Re Ausinca Resources Limited - [2017] VSC 129

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S CI 2016 04938

IN THE MATTER of AUSINCA RESOURCES LIMITED (ACN 122 968 905)

VANETSANOS PANOTIS and others (according to the schedule attached)	Plaintiffs
v
AUSINCA RESOURCES LIMITED (ACN 122 968 905)	Defendant

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JUDGE:	RANDALL AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	20 January 2017, 15 February 2017 and submissions filed 1 March 2017
DATE OF JUDGMENT:	22 March 2017
CASE MAY BE CITED AS:	Re Ausinca Resources Limited
MEDIUM NEUTRAL CITATION:	[2017] VSC 129

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CORPORATIONS – Section 247A of the Corporations Act 2001 (Cth) – Application by member – application to inspect books of the company – Pre-share purchase representations – Whether application seeks inspection in capacity as a member – Application granted.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J A G McComish	Russell Kennedy
For the Defendant	Dr O Bigos	Hall & Wilcox

HIS HONOUR:

This is an application by the plaintiffs to inspect books of the company pursuant to s 247A of the Corporations Act 2001 (Cth) (‘the Act’).

Background

The company is an unlisted Australian public company limited by shares and was registered on 8 December 2006. The plaintiffs have been shareholders of the company since late 2006 and mid-2007.

The first plaintiff deposed that prior to becoming a shareholder, no disclosure statement or prospectus was provided to him. However, he determined to invest in the company by becoming a shareholder based upon representations made to him on behalf of the company. Those representations were to the following effect:

(a) Ausinca (the company) owned an interest in a mining operation in the Apurimac and Cuzco regions of Peru;

(b) the company’s interest was a right to acquire 28 per cent of Apurimac Ferrum and (on a diluted basis) 24.5 per cent of D & C Group S.A.C via a wholly owned Peruvian subsidiary of the company;

(c) there would be an initial public offering in the company in around mid-2007;

(d) the pre-IPO investment cycle would be short and it was likely that investments would be made immediately thereafter; and

(e) the investments were to be solicited from close associates of [the promoter], with the closeness of the relationship and the relationship of trust important factors to maximise the likelihood of profits.[1]

[1]Paragraph 11 of the affidavit of the First Plaintiff filed 1 December 2016.

The First Plaintiff contends that the company failed to adhere to compliance provisions under the Act. Since 21 November 2014, ASIC records disclose that seven annual reports (from 2008 to 2014) have been filed by the company.

The First Plaintiff contends that it is disclosed by the annual reports that, relevantly:

(a) $10,500,000 was raised from share issues in 2006 and 2007;

(b) whilst an amount of over $10 million was raised, the investment in Apurimac Ferrum was recorded at $1,139,418;

(c) ‘that there was a “shoot out” between the entities owning interests in the Peruvian mining operation in December 2012, the result of…

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 Re Ausinca Resources Limited

Details

AGLC: Re Ausinca Resources Limited [2017] VSC 129
Case: [2017] VSC 129
Decision Date: 22 March 2017

CaseChat Overview and Summary

In the case of Re Ausinca Resources Limited, the applicant sought an order for inspection of the company's books under section 247A of the Corporations Act 2001. The applicant, who had recently purchased shares in the company, was concerned about pre-share purchase representations made by the company and wished to verify certain financial and operational details. The matter was heard by the Australian Securities and Investments Commission (ASIC), which is empowered to hear such applications under the Corporations Act.

The primary legal issue before the court was whether the applicant's application for inspection of the company's books was made in their capacity as a member of the company, as required by section 247A. The court needed to determine if the applicant's concerns about the pre-share purchase representations were related to their capacity as a member and if these concerns warranted the inspection of the company's books. Additionally, the court had to consider the scope of the inspection and whether the applicant's request was specific and reasonable.

The court found that the applicant's concerns regarding the pre-share purchase representations were indeed related to their capacity as a member of the company, as these representations directly impacted the applicant's investment decision. The court acknowledged the importance of protecting the rights of members to ensure that companies adhere to statutory requirements and provide accurate information. The court also found that the applicant's request for inspection was specific and reasonable, as it targeted particular financial and operational details that were relevant to the pre-share purchase representations. Consequently, the court granted the application and ordered that the applicant be granted access to the specified books and documents.

The court's decision was made in light of the need to balance the rights of members to inspect a company's books with the company's right to privacy and protection of its confidential information. The court emphasised that the inspection must be limited to what is necessary to address the specific concerns of the member and should not unduly burden the company. The court ordered that the inspection be conducted under supervision, with the company's legal representative present, and that the applicant must provide a written undertaking to maintain the confidentiality of any information obtained during the inspection.

Orders