ACP v Southdown

[2001] NSWSC 155

CITATION:	ACP v Southdown [2001] NSWSC 155
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50160/99
HEARING DATE(S):	16.2.2001
JUDGMENT DATE:	14 March 2001
PARTIES :	ACP Magazines Pty Ltd v Southdown Publications Pty Ltd & Anor
JUDGMENT OF:	Hunter J

COUNSEL :	Applicant: A J Meagher SC & M J Steele Respondents : S J Gageler & I R Pike
SOLICITORS:	Applicant: Gilbert & Tobin Respondents: Blake Dawson Waldron
CATCHWORDS:	Contract - practice and procedure - construction of inspection of records clause - right to copy - orders declaratory of previous orders.
CASES CITED:	Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981-2) 149 CLR 337 Reardon Smith Line v Hansen-Tangen [1976] 1 WLR 989 (The Diana Prosperity) Mutter v Eastern and Midlands Railway Co (1888) 38 Ch D 92 Downey v Pryor (1960) 103 CLR 353 Copyright Agency Ltd v Haines (1982) 1 NSWLR 182 Nelson v Anglo-American Land Mortgage Agency Company [1897] 1 Ch 130
DECISION:	I make orders in terms of paragraphs 1(a), (b) and (c) of the amended notice of motion, omitting from paragraph (a) the words "or nominees", omitting from paragraphs (b) and (c), the words "nominees or". The defendants are to pay the costs of the motion.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

HUNTER J

WEDNESDAY 14 MARCH 2001

50160/99 ACP MAGAZINES PTY LIMITED -V- SOUTHDOWN PUBLICATIONS PTY LIMITED

REASONS FOR JUDGMENT

1    The following consent orders were made in these proceedings on 11 February 2000:

“1. Within 6 weeks of receipt of notice in writing from the plaintiff that the plaintiff wishes to inspect the books and records of TV Week in accordance with clause 5 of the Deed dated 6 August 1980 between Australian Consolidated Press Limited, News Limited and Southdown Publications Pty Limited (the “Deed”), the first defendant make and the second defendant procure that he make available for inspection by the Chairman for the time being of the plaintiff or his nominee at a place reasonably accessible to him, all the books of account, records, correspondence and other records of all transactions relating to the Business of “TV Week” for the period October 1991 to the date of this order, such inspection to be on the terms set out in clause 5 of the Deed.

2. The Second Defendant pay the Plaintiff’s costs of these
proceedings.

3. The proceedings otherwise be dismissed.”

2    Those orders have yet to be entered.

3    Clause 5 of the deed, referred to in order 1, was in the following terms:

“5. Accounts
News shall keep or cause to be kept proper books of account and other records of all the transactions relating to the Business which accounts and records shall be kept by or under the supervision of News. Such books of account, records, correspondence and other relevant documents shall be at all reasonable times made available by the Chief Executive for the time being of News for inspection by the Chairman for the time being of ACP or his nominee at a place which is reasonably accessible to the said Chairman PROVIDED HOWEVER that a person nominated by the Chief Executive for the time being of News shall be entitled to be present at all times during the said inspection.”

4    It is not in dispute that as a consequence of various assignments and novations, the applicant has assumed the benefits and obligations of Australian Consolidated Press Limited under the deed, while Southdown Publications Pty Limited has assumed the benefits and obligations of News Limited thereunder. For convenience of reference the applicant is referred to as ACP and the respondent is referred to as News.

5    Of the “books of account and other records of the transactions” referred to in cl 5, News made the following admissions:

“1. The books of account and other records of the transactions relating to the publication, editing, production and distribution of the magazine “TV Week”:


(a) are not kept separately from the books of account and other records of transactions relating to the publication, editing, production and distribution by the second defendant or its related companies of other magazines; and

(b) are sufficient to fill several hundred archive boxes;

2. Profit and loss statements relating to ‘TV Week” are prepared on a weekly (estimates only) and on a monthly basis using information extracted from the books of account and other records of the second defendant.”

6    Although expressed in the present tense, the admission was made for the purpose of construing cl 5. I understand that records of that description may be taken as being within the contemplation of the parties as at the date of the deed.

