MATTER : Great Southern Managers Australia Ltd (in liq) (Receiver and Manager Appointed) ACN 083 825 405

BETWEEN : MICHAEL GEORGE SNELGROVE AND THE PERSONS DETAILED IN SCHEDULE 1 TO THIS APPLICATION

GREAT SOUTHERN MANAGERS AUSTRALIA LTD (IN LIQ) (RECEIVER AND MANAGER APPOINTED) (ACN 083 825 405)

BETWEEN : ADAM PAUL RITCHIE AND THE PERSONS DETAILED IN SCHEDULE 1 TO THIS APPLICATION

GREAT SOUTHERN MANAGERS AUSTRALIA LTD (IN LIQ) (RECEIVER AND MANAGER APPOINTED) (ACN 083 825 405)

Winding up - Proceedings against company in liquidation - Leave required - Section 500(2) Corporations Act 2001 (Cth)

Winding up - Proceedings to inspect books of a Registered Investment Scheme - Leave required - Section 500(2) Corporations Act 2001 (Cth)

Members - Inspection of books - Insurance policy - Section 247A Corporations Act 2001 (Cth)

Corporations Act 2001 (Cth), s 247A, s 500(2)

Plaintiff's application for leave to commence proceedings against a company under liquidation granted

Plaintiff's application for leave to commence proceedings for the inspection of books of a Registered Investment Scheme granted

Plaintiff's application for an order authorising the inspection of books granted

Defendant : Mr S R Donaldson SC & Ms K F Banks-Smith

Defendant : Mr S R Donaldson SC & Ms K F Banks-Smith

Aquila Resources Ltd v Pasminco Ltd [2002] WASC 53; (2002) 168 FLR 85

Capita Financial Group Ltd v Rothwells Ltd (1989) 15 ACLR 348

Commonwealth v Davis Samuel Pty Ltd (No 5) (2008) 68 ACSR 336

Foxcroft v Inc Group Pty Ltd (1994) 15 ACSR 203

Kirby v Centro Properties Ltd [2009] FCA 695

Lawless v MacKendrick [No 2] [2008] WASC 15

Lawrence v Brighton Hall Securities Pty Ltd (in liq) [2009] FCA 1425

Leahman Brothers Australia Ltd v Wingecarribee Shire Council [2009] FCAFC 63; (2009) 176 FCR 120; (2009) 72 ACSR 251

Lopez v Star World Enterprises Pty Ltd [1997] FCA 454

Re Coastal Constructions Pty Ltd (in liq) (1994) 13 ACSR 329

Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314

Re Style Ltd Merim Pty Ltd v Style Ltd [2009] FCA 314

Tolhurst Druce & Emmerson (a firm) v Maryvell Investments Pty Ltd (in liq) [2007] VSC 271

Treecorp Australia Ltd (in liq) v Dwyer [2009] FCA 278; (2009) 175 FCR 373; (2009) 71 ACSR 127

Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550

Vinciguerra v MG Corrosion Consultants Pty Ltd [2007] FCA 503; (2007) 61 ACSR 583

1 Each of the plaintiffs in COR 236 of 2009 is, or was, a member of Great Southern 2006 Beef Cattle Project ARSN 118 784 026, a managed investment scheme registered under s 601EB of the Corporations Act 2001 (Cth) (the Act). Each of the plaintiffs in COR 237 of 2009 is, or was, a member of Great Southern 2007 Beef Cattle Project ARSN 118 784 115 (the 2007 Beef Scheme), a managed investment scheme registered under s 601EB of the Act. The parties argued the present applications on the basis that there are no material differences between the applications in COR 236 of 2009 and the applications in COR 237 of 2009 and the facts and circumstances of each application. In these reasons I will consider the applications in COR 236 of 2009, and the facts and circumstances of those applications. The parties agree that the outcome of the applications in COR 237 of 2009 should be the same as in COR 236 of 2009.

2 The defendant, Great Southern Managers Australia Limited (GSMAL), is a responsible entity of a managed investment scheme (MIS) under ch 5C of the Act, namely the 2006 Great Southern Beef Cattle Project (Scheme). Administrators were appointed to GSMAL on 16 May 2009 and receivers and managers were appointed on 18 May 2009. At the second meeting of creditors held on 19 November 2009 the creditors resolved that GSMAL be wound up. By reason of s 446A(2) of the Act GSMAL is taken to have passed a special resolution that the company be wound up voluntarily.

3 The plaintiffs wish to commence proceedings against GSMAL and directors of GSMAL for damages or compensation arising from the conduct of the proposed defendants resulting in the plaintiffs exchanging their interest in the Scheme for shares in Great Southern Ltd (GSL). The plaintiffs wish to inspect the books of GSMAL to determine whether their proposed claims against GSMAL and the directors are covered by insurance held by GSMAL. As GSMAL is in liquidation the plaintiffs cannot commence either set of proceedings without the leave of the court under s 500(2) of the Act. The plaintiffs now seek:

1. leave to commence proceedings for the inspection of the books of GSMAL under s 247A of the Act;
2. an order authorising the plaintiffs' solicitors to inspect the books of GSMAL; and
3. leave to commence proceedings against GSMAL for damages or compensation.

4 In support of their application the plaintiffs have produced a draft writ of summons and a draft statement of claim which they propose to file at the same time as the writ should they be given leave to commence the action for damages or compensation against GSMAL. It is convenient to describe the action the plaintiffs wish to bring for damages and compensation by summarising the draft statement of claim.

5 Each of the plaintiffs invested an amount in the Scheme and acquired a number of droves, or groups of cattle, by investment in the Scheme. GSMAL was the responsible entity, as defined in s 9 of the Act, of the Scheme. GSMAL was also the responsible entity for other managed investment schemes including the 2007 Beef Scheme and a number of plantation projects. Cameron Rhodes and Phillip Butlin (the common directors) were directors of GSMAL and directors of GSL. Steven Cole, Murray Colvin and Robert Jenkins (the independent directors) were directors of GSMAL but not directors of GSL. Each of GSMAL and Great Southern Cattle Managers Pty Ltd (GSCM) was a wholly owned subsidiary of GSL. Great Southern Cattle Holdings Pty Ltd (GSCH) was a wholly owned subsidiary of GSMAL. GSL, GSMAL, GSCM and GSCH formed part of the Great Southern Group of Companies (the Great Southern Group).

6 Certain grazing land was owned or leased by GSCH (Grazing Land). Certain female cattle of breeding age (Breeding Cows) were owned or leased by GSMAL. Upon joining the Scheme the plaintiffs and other members of the Scheme (Scheme Members) were granted a lease (or sublease) by GSMAL with respect to one or more droves of four Breeding Cows under the Lease Management and Agistment Agreement Great Southern Beef Cattle Project (LMAA). The plaintiffs and other members of the Scheme were granted a licence by GSCH with respect to the Grazing Land for the agistment of their droves. The plaintiffs were entitled to the progeny of their Breeding Cows.

7 The Scheme property comprised the irrevocable right and power of the responsible entity to sell the progeny of each Scheme Member, to pool the proceeds in the Proceeds Fund and thereafter to apply the Proceeds Fund in accordance with the Constitution and the LMAA. The Scheme property also comprised the money from time to time in the Proceeds Fund and the Application Fund. GSMAL held additional contractual and property rights in connection with the Scheme. Each Scheme Member's individual property held by the Scheme Member in connection with their investment in the Scheme included the Scheme Member's rights to occupy Scheme Grazing Land under the LMAA between the Scheme Member and GSMAL (the Scheme Member's LMAA), to possess the Scheme Member's Leased Cattle, to possess the progeny and the progeny and remoter progeny of such progeny, of such Leased Cattle (the Scheme Member's Progeny), to own the Scheme Member's Progeny, subject to the obligation of the Scheme Member to permit the Responsible Entity to sell the Scheme Members' Progeny during or on termination of the Scheme and to pay the sale proceeds into the Proceeds Fund and to receive the Scheme Member's proportionate entitlement from the Proceeds Fund in accordance with the Constitution and the Scheme Member's LMAA.

8 The directors caused GSMAL by notice of meeting dated 23 October 2008 (the Notice of Meeting) to convene a meeting of Scheme Members on 1 December 2008 (the Meeting) to consider motions:

(1) to pass a special resolution (the First Resolution) requiring the approval of 50% of the Scheme Members by number and 75% by value of the votes cast in person or by proxy to amend the Constitution by inclusion of cl 34A to enable the responsible entity to propose an arrangement to Scheme Members which (if supported by the Second Resolution) would become binding on all Scheme Members; and

(2) if the First Resolution was passed, to pass a resolution with the approval of 50% of the Scheme Members by number and of 75% by value of the votes cast in person or by proxy (the Second Resolution) to approve the arrangement defined in cl 7.3 of the Explanatory Memorandum for the Meeting (the Arrangement) proposed by GSL, by which each Scheme Member would:

(a) agree with GSMAL to terminate the Scheme Member's LMAA;

(b) agree to sell the Scheme Member's Progeny to GSCM; and

(c) agree to assign to GSCM all entitlements of the Scheme Member to receive distributions from the Proceeds Fund;

in exchange for which GSL would issue to the Scheme Member fully paid shares in the capital of GSL (GSL Shares), the number of which would depend on the volume weighted average price of GSL Shares during a reference period.

9 The common directors and the independent directors also convened meetings of members of the other schemes to consider resolutions in relation to each of those schemes in materially identical terms that the First Resolution and the Second Resolution had on the Scheme.

10 The plaintiffs say that the arrangement effected by the First and Second Resolutions (the Arrangement) was a component of a proposal to change the business operations of the Great Southern Group known as and referred to as Project Transform. The plaintiffs say that the Arrangement would be of significant benefit to GSL as it could have a dramatically positive input on GSL. The plaintiffs further say that the benefits to GSL if the Arrangement were implemented, included:

(a) the acquisitions by GSL of all interests in the Scheme from Scheme Members;

(b) the acquisition by the Great Southern Group of a cattle business with a total value of over $250 million; and

(c) providing improved flexibility to manage the cattle business, including the ability to sell some or all of these cattle business assets to realise the significant value appreciation of the land and provide proceeds to repay debt and reduce Great Southern's gearing.

11 The plaintiffs say that there was significant uncertainty as to the Great Southern Group continuing as a going concern if, amongst other things, Project Transform was not successfully implemented or sales of assets did not proceed in 2009. Further, they say that the auditors of Great Southern Group had qualified or indicated an intention to qualify their audit report by stating that there was significant uncertainty whether the Great Southern Group would be able to continue as a going concern as a result of a number of matters including if Project Transform was not successfully implemented or sales of assets did not proceed in 2009. The plaintiffs say that the Great Southern Group was required to refinance $105 million in senior debt in October 2009 and the ability of the Great Southern Group to operate within its financial covenants was dependent on generation of sufficient operating cash flows through, amongst other things, asset sales.

12 The plaintiffs say that for the acquisition by the Great Southern Group of the beef cattle project assets (land and cattle) either all Scheme Members had to unanimously agree or the Constitution had to be modified to enable all Scheme Members to be bound by a special resolution of Scheme Members to implement the Arrangement. They further say that as unanimity of Scheme Members was extremely unlikely, the modification of the Constitution was the only possible method by which the Arrangement could be successfully implemented. The plaintiffs say that the Meeting was convened with the material object of achieving for the Great Southern Group the benefits referred to earlier and thereby reducing the risk of the Great Southern Group being unable to continue as a going concern or to operate within its financial covenants.

13 The plaintiffs say that the modification to the Constitution (the Modification) could not take effect until a copy of the Modification was lodged with ASIC by reason of s 601GC(2) of the Act. As a consequence, the plaintiffs say a special resolution to implement the Arrangement pursuant to the provision to be included in the Constitution by the Modification could not be lawfully passed at the same time as the resolution to approve the Modification. Nevertheless, the plaintiffs say that the Meeting was convened to consider both the First Resolution and the Second Resolution with no interval between considering them to enable the First Resolution to take legal effect by lodgement with ASIC before the Second Resolution was considered. In consequence, the plaintiffs say the Scheme Members invited to vote on the Second Resolution by proxy would be voting before the First Resolution had even been considered and on the Second Resolution before the Modification was effective.

14 The plaintiffs say a number of things about the Explanatory Memorandum accompanying the Notice of Meeting including that there was no disclosure to Scheme Members of the fact that the Great Southern Group could not sell the Scheme Grazing Land, the Scheme Land the subject of the other schemes, the Grazing Land of the 2007 Beef Scheme, the cattle the subject of the Scheme or the cattle the subject of the 2007 Beef Scheme. The plaintiffs also say that there was no disclosure to Scheme Members of the benefits to GSL if the Arrangement was implemented, that there was uncertainty as to the Great Southern Group continuing as a going concern if Project Transform was not successfully implemented and a number of other matters that should have been disclosed.

15 The Meeting was adjourned on 1 December 2008 until 19 January 2009. The plaintiffs say that if the Great Southern Group became unable to continue as a going concern Scheme Members would be likely to be financially better off if the Arrangement was not approved at the Meeting and the Scheme Members thereafter removed GSMAL as the responsible entity. The plaintiffs say it was not in the best interests of the members to approve the Arrangement. The plaintiffs say that prior to and during the adjourned meeting GSMAL, the common directors or the independent directors, or some of them, offered financial inducements to, and thereby procured that, some Scheme Members change their votes from being against (by proxy) to being in favour of the First Resolution and the Second Resolution and other Scheme Members cancelled their vote against the First Resolution and the Second Resolution.

16 The adjourned meeting was held on 19 January 2009. At the adjourned meeting the First Resolution and the Second Resolution were passed with votes over 75% in favour. At the adjourned meetings of members of the other schemes, the members of those schemes voted against the equivalent resolutions.

17 The Second Resolution was voted on and passed despite the fact that the Modification had not been lodged with ASIC. The plaintiffs say that in the circumstances when the Second Resolution was proposed and voted upon on 19 January 2009 the Constitution did not permit the proposal or vote because the Constitution had not been amended.

18 The plaintiffs say that the effective operation of the Scheme ended by the lodgement with ASIC of the Modification on 27 January 2009 and the issue of shares in GSL to Scheme Members on 4 February 2009.

19 The plaintiffs allege that GSMAL contravened the duty imposed on it by s 601FC(1)(d) of the Act to treat all Scheme Members equally. The plaintiffs allege that GSMAL contravened the duty imposed on it by s 601FC(1)(c) of the Act to act in the best interests of the Scheme Members and to give priority to the interests of the Scheme Members over the interests of GSMAL if there was a conflict between those interests. The plaintiffs allege that GSMAL contravened the duty imposed by GSMAL by s 601FC(1)(b) to exercise the degree of care and diligence that a reasonable person would exercise if they were in GSMAL's position.

20 The plaintiffs allege that each of the common directors and the independent directors were involved in the alleged contraventions by reason of having procured the contraventions by ordering the convening of the Meeting and the Adjourned Meeting and by proposing the First Resolution and Second Resolution and by having been knowingly concerned in or party to the contraventions.

21 The plaintiffs allege that each of the common directors and the independent directors contravened the duty imposed by s 601FD(1)(f)(i) of the Act by not taking all steps that a reasonable person would take if in their position to ensure that GSMAL complied with the Act and contravened the duty imposed by s 601FD(1)(f)(iii) by not taking all steps that a reasonable person would take if in their position to ensure that GSMAL complied with the Constitution. The plaintiffs allege that the common directors and independent directors contravened other duties imposed upon them by the Act.

22 The plaintiffs say that but for the alleged contraventions the First Resolution and the Second Resolution would not have been passed, each of the plaintiffs would have retained their Individual Scheme Member's Property, the Scheme would have continued in operation with GSMAL or another Responsible Entity holding the Scheme Property and the Additional Property subject to the Constitution and the Act and none of the plaintiffs would have received shares in GSL in exchange for their individual Scheme Member's Property and their interests in the Scheme.

23 The plaintiffs allege that by reason of those matters they have suffered loss and damage. The loss and damage is said to be the value of the Member's Assets of each plaintiff on the basis that the GSL Shares issued to Scheme Members were at, and all times after, the Adjourned Meeting worthless. That is said to be supported by the fact that GSL and the entire Great Southern Group went into administration on 16 May 2009 and into receivership on 18 May 2009. Alternatively, the plaintiffs say that the loss and damage they have suffered is the difference between the value of each Member's Asset and the value of GSL Shares received by each plaintiff. The plaintiffs claim to be entitled to recover their loss and damage from GSMAL pursuant to s 601MA(1) of the Act and from GSMAL, the common directors and the independent directors pursuant to s 1325(1) of the Act.

Proposed application for inspection of books

24 Section 247A(1) of the Act empowers the court to make an order authorising a member of a registered MIS, or another person, to inspect the books of the scheme on the applicant member'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.

25 The plaintiffs believe that GSMAL has an insurance policy or policies which may respond to the plaintiffs' claims and want to inspect GSMAL's books to confirm that and ascertain the extent of the insurance cover.

26 The liquidators submit that the plaintiffs' application for leave to commence proceedings against GSMAL for damages and compensation should be refused on the ground that the application is premature. The liquidators say that the plaintiffs have not, or not sufficiently, identified the losses they claim to have suffered. The liquidators submit that the plaintiffs' application for leave to commence proceedings for the inspection of the books of GSMAL and the application for an order authorising the plaintiffs' solicitors to inspect the books of GSMAL should be dismissed on three grounds. The first is that the allegations upon which the plaintiffs' alleged causes of action are founded, that is, the loss by the plaintiffs of their relevant rights in connection with the operation of the Scheme in exchange for a shareholding in GSMAL of inferior value, are irreconcilably inconsistent with the plaintiffs being members of the Scheme, which is a condition for the grant of an order authorising the inspection of the books of GSMAL under s 247A of the Act. The second ground is that the insurance documents are not books of the Scheme. The third ground is that in any event the discretion under s 247A should not be exercised so as to permit the plaintiffs to have access to contracts of insurance and communications or records of communications between GSMAL and its insurers.

27 Section 500(2) of the Act imposes a statutory stay on pending or contemplated civil actions against a company being voluntarily wound up. After the passing of the resolution for voluntary winding up under s 491, no action or other civil proceeding may be preceded with or commenced against the company except by leave of the court and subject to such terms as the court imposes. A grant of leave can be made subject to conditions directed at minimising interference with the orderly winding up of the company in liquidation.

28 Section 500(2) is in similar terms to s 471B which provides that while a company is being wound up in insolvency or by the court a person cannot begin or proceed with a proceeding in a court against the company or in relation to property of the company or enforcement process in relation to such property except with the leave of the court and in accordance with such terms (if any) as the court imposes. The authorities concerning the purpose of s 471B and the considerations relevant to granting leave under s 471B are relevant to the purpose of s 500(2) and the considerations relevant to granting leave to proceed under s 500(2).

29 Section 471B of the Act is in materially the same terms as its predecessors, s 471(2) of the Corporations Law and s 230(3) of the Companies Codes. In Re Gordon Grant & Grant Pty Ltd [1983] 2 Qd R 314 McPherson J concisely set out the history of s 230(3) of the Companies Codes (316). McPherson J, with whom W B Campbell CJ and Sheahan J agreed, said:

The precise purpose and function of provisions similar to s 230(3) have seldom been explained. From time to time the suggestion has been made that the prohibition exists in order to effectuate the statutory policy of ensuring that corporate assets are distributed rateably amongst all creditors so that none of them will gain an advantage over others: see eg Re Sydney Formworks Pty Ltd [1965] NSWR 646, 649-650. But in Australia at least it is not often that the institution of proceedings or even the recovery of judgment operates to confer a priority or advantage on a litigating creditor. A more convincing explanation is that, without the relevant restriction, a company in liquidation would be subjected to a multiplicity of actions which would be both expensive and time-consuming, as well in some cases as unnecessary. This explanation has been accepted in a number of Canadian cases and appears also to have been adopted by Street J in Re A J Benjamin Ltd (1969) 90 WN (NSW) 107, 109. It is consistent with this that there should be no automatic prohibition upon proceedings against a company in members' voluntary winding up, where the company is solvent and therefore less likely to be the target of numerous actions (316 - 317).

30 The identification of the purpose of s 417B of the Act and s 500(2) is important to enable the court to identify the relevant considerations to be considered in determining whether to grant leave. McPherson J continued in Re Gordon Grant & Grant Pty Ltd:

As a matter of history a winding up by the court was, and it remains today, an administration conducted by the court: Re Phoenix Oil & Transport Co Ltd (No 2) [1958] 1 Ch 565, 370. Both because of this, and because it was before the Judicature Act an administration conducted in Chancery, it was inevitable that there should be restrictions on the bringing of proceedings, whether at common law or otherwise, during the course of that administration. What is substituted for litigation in the ordinary form is a procedure by which a claimant lodges a verified proof of debt with the liquidator, who admits or rejects it wholly or in part, and from whom an appeal lies to a judge, who determines that appeal de novo primarily on affidavit material: Re Kentwood Constructions Ltd [1960] 1 WLR 646. There can be no doubt that ordinarily such a procedure is, and is designed to be, much more expeditious and less expensive than ordinary proceedings by way of action. If this means that it occasionally has the consequence that the attainment of perfect justice is sacrificed to expedience, it may be justified by the circumstance that on appeal it is possible under modern rules of procedure for the judge in appropriate cases to make orders for discovery and even for the delivery of pleadings where it appears necessary or desirable to do so.

The question whether a claimant should be permitted to proceed by action, or should be required to submit his proof of debt and, if dissatisfied, appeal to a judge, is therefore reduced largely to one of choosing between alternative forms of procedure. The effect of s 230(3) is to require the claimant to adopt the course of lodging proof of debt unless he can demonstrate that there is some good reason why a departure from that procedure is justified in the case of the particular claim in dispute. This is really all that is meant in this context by expressions such as 'convenience' and 'balance of convenience' that appear in judgments on the matter: see, for example, Re The Queensland Mercantile Agency Company Ltd (1888) 58 LT 878, 879; Stewart v Intercity Distributors Limited [1960] NZLR 944, 946; and cf Century Mercantile Co v Auckland Provincial Fruitgrowers' Co-operative Society Ltd [1921] NZLR 272, 276. It, of course, follows that it is quite impossible to state in an exhaustive manner all the circumstances in which leave to proceed may be appropriate, but in the past they have been said to include factors such as the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved, and the stage to which the proceedings, if already commenced, may have progressed (317).

31 The applicant for leave must first show that the case they wish to bring has some merit so as not to risk dissipating the company's assets on hopeless litigation. In Capita Financial Group Ltd v Rothwells Ltd (1989) 15 ACLR 348 Rogers CJ said that an applicant must establish that its claim amounts to a prima facie case (350). In Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550 the Full Federal Court said that an applicant was not required to adduce evidence of every element of its claim because to impose that burden would be to shut out many meritorious claims (553). Discovery or interrogation, which could not be undertaken until the action was commenced, might be necessary in order to adduce evidence of all elements of the claim. The Full Federal Court concluded that:

Upon a close reading of the relevant authorities, it is apparent to us that the courts have not in fact required applicants for leave to demonstrate a prima facie case against the company in liquidation, in the technical sense of that term. They have required to be affirmatively satisfied that the claim has a solid foundation and gives rise to a serious dispute. Having regard to the course actually taken by the courts, the term 'prima facie case' is misleading. Perhaps it should be avoided in the future.

The test which has actually been applied is akin to that now used in considering whether interlocutory relief should be granted: 'a serious question to be tried' (556).

In essence, the Full Court required affirmative satisfaction that the claim had a solid foundation and gave rise to a serious dispute.

32 In Tolhurst Druce & Emmerson (a firm) v Maryvell Investments Pty Ltd (in liq) [2007] VSC 271 Dodds-Streeton J said:

In my opinion, although the authorities establish that an applicant need not prove every element of its claim, mere assertion, which is unsupported by a solid foundation, will not suffice. In Vagrand, the Full Federal Court emphasised that 'the question of leave is always a matter of discretion'. Where, as in the present case, an applicant presents an inconsistent and fluctuating account of his claim based on a contradictory document with a false factual foundation, and repeatedly makes false assertions under oath without any credible explanation or excuse, it is unlikely that the Court could be affirmatively satisfied that his claim has a solid foundation or gives rise to a serious dispute [164].

33 In Commonwealth v Davis Samuel Pty Ltd (No 5) (2008) 68 ACSR 336 Refshaugh J said that the test formulated by the Full Federal Court in Vagrand Pty Ltd (in liq) v Fielding is now widely accepted as the appropriate approach and cited a number of authorities to that effect [28].

34 I am satisfied that the claim which the plaintiffs wish to bring has a solid foundation and gives rise to a serious dispute.

35 The second meeting of the creditors of GSMAL and the other members of the Great Southern Group took place on 19 November 2009. The administrators, who subsequently became liquidators, presented a consolidated group report pursuant to s 439A(4)(a) of the Act. In that report the liquidators stated that they had undertaken a preliminary investigation into the affairs of the Great Southern Group pursuant to their statutory obligations and in order to assist in formulating their opinion as to, amongst other things, what course of action is in the best interests of the creditors of each Great Southern Group company. The report stated the administrator's investigations concerning Project Transform. The material in the report confirms much of the facts asserted in the proposed statement of claim. The report states that there are a number of issues that the administrators were continuing to investigate and consider further with respect to Project Transform. The report says that the key factors that were being considered were:

• Any irregularities arising from GSL and its subsidiaries agreeing to provide incentives to some of investors to encourage them to vote in favour of the resolutions;
• Whether the explanatory memoranda and prospectuses issued in connection with the proposal satisfied disclosure obligations. Specifically, we are considering the reasonableness of the work undertaken by the Independent Expert to assess the future viability of GSL following the release of the auditor's going concern emphasis, and in particular whether GSL would be able to pay its debts as when they become due;
• Whether the issue of shares in GSL to investors in the MIS in the manner prescribed by Project Transform may have been inconsistent with section 231(b) of the Act that requires a person to agree to become a member of the company;
• The legitimacy (or otherwise), of the two resolutions proposed and passed at the meeting of growers/investors on 19 January 2009, including specifically the amendment to the scheme constitution. This area of the law is uncertain and cannot be easily determined at this time. That said, we note that two first tier legal firms were consulted by the respective Boards on this issue
• Whether voting exclusions preventing interested parties from voting on the proposals were sufficient and appropriate (and have been complied with).

36 Those matters are at the heart of the plaintiffs' proposed action. Earlier in their report the administrators referred to financial incentives offered to certain investors in order to encourage them to vote in favour of Project Transform:

In the period prior to the meetings of Scheme members to consider Project Transform it is apparent that the GS Group sought to provide financial incentives to certain investors, by way of concessions on loans originated by GSF, in order to encourage those investors to vote in favour of Project Transform. Examples of the types of concessions afforded to investors represented a reduction in interest rate or an extension of loan terms in the majority of cases, but also included conversion of part of the loans to interest free terms, GSL agreeing to meet the repayment obligations on existing loans for the investor for a period of 12 months and reduction of loan principal.

In several instances we understand that these incentives were targeted towards investors that were suspected by GSL to have voted against or not replied to the proposal at a point in time. We were advised that GSL took legal advice on the matter before offering the incentives. We have not sighted this written advice or been provided with the scope of reference within which this advice was provided.

It does not necessarily follow that the integrity of the voting process is impugned or was invalid as a result of transactions associated with those certain investors. The matters that may follow from this area of review do not arise from dishonest actions but instead may result in breach of duty claims against the directors of GSL, GSMAL and GSF arising from certain actions or omissions.

To the extent that the above matters do result in claims available to investors affected by Project Transform (which has not been established) it is likely that the appropriate remedy would be in the form of damages (rather than a reversal of the transaction) with the defendant being liable to account or provide equitable monetary compensation. It will be necessary to undertake a further review of the incentives transactions and obtain advice thereon before we can express an opinion.

37 The material in the affidavits read by the plaintiffs satisfies me that there is a sufficient foundation for the proposed actions to justify leave to commence proceedings against the company. The liquidators did not argue to the contrary.

38 In their written submissions the liquidators submitted that there is no reason why the plaintiffs' claims cannot be dealt with, at least in the first instance, in the ordinary way by the proof of debt process in the liquidation. However, in his oral submissions counsel for the liquidators expressly withdrew the submission that the plaintiffs should be required to adopt the course of lodging proofs of debt (ts 24). I find that the amounts and seriousness of the plaintiffs' claims and the degree of complexity of the legal and factual issues involved makes it appropriate for their claims to proceed by action rather than proof of debt.

39 The principal submission by the liquidators in opposing leave to commence proceedings against the company is that it is premature for the plaintiffs to commence such action. The liquidators submit that no material has been put forward by the plaintiffs which suggest that the value of their claims has been seriously considered and until that has been done and it is apparent that a dispute exists between the liquidators and the plaintiffs in relation to those claims, the court should not exercise its discretion to lift the stay of proceedings.

40 In the proposed statement of claim the plaintiffs give the following particulars of loss and damage:

1. The value of the Member's Assets of each plaintiff ('Member's Assets'), on the basis that the GSL Shares issued to Scheme Members were at, and all times after, the Adjourned Meeting worthless: GSL (and the entire Great Southern Group) went into administration on 16 May 2009 and into receivership on 18 May 2009.
2. Alternatively, the difference between:
   1. the value of each Member's Asset; and
   2. the value of GSL Shares received by each plaintiff.

1. For the purposes of A and B, the value of the Member's Assets of each plaintiff is not less than the median of the high and low figures ascribed in Annexure 1 to the Explanatory Memorandum (being the 'Concise Independent Expert Report' prepared by KPMG and dated 13 October 2008 at page 9), namely $2,967.00.

41 Counsel for the liquidators submitted that the plaintiffs' claim assumes that if the plaintiffs had not exchanged their Member's Assets for GSL shares the Scheme would have run its course. However, it was submitted the Scheme would not have run its course because the responsible entity and other members of the Great Southern Group were insolvent and are now in liquidation. Counsel for the liquidators submitted that these schemes 'were never going to run their course'. Counsel submitted that there are many factors and very serious considerations in identifying what loss members suffered as a consequence of having their membership in the Scheme converted into a shareholding in GSL.

42 Counsel for the plaintiffs submitted that the proceedings are not premature. Counsel submitted that if the responsible entity was insolvent then it would have been removed and the Scheme would have continued with a new responsible entity. Further, counsel submitted, the evidence does not suggest that the responsible entity was insolvent at the time the resolutions were passed in January 2009. Counsel submitted that in the administrator's report they said that the likely date of insolvency was around the date of their appointment, that is, 16 May 2009.

43 The assessment and quantification of any loss and damage suffered by the plaintiffs is a complex issue. I find that the plaintiffs have sufficiently identified their alleged loss and damage to justify being grant leave to commence proceedings against the company.

44 In considering whether to grant leave the court should consider whether the action will affect the orderly winding up of the company and whether any action would prejudice the other creditors. The question is 'fundamentally one of expedience and convenience': McPhersons Law of Company Liquidation (Thomson On-line Service) [7.1000]. In this case there are three principal reasons why leave should be granted. First, the plaintiffs' claim is factually and legally complex. Litigation would be a more convenient way to resolve the claims than the proof of debt procedure.

45 Secondly, the plaintiffs propose to bring actions against the directors of GSMAL. The proposed claims against the directors of GSMAL are inextricably linked to the proposed claim against GSMAL. The court should avoid a multiplicity of proceedings wherever possible. If leave is not granted then there are likely to be two sets of proceedings: an action against the directors and a proof of debt and possible appeal in relation to the company. The multiplicity of proceedings and the risk of inconsistent outcomes may be avoided by granting the plaintiffs leave to commence proceedings against the company.

46 Thirdly, there is a likelihood that the company is insured against the plaintiffs' claim. The plaintiffs submit that the existence of insurance is a well established reason why leave will be given to commence proceedings under s 471B and, by analogy, s 500(2) of the Act. The plaintiffs cite Foxcroft v Inc Group Pty Ltd (1994) 15 ACSR 203, 205; Aquila Resources Ltd v Pasminco Ltd [2002] WASC 53; (2002) 168 FLR 85, 87 [6] - [7] and Lawrence v Brighton Hall Securities Pty Ltd (in liq) [2009] FCA 1425 in support of that proposition.

47 Lawless v MacKendrick [No 2] [2008] WASC 15 concerned an application for leave to proceed against the third defendant under s 444E(3) and s 471B of the Act, the third defendant being the subject of a winding up order and a deed of company arrangement. Newnes J considered that there was no material difference between the principles to be applied on an application under s 471B of the Act and those to be applied under s 444E(3) of the Act. His Honour stated that where there is an insurance company standing behind the company to pay any judgment which the plaintiff may obtain, that is a factor strongly favouring the grant of leave. In such circumstances, his Honour stated 'the proceedings will generally cause no prejudice - procedural or substantive - to the other creditors' [37] and referred to Re AJ Benjamin Ltd, Re Sydney Formworks and Re Coastal Constructions Pty Ltd (in liq) (1994) 13 ACSR 329.

48 The plaintiff submits that the evidence suggests that it is highly probable that GSMAL is insured with respect to the proposed proceedings. The plaintiff bases that submission on two matters. First, it is a condition of GSMAL's Australian Financial Services licence that GSMAL must maintain an insurance policy covering professional indemnity and fraud by officers. Second, on 30 July 2009 the plaintiffs' solicitors received a facsimile from the solicitors for the administrators of GSMAL which stated, amongst other things, that their clients would provide a copy of the draft writ and statement of claim to GSMAL's insurers. The plaintiff says that for the administrators to have notified the insurers they must have located the relevant insurance policy or policies.

49 For the reasons stated the plaintiffs will have leave to commence the proposed action against GSMAL for damages and compensation.

Leave to commence proceedings to inspect books

50 The plaintiffs wish to inspect GSMAL's books to ascertain whether GSMAL has relevant insurance cover and, if so, the terms of the cover. That is for the purpose of deciding whether to proceed with the proposed action against GSMAL and the common directors and independent directors for damages or compensation.

51 Lopez v Star World Enterprises Pty Ltd [1997] FCA 454 concerned an application for leave pursuant to s 440D(1)(b) of the Corporations Law. The applicant sought leave and an order that the respondent produce for inspection relevant insurance policies. Olney J granted the application. Olney J said that the respondent was in jeopardy of going into liquidation and if it did then s 562 of the Corporations Law addressed the situation where the respondent had a liability that was covered by insurance. His Honour said that if the respondent went into liquidation a successful applicant would have a right to know the particulars of the insurance cover so that the right under s 562 would not be defeated. That consideration led his Honour to the opinion that the interests of justice required that the applicant have leave to proceed against the respondent.

52 There is good reason to give the plaintiffs leave to commence proceedings against the company for an order under s 247A so that they may ascertain the existence and extent of any relevant insurance cover held by the GSMAL. If GSMAL does not have insurance cover against the plaintiffs' claims or the limit of the cover makes the plaintiffs proposed action commercially not viable then it is to be expected that the plaintiffs will not proceed with the action. That would spare the company the inconvenience of having to defend the proceedings and spare the plaintiffs from proceeding with a commercially not viable proceeding. I would grant the plaintiffs leave to commence proceedings for an order under s 247A unless one of the specific issues raised by the liquidators constitutes a sufficient reason not to do so.

53 The liquidators have raised a number of specific issues in relation to the application for an order under s 247A. In particular, the liquidators say leave should be refused for the following reasons:

(a) the plaintiffs do not have standing to bring the application;

(b) the insurance policies providing indemnity to the responsible entity or its officers are not books of the scheme managed by the responsible entity;

(c) the use of s 247A to access such insurance policies is not a 'proper purpose' within the meaning of s 247A; and

(d) it is not appropriate in the circumstances that the court exercise its discretion in favour of the plaintiffs.

54 The liquidators submit that an applicant for an order under s 247A must currently be a member of a registered investment scheme to have standing to bring the application. The plaintiffs frame their application under s 247A on the basis that they are members of a scheme. However, the liquidators submit that the relief sought by the plaintiffs in their proposed action for damages or compensation presupposes they have been stripped of membership rights, that the scheme is no longer in operation and they are now shareholders of GSL. The liquidators submit that while it might be suggested that there is an arguable case that the Project Transform resolutions were ineffective, so that the plaintiffs retain their status as members of a registered investment scheme, in circumstances where the application is for the purpose of assisting or facilitating the pursuit of a cause of action dependent upon proving that they are not, it should be refused on the basis that either the plaintiffs do not have status to bring the application of their proposed action is futile.

55 The plaintiffs submit that the Scheme has not been wound up and each of the plaintiffs is still a member of the Scheme with whatever rights members of the Scheme still have. The resolutions passed at the meeting of Scheme Members terminated the Scheme Members LMAA, sold the Scheme Members progeny to GSGM and assigned to GSCM all entitlement of the Scheme Members to receive proceeds from the Proceeds Fund. GSCM acquired the assets of the Scheme Members but not the interest of each plaintiff in the Scheme. The Scheme has not been formally wound up. The Scheme has not been wound up in accordance with s 601NB or s 601NC, nor wound up by the court under s 601ND. I accept the submissions of the plaintiffs that the Scheme has not been wound up and they remain members of the Scheme.

56 The liquidators submit that insurance policies under which indemnity is provided to a responsible entity or its officers are not assets of the schemes managed by such an entity and are not books of the scheme. It is submitted that they do not fall within the Act definition of 'scheme property' and they are not 'owned' by the scheme. It is submitted that a licence or insurance policy held by a responsible entity is not 'scheme property'. The licence and any insurance policies are said to be the property of the licensee itself.

57 The plaintiff submits that the property of the Scheme is not limited to scheme property as defined in the Act. The use of the defined term 'scheme property' ensures constant treatment of certain types of property throughout ch 5C of the Act but does not render all other property immaterial. In Treecorp Australia Ltd (in liq) v Dwyer [2009] FCA 278; (2009) 175 FCR 373; (2009) 71 ACSR 127 Gordon J said:

Significantly, the reference to 'a right, obligation or liability' in s 601FT is not limited to or identified by reference to 'scheme property' as that term is defined in s 9 of the Act. That is not surprising. There will often be, as in this case, contractual arrangements entered into by the responsible entity for the benefit of the scheme which will not constitute scheme property [48].

58 The plaintiff further submits that an insurance policy is a document of the type referred to in s 601FT of the Act to which a new responsible entity appointed would have an entitlement and therefore forms part of the books of the Scheme and may be inspected by the members.

59 The notion of books of the Scheme is different from the notion of scheme property. The Scheme is not a legal entity capable of owning books or other property. Books, the legal title to which is vested in the responsible entity, may be books of the scheme.

60 'Books of the Scheme' should be given a broad construction so as to facilitate the inspection of documents relevant to the affairs and interests of the Scheme. I find that the insurance policies are books of the Scheme. The liquidators submit that documents created for and in the course of the management of the business enterprise carried on for the benefit of the scheme members could potentially be regarded as books of a scheme, but documents relating specifically to the affairs of the responsible entity as distinct from the affairs of members cannot. Insurance policies which may respond to the plaintiffs' claims are for the benefit of the members as well as the responsible entity. The documents constituting or evidencing the insurance policies are not distinct from the affairs of scheme members.

61 Whether the application to inspect the relevant insurance policies is for a proper purpose and whether a grant of the relief sought would constitute a proper exercise of discretion under s 247A are related questions. The liquidators submit that the plaintiffs have decided to commence the proceedings because the application for leave under s 500(2) to commence the proceedings has already been made. Therefore, the liquidators submit, the real purpose is not to advise on whether the proceedings ought to be commenced but to assist the solicitors in advising on whether the action ought to be maintained. Second, the liquidators submit that the purpose of s 247A is to assist a member of a MIS to inform himself or herself as to matters pertinent to the management of the affairs of the company or Scheme, generally in the context of a dispute between a member and the board and/or other members. The liquidators submit that enquiries which the solicitors for the plaintiffs wish to pursue bear no sufficient connection with the management of the Scheme or the affairs of the Scheme.

62 The plaintiffs submit that the application for leave to commence proceedings for an order to inspect the books and the application for leave to commence the proceedings for damages were brought concurrently because it is the most efficient way to progress the matter. I do not consider the fact that the applications were brought at the same time has the effect that the application to inspect the books of the Scheme is not for a proper purpose.

63 There are a number of recent decisions in cases where plaintiffs have attempted to get access to the insurance policies of companies and their directors targeted for litigation. In Re Style Ltd Merim Pty Ltd v Style Ltd [2009] FCA 314 Merim was a shareholder in Style which is an ASX listed company. Merim sought to inspect Style's books to investigate whether Style's directors and officers had breached their duties and whether they had misled Style's members and the market regarding the performance of Style and the application of funds, particularly the proceeds of a convertible note issue made in July 2007. Merim sought an order to permit its representatives to inspect D&O insurance policies held by Style. Goldberg J noted that the parties had not identified any previous cases considering whether orders should be made which allowed for inspection under s 247A of the Act of such insurance policies, although Merim acknowledged that access to D & O insurance policies usually would be denied under an application for preliminary discovery. Goldberg J concluded that information relating to the extent of cover granted under Style's D & O insurance policies would be relevant to Merim's decision whether to apply for leave to bring proceedings in Style's name against any directors or officers of Style and granted access to them.

64 In Kirby v Centro Properties Ltd [2009] FCA 695 Centro was the subject of a securities class action by investors alleging non-compliance with the ASX continuous disclosure rules. The parties were ordered into mediation. The investors applied to the Federal Court for discovery of Centro's insurance policies. The investors argued that their legal advisers could not give them meaningful advice in the mediation if they did not know what insurance Centro carried and that the court would be unable to determine whether any offer of settlement was fair, reasonable and adequate in the interests of the investors. The court refused access. Ryan J considered that knowledge of the insurance policies was a commercial bargaining chip rather than an essential legal component of the mediation [23]. His Honour did not accept that a lack of knowledge by the applicant and his advisers of the existence and extent of insurance cover held by the respondent would, at that early stage, preclude the applicant's advisers from forming an opinion on the reasonableness of any proposed outcome of negotiations in a mediation. Nor did his Honour accept that a mediation occurring in the absence of that knowledge would be hollow or inconsistent with the principles which the court had developed for the mediation or case management of disputes [25]. In addition, Ryan J did not think that the existence or terms of Centro's insurance policies fell within the category of discoverable documents in O 15 r 11 of the rules of court [26].

65 In Leahman Brothers Australia Ltd v Wingecarribee Shire Council [2009] FCAFC 63; (2009) 176 FCR 120; (2009) 72 ACSR 251 the Full Court of the Federal Court held that the court had the power to compel disclosure of a defendant's insurance policy and of its asset position under s 23 of the Federal Court of Australia Act 1976 (Cth) but decided that as a matter of discretion no such order would be made because there was no evidence that disclosure was required to prevent any abuse of the court's process.

66 The court may only make an order under s 247A if it is satisfied that the applicant is acting in good faith and that the inspection is to be made for a proper purpose. In this case the liquidators argue that the plaintiffs do not seek inspection of the relevant insurance policies for a proper purpose. It is helpful to consider the circumstances in which courts have granted or refused access having regard to the applicant's purposes. Mantziaris C, 'The Members Right to Inspect the Company Books: Corporations Act, s 247A' (2009) 83 ALJ 621, 633 summarises some precedents concerning orders for inspection under s 247A:

The court has recognised the following purposes as proper inspection purposes:

1. To allow a member to investigate prima facie irregularities in the company's financial accounts or transactions - for example, the creation of parallel financial records (Vinciguerra v MG Corrosion Consultants Pty Ltd [2007] FCA 503; (2007) 61 ACSR 583), or a loan transaction between companies with a large number of common directors (Cescastle Pty Ltd v Renak Holdings Ltd (1991) 6 ACSR 115).
2. To allow a member to investigate the conduct of the directors in relation to 'the whereabouts and commercial benefit [to] the company of the profit and cash flow' of the company for a certain periods (United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2003] NSWSC 404 at [27], [29]-[30]; Vinciguerra v MG Corrosion Consultants Pty Ltd [2007] FCA 503; (2007) 61 ACSR 583 at [57]- [59], [64], [66]).
3. To allow a member to investigate other reasonably suspected breaches of duty (Barrack Mines Ltd v Grants Patch Mining Ltd (1987) 12 ACLR 357 (affirmed Barrack Mines Ltd v Grants Patch Mining Ltd [No 2] [1988] 1 Qd R 606); McNeill v Hearing & Balance Centre Pty Ltd [2007] NSWSC 942 at [17]; Humes Ltd v Unity APA Ltd [No 1] [1987] VicRp 42; [1987] VR 467; (1986) 11 ACLR 641).
4. To allow a member to value the members' shares, so as to: (i) negotiate a fair exit price from the company (Tinios v French Caledonia Travel [1994] FCA 1154; (1994) 13 ACSR 658), or (ii) to examine the effect of a corporate debt transaction on the value of the shareholding (United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2003] NSWSC 404 at [20]- [23]; see also United Rural Enterprises Pty Ltd v Lopmand Pty Ltd (2003) 45 ACSR 271; [2003] NSWSC 405).
5. To allow a member to prosecute a proceeding to enjoin the holding of an extraordinary general meeting on the ground that the company directors will have failed to discharge their duty of disclosure to their shareholders (ENT Pty Ltd v Sunraysia [2007] NSWSC 270; (2007) 61 ACSR 626 at [79]; [2007] NSWSC 270).
6. To allow a member of a corporation holding property in an apartment block in which all members reside to investigate board decisions regarding the conduct of litigation by the corporation (Rowland v Meudon [2008] NSWSC 381; (2008) 220 FLR 362; 66 ACSR 83).

Simple disgruntlement with the management of the corporation is not sufficient as a proper purpose (Biala Pty Ltd v Mallina Holdings Ltd [1990] WAR 371; (1989) 15 ACLR 208 at 211; Keenfern Pty Ltd v Thorlock International Ltd (2002) 20 ACLC 1322 at [4]; [2002] WASC 142). A corresponding list of circumstances in which the court has refused applications, would include the following 'improper' purposes:

1. To ascertain the value of the equity of redemption in respect of a mortgage issued over the member's share by investigating the exercise of rights between mortgagor and mortgagee (United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2003] NSWSC 404, [24]-[26], [10]).
2. To outflank a claim for client legal privilege made (or anticipated) over the company's books (Czerwinski v Syrena Royal Pty Ltd [No 1] (2001) 34 ACSR 245; [2000] VSC 125; Keenfern Pty Ltd v Thorlock International Ltd (2002) 20 ACLC 1322 at [6]; [2002] WASC 142) or to serve as a substitute for discovery (Rowland v Meudon [2008] NSWSC 381; (2008) 220 FLR 362 at [38]; [2008] NSWSC 381; 66 ACSR 83; Re Claremont Petroleum NL [No 2] [1990] 2 Qd R 310 at 314; Czerwinski v Syrena Royal Pty Ltd [No 1] (2001) 34 ACSR 245; [2000] VSC 125).
3. To obtain confidential information for a competitor to the company (Knightswood Nominees Pty Ltd v Sherwin Pastoral Co Ltd (1989) 15 ACLR 151; 7 ACLC 536).
4. To improve the chances of a take-over bid (Garina Pty Ltd v Action Holdings Ltd (1989) 7 ACLC 962).
5. To ascertain whether the corporation is solvent (a finding which should be attended by some doubt if it is intended to state a general principle) (Keenfern Pty Ltd v Thorlock International Ltd (2002) 20 ACLC 1322 at [9]; [2002] WASC 142).

67 It is a proper purpose to inspect the company's books for the purpose of investigating whether there are good grounds for seeking to bring a derivative action or a personal action against the company. The purpose of the plaintiffs in seeking access to the relevant insurance policies is to assist them in considering the economic viability of pursuing their proposed action against the company. That is a proper purpose.

68 The court may refuse the application on discretionary grounds even if it is satisfied that the applicant is acting in good faith and that the inspection is to be made for a proper purpose: Vinciguerra v MG Corrosion Consultants Pty Ltd [2007] FCA 503; (2007) 61 ACSR 583 [37]. The nature and extent of the company's insurance cover is not in itself a matter in dispute in the action which the plaintiffs are contemplating commencing against the company. However that is not a condition for the exercise of the power under s 247A. The disclosure of the existence and extent of the relevant insurance cover is likely to assist the plaintiffs in determining whether or not to commence or proceed with the proposed action. If the company does not have insurance which covers the plaintiffs' claims or the quantum of the cover is such that it is likely to be substantially exhausted in legal costs then the plaintiffs may well not proceed with the proposed action. That would prevent the resources of the parties and public resources being wasted. The thrust of the approach to litigation enshrined in the case management rules of this court and other superior courts in Australia is to avoid waste of time and cost and to ensure as far as possible proportionate and economical litigation. It is an appropriate exercise of the discretion of the court to make an order granting access to the plaintiffs to the company's relevant insurance policies.

69 The plaintiffs should have leave to commence proceedings against the defendant claiming damages or compensation or other relief arising from the conduct by the defendant and others resulting in the plaintiffs exchanging their interests in the Scheme for shares in GSL. That leave should be subject to the condition that the defendant, by its receiver/managers, liquidators or otherwise, have liberty to apply to stay any proceedings commenced against the defendant under the leave granted if the claim against the defendant is uninsured or for any other reason.

70 The plaintiffs should have leave to commence proceedings for the inspection of the books of the defendant under s 247A of the Act. There will be an order under s 247A authorising the plaintiffs, or their nominated solicitors, to inspect all insurance policies which may respond to the plaintiffs' claims for damages or compensation arising from the conduct by the defendant and others resulting in the plaintiffs exchanging their interests in the Scheme for shares in GSL. The inspection should not extend to documents pertaining to any claims made by the defendants against its insurance policies or correspondence between the defendant and its insurers concerning claims or potential claims against the defendant arising from the conduct by the defendants and others resulting in the plaintiffs exchanging their interests in the scheme for shares in GSL. Disclosure of the latter documents might unfairly prejudice the defendant or its insurers in their response to or defence of the plaintiffs' claims.