IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
Commercial Court
Corporations List
S ECI 2023 05188

In the matter of Stirloch Constructions Pty Ltd (ACN 082 616 840)
HAROLD JOHN McINTOSH	Plaintiff	
		
v		
		
STIRLOCH CONSTRUCTIONS PTY LTD (ACN 082 616 840) & ORS (according to the Schedule)	Defendants	

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JUDGE:	Waller J	
WHERE HELD:	Melbourne	
DATE OF HEARING:	21 May 2024	
DATE OF RULING:	17 June 2024	
CASE MAY BE CITED AS:	Re Stirloch Constructions Pty Ltd	
MEDIUM NEUTRAL CITATION:	[2024] VSC 322	

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CORPORATIONS — Derivative action — Corporations Act 2001 (Cth) ss 236 and 237 —Application by director of company for leave to bring proceeding — Alleging breaches of fiduciary and statutory duties by another director and knowing assistance by other parties — Factors under s 237(2) considered — Whether good faith, best interests and serious question requirements met — Leave granted.

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APPEARANCES:
	Counsel	Solicitors	
For the Plaintiff	M McNamara	CIE Legal	
			
For the Second and Fourth Defendants	D McAloon	Piper Alderman	

HIS HONOUR:
A.	INTRODUCTION
1	The Plaintiff, Mr Harold McIntosh, applies under s 237 of the Corporations Act 2001 (Cth) (‘Corporations Act’) for leave to bring a proceeding (‘Proposed Proceeding’) on behalf of Stirloch Constructions Pty Ltd (‘StirCon’) against a director and former director of StirCon and a company incorporated by them.
2	The Plaintiff is a director of StirCon.
3	The Proposed Proceeding would be brought by StirCon against:
(a)	Wayne Peter Loechel (the Second Defendant);
(b)	Stirloch Group Pty Ltd (the Third Defendant); and
(c)	Peter Richard Geurts (the Fourth Defendant).
4	In broad terms, the Proposed Proceeding would allege that Mr Loechel breached his director’s duties and fiduciary duties owed to StirCon and that StirGroup and Mr Geurts knowingly assisted Mr Loechel to breach his fiduciary duties.
5	The Plaintiff relies on the following affidavits in support of his application:
(a)	affidavit of Harold John McIntosh sworn 3 November 2023;
(b)	affidavit of Mark Waters affirmed 6 November 2023;
(c)	affidavit of Harold John McIntosh sworn 21 December 2023;
(d)	affidavit of Harold John McIntosh sworn 20 March 2024; and
(e)	affidavit of Harold John McIntosh sworn 20 May 2024.
6	In opposition to the application, the Second and Fourth Defendants rely on the following affidavits:
(a)	affidavit of Wayne Peter Loechel sworn 27 February 2024;
(b)	affidavit of Dallas Richard Gist sworn 27 February 2024;
(c)	affidavit of Wayne Peter Loechel sworn 6 March 2024; and
(d)	affidavit of Wayne Peter Loechel sworn 17 May 2024.
7	There was no cross-examination of any deponent.
8	For the reasons set out below, I have concluded that the Plaintiff should have leave to bring the Proposed Proceeding on behalf of StirCon.
B.	FACTUAL BACKGROUND
9	Mr McIntosh has a background in engineering and construction. In or around 1995, he met Mr Loechel while working at JJB Constructions Pty Ltd in Traralgon. 
10	On 13 May 1998, Mr McIntosh and Mr Loechel incorporated StirCon for the purpose of going into business together. 
11	On 27 July 2000, Mr McIntosh and Mr Loechel incorporated Harway Management Pty Ltd (‘Harway’). Mr McIntosh and Mr Loechel each have an indirect interest in StirCon via Harway, which holds two of StirCon’s three issued shares. Through Harway, Mr McIntosh and Mr Loechel have an interest in several companies.
12	In late 2009, Mr Loechel introduced Mr Geurts into businesses in which Mr McIntosh and Mr Loechel were involved and Mr Geurts acquired interests in those businesses.
13	Mr McIntosh, Mr Loechel and Mr Geurts are together involved in the following companies:
(a)	StirCon;
(b)	Stirloch Developments Pty Ltd;
(c)	Stirloch Constructions (Qld) Pty Ltd;
(d)	RPA Group Pty Ltd;
(e)	Waynan Pty Ltd;
(f)	Stirmos Pty Ltd; and
(g)	Stirloch Property Pty Ltd.
StirCon
14	Following its incorporation in 1998, StirCon commenced operating a construction business mainly focused on the construction, upgrading and repair of water treatment plants and waste water treatment plants. StirCon also undertook some concrete construction works on power stations and coal mines in the Latrobe Valley and at the Maryvale Paper Mill.  
15	Mr McIntosh was a director of StirCon during the periods:
(a)	13 May 1998 to 6 September 2013; and
(b)	26 October 2013 to present.
16	Mr Loechel was a director of StirCon during the periods:
(a)	13 May 1998 to 5 February 2007;
(b)	6 September 2013 to 26 October 2013; and
(c)	1 September 2020 to present.
17	Mr Geurts was a director of StirCon during the period 26 October 2013 to 14 September 2020.
18	The current directors of StirCon are Mr McIntosh and Mr Loechel. 
19	The shareholding of StirCon is as follows:
(a)	Harway owns two of the three issued shares in StirCon; and
(b)	RPA Constructions (Qld) Pty Ltd (‘RPA Con’) (a company associated with Mr Geurts) owns one of the three issued shares in StirCon.
StirCon projects
20	Much of the work of the StirCon business was undertaken in Victoria and, from about 2009, also in Queensland. Between 1998 and 2023, StirCon undertook approximately 110 projects. 
21	Seqwater is the Queensland Bulk Water Authority responsible for delivering bulk water supply to more than three million people across South East Queensland.
22	Between November 2013 and May 2022, StirCon carried out works for Seqwater (‘StirCon’s Seqwater Projects’) including:
(a)	works at the Image Flat Water Treatment Plant which had a total contract price of approximately $10,400,000; and
