Gooley & Ors v Breda Pty Ltd & Ors

Melville William Gooley (the sixth defendant) is a director and shareholder of several family companies with substantial assets. He is now aged in his 90s and is the father of four adult children. Two of his children, Dr Brett Raymond Gooley (the first plaintiff) and Janine Ruth Gooley (the third plaintiff), commenced these proceedings in July 2016 seeking preliminary discovery under Uniform Civil Procedure Rules 2005 (“UCPR”), r 5.3 of documents concerning the affairs of some of these family companies. His other two children, Melinda Louise Foley (the seventh defendant) and Aleta Joy Gooley, also known as Aleta Joy Kinsella (the eighth defendant), oppose the applications.

In the course of argument the parties referred to the four Gooley siblings by their first names and to Melville William Gooley by his familiar name, “Bill”. For convenience, and without intending any disrespect to any party, the Court will do the same throughout these reasons.

The Summons with three plaintiffs joins eight defendants. Brett is a director and the major shareholder of Finbob Pty Ltd (the second plaintiff, “Finbob”), the trustee of Brett’s own family trust, the KB Trust. His wife, Christine Gooley, is the other director and shareholder. The remaining parties are five companies variously controlled by members of the Gooley family.

The underlying theme of these proceedings is a dispute about the control and proper administration of some of these corporate defendants, which hold the Gooley family’s substantial wealth.

Bill, Melinda and Aleta are presently the directors of three of these companies, Breda Pty Ltd (the first defendant, “Breda”), Decahill Pty Ltd (the second defendant, “Decahill”) and Barton Press Pty Ltd (the fourth defendant, “Barton”). Brett, Janine and Finbob seek UCPR, r 5.3 relief to assist them to decide whether to commence proceedings in relation to the affairs of Breda, Decahill and Barton.

The state of the share registers of these three companies is a part of the controversy between these parties. But their present shareholdings, according to the Defendants, may be shortly described. Goold Enterprises Pty Limited (the fifth defendant, “Goold”) currently holds 45,999 of the 50,000 issued shares in Breda. Bill holds 97 of the 100 issued shares in Decahill, with Brett holding the other three. And Breda holds 99 of the 100 issued shares in Barton, with Bill holding the other share

Two other companies Dama Enterprises Pty Limited (the third defendant, “Dama”) and Goold are more closely associated with Aleta and Melinda. Aleta is the sole director and shareholder of Dama and has been a director for periods since 1988. Melinda is the sole director of Goold and has been a director since 2000. She is the sole shareholder in Goold. Brett has never been a shareholder of either Dama or Goold and has therefore not been a director of either of them since 2000. Another company mentioned in argument, Naladon Pty Limited (“Naladon”), is not joined as a defendant, but has associations with Aleta and Melinda.

By reason of Bill’s age and current medical condition, in June 2015 the NSW Civil & Administrative Tribunal (“NCAT”) in its Guardianship Division confirmed its March 2015 appointment of Melinda and Aleta as Bill’s financial managers under Guardianship Act, Part 3A. At the same time, the Tribunal declined to make a Guardianship order in respect of Bill in Brett’s favour under Guardianship Act, Part 3.

The plaintiffs, Brett, Janine and Finbob, allege that six questioned transactions may have given rise to claims for relief against several of the defendants. They seek UCPR, r 5.3 relief for preliminary discovery of documents concerning each of these transactions (and one other group of documents, group (7), that are said to be relevant to the other six transactions); in order, they claim, to decide whether or not to commence proceedings in respect of the transactions:

The Summons lists in five Schedules, A to E, the particular documents sought in respect of these various transaction. Mostly, the documents sought in respect of each transaction can be dealt with in these reasons as a class rather than by reference to particular documents. Other prayers for relief in the Summons under UCPR, r 5.2 and Corporations Act 2001 (Cth), s 247A were not pressed at trial.

The defendants resisted the UCPR, r 5.3 applications on several grounds. Among the grounds pressed, the defendants contended: the proposed claims were weak; the plaintiffs’ requests for documents failed to distinguish between the different capacities in which Melinda and Aleta had acted in the affairs of these companies; and the plaintiffs did not need the documents they sought because they had already decided to commence proceedings.

The matter was argued on 8 February 2017. Mr J Knackstredt of counsel appeared for the plaintiffs instructed by M & K Lawyers Group Ltd (“M & K Lawyers”). Mr S Goodman SC appeared for the defendants instructed by Thomson Geer. The Court was greatly assisted by the careful arguments advanced on both sides.

The Gooley family companies collectively hold a substantial real estate portfolio. Control of these corporate entities represents a very valuable right to family members.