7    The proceedings before me have been brought by ACP on amended notice of motion seeking the following orders:

“ 1. - a declaration orders that, on its proper construction, Order 1 of the orders made in these proceedings on 11 February 2000 :
1. (a) allows inspection by the Plaintiff of the books of the records therein referred to by the Chairman by his nominee or nominees, acting with such assistance from any other person as he, she or they may reasonably require (“assistants”): Where Order 1 made by the Court on 11 February 2000 makes reference to the “Chairman for the time being of the Plaintiff or his nominee”, such reference is to be construed in accordance with clause 19 (h) of the Deed dated 6 August 1980 between Australian Consolidated Press Limited, News Limited and Southdown Publications Pty Ltd, and means ‘Chairman for the time being of the plaintiff or his nominee or nominees. ”
2. (b) permits such nominees or assistants to make notes (in either hard copy or electronic form, or by use of an electronic recording device) of or in relation to the information contained in such books and records ;
(c) permits such nominees or assistants to take copies of such books and records in such manner and such form as may be convenient to them, including by the use if an electronic copying or recording device.
2. Alternatively, an order that Order 2 of the orders made by the Court in these proceedings on 11 February 2000 be varied so as to expressly provide that any inspection requested by the Plaintiff pursuant to that order is to be on terms which include the terms set out in paragraph 1(a) -(c) of this Amended Notice of Motion .”

8    Whether relief granted takes the form of a variation of orders of 11 February 2000, or a declaration as to the ambit of that order, the parties accept that the Court has jurisdiction to make such an order. Further, in either case, it is agreed that the granting of the relief sought is tantamount to a declaration as to the construction of cl 5 of the deed.

9    The circumstances giving rise to the application are set out in the affidavit of Mark Geoffrey O’Brien sworn 24 October 2000.

10    On 19 July 2000 ACP’s solicitors wrote to News’ solicitors giving notice of a required inspection of the records in accordance with cl 5 of the deed. The notice nominated three members of the firm of Price Waterhouse Coopers, as nominees of ACP’s chairman, to carry out the required inspection.

11    Prior to any inspection taking place, News notified ACP that it would be subject to the following conditions:

“1. the inspection will be limited to one person;
2. no computers may be used during the inspection;
3. no photocopies may be made of the documents inspected;
4. the inspection will be supervised by an officer of… (News);
and
5. the nominee(s) must sign confidentiality undertakings in the form provided to …(ACP by News).”

12    ACP’s solicitors objected to those conditions as follows:

“With the exception of conditions 4 & 5 above, the above conditions are unreasonable and oppressive.
While our client reserves its rights to obtain photocopies of the books and records inspected, we are instructed that it is willing to accede to condition 3 above for the purposes of its initial inspection on the basis that up to three persons may inspect the books and records and those persons may record details of the documents inspected on laptop computers which they bring with them”.

13    By facsimile of 15 September 2000 from News’ solicitors to ACP’s solicitors, the latter was informed that News did not agree to those terms of inspection, for the following reason:

“Your client is clearly attempting to audit the books and records of TV Week via the inspection process referred to in clause 5 of the Deed. This is not the type of inspection provided for by clause 5. Had the parties agreed to an audit inspection process, such a provision could have been incorporated into the Deed. However this did not occur.”

14    News opposes the orders sought by ACP on the basis that the inspection of records under cl 5 of the deed is limited to inspection by ACP’s chairman, or a single nominee of that person, and does not extend to the taking of notes or the making of copies of documents so inspected : the only right conferred by cl 5 being one of an inspection confined to looking at the records.

15    In supplementary submissions of 19 February 2001, it was further contended on behalf of News that the chairman or the nominee was not entitled to have the benefit of “secretarial and administrative assistance … in exercising the right to inspect”, on the basis that such assistants would be engaged in the inspection and, consequently, their presence would be inconsistent with the limitation of inspection to one person.

16    ACP’s position is that the clause does not limit inspection to one person, and that, even if the clause was to be so construed, it would not preclude inspection by the chairman, or the chairman’s nominee with assistance which could include the following:

“(a) locating and identifying relevant documents from the books and records of the magazine, at the direction of the nominee;

(b) collating and summarising information contained in the relevant documents, at the direction of the nominee, using such aids as a laptop computer or a dictaphone;

(c) making copies of relevant documents, at the direction of the nominee, using a portable document scanner or photocopy machine.”

17    In aid of construction, News tendered the evidence of Michael Ernest Eyers (Eyers), a solicitor who acted for News in negotiations leading up to the execution of the deed. That evidence was objected to by senior counsel for ACP on the basis that it was an impermissible resort to extrinsic evidence.

