Re ICRA Rolleston Pty Ltd

Case [2021] QSC 98

SUPREME COURT OF QUEENSLAND

CITATION:

Re ICRA Rolleston Pty Ltd [2021] QSC 98

PARTIES:

IN THE MATTER OF ICRA ROLLESTON PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED)
ACN 106 260 600

JOHN PHILLIP CANAVAN

(applicant)

v
WILLIAM JAMES HARRIS, KEITH ALEXANDER CRAWFORD AND JASON PRESTON AS RECEIVERS AND MANAGERS OF ICRA ROLLESTON PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED)

(respondents)

FILE NO:

SC No 4006 of 2021

DIVISION:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

18 May 2021

DELIVERED AT:

Brisbane

HEARING DATE:

5 May 2021

JUDGE:

Flanagan J

ORDER:

1.    The originating application filed on 9 April 2021 is dismissed.

2.    I will hear the parties as to costs.

CATCHWORDS:

CORPORATIONS – MANAGEMENT AND ADMINISTRATION – INSPECTION OF OR ACCESS TO FINANCIAL RECORDS, REGISTERS, DOCUMENTS AND OTHER INFORMATION – FINANCIAL RECORDS – GENERALLY – where receivers and managers were appointed to a company – where the receivers and managers entered into a contract to sell the company’s interest in a coal mining joint venture – where the company’s sole director seeks to inspect the contract of sale for the purposes of formulating a deed of company arrangement – where the director is entitled to inspect ‘financial records’ kept by the receivers and managers pursuant to s 421 of the Corporations Act 2001 (Cth) – where the receivers and managers oppose inspection by the director – whether the contract is a ‘financial record’ for the purposes of s 421 of the Corporations Act 2001 (Cth)

Corporations Act 2001 (Cth), s 9, s 421, s 1303

Australian Gas Light Co v Valuer-General (1940) 40 SR (NSW) 126, applied
Australian Securities and Investments Commission v Rich (2005) 216 ALR 320; [2005] NSWSC 417, considered
Boulos v Carter (2005) 220 ALR 572; [2005] NSWSC 891, applied
Commonwealth Bank of Australia v Tabet [2008] VSC 161, considered
Confidential v Federal Commissioner of Taxation (2013) 93 ATR 491; [2013] AATA 112, considered
Phillips v Corporate Affairs Commission (SA) (1986) 11 ACLR 182, considered
Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal (2011) 193 FCR 57; [2011] FCAFC 58, applied
Re Lawrence Waterhouse Pty Ltd (in liq) [2011] NSWSC 964, considered
Van Reesema v Flavel (1992) 7 ACSR 225, considered

COUNSEL:

D B O’Sullivan QC, with C A Wilkins, for the applicant

M R Hodge QC, with A R Langshaw, for the respondents

SOLICITORS:

Piper Alderman for the applicant
Arnold Bloch Leibler for the respondents

  1. The applicant applies for an order pursuant to s 1303 of the Corporations Act 2001 (Cth) (Act) compelling the respondents to immediately make available for inspection and copying a contract of sale. Section 1303 gives the Court a discretion to make such an order if a person, in contravention of the Act, refuses to permit the inspection of any book or supply a copy of any book. The applicant asserts that the respondents have contravened s 421(2) which provides that:

    “Any director,…

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Details
AGLC
Re ICRA Rolleston Pty Ltd [2021] QSC 98
Case
[2021] QSC 98
Decision Date

CaseChat Overview and Summary

The case of Re ICRA Rolleston Pty Ltd involved the Company, its receivers and managers, and its administrator. The sole director of the Company sought to inspect a contract of sale entered into by the receivers and managers, for the purpose of formulating a deed of company arrangement. The receivers and managers opposed the inspection, leading to a dispute over whether the contract was a financial record as defined by s 421 of the Corporations Act 2001 (Cth). The central legal issue was whether the contract of sale was a financial record, and thus subject to inspection by the director under the Act.

The court examined the definition of "financial records" and determined that the contract of sale was not one of the documents specified in the Act. The court refined the issue into three sub-issues: whether the contract of sale was a document of prime entry, whether it was a working paper or other document needed to explain the methods by which financial statements are made up or adjustments to be made in preparing financial statements, and whether it was a financial record within the ordinary meaning of that term. The court held that the contract of sale was not a financial record, and thus the sole director was not entitled to inspect it. The court also considered the context of the joint venture and the significant creditor status of Glencore.

In conclusion, the court dismissed the originating application filed by the sole director and ordered that the parties would be heard as to costs. The court found that the contract of sale was not a financial record, and therefore the sole director was not entitled to inspect it. The court's decision highlights the importance of understanding the definition of financial records under the Act and the limitations on a director's right to inspect such records.

Orders

Orders of the court

1. The originating application filed on 9 April 2021 is dismissed.

2. I will hear the parties as to costs.

Background

Background to the litigation

As the contract of sale is not one of the documents specified in paragraph (a) of the definition of “financial records”, the issue can be further refined into three sub-issues:(a)Is the contract of sale a document of prime entry?(b)Is the contract of sale a working paper or other document needed to explain:(i)the methods by which financial statements are made up; and(ii)adjustments to be made in preparing financial statements?(c)As the definition of “financial records” in s 9 is an inclusive definition, is the contract of sale a financial record within the ordinary meaning of that term? These three questions arise in the context of the following background.Background ICRA Rolleston Pty Ltd (Company), Rolleston Coal Holdings Pty Ltd (Glencore) and Sumisho Coal Australia Pty Ltd are parties to a joint venture in respect of a coal mine located near Rolleston, Queensland. Glencore holds a 75% interest in the joint venture and its assets, and the Company and Sumisho each hold 12.5%. The applicant is the sole director, an employee and a creditor of the Company. He is also one of three directors of the Company’s sole shareholder, ICR Australia Pty Ltd. On 8 December 2020, Glencore, as a secured creditor, appointed the respondents as receivers and managers of the Company pursuant to Glencore’s right under a charge. On 10 December 2020, the applicant appointed an administrator pursuant to s 436A of the Act on the basis that the Company was insolvent or likely to become insolvent at a future time. On 21 December 2020, Glencore, at the first meeting of creditors, caused the administrator originally appointed by the applicant to be replaced by new administrators. In or about February 2021, the respondents entered into a contract to sell the Company’s 12.5% interest in the joint venture. This contract of sale is not before the Court. It is accepted, however, that the contract is executory as the transaction it contemplates has not been completed and, as such, Glencore remains a creditor of the Company for the full amount of its lodged proof of debt (which exceeds $29 million). Glencore is the Company’s most significant creditor. On 10 March 2021, the applicant, by his then solicitors, Stokes Lawyers, told the new administrators that they ought to request details of the sale from the respondents. On 17 March 2021, having received no response to their correspondence of 10 March, Stokes Lawyers made a further enquiry of the administrators as to what enquiries they had made of the respondents about the sale of the Company’s joint venture interest. On 22 March 2021, the administrators responded to Stokes Lawyers, stating:“We confirm that we have made several formal demands for information from [Glencore] since our appointment. Additionally, we have also held several telephone conversations and one meeting with [Glencore] to obtain further information regarding the operation of the Rolleston joint venture. For the avoidance of doubt, we have verbally flagged with [Glencore] that we expect further enquiries will be made as our investigations progress.As to the second element of your letter, we are on notice that the [respondents] intend to sell [the Company’s] interest in the Rolleston Joint Venture, although the details surrounding that sale have not been disclosed to us at this time. In the normal manner, we have advised the [respondents] that [the Company’s] rights in relation to any sale process are being reserved.”

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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