Bill’s wife Joyce, the mother of the four children, died in 2000. After her death, Bill’s own declining health led to him over time to appoint a number of persons to act as his attorneys. Between 2004 and 2006 Brett held an enduring power of attorney from Bill. But on or about 11 February 2009, Bill appointed Melinda and Aleta as his enduring guardians and then on 9 November 2012 as his attorneys.

Brett opposed this change. He lodged an application for powers of guardianship and financial management before NCAT in its Guardianship Division. Those proceedings were resolved on 15 June 2015, when NCAT ordered that Melinda and Aleta be confirmed in their appointments as Bill’s financial managers under the Guardianship Act, Part 3A. The Tribunal found that Melinda and Aleta had complied with all the NSW Trustee and Guardian’s directions and requests since their appointment in March 2015 and that no mismanagement of Bill’s financial affairs had been established. NCAT declined to make its financial management orders reviewable within 12 months for those reasons.

But through 2013–14 Brett remained as a director of some of the corporate defendants. In that role he took responsibility for the preparation of tax returns, including for Breda. To assist in this task he requested information from Bill’s then solicitor, Mr Gary White of Whites Lawyers, and from Bill’s accountant, Mr John C. Colley. As the correspondence set out below shows, these requests were not answered to Brett’s satisfaction and this resulted in a complaint against Mr Colley to the Tax Practitioners Board, and other correspondence between Mr Colley and Brett’s own accountant, Mr Lillyman.

Much of the documentation in evidence on this application emerged in course of the NCAT proceedings and from Brett’s enquiries in relation to the tax affairs of the various Gooley companies. The plaintiffs have developed a concern that Melinda and Aleta had been involved in, and possibly initiated, several transactions that would have the combined effect of transferring their valuable interests in the Gooley companies away from the plaintiffs. So, they filed the Summons on 1 July 2016 seeking orders under UCPR rr 5.2 and 5.3 and Corporations Act 2001 (Cth), s 247A.

At the start of the hearing the plaintiffs indicated that they were only pressing their applications under r 5.3. But as these reasons show, one application for preliminary discovery of a person’s identity under r 5.2 was briefly revived and resolved during the course of the day’s argument.

The plaintiffs invite the Court to exercise its power under UCPR, r 5.3 to order a prospective defendant to give preliminary discovery. That rule provides as follows:

UCPR, rr 5.2 and 5.3 have been extensively analysed by appellate Courts. In Hatfield v TCN Channel Nine Pty Ltd (2010) 77 NSWLR 506 at [47] – [52] (“Hatfield”), McColl JA collected the following “key principles” that govern applications under UCPR, r 5.3 for preliminary discovery:

In the application of these authorities, the parties agreed upon the preconditions that need to be established for success on UCPR, r 5.3 applications. Although the parties expressed and numbered the preconditions slightly differently they came down in substance to the same ideas.

Once these preconditions are met, the Court has a discretion whether or not to order the defendants to provide discovery of the documents in question that are or have been in the defendants’ possession. In the exercise of this discretion the plaintiffs’ prospects of success can be relevant and the operation of the discretion operates as a brake on any excesses that may flow from a beneficial construction of the rule: St George Bank Limited v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147 at 154 [26].

The Court of Appeal in The Age Company Ltd & Ors v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 (“Liu”) made clear the limited procedural scope of proceedings such as this. Bathurst CJ commented in Liu that applications for preliminary discovery should not be treated as a dress rehearsal for the proceedings, and did not entitle litigants to findings on matters which would ultimately depend upon the assessment of the whole of evidence and that contested issues of fact between the parties should not be either litigated much less decided upon: Liu at [102], [104], [107] and [108]. Accordingly, cross-examination was not permitted in these proceedings and the Court has not made a finding of any contested issues of fact.

A number of other authorities were referred to in the course of argument and these are mentioned elsewhere in these reasons.

The first of the six putative transactions relates to shares that it is claimed Finbob once held in Breda. Brett was a director of Breda from 1 October 1997 until 31 May 2007 and then again from 18 November 2011 until 2 May 2014. The plaintiffs contend that Finbob, the trustee of Brett’s family trust, acquired a shareholding in Breda in about the year 2000. This shareholding is recorded in ASIC databases as having been acquired during Brett’s first term as a director. But beyond ASIC’s records, the evidence of Finbob’s shareholding in Breda is scanty. The plaintiffs contend that this shareholding may have been invalidly or improperly cancelled after Brett ceased to be a director in 2007 and before his reappointment in 2011. Brett and Finbob seek preliminary discovery to assist in their deciding whether to commence proceedings in respect of the suspected improper cancellation of this Finbob shareholding.

