FEDERAL COURT OF AUSTRALIA
Simba Global Pty Ltd v IFOTA Pty Ltd [2019] FCA 1020
File number: VID 561 of 2019 Judge: MOSHINSKY J Date of judgment: 27 June 2019 Catchwords: CORPORATIONS – access to books of company – whether order should be made under s 247A(1) of the Corporations Act 2001 (Cth) Legislation: Corporations Act 2001 (Cth), ss 247A, 247B, 247C Cases cited: Mesa Minerals Ltd v Mighty River International Ltd (2016) 241 FCR 241 Date of hearing: 26 June 2019 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 27 Counsel for the Plaintiff: Mr DF McAloon Solicitor for the Plaintiff: Hall & Wilcox Counsel for the Second, Third and Fourth Defendants: Mr CT Moller Solicitor for the Second, Third and Fourth Defendants: Logie-Smith Lanyon ORDERS
VID 561 of 2019 BETWEEN: SIMBA GLOBAL PTY LTD (ACN 613 005 039)
Plaintiff
AND: IFOTA PTY LTD (ACN 618 965 076)
First Defendant
ANOU PTY LTD (ACN 080 707 017)
Second Defendant
GREGORY WILLIAM MCPHERSON (and another named in the Schedule)
Third Defendant
JUDGE:
MOSHINSKY J
DATE OF ORDER:
27 JUNE 2019
THE COURT ORDERS THAT:
1.Pursuant to s 247A(1) of the Corporations Act 2001 (Cth), the plaintiff and its legal and accounting advisers are authorised to inspect the “books” (as that term is defined in s 9 of the Corporations Act) of the first defendant, such inspection to take place on or after 22 July 2019.
2.The first defendant, by its officers and employees, must make the books of the first defendant available for inspection and copying, in accordance with paragraph 1 of these orders at:
(a)117 Wellington Street, St Kilda, Victoria;
(b)219 Albion Street, Brunswick, Victoria; or
(c)106 Albert Street, East Brunswick, Victoria,
on reasonable notice and for a reasonable period of time between the hours of 9.00 am and 5.00 pm.
3.Subject to further order or the consent of the second, third and fourth defendants:
(a)the plaintiff and its legal and accounting advisers are to keep the information obtained during the inspection confidential;
(b)the plaintiff must not use the information obtained during the inspection for any purpose other than the conduct of this proceeding;
(c)the inspection under paragraph 1 of these orders may only be conducted by Kamal Somaia and/or Dhanush Ganglani of the plaintiff, personnel from Hall Chadwick, and personnel from Hall & Wilcox.
4.By 4.00 pm on 6 September 2019, the plaintiff file and serve a concise statement.
5.By 4.00 pm on 26 September 2019, the second, third and fourth defendants file a concise response.
6.The proceeding be referred to mediation, to be conducted by a Registrar of the Court, to be completed by 25 October 2019.
7.The proceeding be listed for a case management hearing at 9.30 am on 8 November 2019.
8.There be liberty to apply.
9.Costs be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MOSHINSKY J:
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- Case
- [2019] FCA 1020
- Decision Date
CaseChat Overview and Summary
The court found that the applicant had demonstrated that the inspection was being made in good faith and for a proper purpose. The applicant's concerns regarding IFOTA's financial position and management, as well as the unexplained irregularities and related-party transactions, justified the inspection. The court rejected the argument that the applicant's potential status as a competitor disqualified it from making the application in good faith or for a proper purpose. The court also determined that the applicant was not constrained by its previous request for documents and could make a more general application for access to documents. While the respondent argued that the inspection would be unduly burdensome and disruptive, the court did not accept this contention and authorised the inspection.
The court's orders included authorisation for the applicant and its legal and accounting advisers to inspect the respondent's books at specified locations and times, with certain confidentiality and usage restrictions. The applicant was required to file and serve a concise statement and the respondent a concise response. The proceeding was referred to mediation and listed for a case management hearing. Costs were reserved, and liberty to apply was granted.
Orders
Orders of the court
1. Pursuant to s 247A(1) of the Corporations Act 2001 (Cth), the plaintiff and its legal and accounting advisers are authorised to inspect the “books” (as that term is defined in s 9 of the Corporations Act) of the first defendant, such inspection to take place on or after 22 July 2019.
