FEDERAL COURT OF AUSTRALIA
Jervois Mining Limited, in the matter of; Campbell v Jervois Mining Limited,
[2009] FCA 316
CORPORATIONS – Application to inspect books of a company – s 247A and s 198F of the Corporations Act 2001 (Cth) – common law rights of inspection for directors – Company Register maintained electronically by agent – Register features live proxy count – good faith and proper purpose – company purpose and personal purpose – whether lobbying proxies proper purpose.
Corporations Act 2001 (Cth): ss 9, 174, 198F, 233, 247, 320
Edman v Ross (1922) 22 SR (NSW) 351, followed
Conway v Petronious Clothing Co Ltd [1978] 1 WLR 72, considered
Burn v London and South Wales Coal Co (1890) 7 TLR 118, followed
Molomby v Whitehead (1985) 7 FCR 541, cited
Boulos v Carter; Re TARBS World TV Australia Pty Ltd (2005) 220 ALR 572, cited
Berlei Hestia (NZ) Ltd v Fernyhough [1980] 2 NZLR 150, followed
Kriewaldt v Independent Direction Ltd (1996) 14 ACLC 73, followed
Intercapital Holdings Ltd v MEH Ltd (1988) 13 ACLR 595, cited
Knightswood Nominees Pty Ltd v Sherwin Pastoral Company Ltd (1989) 15 ACLR 151, cited
Czerwinski v Syrena Royal Pty Ltd (No 1) (2000) 34 ACSR 245, followed
Unity APA Ltd v Humes Ltd (No 2) [1987] VR 474, followed
Acehill Investments Pty Ltd v Incitec Ltd [2002] SASC 344, followed
IN THE MATTER OF JERVOIS MINING LIMITED (ACN 007 626 575)
RICHARD CAMPBELL v JERVOIS MINING LIMITED (ACN 007 626 575)
VID 193 of 2009
GOLDBERG J
31 MARCH 2009
MELBOURNE
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IN THE FEDERAL COURT OF AUSTRALIA |
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VICTORIA DISTRICT REGISTRY |
VID 193 of 2009 |
IN THE MATTER OF JERVOIS MINING LIMITED (ACN 007 626 575)
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BETWEEN: |
RICHARD CAMPBELL Applicant
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AND: |
JERVOIS MINING LIMITED (ACN 007 626 575) Respondent
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JUDGE: |
GOLDBERG J |
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DATE OF ORDER: |
1 APRIL 2009 |
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WHERE MADE: |
MELBOURNE |
THE COURT ORDERS THAT:
1. The applicant is granted leave to amend the Originating Process in the form filed in Court on 31 March 2009.
2. The applicant is authorised to inspect, and make copies of, the following documents forming part of the books of the Respondent:
(a) the share register;
(b) all documents relevant to the issuing of shares by the respondent since the calling of the Extraordinary General Meeting of the respondent scheduled for 2 April 2009 (“the EGM”);
(c) all documents relevant to the appointment of proxies to act at the EGM,
(“the books”).
3. The respondent make available the books referred to in paragraph 2(a) and 2(c) of this order for such inspection and copying by the applicant forthwith at the office of the respondent, Level 20, 114 William Street, Melbourne, or at the premises of Computershare Limited, and make available the books referred to in paragraph 2(b) of this order for such inspection and copying by the applicant by 10.00am on 3 April 2009, subject to further order.
4. The respondent forthwith do all such things as may be necessary on its part to enable the applicant to have the same access as he did in the period prior to 10 March 2009 to the registry service provided by Computershare Limited to the respondent.
5. The respondent pay the applicant’s costs of and incidental to the proceeding.
6. Liberty to apply is reserved to all parties.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.
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IN THE FEDERAL COURT OF AUSTRALIA |
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VICTORIA DISTRICT REGISTRY |
VID 193 of 2009 |
IN THE MATTER OF JERVOIS MINING LIMITED (ACN 007 626 575)
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BETWEEN: |
RICHARD CAMPBELL Applicant
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AND: |
JERVOIS MINING LIMITED (ACN 007 626 575) Respondent
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JUDGE: |
GOLDBERG J |
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DATE: |
31 MARCH 2009 |
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PLACE: |
MELBOURNE |
REASONS FOR JUDGMENT
1 The application before the court is by Mr Richard Campbell, a director and shareholder of the respondent company, Jervois Mining Limited, (“the Company”), for an order that he be authorised to inspect and make copies of the following documents of the Company which form part of the “books” of the Company:
(a) the share register;
(b) all documents relevant to the issuing of shares by the Company since the calling of an Extraordinary General Meeting of the Company scheduled for 2 April 2009;
(c) all documents relevant to the appointment of proxies to act at the Extraordinary General Meeting.
The expression “books” is referred to in the material before the Court in the sense in which that expression is defined in s 9 of the Corporations Act 2001 (Cth) (“the Act”).
2 Mr Campbell, his wife and a trustee of Mr Campbell’s superannuation fund have shareholdings in the Company which total 1,173,800 shares.
3 According to Mr Duncan Pursell, the Chairman of Directors and the Managing Director of the Company, the issued capital of the Company on 1 January 2009 was 2,141,799,604 shares, and subsequent to that date, 721,258,638 shares have been issued by way of rights issues and placements.
4 The application, as amended in the course of the hearing, is made on alternative bases:
(a) pursuant to common law principles;
(b) pursuant to s 247A of the Act;
(c) pursuant to s 198F(1) of the Act.
5 Mr Campbell also seeks an ancillary order that the Company forthwith make the books available for inspection by providing him with a new password to access those parts of the books of the Company that are maintained by Computershare Limited (“Computershare”) and otherwise by providing the books in hard copy at the offices of the Company. I will explain in the course of these reasons why that ancillary order is sought.
6 The Company is a small listed public company involved solely in the mining of natural resources in Australia. Presently the board of directors comprises Mr Duncan Pursell, who is Chairman and Managing Director, Mr Malcolm Jansen, Mr Derrick Foster, Professor Kenneth Collison and Mr Campbell.
7 There is a history of tension and disagreement between at least Mr Pursell and Mr Campbell. That tension relates, in general terms, to an agreement between the Company and China Rails Resource Co Ltd and Yunnan Jaiming Technology and Industry Company Ltd. The issue in relation to that agreement occurred towards the latter part of 2008. It is not necessary to rehearse the circumstances relating to that agreement or the tension and disagreement between Mr Pursell and Mr Campbell in relation to it, other than to note those circumstances have caused such tension.
8 There has also been previous litigation in relation to the Company involving Mr Pursell and Mr Campbell which related, in general terms, to claims by Mr Campbell and a former director of the Company, Ms Melanie Leydin, challenging the right of Mr Pursell to chair meetings of the board of directors. There was also an issue as to the appointment of directors of the Company subsequent to either 12 or 22 December 2008. That litigation was discontinued early in February 2009.
9 One of the issues which presently concerns Mr Campbell relates to resolutions of the board of directors of the Company to issue further shares in the capital of the Company. At a board meeting held on 12 December 2008, it was resolved to give approval to Mr Pursell to seek new funds through the placement of shares up to 300,000,000 shares, at a price not less than 80% of the current market price at the time of placement. There were subsequent board meetings, at some of which Mr Campbell was present, where the board passed resolutions to make further rights issues of shares to shareholders and also to allot shares, some of which allotments related to the acquisition of interests in two companies, New Age Exploration Ltd and Goldpride Pty Ltd.
10 As I noted earlier, according to Mr Pursell on 1 January 2009 the issued capital of the Company comprised 2,141,799,604 shares and subsequent to that date 721,258,638 shares were issued by way of rights issue or placements. That figure, according to my calculations, involved an increase in the issued capital of the Company as at 1 January 2009 of the order of 30%.
11 On 6 January 2009, the Company announced to the Australian Stock Exchange (“ASX”) a capital raising being a non‑renounceable rights issue to shareholders on a one for five basis at an issue price of $0.004. If fully subscribed, the issue of 428,366,000 shares would raise approximately $1,713,000.
12 On 22 January 2009, the Company sent the offer letters for that capital raising to shareholders.
13 On 6 February 2009, 124 shareholders in the Company, including Mr Campbell, delivered a request to the Company pursuant to s 249D of the Act, requesting an extraordinary general meeting of the shareholders of the Company to consider resolutions to be proposed at the meeting for the removal of the current board of directors other than Mr Campbell, and the appointment of new directors.
14 On the same day, 6 February 2009, the Company announced to the ASX that it had received a request for the extraordinary general meeting and it identified the directors who were sought to be removed, the appointment of Mr Norman Seckold, Mr Peter Nightingale and Ms Leydin as directors and confirmation of the appointment of Mr Campbell as a director. Subsequently, a resolution was proposed to be put at that extraordinary general meeting that Mr Campbell be removed as a director.
15 Computershare manages the Company’s share register in accordance with the provisions of s 174 of the Act. On 26 February 2009 notice of the extraordinary general meeting was issued to all shareholders by Computershare, together with a blank proxy form.
16 On 27 February 2009 Mr Pursell sent a letter to shareholders inviting them to reject the resolutions to be proposed at the extraordinary general meeting – that is, the resolutions proposed by the persons who requested the meeting.
17 On 27 February 2009 there was a board meeting of the Company at which a list of six persons to be allotted shares in the Company, totalling 20,500,000 shares, was tabled. The allotment of those shares arose out of a shortfall in the take up of the rights issue. It was resolved that those shares be issued.
18 Prior to 10 March 2009, Mr Campbell was able to gain access to the Computershare full registry service provided to the Company by remote electronic access and the use of a password provided to him as a director. The Computershare records included not only the share register but also the proxies lodged by shareholders in relation to the extraordinary general meeting and information relating to the count of the proxies in respect of that annual general meeting. As I understand the situation, Computershare maintains the share register of the Company, which includes not only the share register, strictly so called, which is accessible by members of the public in accordance with the relevant provisions of the Act, but also records which are not part of the share register, strictly so called, but which relate to issues associated with the share register, such as the receipt and counting of proxies. Access to the Computershare full registry service, which included these latter documents, was obtained by the use of a password provided by Computershare.
19 Mr Campbell wished to inquire as to the form of the proxies that had been lodged and on 10 March 2009, Mr Campbell discovered that the password provided to him was no longer active.
20 On the next day, 11 March 2009, Mr Campbell sent an email to Computershare in which he stated that he had ascertained that on the instructions of the Company’s Company Secretary, Mr John Neill, he had been denied access to the proxy count for the extraordinary general meeting and he asked for what he called an “update” by return mail. He was told by Computershare that it was under instructions from Mr Pursell, the Managing Director, and Mr Neill, the Company Secretary, to prevent him from having access to the proxy count which was contained in the records of Computershare for the Company.
21 That denial of access came about in the following way. Mr Pursell says as part of the registry services provided to the Company by Computershare, the Company Secretary, Mr Neill, and the Managing Director were provided with electronic passwords which provided access to Computershare’s database. Mr Pursell was not aware that anyone else, whether they were shareholders or non‑executive directors, had password access. He acknowledged that the services provided, included what was called a live proxy count of proxy votes lodged in respect of the meeting on 2 April 2009.
22 On 10 March 2009 it was brought to Mr Pursell’s attention that Mr Campbell had access to the online service provided by Computershare and that as that access had not been approved by the board and no other non‑executive director or any other shareholder had access to such a facility, Mr Pursell instructed Computershare immediately to terminate this access. According to Mr Pursell, the only person who currently has access to the live proxy count in relation to the meeting to be held on 2 April 2009 is Mr Neill in his capacity as Company Secretary. Mr Pursell had access until about 26 March 2009 when, in response to a complaint by Mr Campbell’s solicitors, he ceased his access rights.
23 I should also recount, as deposed to by Mr Pursell in an affidavit, that on 16 March 2009, it appears that Mr Campbell, under a nom de plume (“DRACHIR”), posted a message on what has been called the Hot Copper website. The message was to the effect that if a change of the board of directors does not occur, China Rails Resource Co Ltd will demand US$1 million back from the Company and seek damages. The message also referred to the fact that shareholders seemed to be overwhelmingly supporting what was called the change ticket. A further message was posted on the Hot Copper website on 21 March 2009, apparently by Mr Campbell, which again referred to the transaction involving China Rails Resource Co Ltd.
24 The Company’s solicitors complained to Mr Campbell about the posting of sensitive company information on the Hot Copper website, and on 25 March 2009 the two postings were removed from the website.
25 On 26 March 2009, Mr Campbell’s solicitors wrote a letter to the Company’s solicitors requesting that Mr Campbell’s rights to access the live proxy count be reinstated. In the letter, the solicitors pointed out that Mr Campbell had serious concerns in relation to the operations of the Company, including the issuing of approximately 590,000,000 shares the previous week. According to Mr Campbell’s solicitors, the shares were issued between the calling of the Extraordinary General Meeting and the date it is to be held, that is 2 April 2009. The letter continued:
“…Our client understands that, when viewed as a whole, the transactions entered into by Jervois did not raise any fresh capital for Jervois. This is of concern given that there has been more recently a focus on raising capital, including in submissions made to the Federal Court in December 2008. Our client has serious concerns as to whether the shares were capital for Jervois. This is of concern given that there has been more recently a focus on raising capital, including in submissions made to the Federal Court in December 2008. Our client has serious concerns as to whether the shares were issued in the best interests of Jervois or for an improper purpose, namely to provide extra voting rights under an arrangement or understanding with the recipient of those shares to defeat our client’s motion at the EGM. Our client is continuing his enquiries in relation to that share issue and the associated transactions.”
The letter then continued:
“Our client now demands that his access to the records of Jervois maintained by Computershare be immediately re‑instated. Apart from the fact that our client should be entitled to this access as a director of Jervois, our client has a legitimate interest in the records. His interest includes reviewing the above share issue and conducting a check on proxies that may have been lodged in his favour, being matters about which our client was given little or no information.”
26 The Company’s solicitors replied to Mr Campbell’s solicitors by letter dated 27 March 2009 in which they stated that the Company had no objection to Mr Campbell accessing “the Register of Members” held by Computershare as it is a public record, but the Company denied Mr Campbell access to the live proxy count. The letter noted that to ensure that there was no bias or prejudice in relation to the extraordinary general meeting, the Company had requested its independent auditor to attend the meeting and act as scrutineer.
27 Mr Campbell has sworn an affidavit in which he says:
“31. I have serious questions about the operations of Jervois, including the issuing of approximately 590,000,000 shares as outlined above. Those shares were issued after the calling of the EGM and obviously prior to its date on 2 April 2009.
32. When viewed as a whole, the transactions involving New Age Exploration Ltd and Goldpride Pty Ltd, which involve the issue of 325,000,000 shares, do not raise any fresh capital for Jervois. This is of concern given that there has, more recently, been a focus on the raising of capital for Jervois at the time of the hearing of a prior Federal Court proceeding on 30 December 2009. That prior proceeding has now been resolved.
33. I am concerned that the more recent issue of shares by Jervois is not in its best interests and was made for an improper purpose, namely to provide extra voting rights under an arrangement or understanding with the recipient of those shares to defeat the motion removing the old directs (except for me) at the EGM.”
“A director’s right to inspect and take copies of documents belonging to his company is, I think, clear. …
The right to inspect documents and, if necessary, to take copies of them is essential to the proper performance of a director’s duties, and, though I am not prepared to say that the Court might not restrain him in the exercise of this right if satisfied affirmatively that his intention was to abuse the confidence reposed in him and materially to injure the company, it is true nevertheless, that its exercise is, generally speaking, not a matter of discretion with the Court and that he cannot be called upon to furnish his reasons before being allowed to exercise it. In the absence of clear proof to the contrary, the Court must assume that he will exercise it for the benefit of his company.”
29 In Conway v Petronious Clothing Co Ltd [1978] 1 WLR 72, Slade J followed this observation of Street CJ and reached the following conclusions in relation to the nature of the rights of a director to inspect the books of account of a company:
“1. The right exists, but it is a right conferred by the common law, and not by statute …
2. The right of a director to see his company’s books of account, which is exercisable both at and outside meetings, is conferred by the common law in order to enable the director to carry out his duties as a director …
3. The right of a director to inspect the company’s books of account must determine upon removal of the director from office.
4. The right not being a statutory right, the court is left with a residue of discretion as to whether or not to order an inspection.”
30 Slade J also relied upon, and adopted, the observations of North J in Burn v London and South Wales Coal Co (1890) 7 TLR 118 at 119, where North J accepted that a director, in order that he might properly perform his duties, had, from the nature of the case, a right to see all the documents under the control of the Company.
31 The observations of Street CJ in Eq have been followed in subsequent cases. See for example Molomby v Whitehead (1985) 7 FCR 541 at 550, where Beaumont J said:
“The right or power of a director of a company or a corporation to inspect corporate material in aid of the proper execution of his fiduciary obligations to advance the interests of the Company or corporation is well recognised.”
Beaumont J cited a number of earlier cases in support of this proposition, to which I do not need to refer at this point of time.
32 In Boulos v Carter; Re TARBS World TV Australia Pty Ltd (2005) 220 ALR 572, Barrett J said at 582:
It is unnecessary to go into any detailed analysis of the general law position. The right of a director to inspect company documents, and, if necessary, to take copies of them has long been recognised as one of the rights that general law affords a director for the purpose of enabling him or her to perform the functions and discharge the duties of the office of director. The classic statement of this right appears in a judgment of Street CJ in Eq Edman v Ross.”
33 The only issue which might be controversial is the observation of Slade J in Conway v Petronious Clothing Co Ltd, that the court has a discretion whether or not to allow inspection. In Berlei Hestia (NZ) Ltd v Fernyhough [1980] 2 NZLR 150, Mahon J rejected the proposition that the court had a discretion whether or not to permit a director to have access to the books of the Company.
34 Edman v Ross (supra) was also followed by De Jersey J, as he then was, in Kriewaldt v Independent Direction Ltd (1996) 14 ACLC 73, where at 75, his Honour said:
“A director obviously has a right of access to company documents to facilitate the performance of his or her duty, and that carries with it a right to make copies. See Edman v Ross and McGee v Sanders (1991) 32 FCR 397, 405”.
35 The common law right to which I have referred is dependent upon the access being sought to enable a director to comply with his duties as a director. That is, to enable a director to discharge his duties and obligations to the Company.
36 As was pointed out by Street CJ in Eq in Edman v Ross (supra) (par [28] above), a limitation on that right might arise if the court was satisfied affirmatively that the director’s intention was to abuse the confidence reposed in him and materially to injure the Company.
37 I should point out that on the material before me, I do not consider that I should make a finding that what Mr Campbell proposes, or what his intention is, is to abuse the confidence reposed in him, or to materially injure the Company. I am making no ultimate findings in this proceeding in relation to the substantive issues raised by Mr Campbell and Mr Pursell in their affidavits. This matter has been brought on as a matter of urgency. Neither deponent was cross‑examined and any views I express at the moment are tentative, insofar as they relate to findings as to what the particular purpose or intention of the parties, in particular, Mr Campbell, may be.
38 Counsel for the Company submitted that the common law right arises on the basis of a director having access for the purposes of the Company, and that if that access is not sought in the interests of the Company, then the common law right could not be availed of. Counsel for the Company submitted that Mr Campbell wanted access to the proxies delivered to Computershare and to what was called the “live count” to enable him, amongst other matters, to lobby proxy holders and to establish a foundation to challenge votes that may be cast. Counsel for the Company submitted that these purposes related to personal interests.
39 It is true that counsel for Mr Campbell, in the course of submissions, submitted that one of the purposes for which access was sought by Mr Campbell was the lobbying of shareholders who had given proxies. However, Mr Campbell indicated other purposes, and these were referred to in paragraphs 31‑33 of his affidavit, to which I have referred earlier. The purpose that was identified by Mr Campbell’s counsel as the lobbying of shareholders is a matter which I do not consider, adopting the words of Street CJ in Eq, “abuses the confidence reposed in him”, nor does it materially injure the Company.
40 I also consider that Mr Campbell has raised serious issues which are not fanciful or specious in relation to the issue and allotment of shares since the beginning of February 2009, and after the extraordinary general meeting was called.
41 It is important to emphasise that on this application, having regard to the fact that no parties have been cross-examined, and that the matter has been brought on as a matter of urgency, that I form no view as to the merits or demerits of the matters raised by Mr Campbell or Mr Pursell. Nevertheless, I am satisfied, borrowing from the learning on s 247A of the Act, that there is a case for investigation: Intercapital Holdings Ltd v MEH Ltd (1988) 13 ACLR 595; Knightswood Nominees Pty Ltd v Sherwin Pastoral Company Ltd (1989) 15 ACLR 151.
42 In Conway v Petronius Clothing Co Ltd (supra), Slade J considered that the court was left with a residue of discretion whether or not to order inspection in accordance with the common law right given to a director. There is a dispute in the authorities as to whether the court does have a discretion.
43 In Berlei Hestia (NZ) Ltd v Fernyhough (supra), Mahon J at 163 disagreed with the conclusion of Slade J that there was a discretion as to whether or not a court would, acting under common law principles, permit a director to have access to corporate records and accounts. Mahon J said at 163:
“The correct construction of the authorities relied upon by Slade J seems to me to be that the right of inspection is unqualified, but that where it is proved that a director is acting or is about to act in breach of his fiduciary duty to the company, and intends to aid that process by inspecting the books, then his right to inspection disappears.”
(see Company Directors: Principles of Law and Corporate Governance, Austin, Ford and Ramsay (2005), 193, [4.13]).
44 Mahon J also said in Berlei Hestia (NZ) Ltd v Fernyhough (supra):
“In other words, in order to restrain a director from exercising his right of access to corporate information, it must be proved, either from his words or conduct, that there in fact exists an intention on the part of the director to use the information not for the benefit of the company and the shareholders but for the benefit, wholly or in part, of a competitor.”
45 I am satisfied, consistently with common law principles, that Mr Campbell should be entitled to have access to, and should be allowed to inspect, all the records of the Company held by Computershare and also the records of the Company that relate to the share issues.
46 I should add that not only should Mr Campbell have that right of access and inspection, also each and every director of the Company should have it. I do not consider on the material before me that it can be said that there is an intention on the part of Mr Campbell to use the information, not for the benefit of the Company and the shareholders but for the benefit wholly or in part of a competitor, adopting the words of Mahon J. Further, I am not satisfied that by having access to those records and inspecting them Mr Campbell is acting, or is about to act, in breach of his fiduciary duty to the Company and intends to aid that process by inspecting the books.
47 I turn, then, to the second basis upon which Mr Campbell claims to be entitled to have access to the books, s 198F of the Act.
48 I do not consider that there is any basis upon which Mr Campbell is entitled to have access to, or inspect, the books of the Company pursuant to s 198F of the Act. That right to inspect books is conditioned upon a director wishing to do so for the purposes of a legal proceeding to which the director is a party, or that the director proposes in good faith to bring, or that the director has reason to believe will be brought against him or her. None of those categories apply in the present case. Other than this application, there is no proceeding extant against Mr Campbell, nor is it proposed by him at the present time on the evidence before me to bring any proceeding, nor does he have reason to believe any proceeding will be brought against him.
49 The application before me itself is not an appropriate basis on which to grant access, pursuant to s 198F of the Act. This approach or construction of s 198F is consistent with the Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 1999, which introduced s 198F into the legislation. (See paragraph 6.106 to 6.110 of that Explanatory Memorandum).
50 I turn to s 247A of the Act. Section 247A provides:
“(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.”
51 It is not an issue in this proceeding that the books of the Company, as referred to in s 247A, and as defined in s 9 of the Act, include, in particular, the proxies lodged with Computershare and the live count of those proxies. Counsel for the Company did not submit that the books of the Company did not include those records and documents, and in my respectful view that was an appropriate and correct position for the Company to take.
52 The principles in relation to the proper interpretation of s 247A have been well established and are not in dispute. Mr Campbell must satisfy me that he is entitled to inspect the books because the information sought relates to matters that he as a shareholder ought to be informed of by the Company: Czerwinski v Syrena Royal Pty Ltd (No 1) (2000) 34 ACSR 245 at 248. It is also clear that provided Mr Campbell’s primary or dominant purpose for which the inspection is sought is a proper purpose, a subsidiary purpose for some other benefit is not relevant: Unity APA Ltd v Humes Ltd (No 2) [1987] VR 474.
53 Mr Campbell stated the issues which concerned him in paragraphs 31 to 33 of his affidavit. He was not cross‑examined on his affidavit. Nevertheless, as emerged from the correspondence between the parties, and as Mr Campbell’s counsel submitted, as well as those purposes he also has a purpose of lobbying proxy holders as being the reason for which he seeks access. It is clear that such a purpose is a purpose which is personal to him in the sense that he is concerned to ensure that he is not removed as a director from the board. However, what is a proper purpose for the purposes of s 247A(1) is not constrained by a desire to be acting in the interests of the Company.
54 In Acehill Investments Pty Ltd v Incitec Ltd [2002] SASC 344, Debelle J stated a number of propositions which he extracted from the authorities. His Honour stated at par [29]:
“1. The requirement that the applicant is acting in good faith and that the inspection is to be made for a proper purpose expresses a composite notion and the court will determine whether each has been demonstrated by applying an objective test.
2. The onus is on the applicant to demonstrate that he is acting in good faith and that the inspection is for a proper purpose.
3. The section operates where the applicant seeks to protect some specific or personal right by the making of the order. Examples are where a shareholder contemplates proceedings under s 233 of the Corporations Act (the statutory successor of s 320 of the Companies Code)… or where a shareholder reasonably takes the view that a transaction could adversely affect his investment and he seeks to investigate the transaction for the purpose of determining what action he should take … or where a shareholder seeks to ascertain facts for the purpose of considering a takeover offer…
4. If the applicant’s primary or dominant purpose is a proper purpose, it is not to the point that an inspection may be of benefit to the applicant for some other purpose…
5. The rights provided by s 247A should not be regarded as affecting the basic rule of company law that a shareholder should not ordinarily have recourse to the courts to challenge a managerial decision made by or with the approval of the directors.
6. Since every shareholder has a right to apply under the section for an inspection order, it is no answer to an application that, if an order is made, the applicant may acquire information not available to other shareholders and thereby be in a more advantageous position than those shareholders.
7. Applicants do not necessarily lack a proper purpose merely because (a) they are hostile to other directors; or (b) they will, after inspection, have more information than other members.
8. The procedure under s 247A is not intended to be a process as wide-ranging as the process of discovery of documents so that, as a general rule, inspection will be confined to, say, the results of decisions of directors rather than all the documents such as board papers leading to decisions … I emphasise that this is a general rule. There may be occasions where it is proper to admit inspection of board papers …
9. Even where an applicant is acting bona fide and has shown a proper purpose, the court has a discretion whether to order inspection.
“
[citations omitted]
55 For present purposes I am prepared to accept that the lobbying of proxy holders is a significant purpose of Mr Campbell in seeking access to the Company’s books. In other words, I am prepared to accept that there is a doubt as to whether Mr Campbell’s primary or dominant purpose is related to the issues arising out of the allotment of shares. I do not forget that the power given under s 247A must depend upon the application by “a member” of the Company. Can it be a proper purpose for a member of the Company to seek access for the purpose of lobbying proxy holders to vote in a particular way to ensure that that member is elected, to or retained on, the board of directors of the Company? I consider that is a proper purpose and I compare, for example, proposition 3 extracted by Debelle J in Acehill Investments Pty Ltd v Incitec Ltd (supra), which I repeat in this context:
“The section operates where the applicant seeks to protect some specific or personal right by the making of the order. …
“or where a shareholder reasonably takes the view that a transaction could adversely affect his investment and he seeks to investigate the transaction for the purpose of determining what action he should take.”
56 It seems to me that it can be a proper purpose for a member of the Company to seek access to proxies, even though he also has another role as a director of the Company, to determine whether he should take any, and if so what, action in support of his aim to remain on the board of directors. Again, borrowing from the doctrine in relation to the common law principles, that purpose is not to abuse the confidence reposed in him as a director or materially to injure the Company.
57 Although Mr Campbell posted messages on the Hot Copper website, to which Mr Pursell has referred and which I have summarised in these reasons, those matters again related to the issues of the composition of the board of directors.
58 In all the circumstances, I am satisfied that in accordance with s 247A of the Act, Mr Campbell is seeking an inspection in good faith and for a proper purpose. In the course of submissions I put to counsel for the Company, if Mr Campbell’s purpose is not as he stated, what is his purpose? Counsel responded, in substance, that it was a stunt to cause disruption to the extraordinary general meeting where there are resolutions proposed which include a resolution for his removal as a director. Counsel for the Company also submitted that he was unable to divine what he submitted was a legitimate purpose of Mr Campbell.
59 I am satisfied that the purposes identified by Mr Campbell, including the lobbying of proxy holders, is a proper purpose for the purposes of s 247A of the Act. I am also affirmatively satisfied that he is acting in good faith, that is to say I am affirmatively satisfied that he is not seeking to cause disruption to the extraordinary general meeting. Rather I am satisfied that his purpose in seeking the inspection is in aid of the passing of the resolutions which he and 123 other shareholders have put in their request to the Company to call the extraordinary general meeting.
60 I therefore propose, subject to hearing counsel as to the form of orders, to make the orders in the general terms sought in the amended originating process.
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I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg. |
Associate:
Dated: 2 April 2009
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Counsel for the Applicant: |
D H Denton S.C. and R L Enbom |
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Solicitor for the Applicant: |
O'Donnell Salzano Lawyers Pty Ltd |
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Counsel for the Respondent: |
M Osborne |
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Solicitor for the Respondent: |
Fitzpatrick Legal Solicitors |
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Date of Hearing: |
31 March 2009 |
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Date of Judgment: |
31 March 2009 |
