Oswal v Burrup Fertilisers Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Oswal v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed)

[2013] FCAFC 9

Citation: Oswal v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [2013] FCAFC 9
Appeal from: Oswal v Burrup Holdings Limited [2011] FCA 609
Parties: PANKAJ OSWAL v BURRUP FERTILISERS PTY LTD (ACN 095 441 151) (RECEIVERS AND MANAGERS APPOINTED)
File number: WAD 210 of 2011
Judges: DOWSETT, FOSTER AND NICHOLAS JJ
Date of judgment: 7 February 2013
Catchwords: CORPORATIONS – whether the primary judge misapplied the relevant principles when he refused access to certain books and records of a corporation and its parent held by the first corporation which books and records were created after the appointment of receivers and managers to all of the assets and undertaking of the corporation and which materials were closely connected to the realisation of the assets of that corporation and its parent in circumstances where the receivers had very wide powers (both contractual and statutory) to realise the assets of that corporation and its parent in order to repay debts due from that corporation and its parent to the appointor of the receivers – relevant principles discussed  
Legislation: Corporations Act 2001 (Cth), ss 198F, 290, 420, 421 and 1303
Cases cited:

Oswal v Burrup Holdings Limited (2011) 281 ALR 432; [2011] FCA 609 affirmed
Deangrove Pty Ltd (Receivers and Managers Appointed) v Commonwealth Bank of Australia (2001) 108 FCR 77 cited
Edman v Ross (1922) 22 SR (NSW) 351 followed
Foss v Harbottle (1843) 2 Hare 461 cited
Hawkesbury Development Co Ltd v Landmark Finance Pty Ltd (1969) 2 NSWR 782 followed
James v Commonwealth Bank of Australia (1992) 37 FCR 445 cited
Newhart Developments Ltd v Co-Operative Commercial Bank Ltd [1978] QB 814 cited
R v Board of Trade; Ex parte St Martins Preserving Co Ltd [1965] 1 QB 603 cited
Re B Johnson & Co (Builders) Ltd [1955] Ch 634 cited
Re Excel Finance Corp Ltd (Receivers and Managers Appointed); Worthley v England (1994) 52 FCR 69 cited
Re Genasys II Pty Ltd (1996) 19 ACSR 435 cited
Re Geneva Finance Ltd; Quigley v Cook (1992) 7 WAR 496 followed
Sun-Life Properties Pty Ltd v Chellaston Pty Ltd (1993) 10 ACSR 476 cited
Tudor Grange Holdings Ltd v Citibank NA [1992] Ch 53 cited
Visbord v Federal Commissioner of Taxation (Cth) (1943) 68 CLR 354 cited
Worthley v England (1994) 52 FCR 69 cited

Kerr on Receivers (14th ed, 1972)   
Date of hearing: 15 August 2011
Place: Canberra (via video link to Perth) (heard in Sydney)
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 97
Counsel for the Appellant: Mr PW Colinson SC and Ms E Dias
Solicitor for the Appellant: Murcia Pestell Hillard
Counsel for the Respondent: Mr K de Kerloy and Mr Cooke
Solicitor for the Respondent: Freehills

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION

WAD 210 of 2011
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN:

PANKAJ OSWAL
Appellant
AND:

BURRUP FERTILISERS…

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Details
Case
[2013] FCAFC 9
Decision Date

CaseChat Overview and Summary

Oswal v Burrup Fertilisers Pty Ltd concerned an appeal brought by Mr Oswal, the former Managing Director of Burrup Fertilisers Pty Ltd (BFPL), against the decision of the primary judge to deny him access to certain books and records of BFPL and its parent company, Burrup Holdings Limited (BHL). Mr Oswal sought the inspection and copying of specific categories of documents, arguing that as a director of the companies, he had a right to access these records to protect the interests of the companies and their shareholders. The records in question were created after the appointment of receivers and managers to the assets and undertaking of BFPL and BHL, and were closely connected to the realisation of the assets of the companies.

The primary legal issue before the court was whether the primary judge had correctly refused Mr Oswal access to the specified books and records under the general law. Mr Oswal had abandoned any reliance on statutory provisions of the Corporations Act in support of his claims for relief and relied solely on general law principles. The court needed to determine if the primary judge had misapplied the relevant principles when denying Mr Oswal access to these records, particularly in the context of the wide powers of the receivers to realise the assets of BFPL and BHL to repay debts.

The court found that the primary judge had not misapplied the relevant principles. It was established that the receivers had extensive powers to manage and dispose of the assets and shares of BFPL and BHL, and that the records sought by Mr Oswal were closely related to these actions. The court held that Mr Oswal's right to inspect books and records was not absolute and could be restricted in the interest of the companies and their creditors, especially given the receivers' authority to act in these matters. The court concluded that the primary judge's decision to deny Mr Oswal access to the specified records was correct and dismissed the appeal. The appellant was ordered to pay the respondent's costs of and incidental to the appeal.

