Derivative Actions Flashcards
When can a member take a derivative action?
If a member comes within one of the exceptions, they are given permission to take a derivative action on behalf of the company
Who is named in the proceedings?
The company
Who is an order against the wrongdoer enforceable by?
Any order against a wrongdoer will be enforceable by and for the benefit of the company
What rule emerged from Prudential Assurance Co Ltd?
A prima facie case must be established that the action falls within the proper boundaries of the exception
What was added to the procedural requirements of a derivative action in Fanning v Murtagh?
The plaintiff is required to demonstrate a realistic prospect of success based on the extent of the evidence laid before the court
What do the Rules of the Superior Courts say about the standard of proof?
The Rules of the Superior Courts reflect this standard of proof and require an applicant to first obtain the leave of the High Court before a derivative action can be commenced
What must an application to the HC for a Derivative Action be accompanied by?
An affidavit which sets out the efforts, if any, made by the applicant to cause the company to prosecute the claim concerned.
It must also set out the relevant evidence to support the claim and other matters which would indicate a realistic prospect of success.
What happens if these procedural requirements are not satisfied?
The trial cannot proceed, sparing the company and the other parties the needless cost of litigation
What was the view of the court in Saggart Motors Ltd v NG Motors Ltd?
The court will take a dim view of a failure to comply with the evidential requirements
What other considerations must be given to a derivative action?
- Must be bona fide for the benefit of the company (Barrett v Duckett)
- Must be no ulterior motive (Nurcombe v Nurcombe)
What issue should the claimant be particularly mindful of?
Costs
What could be ordered at the same time as seeking leave to take the derivative action?
A pre-emptive order may be sought requiring the company to indemnity the applicant for some or all of the costs.
If such a parallel application is made, and the applicant fails at the preliminary hearing to obtain leave to commence the proceedings, the court may still order the company to pay the costs involved.
If the preliminary hearing is not successful, the applicant may be fixed with the costs.
