Welcome to today’s Chamberlains Selection, where we will discuss with James d’Apice on the matter of Vicad Pty Limited  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.  P said the directors were occupying the Co’s land without paying rent, and so benefiting themselves at the Co’s expense. ,  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.  (ii)
Notwithstanding any personal animosity, and other litigation commenced by the P, the application was made in good faith.  (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).  (iv) There was a serious question to be tried in relation to the directors’ liability to the Co.  (v) The required notice was provided.  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.