(b)	works at the Landers Shute Water Treatment Plant, which had a total contract price of approximately $12,400,000.
23	StirCon’s Seqwater Projects had a total contract price of approximately $25,800,000.
StirGroup
24	On 26 February 2021, Mr Loechel and Mr Geurts incorporated Stirloch Group Pty Ltd (‘StirGroup’). 
25	Mr Loechel was a director of StirGroup during the period 26 February 2021 to 7 February 2022.
26	Ms Rachael Loechel (Mr Loechel’s daughter) has been a director of StirGroup since 7 February 2022.
27	Mr Geurts has been a director of StirGroup since 26 February 2021.
28	The current directors of StirGroup are Mr Geurts and Ms Rachael Loechel.
29	Stirloch Pty Ltd (Mr Loechel’s company) and RPA Con each own 10 of the 20 issued shares in StirGroup.
30	Since its incorporation, StirGroup has and continues to carry on business as a construction company involved in the design, construction, upgrading and repair of water treatment plants.
31	Mr McIntosh asserted that he first became aware of StirGroup’s existence on or shortly after 26 August 2022, when his son conducted an ASIC search in respect of Mr Loechel and Mr Geurts and obtained a company extract of StirGroup. 
StirGroup Projects
32	StirGroup has carried out, or is carrying out, the following construction projects (‘StirGroup Projects’):
(a)	for Seqwater: 
(i)	flood repair work at Image Flat Water Treatment Plant, Queensland, for a contract price of $27,632.51, with a completion date of on or about 30 November 2022 (‘StirGroup’s Image Flat Water Treatment Plant Project’);
(ii)	Lowood Water Treatment Plant UV Retrofit in Lowood, Queensland, being the provision of detailed design and construction services for a contract price of approximately $3,625,742.66, with a completion date of on or about April 2023 (‘StirGroup’s Lowood Water Treatment Plant Project’);
(iii)	a project at Landers Shute Water Treatment Plant with a contract price of approximately $5,800,000;
(b)	for Scenic Rim Regional Council:
(iv)	facilities upgrade at Lake Moogerah Caravan Park at Lake Moogerah, Queensland, for a contract price of approximately $2,738,872.40, with a completion date of in or about August 2022; and
(c)	for Chunxing Corporation Pty Ltd:
(v)	preliminary work in respect of the design of a Used Lead Acid Battery recycling facility at Fourth Road, Hazelwood North, Victoria for a contract price of approximately $335,863 (‘StirGroup’s ULAB Project’).
The Proposed Statement of Claim
33	A draft statement of claim for the Proposed Proceeding (‘Proposed Statement of Claim’) is exhibited to Mr McIntosh’s affidavit dated 3 November 2023. 
34	After introductory paragraphs at [1]–[20] dealing largely with the background of the parties and with company structures, the pleading at [21]–[22] details some of the projects that StirCon carried on, including relevantly for Seqwater, with further detail about the projects contained in [23]–[26].
35	At [27], it is alleged that on 26 February 2021, StirGroup was incorporated at the instigation of Mr Loechel and Mr Geurts. StirGroup carries on, and since its incorporation has carried on, business as a construction company, including the design and construction, upgrading and repair of water treatment plants.
36	At [28]–[29], the pleading details the ownership of Stirloch Pty Ltd by Mr Loechel, and the ownership of RPA Con by Mr Geurts, Anthony Geurts and Richard Geurts. Stirloch Pty Ltd and RPA Con each own 10 of the 20 issued shares in StirGroup.
37	At [30], it is alleged that Mr Loechel and Mr Geurts:
(a)	did not inform StirCon, or Mr McIntosh as Mr Loechel’s co-director of StirCon, that they intended to incorporate StirGroup; 
(b)	gave Mr McIntosh no opportunity to be an officer of StirGroup, or to be otherwise involved in StirGroup;
(c)	gave StirCon no opportunity to be a shareholder in StirGroup;
(d)	upon StirGroup being incorporated, did not inform StirCon, or Mr McIntosh as Mr Loechel’s co-director of StirCon, that StirGroup had been incorporated;
(e)	never informed StirCon, or Mr McIntosh as Mr Loechel’s co-director of StirCon, of the existence of StirGroup or of the activities that it was carrying on; and
(f)	concealed the existence of StirGroup and its activities from StirCon, and from Mr McIntosh as Mr Loechel’s co-director of StirCon, after it had been incorporated.
38	It is alleged at [34] that, as at 26 February 2021, and at all times thereafter, Mr Loechel knew of StirCon’s experience as a contractor, that Seqwater was a client of StirCon and that StirCon had been awarded a Prequalification and Standing Offer Agreement with Seqwater.
39	It is alleged at [35] that Mr Loechel, among other things, procured or assisted in procuring StirGroup to obtain a Prequalification and Standing Offer Agreement with Seqwater; procured or assisted in procuring StirGroup to obtain StirGroup’s Lowood Water Treatment Plant Project using StirCon’s Seqwater Prequalification and procured or assisted in procuring StirGroup to render invoices that were very similar to invoices rendered by StirCon and which were headed ‘Stirloch Constructions’, but included in much smaller font the words ‘Stirloch Group Pty Ltd’ and bank account details for payment to StirGroup. 
40	It is alleged at [36] and [41] that, by reason of his position at all material times as a director of StirCon, Mr Loechel owed fiduciary duties to StirCon and statutory duties under ss 181(1), 182(1) and 183(1) of the Corporations Act.
41	It is alleged at [37]–[39] and [42]–[43] that Mr Loechel breached his fiduciary and statutory duties and that StirCon suffered loss and damage for which it is entitled to equitable compensation. 