The plaintiffs make their case in steps. First, they seek to prove that Finbob acquired shares in Breda during Brett’s first term as a director of that company. They rely in part on Breda’s 2000 annual return signed by Bill on 7 November 2000 (“the 2000 Annual Return”). The typed list of members on the 2000 Annual Return records the same share numbers as the current ASIC register but with handwritten changes: Goold holds 45,599 shares; Brett, Melinda, Janine, Aleta and Naladon each hold 800 shares; and Bill holds 401 shares. But importantly, the entries for Naladon, Melinda, Janine, Goold and Aleta have been struck out and replaced by a single entry, which it is accepted is in Bill’s handwriting, recording that Finbob held 48,799 shares.

Next the plaintiffs rely on an ASIC Form 484, “Change to company details” to show the cancellation of Brett’s shares. This Form 484 was signed by Bill on 7 June 2007 and lodged on 13 June 2007 (“the June 2007 Form 484”) just after the end of Brett’s first term as a Breda director. The June 2007 Form 484 records the cancellation of Finbob’s 48,799 shares, as recorded in the 2000 Annual Return. It describes an amount of $9,260, which seems somehow to be related to the consideration payable for those cancelled shares, as “NEVER PAID”. It further records that Naladon, Janine, Melinda and Aleta each hold 800 shares and that Goold holds 45,599 shares at the date of the June 2007 Form 484. And curiously, it contains the following handwritten statement:

Bill’s family accountant, Mr Colley wrote to the Secretary of the Tax Practitioners Board on 2 September 2013. This letter responds to a number of Brett’s complaints including about this transaction. It purports to describe Bill’s “succession plan”, which included a proposal to allow the Gooley children to take over management of companies that Bill had intended to bequeath to them. The letter continues:

The plaintiffs contend that that Brett and Finbob may be entitled to bring claims against Breda to correct its share register and restore Finbob’s shareholding as recorded between 2000 and 2007 and for oppression, respectively under Corporations Act, ss 175(1) and 233. The plaintiffs maintain that it is not incumbent upon them to elaborate upon the various claims they propose to commence in detail at this stage as they say they are not obliged not to do so: Pritchard Lees Pty Ltd v Cathleen Heather [2013] NSWSC 1521.

The defendants answer this first application in several ways. They submit that the evidence of Finbob’s initial shareholding is so tenuous that any claims for wrongful cancellation are speculative. They refer to Re Motasea Pty Ltd [2014] NSWSC 69 as authority that ASIC forms are no evidence, or weak evidence, of the existence of such a shareholding, and certainly weaker than the current ASIC online register: see Corporations Act, s 1274B(2). The defendants identify several other forms of evidence that the plaintiffs failed to proffer in support of their current applications, such as evidence of payment for the shares, evidence of payment of stamp duty on the issue on transfer of shares to Finbob, or the receipt of share certificates or company resolutions for the issue of the shares. The defendants stress that Brett was a director of both Breda and Finbob at the time of the putative change and therefore should be in a position to produce this material in support of the present application.

The defendant’s first challenge is in substance to whether Finbob and Brett have a prospective claim of the kind they describe. But in my view the defendant’s submissions take too strict a view of the proof requirements on these applications. The Court does not have to reach a firm view there is a right to relief and not every element of the cause of the putative action needs to be established. It can be conceded that an annual return on its own is less than adequate evidence of a shareholding such as the kind Finbob claims but it is certainly some evidence and Finbob says that it genuinely does not have any other documents to establish the allocation of shares to it in 2000. Whether the 2000 Annual Return or the June 2007 Form 484 are the more reliable and accurate documents is something which will have to be determined at a final hearing of any proceedings that are commenced. There is certainly some evidence in my view of appointing Finbob shares as it claims and a cancellation without explanation and without him apparently being informed of the cancellation. There is enough here in my view to satisfy the prospective claim for a condition.

The next issues, reasonable inquiries issues, centre on a chain of correspondence between the plaintiffs’ solicitors, M & K Lawyers, and representatives for the defendants.

On 24 December 2015 M & K Lawyers wrote separate, but largely identical, letters to the defendants’ accountants, PwC, and their solicitors at the time, Willis & Bowring Solicitors. The letters identify each recipient as possibly acting for “Melinda Foley and Aleta Gooley, in their capacity as financial managers for Melville William Gooley”. The remainder of their contents are not presently relevant. The defendants argue that this limitation to Melinda and Aleta in their capacities as financial managers is implicitly applied in subsequent letters.

