ROWLAND v MEUDON PTY LIMITED

Supreme Court of NSW|2008-05-02|Before: Bryson AJ, Gzell J

CITATION : ROWLAND v MEUDON PTY LIMITED [2008] NSWSC 381

1.An order pursuant to Section 247A of the Corporations Act 2001, authorising the Plaintiff to inspect documents recording matters taken into account by the directors of the company in the defence, or prosecution of the defence, of Supreme Court proceedings No. 5011/2002 and the Appeal, and in particular documents recording: i. deliberations of the company or the Board concerning the prospects of success of the defence of the respective proceedings; DECISION : ii. advices, whether of a legal nature or otherwise, in relation to the respective proceedings and their prosecution; iii. consideration given to the costs, or cost risks, of the proceedings. 2. Reserve liberty to apply with respect to costs, inspection by authorised person, identification and production of documents, legal professional privilege and generally.

Australian Securities Commission V Marlborough Gold Mines Pty Ltd (1993) 177 CLR 485 Barrack Mines Ltd v Grants Patch Mining Ltd (No. 2) (1987) 12 ACLR 630 Czerwinski v Syrena Royal Pty Ltd (No. 1) [2000] VSC 125, 34 ACSR 245 Edman v Ross (1922) 22 SR NSW 351 Farah Constructions v Say-Dee Pty Ltd (2007) 81ALJR 1107 CASES CITED : Mutter v Eastern and Midlands Railway Co. (1888) 38 ChD 92 Re Claremont Petroleum NL (1990) 2 Qd. R 31 Re Claremont Petroleum NL (No. 2) (1990) 8 ACLC 548 Rex v Hostmen in Newcastle upon Tyne (1746) 2 Strange 1223, 93 ER 1144 Rex v Babb (1790) 3 Term Reports 579, 100 ER 743 Rex v Merchant Tailors Company (1831) 2 Barnewall and Adolphus 115, 109 ER 1086 Wilson v Meudon [2004] NSWSC 1183 (Gzell J) and [2005] NSWCA 448 (Court of Appeal)

COUNSEL : R Kaye SC - Plaintiff L. Macinnis (s) - Defendant

SOLICITORS : David Le Page solicitor - Plaintiff Dibbs Abbott Stillman Lawyers - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3355/07 PENELOPE ROWLAND v MEUDON PTY LTD JUDGMENT 1 HIS HONOUR: These proceedings again involve the internal affairs of Meudon Pty Ltd, which owns the residential building "Meudon" in Onslow Avenue Elizabeth Bay, New South Wales. The present controversy has origins in earlier litigation: Wilson v Meudon [2004] NSWSC 1183 (Gzell J) and [2005] NSWCA 448 (Court of Appeal). Mr and Mrs Wilson own the shares associated with a home unit on the seventh floor, and they established that Mr Baker, who owned the shares associated with the Penthouse on the roof, could not carry out building works on the roof garden, or use the roof garden otherwise than as a roof garden, although the directors of Meudon had given him permission to do so. Mr and Mrs Wilson's claim was dismissed by Gzell J. but succeeded on appeal. 2 Ms Rowland seeks remedies relating to decisions made by the Company on the conduct of the Wilson litigation. In her Amended Originating Process she claims: 1. An order pursuant to Section 247A of the Corporations Act 2001, authorising the Plaintiff and her appointed legal adviser to inspect documents recording matters taken into account by the directors of the company in the defence, or prosecution of the defence, of Supreme Court proceedings No. 5011/2002 and the Appeal, and in particular documents recording: i. deliberations of the company or the Board concerning the prospects of success of the defence of the respective proceedings;

ii. advices, whether of a legal nature or otherwise, in relation to the respective proceedings and their prosecution;

iii. consideration given to the potential settlement or resolution of the proceedings; and/or