42	At [44] it is alleged that Mr Loechel is liable to account to StirCon for the whole of the profit or benefit obtained by him by virtue of his breach of fiduciary duties.
43	At [45] it is alleged that, by reason of the matters pleaded in paras [11](b), [21]–[28] and [30]–[44] of the Proposed Statement of Claim, Mr Loechel’s breaches of fiduciary duty constituted a dishonest or fraudulent design.
44	The next section of the Proposed Statement of Claim deals, at [46] and [49], with each of StirGroup’s and Mr Geurts’ alleged knowing assistance in the breaches of fiduciary duty by Mr Loechel, by reason of which it is alleged at [48] and [51] that StirGroup and Mr Geurts are liable to account to StirCon for the whole of the profit or benefit obtained by them in respect of the StirGroup projects referred to in subparagraphs [32](b)–(e) of the Proposed Statement of Claim.
45	At [40], [43], [47] and [50] it is alleged that StirCon has suffered loss and damage, in the sum of $1,408,951.46, being the loss of the opportunity to earn profits in various StirGroup projects.
Documents relevant to or referred to in the Proposed Statement of Claim
46	Exhibited to Mr McIntosh’s affidavits are documents either referred to or relevant to the allegations in the Proposed Statement of Claim. During the hearing of the application, I was taken to a number of these documents.
C.	legislative regime
47	Part 2F.1A of the Corporations Act creates the derivative actions regime. Within that part, s 236(1) relevantly provides that a person may bring proceedings on behalf of a company if: (a) the person is a member of the company or an officer or former officer of the company; and (b) the person is acting with leave granted under s 237.
48	Section 237 of the Corporations Act provides:
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.
49	Subsections (3) and (4) of s 237 of the Corporations Act provide a rebuttable presumption that granting leave is not in the best interests of the company to arise in certain circumstances. In the present case, there is no reliance on the rebuttable presumption.
D.	Derivative Action Legal PRINCIPLES
Principles applicable to Part 2F.1A generally
50	As was observed by Lyons J in Landsville Huynh Pty Ltd v Huynh, ‘it is important to note that leave to bring a derivative action must not be given lightly’.
51	The applicant bears the onus of establishing each of the five requirements of s 237(2) of the Corporations Act on the balance of probabilities. This is in recognition of the ‘possibly serious consequences to the company if the application is allowed and the company is thereby compelled to engage in litigation as a plaintiff against its will’. If the s 237(2) criteria are made out, there is no discretion and the Court is required to grant leave. Conversely, if any one of the criteria is not made out, the Court should refuse leave. 
52	In Chahwan v Euphoric, Tobias JA considered that the elements of s 237 are not mutually exclusive; there is some overlap between paragraphs (a), (b) and (c). His Honour said ‘for example if there was no serious question to be tried to the knowledge of an applicant for leave in that he had been advised that the case was hopeless or highly unlikely to succeed, then that might well constitute evidence of bad faith or at least lack of good faith’. Similarly, if there is no serious question to be tried, it would not be possible to establish that the proposed claim was in the best interests of the company.
Principles applicable to s 237(2)(a) – probable that the company will not itself bring the proceeding
53	In Swansson v R A Pratt Properties, Palmer J said that it would be readily apparent, in most cases, whether the requirement of s 237(2)(a) of the Corporations Act is satisfied. ‘Usually the defendant in the proposed derivative action is in control of the company or is supported by the majority of shareholders or of the board.’ It will become less clear in circumstances ‘[w]here there is not a clear-cut and authoritative refusal by the company to take specific proceedings after a properly particularised request to do so by or on behalf of the applicant’. In such a scenario, the applicant bears the onus of establishing either the actual refusal or that the probability of refusal is to be inferred.
Principles applicable to s 237(2)(b) – good faith
54	In determining whether the requirement of good faith is satisfied, Palmer J in Swansson considered there to be two interrelated and often overlapping factors the court will have regard to:
The first is whether the applicant honestly believes that a good cause of action exists and has a reasonable prospect of success. Clearly, whether the applicant honestly holds such a belief would not simply be a matter of bald assertion: the applicant may be disbelieved if no reasonable person in the circumstances could hold that belief. The second factor is whether the applicant is seeking to bring the derivative suit for such a collateral purpose as would amount to an abuse of process.
55	However, when considering the two grounds identified by Palmer J in Swansson, Tobias JA in Chahwan v Euphoric said that the good faith requirement need not be confined to those two factors; ‘the law will develop incrementally as different factual circumstances come before the courts’.
56	It will generally be easy to demonstrate the good faith requirement to the court’s satisfaction where the applicant is a current director or officer and the derivative action seeks recovery of property. This is because it will ‘be easy to show that such an applicant has a legitimate interest in the welfare and good management of the company itself, such that action to recover property is warranted. 