Orders

Orders of the court

1. The appeal be dismissed.

2. The appellant pay the respondent’s costs of and incidental to the appeal.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

On appeal, Mr Oswal relied only upon general law principles in support of the claims for relief which he continued to press. He specifically abandoned any reliance upon any of the provisions of the Corporations Act which he had invoked before the primary judge.SOME RELEVANT FACTS In this section of our Reasons, we shall record a number of facts and matters which bear upon our consideration of Mr Oswal’s outstanding claims. Not all of these facts and matters were referred to by the primary judge. However, it is our understanding that they are uncontroversial as between the parties. The facts and matters recorded in this section of our Reasons reflect the position as at the date of the hearing before the primary judge. Mr Oswal was the Managing Director of BHL. He also owned 30% of the issued capital of BHL. His wife, Radhika Oswal, owned 35% of that issued capital. The remaining 35% of the issued capital of BHL was held by Yara Australia Pty Ltd (ACN 076 301 221) (Yara). Mr Oswal was also the Managing Director of BFPL. BFPL was a wholly owned subsidiary of BHL. The only other director of BHL and BFPL was Tor Holba. For approximately six years, BFPL had owned and operated a substantial liquid ammonia production plant on the Burrup Peninsula in Western Australia. On 16 December 2010, the day before the receivers were appointed, Mr and Mrs Oswal left Australia and have not returned. It appears that they have no present intention of returning. It also appears that they have taken up residence in Dubai and had done so by the time of the hearing before the primary judge. No sale of the shares held by BHL in BFPL had taken place nor had the receivers sold any of the assets of BFPL. In particular, they had not sold the liquid ammonia production plant. However, the receivers had made public announcements which suggested that they intended to take steps as soon as practicable to realise the assets the subject of the receivership. BFPL was a defendant and a counter-claimant in the WA proceedings. The WA proceedings involved (amongst other things) the interpretation of a Gas Sale and Purchase Agreement dated 17 December 2001 between BFPL and the Harriet gas joint venture parties. BFPL had negotiated a very favourable price for gas to be supplied to its liquid ammonia production plant and that price was reflected in and governed by that agreement. The plaintiff in the WA proceedings, Tap (Harriet) Pty Ltd, was one of the parties to the Harriet gas joint venture. The other parties to that joint venture were also defendants in the WA proceedings. The WA proceedings had the potential to result in an increase in the price at which gas would be supplied to BFPL. The receivers were in discussions with BFPL’s protagonists in this litigation with a view to settling the case. Prior to the appointment of the receivers, BFPL was in dispute with Yara in relation to the terms of an Offtake Supply Agreement. By a proceeding commenced in the Western Australia District Registry of this Court on 10 March 2011 (proceeding WAD 66 of 2011), BFPL sued Mr and Mrs Oswal and a corporation associated with them seeking declaratory and pecuniary relief arising out of alleged breaches by Mr Oswal of the duties owed by him to BFPL as a director of that corporation.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Mr Oswal also said that he wished to know what negotiations were taking place between the receivers and prospective purchasers of the assets and shares of both BHL and BFPL in order that he might take such steps as might be necessary to protect the interests of both BHL and BFPL and their shareholders. In a later affidavit, he explained that his intention was to take steps to protect the best interests of BFPL and its shareholders by corresponding with the receivers and, if necessary, commencing legal proceedings in Australia, presumably against the receivers and perhaps others. THE JUDGMENT OF THE PRIMARY JUDGE No Notice of Cross-Appeal has been filed and BFPL did not seek to challenge the inspection orders which the primary judge made. In addition, Mr Oswal has abandoned two of the categories of materials which he had pressed before the primary judge. Further, on appeal, as we have already mentioned, Mr Oswal did not rely upon any statutory provisions in support of his case. In these circumstances, it is not necessary for us to refer to the primary judge’s consideration of those categories of books and records in the possession of BFPL which are not the subject of appeal nor is it necessary for us to refer to his Honour’s analysis of the law relevant to the interpretation and application of ss 198F, 290 and 421 of the Corporations Act. Having abandoned his claims against BHL, Mr Oswal further refined the scope of his claims against BFPL. At (2011) 281 ALR 432 at 434–435 [2], the primary judge set out the terms of the categories of books and records in the possession of BFPL inspection of which was ultimately pressed by Mr Oswal before him as follows: By application, the applicant identifies a number of categories of documents in [5(a) to (g)] that he wishes to inspect by his agents. However, he does not limit his application to those categories. Rather, he requires inspection of “any and all books (as that term is defined in section 9 of the Corporations Act) whether held in paper, electronic or any other form”. By way of recognition of the breadth of such an inspection, at the hearing of the application senior counsel for the applicant only sought inspection of the categories of documents described in [4] of a draft minute of proposed orders dated 27 May 2011 (the proposed orders), as follows:Categories of Documents 4.(a) Any and all advices, correspondence, memoranda, file notes or financial records relating to the potential or actual sale of assets or shares of either Respondent created or received since 17 December 2010 by Ian Menzies Carson, David Laurence McEvoy and Simon Guy Theobald, in their capacity as the Receivers and Managers of BFPL (receivers and managers appointed).(b)Any and all documents created on or after 1 April 2009 relating to entries appearing in BFPL general ledger account 1639 or any other account held in the name of the Respondents that records the transactions referred to in the schedule to the Statement of Claim dated 10 March 2011 in WAD 66 of 2011, including:i.Invoices;ii.Payment requests;iii.edger (sic) entries;iv.Cheques;v.Transfer statements;vi.Payments approved;vii.Receipts;viii.Bank Statements;ix.Correspondence relating to above.(c)Any and all documents of the Second Respondent created, or containing information created, on or after 17 December 2010, being:i.Any primary accounting records relating to any payments made by or on behalf of the First and Second Respondents; ii.any correspondence with potential purchasers (whether by their agents, employees or otherwise) of:a.any assets of either of BFPL or BHL; orb.the Applicant’s shares in BHL. iii.any documents or correspondence containing or referring to negotiations (if any) between BFPL or the Receivers and Managers of BFPL and any one or more of:a.the Harriet Joint Venture; orb.any of the individual parties to the Harriet Joint Venture referred to as the Sellers in the Gas Sale Purchase Agreement dated 17 December 2001; orc.any agent or employee or the persons referred to in (i) or (ii).iv.General Ledger;v.contracts involving purchases or expenditure greater than $50,000 entered into by the Receivers by or on behalf of BFPL; vi.documents constituting any hardcopy or electronic file maintained by the Respondents or the Receivers of BFPL in relation to proceeding number CIV 2329 of 2009 in the Supreme Court of Western Australia; andvii.any document, including correspondence, relating to the determination of the off-take reference price payable pursuant to an agreement dated 13 December 2002 between, on the one part, Yara Australia Pty Ltd (ACN: 076 301 221) and, on the other part, the Second Respondent.(d)The audited accounts of the Second Respondent from June 2006 to December 2010.(e)The following documents evidencing the production profile of the Second Respondent’s ammonia production facility plant generated since 1 January 2010:i.Print outs of the Digital Central System;ii.Daily and Monthly Management Reports; andiii.Daily and Monthly Operational Reports.(f)Any and all documents generated by the Respondents, or at a Respondent’s request by a third party, for the purpose of preparing the prospectus of the First Respondent dated May 2008. (g)Any and all documents, invoices, receipts of transactions, loan documentation and correspondence relating to payments made with respect to construction costs of the ammonia production plant from 1 January 2003 and 31 July 2006.

