Sims v Jooste & Ors (No.2)
[2016] FCCA 1468
•21 June 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SIMS v JOOSTE & ORS (No.2) | [2016] FCCA 1468 |
| Catchwords: COURTS AND JURISDICTION – Whether Court has jurisdiction to hear application under Corporations Act 2001 (Cth) for inspection of company records. |
| Legislation: Corporations Act 2001 (Cth), ss.9, 58AA, 198F, 290, 1303 |
| Cases cited: Boulos v Carter [2005] NSWSC 891; (2005) 194 FLR 96; (2005) 220 ALR 572; (2005) 54 ACSR 827; (2005) 24 ACLC 46 |
| Applicant: | DOUGLAS ARTHUR SIMS |
| First Respondent: | PETER INNES JOOSTE (DEC’D) |
| Second Respondent: | MICHAEL ROBERT STEWART |
| Third Respondent: | MARTIN LAWRENCE BENNETT |
| File Number: | PEG 30 of 2014 |
| Judgment of: | Judge Antoni Lucev |
| Hearing date: | 9 June 2016 |
| Date of Last Submission: | 9 June 2016 |
| Delivered at: | Perth |
| Delivered on: | 21 June 2016 |
REPRESENTATION
| For the Applicant: | In person |
| Counsel for the First Respondent: | Mr N Ebbs |
| Solicitors for the First Respondent: | Bennett + Co |
| For the Second Respondent: | No appearance |
| Counsel for the Third Respondent: | Mr S Popperwell |
| Solicitors for the Third Respondent: | Denman Popperwell Lawyers |
ORDERS (as made on 9 June 2016)
The applicant’s application in a case filed 30 May 2016 be dismissed.
Reasons for judgment to be published from Chambers at a later date.
No order as to costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 30 of 2014
| DOUGLAS ARTHUR SIMS |
Applicant
And
| PETER INNES JOOSTE (DEC’D) |
First Respondent
| MICHAEL ROBERT STEWART |
Second Respondent
| MARTIN LAWRENCE BENNETT |
Third Respondent
REASONS FOR JUDGMENT
Introduction
By an Application in a Case filed on 30 May 2016 the applicant, Mr Sims, seeks an order (transcribed without amendment) as follows:
1.Order of access against Suda Ltd for the Applicant to inspect the records of Suda Ltd pursuant to S 198F (10 (2) (3) (4) & Section 290 of Australian Corporations and Securities legislation to whom the first and Second Respondents acted as Officers and the Third Respondent acted as Legal Representative.
Orders made on 9 June 2016
Immediately following the hearing of the Application in a Case on 9 June 2016 this Court (“Federal Circuit Court”) made the following orders:
1.The applicant’s application in a case filed 30 May 2016 be dismissed.
2.Reasons for judgment to be published from Chambers at a later date.
3.No order as to costs.
The following are the Reasons for Judgment contemplated by order 2 of the orders made on 9 June 2016.
Statutory provisions
Section 198F of the Corporations Act 2001 (Cth) (“Corporations Act”) provides as follows:
Right while director
(1) A director of a company may inspect the books of the company (other than its financial records) at all reasonable times for the purposes of a legal proceeding:
(a) to which the person is a party; or
(b) that the person proposes in good faith to bring; or
(c) that the person has reason to believe will be brought against them.
Right during 7 years after ceasing to be director
(2) A person who has ceased to be a director of a company may inspect the books of the company (including its financial records) at all reasonable times for the purposes of a legal proceeding:
(a) to which the person is a party; or
(b) that the person proposes in good faith to bring; or
(c) that the person has reason to believe will be brought against them.
This right continues for 7 years after the person ceased to be a director of the company.
Right to take copies
(3) A person authorised to inspect books under this section for the purposes of a legal proceeding may make copies of the books for the purposes of those proceedings.
Company not to refuse access
(4) A company must allow a person to exercise their rights to inspect or take copies of the books under this section.
Interaction with other rules
(5) This section does not limit any right of access to company books that a person has apart from this section.
Section 290 of the Corporations Act provides as follows:
(1) A director of a company, registered scheme or disclosing entity has a right of access to the financial records at all reasonable times.
Court order for inspection on director's behalf
(2) On application by a director, the Court may authorise a person to inspect the financial records on the director's behalf.
(3) A person authorised to inspect records may make copies of the records unless the Court orders otherwise.
