Consideration - any basis for the relief sought
146 The starting point in this case is that it is not in issue that Ms Hammond, as a director, has a statutory right of access to the financial records of Quay and a general law right to access the books and records of Quay at all reasonable times. Quay accepts that is the position at law.
147 Whilst Ms Hammond seeks by this application declarations to the effect that she has those rights, there is no real contention to the contrary. Quay does not cavil with the existence of such rights or powers. Nor does Quay suggest, leaving aside the separate question of privilege, that there is any improper purpose on the part of Ms Hammond in seeking the documents she has sought. I note for completeness that Quay contended that there are real reasons to question the purpose for the 6 May 2020 categories letter, having regard to Ms Hammond's evidence that proceedings were to be issued regardless, and submitted that there may be reasons to suspect there was an improper purpose behind it, but says that because the letter has been answered, Quay has no need to explain any non-production, so the question as to improper purpose does not relevantly arise for present purposes. For completeness, I add that Mr Boyd's evidence supported the view that access to the non-legal documents requested in the 6 May 2020 categories letter was not for any improper purpose (see [107] above).
148 Therefore, acknowledging that privilege will be dealt with separately below, the live issue between the parties distils to whether or not Ms Hammond has established by the evidence a basis for the grant of relief.
149 Having considered the evidence, I am not persuaded that declaratory relief should be granted or that the orders as proposed should be made. I am not persuaded that there is any utility in granting such relief.
150 To start with, Ms Hammond seeks the declaratory order by way of a sword to be utilised in the future if she perceives that Quay has not responded to a request for immediate access to documents, so that she does not have to return to Court. So much was clear from her evidence.
151 It cannot be said that the relief sought would give Ms Hammond the comfort as to limiting future litigation that she seeks. It cannot be said that disputes between the parties would be quelled. The potential subsists for litigation, even if a declaration in the terms sought were made; for example, litigation as to its scope and enforceability; as to whether there is any reason for access to particular documents to be excluded; as to the reasonableness of any time stipulation for access; and as to the manner of inspection being reasonable in the circumstances.
152 However, that subsisting potential for dispute is not of itself determinative in this case. It is necessary to consider whether there is any basis upon which such an order should responsibly be made in the circumstances of this case.
153 In my view, there is insufficient evidence from which I can properly draw an inference that Quay will not comply with its obligations to provide access to documents and financial records in a reasonable period when requested going forward. I have formed this view taking into account a number of matters.
154 First, whilst it is fair to say that there is some evidence that Quay did not recognise the scope of the directors' access rights at the time of the First Access Proceedings, it must by now have been disabused of any misapprehension. For example, in HWL's letter to Gadens of 15 May 2020, a request was made that the directors explain why they needed certain financial documents. As is clear from the authorities (see [129] above), directors do not need to provide reasons, particularly where there is no suggestion that documents are to be used for an improper purpose. So much was accepted by senior counsel for Quay in closing submissions in reply. Further, to the extent that Quay may have perceived through the majority directors that it was only necessary for it to respond to a finite list of documents at a particular point in time, it now has clear guidance by way of the statement to the contrary in Stewart J's costs reasons in Hammond v Quayeyeware Pty Ltd, in the matter of Quayeyeware Pty Ltd to the effect that directors are entitled to continue to ask for documents (at [12]-[13]).
155 In addition, Quay made a number of concessions in these proceedings: it accepted that directors have the power at law to access, inspect and take copies of documents, and it did not claim that Ms Hammond had an improper purpose for seeking access to the non-legal documents.
156 Therefore, I do not infer from the fact that the First Access Proceedings were brought that Quay has any tendency or future intention to deliberately or wrongfully withhold access to documents that might properly be requested by the directors.