On 29 January 2016 M & K Lawyers again wrote to PwC and Willis & Bowring Solicitors. They referred to their earlier letter. After describing the purported share transfer, they requested copies of “documents that are said to demonstrate the underlying change in ownership of the 48,799 shares”. On 10 March 2016, the plaintiffs’ solicitors wrote to Breda itself. Here they requested documents recording or referring to the relevant cancellation and issue of shares, and payments or agreements to pay for issued shares.

On 24 March 2016 the defendants’ present solicitors, Thomson Geer, wrote to the plaintiffs’ solicitors. They confirmed their instructions to act for Melinda and Aleta “as Guardians and Financial Managers” for Bill. They also noted that Aleta and Melinda were directors of Breda, Barton and Decahill and that accordingly, the firm had instructions to act for those companies. They requested further time to respond substantively. When that response came, on 6 May 2016, the defendants rejected the plaintiffs’ entitlement to the requested documents; refused to accept that shares were ever transferred or issued to Finbob; and declined to provide any documents except a copy of Breda’s Constitution.

The defendants take the “reasonable inquiries” point on this transaction. They submit that the letters only address Melinda and Aleta in their capacity as Bill’s financial managers, whereas the Summons is directed at them personally. They also contend that the plaintiffs have not indicated why the documents in question would be in the possession of Melinda and Aleta in their personal capacity.

There is a ready answer to both these arguments. There is no distinction in law in my view between Aleta and Melinda holding documents in the capacity as financial managers for Bill and their holding documents otherwise for themselves. This is because it can be seen upon analysis of the Guardianship Act that a person appointed as a financial manager under that Act does not become a trustee of the property of the person under a management order such that it can be said in that role they hold documents in a different legal capacity. This is evident from the analysis in the next paragraph of Part 3A of the Guardianship Act. That being said, in the administration of Bill’s affairs, as financial managers Melinda and Aleta would undoubtedly owe fiduciary duties to him including the duty to keep the administration of his financial affairs separate from their own. But that does not in my view mean that the documents are not still in their possession for all purposes such that a demand expressed to be in the capacity “in their capacity as financial managers” would not also be sufficient notice of a demand for documents that they might hold in their possession otherwise than in administering Bill’s affairs.

The Guardianship Division of NCAT may make financial management orders under Guardianship Act 1987, s 25E. When making such an order the Tribunal orders that the estate of a person is to be subject to management under the NSW Trustee and Guardianship Act 2009. When a financial management order is made of that kind, as it was in this case, the Tribunal may under Guardianship Act, s 25M(1)(a) “appoint a suitable person as manager of the estate” or “commit the management of that estate to the NSW Trustee”: s 25M(1)(a) and (b). But Guardianship Act, Part 3A does not provide that the financial manager so appointed become a trustee of the deceased’s estate. The Guardianship Act gives them certain powers of disposal of that property but they do not hold property in a different capacity such as the trustee. Therefore it is inapt to refer to a financial manager so appointed as acting in a particular “capacity” other than as a convenient shorthand term to show a division of personal functions. The plaintiffs’ correspondence of 24 March 2015 is really pointing out, for more abundant caution, that the documents being sought do include those generated as Bill’s financial manager.

The second “reasonable inquiries” point being made is that the plaintiffs have not indicated why the documents in question would be in the possession of Melinda and Aleta in their personal capacity. Whilst Breda is likely to hold most of the documents sought, if Melinda or Aleta were personally involved in these transactions, they may hold such documents or copies of documents given to them on behalf of Breda and I see no reason why, particularly because they are answerable in any event as Bill’s financial managers, that they should not also be required to give preliminary discovery of documents that are generally in their personal possession.

And the other preconditions are satisfied here. The plaintiffs seek Breda’s share register and documents related to the issue and cancellation of the shares. These are of limited scope and are clearly relevant to the decision to be made. And it would be so expected in the ordinary course of company administration that Breda and its directors would be possession that information.

This second questioned transaction relates to the recovery of the proceeds of sale of two properties that Breda sold in September and October 2011. Shortly before Brett returned to serve as a director of Breda, the company conveyed two parcels of land in Willarong Road, Caringbah to unrelated third parties. The plaintiffs contend that the evidence suggests that Breda did not retain the sale proceeds of these two properties but the proceeds were instead paid to the trustee of the Gooley Family Trust No. 4 (“the Trustee”) and have not since been repaid.