57	In relation to the collateral purpose, Palmer J explained that: 
The applicant may, however, believe that the company has a good cause of action with a reasonable prospect of success but nevertheless may be intent on bringing the derivative action, not to prosecute it to a conclusion, but to use it as a means for obtaining some advantage for which the action is not designed or for some collateral advantage beyond what the law offers.
58	In such circumstances, the application would fail the requirement of s 237(2)(b) of the Corporations Act and the application and the derivative action itself would be an abuse of the court’s process. However, the mere fact that an applicant might derive some collateral benefit from the derivative action may be, in some circumstances, irrelevant.
Principles applicable to s 237(2)(c) – applicant’s leave in best interests of the company
59	Satisfying the best interests criteria requires that an applicant cross the high threshold of satisfying the court on the balance of probabilities ‘that the proposed action is in the bests interests of the company’, not ‘may be, appears to be, or is likely to be’. While there is no fixed test to determine the best interests of a company, in Maher v Honeysett & Maher Electrical Contractors, Brereton J said that ‘[t]he phrase “best interests” directs attention to the company’s separate and independent welfare’. ‘[T]he court will always have regard to whether the benefits of the proceeding are outweighed by the costs and risks that the company would suffer in bringing them.’ 
60	Justice Palmer in Swansson considered that such an enquiry will normally require the applicant to adduce evidence of: 
(a)	the character of the company, which may include whether it is a closely held family company or a large, listed company, and the purpose for which the company was established; 
(b)	the business, if any, of the company, such that the effects of the proposed litigation on its proper conduct may be appreciated; 
(c)	the substance of the redress sought by the applicant, so as to enable the court to determine whether the result the applicant seeks to achieve can be achieved by a means that does not involve the company being brought into litigation; and 
(d)	the ability of the defendant to meet at least a substantial portion of any judgment made in the proposed derivative action in favour of the company.
61	In Pentridge Village, Connock J detailed a list of other matters that have been considered in the context of best interests of the company, including:
prospects of success, the likely costs and likely recovery if the proceedings are successful, the likely consequences if the proceedings are not successful, the nature of any indemnity the applicant has offered to the company, the likelihood of the company recovering under the indemnity, the resources the company will need to devote to the proceedings and the resources it has available, and the effect that the proceedings may have on other parts of the company’s business.
62	Justice Lyons in Landsville recently added to this list:
to the extent it is not already expressed, the likely damages that might be awarded. This is linked to the likely recovery of damages if the proposed claim is successful. The Victorian Court of Appeal recently noted “[i]f the applicants could not show at least a reasonable prospect that the proposed proceeding would yield significant damages…then they could not establish that bringing the proceeding was in the best interests of the company”.
63	Further, s 237(2)(c) of the Corporations Act requires the court to consider not only whether it would be in the best interests of the company that the proceedings be brought. Justice Barrett in Transmetro Corp v Kol Tov said that ‘[i]ntegral to the inquiry is the question whether it is in the “best interests” of the company that the proceedings should be brought on behalf of the company by the particular person who seeks leave’.
64	In Landsville, Lyons J went on to observe:
There have been authorities that suggest that:
(1)	where the company in question is a joint venture vehicle and one of the joint venturers alleges the other has acted unlawfully causing the company loss; and
(2)	where the derivative claim is an action by or on behalf of the company against an officer for the recovery of compensation for the damage done to the company by the officer’s breach of duty,
it will ‘usually’ be appropriate in the context of the best interests requirement to grant leave to allow the proposed claim though the effective outcome of the litigation, if successful, would be indirectly to benefit the complaining joint venturer/shareholder proportionately to its shareholding.
However, even in such cases, other factors of the kind set out above must be considered as to whether the proposed claim meets the best interests requirement. I refer, by way of example, to the likely damages to be awarded, the likelihood of recovery of those damages, the costs or likely costs to be incurred by the Company in pursing the proposed claim (in particular if it is unsuccessful) and the ability for the company to call on any indemnity by the applicants for those costs.
Principles applicable to s 237(2)(d): serious question to be tried
65	A derivative action application ‘does not involve a consideration of the underlying merits of the proposed litigation, except to the extent it is necessary to determine if there is a serious question to be tried’. In establishing that there is a serious question to be tried, the applicant must surmount the same relatively low threshold as in the case of an application for an interlocutory injunction.
E.	submissions
