Federal Court of Australia

Smart EV Solutions Pty Ltd v Guy (No 2) [2024] FCA 1102

ORDERS

THE COURT ORDERS THAT:

1.    On the application filed on 29 July 2024:

(a)    pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) and r 26.01(1)(a) of the Federal Court Rules 2011 (Cth):

(i)    the first cross-respondent, Smart EV Solutions Pty Ltd, have judgment on the Amended Notice of Cross-Claim as against the cross-claimants

(ii)    the Amended Cross-Claim filed on 11 June 2024 be otherwise dismissed as against the first cross-respondent, Smart EV Solutions Pty Ltd;

(b)    the cross-claimants pay the first cross-respondent’s costs of the cross-claim to be taxed or agreed.

2.    On the interlocutory application filed on 2 September 2024:

(a)    the relief sought in paragraph (2) of the interlocutory application be dismissed;

(b)    the first cross-claimant and the third cross-claimant pay the cross-respondents’ costs of and incidental to paragraph (2) of the interlocutory application on an indemnity basis.

IT IS DIRECTED THAT:

3.    By 4.00pm on 3 October 2024, the cross-claimants provide to the cross-respondents any proposed Amended Notice of Cross-Claim and accompanying Statement of Claim in respect of which they intend to seek leave to file.

4.    By 4.00pm on 17 October 2024, the cross-respondents indicate in writing whether they agree to leave being granted for the filing of the proposed Amended Notice of Cross-Claim and accompanying Statement of Claim or oppose the granting of leave.

5.    If, pursuant to order 4 above, the cross-respondents or any of them oppose the granting of leave in respect of the proposed Notice of Cross-Claim or accompanying Statement of Claim, then:

(a)    there will be a hearing at 9.30am on 29 October 2024 on the question of whether the cross-claimants should have leave to file any Amended Notice of Cross-Claim and accompanying Statement of Claim;

(b)    the cross-respondents who oppose the granting of leave are to file and serve any submissions opposing the grant of leave by 4.00pm on 22 October 2024;

(c)    the cross-claimants are to file and serve any written submissions in support of their application for leave to file the proposed Amended Notice of Cross-Claim and Amended Statement of Claim by 4.00pm on 25 October 2024.

6.    There will be a continuation of the hearing of the cross-respondent’s interlocutory application filed on 29 July 2024 at 9.30am on 29 October 2024.

7.    The remainder of any issues arising from the interlocutory applications filed on 29 July 2024 and 2 September 2024, are adjourned to 9.30am on 29 October 2024.

8.    Save as have otherwise been dealt with, the costs of the interlocutory applications filed on 29 July 2024 and 2 September 2024 are to be reserved to the hearing on 29 October 2024.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    The current proceedings were commenced by the applicants, Smart EV Solutions Pty Ltd (Smart EV Solutions) and Smart Grid Investments Pty Ltd (Smart Grid Investments), on 14 June 2023 against Mr Paul Guy and his company, Charge Hub Pty Ltd (Charge Hub).

2    Some background to the proceedings is set out in an earlier interlocutory judgment: Smart EV Solutions Pty Ltd v Guy [2023] FCA 1580 [4] – [28]. In broad terms, the applicants seek orders restraining Mr Guy and Charge Hub from misusing confidential information which Mr Guy allegedly obtained as a director and employee of Smart EV Solutions. The applicants further seek to enforce restraint of trade agreements to which they say Mr Guy is bound. Relevantly, since that judgment was handed down, the respondents and another company related to Mr Guy, Guy O’Sullivan Pty Ltd (Guy O’Sullivan), have filed a cross-claim against the applicants and their directors.

3    Before the Court are two interlocutory applications. The first, which was filed by the applicants in the proceeding on 26 July 2024, seeks an order for summary judgment on part of the cross-claim and, in the alternative, to strike out several paragraphs of the amended statement of cross-claim. The second application, which was dated 30 August 2024, is brought by the cross-claimants, by which they seek leave under s 237 of the Corporations Act 2001 (Cth) (Corporations Act) to bring certain derivative claims against the applicants.

Background

4    There is no need to set out in detail the background of the occasioning of the dispute between the parties, though a brief description is appropriate.

