Czerwinski v Syrena Royal Pty Ltd (No 1)

[2000] VSC 125

SUPREME COURT OF VICTORIA
COMMERCIAL & EQUITY DIVISION	Not Restricted

CORPORATIONS LIST

No. 8014 of 1999

ALEKSANDRA CZERWINSKI	Applicant
v
SYRENA ROYAL PTY LTD (ACN 064 682 784)	Respondent

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JUDGE:	Warren J
WHERE HELD:	Melbourne
DATE OF HEARING:	23 March 2000
DATE OF JUDGMENT:	7 April 2000
CASE MAY BE CITED AS:	Czerwinski v Syrena Royal Pty Ltd (No. 1)
MEDIUM NEUTRAL CITATION:	[2000] VSC 125

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Corporations Law, s.247A – application by a member for inspection of the books of the company – lack of genuine purpose – statutory power sought to be used to overcome a claim for legal professional privilege in related proceedings.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr R.I. Rosenberg	McGrath Carey and Katz
For the Respondent	Mr D. Collins	Coadys

HER HONOUR:

1. This proceeding relates to two proceedings in this court.  In proceeding No. 8262 of 1998 Peter Edward Glover, Alfred Branicki, Syrena Royal Pty Ltd ("Syrena") and Compot Pty Ltd instituted proceedings against Yan Czerwinski, Aleksandra Czerwinski ("the Czerwinskis"), Seventy Ninth Agendy Pty Ltd, Alex Ruben and Brian Rudzki as defendants.  The proceeding No. 8262 of 1998 is hereafter described as ("the first proceeding").

1. In the first proceeding the plaintiffs being the "Syrena Royal interests" allege that a business partnership was entered into with the defendants being the "Czerwinski" interests in 1994.  The partnership involved the formation of a unit trust known as the "Syrena Royal Unit Trust".  It was contemplated that a company based in Poland known as "Syrena Royal Spa z.o.o." would be the vehicle for the purposes of acquiring plant and equipment for the establishment of an export business concerned with raw fish product and related items.  In the first proceeding the plaintiffs alleged that they made capital contributions to the partnership totalling over M$1.4.  The plaintiffs allege in the first proceeding that the defendants breached the terms of an agreement between the parties, breached fiduciary duties, breached duties owed to the partnership, made misrepresentations to the plaintiff, made wrongful payment of moneys and converted moneys due and owed to the Polish company.  As a consequence of these allegations in the first proceeding the plaintiffs seek certain declarations in relation to interests in the business partnership, orders for the taking of accounts, damages and interest. 

1. The Czerwinski interests believe that the fish processing business in Poland was sold by Syrena Royal Pty Ltd and, as a consequence, that the latter company received the sum of $US50,000.  Discovery occurred in the usual course in the first proceeding but the Czerwinski interests in that proceeding are concerned that the discovery process in the first proceeding did not disclose the corporate records of Syrena Royal.  In particular, the Czerwinski interests complain that the discovery process in the first proceeding did not lead to discovery of documents relating to the proceeds of sale of the Polish business by Syrena Royal Pty Ltd.

1. It transpired that in the first proceeding enquiries were made by the solicitors acting for the Czerwinski interests in March and May of 1999 for production of documents relating to Syrena Royal Pty Ltd, in particular, the company's records relating to the sale. Ultimately, on 15 November 1999 the Czerwinski interests made formal demand for inspection of documents pursuant to s.247A of the Corporations Law for various documents described as "books of account".  The demand was not responded to and was repeated on 1 December 1999.

1. As a consequence of the failure of the Czerwinski interests to obtain access to the documents sought in the first proceeding Aleksandra Czerwinski on behalf of the Czerwinski interests had instituted the current proceeding ("the current proceeding") seeking production of the relevant documents under s.247A of the Corporations Law.  The section provides:

"SECTION 247A  ORDER FOR INSPECTION OF BOOKS OF COMPANY OR REGISTERED MANAGED INVESTMENT SCHEME

247A(1)        [Court's power]  On application by a member of a company or registered managed investment scheme, the Court may make an order:

(a)        authorising the applicant to inspect books of the company or scheme; or

(b)        authorising another person (whether a member or not) to inspect books of the company or scheme on the applicant's behalf.

The Court may only make the order if it is satisfied that the applicant is acting in good faith and that the inspection is to be made for a proper purpose.

247A(2)        [Copies]        A person authorised to inspect books may make copies of the books unless the Court orders otherwise."

1. By amended notice of motion dated 23 March 2000 the Czerwinski interests in the current proceeding seek an order pursuant to s.247A of the Corporations Law that they be authorised to inspect the following books of Syrena Royal Pty Ltd:

(i)Any receipts for electronic transfers by or to the Polish company referred to as 'SRA' from November 1998 to date;

(ii)Reports to and from directors created or received in the year 1998 and 1999;

(iii)All advice received by the company from its lawyers in the years 1998 and 1999;

(iv)The copy of Syrena Royal Pty Ltd of its solicitors' bills of costs during 1998 and 1999;

(v)Copy of any fee agreement entered into by Syrena Royal Pty Ltd with its solicitor, Coadys;

(vi)Copy of any agreement between Syrena Royal Pty Ltd in the first proceeding in relation to the sharing of legal costs.