Submissions for the Plaintiff
66	The Plaintiff submitted that Mr Loechel, together with Mr Geurts, caused StirGroup to be incorporated and did so with a view to it carrying out projects in the nature of the StirGroup Projects. 
67	The Plaintiff submitted that StirCon had the experience and expertise to carry out the StirGroup Projects and, but for the incorporation of StirGroup and its conduct, StirCon would have carried out those projects.
68	The Plaintiff submitted that StirCon has suffered loss and damage, in the sum of $1,408,951.46, being the loss of the opportunity to earn profits in various StirGroup projects. 
69	The Plaintiff submitted that, viewed objectively, it is appropriate that action be taken in respect of this conduct. That conduct is not denied, although Mr Loechel deposed that he told Mr McIntosh that StirGroup would be formed — which Mr McIntosh disputes.
Standing
70	As a director of StirCon, Mr McIntosh has standing to seek leave to bring a proceeding on behalf of StirCon, pursuant to s 236(1)(a)(ii) of the Corporations Act. 
71	The Plaintiff must satisfy each of the specific criteria under s 237(2) of the Corporations Act. Satisfaction of s 237(a) and (e) was not disputed by the parties. 
Section 237(2)(b) – good faith
72	The Plaintiff submitted that he has an honest belief that good causes of action exist and that they have reasonable prospects of success.  
73	The Plaintiff submitted that he is attempting to commence the derivative action for the benefit of StirCon and is not seeking to achieve personal outcomes, nor is there any collateral purpose to bringing this application. The derivative action seeks the recovery of money by StirCon. Mr McIntosh owns one of the two issued shares in Harway, and Harway owns four of the six issued shares in StirCon. As a current director of StirCon, Mr McIntosh therefore has a legitimate interest in the welfare and good management of StirCon itself and the recovery of damages, such that the Proposed Proceeding is warranted. 
Section 237(2)(c) – best interests of the company
74	The Plaintiff submitted that consideration of the prospects of success of the action, the likely costs, likelihood of recovery if the action is successful, and the likely consequences if the action is unsuccessful, indicates that the proposed action is in the best interests of StirCon. 
75	The Plaintiff submitted that, on the information available, StirCon has suffered loss and damage in the sum of $1,408,951.46. Mr McIntosh has agreed to pay StirCon’s costs and to indemnify StirCon in respect of any costs orders that might be made against it in the Proposed Proceeding, including if the Proposed Proceeding is not successful against some or all of the Defendants. To this effect, Mr McIntosh has agreed to retain the sum of at least $520,000 in a separate bank account.
76	The Plaintiff further submitted that StirCon currently has no projects on foot, and thus the proposed litigation should have little or no impact on the conduct of StirCon’s business.
Section 237(2)(d) – serious question to be tried
77	In oral submissions, counsel for the Plaintiff highlighted that three of the five projects undertaken by StirGroup that are put forward as a foundation for the Proposed Proceeding are for Seqwater for whom StirCon had previously undertaken five projects. Relevantly:
(a)	one of these projects is on a site that StirCon had previously worked on, being StirGroup’s Image Flat Water Treatment Plant Project; and
(b)	StirGroup used a prequalification arrangement that StirCon had with Seqwater to obtain a $2.625m project with Seqwater, being StirGroup’s Lowood Water Treatment Plant Project.
78	Counsel for the Plaintiff further submitted that, shortly prior to the incorporation of StirGroup, Mr Loechel emailed the senior project coordinator engineer at Chunxing Corporation Pty Ltd in respect of a proposed ULAB recycling plant. This job was misappropriated to StirGroup and became StirGroup’s ULAB Project. StirGroup invoiced for this Project under the name ‘Stirloch Constructions’ although the bank account details were those of StirGroup. 
79	The Plaintiff submitted that there is clearly a serious question to be tried. The wrongful conduct of Mr Loechel, Mr Geurts and StirGroup has had a serious adverse effect on StirCon. Mr Loechel has put himself in a position where his personal interests, and his pursuit of those interests, conflicted with his duty to StirCon as a director. Mr Loechel used his position as a director of StirCon to gain profit or advantage for himself. StirGroup and Mr Geurts knowingly assisted with and participated in, Mr Loechel’s breaches of fiduciary duty.
Submissions for the Second and Fourth Defendants
80	It was submitted for the Second and Fourth Defendants that the Court cannot be satisfied that all of s 237(2)(b), (c) or (d) of the Corporations Act are met . It follows that the Court’s power to grant leave is not enlivened and Mr McIntosh’s application must be dismissed. 
Background
81	The Second and Fourth Defendants submitted that, importantly, StirCon is but one of a broad range of business enterprises and investments in which Mr McIntosh and Mr Loechel each have interests. From around September 2020 to December 2021, Mr McIntosh engaged in negotiations concerning his potential exit from the companies that Mr McIntosh and Mr Loechel were associated with, without any agreement being reached. 
82	On 15 November 2023, an open offer was made to Mr McIntosh (‘Open Offer’) to resolve both this proceeding and a separate proceeding commenced by Mr McIntosh in 2022 (proceeding SEC I 2022 0446) against Mr Loechel and Harway (‘Oppression Proceeding’).
