McNeill v Hearing & Balance Centre Pty Ltd - [2007] NSWSC 942

CITATION: McNeill v Hearing & Balance [2007] NSWSC 942
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 15 August 2007

JUDGMENT OF: Hammerschlag J

EX TEMPORE JUDGMENT DATE: 15 August 2007

DECISION: Inspection of books and access to trustee's records ordered

CATCHWORDS: CORPORATIONS – EQUITY – Application under s 247A of the Corporations Act 2001 (Cth) by shareholder in company trustee for order to inspect its books – Application by unitholder in unit trust of which company is trustee for access to its records – Suspicion that company sold business of trust at undervalue to entity associated with other shareholder beneficiaries – Application in good faith and for proper purpose – As beneficiary unitholder entitled to access trustee’s records

LEGISLATION CITED: Corporations Act 2001 (Cth)
Companies Act 1899

CASES CITED: Quinlan v Vital Technology Australia Limited (1987) 5 ACLR 389
Barrack Mines Ltd v Grants Patch Mining Ltd (1987) 12 ACLR 357
Barrack Mines Ltd v Grants Patch Mining Ltd (No.2) [1988] 1 Qd R 606
Edman v Ross (1922) 22 SR (NSW) 351
Spellson v George (1987) 11 NSWLR 300

PARTIES: Celene McNeill & Or
Hearing and Balance Centre Pty Ltd

FILE NUMBER(S): SC 1906/2007

COUNSEL: J. Stoljar with J.K. Taylor (Plaintiffs)
M. O'Neill (Solicitor) (Defendant)

SOLICITORS: TressCox Lawyers (Plaintiffs)
NOT Lawyers (Defendant)

- 8 -

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

HAMMERSCHLAG J

15 AUGUST 2007

1906/2007 CELENE McNEILL & OR –V- HEARING & BALANCE CENTRE PTY LTD

EX TEMPORE JUDGMENT

1 HIS HONOUR: The first plaintiff, Ms Celene McNeill, is an audiologist. The second plaintiff company is under her control.

2 The second plaintiff, together with Kooniba Pty Limited, a company associated with a Ms Vanessa Baillie and Ms Sarah Marshall, are each unit holders in a trust known as the Hearing & Balance Centre Unit Trust (“the Trust”).

3 The Trust owned and operated an audiology practice which it sold in 2006. The practice was carried on by the plaintiff and Mesdames Baillie and Marshall. The plaintiff retired from it in 2003 and the other two continued.

4 The defendant (“the Trustee”) is the trustee of the Trust.

5 The first plaintiff is a one third shareholder in the Trustee.

6 By Sale of Business Agreement dated 23 May 2006, the Trustee, as seller, in its capacity as trustee of the Trust sold the audiology practice business to Hearing & Balance Pty Limited, the trustee of a trust called the Hearing & Balance Unit Trust for a purchase price of $180,000 inclusive of GST.

7 The Trustee acted solely as trustee of the Trust.

8 It is not in dispute that the buyer is associated with Mesdames Bailey and Marshall.

9 By Amended Originating Process dated 15 August 2007, the first plaintiff seeks an order pursuant to s 247A(1) of the Corporations Act 2001 (Cth) (“the Act”) authorising her to inspect the books of the Trustee.

10…

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: [2007] NSWSC 942
Decision Date: 15 August 2007

CaseChat Overview and Summary

In McNeill v Hearing & Balance Centre Pty Ltd, the plaintiff, McNeill, sought an order under section 247A of the Corporations Act 2001 to inspect the books and records of the defendant, Hearing & Balance Centre Pty Ltd. McNeill is a unitholder in a unit trust, of which the defendant company serves as trustee. The plaintiff suspected that the company had sold the business of the trust at an undervalue to an entity associated with other shareholder-beneficiaries. The dispute centred around whether McNeill, as a unitholder, had the right to access the trustee's records to investigate these suspicions.

The primary legal issue was whether McNeill, as a unitholder, could invoke section 247A of the Corporations Act to compel the company to allow inspection of its books. The court had to determine if McNeill's application was made in good faith and for a proper purpose, which are necessary conditions for such an order. The court also needed to consider the relationship between McNeill's rights as a beneficiary unitholder and the company's duties as a trustee.

The court found that McNeill's application was made in good faith and for a proper purpose, as he sought to investigate the alleged undervaluation of the trust's business. The court recognised that McNeill, as a beneficiary unitholder, had a legitimate interest in the trust's affairs. It concluded that McNeill was entitled to access the company's records to verify his suspicions. The court issued an order granting McNeill the right to inspect the relevant books and records of the defendant company, affirming that such access was necessary to protect the interests of the unit trust's beneficiaries.

Orders