iv. consideration given to the costs, or cost risks, of the proceedings. 3 Section 247A of the Corporation Act 2001 provides: 247A Order for inspection of books of company or registered managed investment scheme (1) On application by a member of a company or registered managed investment scheme, the Court may make an order: (a) authorising the applicant to inspect books of the company or scheme; or (b) authorising another person (whether a member or not) to inspect books of the company or scheme on the applicant's behalf. The Court may only make the order if it is satisfied that the applicant is acting in good faith and that the inspection is to be made for a proper purpose. (2) A person authorised to inspect books may make copies of the books unless the Court orders otherwise. (3) A person who: (a) is granted leave under section 237; or (b) applies for leave under that section; or (c) is eligible to apply for leave under that section; may apply to the Court for an order under this section. (4) On application, the Court may make an order authorising: (a) the applicant to inspect books of the company; or (b) another person to inspect books of the company on the applicant's behalf. (5) The Court may make the order only if it is satisfied that: (a) the applicant is acting in good faith; and (b) the inspection is to be made for a purpose connected with: (i) applying for leave under section 237; or (ii) bringing or intervening in proceedings with leave under that section. (6) A person authorised to inspect books may make copies of the books unless the Court orders otherwise. 4 The plaintiff is qualified as a shareholder to apply under subs 247B(1) and does not need to rely on s 237 or on subss 247B(3), (4) and (5). 5 The Company is the vehicle by which shareholders achieve an economic position close to ownership of home units, and the Company's constitution is appropriate for what are commonly referred to as Company Title Home Units. The constitution adapts a corporate structure and legal mechanism primarily intended to marshal capital from many relatively small contributions into a large fund for use in trading and other commercial ventures, governed not by the proprietors but by directors who manage the commercial enterprise free from control in detail by the proprietors. The principal power which shareholders have over directors is the power of appointment and removal, only exercisable by majority. As is usual, management powers are given to the directors, and the Company including each shareholder is bound by the directors' exercises of powers, with little remedy if the power is truly exercised, that is, if it is exercised in good faith for the purpose for which it was conferred. In a large commercial venture it is relatively easy for shareholders to accept that they have placed their capital in the hands of the directors and must accept their decisions or muster shareholder support to replace the directors. In a small company with shareholders representing only 18 dwellings and affairs relating to such a personally important subject as one's own dwelling, objectivity has a different dimension. It is unusual and markedly unfortunate for a home unit company to be involved in litigation including an appeal, taking its affairs into territory very unlike the ordinary tasks of management of a building in which difficulties can be dealt with by neighbourly interaction and cooperation. 6 Ms Rowland has for a long time opposed dealings between the Company and Mr Baker, which in several forms and over a number of years related to possible further development of the roof garden. She also opposed the Company taking a combative position in its litigation with the Wilsons, and would have preferred some settlement or negotiated outcome. She has been given very little information, practically no information about the basis on which the Board made decisions from time to time which affected the conduct of the litigation. The most information she has received has been brief statements by board members, anodyne in character and conveying nothing in substance, which should be understood as more or less polite endeavours to fend off or to fob off enquiries which the Board and directors did not have an obligation to answer. 7 Although there is no precision or detail, it appears that the Company has used up some fund or reserve which was available for the purpose of conducting the litigation. As well as its own expenses for the conduct of the proceedings, the Company is liable for $357,054.78 under costs orders made by the Court of Appeal when it allowed the Wilsons' appeal. The costs orders bind the respondents, that is, Meudon Pty Ltd and Mr John Baker, and make no provision about how the burden should be borne between the respondents. The ordinary result where the same obligation is imposed on two persons is that it is enforceable in full against either of them but if one of them pays more than half it has an entitlement to contribution from the other so that the burden is borne equally. However this entitlement may be affected by contractual arrangements for indemnity or contribution, and is of value only if and to the extent that the obligation is enforceable against Mr Baker. Ms Rowland has no information on these subjects, and nothing bearing on them is in evidence. 8 The expense incurred by Meudon Pty Ltd and its liability to pay costs have brought a financial burden to bear on Ms Rowland, who has been required by decisions of the Board to pay a number of levies referred to as legal levies in a number of quarterly demands which she is liable to pay under the Company's constitution. As she opposed involvement in the litigation, the Company did not succeed and she has been given very little information, her dissatisfaction is understandable. 9 Special levies for legal fees were or included:

1 April 2004 $1363 1 July 2004 $1363 1 October 2004 two charges of $1363 1 October 2005 a charge of $1363 1 April 2005 a charge of $587.50 1 July 2005 a legal levy of $587.50 1 October 2005 a legal levy of $587.50 1 January 2006 a legal levy of $587.50 1 April 2006 a legal levy of $3760 1 July 2006 a Penthouse legal cost levy of $3760 1 October 2006 a Penthouse legal cost levy of $2350 1 January 2007 a Penthouse legal cost levy of $2350 1 April 2007 a levy of $2350 1 October 2007 a Penthouse legal cost levy of $2350. 10 Ms Rowland has not specifically identified any claim or proposed litigation which she intends to bring or has under consideration, for which she requires to obtain the information sought. Statements of the grounds of her claim to see the documents appear at several places. In her affidavit of 21 June 2007 she says to these effects:

She does not know the basis on which the Company decided to approve Mr Baker's proposal. As a shareholder she opposed the proposal and opposed involvement in the litigation. She does not know the basis on which the Company decided to defend and continued to defend the litigation and the appeal. She has been required to pay levies. She is concerned as to the basis on which the Company approved or agreed to the proposal to build over the roof garden, as to the basis on which the Company decided to defend and continued to defend the proceedings and the appeal, as to whether or not the decision to defend the proceedings was made on the basis of legal advice, and if so on the basis of sound legal advice.

Ms Rowland makes this general statement of her position: I was opposed to the litigation which became the Supreme Court proceedings and subsequently the Court of Appeal proceedings. I am concerned to ascertain whether in deciding to defend the Supreme Court proceedings and Court of Appeal proceedings the Board of Directors of the company acted on the basis of proper legal advice. I am particularly concerned as I have been required to pay levies to defray the legal costs and disbursements of and incidental to the conduct of the litigation, and as it appears that I will continue to be asked for some time to contribute further sums of money towards those legal costs and disbursements. 11 Ms Rowland wrote to the Company Secretary on 30 March 2006 requesting access to documents and said: In order to enable me to understand the basis under which the Directors resolved to undertake the works, it will be necessary for me to have access to all the material, which founded the relevant resolutions and decision to proceed. In particular, I request that you now furnish copies of any advices received by the Company or its Directors. Unless I am in receipt of this information within 7 days, I propose to take such further steps as I am advised. 12 In a reply of some length apparently sent about or before September 2006 the Secretary on behalf of the Board said, among other things: The Board has always acted in relation to the litigation on the advice of solicitors and barristers. You will be aware that the position taken by the company was upheld by the Judge at first instance and it was only on appeal that that judgment was overturned. You have sought access to a wide range of company documents which will require very considerable research to extract. The Board has sought advice concerning a shareholders' right to inspect company documents and the position is that, unless expressly provided for in the company's Constitution, a member has no right to inspect the company's records. 13 The letter also referred to the right to apply to the Court under section 247A of the Corporations Act. However, a member may apply to the court under section 247A for an order allowing the member (or another person on their behalf) to inspect the books of the company. Any such inspection is subject to a duty on the part of the member inspecting the records not to disclose any information obtained from the inspection to any person other than the applicant member or an employee of ASIC. If the court is satisfied that the member is acting in good faith and that the inspection is to be made for a proper purpose, it may make the order on such terms as it sees fit. 14 The letter went on to refer the statement about purpose of the inspection and to discuss terms for an inspection. 15 In her letter of 18 September 2006 Ms Rowland said among other things: While I would have thought that the purpose of my request was patently clear, the copy documents are required to enable me to satisfy myself that the Board in fact acted upon proper advice, especially as I am being asked to contribute a significant sum of money towards the legal costs and disbursements of and incidental to the conduct of the litigation. 16 The letter went on to give this description: All file notes, letters, memoranda and briefs to or from any firm of solicitors or barristers recording, containing or otherwise referring to legal or other advice in respect of but not limited to: (i) the prospects of success of prospective litigation concerning Wilson v. Meudon ("the litigation");

(ii) issues anticipated to be the subject of the litigation and

(iii) resolution of the litigation. 17 On 13 December 2006 the Secretary on behalf of the directors again wrote to Ms Rowland again asking for a statement of the purpose of the inspection and the specification of the documents to be inspected. In view of the earlier correspondence it is not possible to see a justification for these further requests and although it does not directly say so the letter has to be understood as a refusal. Correspondence continued inconclusively and on 15 May 2007 the Secretary on behalf of the directors informed Ms Rowland that access to information would only be given under an order of the court, saying "We are advised that to release such information without an order may unnecessarily prejudice the rights of the company and shareholders." 18 Ms Rowland commenced the present proceedings on 27 June 2007. In her affidavit of 19 November 2007 she stated her claim in these terms: 2. I say that the books of the company that I wish to inspect include all documents which record or relate to the decisions by the Directors of the Defendant to (a) enter into and to continue the Supreme Court proceedings referred to in that Affidavit and

(b) enter into and continue the Court of Appeal proceedings referred to in that Affidavit.