83	The Oppression Proceeding was the subject of a judicial mediation on 20 June 2023 but was not resolved. Mr McIntosh now wishes for StirCon to litigate the claims against Mr Loechel, StirGroup and Mr Geurts articulated in the Proposed Statement of Claim. These claims arise from the same matters detailed in the Points of Claim filed on behalf of Mr McIntosh in the Oppression Proceeding: namely, StirGroup’s carrying out of particular projects, in circumstances where Mr McIntosh has no interest in StirGroup and apparently contends that, ‘but for the incorporation of StirGroup and its conduct’, StirCon could have undertaken the projects undertaken by StirGroup.
84	The Second and Fourth Defendants submitted that the Open Offer addressed Mr McIntosh’s grievance that business opportunities which may have otherwise been available to StirCon were realised by StirGroup in circumstances where Mr McIntosh had no interest in StirGroup. The Open Offer proposed that one-third of the shares in StirGroup be transferred to Mr McIntosh for nominal consideration, an outcome described as being designed to provide Mr McIntosh ‘with an interest in Stirloch Group commensurate to that of Mr Loechel and Mr Geurts’ (noting that StirGroup has not paid any dividends to its shareholders since its inception).
Section 237(2)(b) – good faith
85	It was submitted for the Second and Fourth Defendants in oral submissions that Mr McIntosh does not pass through the statutory gate of s 237(2)(b) — the good faith requirement — because he cannot satisfy the Court that he is not using the proposed derivative action for some collateral purpose. This conclusion can be drawn from Mr McIntosh’s response to the Open Offer.
86	The Second and Fourth Defendants submitted that, rather than accepting the Open Offer, or identifying how the Open Offer did not provide the redress sought by Mr McIntosh, it was stated that ‘in light of the current state of the relationship between Mr McIntosh, Mr Loechel and Mr Geurts, any settlement should be a global settlement, completely separating our clients’ interests … we invite your clients to reconsider and make a global offer of settlement’. The reference to a ‘global offer of settlement’ meant ‘a complete end to the business relationships between Mr McIntosh on the one hand, and Mr Loechel and Mr Geurts on the other hand, that is, a complete separation of their respective interests in all assets (or liabilities, including loans) in which they hold an interest – whether directly or indirectly’.
87	The Second and Fourth Defendants submitted that this response identifies Mr McIntosh’s true commercial objective: ‘a complete end to the business relationships between Mr McIntosh on the one hand, and Mr Loechel and Mr Geurts on the other hand, that is, a complete separation of their respective interests in all assets (or liabilities, including loans) in which they hold an interest – whether directly or indirectly’. 
88	The Second and Fourth Defendants submitted that Mr McIntosh will not secure his desired outcome, that is a ‘global settlement’ via the derivative action application. The Court should therefore infer that Mr McIntosh’s primary purpose in pursuing the derivative action application is to exert commercial pressure upon Mr Loechel and Mr Geurts in order to engineer a separation of their respective commercial interests, commencing with extracting the requested ‘global settlement offer’. That is not a proper purpose within the ambit of s 237 of the Corporations Act.
89	The Second and Fourth Defendants further submitted that the collateral purpose of the derivative action application is also evident from the advancement of knowing assistance claims against StirGroup and Mr Geurts. Mr McIntosh’s evidence contains no commercial justification for StirCon making accessorial claims against StirGroup and/or Mr Geurts. Given the absence of an explanation for their rationale, the Court should conclude that those proposed claims are contemplated to improperly serve Mr McIntosh’s ulterior purpose of achieving a global settlement for himself (rather than to benefit StirCon).
Section 237(2)(c) – best interests of the company
90	The Second and Fourth Defendants submitted that neither of the shareholders in StirCon (Harway and RPA Con), support the granting of leave to Mr McIntosh to bring the derivative action application. The grant of leave is not in StirCon’s best interests for the following reasons:
(a)	The derivative action application has limited prospects of a meaningful recovery for StirCon, relative to the likely associated cost. This is because the evidence adduced by Mr McIntosh does not demonstrate that there is a reasonable prospect that the derivative suit would yield significant damages. Even if StirCon could recover damages from the proposed defendants, any recovery would be modest, relative to the costs estimated as being likely to be incurred in prosecuting the derivative action application.
(b)	The Open Offer conveyed to Mr McIntosh rendered the derivative action application unnecessary. Mr McIntosh has deposed to holding a belief that the redress sought via the derivative action application cannot be achieved by other means. However, Mr McIntosh does not explain his non-acceptance of the Open Offer, nor has Mr McIntosh explained how the relief to be sought via the derivative suit intersects with the relief that is the subject of the Oppression Proceeding.
