Costs in Statutory Derivative Actions : The Lingering Ghost of Wallersteiner

Part 2F.1A of the Corporations Act 2001 (Cth) provides for a statutory derivative action in Australia. Section 242 gives power to the court to make costs orders for derivative proceedings commenced with leave of the court under s 237. The manner in which courts deal with issues of costs impacts significantly upon the utility of the statutory derivative action. This article considers the factors that inform the exercise of the court's discretion as to costs under s 242 at, first, the leave stage and, secondly, at the conclusion of derivative proceedings, drawing on case law in Australia, the United Kingdom, New Zealand and Canada. The English Court of Appeal decision in Wallersteiner v Moir (No 2) [1975] QB 373 is often cited for the proposition that a minority shareholder who brings a derivative action on behalf of the company has the right to be indemnified in respect of costs reasonably incurred, whether the derivative action succeeds or fails. This article will consider whether Wallersteiner reflects the law in Australia under the statutory derivative action provisions