The plaintiffs initially identified several types of potential misconduct in these activities, including sale at an undervalue, payment to the Trustee as an unsecured loan and non-repayment of the loan by the trustee. The putative claims arising from these allegations could take several forms. These include: applications for relief against oppression under Corporations Act, s 233; and, applications for leave to bring proceedings on behalf of Breda against Bill, or the Trustee, under Corporations Act, s 236. But only two putative claims were really developed in argument.

The first is a s 236 derivative leave application for an action in Breda’s name in relation to the Trustee’s putative non-repayment of this advance. Correspondence between Mr Lillyman and Mr Colley supported the characterisation of Breda’s transfer of funds to the Trustee as a loan. But there was some disagreement in submissions as to whether or not this arrangement required a formal loan agreement.

The defendants contended that the unidentified Trustee was not a “prospective defendant” within UCPR, r 5.3 against whom the plaintiffs could be entitled to make a claim for relief from the Court. The plaintiffs noted, the initial claim for relief, namely the application for derivative leave, would be against the company.

But who is the trustee from whom repayment of the loan would be sought? At first it was not clear. So the Court permitted the plaintiffs to revive their recently abandoned application for preliminary discovery under r 5.2 and to request the identity of the Trustee, during the hearing. Following a short adjournment at the end of the hearing, Mr Goodman SC indicated that Jamell Technical Publications Pty Limited (“Jamell”) was the Trustee of the Gooley Family Trust No 4, to the best of his clients’ knowledge.

On the issue of prospective claim, the defendants submit that there is no documentary evidence of any failure to repay in response to a demand or otherwise, so as to ground a claim that the moneys are now due and payable to Breda. But this submission overlooks the letter dated 26 February 2014 to Bill from Brett’s then-solicitor Maurice Marshan, who reports:

This is sufficient for UCPR, r 5.3 purposes to show that the plaintiffs may be entitled to seek leave to bring a derivative claim in Breda’s name for recovery of these advances. In my view, the plaintiffs have satisfied the prospective claim issue in relation to this claim.

They also satisfy the other pre-conditions. The plaintiffs rely upon correspondence from M & K Lawyers. A letter on 19 February 2016 to PwC refers to the loan and enquires about repayment, documents recording repayment and loan agreements. Another on 10 March 2016 to Breda directly contains similar requests. The unanswered requests in M & K Lawyers’ letter of 10 March 2016 for information, as to whether the loan was repaid, as to documents recording repayment and for the loan agreement, are sufficiently wide to satisfy the reasonable inquiries precondition for this claim. The documents sought would be relevant to the decision and could be expected to be in Breda, Melinda or Aleta’s possession.

On the issue of reasonable inquiries, the second potential claim is an application for leave to commence proceedings against Bill for breach of his duties as a director of Breda in advancing the funds to Jamell, the Trustee, and putting Breda in the position of an unsecured creditor having to demand their recovery.

The defendants have an immediate answer. They submit that the plaintiffs have already made a decision to commence proceedings against Bill on these grounds. They rely upon a letter from Maurice Marshan on 26 February 2014 demanding immediate repayment of $860,396.26, and threatening legal action if payment is not received within 28 days.

In reply, the plaintiffs draw an analogy from White J’s decision in Yes Family Pty Ltd v Sphere Healthcare Pty Ltd [2016] NSWSC 917. In that case, at [28], the defendants unsuccessfully submitted that a decision to serve a notice under s 129 of the Conveyancing Act 1919 (NSW) implicitly entailed a decision to commence proceedings for the breaches specified in the notice. White J rejected that submission because the plaintiff had contradictory information about its entitlement to sue at the time.

But the letter for any proceedings against Bill was written in the context of the lack of knowledge of whether there was a loan and whether it was repaid. It is inherently improbable that that letter should be interpreted in the circumstances, as reflecting that a decision has already been made to bring proceedings against Bill, when it seems quite clear that the plaintiffs have insufficient information to know whether any loan has actually been repaid. If a loan had been repaid fully with interest, there may be no loss to Breda at all. In my view the information being requested is relevant to a decision yet to be made, not only to commence proceedings against Bill but against Breda. It is also noteworthy, in answer to this argument, that no proceedings of the kind threatened on 26 February 2014 have in fact been commenced against Bill over three years later.

The defendants again contend that the letters fail to address Melinda and Aleta in their personal capacities. They also submit that the plaintiffs have not requested documents recording the initial payment to the trustee or the trust deed.

The third questioned transaction related to the application of the sale proceeds of one of Barton’s properties. According to ASIC records, Brett was a director of Barton from 29 April 1971 to an unknown date, and then from 1 October 1997 until 31 May 2007 and finally from 10 May 2011 until 24 March 2015. He claims that he has continued as a director since 1971.