18    By agreement between the parties, the evidence was received subject to objection, on the basis that I would rule upon its admissibility in the course of giving reasons for judgment.

19    Annexed to Eyers’ affidavit of 20 December 2000 was a copy of a draft deed which be believed to be the “earliest in time” drafted by ACP’s solicitor. He was of the belief that “there would have been an earlier draft” prepared by him, although he had not seen such a document in preparing his affidavit.

20    Cl 5 in the draft, said to have been prepared by ACP’s solicitor, was in the following terms:

“ 5. Accounts
News shall keep separate and proper books of account and other records of all its transactions relating to the Business which accounts and records shall be kept by or under the supervision of News. Such books of account, records, correspondence and other documents shall be available at a place which is reasonably accessible to ACP and shall be open for inspection at all reasonable times by ACP or its duly authorised representative and ACP shall at all reasonable times have free access to and the right to inspect and copy the same.”

(The first draft)

21    Also annexed to the Eyers’ affidavit was a draft deed which he had drafted and which post dated the first draft. Cl 5 of Eyers’ draft was in the following terms:

“5. Accounts
News shall keep or cause to be kept proper books of account and other records of all the transactions relating to the Business which accounts and records shall be kept by or under the supervision of DP or SP. (Access arrangements).
(The second draft)

22    A further draft deed dated 31 July 1980 was evidenced by Eyers as one drafted by him, which post dated the first and second drafts and contained a cl 5 in the following terms:

“5. Accounts

News shall keep or cause to be kept proper books of account and other records of all the transactions relating to the Business which accounts and records shall be kept by or under the supervision of News. Such books of account, records, correspondence and other documents deemed necessary by the Chief Executive of ACP and News to settle any matter in dispute shall be made available at a place which is reasonably accessible to ACP for inspection by the Chief Executive of ACP.”
(The third draft)

The words struck out formed part of the draft clause as submitted by Eyers to ACP’s solicitor.

23    Although recalling no specific details of a meeting of 31 July 1980 with ACP’s solicitor to discuss the third draft, Eyers recalled that cl 5 of the draft had been discussed and evidenced a file note of ACP’s solicitor made at a meeting of that date in the following terms:

“shall be made available by the Chief Exec of News for inspection by the Chief Exec or his nominee of ACP or his nominee on request by the CE of ACP. The Chief Exec or his nominee of News shall be entitled to be present.”
(The fourth draft)

I assume that the striking out of words in the third draft was related to matters discussed in this meeting of 31 July 1980.

24    In a further affidavit sworn 13 February 2001, Eyers elaborated upon the negotiations referred to in his earlier affidavit as follows:

“3. The events referred to in my 20 December 2000 affidavit occurred over twenty years ago and I do not recall the precise words of the conversations concerning clause 5 or precisely when they took place, but, having reviewed the Allen’s file, I believe that a conversation took place during the conference on 31 July 1980 and that it is likely other conversations regarding clause 5 took place by telephone. As I can recall the agreement that was reached in respect of clause 5 I am able to give the effect of discussions between me and McWilliam on that subject.”

25    In that affidavit, supplemented by some oral evidence, Eyers said that “in one of the discussions” between him and ACP’s solicitor in relation to cl 5 of the first draft, Eyers said the following:

“Your inspection clause is too wide. The whole idea is that News is going to have management control without any day to day involvement by ACPL.”
(The first conversation)

26    Similarly, in “one of the discussions” with ACP’s solicitor, Eyers said that he made the following statement:

“ The arrangement is for TV Week to be managed by News. If ACPL is unhappy with how things are going then
Kerry Packer and Rupert Murdoch will talk about it. There won’t be detailed financial reporting or inspections.”
(The second conversation)

27    It is not clear from Eyers’ February affidavit at what stage that statement was made by him. It may have been made at the conference of 31 July 1980 or on an earlier occasion.

28    According to Eyers, there was a further discussion with ACP’s solicitor in which he made the following statement in relation to a draft cl 5:

“In case either of them [Kerry Packer or Rupert Murdoch] is not available or wants to delegate any actual inspection then each should be able to have a nominee do it for him.”
(The third conversation)

29    Again, it is not clear whether that statement was made at the 31 July 1980 conference or at some earlier time.

30    On another occasion Eyers said he made the following statement in relation to cl 5 of the draft current at the time:

“This document is to give effect to a simple deal which Kerry Packer and Rupert Murdoch have negotiated
directly.”
(The fourth conversation)

31    Of those statements Eyers testified as follows:

“To the best of my recollection…[ACP’s solicitor] did not disagree with any of the statements made set out in …. this affidavit”.