2. The first defendant, by its officers and employees, must make the books of the first defendant available for inspection and copying, in accordance with paragraph 1 of these orders at:
(a) 117 Wellington Street, St Kilda, Victoria;
(b) 219 Albion Street, Brunswick, Victoria; or
(c) 106 Albert Street, East Brunswick, Victoria,
on reasonable notice and for a reasonable period of time between the hours of 9.00 am and 5.00 pm.
3. Subject to further order or the consent of the second, third and fourth defendants:
(a) the plaintiff and its legal and accounting advisers are to keep the information obtained during the inspection confidential;
(b) the plaintiff must not use the information obtained during the inspection for any purpose other than the conduct of this proceeding;
(c) the inspection under paragraph 1 of these orders may only be conducted by Kamal Somaia and/or Dhanush Ganglani of the plaintiff, personnel from Hall Chadwick, and personnel from Hall & Wilcox.
4. By 4.00 pm on 6 September 2019, the plaintiff file and serve a concise statement.
5. By 4.00 pm on 26 September 2019, the second, third and fourth defendants file a concise response.
6. The proceeding be referred to mediation, to be conducted by a Registrar of the Court, to be completed by 25 October 2019.
7. The proceeding be listed for a case management hearing at 9.30 am on 8 November 2019.
8. There be liberty to apply.
9. Costs be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
In his second affidavit, Mr Somaia states that the purpose of seeking inspection of the books of IFOTA is “to enable Simba to ascertain the true financial position of IFOTA and details of the prior transactions by IFOTA that have given rise to that financial position”. Mr Somaia also states that he anticipates that attaining an understanding of IFOTA’s financial position and the transactions of IFOTA relevant to that position will enable Simba to consider in an informed way:(a)the presently unexplained irregularities in the management of IFOTA referred to in the HC Report;(b)the circumstances surrounding related-party transactions; and(c)whether the third and fourth defendants have breached their duties to IFOTA.Consideration In my view, Simba has established that it is acting in good faith and that the inspection is to be made for a proper purpose in the sense explained in Mesa Minerals at [22]. I consider this to be established by Mr Somaia’s second affidavit. It is apparent that Simba has concerns regarding the transparency of the business operations and financial dealings of IFOTA. To this end, Simba (and Mr Scales) engaged Hall Chadwick to prepare the HC Report. This raised a number of matters that Simba wishes to address, prompting the request for documents in the 10 May 2019 letter. As noted above, IFOTA has not provided the documents sought in that letter. If and to the extent that the second, third and fourth defendants contest that the application has been made in good faith and for a proper purpose on the basis that Simba is a potential competitor of IFOTA (see Mr McPherson’s affidavit at [26]-[27]), I do not accept this contention. The material does not establish any likelihood of competition and, as noted above, the Shareholders Agreement contains a non-competition clause. In any event, as discussed above, the evidence in Mr Somaia’s second affidavit establishes that the application is made in good faith and for a proper purpose. It is submitted on behalf of the second, third and fourth defendants that, in terms of proper purpose, the boundaries are drawn by the HC Report and thus, access should only be given to the documents sought in the 10 May 2019 letter. I do not accept this submission. The letter set out a request for documents based on the HC Report. However, the documents were not provided. In these circumstances, I consider it open to Simba to make a more general application for access to documents, and that it should not be constrained by its previous request. As noted in Mesa Minerals at [22], pursuing a reasonable suspicion of breach of duty is a proper purpose. Consistently with this, one of the matters that Simba wishes to examine is whether the third and fourth defendants have breached their duties to IFOTA. While the second, third and fourth defendants oppose the application, they are willing to provide the documents (or categories of documents) sought in the 10 May 2019 letter, subject to the qualifications set out in Mr McPherson’s affidavit at [44]-[51]. The second, third and fourth defendants contend that an order for inspection of the books of IFOTA would be unduly burdensome and disruptive for the reasons set out in Mr McPherson’s affidavit at [36]-[43]. (Although it is stated in [43] that Simba had not paid an invoice for copy documents, counsel for the second, third and fourth defendants accepted at the hearing that this was incorrect.)