5    In early 2020, Mr Guy and Mr Dale Cook (the latter of whom is presently a director of the applicant companies) entered into discussions in which they contemplated going into business together. The proposed business concerned the development and supply of electric vehicle charging technologies and hardware. Over time, several companies were formed for the purposes of the commercial operations which were undertaken. Smart Grid Investments became the holding company of the group of companies, whilst Smart EV Solutions was an operational company. The directors of Smart EV Solutions included Mr Cook and Mr Guy, amongst others who were also investors in the business. Mr Guy was also the managing director of Smart EV Solutions, in an employed position. The relationship between Mr Guy, as managing director, and Smart EV Solutions was recorded in an employment contract which imposed duties on Mr Guy in relation to his employment, his use of confidential information, and his conduct after the termination of his employment.

6    Relevant to the issues before the Court is a shareholders’ agreement between the members of Smart Grid Investments, which included Mr Guy and Mr Cook. The agreement provided, amongst other things, for the restraint of the use of confidential information owned by Smart Grid Investments and it is that restraint on which the applicants partly rely in these proceedings.

7    From around June 2022, the relationship between Mr Guy and the other directors of Smart Grid Investments and Smart EV Solutions deteriorated. That resulted in the resignation of Mr Guy as the managing director of Smart EV Solutions. It should be observed that Mr Guy alleges that he was effectively forced out of the management and control of Smart EV Solutions, but that is a dispute which need not be resolved on the current application. In November 2022, Mr Guy resigned as a director of Smart EV Solutions, and, shortly thereafter, as a director of Smart Grid Investments.

8    In relation to their claims of misuse of confidential information, Smart EV Solutions and Smart Grid Investments allege that shortly prior to his resignation as director, Mr Guy wrongfully downloaded a database maintained by Smart EV Solutions, which contained all the quotations and proposals issued by the company to its customers, as well as the contact details of its customers. Very soon after that, Mr Guy incorporated Charge Hub, of which he is the sole director and secretary and of which the sole shareholder is Guy O’Sullivan. Charge Hub competes in the same business as Smart Grid Investments and Smart EV Solutions.

9    On 6 October 2023, orders were made by this Court restraining Mr Guy and Charge Hub from misusing certain information which the applicants allege is confidential to them. That injunction remains in force.

10    On 18 March 2024, Mr Guy, Charge Hub and Guy O’Sullivan commenced a cross-claim against Smart EV Solutions, Smart Grid Investments and the directors of both companies. It was also advanced against a further cross-respondent, although that has since been abandoned.

11    An amended notice of cross-claim and statement of cross-claim were filed on 11 June 2024.

12    On 26 July 2024, Smart EV Solutions and Smart Grid Investments filed their interlocutory application seeking various orders for summary judgment against the cross-claimants and, in particular, that the cross-claim be dismissed. Further relief is sought in the nature of security for costs and, additionally, an application is made to strike out several paragraphs of the amended statement of cross-claim.

13    On 30 August 2024, just under one week prior to the hearing of that application, the cross-claimants filed their interlocutory application seeking: by paragraph 1, that the interlocutory application filed 29 July 2024 be dismissed; and, by paragraph 2, that Mr Guy and Guy O’Sullivan have leave to bring the cross-claim pursuant to s 237 of the Corporations Act. That application was listed for hearing with the application of Smart EV Solutions and Smart Grid Investments.

14    At the hearing, it was determined that the application for leave should be dealt with first.

The substance of the cross-claim

15    The amended statement of cross-claim is a difficult document to understand. It does not include any identification of the pleader as required by r 16.01 of the Federal Court Rules 2011 (Cth) (the Rules), though there may be good reasons for that.

16    Its introductory paragraphs contain numerous irrelevant allegations and assertions which are rendered more concerning due to the existence of some obvious errors.

17    The remaining substantive part of the document asserts the existence of directors’ duties owed by the directors of Smart Grid Investments and Smart EV Solutions. It identifies (at paragraph 20) the directors of the companies and then makes (at paragraph 21) the vague allegation that each of the directors, or some of them were the controlling minds of either both of the companies, or were the controlling mind singularly. Such an allegation is almost impossible to understand and one to which it would be difficult plead.

