Welcome to today’s Chamberlains Selection, where we will discuss with James d’Apice on the matter of Vicad Pty Limited [2011] NSWSC 166. We will talk about a shareholder who applied to the Court for leave to sue a company’s directors on behalf of the company, otherwise known as a ‘derivative suit’.

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]