McDougall v On Q Group Ltd - [2007] VSC 184

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 2017 of 2007
F. 6083

ON Q GROUP LIMITED ACN 009 104 330

Plaintiff

PETER McDOUGALL

-and-

KINARRA PTY LTD (ACN 004 986 252)

First Defendant

Second Defendant

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JUDGE:	HARGRAVE J
WHERE HELD:	Melbourne
DATE OF HEARING:	11 May 2007
DATE OF JUDGMENT:	5 June 2007
CASE MAY BE CITED AS:	McDougall v On Q Group Ltd
MEDIUM NEUTRAL CITATION:	[2007] VSC 184

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Corporations – Director’s power to inspect financial records – Whether other persons should be authorised to inspect on director’s behalf – Corporations Act 2001 (Cth) s. 290.

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APPEARANCES:	Counsel	Solicitors
For the Applicant Peter McDougall	Mr L Glick QC	Francis V Gallichio
For the Respondent On Q Group Limited	Mr M Wyles	Foster Harris

HIS HONOUR:

I. Introduction

The plaintiff, On Q Group Limited (“the company”), is a publicly listed company. Its directors comprise the first defendant Peter McDougall, Ian Christiansen, Harold Christiansen and Julian Little.

This proceeding concerns a dispute between Mr McDougall and the company as to the amount of money (if any) owing by him to the company. The directors, other than Mr McDougall, have caused the company to issue this proceeding against Mr McDougall, alleging that he owes the company $2,615,102.64 pursuant to the provisions of a loan agreement dated 16 October 2005. A claim for this amount is also made against the second defendant, Kinarra Pty Ltd, a company associated with Mr McDougall.

No defence or counterclaim has been filed. However, it is apparent that Mr McDougall will deny any indebtedness and will counterclaim for an amount which he says, having regard to all dealings between him and the company, is due to him from the company on a balance of account.

Following service of the writ on Mr McDougall, a summons was filed in the proceeding on his behalf seeking:

(1)An order pursuant to s. 1303 of the Corporations Act 2001 (Cth) compelling the company to produce certain financial records of the company to Mr McDougall for immediate inspection.
(2)Pursuant to sub-ss. 290(2) and 290(3) of the Corporations Act, orders authorising a firm of accountants and a nominated individual to inspect those financial records on Mr McDougall’s behalf and to make copies of those documents.

No objection was taken by the company to the use of a summons in the proceeding, rather than an originating motion, to seek this relief.
II. Applicable law

Mr McDougall’s application for inspection relates to certain specified “financial records” of the company. The “financial records” of a company are defined in s. 9 of the Corporations Act in the following terms:

financial records includes:
(a)invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers; and

(b) documents of prime entry; and
(c) working papers and other documents needed to explain:
(i)the methods by which financial statements are made up; and
(ii)adjustments to be made in preparing financial statements.

Section 290…

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.

Continue reading McDougall v On Q Group Ltd

Details

AGLC: McDougall v On Q Group Ltd [2007] VSC 184
Case: [2007] VSC 184
Decision Date: 5 June 2007

CaseChat Overview and Summary

The matter before the Court of Appeal was an appeal from McDougall, a director of On Q Group Ltd, against the decision of the primary judge to dismiss his application for an order permitting him to inspect the company's financial records. The appellant argued that, as a director, he had the right to inspect the company's financial records under section 290 of the Corporations Act 2001 (Cth) and sought an order that would allow other persons to inspect on his behalf. The primary judge had found that the appellant did not have the right to delegate his inspection rights to others and dismissed the application.

The central legal issue was whether a director's right to inspect a company's financial records could be exercised by another person on the director's behalf. The appellant contended that the language of section 290 did not preclude a director from authorising others to inspect the records on their behalf, while the respondent argued that the statutory right to inspect was personal to the director and could not be exercised by others.

The Court of Appeal held that the statutory right to inspect financial records under section 290 was personal to the director and could not be exercised by another person. The Court found that the language of the statute did not permit the delegation of the inspection right, and that the right was intended to be exercised directly by the director. The Court also noted that the statutory scheme did not provide for the appointment of an inspector to exercise the director's inspection rights, and that such an appointment would be inconsistent with the purpose of the inspection right. The Court of Appeal therefore upheld the primary judge's decision to dismiss the appellant's application.

The Court of Appeal dismissed the appeal and affirmed the decision of the primary judge. The appellant was not entitled to an order that would allow other persons to inspect the company's financial records on his behalf. The inspection right under section 290 of the Corporations Act 2001 (Cth) was personal to the director and could not be exercised by another person.

Orders