(4) The Court may make any other orders it consider appropriate, including either or both of the following:
(a) an order limiting the use that a person who inspects the records may make of information obtained during the inspection;
(b) an order limiting the right of a person who inspects the records to make copies in accordance with subsection (3).
Section 1303 of the Corporations Act provides as follows:
If any person in contravention of this Act refuses to permit the inspection of any book or to supply a copy of any book, the Court may by order compel an immediate inspection of the book or order the copy to be supplied.
Section 9 of the Corporations Act defines “director” as follows:
(a) a person who:
(i) is appointed to the position of a director; or
(ii) is appointed to the position of an alternate director and is acting in that capacity;
regardless of the name that is given to their position; and
(b) unless the contrary intention appears, a person who is not validly appointed as a director if:
(i) they act in the position of a director; or
(ii) the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes.
Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person's professional capacity, or the person's business relationship with the directors or the company or body.
Case law
In Oswal v Burrup Holdings Limited [2011] FCA 609; (2011) 281 ALR 432; (2011) 84 ACSR 65; (2011) 29 ACLC 11-031 at [16]-[17] per Barker J (“Oswal”) the Federal Court observed as follows:
15 Section 198F(3) provides that a person authorised to inspect books under this section for the purposes of a legal proceeding may make copies of the books for the purposes of those proceedings.
16 Section 198F does not by its terms empower the Court to make orders about inspection. Rather, it is a provision which creates a statutory right of inspection in a director in the circumstances described in s 198F(1). The Court is however, pursuant to s 1303 of the Corporations Act, empowered to compel compliance with the provision. If any person in contravention of the Corporations Act refuses to permit the inspection of any book or to supply a copy of any book the Court may by order compel an immediate inspection or order a copy to be supplied. …
17 In my view, because the Court is empowered to order compliance under s 1303, the Court may be considered to have something in the nature of a discretion to grant or withhold a compliance order. Ordinarily one would expect that where contravention is made out the Court would grant the inspection that has been requested. However, the Court is not by the terms of s 1303 obliged automatically to compel compliance, and it may be that, in the circumstances of a particular case, good reasons are advanced as to why the Court should withhold an order. For example, it seems to me that it may be considered relevant to the question whether or not a compliance order should be made, that the request for discovery is unduly onerous, or that the company should not be expected to bear the cost of the large inspection exercise, or that the party requesting inspection already has the documents, or that, as a matter of convenience, the documents are about to be supplied to the person in some other way which makes the need for a compliance order unnecessary or redundant. These may be suggested as examples of how, in particular circumstances, a court might decline to grant a compliance order under s 1303 even though contravention of the Act is demonstrated in a particular case. Of course, the examples suggested are not intended to be exhaustive.
The Federal Court further observed in Oswal at [30]-[31] and [36]-[37] per Barker J as follows:
30 Unlike s 198F, s 290 by (2) empowers the Court to make an order concerning the inspection of financial records on behalf of the director by another person.
31 If this statutory right to inspect is denied then, as in the case of contravention of s 198F, a director may seek a compliance order pursuant to s 1303. Similarly, as explained above in relation to s 198F, the power of the Court to grant a compliance order necessarily comprehends the power to withhold such an order and this in turn raises the possibility that, for good reasons, a compliance order may be declined in the circumstances of a given case.
36 I do not accept that the applicant bears anything in the nature of an “onus” when seeking to enforce the statutory right to inspect financial records under s 290(1). However, it is clear enough that the Court has something of a discretion as to whether or not an order should be made under s 290(2), as I have indicated above. This is because the Court “may” authorise a person to inspect on a director's behalf.
37 Additionally, it is not obliged to order compliance merely because contravention is shown. A judicial discretion to withhold the remedy is not removed by s 1303. There is no statutory right to an inspection by an agent that is for the Court to order. Additionally, under s 290(4) the Court is empowered to make any other order it considers appropriate including limiting the use that a person who inspects the record may make of information obtained during inspection and limiting the right of a person who inspects to make copies. Section 290(2) and s 290(4) suggest that the Court is intended to have the power generally to control inspection where it is proposed that it be conducted by an agent of a director, taking into account the nature of records and the potential for misuse, particularly of confidential or private information.
The decision in Oswal was upheld on appeal: Oswal v Burrup Fertilisers Pty Ltd [2013] FCAFC 9; (2013) 7 BFRA 852; (2013) 295 ALR 708; (“Oswal Appeal”), and nothing said in Oswal Appeal affects what was said by the Federal Court at first instance in Oswal with respect to the construction of ss.198F, 290 and 1303 of the Corporations Act.
