In the matter of Optimisation Australia Pty Limited [2014] NSWSC 275

Judgment - ex tempore 1HIS HONOUR: In the substantive proceedings the plaintiff Brian Raymond Kearney claims relief for oppression by way of compulsory purchase orders, and/or winding up on the oppression and/or just and equitable grounds, in respect of the first defendant Optimisation Australia Pty Limited of which he, the second defendant Gary Williams, and the third defendant Susan Elizabeth Williams, are the shareholders and directors. 2After the proceedings were instituted they came before the court on 1 July 2013 when the court made directions for service of pleadings and evidence, and noted the agreement of the parties that the defendants shall give the plaintiff access, including photocopy access, to all of the books and financial records of the first defendant by 3 July 2013. 3By notice of motion filed on 23 September 2013, the plaintiff sought the following relief: 1. For the appointment of Alexander Koutzoumis, Chartered Accountant and Director of Holden & Bolster Avenir Pty Ltd (HBA), a chartered accountancy firm, as Inspector for the First Defendant. 2. That the Inspector be empowered to have access to the books and financial records of the First Defendant so as to: a. complete inquiry into the First Defendant's financial affairs; b. undertake and complete an accounting from the date of incorporation of the First Defendant; c. report to the Court as to the Inspector's findings. 3. That the Second and Third Defendants do all things necessary to facilitate the duties of the Inspector. 4. The remuneration and costs of the Inspector be met by the First Defendant. 5. In the alternative to prayers 1 through to 4 above, that pursuant to Rule 21.1 of the Uniform Civil Procedure Rules 2005 and Section 290 of the Corporations Act 2001 that within 7 days, the Defendants deliver up to the Plaintiff copies in digital format of all books and financial records within the meaning ascribed in Section 9 of the Corporations Act 2001 of the First Defendant from the date of its incorporation including without limitation: (i)MYOB files. (ii)Financial statements (iii)Annual tax returns. (iv)Director loan accounts. (v)Google invoices. (vi)Creditor invoices. (vii)Contractor invoices (viii)Sales invoices (ix)Matching invoices for payments made from the first defendant to Orchard office Services. (x)Payslips for telemarketing employees paid via Orchard Office Services. (xi)Payments made by the first defendant to the plaintiff, second and third defendants. (xii)Bank account records of the first defendant. (xiii)Credit card records in the name of any of the documents used for the purposes of the first defendant's business. 4That motion came before the court on 30 September and 14 October 2013, and was set down for hearing on 4 November 2013. At the hearing on 4 November 2013, the plaintiff did not pursue the relief claimed in the motion but instead handed up a document, called Schedule A, which specified a number of categories of documents which the plaintiff's expert accountant, Mr Koutzoumis, had said in his affidavit of 23 September 2013 that he had not been able to locate and had not been provided with copies. Of the categories initially listed, two - which appeared in the original form of Schedule A as items (f) and (g) - were deleted by counsel then appearing for the plaintiff, apparently on the footing that it was accepted that those documents had been provided. They were: (f) the monthly sales reports of the First Defendant (which commenced in June 2012) for the period May 2013 to date; and (g) documents detailing holiday pay paid to the Plaintiff, the Second and Third Defendants for the period from inception to date 5A new subparagraph (f), which is not relevant for present purposes, was substituted. 6In the course of argument it appeared that the main remaining issue concerned item (b) of Schedule A, namely: (b) Google Invoices of the First Defendant for the entire period from inception until late May 2013. 7In that respect, the defendants said that they had provided to the plaintiff and Mr Koutzoumis the relevant access codes and instructions to enable them to access the invoices online and that such invoices did not exist in hardcopy form, all being maintained only online. Mr Koutzoumis accepted that he had been given the access codes but said that he was unable in fact to access the individual invoices. The defendants' explanation for this was that he was not following the instructions or accessing material correctly, but that he should be able to do so. Ultimately, it was proposed that this could be perhaps resolved if Mr Koutzoumis and someone on behalf of the plaintiff could sit down together and guide Mr Koutzoumis as to how to access the invoices. 8There also appeared at that hearing to be some issue as to whether all the Amex credit card statements referred to in item (a) in Schedule A had been provided. Whilst it seemed that some of those about which Mr Koutzoumis made complaint had in fact been provided, it also seemed that some had not. 9Item (d) on Schedule A was: The timesheets and/or invoices and / payslips of the telemarketers who were contracted by Orchard Office Services to provide services to the First Defendant." 10Orchard Office Services is an entity controlled by the second and third defendants. Apparently it supplied services to the first defendant, and it retained telemarketers to provide services in part for itself or other clients and in part for the first defendant. 