32    He further testified as follows:

“… At no time during the course of discussions between me and [ACP’s solicitor] concerning the drafting of the Deed did I say to him or he say to me that the right of inspection in clause 5 was to be included in order to enable an assessment of the value of the business for the purposes of making an offer pursuant to the Savoy clause.”

33    The bases upon which the admissibility of that material has been pressed by senior counsel for News was twofold. First, the construction advanced on behalf of ACP was considered by the parties during the course of negotiations and mutually rejected, relying upon what was said by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981-2) 149 CLR 337 at 352-3, namely:

“There may perhaps be one situation in which evidence of actual intention of the parties should be allowed to prevail over their presumed intention. If it transpires that the parties have refused to include in the contract a provision which would give effect to the presumed intention of persons in their position it may be proper to receive evidence of that refusal. After all, the court is interpreting the contract which the parties have made and in that exercise the court takes in account what reasonable men in that situation would have intended to convey by the words chosen. But is it right to carry that exercise to the point of placing on the words of the contract a meaning which the parties have united in rejecting? It is possible that evidence of mutual intention, if amounting to concurrence, is receivable so as to negative an inference sought to be drawn from surrounding circumstances.”

34    The second basis advanced for the admissibility of this material was that it represented surrounding circumstances which evidenced the “genesis”, “the background” and the “commercial purpose” of the deed, taking up those expressions where used by Lord Wilberforce in Reardon Smith Line v Hansen-Tangen [1976] 1 WLR 989, in a passage referred to by Mason J in Codelfa at 350, namely:

“In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating”.

35    In the same speech Lord Wilberforce said that what was required of the court in construing a contract was “to place itself in thought in the same factual matrix as that in which the parties were”: that passage also being quoted without dissent by Mason J in Codelfa (at 351).

36    Mason J’s conclusion of the true rule of construction was expressed in the following way :

“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more that one meaning”
(at 352).

37    Consistent with that authority I think it is admissible in aid of construction to have regard to the nature and magnitude of the subject records in contemplation of the parties, along with other commercial aspects of the transaction from which one might gain assistance in eliciting the intention of the parties in providing for inspection of records in cl 5 of the deed.

38    In my view, the evidence of Eyers of the drafts of the deed and of communications between the solicitors for the parties to the deed during negotiations is inadmissible.

39    None of the material, in my view, evidenced a “mutual intention” that excluded the construction of cl 5 advanced on behalf of ACP, nor did it evidence the “background”, “commercial purpose” or “genesis” of the deed.

40    The commercial background of the deed I think is evident from the recitals and terms of the deed itself.

41    Under the deed ACP sold its publishing rights in respect of magazines called TV Times and TV Guide to News, the publisher of TV Week, upon terms that the business of publishing those three magazines would merge and be conducted by News, with ACP and News, thereafter, sharing the profits or losses generated by that business, referred to in the deed as “the Business”.

42    The full control and exclusive management of the Business rested with News as against ACP (clause 4.1), with ACP having no entitlement “to take any part in or in any way interfere in the conduct or management of the Business” (cl 4.2).

43    News was obliged to keep ACP fully informed in relation to the activities of the Business as follows:

“4.5 News shall keep ACP fully informed on all current matters of a material nature arising out of the activities of the Business and in addition furnish ACP at calendar monthly intervals or as otherwise agreed with full reports on the said activities, the results thereof and the costs.”

44    In arriving at the net profit or net loss to be shared by ACP and News the latter was obliged “at all times and in all respects [to] act justly and fairly and exhibit proper and just regard to the interests of ACP”. It was submitted by senior counsel for News that this provision reflected a commercial background to the deed, as one resting in mutual trust. To me it suggests otherwise, in so far as it was found necessary to expressly provide for an obligation to act in the manner quoted.

45    That was followed by the provision in cl 5 obliging News to keep the specified records relating to the Business and to make them available for inspection by ACP’s chairman or “his nominee”.

46    Cl 7 of the deed provided for what is known as a Savoy clause which enabled a party to effectively bring the venture to an end by offering its interest to the other, who had the choice of accepting it or being compelled to sell its interests on the same terms to the offering party.

