Arkin v Tridon Australia Pty Limited - [2003] FCA 1372

FEDERAL COURT OF AUSTRALIA
Arkin v Tridon Australia Pty Limited [2003] FCA 1372
Corporations Act 2001 (Cth) s 286, 290, 290(4)
Income Tax Assessment Act (Cth) Division 7A
Evidence Act 1995 (Cth) s 136
Adam P Brown Male Fashions Pty Ltd v Philip Morris Incorporated (1981) 148 CLR 170 referred to
Arkin v Tridon Australia Pty Limited (2002) 43 ACSR 610 referred to
Cristel v Cristel [1951] 2 KB 725 cited
Kraft v Kupferwasser (1991) 23 NSWLR 236 cited
Thomson Australia Holdings Pty Ltd v Trade Practices Commission (1980) 148 CLR 150 referred to
HARRY LEE ARKIN v TRIDON AUSTRALIA PTY LIMITED
N 3016 OF 2002
HELY J
2 DECEMBER 2003
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 3016 OF 2002

BETWEEN:

HARRY LEE ARKIN
APPLICANT

AND:

TRIDON AUSTRALIA PTY LIMITED
(ACN 001 398 698)
RESPONDENT

JUDGE:

HELY J

DATE OF ORDER:

2 DECEMBER 2003

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.        The applicant’s Notice of Motion of 28 July 2003 is dismissed with costs.
2.        The respondent’s Amended Notice of Motion of 28 July 2003 is dismissed with costs.
Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 3016 OF 2002

BETWEEN:

HARRY LEE ARKIN
APPLICANT

AND:

TRIDON AUSTRALIA PTY LIMITED
(ACN 001 398 698)
RESPONDENT

JUDGE:

HELY J

DATE:

2 DECEMBER 2003

PLACE:

SYDNEY

REASONS FOR JUDGMENT
A director seeks access to documents

The background to this matter is explained in a judgment which I delivered on 24 December 2002: Arkin v Tridon Australia Pty Limited (2002) 43 ACSR 610. As I there explained at [57], the issue in the proceedings in this Court was whether the Court should enforce inspection of Tridon Australia Pty Ltd’s (‘TAPL’) financial records by Mr Arkin, as a person falling within the description of a director for the purposes of s 290 of the Corporations Act 2001 (Cth) (‘the Corporations Act’) having regard to the complaints which TAPL made as to his conduct and connections, and whether this Court should authorise Mr Watson or Mr Donnelly to inspect those records on Mr Arkin’s behalf. One of the grounds on which inspection was originally opposed was that ACDT Tridon Inc (‘ACDT’) was seeking to wind up TAPL in the Supreme Court and, in TAPL’s contention, the inspection sought by Mr Arkin was to aid ACDT in the prosecution of those proceedings. Mr Arkin was appointed to the board of TAPL on the nomination of ACDT pursuant to the provisions of the shareholders agreement referred to in the earlier judgment.
The terms of settlement
The proceedings in this Court were settled, or at least so I was informed. On 7 February 2003, by consent and without admission, I made the following orders:
‘1.That the applicant while he remains a director of the respondent and his nominee, Mr David Watson be at liberty to inspect such…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2003] FCA 1372
Decision Date: 2 DECEMBER 2003

CaseChat Overview and Summary

In the case of Arkin v Tridon Australia Pty Limited, the parties were involved in a dispute that was heard in the Supreme Court. Mr Arkin, a director of Tridon Australia Pty Limited (TAPL), sought to release certain reports to ACDT, while TAPL opposed this action. The court was required to determine whether Mr Arkin had the authority to release these reports, particularly given the ongoing litigation between ACDT and TAPL and the potential conflicts of interest involved.

The legal issues that the court needed to address included whether the Watson reports should be released to ACDT, and if so, under what conditions. TAPL argued that the release of the reports would require certain criteria to be met, such as ensuring that the reports did not contain flawed statements, were based solely on TAPL's financial records, and did not put Mr Arkin in conflict with any provisions of the Corporations Act. Additionally, the court needed to consider whether Mr Arkin had a proper purpose in seeking to release the reports to ACDT, especially given the litigation and the potential value of the distribution agreement between TAPL and ACDT.

The court ultimately decided that Mr Arkin did not bear the onus of proving that the release of the Watson reports to ACDT was in the best interests of TAPL, particularly given the ongoing litigation and the potential conflicts of interest. The court found that Mr Arkin had not provided any evidence to support his application, and therefore, the motion to release the reports was dismissed. The court also dismissed TAPL's motion, as the claims had been abandoned by TAPL's counsel.