I am concerned that the proceedings may have been entered into without good reason, for an improper purpose or not in good faith.

(a) the lack of transparency in the correspondence between the company and myself as to the basis on which the proceedings were commenced and continued;

(b) the failure of the Directors to reply to my question as to the basis on which the Directors resolved to undertake the proceedings;

(d) the reference by Justice Gzell at paragraph 118 of the Supreme Court decision as the "shortcomings of the Board in negotiating with Mr Baker";

(e) the findings made by the Court of Appeal in the Court of Appeal proceedings and

(f) the risk taken by the Directors in procuring the entry of the Company into proceedings into which the Company did not need to enter.

I wish to obtain access to the books of the company in order ascertain whether or not the decisions to commence and continue with the Supreme Court proceedings and the Court of Appeal proceedings were made in good faith and for a proper purpose.

I wish to ascertain whether it is appropriate in the circumstances for me or the company to commence proceedings either against the Directors and/or against their legal advisers in relation to the decisions to commence and continue with the Supreme Court and/or Court of Appeal proceedings. 19 She went on to refer to the levies she had to pay and said that they then totalled $29,482.20. 20 Ms Rowland also put in evidence the affidavit of Mr Laurence Rodney, who has attended annual general meetings on her behalf as proxy and assisted her in drafting letters and in other ways, communicating with the Company and directors on her behalf over some years with varying degrees of patience but with little result. Mr Rodney has been given scraps of information by directors but nothing concrete has been made known. There have been general statements about possible payment towards costs by Mr Baker, about the quality of legal advice given, about the need for levies, about the possibility of conflict between the company and Mr Baker and related subjects, but nothing clear or conclusive has been reported. At an annual general meeting on 28 March 2007 Mr Rodney said to Mr Baker "Do you agree with the company's view? Will you pay 50% of the costs?" and Mr Baker replied, in terms worthy of the Oracle of Delphi, "I will comply with the Court's order." 21 There have been many more inconclusive letters and Mr Rodney produced a large correspondence. There have been references to the possibility of forfeiture of shares if payment of levies was withheld. It is plain in fact that there is no prospect that the Company will tell Ms Rowland anything useful or show her any documents except under compulsion. 22 The Company's financial statements contains some information but, overall, no clear picture of what costs had been incurred and paid, and of the sources from which they have been paid. 23 Under the common law the right of members of a Corporation to inspect its documents was extremely limited. The modern law can be taken to commence with Rex v Merchant Tailors Company (1831) 2 Barnewall and Adolphus 115, 109 ER 1086. The applicants showed that they had a number of concerns about the way the Corporation's affairs had been conducted, that they had attempted to obtain information which had been refused and that they had been unable to learn information relating to the company of which they were members. Lord Tenterden said to the effect ([124] 1089) "… in all the cases … the application had been limited by some legitimate and particular object, in which the party had an interest." Littledale J spoke more clearly [127] 1090-1091: The Master and wardens, who have the care of the documents in question, are bound to produce them if a proper occasion is made out, in a manner affecting the members of the corporation. But I think the members have no right on speculative grounds to call for an examination of the books and muniments, in order to see if by possibility the company's affairs may be better administered than they think they are at present. If they have any complaint to make, some suit should be instituted, some definite matter charged; and then the question will arise whether or not the Court will grant a mandamus. 24 Taunton J spoke to similar effect ([129] 1091) and Patteson J said [130] 1091: I am far from saying that there may not be particular instances in which a corporator may apply for a mandamus to inspect documents, or some of them, of the kind here mentioned, if he can shew a specific ground of application, and that the granting of it is necessary to prevent his suffering injury, or to enable him to perform his duties. But he must state a definite object; and here that is not done. 25 There was earlier case law dealing briefly with inspecting the documents of corporations (Rex v Hostmen in Newcastle upon Tyne (1746) 2 Strange 1223, 93 ER 1144 and Rex v Babb (1790) 3 Term Reports 579, 100 ER 743.) Many older authorities related to copyhold title not to corporations. In the Hostmen case the Court's consideration was brief, but the reporter Strange added a note with an exhaustive review of earlier cases, antique and remote from the circumstances of corporations today. 