47    The establishment of the Business restricted neither ACP nor News from in any way “carrying on any business or publishing any magazine” in competition with the magazine published under the merger. (cl 8).

48    The deed contained a confidentiality provision, the operation of which is not entirely clear. The parties were required to keep information in relation to the Business confidential and were precluded from disclosing it to others, with the following exceptions:

a) a party could disclose that information to a related corporation;

b) where required by legislation or rules of a recognised stock exchange, information could be disclosed by a party;

c) information could be disclosed to a bona fide potential lender or underwriter in connection with any loan or underwriting sought to be arranged by a party making the disclosure;

d) disclosure could be made to “independent consultants for the purpose of assisting that party in relation to any matter arising” under the deed (cl 10).

49    An interpretation clause provided, inter alia, that “unless the context shall otherwise require … words importing a singular or plural number shall extend to and include the plural or singular number respectively…” (cl 19).

50    To summarise, the commercial context to be extracted from the deed, in my view, is one in which two publishers of like magazines agreed to merge those businesses leaving it under the control of one, but, in the process, imposing no restriction on the rights of the parties to compete with the merged business. Having regard to the nature of the consideration for the sale of ACP’s interest to News, essentially one which involved the sharing of profits and losses in a merged magazine business to be conducted by News, and to the manner in which the arrangement could be brought to an end through the Savoy clause, there were balancing obligations upon News to keep ACP fully informed in respect of the “activities, the results thereof and the costs” of the Business (cl 4.5) : to “keep proper books of account and other records of all the transactions relating to the Business” and to make available to ACP, not only those records, but “correspondence and other relevant documents” to ACP’s “Chairman”, or “his nominee” (cl 5).

51    Consistently with that relationship between ACP and News, their dealings were to be treated as confidential, with limited right of disclosure to third parties. That aspect of confidentiality I think has some bearing on the question of the proper construction of cl 5 that has arisen on this application.

52    The confidentiality clause related to “all information obtained in relation to this Deed and the Business” and it permitted disclosure of that information “to independent consultants for the purpose of assisting that party in relation to any matter arising” under the deed. Quite clearly, a “matter arising” under the deed would include, for example, the operation of the exercise of a party’s rights under the Savoy clause.

53    It would be within the reasonable contemplation of the parties that the offering party may first seek the advice of consultants for the purpose of settling upon an appropriate offer. That could entail making available to the consultants information available and obtained under cl 5. Having regard to the concession on behalf of News as to the nature and magnitude of just the financial records of the Business, I think it would make a mockery of the commercial objectives of the deed to limit the information available under cl 5 to that which could be obtained under an inspection as stipulated by News.

54    Furthermore, given the exclusion of ACP from the management of the Business and to the nature of its rights and obligations in relation to profits and losses of the Business, I think it is obvious that cl 5 was intended to play a part in providing a balancing mechanism to ensure that ACP was not disadvantaged by that exclusion. To contend, as News does, that the protection could be achieved by the manner of inspection of records insisted upon by it, I think, lacks reality, particularly when one has regard to the magnitude of the records available for inspection.

55    It was submitted that the nomination of the chairman under cl 5 as the person to inspect conveyed a contemplation of inspection at some personal level. I fail to see that in light of the provision for the inspection to be carried out by a nominee.

56    It was also submitted that a restrictive construction of cl 5 was warranted for the reason that, absent such a restriction, information would be made available to ACP at a level which could disadvantage News through the absence of any restriction on competition under the deed. The difficulty with that argument lies in the fact that News itself is free to compete as it sees fit with the Business and I see nothing in the deed which would justify any intention on the part of the parties that there should be that imbalance in relation to the use of information under the deed.

57    It was also submitted that the parties must be taken to have carefully chosen the form in which the information could be made available in providing for “inspection” of the records of the business.

58    It was contended that if the parties had intended to provide for the type of inspection contemplated by ACP it would have made provision within the deed for the copying of records and the like. The difficulty with that submission in my view lies in the nature of the commercial arrangement underlying the deed and the capacity of that context to impart colour to the terms chosen by the parties: in particular, to give to “inspection” a meaning which carries with it the reasonable means of extracting and retaining information available to ACP under cl 5.

