AUSTRALIA Law and Practice Contributed by: Joachim Delaney and Ranjani Sundar, HFW
selling, or procuring a contravention (Corporations Act 2001 (Cth) Section 79). For instance, in the decision of ASIC v Somerville & Ors (2009) 77 NSWLR 110, a solicitor, who provided legal advice to company directors that amounted to phoenix activity, was found to be involved in the con - travention through his advisory conduct. 3.2 Claims Against Ultimate Beneficial Owners Generally, a claim may be brought against the ultimate beneficial owner of a company where it can be shown that a company was set up as a sham and/or mani - fested the alter ego of a director, majority shareholder or other beneficial owner of the company, to perpe - trate a fraud ( Australian Securities and Investments Commission v Caddick (2021) 395 ALR 481; Ford (in his capacity as Commissioner for Fair Trading) v TLC Consulting Services Pty Ltd [2011] QSC 233; Artedo- mus (Aust) Pty Ltd v Del Casale (2006) 68 IPR 577; [2006] NSWSC 146; Smith v Hancock [1894] 2 Ch 377). There is no fixed test to determine when such a claim may succeed; rather, each case turns on its facts. Such a claim requires the piercing of the cor - porate veil, which courts have been willing to do if it can be shown that the “concept of separate corporate personality is sought to be used to defeat public con - venience, or to justify wrong, or to protect fraud, or to defend crime” ( Ace Property Holdings Pty Ltd v Aus- tralian Postal Corporation [2011] 1 Qd R 504; [2010] QCA 55 at [88]). It is also possible for the corporate veil to be pierced in instances where a court “can see that there is in fact or in law a partnership between companies in a group” ( Pioneer Concrete Services Ltd v Yelnah Pty Ltd and Others (1986) 5 NSWLR 254, 267) or where there is “a finding by unrebutted infer - ence that one of the reasons for the creation of the intervening company was to evade a legal or fiduciary obligation” ( Pioneer Concrete Services Ltd v Yelnah Pty Ltd and Others (1986) 5 NSWLR 254, 267; Gilford Motor Company Ltd v Horne [1933] Ch 395). However, mere control of a subsidiary by a parent company is not sufficient to pierce the corporate veil ( Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148 at [124]–[127]).
For instance, in Australian Securities and Investments Commission v Caddick (2021) 395 ALR 481, the Fed - eral Court of Australia found that a company had contravened Section 911A of the Corporations Act 2001 (Cth) by carrying on a financial services busi - ness and issuing a financial product in the absence of holding an Australian Financial Services licence. The Federal Court further held that the actions of the company were also attributable to the sole director, shareholder and secretary of the company. This was because the evidence established that the company was used as a sham to disguise the sole director’s fraudulent Ponzi scheme; particularly given that the actions of the company were carried out at the sole director’s behest, the sole director “took all the neces - sary steps, provided the advice and ran the scheme” and the funds provided by the company’s investors “were not applied to the purchase of share portfolios on their behalf but were transferred to accounts in the name of or associated with (the sole director) and used to fund her lifestyle and/or... to repay investors who redeemed their investments in part or in whole” ( Australian Securities and Investments Commission v Caddick (2021) 395 ALR 481, 554 [282]–[283]). 3.3 Shareholders’ Claims Against Fraudulent Directors Shareholders, former shareholders, or persons entitled to be registered as members may, with leave of the court, bring a claim on behalf of the company against the directors, who exercise control over the company, through a statutory derivative action under Part 2F.1A of the Corporations Act 2001 (Cth). A statutory deriva - tive action is brought by shareholders on behalf of the company for wrongs that have been done to the com - pany by the directors, and where it is probable that the company itself will not bring proceedings. This may occur where the directors of a company will not pass a resolution that the company ought to bring proceed - ings against those directors for breaches of directors’ duties. Prior to commencing a derivative action, the shareholders bringing the action must provide notice in writing to the company. Furthermore, for a court to grant leave to shareholders to bring a derivative action, the court must be satis - fied that the shareholders are acting in good faith, the proceedings are in the company’s best interests, the
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