(c)	The conduct of the derivative action application would have a deleterious impact on the business operations of StirCon, principally on account of the effect of the derivative action application upon the capacity of StirCon’s key employee, Mr Loechel, to conduct StirCon’s business. Mr Loechel’s evidence is that Mr McIntosh has not been actively involved in StirCon’s affairs for some years and is unlikely to be able to resume responsibility for the conduct of StirCon’s affairs. Nor has Mr McIntosh identified how StirCon would continue to trade in a setting where StirCon would, via the derivative suit, be suing the person presently responsible for tendering for and managing projects (Mr Loechel). There is a genuine risk that the derivative suit would reduce StirCon to a non-trading entity, continuing in existence solely for the purpose of litigating the derivative suit at the behest of Mr McIntosh.
(d)	Mr McIntosh has conceded that he is not capable of conducting the derivative action application on behalf of StirCon without assistance from his personal associates, including his son Daniel McIntosh, who is a lawyer, and his personal accountant, Frank Monacella. Neither of these parties are officers of StirCon and are likely, or duty bound to advance Mr McIntosh’s interests.
Section 237(2)(d) – serious question to be tried
91	The Second and Fourth Defendants submitted that, insofar as the derivative action application contemplates claims by StirCon against StirGroup and Mr Geurts (as pleaded in the Proposed Statement of Claim), those claims have no reasonable prospect of success. 
92	It was submitted that the Proposed Statement of Claim does not disclose a reasonable or sustainable factual basis for alleging that Mr Geurts not only assisted Mr Loechel’s alleged breaches of duty, but also knew that the breaches of duty were dishonest, or constituted, or were part of a dishonest and fraudulent design. Further, no evidence has been adduced by Mr McIntosh that suggests that such allegations have a proper basis or could be established by StirCon.
93	In oral submissions, it was further submitted for the Second and Fourth Defendant, that the knowing assistance claim against Mr Geurts and StirGroup is in a form that would be susceptible to being struck out and the Court ought not grant leave for the commencement of such a proceeding. The pleading would be liable to being struck out as the Proposed Statement of Claim fails to adequately link any element of dishonest and fraudulent design to Mr Geurts at all. Such a serious allegation has to be pleaded and particularised appropriately. 
94	In such circumstances, the Second and Fourth Defendants submitted that, insofar as the proposed claims against Mr Geurts and StirGroup are concerned, s 237(2)(d) of the Corporations Act is not satisfied.
F.	consideration
95	Mr McIntosh, as a director of StirCon, falls within s 236(1)(a) of the Corporations Act and therefore has standing to bring the application.
96	Turning to the requirements of s 237(2) of the Corporations Act, there is no issue, and the Second and Fourth Defendants conceded, that the requirements in paragraphs (a) and (e) are satisfied. It is clear that, in relation to (a), StirCon will not itself bring the Proposed Proceeding. In relation to (e), Mr McIntosh gave notice to StirCon of his intention to apply for leave and his reasons for applying by email and letter dated 4 September 2023. 
Good faith
97	In relation to paragraph (b) of s 237(2) of the Corporations Act, I am satisfied that Mr McIntosh is acting in good faith. Having regard to his affidavits, I accept that he honestly believes that a good cause of action exists which has reasonable prospects of success. The Plaintiff is a current director of StirCon and the Proposed Proceeding seeks recovery of profits that would have been earned by StirCon but for the actions of the Defendants. 
98	The Second and Fourth Defendants placed considerable weight on Mr McIntosh’s response to their Open Offer in arguing that he is seeking to bring the Proposed Proceeding for a collateral purpose.
99	It is important to note, however, that the Plaintiff’s application was brought before he had received the Open Offer, let alone responded to it. The application was foreshadowed in an email sent on 4 September 2023 and commenced by originating process filed on 3 November 2023. The Open Offer was not sent until 15 November 2023. It proposed a settlement of this application and the Oppression Proceeding. The Plaintiff’s response to the Open Offer was to invite a ‘global settlement offer’ which would bring a complete end to the business relationships between Mr McIntosh on the one hand, and Mr Loechel and Mr Geurts on the other hand, and separate all of their respective interests.
100	That the Plaintiff would respond to the Open Offer in that way does not mean that he is pursuing the derivative action application for a collateral purpose. It is not unusual for parties to settle a proceeding by reference to matters that are extraneous to the proceeding itself. That does not mean that the proceeding has been brought for a collateral purpose. Moreover, where a plaintiff has multiple purposes for commencing an action, one of which is improper and collateral, there will be no abuse of process unless the improper and collateral purpose is the predominant purpose.
101	On the evidence presented I do not find that the Plaintiff is actuated by an improper and collateral purpose. Nor am I prepared to infer that the Plaintiff’s predominant purpose in pursuing the derivative action application is to exert commercial pressure upon Mr Loechel and Mr Geurts in order to engineer a separation of their respective commercial interests, commencing with extracting the requested ‘global settlement offer’.