11The defendants' response in respect of that item, up to the time of the hearing on 4 November, was that those were not financial records of the first defendant, that the telemarketers were employees of Orchard Office Services, and that all of the invoices from Orchard Office Services rendered to the first defendant had been made available to be accessed in the financial information made available to the plaintiff. Photos of the alleged missing Orchard Office invoices were attached to establish that. 12However, item (d) went beyond invoices, referring to the timesheets, invoices and payslips of the telemarketers. It was correct to observe, as the defendants had, that those documents were not records of the first defendant, but records of Orchard Office Services. They would therefore not have been captured by an order for access to or in respect of records of the first defendant company. Nonetheless they were in the possession, custody or power, directly or indirectly, of the second and third defendants, and accordingly they were included in Schedule A. 13I have referred already to the former item (g) in Schedule A, concerning documents detailing holiday pay. So far as the evidence goes it appears that the only records of leave accrued and leave taken kept by the first defendant are maintained on its MYOB records and are to be found there. As I have said, on 4 November item (g) was withdrawn from Schedule A, apparently on the footing that the plaintiff accepted that he had access to those documents. 14Ultimately, the court treated Schedule A as if it were, in effect, an amendment to the motion filed on 23 September, and made orders that by 25 November 2013, Mr Koutzoumis on behalf of the plaintiff, and Mr Seaton on behalf of the defendants, meet and confer for the purpose of facilitating the economic and convenient access on behalf of the plaintiff to the documents referred to in the document entitled Schedule A and, to the extent of any remaining disagreement, report to the court the matters remaining in dispute and the reasons for the disagreement. The proceedings were adjourned to 2 December 2013 in the Corporations Motions List. 15Mr Koutzoumis, Mr Seaton and others met on 21 November 2013, when Mr Seaton located and pointed out the whereabouts of the documents referred to in the various paragraphs of Schedule A. The parties appear to have been oblivious to the fact that former items (f) and (g) had been deleted from Schedule A, and addressed them also. The defendants produced, sometime after 4 November, a document summarising the annual leave and holiday pay position although, as I have said, Schedule A did not ultimately require them to do that. The plaintiff asserts that there are inconsistencies between the summary document prepared and produced on that occasion and the MYOB records, from which it is evident enough that the plaintiff has been able to locate annual leave records in the MYOB records. 16Present at the meeting on 21 November was the then solicitor for the plaintiff, Ms Mallon of Yates Beaggi. She made a detailed note setting out against each item referred to in Schedule A and each subparagraph and sub-subparagraph of it what documents were produced. Her note concludes with a note to the effect that Mr Koutzoumis "is satisfied, subject to provision of docs in paragraph (d) and MYOB." The reference to paragraph (d) was to the timesheets, invoices and payslips of the telemarketers contracted by Orchard. In the course of the meeting, Mr Seaton, on behalf of the defendants, agreed to provide Orchard's pay records in respect of the telemarketers, and those documents were subsequently provided. The plaintiff claims that it is not possible to tell from those documents how much of the telemarketers' time was applied to work done for the first defendant and how much for other clients, and at first sight that complaint seems to be correct, but that does not establish that there are documents in existence which have not been produced. 17No joint report had been produced by the time the matter returned to court on 2 December 2013, and on that occasion an order was made extending time for its production. A draft joint report was prepared by Mr Seaton and submitted to Mr Koutzoumis, but was not the subject of any response, or at least meaningful response. Ultimately, an affidavit of Mr Koutzoumis was filed, which set out a number of complaints as to the adequacy of the access provided. However, it must be said that those complaints essentially relate to matters that are outside the scope of Schedule A, or were matters which related to the seeking of explanations of transactions rather than access to documents. 18Ultimately, there were four classes of documents in respect of which it was suggested that the plaintiff had not had access. 19The first was documents relating or detailing the holiday pay paid to the plaintiff, the second and third defendants. However, as I have indicated, that was withdrawn from the scope of Schedule A before the order was made. The evidence does not disclose that there are any documents in existence other than those recorded in MYOB, nor reason to suppose that such documents would exist beyond those recorded in MYOB to which the plaintiff has had access. 20The second category was the time sheets of the telemarketers. The defendants' evidence is that neither the first defendant nor Orchard has such timesheets, and that the time of the telemarketers is entered directly into the computer so that there are no hard copy time sheets. Whether or not that is so, the evidence does not establish that any such time sheets exist. In any event, they would be records of Orchard, and not of the first defendant, and strictly outside the scope of an application for access by a member or director to the corporate records of the first defendant. 