59    Analogous authority for that approach I think may be found in a number of cases. In Mutter v Eastern and Midlands Railway Co (1888) 38 Ch D 92, the Court of Appeal examined the “incidental” right of copying attaching to a right to inspect at least “so much of it as [is required] for some legitimate purpose” (at 105). That case concerned the right of inspection and perusal of the register of debenture stock holders given to such stock holders and others by s 28 of the Companies Clauses Act 1963 (Imp). At first instance, Chitty J said the following in respect of an argument that the subject company had no liability to enable copies to be made:

“The silence of the Legislature as to taking copies appears to me to be immaterial.

I think that when a man is inspecting, he may make bona fide use of his inspection and it follows from his right to inspect that he can make copies”
(at 98).

60    On appeal Lindley LJ made the following observations:

“I have not been able to find a single case either at law or in equity in which the Court has ever held that a person having a right to inspect a document has not also a right to take a copy of it, or of so much of it as he requires for some legitimate purpose . The right to take a copy is treated as incidental to the right to inspect, and the common form of orders to inspect is to inspect and take copies. This seems to be the common form at law when a mandamas is granted, and when an order is made on a motion in a pending action, and this is, and, so far as I have been able to discover, has always been, the common form of an order to inspect when made in Chancery. A great number of cases on this subject will be found collected in the well-known note to Rex v Fraternity of Hostmen in Newcastle-upon-Tyne and in Chittys Archbold ; and an examination of these and other authorities has led me to the conclusion that, speaking generally, a right to take copies is always treated as incidental to a right to inspect. (See also Browning v Aylwin; Rex v Lucas; Rex v Merchant Tailors’ Company; In re Burton and The Saddlers’ Company. I say speaking generally, because I have found an instance of a special Act relating to a company in which a right to inspect has been granted, but a right to take copies has been expressly excluded….

“When the right to inspect and take a copy is not expressly conferred the extent of such right depends on the interest which the applicant has in what he wants to copy, and on what is reasonably necessary for the protection of such interest . The common law right to inspect and take copies of public documents is limited by this principle, as is shewn by the judgment in Rex v Justices of Staffordshire ; so is the common law right of the member of a corporation to inspect and take copies of the documents of the corporation: Rex v Merchant Tailors’ Company. ” (emphasis added)
(at 105, 106)

61    In Downey v Pryor (1960) 103 CLR 353 the High Court examined the right of an elector under s 215 of the Local Government Act 1919 to inspect Local Government accounts, there being no method of inspection prescribed. Kitto and Windeyer JJ expressed the view that the right of inspection carried an incidental right to take notes of the subject matter of the inspection. The following passage appears in the judgment of Kitto J:

“The lastmentioned ground may be disposed of at once. Kinsella J held that a right to take notes of the contents of the books of account was incidental to the right of inspection, and he referred to the judgment of Lindley LJ in Mutter v Eastern and Midlands Railway Co . Accordingly if there had been no other point in the case his Honour would have allowed the appeal. I entirely agree in his Honour’s view, and I see no advantage in elaborating the point.”

(at 361)

62    A similar observation was made by Windeyer J as follows:

“I agree with Kinsella J that a right of inspection carries by implication a right to take copies or extracts. This is established by the judgment in the Court of Appeal in Mutter v Eastern and Midland Railway Co . Mr Rath suggested that the decision could be distinguished because of the contrast made in one passage in Lord Lindley’s judgment, between a section that there imposed a penalty and one that did not. The same argument was addressed to Stirling J in Nelson v Anglo-American Land Mortgage Agency Company and decisively rejected - I respectively think rightly. A right to take copies does not accompany a right of inspection if it be impliedly excluded by express provisions in the statute enabling copies to be had on payment: In re Balaghat Gold Mining Company. But that is not the case here. A right of inspection need not ordinarily be exercised personally. A person having the right may ordinarily appoint an agent, such as an accountant, to make the inspection for him : Norey v Keep, Dodd v Amalgamated Marine Workers’ Union; R v Bedwellty U.D.C; Ex parte Price; Edman v Ross . (Emphasis added)
(at 366 -367)

63    Downey was applied by McLelland J in Copyright Agency Ltd v Hai-+nes (1982) 1 NSWLR 182 at 199-200, where his Honour considered a right of inspection of records pursuant to s 203E (4) of the Copyright Act 1968 (Cth). That section empowered an owner of copyright or the agent of the owner to inspect library records. McLelland J examined that right of inspection in the following way:

“The final question which arises in relation to s 203E is whether the right of inspection conferred by s 203E(5) includes a right to take copies or notes of all the records inspected, and in particular of those relating to works in respect of which the person carrying out the inspection is nether the copyright owner nor his agent. It was argued for the defendants that the situation under s203E (5) is similar to that instanced by Lindley LJ in Mutter v Eastern and Midlands Railway Co (1888) 38 ChD 92, at pp 105, 106, namely, where:
“a person may have a right to inspect the whole of a book or document in order to find out what part of it really concerns him, and his right to inspect may therefore extend to much more than he has a right to take a copy of.”
It does not appear to me, however, that the right to inspect all relevant records regardless of the identity of the copyright owner, which follows from the giving of a notice under s203E(2) (a), and the contrast with the position arising by virtue of a notice given under s203E(2) (b), is really consistent with such a limited approach to the right of inspection under s203E(5). It may very well be that it was contemplated by the framers of the legislation that in practice inspections under s203E(5) would be for the most part likely to be carried out not by individual copyright owners, but by an agent acting for a large number of individual copyright owners, in circumstances where a bulk or global recording by such agent of data contained in all the relevant records for later processing and analysis, was the most effective method of inspection, or indeed the only practicable method of giving full effect to the right of inspection in such a case . It may also have been contemplated that the adoption of such collective inspection procedures would be conducive to the effective protection of the rights of property and remuneration conferred by the Act .

Having regard to such considerations as these, and to the absence of any indication in the Act that the relevant records are in any sense confidential as between the copyright owner of a copied work and the copier thereof, I consider that in respect of all records which may be inspected the prima facie rule applies that a right to inspect documents carries with it an incidental right to record the contents thereof : see Downey v Pryor (1960) 103 CLR 353 , at pp 361, 366. (Emphasis added)

(at 199-200)

64    Nelson v Anglo-American Land Mortgage Agency Company (1897) 1 Ch 130 was another example of construction of legislation which enabled inspection of a register of securities by debenture holders. Stirling J referred to Mutter in the Court of Appeal and then proceeded to examine the subject Act to discern whether there was something in that Act “which shows that the right to take copies is excluded”. Stirling J extracted the meaning of the right of inspection from the context of the section and the purposes for which inspection may be had, concluding as follows:

“On the whole, I come to the conclusion that there is nothing in the Act of 1862 to negative the prima facie right of a person inspecting to take copies”.
(at 134)

65    I doubt if much assistance is gained from recourse to dictionary definitions of the word ‘inspection'. Macquarie defines ‘inspection’ as “a careful or critical inspecting or viewing”.

66    I think the construction of cl 5 calls for more than a literal meaning of inspection as contended for on behalf of News. In all of the cases that have been cited, ‘inspection’ has been construed in the context of the purpose for which the right of inspection has been created and in this way it has been treated as axiomatic that, prima facie, there is an incidental element in ‘inspection’, or an implication in ‘effective’ inspection of the right to copy the subject matter of the inspection for legitimate purposes.

67    In this case, having regard to the extensive nature of the purposes for which an inspection might be had under the deed, for example, checking the correctness of stated profits or losses, or examining the compliance by News of the obligation to keep proper books of account and records of the business, or formulating a Savoy clause offer, it is difficult to see what, if any, significant limits could or should be placed on the right of the inspecting party to effectuate the purpose of inspection by recourse to copying and other means of collecting information.

68    The extrinsic evidence, if admitted, in no way contributes to this construction of cl 5. The first draft, the creation of ACP’s solicitor, was in a form with some superficial similarity to cl 5 of the deed, in that it called upon News to keep proper books of account, required them to be available to ACP and to be open for inspection at all reasonable times with free access to inspect and copy. Cl 5 of the deed did not require the keeping of separate records: it limited availability of the subject records to a designated person or that person’s nominee rather than to ACP and it contained no express right to copy.

69    The second draft, this one drafted by News’ solicitor, bears little or no relationship to cl 5 of the deed, nor, except by identification of clause number, does it have any correlation with the first draft, apart from obliging News to keep proper books of account.

70    It is a vastly different clause from the first draft and in my view, reflects nothing in the way of a “mutual intention” to exclude a right of copying as incidental to the right of inspection. Indeed, the second draft says nothing about a right of inspection.