102	I also do not accept the Second and Fourth Defendants’ assertion that Mr McIntosh’s pursuit of Mr Geurts and StirGroup (in addition to Mr Loechel) indicates a lack of good faith. The Plaintiff is entitled to pursue all solvent defendants against whom a good cause of action exists.
103	In addition, I regard the Plaintiff’s offer to indemnify StirCon in respect of the costs of the Proposed Proceeding, including any adverse costs order and to retain the sum of at least $520,000 in a separate bank account, as further demonstrating good faith on his part.
Best interests of the company
104	In relation to paragraph (c) of s 237(2) of the Corporations Act, I am satisfied that it is in the best interests of StirCon that the Plaintiff be granted leave to bring the Proposed Proceeding on its behalf. In reaching this view, I have had regard to the matters referred to in paragraphs [59]–[64] above. In particular, I have considered the likely damages to be awarded, the likelihood of recovery of those damages, the costs or likely costs to be incurred by StirCon in pursuing the Proposed Proceeding (in particular if it is unsuccessful), and the ability for StirCon to call on any indemnity by the Plaintiff for those costs.
105	The claims pleaded in the Proposed Statement of Claim are clearly and cogently expressed. During the hearing of the application, I was taken to some of the documents supporting the central allegations in the Proposed Statement of Claim. The material before the Court demonstrates that there is a proper basis for the pleaded claims. 
106	If the claims succeed there is no evidence to suggest that the Defendants would not be able to meet an order that they pay damages or account for profits and any order for costs. I have also taken into account the Plaintiff’s preparedness to pay StirCon’s costs and to indemnify StirCon in respect of any costs orders that might be made against it in the Proposed Proceeding, including his agreement to retain the sum of at least $520,000 in a separate bank account.
107	I am also satisfied that the Plaintiff, if granted leave, has the capacity to bring the Proposed Proceeding on behalf of StirCon. I do not accept the Second and Fourth Defendants’ submission that the Plaintiff’s evidence that his son, who is a lawyer, and his accountant are prepared to assist him where necessary, suggests that he himself lacks the capacity to conduct the Proposed Proceeding. It is not uncommon for assistance of that kind to be provided to a litigant. In any event, the Plaintiff will retain solicitors and counsel to prepare and prosecute the claims in the same way that he has in respect of this application.
108	Further, I do not consider that the proposed litigation will unduly interfere with the conduct of StirCon’s ongoing business.
Serious question to be tried 
109	In relation to paragraph (d) of s 237(2) of the Corporations Act, I am satisfied that the Proposed Proceeding raises a serious question to be tried. The claims set out in the Proposed Statement of Claim which are summarised earlier in these reasons are clearly and cogently expressed.
110	At the hearing, counsel for the Second and Fourth Defendants conceded that there was a serious question to be tried in respect of the claims pleaded against the Second Defendant. It was submitted, however, that the claims of accessorial liability based on knowing assistance pleaded against the Third and Fourth Defendant were defective and therefore did not raise a serious question to be tried.
111	I consider that the Proposed Statement of Claim adequately pleads the elements of a claim of knowing assistance under the second limb of Barnes v Addy. Paragraph [42] alleges that the Second Defendant breached his fiduciary duties to StirCon. Paragraph [45] alleges that those breaches of fiduciary duty constituted a fraudulent and dishonest design. Paragraphs [46] and [49] allege that each of the Third and Fourth Defendants knowingly assisted in those breaches of fiduciary duty. Particulars of knowledge are also set out in some detail. 
G.	conCLUSION AND ORDERS
112	I am therefore satisfied of each of the matters referred to in s 237(2). 
113	Subject to the Plaintiff providing an undertaking to the Court that he will, subject to further order:
(a)	pay and indemnify StirCon against all costs, charges and expenses incurred by the Plaintiff on behalf of StirCon in bringing and maintaining the proceeding in substantially the same form as the Proposed Statement of Claim exhibited to the affidavit of Harold John McIntosh sworn on 3 November 2023 and against any orders for costs made against it in the Proposed Proceeding; and
(b)	retain the sum of at least $520,000 in a separate bank account to meet the costs of the Proposed Proceeding and of any adverse costs orders against StirCon and to use the funds in that account solely to pay StirCon’s costs of the Proposed Proceeding and to indemnify StirCon in respect of any costs orders that might be made against it in the Proposed Proceeding, including if the Proposed Proceeding is not successful against some or all of the Defendants, 
I will order that the Plaintiff be granted leave, pursuant to s 237 of the Corporations Act, to bring the Proposed Proceeding on behalf of and in the name of StirCon against:
(i)	Wayne Peter Loechel (the Second Defendant);
(ii)	Stirloch Group Pty Ltd (the Third Defendant); and
(iii)	Peter Richard Geurts (the Fourth Defendant).
114	I will hear the parties as to costs.

SCHEDULE OF PARTIES
Harold John McIntosh 	Plaintiff	
		
v 		
		
Stirloch Constructions Pty Ltd (ACN 082 616 840)	First Defendant	
		
Wayne Peter Loechel	Second Defendant	
		
Stirloch Group Pty Ltd (ACN 648 289 034)	Third Defendant	
		
Peter Richard Geurts	Fourth Defendant	

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