157 Second, turning then to circumstances after December 2019, it is apparent that from February 2020 the data room contained a significant amount of relevant documentation. Ms Hammond's second affidavit filed in the proceedings referred to a number of financial documents that she had been able to access and which permitted her, for example, to reproduce different aspects of the 2020 budget, including the mix of online, wholesale and net sales in the various regions in which Quay sold its products.
158 Third, Mr Boyd accepted that since December 2019 he has been able to access Quay's financial information by access to the data room. Leaving aside the question of access to documents relating to legal fees, the overall effect of Mr Boyd's evidence was that he had been able to access the documents he required post December 2019, and he accepted (quite properly) that the concerns he expressed in his affidavit were somewhat exaggerated.
159 Fourth, in considering the circumstances from December 2019, it is artificial to only view Quay's conduct. Ms Hammond's own conduct, to some extent based on a level of misapprehension as to her rights, no doubt had some impact on Quay's conduct.
160 It was apparent from Ms Hammond's evidence during the hearing that she held the belief during this period that she had a right, as a non-executive director, to ask questions of either management or the majority directors and have them answered, and that such right could be enforced. For example, Ms Hammond was asked during cross-examination about the company's proposal that, in light of the number of questions being received, the company might collate those questions and put in place a structure to have them answered. Ms Hammond's response was that such an approach was not reasonable, particularly in light of COVID-19, and that if she had a question about the company's strategy, she should receive answers, particularly having regard to the fact that she and Mr Boyd were 'sitting in a totally different country'.
161 As the correspondence disclosed, after the resolution of the First Access Proceedings, Ms Hammond continued to seek information from Quay. It was her view that she had not received information in a manner which she had anticipated would occur. However, viewed objectively, up until 6 May 2020, the various emails from Ms Hammond addressed to Ms Bricker or the majority directors requested information (not documents); they requested opportunities to discuss or obtain answers to various questions; or they requested the production of documents that it appeared were not being generated and did not exist (see [48] above). Further, it is not to be assumed that new management and a new board will require company information and reports to be collated or recorded in the same manner as in previous years. It does not follow from the absence of the provision of reports to the board in the same format as may have occurred previously that documents have been withheld.
162 Ms Hammond accepted that the letter from Gadens to HWL of 27 February 2020 was an attempt to enforce her rights (as she understood them to be) by seeking a written response to the many questions that had been asked and anticipating that proceedings would be instituted by Ms Hammond as early as March 2020. Ms Hammond said she considered that the company would also be obliged to answer any further questions that arose out of any response. Ms Hammond said she did not recall why the proceedings were not instituted until May 2020.
163 It was clear from Ms Hammond's evidence that she decided to issue proceedings as a result of the absence of response to those emails of January 2020 and February 2020. It was that failure that she relied upon as a development that distinguished the position from that in December 2019, a time at which Ms Hammond agreed there were no other outstanding issues to be litigated.
164 I accept that there was some delay by Ms Bricker or the majority directors in ensuring that there was a response to Ms Hammond and Mr Boyd in January and February 2020. I take into account that there were five communications made over a two week period. Ms Hammond's 23 January 2020 email sought information rather than existing documents. Mr Boyd's 7 February 2020 email was broad-ranging and asked many questions. The first letter from Gadens imposed a three day turn around in circumstances where there was no apparent urgency, based on Ms Hammond's evidence. I accept that Ms Hammond was not treated with the courtesy she deserved in that period - it would not have been difficult for the recipients of her emails to at least acknowledge receipt and to provide a short email holding response or other explanation. However, HWL did respond to the emails on 3 March 2020, indicating that to the extent the requests included requests for documents, they would be uploaded to the data room.
165 To my mind, the communications and responses during January 2020 and February 2020, and the following period, reflect an unhappy and strained relationship between two opposing sides who, by that time, had both instituted litigation against each other and had subsisting litigation between them (the Elevate Proceedings was not resolved until April 2020). Quay's answers to the chain of requests do not establish that it was denying its obligations to provide access to documents or was deliberately refusing to provide documents. The involvement of lawyers, and short periods of delay, was perhaps to be expected. The delay in providing the requested documents (rather than answering the questions), although not inordinate, is regrettable, but does not in the circumstances indicate that there was a pattern of non-compliance with requests for financial records or documents.