In conclusion, the court dismissed both motions with costs. The decision highlighted the importance of demonstrating a proper purpose when seeking to release sensitive information, particularly in the context of ongoing litigation and potential conflicts of interest.

Orders

Orders of the court

1. The applicant’s Notice of Motion of 28 July 2003 is dismissed with costs.

2. The respondent’s Amended Notice of Motion of 28 July 2003 is dismissed with costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

HELY J

Accordingly, it is not appropriate for any order to be made in relation to par [1] of TAPL’s Amended Notice of Motion. The other claims in that Motion were specifically abandoned by Mr Jacobs QC.Conclusion Mr Arkin’s Motion filed on 28 July 2003 is dismissed with costs. TAPL’s Amended Notice of Motion filed on 28 July 2003 is dismissed with costs.

Ratio Decidendi

Legal Principle Established

Established by: HELY J

TAPL contends that should this Court hold that it has power to grant Mr Arkin’s application it would be necessary to read into the orders made by Austin J and this Court certain criteria to determine whether the Watson reports should be released to ACDT. In TAPL’s submission these criteria should, at the very least be:‘(a) the Reports should not contain obviously flawed statements;(b)the Reports should not exceed reports on the financial records of TAPL that he has inspected, based on such financial records, and without unsupported commentary, inferences and speculation;(c)the Reports should not refer to or deal with any entity other than TAPL;(d)that the release of the Reports would not put Mr Arkin in conflict with any provisions of the Corporations Act, including secs 180(1), 181(1), 182(1), 183(1), as well as those common law duties to the company upon which a director is bound;(e)that the release of the Reports is necessarily for and is to be used for TAPL’s purposes;(f)the release of the Reports is in the best interests of TAPL or at least not contrary to the best interests of TAPL;(g)the Reports released to ACDT would not contain any information confidential to TAPL and TNZL.’ The Court is not required, as it were, to ‘mark’ Mr Watson’s reports, or to form some assessment as to whether the controversy which apparently exists between Mr Watson’s opinions, on the one hand, and the views of Mr Lennox and his experts, on the other, is likely to be resolved in Mr Watson’s favour. The resolution of that controversy would require a substantial trial which is quite outside the scope of the orders implementing the ‘settlement’. However, Mr Arkin bears the onus of establishing that he should be at liberty to release the Watson reports to ACDT in a context where Mr Watson has not completed his investigation, and where the litigation between ACDT and TAPL designed to achieve the liquidation of TAPL is still pending. According to Mr Walker SC there is a ‘very considerable overlap’ between the issues identified in the Watson reports and the issues in the Supreme Court proceedings. According to Mr Jacobs QC, all the issues raised by the Watson reports are issues in the Supreme Court proceedings. In my view, whether Mr Walker’s formulation, or Mr Jacob’s formulation of the overlap is accepted, the discharge of that onus at least involves demonstration that Mr Arkin reasonably conceives it to be his duty as a director of TAPL to provide the Watson reports to ACDT notwithstanding that ACDT is seeking to wind up TAPL, and to terminate what appears to be a valuable distribution agreement, at least from TAPL’s point of view, and even though the issue of ACDT’s membership of TAPL is yet to be resolved. Or, putting it shortly, the context is such as to impose an onus on Mr Arkin to prove that his purpose in seeking to provide ACDT with information as to the internal financial affairs of TAPL is a proper one. Mr Arkin has not filed any evidence to that effect. He has not filed an affidavit in support of this application. In some circumstances an inference could be drawn from the nature of the information sought to be conveyed that Mr Arkin’s desire to release the reports to ACDT was activated by a proper purpose. But given the nature of the Watson reports, the controversy which attends those reports and the litigation between ACDT and TAPL and the ultimate objective of that litigation, it is not an inference which I am prepared to draw without express evidence.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 3016 OF 2002

BETWEEN:	HARRY LEE ARKIN APPLICANT
AND:	TRIDON AUSTRALIA PTY LIMITED (ACN 001 398 698) RESPONDENT
JUDGE:	HELY J
DATE OF ORDER:	2 DECEMBER 2003
WHERE MADE:	SYDNEY

JUDGE:	HELY J
DATE:	2 DECEMBER 2003
PLACE:	SYDNEY