18    Allegations are then made (at paragraph 22) that Smart EV Solutions commenced trading under the business name “Tribus” in about March 2024. It appears that the nomenclature, Tribus, was used as part of the name of a number of companies operated and controlled by one of the directors of Smart EV Solutions. On that basis, it is alleged by the cross-claimants that by trading under the name Tribus, Smart EV Solutions will be financially denigrated, and the value of its shares will be reduced. It is then claimed, amongst other things, that this will cause damage to the third cross-claimant, Guy O’Sullivan, in its capacity as a shareholder in Smart Grid Investments. A complaint is made that Smart EV Solutions did not inform its members of its intention to begin trading under the name Tribus, or why. That is a misunderstood allegation because Smart EV Solutions only had one member, being Smart Grid Investments and it had some common directors with Smart EV Solutions. This becomes more relevant later in these reasons.

19    A complaint is also made (at paragraph 32) that Smart EV Solutions terminated some of its employees and, again, did not inform the members that it intended to pursue that course, or why.

20    It is then pleaded that Smart EV Solutions “may be” trading insolvently and/or experiencing cashflow issues. Again, pleadings of that nature are unsustainable.

21    A further allegation is made that Smart EV Solutions has not informed Mr Guy and/or Guy O’Sullivan as to the manner in which it is currently performing contracts with third parties. A particular contract referenced is one with the Royal Automobile Association in Adelaide, referred to as the “RAA Contract”. The basis on which Mr Guy, as a shareholder of a shareholder of Smart EV Solutions, would be entitled to such information is not stated. Nevertheless, it is alleged that if Smart EV Solutions has used funds from external sources for the purposes of maintaining the required amount of capital reserves for the purpose of the RAA Contract, it would be a breach of the shareholders’ agreement, oppressive or unfairly prejudicial to, or discriminatory against Guy O’Sullivan. There is, of course, great difficulty with such an allegation given that Guy O’Sullivan is not a member of Smart EV Solutions and neither is Smart EV Solutions a party to the shareholders’ agreement. There is much which is not explained in the pleading in relation to these concerns.

22    In the body of the pleading some relief is sought in relation to this specific allegation, being that the cross-claimants be provided with evidence about Smart EV Solutions’ compliance with its obligations under the RAA Contract. Yet that does not seem to find any home in the prayer for relief at the end of the pleading.

23    A further complaint is made (at paragraph 37) that Smart EV Solutions and Smart Grid Investments commenced the present proceedings without seeking the approval of the shareholders of Smart Grid Investments, which obligation is said to have existed in the shareholders’ agreement of Smart Grid Investments. This is said to constitute conduct which will detrimentally affect the value of Smart Grid Investments and, therefore, devalue the interest of Guy O’Sullivan.

24    Under a heading entitled, “Further Oppressive conduct of the First and Second Cross-respondents”, that being Smart EV Solutions and Smart Grid Investments, are allegations that Guy O’Sullivan has been denied its rights under the shareholders’ agreement of Smart Grid Investments. This is said to have, in some way, devalued Smart Grid Investments or caused it to be mismanaged and, perhaps, caused the value of its shares to be reduced. The allegations of that loss and damage or diminution in value are only vague and difficult to understand. No particulars as to the loss of value are provided. That may be because the allegations about loss of value are hypothetical, in that the pleading has not indicated that loss of value has been caused, but rather that it might have been.

25    The allegations made (at paragraph 46) are then that the affairs of Smart EV Solutions and Smart Grid Investments have been conducted contrary to the interests of members, or have been oppressive, unfairly prejudicial to, or discriminatory against a member of each company. Relevantly, it is also said that the directors of each have somehow contravened their statutory duties.

26    The relief sought in the pleading under the heading entitled, “Relief”, is important. It says that, for the reasons pleaded in the defence and in the statement of cross-claim, each of the first cross-claimant, being Mr Guy, the second cross-claimant, Charge Hub, and the third cross-claimant, Guy O’Sullivan, are entitled to an order pursuant to s 233 of the Corporations Act that a provisional liquidator be appointed to Smart EV Solutions and/or Smart Grid Investments. The asserted purpose for the appointment of a provisional liquidator is to undertake a wide-ranging inquiry or investigation into the companies to make some report to the Court and advise the Court about recommended actions and the like. No other relief is sought.

