Coeur de Lion Investments Pty Ltd v Kelly & Ors

This litigation is part of the disputation between a company (“CDLI”) in which Mr. Clive Palmer is interested and the persons who own interests in the time share schemes which was formerly part of the Hyatt Coolum Resort.  CDLI was the owner of interests in the time share and was also the owner of substantial parts of the resort.  CDLI sought leave to commence a derivative action against the members of the Board of Directors of the time share companies on the basis that they had improperly received payments for their work as directors.  At first instance it was held that whilst there may have been a question to be tried as to whether or not any payments to the directors were authorised, the Court was not satisfied that CDLI was acting in “good faith” or that it was in the best interests of the members that leave be granted.  The case contains a useful analysis of the requirement of “good faith” when considering whether or not leave should be granted to commence derivative proceedings including the requirement of the shareholder to demonstrate affirmatively that they honestly believe that the proposed cause of action exists and has reasonable prospects of success.  It was also observed that the range of factors which might be taken into account will not be circumscribed.  Although the circumstances of the case were unusual, the reasons for judgment contain important analysis of some substantive issues concerning the granting of leave to bring a derivative action.