166 Fifth, despite the tension between the parties, it is relevant to note that the relationship between the directors was not completely dysfunctional (to adopt the phrase used by senior counsel for Ms Hammond). For example, Ms Hammond considered that she was entitled to ask for a weekly telephone call in order to be updated by management. Despite holding that belief, the parties, including Ms Hammond, were able to agree that the COVID-19 weekly updates would be provided.
167 Sixth, the fact that there was a board meeting in April 2020 at the time of the elevation of the pandemic, the fact that Quay agreed to generate and provide COVID-19 weekly updates (and did so until these proceedings commenced) and the fact that on 15 April 2020 Ms Bricker provided information to the board members about the strategy to manage the pandemic, all suggest that Quay was seeking to keep its board informed of current events in a challenging period.
168 Seventh, turning specifically to the 6 May 2020 categories letter, from Ms Hammond's perspective, whether or not the company responded to the 6 May 2020 categories letter was not relevant to the decision to commence proceedings. Ms Hammond accepted that a complete and adequate answer to that letter would not have avoided the commencement of litigation.
169 As it happens, Quay responded to the requests in the 6 May 2020 categories letter, as set out above. HWL by its letter of 30 June 2020 asserted that the requests made in that letter had been responded to in full, and there was no evidence that anything was said to HWL or Quay at the time that sought to disabuse Quay of that understanding, other than by way of submissions in these proceedings.
170 I have found that one category of documents was not answered by the correspondence: see [87] above (documents or correspondence with creditors which are outside ordinary trading terms). However, I do not consider that the one concrete example of a failure to respond is, in all of the circumstances, sufficient to establish any pattern of non-compliance or sufficient to justify the relief sought. Nor do I consider other examples referred to by Ms Hammond were compelling: see [84]-[85] above.
171 Eighth, and also relating to the 6 May 2020 categories letter, Ms Hammond was unable to explain during cross-examination why it was that she required answers urgently to her numerous requests set out in that letter, some of which encompassed a considerable period of time, and particularly having regard to the other events unfolding in the United States at the time relating to the COVID-19 pandemic and protests (as referred to in the HWL letter of 10 June 2020).
172 The 6 May 2020 categories letter was very detailed (and sought explanations about the documents akin to a request for discovery and answers to interrogatories). It sought responses at a time that due to COVID-19, the Melbourne and San Francisco offices were closed; but regardless, 'many resources' were deployed to answer it. Quay did not suggest it would not comply: it informed Ms Hammond that in the particular circumstances, it needed until the end of June 2020 to do so. It responded by the end of June 2020, as it had anticipated. In the meantime (according to the 25 May 2020 HWL letter) it continued to provide COVID-19 weekly updates, a CEO report and other financial information via the data room.
173 Even the authority on which Ms Hammond placed great weight (Fox v Gadsden) speaks of access at 'all reasonable times'. Hawksford speaks of access that is 'reasonable in all of the circumstances, and also bearing in mind the context in which the access and inspection is being carried out'. I accept that Quay was obliged to provide access to requested documents as soon as was reasonably practicable, without delay and without obfuscation. However, facilitating speedy access in the case of a small company with limited documentary records might be quite different to doing so in the case of a large-scale, international business with records kept at various levels of management and with internal hierarchies of access and confidentiality, particularly if access is sought to a very broad range of documents, let alone to all documents.
174 Ninth, it is regrettable that Quay initially chose to provide access to Ms Hammond to the data room which was in 'read only' format. No malevolent reason for that course was revealed. However, it was clearly a cumbersome and ill thought out restriction. It should have been remedied more quickly than it was. However, access was not denied.