Affidavit in support of the Application in a Case
Mr Sims filed an affidavit (“Mr Sims’ Affidavit”) in support of the Application in a Case, in which he asserted as follows:
1.I am the Applicant as litigant in person in this matter.
2.On the 8th June 2009 I was forced to resign from Suda Ltd by the First Respondent effective at 12 noon the 9th June 2009.
Attached hereto and marked “DAS 1” is the Suda Ltd public announcement.
3.My resignation was forced upon me by the Second Respondent.
4.Suda Ltd have not given Notice me access to their records which records contain serious offense of the Australian Corporations and Securities legislation which offences include the Offences of the First and Second Respondents.
5.The Third Respondent is a concurrent wrongdoer with the First and Second Respondent.
Annexure “DAS 1” is an ASX Release by Eastland Medical Systems Ltd, a company which it is common ground became Suda Ltd. The ASX Release is dated 10 June 2009 and headed “Board Retirement” and provides as follows:
Eastland Medical Systems Ltd (ASX: EMS) wishes to announce as foreshadowed the retirement of Mr Douglas Sims from the board.
His resignation has been accepted with regret.
…
Further information:
Peter Jooste QC
Chairman
Eastland Medical Systems Ltd….
Consideration
Jurisdiction
Reading together ss.198F and 290 with s.1303 of the Corporations Act it is “the Court” which may make an order concerning inspection of the books of a corporation. In s.58AA of the Corporations Act “Court” is defined to include the Federal Court, the Supreme Court of a State or Territory, the Family Court of Australia, or a court to which s.41 of the Family Law Act 1975 (Cth) (“FL Act”) applies because of a Proclamation made under s.41(2) of the FL Act: Corporations Act, s.58AA(1). Section 41 of the FL Act deals with the establishment of so-called “State Family Courts”, and has no relevant application in relation to the jurisdiction of the Federal Circuit Court in these proceedings.
Section 58AA(1) is subject to s.58AA(2) of the Corporations Act. Section 58AA(2) of the Corporations Act provides that proceedings under the Corporations Act may be brought in any court, “Except where there is a clear expression of a contrary intention (for example, by use of the expression “the Court”)”. Thus, the use of the expression “the Court” in ss.290 and 1303 of the Corporations Act precludes the Federal Circuit Court from making any orders under those sections, including any orders under s.1303 relating to s.198F of the Corporations Act.
In any event, and for reasons set out in Sims v Jooste & Ors [2016] FCCA 1343 at [47]-[61] per Judge Lucev (“Sims v Jooste (No. 1)”) the Federal Circuit Court has no relevant jurisdiction in civil or criminal proceedings under the Corporations Act relevant to the matters alleged in the substantive application in these proceedings. Furthermore, insofar as the order sought in the Application in a Case is ancillary to the substantive application in these proceedings, no order can be made because the Federal Circuit Court in Sims v Jooste (No. 1) found that it had no jurisdiction to deal with the application. Thus, the Federal Circuit Court has no jurisdiction to make an order on an application in a case where it has no jurisdiction in relation to the application itself.
For all of the above reasons, the Federal Circuit Court does not have jurisdiction to make the order sought in the Application in a Case. Even if the Court did have jurisdiction, it would not have made the order sought for other reasons which follow below.
Whether “director” for purposes of s.290 of the Corporations Act
An issue arises as to whether Mr Sims is a “director” for the purposes of s.290 of the Corporations Act. A “director” is defined in s.9 of the Corporations Act to be a person who “is appointed to the position of a director. As a matter of ordinary language this means that the person who is a “director” for the purposes of s.290 of the Corporations Act must be a current director. That the person must be a current director for the purposes of s.290 of the Corporations Act can also be inferred from the provisions of s.198F, which distinguishes between a person who is a director: Corporations Act s.198F(1), and a person who “has ceased to be a director”: Corporations Act, s.198F(2).