The plaintiffs’ evidence in relation to this Barton transaction includes a Real Property Act transfer dated 1 August 2014, which records the transfer of a property in Port Hacking Road, Caringbah known as “Connell House” from Barton to a third party company. Bill is the only signatory for Barton, the transferor, on the Transfer. And he describes himself on the Transfer as signing as “Sole Director/Secretary”. As noted above, and contrary to the way that Bill has signed this form of Transfer, the ASIC records for Barton indicate that Brett was also a director of Barton at the time.

Other documents associated with this transaction show similar unilateral action by Bill. A “Direction to Pay” dated 31 July 2014 signed only by Bill, apparently for the Connell House transaction, provides: “On settlement of the above sale you are hereby authorised to pay the net proceeds of sale after agreed costs to Jamell Technical Publications Pty Limited”.

The plaintiffs submit that the documents raise the spectre of unauthorised dealing by Bill. If Bill were not the sole director of Barton, the ordinary course, which involves two directors signing documents of this nature has not been followed: see Corporations Act, s 127. Barton’s constitution may provide otherwise, as Bill was what is called a “Governing Director” of a number of these companies – a circumstance the plaintiffs submit favours preliminary discovery in this instance.

The defendants respond that no relief should be granted against Breda. However, one way in which the plaintiffs say they may pursue a substantive claim against Bill is by a nested derivative action: Finbob could apply for s 236 leave to bring a proceeding on behalf of Breda against Barton, where Barton is said to have engaged in oppressive conduct to the detriment of its shareholder Breda and the next proceeding to be brought would itself be an application for leave to bring a proceeding on behalf of Barton, (i) against Bill, and (ii) against the recipient of the funds who again appears to be Jamell. The plaintiffs submit that Breda, Barton and Bill are all “prospective defendants” in their action.

The defendants note their request on 21 October 2016 for clarification as to which of the three plaintiffs was seeking each prayer for relief in the Summons. In their response on 27 October 2016, the plaintiffs indicated that only Brett was seeking relief in relation to Barton.

Given the documents the plaintiffs have advanced it cannot be said, as the defendants submit, the proposed claims are mere assertions, suspicion or conjecture. The defendants say that no claim is foreshadowed against Melinda or Aleta and there is no basis for an order for preliminary discovery against them in respect of this transaction. The Court agrees with that contention and will limit relief here to relief against Barton and Bill.

The documents sought in respect of this transaction from Barton Press, Bill, Melinda and Aleta are documents recording the making of payments to or payments received from the recipients of the proceeds of sale of Connell House and any loan agreement between Barton Press and the recipient of the proceeds of sale of Connell House. There is evidence of the advance and in my view it is probable that the defendants in their respective capacities as directors of both Breda and Barton should be possessing that information. The information sought is relatively limited and has, in my view, obvious relevance to the decision to be made.

The remaining issues are once again similar to those on which the parties joined issue on the previous transactions. The defendants say that letters to PwC on 19 February 2016 and to Barton on 10 March 2016 did not inquire of Melinda and Aleta in their personal capacities and omitted reference to Barton’s constitution and documents recording payment to Barton from the recipient of the sale proceeds. The Court has already deal with this issue.

The fourth questioned transaction relates to the allocation of liability among the Gooley family companies for a settlement with the ATO of their liability for tax. The plaintiffs contend that any settlement reached may not have correctly or reasonably allocated the liability for taxation among Goold family companies in a way that unfairly overburdens companies in which the plaintiffs have a greater interest.

On 31 October 2014 the ATO informed Brett that it intended to audit his affairs and the affairs of several family companies, including the corporate defendants. That audit took place. NCAT’s reasons for decision on 15 June 2015, commencing Bill’s guardianship, found that the ATO audit had identified that Goold family companies had a potential tax liability in the sum of $20 million. On 14 December 2015 PwC informed the plaintiff’s that the ATO audit had finished but PwC could “not divulge the terms of the outcome reached with the ATO”.

In his affidavit sworn 21 June 2016, Brett expresses his belief that Melinda and Aleta, in their capacities as Bill’s financial managers and as directors of Breda, Decahill, Goold and Dama, have since this audit agreed to an imbalanced settlement of this liability with the ATO. Brett fears a settlement has been agreed that would benefit Goold and Dama, companies in which Melinda and Aleta have a greater stake, and at the expense of Breda and Decahill.

The plaintiffs submit that Brett’s belief, combined with the defendants’ general conduct towards the family companies, raised a sufficient possibility of a claim about an imbalanced ATO settlement as to warrant the making of orders on the present claim for relief by way of preliminary discovery.