21The third category was what was described in Schedule A as item (e): The Amex Reward Points Redemption Statements of the Second Defendant from the period from inception of the First Defendant to date." 22That description, couched as it was, appeared to suppose that there existed a "statement" by Amex of reward points redemption. The evidence entirely fails to establish that any such documents exist. 23The fourth category was in the nature of an explanation for changes that had taken place in the MYOB records. But entitlement to access to documents is not an entitlement to an explanation for the transactions that those documents record. 24On 3 February 2014, the court made new directions for the filing of pleadings, and set down at the balance of the motion for hearing today. In written submissions lodged in preparation for the hearing, the plaintiff indicated that it sought that the notice of motion be dismissed but that the defendants pay the plaintiff's costs. The defendants submit that the plaintiff should pay the defendants' costs of the motion, on an indemnity basis and forthwith. 25The plaintiff's acceptance that the motion should be dismissed would normally carry with it the consequence that, costs following the event, the plaintiff should pay the defendants' costs of the motion. Accordingly, the first question to be addressed is whether there is any reason in this case to "otherwise order", namely, make some order other than that the plaintiff pay the defendants' costs which is the default outcome on the dismissal of the motion. 26An "otherwise order" might be made if the motion was dismissed or abandoned because the plaintiff had substantially achieved the relief sought in the motion without proceeding to a hearing of it. In such a case, notwithstanding the dismissal of the motion, the defendants, having effectively acceded to the relief sought by the plaintiff without forcing the matter to a hearing, might well be ordered to pay the plaintiff's costs. Secondly, an "otherwise order" might be made if the requirement for the relief in the motion were superseded by other events. If that did not involve the defendant practically submitting, out of court, to the relief sought, then it might result in no order being made as to the costs of the motion, or perhaps the costs of the motion being costs in the cause. I do not suggest that they are the only categories, but they are typical and illustrative of the grounds upon which the court might decide to "otherwise order" in this respect. 27The purpose of the motion, in substance, was to enforce the plaintiff's right of access and inspection of the corporate documents of the first defendant. While the defendants' case is that the plaintiff had all that access before the motion was brought and before 4 November, it seems to me that the plaintiff obtained some minor modicum of advantage from the orders made on 4 November. Those orders facilitated the plaintiff's access to the Google invoices about which there appears to have been continuing difficulty to that point, and also secured for the plaintiff on a voluntary basis access to the Orchard payroll records which the plaintiff could not have obtained under the (Cth) Corporations Act 2001. While that was quite different in form from the relief sought in the notice of motion it did amount to some slight modicum of success for the plaintiff, although falling well short of what might be described as substantial success. 28However, after 4 November, the position was quite different. By 25 November, Mr Koutzoumis had accepted that the Schedule A documents had been produced (except for the item (d) documents, which were produced shortly thereafter). His ongoing reservations, when one closely reads his January affidavit, are plainly concerned with matters that go beyond the scope of Schedule A. 29An enormous amount of time, effort and no doubt cost has been devoted to continuing argument over the issue after 4 November, both in Mr Koutzoumis' affidavit and in the numerous responsive affidavits. The affidavits on both sides address many issues extraneous to an application for access to corporate documents. 30It seems to me that after 4 November 2013, and at least after the outcome of the conference on 21 November, there was no occasion for the motion to remain on foot, and no occasion for the costs associated with it to be incurred. 31That said, I do not think the maintenance of the motion involved that element of delinquency that would justify an indemnity costs order. On the other hand, as was submitted for the defendants, this motion for access to corporate documents was in substance a discrete part of the proceedings, and a not insubstantial one at that. As the statement of claim has only just been filed today it will be a long time before there is a final order and a final costs order. To my mind, the conditions for a "forthwith costs order" are satisfied. 32I do not propose to visit on the parties the further costs and delay of a costs assessment. Relevantly, the matter was before the court on 2 December for directions, on 3 February for directions and today for hearing. The defendants have prepared four affidavits in the period since 4 November but, as I have observed, to a significant extent they involve inadmissible conclusionary assertions which could never have been resolved on the hearing of this motion, and they address to some extent issues outside the scope of the motion. In a sense that is not surprising, because the plaintiff's affidavits suffer from the same vices. 33It seems to me, although I will give both parties an opportunity to be heard on this, that a fair assessment of the costs of the motion since 4 November is $15,000. Accordingly I propose, once I have heard the parties, to make orders to the effect that the motion be dismissed and that the plaintiff pay the defendants' costs of the motion incurred after 4 November 2013 assessed in the sum of $15,000 payable forthwith.