Federal Court of Australia

M.J.M Holdings (NT) Pty Ltd v Australian Marine Contractors [2024] FCA 691

ORDERS

THE COURT ORDERS THAT:

1.    By on or before 4 July 2024, the parties are to confer and provide to the Court draft orders reflecting the reasons delivered today.

2.    In the event the parties cannot agree draft orders, the matter will be listed for further submissions on the terms of any orders.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

O’SULLIVAN J:

1    M.J.M Holdings (NT) Pty Ltd ACN 609 503 086 is one of three shareholders in Australian Marine Contractors Pty Ltd (AMC) each of which owns one third of the issued shares. The other two shareholders and are the second defendant, Wavelength Assets Pty Ltd, and the third defendant, Oliver Hans Barz, respectively.

2    The sole director and shareholder of Wavelength is the fourth defendant, Mr Bjorn Matthew Farley.

3    Mr Matthew Mitchell is the sole director and shareholder of MJM. There is an issue over whether Mr Mitchell’s directorship of AMC ceased on or about 8 November 2022 but at least up until that date, he was one of three directors of AMC, the others being Mr Barz and Mr Farley.

4    By its amended interlocutory application dated 3 June 2024, MJM seeks the following interim orders pursuant to ss 247A(1), 290, 1303 and 1324(1) of the Corporations Act 2001 (Cth):

(a)    Restraining Mr Farley and Mr Barz from taking any steps to remove Mr Mitchell as a director of AMC;

(b)    Restraining Mr Farley and Mr Barz from:

(i)    Causing AMC to incur or pay any expenses or liabilities above $50,000 or make any payment in respect of the legal costs of this proceeding;

(ii)    Transferring, selling, pledging as security or otherwise divesting any assets of AMC;

(iii)    Placing AMC into any form of external administration; and

(iv)    Dealing or purporting to deal with MJM’s shares in AMC.

(managerial restraint)

(c)    Granting access to Mr Mitchell to the books and records of AMC, including, for example, its Xero accounting software, bank statements, bank accounts, email accounts, One Drive account etc.

5    It is for the reasons which follow that:

(a)    The application for an order restraining Mr Farley and Mr Barz from taking any steps to remove Mr Mitchell as a director of AMC is dismissed;

(b)    The application for an order restraining Mr Farley and Mr Barz from acting as set out in [4(b)] above is dismissed;

(c)    There will be an order requiring the defendants to provide access to certain of AMC’s documents pursuant to s 247A of the Act; and

(d)    I will hear the parties to the terms of any orders in view of these reasons.

DOCUMENTS READ AND RELIED UPON

6    MJM reads:

(a)    The affidavit of Matthew Mitchell filed 27 May 2024 (first Mitchell affidavit);

(b)    The affidavit of Matthew Mitchell filed 27 May 2024 (second Mitchell affidavit);

(c)    The affidavit of Matthew Mitchell filed 3 June 2024 (third Mitchell affidavit);

(d)    The affidavit of Matthew Mitchell filed 17 June 2024 (fourth Mitchell affidavit); and

(e)    The affidavit of Frank John Lawrence filed 4 June 2024.

7    The defendants read:

(a)    The affidavit of Bjorn Matthew Farley filed 12 June 2024 (Farley affidavit).

BACKGROUND

8    The application is ancillary to an amended originating application filed 3 June 2024 in which MJM seeks, amongst other things, orders pursuant to ss 232 and 233 of the Act (Oppression Proceedings).

9    The affidavits filed by the parties reveal a number of issues between Mr Mitchell, Mr Farley and Mr Barz.

Conflict of interest

10    Since its’ incorporation on 27 November 2015, AMC has provided, and continues to provide, a range of marine services and products, including mooring services and subsea operations. When a particular project requires commercial diving services, AMC subcontracts that component of the work to a commercial diver but continues to manage the project itself.

11    Since 2019, AMC has considered and taken steps to expand its’ services to provide commercial diving services directly.

12    On 14 February 2022, Mr Mitchell established Oceantec Pty Ltd. Oceantec provides marine services including mooring services, subsea operations and commercial diving services.

13    During the period from Oceantec’s incorporation to on or about 22 April 2022, Mr Farley and Mr Barz found out about Oceantec. Thereafter, Mr Farley and Mr Barz became increasingly concerned that Mr Mitchell’s involvement with the establishment and management of Oceantec constituted a conflict of interest with his role as a director of AMC.

Withdrawals from AMC

14    On 14 December 2021, Mr Farley withdrew $36,000 from AMC’s account for the purchase of a van for another company. There is an issue as to whether the money was withdrawn on the basis that it was a director-loan with funds to be repaid, and whether Mr Mitchell consented to the withdrawal.

15    On 8 February 2022, Mr Mitchell withdrew $36,000 from AMC’s account “to match” the funds Mr Farley had withdrawn and to fund the building of a house jointly owned by Mr Farley and Mr Mitchell in Dundee, in the Northern Territory. There is an issue as to whether Mr Farley and Mr Barz consented to this withdrawal.

16    Subsequently, Mr Mitchell sent an e-mail to Mr Farley and Mr Barz in which Mr Mitchell offered to sell AMC a mooring that he had personally acquired as consideration for the $36,000 that he had withdrawn. Mr Barz agreed to the purchase of the mooring. However, there is an issue between the parties over whether Mr Farley responded to the email, and as to Mr Farley’s position on the purchase of the mooring.

17    Accordingly, Mr Mitchell’s withdrawal on 8 February 2022 was recorded by him in AMC’s Xero accounting software as a purchase of equipment being ‘76MM U3 SLAC - anchor chain’. The transaction was then later reconciled by Mr Mitchell as a payment for a mooring (DG03), which was owned by Mr Mitchell’s company.

18    In March 2022, Mr Mitchell’s access to AMC’s Xero accounting software was removed.

19    On 31 May 2022, Mr Farley emailed AMC’s accountant and requested that the $36,000 be recorded as a director’s loan to Mr Mitchell in AMC’s accounts.

Complaints about conduct

20    On 5 August 2022, Mr Farley submitted a complaint to ASIC concerning Mr Mitchell’s conduct.

Purported removal of Mr Mitchell as a director of AMC

21    On 8 August 2022, Mr Farley sent an email to Mr Barz and Mr Mitchell outlining various concerns about Mr Mitchell’s conduct, including an alleged conflict of interest and misconduct in relation to his involvement with Oceantec, and raising the possibility of Mr Mitchell being removed as a director of AMC.

22    At an AMC directors’ meeting held on 31 October 2022, Mr Farley again voiced his concerns and proposed a formal resolution for Mr Mitchell’s removal as director if he did not voluntarily resign. Mr Mitchell denied any conflict of interest. The meeting concluded before a formal vote on Mr Mitchell’s removal could take place.

23    On 1 November 2022, Mr Farley wrote to Mr Mitchell informing him that he would be continuing to pursue a resolution to remove him as a director of AMC. On 7 November 2022, Mr Farley and Mr Barz executed “consents” for Mr Mitchell’s removal as a director. On 8 November 2022, at an AMC board meeting (neither notified to, nor attended by Mr Mitchell), Mr Farley and Mr Barz resolved that Mr Mitchell be removed as a director.

24    On 10 November 2022, Mr Farley sent an email to Mr Mitchell and Mr Barz noting that a motion to remove Mr Mitchell as a director of AMC had been proposed, and that the motion had been passed. Mr Farley’s email attached his and Mr Barz’ consent to remove Mr Mitchell as a director. Mr Mitchell did not respond to this correspondence and did not object to or take any steps to oppose or contest his removal.

25    On 17 November 2022, AMC’s documentation removing Mr Mitchell was lodged with ASIC.

26    One year later, on 17 November 2023, Mr Farley arranged to meet with Mr Mitchell the following day to discuss Mr Mitchell’s shareholding in AMC (through MJM) and a proposal Mr Farley wanted to put to him.

27    There are conflicting accounts of what was discussed when Mr Farley and Mr Mitchell met on 18 November 2023. Both depose that Mr Farley made a proposal to buy out MJM’s shares in AMC, however Mr Mitchell asserts that Mr Farley made a threat that if his proposal was not agreed, he would transfer AMC’s assets to another company and dissolve AMC with the effect that MJM’s shareholding would become worthless (alleged threat). Mr Farley denies the alleged threat.

28    On 6 December 2023, the solicitors for MJM and Mr Mitchell sent a letter to Mr Farley and Mr Barz asserting (for the first time) that Mr Mitchell had been improperly removed as a director of AMC in November 2022 and sought confirmation that he would be reinstated as a director. The letter also asserted (for the first time) that Mr Farley had made the alleged threat and stated that if various demands were not complied with, both Mr Mitchell and MJM would commence legal proceedings.

29    On 27 May 2024, MJM filed the originating application.

Order one - Restraint from removing Mr Mitchell as a director of AMC - contentions and consideration

Principles - interim injunctive relief

30    In seeking an order that until the hearing and determination of the proceeding or further order, Mr Barz and Mr Farley are restrained from taking any step to remove Mr Mitchell as a director of AMC, MJM not only seeks interim injunctive relief, it does so on the assumption that Mr Mitchell has not been removed. Whether that assumption is correct or not is one I am not in a position to determine at this stage.

31    Although the application is asserted by MJM to be urgent, I am not satisfied that is the case.

32    Interim injunctive relief will be granted if MJM demonstrates that there is a serious question to be tried as to whether it is entitled to the final relief sought in the amended originating application and the balance of convenience favours the making of such an order: Australian Broadcasting Corporation v O'Neill [2006] HCA 46; 227 CLR 57 at [65]-[72] per Gummow and Hayne JJ (with whom Gleeson CJ and Crennan J agreed at [19]).

33    MJM refers to clauses 28 and 29 of AMC’s Constitution and submits that Mr Mitchell has not been validly removed as a director.

34    Clause 28 of AMC’s Constitution provides:

A director may convene a meeting of directors at any time. The company secretary must convene a meeting if requested by a director to do so. The convenor convenes a meeting by giving written or oral notice of it to all directors. The convenor does not have to give notice of a meeting to a director whom the convenor reasonably believes to be outside Australia.

(emphasis added)

35    Clause 29 provides:

The resolutions passed at a meeting of directors for which notice was not given to all directors, and actions taken to implement those resolutions, are nonetheless valid if each director who was not given notice later agrees to waive the receipt of that notice.

(emphasis added)

36    Mr Mitchell deposes that prior to 13 June 2024, he did not know that a meeting of the board of directors had been held on 8 November 2022 and he had not seen the minutes of that meeting. Further, MJM submits that Mr Mitchell did not waive the non-receipt of notice of the meeting held on 8 November 2022. Consequently, MJM contends that the resolution passed at the meeting on 8 November 2022 is not valid such that Mr Mitchell has not been removed as a director of AMC.

37    The defendants contend that the application is problematic for a number of reasons.

38    First, the defendants contend that the injunctive order does not preserve the “status quo” as Mr Mitchell had been validly removed as a director of AMC on 8 November 2022 and is no longer involved in the management or affairs of AMC. The difficulty with that submission is that the “status quo” was created, on one view, by the (arguably) unlawful acts of Mr Barz and Mr Farley.

39    Second, the final relief that is sought (a declaration that Mr Mitchell was not validly removed) would not be rendered nugatory if the injunction were not granted. The defendants contend that, even if Mr Mitchell was not validly removed as a director in 2022, it does not then follow that the defendants would therefore be restrained from further removing him as a director. I accept that submission, but given the circumstances there may well be an issue should they attempt to do so.

40    Third, the defendants submit that MJM has not established the requisite serious question to be tried, or alternatively, the weakness of MJM’s case tells against the balance of convenience in granting an injunction. The defendants submit that although MJM contends Mr Mitchell’s removal as a director in 2022 was invalid because he did not receive notice of the board meeting held on 8 November 2022, nonetheless even if Mr Mitchell did not receive notice such that the resolution passed on 8 November 2022 was a result of a procedural irregularity, it does not follow that his removal as a director was invalid. The defendants rely on s 1322(4) of the Act.

41    Whereas s 1322(4) of the Act may provide an answer to the lack of notice, that is a submission about which I express no view at this point.

42    Alternatively, the defendants submit that Mr Mitchell was in fact removed by way of notice given in Mr Farley’s email of 10 November 2022 and that Mr Mitchell has since demonstrated both a conflict of interest (Oceantec) and a lack of involvement with AMC since November 2022. There seems to be no issue that Mr Mitchell has not been involved as a director of AMC since on or about 8 November 2022, however the remaining two submissions invite findings of fact which I am not in a position to make at this time.

43    Fourth, the defendants submit that an injunction to prevent the defendants from taking steps to remove Mr Mitchell as a director is nonsensical and hypothetical. I am not in a position to make the factual findings underpinning those submissions and I do not accept either of them.

44    Fifth, the defendants submit that, to the extent that the injunctive order would not be hypothetical, the balance of convenience lies against granting the injunction. The defendants submit that Mr Mitchell’s conflicts of interest and the acrimonious relationship between him and Mr Farley and Mr Barz would be problematic. By contrast, they contend that refusing the injunction would not cause Mr Mitchell any hardship or prejudice, let alone irreparable prejudice for which damage would not be an adequate remedy, as it would simply involve a continuation of the status quo for over the last 18 months.

45    I accept that the obviously acrimonious relationship between Mr Mitchell on the one hand and Mr Farley and Mr Barz on the other is a factor to be taken into account in assessing the balance of convenience. Whether Mr Mitchell has a conflict of interest is a matter that will need to be determined at a later date. I accept the plaintiff has not demonstrated any irreparable damage.

46    Sixth, the defendants argue that MJM’s delay in bringing the application tells strongly against the urgency of the matter and the granting of an injunction. I deal with that submission below when considering the balance of convenience.

47    Seventh, the defendants submit that a further problem with the application is that Mr Mitchell is not a party to the proceeding, yet he is the party who would naturally be seeking this form of relief. I do not accept that submission. The shareholder is MJM and it is in its’ interests which are alleged to be affected by the alleged actions of Mr Barz and Mr Farley.

Serious question to be tried

48    I am satisfied there is a serious question to be tried on the issue of whether Mr Mitchell has been validly removed as a director of AMC.

Balance of convenience

49    One of the factors to be taken to account in assessing the balance of convenience is the strength of the plaintiff’s case. In circumstances where a director has purportedly been removed at a directors’ meeting of which he was given no notice, and has not subsequently waived receipt of that notice the case, at least on its face, is strong. Whether s 1322 of the Act may be called in aid to cure what the defendants contend is an irregularity is a matter that cannot be determined at this stage.

50    Nonetheless, MJM through Mr Mitchell has taken no steps to be involved in the management of AMC from 8 November 2022, nor taken any steps to address his alleged removal as a director of the company.

51    Mr Mitchell deposes in his fourth affidavit to the reasons why he took no steps in relation to his purported removal as a director. Whereas the reasons given are understandable, delay in seeking interim injunctive relief is an important consideration. The delay in this matter is both significant in terms of length and in terms of consideration of the balance of convenience: Carlton & United Breweries (NSW) Pty Ltd v Bond Brewing New South Wales Ltd (1987) 76 ALR 633, 638; [1987] FCA 640. The delay is such that it is an important consideration against the granting of an interim injunction in the terms sought.

52    A further consideration is that it is quite obvious that the relationship, certainly as between Mr Mitchell and Mr Farley, is what may be described fairly as acrimonious. That, of course, does not mean that directors have to like each other or get along personally. However, the position goes much further than that. Mr Mitchell alleges a breach of directors’ duties against, at least, Mr Farley and both Mr Farley and Mr Barz allege Mr Mitchell has a conflict of interest. These allegations comprise more than mere disagreement. Under those circumstances, by making the order sought, there is a significant risk that the Court will be creating a dysfunctional board to the detriment of AMC. That is also an important consideration against the granting of an interim injunction in the terms sought.

53    Further, the order sought constitutes final relief and if made, entrenches that dysfunctional situation.

54    A still further consideration is the issue of what irreparable loss or disadvantage MJM faces should the order not be made. None is identified. That too is an important consideration against the granting of an interim injunction in the terms sought.

55    Although there is a serious question to be tried, it is for the reasons I have set out above that I am not satisfied that the balance of convenience is such as to warrant the order sought being made.

56    The application for an interim interlocutory injunction restraining Mr Farley and Mr Barz from removing Mr Mitchell as a director of AMC (assuming he still occupies that position) is dismissed.

Order two – Managerial restraint

57    In seeking an order that until the hearing and determination of the proceeding or further order, Mr Barz and Mr Farley be restrained from taking the specified steps, MJM seeks interim injunctive relief, the principles in relation to which I have set out above.

58    MJM submits that after Mr Mitchell was purportedly removed as a director of AMC, on 18 November 2023, Mr Farley threatened to strip the assets of AMC and dissolve the company thereby making MJM’s investment in AMC worthless.

59    The alleged threat is disputed. I am not in a position to determine if the alleged threat was made or not, however even if I was, any asset stripping prior to an application to wind up AMC is likely to be the subject of investigation.

60    Further, MJM’s position can be protected by requiring Mr Farley and Mr Barz, as directors of AMC, to give an appropriate period of notice to MJM and Mr Mitchell, as its sole director and shareholder, of the intention to dispose of any of AMC’s assets. An undertaking in those terms has been proferred by Mr Farley on behalf of himself and Mr Barz. Although, that undertaking is on the Court file in the sense it is in the Farley affidavit, nonetheless, subject to hearing from the parties, I will make an order in the terms I have described.

61    With respect to the order sought to restrain the conduct of AMC’s affairs, the defendants submit that such orders would not preserve the status quo but rather substantially alter it so as to constrain AMC’s business operations. In addition, the defendants submit that in circumstances where they have assured MJM that AMC’s business operations are being run in the normal course, and where Mr Farley and Mr Barz are prepared to provide an undertaking in the terms I have described above, there is no reason for the orders sought in the application.

Serious question to be tried

62    I am not satisfied there is a serious question to be tried. Since I am not satisfied there is a serious question to be tried, the issue of the balance of convenience does not arise.

Order three - access to documents - the parties’ contentions and consideration

63    MJM seeks an order pursuant to s 247A of the Act that AMC provide Mr Mitchell with unrestricted access to the books of AMC, including its’ Xero accounting software, bank accounts, bank account statements, email accounts, One Drive account, minutes of meetings of directors and minutes of meetings of shareholders.

Principles

64    Sections 247A and 290 of the Act provide respectively:

247A    Order for inspection of books of company or registered scheme

(1)    On application by a member of a company or registered 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.

290    Director access

Personal access

(1)    A director of a company, registered scheme, registrable superannuation entity or disclosing entity has a right of access to the financial records at all reasonable times.

Note: Section 1232B extends this section to the directors of the corporate director of a retail or wholesale CCIV.

Court order for inspection on director’s behalf

(2)    On application by a director, the Court may authorise a person to inspect the financial records on the director’s behalf.

(3)    A person authorised to inspect records may make copies of the records unless the Court orders otherwise.

(4)    The Court may make any other orders it consider appropriate, including either or both of the following:

(a)    an order limiting the use that a person who inspects the records may make of information obtained during the inspection;

(b)    an order limiting the right of a person who inspects the records to make copies in accordance with subsection (3).

65    MJM refers to the Full Court’s decision in Enares Pty Ltd v Nimble Money Ltd [2022] FCAFC 126; (2022) 294 FCR 31, [42] in which the Full Court said that seeking inspection of documents to ascertain whether there has been a breach of a directors’ duty or whether oppressive conduct has been engaged in, “is self-evidently within the scope of a proper purpose”: Barrack Mines Ltd v Grants Patch Mining Ltd (1987) 12 ACLR 357, 365. It may also be accepted that a legitimate purpose of inspection is the desire of a member to protect their investment in the company: Re Tolco Pty Ltd [2016] NSWSC 1069, [22]-[23]; Rowland v Meudon Pty Ltd [2008] NSWSC 381; (2008) 220 FLR 362, 371 [35], 372-373 [41], 373 [43]; Intercapital Holdings v MEH Ltd (1988) 13 ACLR 595, 602.

66    That may be so, but s 247A requires the applicant to satisfy the Court that it is acting in good faith and that the inspection is to be made for a proper purpose: Praetorin Pty Ltd V TZ Ltd [2009] NSWSC 1237; (2009) 76 ACSR 236, 244 [36]; Intercapital at 602.

67    Once the Court is satisfied of the required criterion, it is then a matter of whether the Court should exercise its’ discretion to make the order.

68    The Full Court in Enares observed that the authorities suggest: at [38]

(a)    The expression, “acting in good faith and that the inspection is to be made for a proper purpose”, is a composite one such that it ought not to be parsed and then an attempt made to satisfy each identified element: Barrack Mines Ltd v Grants Patch Mining Ltd (No 2) [1988] 1 Qd R 606 (Barrack Mines Ltd (No 2)); Knightswood Nominees Pty Limited v Sherwin Pastoral Company Ltd (1989) 15 ACLR 151, 156; Acehill Investments Pty Ltd v Incitec Ltd [2002] SASC 344, [29];

(b)    The proper purpose asserted must be the dominant or the primary purpose for seeking inspection, and if that is shown, it is irrelevant that the applicant may well secure some collateral or incidental benefits from obtaining an order: Unity APA Limited v Humes Limited (No 2) [1987] VR 474, 480; Barrack Mines (No 2) at 615; and

(c)    The proper purpose so identified must relate to each category of document which the applicant seeks to inspect: Rasley (Singapore) Pte Ltd v Financial & Energy Exchange Ltd [2020] FCA 1462, such that if the terms of the application are cast too widely, there is a real risk of undermining the veracity of the asserted purpose.

69    It will often be the case that the requirements of good faith and proper purpose inform each other. Self-evidently, an application which is not brought in good faith is not brought for a proper purpose. So too, an application brought in good faith but for an improper purpose will not enliven the Court’s discretion.

70    The Full Court in Enares at [39], [40], [43] observed that the question of whether the applicant brings the application in good faith turns on whether the applicant has established by admissible evidence that, in fact, it has the asserted purpose and that the application has been made to advance it.

71    The Full Court continued that the question of whether the application is brought for a proper purpose, is to be considered from the perspective of whether the applicant’s asserted purpose or object of inspection is a legitimate one given the nature of the statutory relationship between the applicant as shareholder on the one hand, and the company and its’ directors on the other: Ingram (As Trustee for The Ingram Superannuation Fund) v Ardent Leisure Ltd [2020] FCA 1302, [74]. That in turn has to be seen against the basic rule that shareholders do not ordinarily have access to the Courts to challenge directors’ managerial decisions: Acehill [29].

72    Hence mere dissatisfaction with such decisions cannot provide a basis for an order under s 247A: Re Augold NL [1987] 2 Qd R 297, 308; Cescastle Pty Ltd v Renak Holdings Ltd (1991) 6 ACSR 115, 117 although the Full Court in Enares observed at [47] that hostility by a shareholder towards the directors will not, of itself, be sufficient to exclude the existence of a proper purpose.

73    MJM contends that there are five issues that demonstrate that there is a case for investigation that warrants access to the books and records of AMC.

74    The first concerns the question of charges rendered by Broadsword Marine Contractors Pty Ltd to AMC.

75    In the first Mitchell affidavit, Mr Mitchell deposed to the circumstances surrounding Broadsword apparently charging AMC $190,000. The Farley affidavit annexes an email dated 24 September 2015 and three tax invoices dated 1 July 2020 which total $195,000. MJM contends that Mr Farley’s evidence alone raises more questions than it answers and does not sufficiently explain why the three invoices were written.

76    For the purposes of this application, I am satisfied that Mr Farley has explained the circumstances surrounding the Broadsword charge.

77    Second, MJM contends that since the meeting with Mr Mitchell on 18 November 2023, Mr Farley has diverted AMC’s income. MJM submits that on 13 June 2024, Mr Mitchell spoke with Ms Jodi Simpson of Duratec, a company which is presently hiring two moorings from AMC in Darwin harbour. During that telephone conversation Ms Simpson said that Duratec had recently received direction from AMC to pay mooring hire fees into an alternative bank account. Mr Mitchell has not yet received the email from Ms Simpson.

78    At the hearing of this application, I granted leave to the defendants to provide to the plaintiff and to the Court copies of the emails in question. The emails were provided on 20 June 2024. Upon consideration of those emails, I am satisfied that the direction to Ms Simpson is to pay the mooring hire fees into an AMC account.

79    Third, MJM refers to the issue of the “Management Fee” of $129,838 and “Repairs and maintenance” of $226,925 recorded in the draft Financial Report for the financial year ended 30 June 2023 (FY23). MJM submits that no management fee was paid in the financial year ended 30 June 2022 nor in the period prior to 8 November 2022. Further, MJM submits that the fact that the “Repairs and maintenance” expense in FY23 is almost three times higher than in the financial year ended 30 June 2022, and almost double the expense of $127,816 in the financial year ended 30 June 2021, requires investigation.

80    At the hearing, the defendants were unable to explain to whom the management fees were paid nor produce documents in relation to the management fee. That is a matter which I am satisfied warrants investigation.

81    The fact that the amounts in the draft 2023 Financial Report for MJM records an increase in repairs and maintenance is in the overall context of the draft Financial Report, not such as to warrant an order under s 247A.

82    Fourth, MJM asserts that Mr Farley’s company, Wavelength, repaired assets which belong to Marine Construction & Maintenance Services Pty Ltd, a company in which Wavelength owns all of the shares. Further, it contends that it is not in the ordinary course for an arms-length hirer of equipment to pay for the repair and maintenance of the hired equipment and such circumstances are cause for concern.

83    Mr Farley deposes the repairs were undertaken on vessels AMC was using at the time to support its’ operations. To allow AMC to continue to use the vessels and continue its operation, the repairs were paid for by AMC.

84    I accept that paying for the repairs to assets belonging to another company in circumstances where a shareholder of AMC owns all the shares in that other company is a matter that may warrant investigation, however Mr Farley has explained the reason and I am not in a position to determine at this stage the appropriateness of those actions.

85    Fifth, MJM submits that there is the issue of marina berth F05, which was sold by Mr Farley to AMC. According to MJM, AMC did not receive rent from the hire of the marina berth and Mr Farley kept the rent after the sale of the marina berths. Mr Farley denies that allegation. It is not a matter I can determine at this time.

86    The defendants contend that MJM has not satisfied the requirements for an order to access the books and records of AMC pursuant to s 247A of the Act for a number of reasons.

87    First, the defendants submit that MJM misconceives the nature of s 247A relief. They note that s 247A relief is final relief but deposes of the fact that MJM’s application is effectively pre-action discovery and was filed in circumstances where MJM has already commenced proceedings.

88    I accept that submission.

89    Second, the defendants submit that s 247A relief is not intended as a substitute for discovery and that the relief sought would enable Mr Mitchell to have complete access to every document of the company akin to an audit. In particular, the defendants refer to Mesa Minerals Ltd v Mighty River International Ltd [2016] FCAFC 16, [22] (Katzman J) in which the Full Court said that “the procedure under s 247A is not intended to be as wide-ranging as discovery so that the general rule is that inspection will be limited to such documents as evidence the results of board decisions, rather than all board papers leading to decisions, but there may be occasions when it is proper to permit inspection of board papers: Acehill at [31].”

90    I accept that submission.

91    Third, the defendants contend that MJM has not established that it is acting in good faith in circumstances where MJM has delayed bringing the application, and until after MJM had commenced proceedings on 27 May 2024. I am not prepared to find that MJM is not acting in good faith. The delay in bringing the application has relevance to the first order sought restraining the removal of Mr Mitchell as a director but the matters the subject of the s 247A application arise out of AMC’s draft 2023 Financial Report.

92    Fourth, the defendants submit that MJM has failed to establish that it has brought the application for a proper purpose. They contend, in effect, that the predominant purpose of the application is to assist MJM to understand whether there have been directors’ breaches and oppression, but in circumstances where proceedings have already commenced. Further, they submit that the plaintiff has failed to explain the urgency of the application.

93    I accept that MJM has failed to explain the urgency of this application and as I have noted, I do not consider it is urgent. A predominant purpose directed at determining whether there has been a breach of director’s duties or whether there has been oppressive conduct is within the scope of a proper purpose: Barrack Mines at 365.

94    Finally, contrary to MJM’s submissions that its’ application for inspection is based on “something beyond mere belief or assertion” (Enares, [47]), the defendants contend that MJM’s oppression claim is misconceived as it is based on an alleged threat (which the defendants deny) rather than any actual oppressive conduct. Further, they submit that the documents which AMC has recently provided pursuant to orders dated 5 June 2024, show that there is no oppressive conduct, that the value of AMC’s equity continues to increase and that the profit has increased year on year since 2020.

95    As I have said above, I am not in a position to determine if the alleged threat was made or not. As to the increase in equity and profit over successive financial years, such increases do not preclude an ultimate finding of oppression.

96    I consider that the request for access to documents pursuant to s 247A is made in good faith and for a proper purpose. That said, the request is far too wide and I am only prepared to order that MJM be provided with access to the documents relating to the payment of management fees of $129,838 for the financial year ended 30 June 2023.

97    There will be an order accordingly.

CONCLUSION

98    The defendants requested that they be heard on the terms of any orders I might make.

99    I am prepared to accede to that request and the parties are to confer about the terms of any orders to be made arising out of these reasons.

Associate:

Dated:    27 June 2024

SCHEDULE OF PARTIES