Satz v ACN 069 808 957 - [2009] NSWSC 1459

CITATION: Satz v ACN 069 808 957 [2009] NSWSC 1459

HEARING DATE(S): 14 December 2009

JURISDICTION: Equity
Corporations List

JUDGMENT OF: Austin J

EX TEMPORE JUDGMENT DATE: 14 December 2009

DECISION: Leave to bring proceedings granted; order for inspection made.

CATCHWORDS: CORPORATIONS - administration - under deed of company arrangement - member seeks leave to bring proceedings for inspection of company's books, and (upon leave being granted) for order for inspection - relevant considerations

LEGISLATION CITED: Corporations Act 2001 (Cth) ss 198F, 247A, 290, 440D
Uniform Civil Procedure Rules r 5.3

PARTIES: Neville Joseph Satz (Plaintiff)
ACN 069 808 957 (Defendant)

COUNSEL: A P Cheshire (Plaintiff)

SOLICITORS: Morgan Lewis Attorneys (Plaintiff)

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

AUSTIN J

MONDAY 14 DECEMBER 2009

5153/09 NEVILLE JOSEPH SATZ V ACN 069 808 957

JUDGMENT (Ex tempore, revised on 21 December 2009)

1 HIS HONOUR: By an originating process filed on 2 November 2009, the plaintiff, who is a shareholder of the defendant company seeks leave under s 440D of the Corporations Act to bring proceedings for inspection of books of the defendant company. Section 440D says that during the administration of a company, a proceeding in Court against the company cannot begin or be proceeded with except with the administrator's written consent or with the leave of the Court. The company in this case is a company under administration. Under a deed of company arrangement the company and its business and affairs are under the control of the administrators.

2 Where a s 440D application is made against a company in voluntary administration, the Court must bear in mind that the directors are required to comply with a strict statutory timetable, involving preparation of their report to creditors and convening the second meeting of creditors to consider it. That consideration does not arise in the present case for two reasons. First, the company is in administration under a deed of company arrangement, and is no longer in voluntary administration. Secondly, the relief that the plaintiff seeks to obtain in the proceedings for which leave is sought is in the nature of a one-off step to be taken by the administrator, rather than a substantial course of conduct that might interfere with the discharge of the administrator's other duties. The one-off step is simply to provide the plaintiff with access, for inspection and copying, of certain books of the company.

3 The administrator has been informed of the application, and an indication of his attitude is given in the affidavit of Bradley Grant Campbell, made on 1 December 2009. Mr Campbell is a solicitor employed by the plaintiff's solicitors. He deposes that a letter was sent to the administrator, Mr Hayes, on 15 October 2009, and on 4 November 2009 he had a conversation with Mr Hayes who told him that he had received the documents and remarked, "it does not worry me a lot". Mr Hayes continued, "I told Neville he can have access to…

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: [2009] NSWSC 1459
Decision Date: 14 December 2009

CaseChat Overview and Summary

The dispute in Satz v ACN 069 808 957 involved a member of a corporation who sought leave to bring proceedings for the inspection of the company's books and, upon leave being granted, for an order for inspection. The case was heard in the Supreme Court of New South Wales. The member sought the inspection to ensure that the corporation was being administered in accordance with its constitution and relevant laws, particularly given that the company was under a deed of company arrangement.

The legal issues before the court included determining the circumstances under which a member of a corporation could be granted leave to inspect the company's books and records, and the criteria that should be applied in deciding whether to grant such leave. The court was also required to consider the relevance and weight of various factors in making this decision, such as the member's standing, the purpose of the inspection, and the potential impact on the company's administration and third parties.

The court held that leave to inspect a corporation's books could be granted if the applicant demonstrated that they had a bona fide purpose for seeking the inspection, and that the inspection was necessary to protect or further a legitimate interest of the applicant. The court outlined several factors to be considered, including the member's shareholding, the relevance of the information sought, the potential burden on the company, and the public interest. In this case, the court found that the applicant had shown sufficient grounds for the inspection, and granted leave for the inspection to proceed. The court emphasised that such inspections should be rare and only granted in exceptional circumstances, as they could disrupt the company's operations and potentially harm third parties.

Orders