27    Before addressing the issues in the interlocutory application, it must be said that there are a number of difficulties with the amended statement of cross-claim. Some have been mentioned above. A further failing is that attempts have been made to articulate particulars by incorporation by reference of allegations or matters referred to in other pleadings and documents, without referencing their substance. Whilst it may be that, on occasion, particulars can be provided by referring to the content of other documents, the substance of the content of that document must be stated. A pleading should be capable of being read and understood as a stand-alone document rather than one which requires the location and consideration of other documents.

28    Secondly, a number of allegations in the amended statement of cross-claim are advanced in hypothetical terms. That is, the pleader has alleged that if something happened or if some particular circumstances are found to exist, then the relief sought will be available. Such a pleading does not amount to the assertion of a right to relief, but only the possibility that relief might be available, depending upon the circumstances found to exist.

29    Perhaps the most problematic element is the rolled-up nature of the claims. This is particularly relevant given that the cross-claimants proffer claims of oppressive conduct against two separate entities: Smart EV Solutions and Smart Grid Investments. Necessarily, the considerations in relation to each must be separate and distinct given their differential operations and management. In this case, no attempt was made to separate the particular allegations in relation to each company, the consequence being that it is impossible to discern the nature of the allegations which are to be made against which company. Necessarily, such a pleading will cause much confusion at any trial.

The application for leave to bring derivative claims

30    As mentioned, the cross-claimants (being Mr Guy, Charge Hub, and Guy O’Sullivan) seek orders by paragraph 2 of their interlocutory application that Mr Guy and Guy O’Sullivan have leave nunc pro tunc under s 237 of the Corporations Act to bring or otherwise intervene in proceedings on behalf of and against Smart EV Solutions and Smart Grid Investments in the form of the amended notice of cross-claim filed on 11 June 2024.

31    Some background is required as to why this application was made. The most obvious and direct motivation for the application is to seek to address the issues raised by the interlocutory application filed by Smart EV Solutions and Smart Grid Investments on 26 July 2024, in which summary judgment is sought. The foundation for seeking that order is that the relief sought by the first and second cross-claimants, being Mr Guy and Charge Hub, against Smart EV Solutions pursuant to s 233 of the Corporations Act was not available. The persons who might bring a proceeding for relief under s 233 are identified in s 234 of the Corporations Act and, relevantly for present purposes include a person who is a member of the company. Neither Mr Guy nor Charge Hub are, or were, members of Smart EV Solutions, and their claim for relief under s 233 would necessarily fail.

32    It is relevant to note that the relief sought in the interlocutory application brought by Smart EV Solutions and Smart Grid Investments is reflective of their defence to the cross-claim filed in April 2024, which includes an assertion that Mr Guy and Charge Hub lacked standing to bring the claims for relief under s 233. In the face of the applicants seeking judgment on this point, the cross-claimants’ response was to make the present application for leave pursuant to ss 236 and 237 to bring certain of the claims articulated in the statement of cross-claim on behalf of Smart EV Solutions and Smart Grid Investments as derivative actions. No new statement of cross-claim was filed and the causes of action in respect of which the orders for leave were sought remained those advanced by the cross-claimants, as did the relief.

33    As these reasons disclose, that attempt to avoid the consequences of the interlocutory application for judgment — by effectively seeking orders that the claims were to be brought as derivative actions — was rash. It was not appropriately considered, with one of the matters to which attention was not given being the need for there to be a new and different pleading which met the requirements of ss 236 or 237 of the Corporations Act. No new cross-claim was formulated and no new statement of cross-claim was prepared advancing claims on behalf of either Smart EV Solutions or Smart Grid Investments or any other person capable of bringing the derivative claims. All that was relied upon was the original (earlier amended) cross-claim and amended statement of cross-claim brought by Mr Guy, Charge Hub and Guy O’Sullivan.

34    At this juncture, it is useful to set out the relevant parts of ss 236 and 237 of the Corporations Act:

236 Bringing, or intervening in, proceedings on behalf of a company

(1)     A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:

(a)     the person is:

(i)     a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or

(ii)     an officer or former officer of the company; and

(b)     the person is acting with leave granted under section 237.

(2)     Proceedings brought on behalf of a company must be brought in the company’s name.