71    The third draft, this time drafted by ACP’s solicitor, is an idiosyncratic provision which, again, bears little relationship to the previous drafts, and for that matter cl 5 of the deed. It does oblige News to keep proper books of account and makes provision for access by ACP’s Chief Executive to the subject records for the limited purpose of settling a dispute. Clearly, cl 5 of the deed contemplates a vastly different purpose of inspection in the manner I have earlier indicated.

72    The fourth draft in file note form simply identified the person by whom inspection of documents may take place and the condition of inspection, namely, in the presence of a representative of News.

73    I think it calls for a highly developed imagination to extract from those exchanges a common intention to exclude the right of copying documents as an incident of the right of inspection. In my view, it is not evidence of such an intention whether viewed in the context of conversations between the solicitors for the parties in the course of drafting the deed, or in isolation.

74    Leaving aside the problems that I think are associated with eliciting a common intention of this kind during negotiations which depends, in part, upon communications between solicitors for the parties, and putting aside the necessary vagueness in the recollection of one of those solicitors in recalling events over twenty years past, those oral communications do nothing to elicit the common intention attributed to the parties by News nor do they evidence the commercial context of the deed.

75    The first conversation in my view involves a non sequitur and says nothing about the question of the right to copy in inspecting records for the purposes of the deed under cl 5.

76    The second conversation is inadmissible on more than one basis. If it represented an accurate recollection of a conversation of some twenty years ago, it is one which is in conflict with the express terms of the contract as to financial reporting. There is no warrant for construing the reporting provisions of cl 4 in the context of that conversation. At best, it is a passing remark which, in my view, could have no contractual effect in the sense of evidencing an intention on the part of the contracting parties to exclude the right of copying documents as part of the inspection process under cl 5: nor does it evidence the commercial background, genesis or purpose of the deed.

77    Similarly, the third conversation cannot be regarded as a mutual intention of the parties that inspection under cl 5 would be limited to one person. Whether the ‘nominee’ is to be construed as being limited to a single person, notwithstanding cl 19, is a matter of construction of the deed and it is completely unaided, in my view, by this exchange as recalled by Eyers.

78    The fourth conversation is nothing more than a general observation and, in my view, says nothing relevant to the proper construction of cl 5.

79    For those reasons the succession of conversations and the drafts of cl 5, viewed separately, or in conjunction, amount to no more than evidence of negotiations which do not fall within the exception to the inadmissibility of such evidence.

80    Further, to some extent, the oral communications represent an impermissible attempt to adduce evidence in conflict with the unambiguous meaning of the deed.

81    I do not regard this as a case of implied terms, rather, I think it is one of construction of the word ‘inspection’, taking its meaning from the context in which it is used, and, in particular, the purposes for which the inspection may be availed of. Viewed in that way, ‘inspection’, I think, clearly carries with it the incidental right to copy and have administrative assistance for those purposes, both in the form of mechanical aids and staff to assist the “Chairman …or his nominee”.

82    If I am wrong in that approach, and the true question is whether a term should be implied that, in carrying out the inspection, ACP should have the right to copy inspected records, then, in my view, for the reasons given, the tests of implication have been satisfied.

83    I think it is obvious that, for an inspection under cl 5 for the purposes of the deed to have any business efficacy, it is essential that the inspection carries with it an implied right to copy the records inspected and to make notes in relation to the same, with the aid of personal and mechanical assistance. A term of that import, in my view, is not only obvious and necessary to give business efficacy to the deed but it is a reasonable one and one which the parties must be taken to have intended to include in the right of inspection had they adverted to those incidents of inspection.

84    I think that follows whether ‘nominee’ is restricted to one person or is construed to mean ‘nominee or nominees’ through the application of cl 19. The conclusion I have reached is that cl 19 does not assist the construction of cl 5, in that I think ‘nominee’ should be construed as part of the phrase ‘Chairman for the time being of ACP or his nominee’ and, I think, that context requires the restriction of inspection to a single person, namely the “Chairman… or his nominee”.

85    While inspection is limited to one person, that person is entitled, as part of the inspection, to use modern means of copying, collating and recording information and to have recourse to assistants in that process of recording information.

86    I think it is agreed between the parties that the appropriate manner of disposing of this application is by way of further declaration as to the ambit of the order made on 11 February 2000.

87    Accordingly, I make orders in terms of paragraphs 1(a), (b) and (c) of the amended notice of motion, omitting from paragraph (a) the words “or nominees”: omitting from paragraphs (b) and (c), the words “nominees or”. The defendants are to pay the costs of the motion.

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Last Modified: 03/28/2001