175 Tenth, as to further requests for information in July 2020 and August 2020 about strategic matters, the communications on behalf of Quay suggest requests for documents were met (to the extent they existed) and a board meeting was to be scheduled for further discussions: nothing in these communications points to the withholding of access.
176 Eleventh, to the extent access was denied by Quay on the basis of legal professional privilege, having regard to the complexity of that issue, such denial should not be seen as indicative of a more general predisposition to deny access to documents.
177 Having regard to all of those matters, I am not satisfied that there are clear, unanswered requests for access to documents, nor sufficient other evidence, from which to draw an inference that Quay, by its majority directors or CEO, has any continuing intention to refuse to permit access to company documents to Ms Hammond, such that any general access declaration as sought should be granted. In coming to this view, although I have separated some of the events, I have also assessed the overall effect of the evidence. I have accepted that there may have been a limited number of documents that may have fallen within the scope of the document requests that were not provided by the time of the hearing. However, against the broader backdrop I have addressed, and absent a request for an order or declaration as to a breach relating to any specific documents, I do not consider that the non-production of any such documents viewed in all the circumstances, is sufficiently probative or of sufficient force to ground the inference the Court is requested to draw.
178 The declaratory relief sought, in effect, seeks to restate the directors' rights at law, a position that Quay and its majority directors now accept, even if they did not do so before. I see no utility in making a general declaration of rights in those circumstances. It follows that I would not make inspection orders as sought: there is no real controversy between the parties as to the existence of such powers (as against the breadth).
179 For those reasons I decline to grant the relief sought in the originating process.
180 I should add that whilst not referred to in the originating process, in her submissions Ms Hammond suggested that the Court should make the declaration as to general access, and 'should also make orders that facilitate such access'. As I have declined to make the declaration, it follows that it is not appropriate to make access orders of any general nature. However, I will address the submission. It was said that general access could be facilitated by an order granting Ms Hammond access to Quay's electronic recording system known as NetSuite, which it was said contained all of Quay's electronic records including accounting information (referred to as an enterprise resource planning program). There was evidence from Ms Hammond's solicitor, Kier Svendsen, that he had been told by Ms Hammond that she had access to that system when she was an employee, but had not had access since she resigned (despite request); that she had been told in January 2018 that no director (apart from the chairman) was to have access to such system; and that correspondence from Quay in September 2017 was to the effect that Quay did not consider any directors needed access to the system for any of them to fulfil their duties as directors. Mr Svendsen's evidence was that Ms Hammond believes (but cannot be sure) that Quay continues to operate such an electronic program.
181 Ms Hammond gave no evidence about the program, or information stored in it that she was able to and needed access to in the past. To the extent that it continues to exist (and I am prepared to assume that a company the size of Quay would make use of electronic programs), then it apparently contains accounting information. Quay is obliged to provide access to all financial records, as already discussed. Quay claims to be doing that already, primarily through the data room. Provided access to accounting information is being provided by access to the data room or separately upon reasonable request, then it is not apparent why Quay should be obliged to duplicate such access.
182 However, the greater concern in making an order that entitles Ms Hammond to have access to such a program on the basis of very limited evidence is that it would seem to go beyond what may be required in order for Quay to provide the necessary access to a director to financial records and documents. Such access may compromise aspects of the company's operations. Ms Hammond apparently seeks complete access: I do not know whether any issues of confidentiality, privacy, third party rights, privilege or otherwise might arise from such unilateral open access. No parameters for or monitoring of access were suggested to address such obvious matters. It is not for the Court to speculate as to how such access might operate in practice. Going forward, it is entirely open to the parties to come to terms as to the reasonable manner in which ready access to financial accounts and records might be maintained. It might be that access to certain electronic programs might achieve that end. However, on the limited evidence available to the Court, I would not make an order permitting Ms Hammond to have apparently unrestricted access at any time, without any prior request or notice to Quay, to all electronic records of the company.