Ratio Decidendi

Legal Principle Established

In his capacity as a director of those corporations, in the proceeding below, Mr Oswal sought orders permitting him to inspect and take copies of seven categories of books and records of BHL and BFPL. Each of the categories described a very broad class of books and records in relation to each of BHL and BFPL. Mr Oswal relied upon ss 198F, 290, 421 and 1303 of the Corporations Act 2001 (Cth) (the Corporations Act) and upon general law principles. He also claimed that he was entitled to exercise his right to inspect the books and records of BHL and BFPL through agents. He had in mind enlisting the aid of professional lawyers and professional accountants for this purpose. By the time of the hearing before the primary judge, Mr Oswal had streamlined his demands. He accepted that BHL did not hold any relevant books and records. For this reason, he agreed that his claims against BHL should be dismissed. Therefore, at the commencement of the hearing before him, by consent, the primary judge made an order dismissing Mr Oswal’s Application as against BHL upon the basis that there be no order as to the costs of that part of his Application. It is for this reason that BFPL is the only respondent in the appeal. For the same reason, it is only the books and records of BHL and BFPL in the possession of BFPL which remain in issue. The primary judge made orders in favour of Mr Oswal in respect of several categories of documents but refused him relief in respect of a number of other categories of documents (Oswal v Burrup Holdings Limited (2011) 281 ALR 432; [2011] FCA 609). In the appeal, Mr Oswal seeks orders permitting him to inspect those books and records of BHL and BFPL in the possession of BFPL in all but two of the categories in respect of which the primary judge declined to grant relief. On 17 December 2010, ANZ Fiduciary Services Pty Limited (ANZ) appointed Ian Menzies Carson, David Laurence McEvoy and Simon Guy Theobald (the receivers) as joint and several receivers and managers over all of the assets and undertakings of BFPL pursuant to a Fixed and Floating Charge dated 18 December 2002 between BFPL and ANZ (the charge). On the same day, ANZ appointed the same persons as receivers and managers of all of the shares held by BHL in BFPL pursuant to a Share Mortgage dated 18 December 2002 between BHL and ANZ. The categories of books and records in the possession of BFPL which fall for consideration in the appeal all concern documents and records created or received after 17 December 2010 and all concern actions taken or which might be taken by the receivers in respect of the assets the subject of the receivership. Included within the remaining categories in dispute is a category described by reference to certain proceedings in the Supreme Court of Western Australia (Tap (Harriet) Pty Ltd v Burrup Fertilisers Pty Ltd CIV 2329 of 2009 (the WA proceedings)). On appeal, Mr Oswal relied only upon general law principles in support of the claims for relief which he continued to press. He specifically abandoned any reliance upon any of the provisions of the Corporations Act which he had invoked before the primary judge.SOME RELEVANT FACTS