26 As companies came to be organised on more modern bases statute law conferred express rights of inspection and perusal of documents. Mutter v Eastern and Midlands Railway Co. (1888) 38 ChD 92 related to section 28 of the Companies Clauses Act 1863 (U.K.) and inspection of the Register of Debenture Stockholders. In the course of consideration in the Court of Appeal Lindley LJ said at 106: When the right to inspect and take a copy is expressly conferred by statute the limit of the right depends on the true construction of the statute. When the right to inspect and take a copy is not expressly conferred the extent of such right depends on the interest which the applicant has in what he wants to copy, and on what is reasonably necessary for the protection of such interest. The common law right to inspect and take copies of public documents is limited by this principle, as is shewn by the judgment in Rex v Justices of Staffordshire (6 Ad. & E. 84 see pp 99-101); so is the common law right of the member of a corporation to inspect and take copies of the documents of the corporation: Rex v Merchant Taylors' Company (2 B. & Ad. 115). 27 See too Bank of Bombay v Suleiman Sonji (1908) 99 Law Times 62 at 63:2. 28 When Edman v Ross (1922) 22 SR NSW 351 was decided by PW Street CJ in Eq Companies legislation in New South Wales did not contain any precursor of section 247A. At 358 PW Street CJ in Eq said: It is abundantly clear, as I have already pointed out, that in the first instance it was as a shareholder that he claimed the right to investigate the company's affairs by means of skilled assistance, and in instituting these proceedings he still complained that he was being prevented from obtaining information to which, as a shareholder, he was entitled. It is clear, however, that as a shareholder he is not entitled as of right to range at will through the company's affairs. No statutory right to inspect the affairs of a company is given to shareholders by the Companies Act , and no such right is conferred upon the shareholders of this company by the articles of association. His right as a shareholder is merely the common law right of a member of a corporation to inspect its documents, and the authorities establish that it must be shown that inspection is necessary with reference to some specific dispute or question in which the party applying is interested, and that it is only then granted to such an extent as may be necessary to the particular occasion: Rex v Merchant Tailors' Company (2 B. & Ad. 115); Mutter v Eastern And Midlands Railway Company (38 Ch D 92, per Lindley, L.J., at p. 106). 29 At 357 PW Street CJ in Eq went on to deal with inspection by an agent of the member, and with taking copies. 30 Section 247A appears to embody the previous law and restate it, but not in a way which limits the operation of s 247A to the earlier general law. The tests of good faith and proper purpose leave it to the court to address in detail the facts put before it in each case. 31 In Barrack Mines Ltd v Grants Patch Mining Ltd (No. 2) (1987) 12 ACLR 630 the Full Court of the Supreme Court of Queensland in a judgment delivered by Andrews CJ considered the operation of s 265B of the Companies (Queensland) Code a precursor of s 247A. At 636, 637 Andrews CJ said: There was some discussion as to whether or not s 265 b has extended the rights of shareholders of the company to have access to its documents. … However, bearing in mind that that case dealt with law as it stood some 80 years ago and that there are now in the statute books codes regulating the take-over of companies with their considerably detailed rules, I have some doubt whether s 265 b really takes the matter any further than did the common law. 32 Andrews CJ reviewed the old cases, in the course of which his Honour said: Lord Atkinson in the Bank of Bombay case at 63 (second column) adopted a statement in Taylor on Evidence , Vol 2, para 1495, 10th ed, 1906 thus: "… the privilege of inspection is now confined to cases where the member of the corporation has in view some definite right or object of his own and to those documents which would tend to illustrate such a right or object". This statement was a corollary of the proposition adverted to by Williams J in Re Augold NL (1986) 11 ACLR 362 at 370: The creation of a statutory right to inspect company documents with the leave of the court should not, in my view, be regarded as affecting the basic rule of company law which has stood for many years: that a shareholder ought not ordinarily have recourse to the courts to challenge a managerial decision made by or with the approval of its directors. That principle is one of the underlying presumptions on which the rule in Foss v Harbottle (1843) 2 Hare 461 is based, and it is reflected in many recent judgments dealing with challenges to decisions made by directors (and in the trust situation by trustees, where an analogous rule is applied). Reference need only made to Butt v Kelson [1952] Ch 197 ; Re Londonderry's Settlement; Peat v Walsh [1965] Ch 918 ; and Tierney v King [1983] 2 Qd R 580. 33 Andrews CJ also said:

Whether s 265 b truly extends the range of circumstances in which applicants may be allowed to inspect beyond those prescribed by common law, it seems to me that at least within the principles underlying the decisions in the Bank of Bombay case and the Merchant Tailors' Co case the learned judge of first instance has found that Barrack had such an interest of its own as would justify an order for inspection and that he has then proceeded to grant inspection to such extent as in his discretion was deemed necessary for the particular occasion. It seems, further, to me that the interest which Barrack was found to be endeavouring to protect enabled its purpose to be regarded as proper. The section requires as well that good faith be demonstrated. It was submitted that the requirement of good faith means "honesty and with no ulterior motive" and that a proper purpose must be the primary or dominant purpose actuating the inspection. 34 After considering the significance of an ulterior motive and a statement by Lord Denning MR in Central Estates v Woollgar (1972) 1 QB 48 at 55 Andrews CJ went on: There is nothing in the statement to suggest that if there is a primary purpose which is proper being pursued by an applicant seeking inspection of a company's documents with a concern honestly based his application will be defeated if the inspection could open up an opportunity which he has in present contemplation to pursue another advantageous purpose depending on circumstances. Provided that the judge who was called upon to exercise his discretion in such a matter finds on evidence before him that the application is based upon a proper purpose, for example, to protect a right or interest which is personal to the applicant he may then regard the application as being made in good faith. 35 In Re Claremont Petroleum NL (1990) 2 Qd. R 31 the Full Court of the Supreme Court of Queensland in a judgment given by Connolly J upheld an order made by McPherson J under s 265B of the Companies (Queensland) Code giving a shareholder leave to inspect books and records relating to nominated transactions. Connolly J. surveyed the antecedent common law and decisions and the operation of s 265B in a manner and in terms which command respect and should in my opinion be applied to an application under s 247A. In my opinion this decision authoritatively established that 1. The legislation should not be treated as doing no more than stating or clarifying the principles of the common law on the subject (p 33 line 50). The cases at common law should not be regarded as stating conditions for making an order, as the legislation has made the discretion wider and uncontrolled (p 34 line 4).

It is a relevant consideration that there is a specific dispute rather than general dissatisfaction with management (p34 line 8). However the judgment of Connolly J. as a whole shows that an application should not be necessarily be refused because it is grounded on general dissatisfaction with management.

It is a relevant consideration that the applicant is personally interested, and so also are the extent and value of his interest (p 34 line 8).