In my view there is much to be said for the defendants’ argument that there is only mere assertion, suspicion and conjecture behind the plaintiffs’ concerns about the ATO settlement. Indeed, there is limited evidence that a settlement has actually taken place but the 14 December 2015 PwC letter is some basis to infer a settlement has occurred.

The categories of documents sought principally relate to Decahill and seek information about the audit, tax assessments, payments required or agreed to be made, tax returns over a long period back to 1997 and property transfers back to that time.

There is clear evidence of reasonable enquiries in respect of this questioned transaction. M & K Lawyers made relevant requests on 24 December 2015.

In my view if it could be established that the plaintiffs had a prospective claim preconditions of possessing information and relevance to the decision would probably be satisfied as any documents recording a settlement with the ATO would tend to establish whether or not an imbalanced settlement of the kind alleged had actually taken place.

But the real issue with respect to this questioned transaction is whether the plaintiffs have a prospective claim at all. In my view the defendant’s contention is correct that the plaintiff’s case on this questioned transaction is merely based on suspicion. And such suspicion is largely the product of the long-term stand-off between these siblings. There is no objective evidence even pointing to an inference that Melinda or Aleta have breached their respective director’s duties to Breda and Decahill by entering into an arrangement with the ATO favouring themselves. There is nothing but the fact of the probable settlement itself. But in my view that is not enough for them to make out the requirement of a prospective claim.

The fifth questioned transaction relates to the removal of Breda as a shareholder in Dama and its replacement as a shareholder by Aleta in circumstances of which Brett presently has no knowledge. Dama holds substantial real estate assets and this questioned transaction would transfer control of those assets to Aleta.

According to ASIC records, Brett was a director of Dama between 1 October 1997 and 8 November 2000. When his term as a director began in 1997, Breda held 98 shares in Dama, Bill held 1 share and Joyce Gooley held 1 share. Three changes in this shareholding structure followed.

First, on 26 November 1997 Joyce’s share was apparently transferred to Bill. Brett expresses a belief that his mother would have been incapable of effecting this transfer following a major stroke she suffered in 1991.

Secondly, three years later, on 27 November 2000, a month after Aleta was appointed as a director, Bill signed the 2000 annual return for Dama. In the list of members, Breda’s entry as a shareholder has been struck out and replaced by Aleta’s name and at a different address. The change appears in what is said to be Bill’s handwriting. If effective, it would record the transfer of 98 shares to Aleta. Brett claims to have been entirely unaware of this change during his three year directorship of Dama.

Finally, an ASIC Form 484 signed on 18 March 2013 (“the March 2013 Form 484”), records the issue of 9,900 shares to Aleta for $197, which consideration is shown as paid. If effective, this change in shareholding would dilute Bill’s proportionate interest in Dama to approximately 0.02%.

The plaintiffs contemplate derivative claims on Breda’s behalf, as the original pre-2000 shareholder in Dama for oppression, and for the correction of Dama’s register. The plaintiffs impugn each of the three transactions: Joyce’s 1997 transfer of a share to Bill, Breda’s probable 2000 transfer to Aleta, and the dilution of Bill’s shareholding interest about 2013. In response, the defendants submit that the length of time since each of these transactions raises a strong discretionary ground for denying relief.

The defendants are partly right about the age of these transactions. On the issue of prospective claim, in my view Joyce’s 1997 transfer of Joyce’s share is simply too old to be the subject of a claim with any prospect of success and the weakness of the claim was decisive against it. Joyce is deceased. Bill may not be capable of giving evidence. Little or nothing of value could now properly be said about this transaction.

But in my view relief should be granted in respect of the other two transactions. The circumstances in which Breda ceased to be a shareholder of Dama in about 2000 without Brett’s knowledge as a director may arguably raise a case of oppression. And Aleta appears to have benefited at the time.

As with the Breda share transfer, the plaintiffs rely on the letters from M & K Lawyers to PwC and Willis & Bowring Solicitors on 29 January 2016. The defendants once again on the issue of reasonable inquiries point to a failure to make demands in each of the distinct capacities of Melinda and Aleta. This is dealt with in the same way as above: the Court does not recognise this as a distinction of substance.

The defendants also raise in answer on this transaction the plaintiffs’ failure specifically to request the Dama constitution and the Dama share register before commencing these proceedings. The Court dealt with this point quickly, and in accordance with Civil Procedure Act, ss 56, 57 and 58. The Court permitted the plaintiffs to request the constitution from the defendants during the Court hearing. So the reasonable inquiries precondition is satisfied in my view.