1. In the first proceeding Syrena Royal Pty Ltd has made full discovery to the Czerwinski interests of all documents in its possession or formerly in its possession that fall within the categories of documents sought by the Czerwinski interests in the present proceeding. The only documents that have been discovered but not produced are those documents for which a general claim for legal professional privilege has been claimed by the interests associated with Syrena Royal Pty Ltd. The Czerwinski interests have not taken any action by way of interlocutory application in the other proceeding to obtain access to the documents pursued in the current proceeding. In effect, the Czerwinski interests in the current proceeding seek to invoke the statutory procedure under s.247A of the Corporations Law to inspect the books and records of Syrena Royal Pty Ltd rather than pursuing interlocutory processes in the first proceeding.

1. The approach adopted by the Czerwinski interests in instituting the current proceeding in order to obtain access to documents is challenged initially by the Syrena Royal interests in the current proceeding on the basis that the application is an abuse of process. The Czerwinski interests respond to the attack by asserting that a party entitled to access to documents under s.247A of the Corporations Law thereby purporting to exercise a statutory right cannot commit an abuse of process.

1. The applicant in the current proceeding, Aleksandra Czerwinski is a shareholder of Syrena Royal Pty Ltd. As such it was submitted that she was entitled to access to the documents sought under s.247A of the Corporations Law.

1. Ultimately, the position of the Syrena Royal interests in the current proceeding was that the documents sought in category (i) have been discovered in the first proceeding, the documents in category (ii) are non-existent and otherwise all categories of documents are subject to legal professional privilege and have not and will not be produced for that reason subject to court order.

1. The only evidence in support of the Czerwinski interests in the application before me was the alleged concern of the applicant that there was a lack of adequate explanation as to the circumstances surrounding and the disposition of the proceeds of sale of the Polish business, namely the sum of $US50,000.  The evidence was provided by way of affidavit of the applicant's solicitors.  The applicant herself as shareholder did not provide evidence to the court on affidavit.  As a consequence, this court was entirely lacking knowledge and information as to the purpose of the applicant in instituting this proceeding.  Significantly, an examination of paragraph 13 of the defence and counterclaim filed in the first proceeding disclosed that the applicant in the present proceeding, Aleksandra Czerwinski has not alleged that she was involved in any way with the transactions whereby contributions of money were made to the business partnership or, more importantly that she herself made any contribution.  In all the circumstances, therefore, I have strong reservations as to whether the applicant in the current proceeding, Aleksandra Czerwinski is seeking to protect or investigate any investment made by her in relation to the business partnership. 

1. Be that as it may it is apparent from the affidavits before me in the current proceeding that extensive production of documents has occurred in the first proceeding on behalf of Syrena Royal Pty Ltd. Moreover, the claim for privilege by Syrena Royal in the first proceeding has not been challenged in that proceeding. In my view the power under s.247A of the Corporations Law is a discretionary power whereby if the court is satisfied that it is appropriate to do so may order inspection and production of documents. In the circumstances of this matter, particularly the lack of evidence to demonstrate the true interest of the applicant in obtaining access to the documents other than that she is technically a shareholder in Syrena Royal Pty Ltd combined with the fact that there has been no effort to pursue the privilege issue in the first proceeding leads me to conclude that the applicant does not seek the relevant documents under s.247A of the Corporations Law for a genuine purpose. The approach of the applicant in the current proceeding has all the hallmarks of a tactical manoeuvre adopted to bypass difficulties and overcome the claim for legal professional privilege in the other proceeding. In this respect the applicant in the current proceeding seeks to use s.247A of the Corporations Law for an ulterior purpose. Section 247A of the Corporations Law is intended to enable a member of a company to inspect books in order to obtain information about matters that, as member or shareholder in the company, that member or shareholder ought be informed of by the company. The procedure under s.247A is not intended as a form of or substitute for inspection of documents to overcome the obstacle of legal professional privilege claimed in another proceeding (see also Re Claremont Petroleum N.L. (No. 2) (1990) 8 ACLC 548; also, Claremont Petroleum N.L. v AGL (1990) 1 ACSR 504). The position is moreso in circumstances where the party seeking to exercise a statutory right to documents has no real investment to protect by reason of access to the documents of the relevant company (see Quinlan v Vital Technology Australia Ltd (1987) 5 ACLC 389, 393; also, Intercapital Holdings Ltd v MEH Limited & ors (1988) 13 ACLR 595, 602).

1. In the present matter I cannot be satisfied that the applicant is acting in good faith or that the inspection pursued is made for a proper purpose.  Rather, on the basis of the affidavits before me it is apparent that the Czerwinski interests seek to utilise the current proceeding to overcome the difficulties they have encountered in the first proceeding where the Syrena Royal interests have claimed legal professional privilege.

1. Ultimately, the statutory right of a shareholder such as the applicant in the current proceeding to gain access to documents pursuant to s.247A of the Corporations Law is properly construed as a remedial or last resort provision. Section 247A of the Corporations Law confers a discretionary power on the court to order inspection of documents in circumstances where it is otherwise impossible and the party seeking access to the documents has a bona fide interest in such access and the inspection is made for a proper purpose (see Re Augold N.L. (1987) 2 Qd R 297; also, Barrack Mines Ltd v Grants Patch Mining Ltd (1988) 1 Qd R 606; Intercapital Holdings Ltd v MEH Ltd, supra; Biala Pty Ltd & Anor v Mallina Holdings Ltd (1990) WAR 371; Cescastle Pty Ltd v Renak Holdings Ltd (1991) 6 ACSR 115; Knightswood Nominees Pty Ltd v Sherwin Pastoral Company Ltd (1989) 15 ACLR 151). For these reasons the applicant's attempt to access documents under s.247A of the Corporations Law for the purposes of achieving a purpose relating to the first proceeding must be refused.  The amended notice of motion will be dismissed.

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