It is not necessary that the applicant's interest be separate and distinct from that of the general body of members (p 34 line 11). The confinement of the common law remedy to specific disputes or questions in which the party applying was interested, and related restrictions, was the perceived mischief which the legislation remedied. The remedy chosen was to give a broad unfettered discretion to the court (p 34 line 30). 36 The decision of the Full Court in Re Claremont Petroleum NL has the authority accorded to it by Farah Constructions v Say-Dee Pty Ltd (2007) 81 ALJR 1107 at 1142 [135] referring to Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 492. It should be understood as a more ample restatement of the law explained in cautious and limited terms in Barrack Mines v Grants Patch. 37 At a later stage in the Claremont Petroleum litigation McPherson J dealt with some particular documents about which dispute had arisen when the order was being complied with: Re Claremont Petroleum NL (No. 2) (1990) 8 ACLC 548 McPherson J said at 552: "… I have acted on the principle that section 265B is intended to enable a member of a company to inspect its books in order to obtain information about matters that, as member or shareholder in the company, he ought to be informed of by the company. 38 McPherson J also said: The procedure under s 265B is not intended as a form of or substitute for inspection of documents after discovery on affidavit or answers to interrogatories in pending litigation. I therefore consider that in many circumstances a shareholder ought not to be assisted by an order under s 265B to examine decisions of directors, or the reports or records leading to those decisions; but I think that in a case like this he is entitled by inspection of books to find out what the results of those decisions are; that is to say, whether the company has entered into agreements, and with whom, disposing of corporate assets of value, and for what consideration, and what has happened to those assets or to considerations given in return for them. 39 My attention was also directed to a number of decisions at first instance in which applications under s 247A had been dealt with. 40 In Czerwinski v Syrena Royal Pty Ltd (No. 1) [2000] VSC 125, 34 ACSR 245 Warren J dismissed an application which her Honour regarded as "… a tactical manoeuvre adopted to bypass difficulties and overcome the claim for legal professional privilege in the other proceedings" (248). Her Honour echoed an observation of McPherson J. in Re Claremont Petroleum (No. 2) saying at 248 "Section 247A of the Corporations Law is intended to enable a member of the company to inspect books in order to obtain information about matters that, as member or shareholder in the company, that member or shareholder ought to be informed of by the company." 41 The references by McPherson J and by Warren J to information about matters of which a shareholder ought to be informed by the company are not references to information which the company has a legal duty to give to the shareholder. These observations were made in exposition of the operation of legislation which confers a broad discretion on the court, and the operation of that discretion extends to consideration of what the court ought to require that the company tell its shareholder, a different test to what the company has a legal duty to tell its shareholder. If the section was limited to providing means of enforcement for existing legal duties it would take an altogether different form, and the good faith requirement would not be appropriate. In my opinion the assignment of powers of management to the directors, and the non-involvement of shareholders in management of a company are important considerations. Business conducted in the corporate structure could readily be rendered inefficient or disrupted if this power became too ready a vehicle for examination by shareholders of management decisions and documents relating to them. However there is no rule of exclusion and no reason why involvement of a management decision should be a ground for refusal of access to documents; the matter is discretionary. With respect to management decisions a conservative approach to exercise of the discretion is appropriate. 42 In the present case the plaintiff's dissatisfaction, and the sources of her dissatisfaction, and the expressions of her dissatisfaction have continued over some years without producing more than shadows of an explanation. There have been references or allusions to the influence of legal advice on the directors' conduct. The subject matter is naturally of great and close concern to the plaintiff, and also to directors: the building in which they have their dwellings. The financial burden which has fallen on the plaintiff is heavy, as a proportion of the total levies imposed on her. The burden has continued, recurring quarterly and significantly increasing in amounts, over some years, in circumstances where she has no understanding of how great a liability will ultimately be involved and how long the burden is likely to continue. In my judgment the information which the plaintiff seeks is, in the words of McPherson J, "information about matters that, as a member or shareholder in the company, [she] ought to be informed of by the company." 43 I am satisfied, in the terms of subs (1) (b), that the inspection is to be made for a proper purpose. There is no room for doubt that she is acting in good faith. It is not necessary that there should be any proposed application under s 237, or any other proposed proceedings. I will limit the ambit of the documents which are to be produced in a manner I regard as reasonable. I have omitted from the order the claim for documents about considering settlement of the proceedings because I regard that as unduly intrusive into the management function. I will reserve liberty to apply with respect to the production of any document for which the company wishes to maintain that production should be withheld on the grounds of legal professional privilege. A question of that kind could only be addressed in the context of an objection to production of an identified document, and of evidence showing the grounds upon which production was resisted. I am prepared to make an order under s 247B(1)(b) authorising inspection by another person if satisfied as to the suitability of the person proposed. 44 It may be necessary to require identification and production on oath of the documents which fall within the description in the order. This too is the subject of liberty to apply. 45 My orders are: 1. An order pursuant to Section 247A of the Corporations Act 2001, authorising the Plaintiff to inspect documents recording matters taken into account by the directors of the company in the defence, or prosecution of the defence, of Supreme Court proceedings No. 5011/2002 and the Appeal, and in particular documents recording: i. deliberations of the company or the Board concerning the prospects of success of the defence of the respective proceedings;

ii. advices, whether of a legal nature or otherwise, in relation to the respective proceedings and their prosecution;

iii. consideration given to the costs, or cost risks, of the proceedings.

Reserve liberty to apply with respect to costs, inspection by authorised person, identification and production of documents, legal professional privilege and generally.

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Judgment (34 paragraphs)

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Cases Cited (5)