(3)     The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished.

237 Applying for and granting leave

(1)     A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.

(2)     The Court must grant the application if it is satisfied that:

(a)     it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and

(b)     the applicant is acting in good faith; and

(c)     it is in the best interests of the company that the applicant be granted leave; and

(d)     if the applicant is applying for leave to bring proceedings—there is a serious question to be tried; and

(e)     either:

(i)     at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or

(ii)     it is appropriate to grant leave even though subparagraph (i) is not satisfied.

…

(Notes omitted).

35    Prior to the Court proceeding with the hearing of the applications, an opportunity was given to the cross-claimants to seek an adjournment so as to reorganise themselves and to produce a statement of claim which would conform to the requirements of ss 236 and 237. Despite that being offered on several occasions, it was rejected. Therefore, the matter must be dealt with on the basis that the Court is asked to give leave for Mr Guy and Guy O’Sullivan to pursue the current statement of cross-claim as a derivative claim on behalf of Smart EV Solutions and/or Smart Grid Investments.

36    This immediately encounters a problem. By s 236(2) of the Corporations Act, any proceedings in respect of which leave is given are to be brought on behalf of the company in the company’s name. In this case, the proceedings are not brought in either of the companies’ names, rather, they are in the name of the cross-claimants. No relief is sought on behalf of Smart EV Solutions or Smart Grid Investments. On one view, that might be seen to be formalistic, but it is not. Though, in certain proceedings, the company need not be named as a plaintiff: see Power v Ekstein (2010) 77 ACSR 302, 315 – 316 [33] – [34]: this is not such a case. The manner in which a claim is articulated is not just one of the form of the proceedings, it is a matter of substance. The proceedings for which leave is given must relate to claims belonging to the company, for relief to the company, and are at the company’s risk. This was made clear by the New South Wales Court of Appeal in Oates v Consolidated Capital Services Pty Ltd (2009) 76 NSWLR 69, 93 [118]:

The expression “on behalf of the company” also appears in s 236(2). The purpose of that provision, in my view, is to make the form of the action accord with the substantial reality that underlies it, namely that it is the right of the company that is being asserted in the proceedings.

37    Here, this basic threshold requirement has not been met. The claims in respect of which leave is sought are advanced by the cross-claimants, Mr Guy, Charge Hub and Guy O’Sullivan to enforce their own rights, claims and interests. Indeed, the pleading expressly states that those persons suffered loss as a result of the conduct alleged and that they are the entities which seek relief. There is not a skerrick of an allegation which suggests that either Smart EV Solutions or Smart Grid Investments suffered any loss which the proceedings in respect of which leave is sought are intended to remediate. The substance of the claims advanced are not for the benefit of either Smart Grid Investments or Smart EV Solutions.

38    By paragraph 2 of the interlocutory application, orders were also sought that the first and third cross-claimants have leave to intervene in the proceedings on behalf of both Smart Grid Investments and Smart EV Solutions. As the matter progressed, it became clear that there is no proceeding in which Mr Guy or Guy O’Sullivan seek to intervene and pursue on behalf of either Smart EV Solutions or Smart Grid Investments. None were identified in submissions, and none can be identified in the pleadings. Indeed, it would be odd if the cross-claimants truly wished to intervene in any parts of the proceedings — Smart EV Solutions and Smart Grid Investments have claimed against Mr Guy and his other companies, but it was not suggested that intervention in those proceedings were sought. The relief in this respect is entirely misconceived.

39    Even if it were assumed that the applications were for leave so that the first and third cross-claimants could bring proceedings on behalf of the two companies, there would be further insurmountable difficulties. During the hearing, Mr Jordaan, the solicitor appearing for the cross-claimants, was asked to identify the claims of Smart EV Solutions in respect of which the cross-claimants sought to leave to bring on its behalf. No clear answer was given. That is not surprising as neither the amended notice of cross-claim nor the amended statement of cross-claim identifies any causes of action which might be pursued by or on behalf of Smart EV Solutions. On the contrary, part of the relief sought by the cross-claim is against Smart EV Solutions, being the appointment of a provisional liquidator to it.

