemnity']

Ratio Decidendi

Leave to conduct derivative proceedings in the name of a company in provisional liquidation requires an adequately robust indemnity protecting the company's estate against the risk of an adverse costs order. The indemnity offered by HY International was insufficient, as it did not secure costs for the entire proceedings, could be terminated unilaterally, and was not supported by sufficient assets. Therefore, leave to prosecute in the company's name was refused and the interlocutory process dismissed.

Court Disposition

Plaintiffs' interlocutory application dismissed; Plaintiffs to pay costs of the application.

Orders

  • ["The Plaintiffs' Interlocutory Process filed on 31 January 2014 be dismissed." 'The Plaintiffs pay the costs of the application as agreed or as assessed.']