Lucy v Prescribing Biochemists Pty Ltd

[2000] NSWSC 1137

CITATION:	Lucy v Prescribing Biochemists Pty Ltd [2000] NSWSC 1137
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 4386/00
HEARING DATE(S):	28 November 2000
JUDGMENT DATE:	28 November 2000
PARTIES :	David Robert Lucy (P) Prescibing Biochemists Pty Limited (D1) Manucom Pty Limited (D2) The College of Somatic Studies Pty Limited (D3)
JUDGMENT OF:	Hamilton J

COUNSEL :	K P Smark (P) P Worrall (D1-3)
SOLICITORS:	Schweizer & Co (P) Paul Nass Esq (D1-3)
CATCHWORDS:	CORPORATIONS [146] - Management and administration - Inspection of records - Purpose of inspection - Determination of whether action justified in respect of shareholder's position as a minority shareholder.
LEGISLATION CITED:	Corporations Law s 247A
CASES CITED:	Biala Pty Ltd v Mallina Holdings Ltd (1989) 15 ACLR 208 Cescastle Pty Ltd v Renak Holdings Ltd (1991) 6 ACSR 115 Knightswood Nominees Pty Ltd v Sherwin Pastoral Co Limited (1989) 15 ACLR 151
DECISION:	Order made authorising inspection.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

TUESDAY, 28 NOVEMBER, 2000

4386/00 DAVID ROBERT LUCY v PRESCRIBING BIOCHEMISTS PTY LTD

JUDGMENT

HIS HONOUR:

1 This is an application under s 247A of the Corporations Law for leave to inspect documents of a company. The plaintiff, David Lucy, is the administrator cta of the estate of his late father, Robert Lucy. Robert Lucy was in his lifetime the holder of 47 per cent of the shares in each of the three defendants and was until 29 June 1998 a director of each of them. The holder of the remaining 53 per cent of the shares in each of the companies was and is Brenda Lomas, who acquired those shares from Robert Lucy in 1994. On 29 June 1998 at a meeting which was, by agreement of the shareholders, treated as a shareholders' meeting of each of the three companies, Robert Lucy was removed as a director of each of them. Thereafter, he did not participate in the affairs of any of the companies. Since his death there has been other litigation between the parties in the District Court, where judgment has been sought against Robert Lucy's estate in respect of a loan account of some $400,000 owing to one or more of the companies, and in this Division of this Court, where there are proceedings brought on behalf of the estate against a superannuation trustee. The District Court proceedings are apparently close to judgment and the proceedings in this Division close to settlement.

2 The purpose for which access to the books is sought is to permit the plaintiff as executor to consider whether any action can or ought be brought by the holder of Robert Lucy's shares in respect of his exclusion from directorship and management of the companies. It appears that there is authority for the proposition that the gaining of information for the purposes of decision whether or not a shareholder's rights in respect of the company may or ought be exercised is potentially a proper purpose for the seeking and grant of inspection under the section: see Biala Pty Ltd v Mallina Holdings Ltd (1989) 15 ACLR 208, a decision of Rowland J in the Supreme Court of Western Australia; and the decision of Young J in this Division in Cescastle Pty Ltd v Renak Holdings Ltd (1991) 6 ACSR 115. There is difference in judicial opinion as to whether the test for the grant of an order should be regarded as a bipartite one, that is, one under which there are separate requirements that the applicant demonstrate good faith in and a proper purpose for the application (as Rowland J appeared to in the Biala case) or whether those matters together in reality pose only one question (as did Brooking J in the Supreme Court of Victoria in Knightswood Nominees Pty Ltd v Sherwin Pastoral Co Limited (1989) 15 ACLR 151). I am inclined to the latter view. But, whichever view is correct, it seems to me that the plaintiff has demonstrated in these proceedings that it ought have an order. In the context of the evidence in this case, the purpose of the executor, who now holds the shares, seeing the records for the purpose of determining whether or not an application can or ought be made to the Court in relation to his father's and thus his position as a minority shareholder appears an entirely proper one and I cannot see, on the evidence, any basis on which it could be suggested that the application was not made in good faith.

3 The objections which have, in fact, been taken on the defendants' behalf in correspondence and in this Court turn, in part, on a mistaken belief that the requirements of subs (5) of s 247A apply to an application under subs (1) whereas, on a proper reading, it seems to me clear that they apply only to the different application which may be made under subs (3). Other than that, the defence appears to be merely a denial in terms that the application is made bona fide and for a proper purpose. Any suggestion that there is an element of improper purpose in desiring to see books for the purposes of the District Court proceedings, which I have mentioned, is dealt with by the fact that an undertaking is proffered to the Court by the plaintiff not to use any record inspected under the order in that way without the leave of this Court. The conclusion I have come to is that, upon the basis that that undertaking is given, the order should be made as sought by the plaintiff.

4    I make the following orders:

(1) Upon the plaintiff by his counsel undertaking to the Court that he will not by himself his servants or agents use any information obtained under this order in any manner in relation to existing Court proceedings between the parties without the leave of the Court order that a person nominated by the plaintiff being a qualified accountant is authorised to inspect the books of the defendants.
(2) Order that order (1) is not to extend to any of the defendants' books the subject of an order for inspection made by his Honour Judge Phegan on 24 November 2000 in proceedings 8005/98 in the Sydney District Court.
(3) Order that order (1) is not to extend to any documents over which privilege is claimed by the defendants and is properly maintainable.
(4) Order that the plaintiff give not less than three days written notice of his intention to inspect the defendants' books and that such inspection take place in ordinary business hours.
(5) Order that the defendants pay the plaintiff's costs of these proceedings.
(6) Grant leave to all parties to apply to the Court on two days notice in respect of the implementation of these orders.

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Last Modified: 03/02/2001