40    In reply, Mr Jordaan suggested that there was a claim against the directors for breach of their directors’ duties. It is true that somewhere in the pleading under the heading, “Further Oppressive conduct of the First and Second Cross-respondents”, there are allegations about the directors of Smart EV Solutions to the effect that they were mismanaging Smart EV Solutions. Some consequential pleading is made to the effect that, as a result of their conduct, Smart EV Solutions has, or ought to have, suffered loss and/or damage, being a decrease in the value of its shares, or the value of the shares held by the third cross-claimant. But the real gravamen of the complaint is that the shares in Smart Grid Investments were devalued even if, in part, that is derivatively upon a devaluation of Smart EV Solutions’ shares. In substance, there were no claims articulated in the pleading against the directors of Smart EV Solutions which might lead to an award of damages in favour of that company. No relief was sought against them and, on that basis, there was no real claim that Smart EV Solutions has which is articulated in the pleading against any third party. Indeed, a substantive claim is against it, and it could hardly be said to be for its benefit to grant leave for proceedings to be brought against it.

41    In relation to Smart Grid Investments, the position is perhaps slightly different. That is because, on one view of the pleading, it might be possible to eke out a claim that the conduct of Smart EV Solutions was, or occurred in such a manner which was, oppressive to Smart Grid Investments. At least, there is relief sought against Smart EV Solutions. However, if one were to proceed on the basis that the claim advanced by Smart Grid Investments is in respect of alleged oppressive conduct, it would be immediately noticed that Smart Grid Investments is the 100 per cent shareholder in Smart EV Solutions. It is conceptually difficult to see how a court might be persuaded to exercise power in favour of the shareholder that has 100 per cent voting rights in the company to grant the relief sought. Smart Grid Investments is entitled to replace all of the directors of Smart EV Solutions and relief by way of the appointment of a provisional liquidator hardly seems appropriate.

42    There is no need to resolve that conceptual difficulty, but it does serve to identify that the reality is that the proceedings are not being brought for the benefit of Smart Grid Investments, but rather, for the benefit of the shareholders, or a shareholder of that company itself, Guy O’Sullivan.

43    Looking at the requirements under s 237(2) which must be satisfied, it cannot be doubted that it is probable that Smart Grid Investments would not bring a claim against Smart EV Solutions for the relief sought in the proceedings. The consequence is that s 237(2)(a) is satisfied.

44    However, the observation made above that the proceedings are not really brought for the benefit of Smart Grid Investments creates significant problems. Whilst Mr Di Lizia, counsel for the applicants, was not prepared to go so far as to say that the application was not brought in good faith, the fact that the claim is really for the benefit of Guy O’Sullivan, rather than for the benefit of Smart Grid Investments, is sufficient to prevent the Court from concluding that s 237(2)(b) is satisfied in this case. The timing of the application under ss 236 and 237 of the Corporations Act bear this out. There was never any intention to bring a claim by Smart Grid Investments for its benefit. It was only when the lack of standing of the cross-claimants to bring a claim against Smart EV Solutions was brought to their attention that the application for leave to bring the claim derivatively was made.

45    The next important element is whether or not it is in the best interests of the company, that is, Smart Grid Investments, that leave be granted to bring the derivative proceedings: s 237(2)(c). In this instance, one difficulty is that the interests being advanced by Guy O’Sullivan are its own rather than those of Smart Grid Investments. Secondly, and more importantly, the point in issue is whether the benefits which might be derived from the outcome of the proposed proceedings outweigh the risks and the costs which exist in all forms of litigation: see In the matter of Fishinthenet Investments Pty Ltd and Coastal Waters Seafood Pty Ltd [2014] NSWSC 260 [31]. In this case, there will necessarily be substantial costs involved if the action is allowed to proceed. There was no offer of an indemnity by the cross-claimants in respect of those costs, save until very late in the hearing when Mr Jordaan indicated that he had obtained instructions that his clients would give such an indemnity. Even if an indemnity can be given, it is too little and too late. It is too late because the respondents to the application do not have time to assess it, but, moreover, it is too little because nothing is known of its value. There was no offer to put money into Court or to assess the amount of costs likely to be paid or the costs which are likely to be payable if the action fails. On that basis, the requirement in s 237(2)(c) that the grant of leave is in the best interests of the company is not satisfied.