The documents requested (directly recording or related to these transactions() are limited in scope and are relevant to the decision and their production is not inherently burdensome.

The evidence and submissions on this, the sixth questioned transaction, closely resemble those in relation to the Dama Share Transfer. ASIC records show that Brett was a director of Goold between 28 December 1984 and 1 June 1988 and between 12 June 1992 and 2 February 2000. These records also show that the third plaintiff, Janine, was a director from 16 April 1986 to 16 October 2000. She believes that she never resigned this directorship. But an ASIC form 305, “Change of Office Holders”, asserts otherwise. Melinda has apparently been a director since 16 October 2000.

On 21 November 2000 Bill signed the annual return for Goold. Handwritten changes on the Goold 2000 annual return show 990 of his 1000 shares are now held in Melinda’s name. Then on 10 October 2014 he signed and lodged a form 484 recording a transfer of his remaining 10 shares to Melinda.

The plaintiffs outlined their submissions on this questioned transaction in a letter dated 19 April 2016. If the transfers were invalid, they pointed out Goold could apply for correction or, if no register existed, the Court could create one. As former (or present) directors, the plaintiffs submit that Brett and Janine could seek derivative leave to pursue those remedies.

Brett and Janine seek orders that Goold and Melinda provide discovery of documents including Goold’s constitution, the transfer of the 990 shares from Bill to Melinda and the transfer of Bill’s 10 shares to Melinda. The requests are suitably limited to capture documents with respect to these Goold questioned transactions and are not unduly burdensome in my view.

As former directors of Goold (or if she is right in Janine’s case as a present director) Brett and Janine have standing to apply to bring derivative proceedings on Goold’s behalf to have its share register corrected. Although the defendant’s submit that they have not offered a cogent explanation as to why the register is incorrect, if Janine is still a director and she argues she is, the fact that she was not given any information about these transactions is some evidence of arguable irregularity that may require the Goold’s share register to be corrected.

The reasonable inquiries issues are the same on this transaction as previous transactions. It can be expected that both Goold and its sole director (subject to Janine’s claim) would be possessing this information which is in my view obvious relevance to any decision to be made to correct the Goold’s share register.

Finally, the plaintiffs seek preliminary discovery of all current and superseded wills that Bill has executed. This part of their application is to ascertain the economic value of their other six potential claims. If, for example, these wills indicate Bill’s present intention is to divide his estate equally between his four children, it could be economically rational for the plaintiffs to pursue reversal of any diminution in Bill’s shareholding in Dama and Goold.

The plaintiffs submit that considerations of the economic viability of their contemplated action are relevant to their decision regarding whether or not to commence proceedings and are therefore permissible discretionary matters within the purview of UCPR, r 5.3.

It is clear from the decision of White J in Morton v Nylex Ltd [2007] NSWSC 562 and from the principles explained in Hatfield above that a UCPR, r 5.3 applicant may be entitled to documents going to potential defences, because those defences may be relevant to deciding whether or not to commence proceedings. It seems to me that the economic viability of prospective proceedings can also be a key integer in the decision of whether or not to commence proceedings to pursue a claim for relief.

It is contended in light of Bill’s current medical condition that he may no longer have the testamentary capacity to make another will and that is why prior wills are sought. Given the NCAT findings, there is a proper basis for this contention. If Bill currently has testamentary capacity, this argument would have little substance, because he would be able to change his will at any time. But there is reasonably good evidence to the contrary. One can readily see that were Bill’s last will to split all of his estate equally or, for example give 100 per cent of it to Brett, or to one of the other siblings, that information would bear closely on whether it was worthwhile to commence some of the proceedings contemplated arising out of the six questioned transactions.

Orders for preliminary discovery of Bill’s current will and any previous wills will be granted. But there will be a need to be some limits on how far back the order for previous wills goes. A period of between seven and ten years would seem to be the practical limit for such an order.

In the result therefore the plaintiffs have been successful in securing orders for preliminary discovery in respect of most but not all of the categories of documents sought in the Summons. A small number of documents have been informally supplied to the plaintiffs. So the parties will be directed to bring in short minutes of order to give effect to these reasons.

In the successful categories the Court was not satisfied that the plaintiffs’ case was so weak that the UCPR, r 5.3 discretion should not be exercised in their favour.

Although the plaintiffs were substantially successful, the plaintiffs were not successful on all the categories they sought. This outcome may possibly result in argument about costs. So if agreement cannot be reached on that issue, the Court will give the parties an opportunity to advance such arguments as they wish in relation to issues of costs.

Accordingly the Court’s orders and directions on the plaintiffs’ application are as follows: