from lawyersGetting acess to DFM booksTherelevant principles
In Mesa Minerals at [22], Katzmann J (with whom Siopis andGilmour JJ agreed) summarised thirteen principles which were relevant to anapplication under s 247A. Her Honour noted that these principles were drawnfrom the summary propositions set out by Debelle J in Acehill Investments Pty Ltd v Incitec Ltd [2002] SASC 344; 223 LSJS 97 (“Acehill Investments”) at [29] and the additional principles identified by Gordon Jin Hanks v Admiralty Resources NL [2011] FCA 891; (2011) 85 ACSR 101 at[32].
The principles (omitting references to thecases) are as follows:
· The stipulation thatan application be made in good faith and for a proper purpose is a compositenotion rather than two distinct requirements. Acting in good faith andinspecting for a proper purpose means acting and inspecting for a bona fideproper purpose.
· Good faith and properpurpose must be proved objectively.
· “Proper purpose” meansa purpose connected with the proper exercise of the rights of a shareholder asshareholder and not, for example, as a litigant in proceedings against thecompany or as a bidder under a takeover scheme.
· The onus of proof ison the applicant.
· An applicant who has asignificant holding and who has been a shareholder for “some considerable time”will more easily discharge the onus than one who has recently acquired a tokenholding.(Note: See also Katzmann J’s comments at [38]-[39]).
· It is not necessarythat the applicant show that its interests are different to those of othershareholders. (Note: Acehill Investments was to the contrary, but Katzmann Jobserved at [23]-[25] that a different view had been expressed by other cases).
· Nor is it necessarythat the applicant have sufficient evidence to bring or make out an action; itis enough that the issue raised by the applicant is “substantive and notfanciful”, not “artificial, specious or contrived”.
· Pursuing a reasonablesuspicion of breach of duty is a proper purpose.
· Provided that theapplicant’s primary or dominant purpose is a proper one, it is not to the pointthat an inspection might benefit the applicant for some other purpose.
· Applicants do notnecessarily lack a proper purpose merely because they are hostile to otherdirectors.
· Neither the fact thatan applicant may have had sufficient information earlier nor the fact that anapplicant may have other means of obtaining the information is detrimental toan application under the section. (Note: See also [50]-[68]).
· The procedure under s247A is not intended to be as wide-ranging as discovery so that the generalrule is that inspection will be limited to such documents as evidence theresults of board decisions, rather than all board papers leading to decisions,but there may be occasions when it is proper to permit inspection of boardpapers.
· The Court has aresidual discretion whether to order inspection.
Other matters to note
Other matters to note from Mesa Minerals includethe following:
· At [78]: Delay inbringing an application may weigh against the grant of an inspection order ifthe delay is indicative of acquiescence, or the applicant has “sat on itshands, so to speak” or the delay has caused prejudice to the company.
· At [82]: The Corporations Act does not exclude foreign companies from making anapplication under s 247A(1) and there is no authority for the proposition thatadditional limitations should be placed on foreign investors in Australiancompanies.
· At [83]-[84]:Reference was made to the following passage in the judgment of Goldberg Jin Re Style Limited [2009] FCA 314; (2009) 255 ALR 63 at[71] which has been followed by a number of other judges at first instance andthe passage was applied to the facts of the case:
“In granting an order forinspection under s 247A it is not appropriate to allow a wholesale and generalinspection of Style’s books. This would cause unnecessary disruption tothe company. In any event the books to be inspected should be books that bearon, and be particularly relevant to, the purpose for which the inspection issought.”
