AUSTRALIA Law and Practice Contributed by: Joachim Delaney and Ranjani Sundar, HFW
tors of a company will not pass a resolution that the company ought to bring proceedings 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 share - holders to bring a derivative action, the court must be satisfied that the shareholders are acting in good faith, the proceedings are in the company’s best interests, the company is unlikely to bring proceedings itself in relation to the fraudulent conduct of the directors, and that there is a serious question to be tried (Corpora - tions Act 2001 (Cth) Section 237(2); Swansson v RA Pratt Properties Pty Ltd (2002) 42 ACSR 313; [2002] NSWSC 583), recently discussed in Sunny International Hardware Group Pty Ltd, Re [2025] NSWSC 254 at [46]). The best interests of a company are determined by considering the type and nature of the company, such as where there is a closely held company, and where there would be a reasonable expectation of involve - ment in the management of the company. Additionally, the court may consider whether a company is well resourced, and the effect that the derivative action will have on the company’s business, such as whether the action would cause the company to cease trading, or to divert resources from its ordinary operations. There is also a rebuttable presumption that granting leave to bring a derivative action is not in the company’s best interests, where the company has decided not to commence proceedings or has discontinued proceedings (Corporations Act 2001 (Cth) Section 237(3)(b)). In considering whether to grant leave to share - holders of a company to commence a statu - tory derivative action, a court will also con -
sider whether the shareholders have ratified or approved the misconduct of the directors (Cor - porations Act 2001 (Cth) Section 239). Additionally, in some instances a statutory deriv - ative action will not be available to shareholders, where the company is in liquidation (Smart Com - pany Pty Ltd (In Liquidation) v Clipsal Australia Pty Ltd (No 6) [2011] FCA 419). 4. Overseas Parties in Fraud Claims 4.1 Joining Overseas Parties to Fraud Claims The courts have taken an expansive view in rela - tion to fraud and misleading conduct/misrepre - sentation claims in Australia. Overseas parties may be joined to fraud claims in Australia where: • the representation or conduct, although originating overseas, is received in Australia (Ramsey v Vogler [2000] NSWCA 260, [36]– [48]); • part of the conduct occurs in Australia and part outside (Trade Practices Commission v Australian Meat Holdings Pty Ltd (1988) 83 ALR 299); • the conduct overseas nonetheless involves instructing an agent to act in Australia (Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1); and • the conduct overseas has a technology ele - ment that is capable of being accessed in Australia (Australian Competition & Consumer Commission v Hughes (t/a Crowded Planet) [2002] ATPR 41–863, 44, 792).
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