On the face of the relevant provisions there is therefore a distinction between a “director” for the purposes of s.290 and a former director. The distinction is borne out in the Federal Court decision in Lei, in the matter of Tai-Ao Aluminium (Australia) Pty Ltd v Cordukes [2004] FCA 1488; (2004) 51 ACSR 465 (“Tai-Ao Aluminium”) where the Federal Court had before it an application for relief under s.198F and 290(1) of the Corporations Act. In relation to the orders sought under s.290(1) of the Corporations Act, the Federal Court in Tai-Ao Aluminium observed as follows:
a)the person seeking the order was a person who was to only remain in the office of director for a few hours, and it was therefore not disposed to make an order giving that director access to the company’s records “as no useful purpose would be served by such an order”; and
b)that even if the person concerned “originally had a legitimate reason for gaining access to the company records he was no longer in a position where he could, in a practical sense, perform any duties of office. Accordingly he no longer had any need for inspection.”
Tai-Ao Aluminium at [8] per Finkelstein J.
In this case, Mr Sims is a former director, and as such, has no right of access to company records under s.290 of the Corporations Act.
The requirements of s.198F of the Corporations Act
Under s.198F of the Corporations Act the former director of the relevant company must “be, actually or in prospect, a party to litigation”, and must establish the factual background to the application, which may not be done by unsubstantiated assertions, and the Court must find that the director in question proposes to bring a particular proceeding and that that proposal is advanced in good faith: Boulos v Carter [2005] NSWSC 891; (2005) 194 FLR 96; (2005) 220 ALR 572; (2005) 54 ACSR 827 (2005) 24 ACLC 46 at [28] and [31] per Barrett J (“Boulos”) (and the case cited at [31]: Stewart v Normandy NFM Limited [2000] SASC 344 at [10] per Judge Burley).
The factual background to the Application in a Case does not allow the Court to make a finding that any particular litigation to which Mr Sims will be a party is to be brought against any particular person or company. Beyond a vague and unsubstantiated reference to the records of Suda Ltd containing “serious offense of the Australian Corporations and Securities legislation which offences include the Offences of the First and Second Respondents” and in respect of which it is alleged that the “Third Respondent is a concurrent wrongdoer with the First and Second Respondent” there is no particularity or specificity as to what the alleged offence is, or what the particulars of any alleged offence are and how it is alleged that any person referred to in the above quote from Mr Sims’ Affidavit at [4] and [5] is said to be involved in those offences whatever they might be. It is impossible to discern from the Application in a Case and from Mr Sims’ Affidavit what, if any, legal proceeding might be brought against the late Mr Jooste, Mr Stewart or Mr Bennett. No support can be derived from the Reasons for Judgment in Sims v Jooste (No. 1) where the Court found that the various allegations there made (which included references to offences, again unspecified and unparticularised), were frivolous, vexatious and an abuse of process: Sims v Jooste (No. 1) at [135]-[139] and [149(c)] per Judge Lucev.
Nothing put before the Court on the hearing of the Application in a Case, or by reference to Sims v Jooste (No. 1), provides a foundation for finding that Mr Sims might be proposing to engage in a legal proceeding, whatever it might be, in good faith, which is another of the requirements in s.198F of the Corporations Act: Boulos at [31] per Barrett J.
For the above reasons, Mr Sims cannot make out, and has not made out, a case for the Court to exercise any discretion it might have had to make an order under s.198F of the Corporations Act.
Factual premise for order sought
Mr Sims’ Affidavit filed in support of the Application in a Case contends that he was forced to resign from Suda Ltd with effect from 9 June 2009.
The ASX Release is a public announcement of Mr Sims’ “Board Retirement” from EMS”. It refers to Mr Sims’ retirement from the Board of EMS having been “foreshadowed”, and goes on to say that “His resignation has been accepted with regret.” It is not apparent whether the “resignation” refers to Mr Sims’ “retirement” from the Board of EMS, or his “resignation” from employment.
Insofar as Mr Sims’ Affidavit intends to refer to a forced resignation from employment from Suda Ltd, any allegation of forced resignation from employment is contrary to the findings in the judgment of the District Court of Western Australia (“District Court”) in Sims v Suda Ltd [2014] WADC 7 (“Sims – District Court”). Following an eight day hearing in relation to a claim by Mr Sims of constructive dismissal from employment with Suda Ltd, the judgment of 48 pages and 186 paragraphs, having referred extensively to the evidence found at [185] per Stone DCJ as follows:
In the circumstances, on the totality of the evidence, I was not satisfied that Mr Sims had established that EMS terminated the Employment Contract, or alternatively, that he had been improperly dismissed by EMS in a constructive fashion.
