Vicad Pty Limited [2011] NSWSC 166

"The directors aren't paying any rent!"

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

The Co was the owner of farming property, and this dispute was one limb of a broader estate and succession dispute within a family: [3]

P said the directors were occupying the Co’s land without paying rent, and so benefiting themselves at the Co’s expense: [12], [23]

In relation to each of the s237 criteria “derivative suit” criteria:
(i) The Court found it was unlikely the directors would cause the Co to commence proceedings against themselves: [40]
(ii) Notwithstanding any personal animosity, and other litigation commenced by the P, the application was made in good faith: [57]
(iii) The Co would stand to benefit from the proceedings as it would receive money from the directors if successful (and conditional upon an indemnity from the P): [64]
(iv) There was a serious question to be tried in relation to the directors’ liability to the Co: [83]
(v) The required notice was provided: [86]

Conditional upon the plaintiff providing an indemnity to the Co, the Court granted leave for the plaintiff to cause the Co to pursue to the directors: [89]