46    The next requirement is found in s 237(2)(d), being that there is a serious question to be tried. It can be accepted for present purposes that that element is one in respect of which there is a low threshold to be met or an undemanding test: see Ao Qing Investment Pty Ltd v 52 Lord St East Perth Pty Ltd [2022] FCA 743 [73]. However, even though the test is undemanding, in the present case it is not satisfied. Overall, the claims advanced in the cross-claim do not have any prospects of success. The most significant issue is that the cross-claim does not seek final relief in any substantive form. The only substantial relief sought is the appointment of a provisional liquidator which, as indicated by its name, is only interlocutory: see Re Rothwells Ltd [1990] 2 Qd R 181, 186; Re Scobie; Ex parte Commissioner of Taxation (1995) 59 FCR 177, 186; Jeruth Pty Ltd v Haybale Pty Ltd [2004] VSC 319 [49].

47    It was submitted by Mr Jordaan on behalf of the cross-claimants that the Court ought to appoint a provisional liquidator to undertake the investigations into the affairs of Smart EV Solutions in relation to a number of matters which cause Mr Guy concern, including the conduct of the directors, and to make a report to the Court about them. Mr Jordaan suggested that, thereafter, other relief might be sought. That is wholly inappropriate. The relief to which a party is entitled to bring or seek in a proceeding of this nature is for final relief. A provisional liquidator might be appointed to preserve property for purposes ancillary to final relief or in the enforcement of final relief, but the appointment is not, per se, final relief in support of a cause of action. Here, even if all the allegations were established, there would be no justification to make some indefinite appointment of a provisional liquidator for some unexplained, unidentified and unarticulated reasons and in respect of some unknown relief which is not presently identified. It follows that the proposed proceedings would fail.

48    The application for leave also does not satisfy the requirements of s 237(2)(e). It was not denied by the cross-claimants that 14 days’ notice in writing of their intention to apply for leave was not given to either Smart EV Solutions or to Smart Grid Investments. Presumably, that was because the making of the application was a reaction to the notification to the cross-claimants that they lacked standing to bring the oppression claim against Smart EV Solutions. Nonetheless, the giving of notice is not merely a matter of form. It is essential to allow the company in question the opportunity to consider the circumstances of the claim being made and what it will do in response to it. Indeed, it might be prompted to indicate that it will pursue the proposed proceedings itself. It follows that the giving of notice is an important preliminary step. Additionally, for the reasons identified previously as to why other subsections of s 237(2) have not been satisfied, this is not a case where it would be appropriate to dispense with the requirement to provide notice.

49    In those circumstances, the application for leave to bring the derivative proceedings must be dismissed.

Costs

50    The applicants sought an order for the payment of their costs of paragraph 2 of the interlocutory application on an indemnity basis. The foundation for that application is a letter written by CDG Law to Taylor Rose of 3 September 2024. In it, the author articulated in detail the substance of the grounds on which the application was opposed. It suffices to say that each of those grounds provided a significant part of the reasons for which leave was refused. In that sense, the letter was rather prescient. Had that been the only evidence before the Court on this issue however, the letter which was sent on 3 September, being some two days prior to the hearing, would be inadequate to satisfy the Court that the interlocutory application was advanced by the applicants in a high-handed manner, regardless of obvious deficiencies. However, a second letter, being a letter from Taylor Rose to CDG Law which was sent some two hours after the receipt of the first letter, dismissed any concerns which were raised by CDG Law about the application. That rejection of the identification of the deficiencies in the application was made without any serious regard to the statutory requirements which needed to be satisfied. That was unusual in circumstances where it would have taken but a few minutes to confirm the veracity of the concerns which were raised by CDG Law. That indicates a high-handed approach to the application which, for the reasons which have been given, was doomed to fail. Though the application was brought in response to the application for summary judgment, when its deficiencies were identified, no backward step was taken, and no time was taken to consider the position. In these events, the circumstances meet the threshold for making an order for indemnity costs.

51    It follows that the first and third cross-claimants, Mr Guy and Guy O’Sullivan, must pay Smart EV Solutions and Smart Grid Investments’ costs of and incidental to paragraph 2 of the interlocutory application on an indemnity basis.

Associate:    

Dated:    20 September 2024

SCHEDULE OF PARTIES