An appeal to the Supreme Court of Western Australia, Court of Appeal against the judgment in Sims – District Court failed: Sims v Suda Ltd (No. 2) [2015] WASCA 105 (“Sims (No. 2)”). An application to the High Court for special leave to appeal the judgment of the Supreme Court of Western Australia, Court of Appeal in Sims (No. 2) was dismissed: Sims v Suda Ltd [2015] HCASL 182.
To the extent that an alleged forced resignation from employment with Suda Ltd is part of the factual premise for the application, that factual premise has been found by the District Court to be false, and that factual finding by the District Court has not been overturned on appeal.
Comity between federal and State courts is an important consideration in deciding cases, and generally federal and State courts ought not to be seen to be competing for litigation business and should not be hearing the same matters, or matters which are substantially similar, particularly where either a federal or a State court has already determined the matter or matters. Comity between federal and State courts is one aspect of the public interest which must be considered when determining whether or not a second set of proceedings constitutes an abuse of process having regard to proceedings which have already been instituted, or in this case, completed: Pegasus Leasing Limited v Cadoroll Pty Limited & Ors (1996) 59 FCR 152; [1996] ATPR 41-495; FCR at 158 per Lee and Tamberlin JJ. In a matter such as this where the District Court in Sims – District Court has determined the issue of whether or not there was a forced resignation from employment, and that finding has not been overturned on appeal or on an application for special leave to appeal, comity requires that the Federal Circuit Court not interfere with the findings of the District Court in Sims – District Court, but rather treat the District Court’s findings as conclusive. That view must be reinforced by the fact that the High Court, the ultimate appellate court for judgments of the Federal Circuit Court, has refused special leave to appeal from the Supreme Court of Western Australia, Court of Appeal in Sims (No. 2) wherein Mr Sims’ appeal against Sims – District Court failed.
Insofar as Mr Sims asserts a forced resignation from the board of Suda Ltd, that is not made out on the factual material relied upon in Mr Sims’ Affidavit. The ASX Release refers to a “foreshadowed” retirement, not a forced one, and there is no evidentiary basis in Mr Sims’ Affidavit for a finding to contrary effect.
The Court is therefore not satisfied that the factual premise for the order sought has been made out by Mr Sims.
Parties to the application and Application in a Case
In Sims v Jooste (No. 1) the Federal Circuit Court dismissed the substantive application in the proceedings as against the late Mr Jooste, and Mr Bennett. When this Application in a Case was called immediately after judgment was delivered in Sims v Jooste (No. 1) Counsel for the late Mr Jooste, and Mr Bennett, both indicated to the Federal Circuit Court that they were unaware of this Application in a Case by Mr Sims for access to the records of Suda Ltd. In the course of an exchange with the Federal Circuit Court during submissions, Mr Sims conceded that Mr Stewart, the second respondent to the substantive application and the Application in a Case, had not been served with any process in these proceedings. In circumstances where the substantive application has been dismissed against the late Mr Jooste and Mr Bennett (and in any event where they do not appear to have been served), and where Mr Stewart has not been served, the Federal Circuit Court, in the exercise of its discretion would not be prepared to make the order sought by Mr Sims against the late Mr Jooste, Mr Stewart or Mr Bennett.
Insofar as an order against Suda Ltd is concerned, it is not a party to these proceedings. Although it is named in the Application in a Case as a person served, there was no evidence before the Federal Circuit Court that Suda Ltd had been served, and Counsel for the late Mr Jooste, who has been acting for Suda Ltd in related proceedings over a lengthy period of time, indicated to the Federal Circuit Court that he was unaware of the present Application in a Case. In those circumstances, the Federal Circuit Court, in the exercise of its discretion, would not be prepared to make the order sought by Mr Sims against Suda Ltd.
Conclusion
In the Court’s view it does not have jurisdiction to make the order sought in the Application in a Case. Even if it had jurisdiction (which it does not) the Federal Circuit Court would not have been prepared to exercise its discretion to make an order in the terms sought in any event, for the other reasons set out above.
It was for the above reasons that the Federal Circuit Court made the orders set out in [2] above at the hearing of the Application in a Case on 9 June 2016. No order as to costs was made, Counsel for the late Mr Jooste, and Mr Bennett, both not seeking such costs in circumstances where it appears that there had been no service of the Application in a Case on the parties they represented, and that the parties were therefore unaware of the Application in a Case, until the matter was called immediately following the handing down of judgment in Sims v Jooste (No. 1).
I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev
Date: 21 June 2016
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