Case: Acehill Investments Pty Ltd v Incitec Ltd [2002] SASC 344
Outcome: followed
person applying for an order pursuant to s 247A bears the onus of establishing that he is acting in good faith and that the inspection is to be made for a proper purpose: Acehill Investments Pty Ltd v Incitec Ltd [2002] SASC 344 at [29] . Merim must do more than demonstrate that it is dissatisfied with the management decisions: Re Augold NL [1987] 2 Qd R 297 at 308 Cescastle Pty Ltd v Renak Holdings Ltd (1991) 6 ACSR 115 at 117. Merim must satisfy me that it is entitled to inspect the books because the information sought relates to matters that it as a shareholder ought to be informed of by the company: see, for example, Czerwinski v Syrena Royal Pty Ltd (No 1) [2000] VSC 125 ; (2000) 34 ACSR 245 at 248. The authorities in relation to s 247A and its predecessor were usefully summarised in a series of propositions by Debelle J in Acehill Investments Pty Ltd v Incitec (supra) at [29]: "1. The requirement that the applicant is acting in good faith and that the inspection is to be made for a proper purpose expresses a composite notion and the court will determine whether each has been demonstrated by applying an objective test. The onus is on the applicant to demonstrate that he is acting in good faith and that the inspection is for a proper purpose. The section operates where the applicant seeks to protect some specific or a personal right by the making of the order. Examples are where a shareholder contemplates proceedings under s 233 of the Corporations Act (the statutory successor of s 320 of the Companies Code)... or where a shareholder reasonably takes the view that a transaction could adversely affect his investment and he seeks to investigate the transaction for the purpose of determining what action he should take ... or where a shareholder seeks to ascertain facts for the purpose of considering a takeover offer.... If the applicant's primary or dominant purpose is a proper purpose, it is not to the point that an inspection may be of benefit to the applicant for some other purpose... The rights provided by s 247A should not be regarded as affecting the basic rule of company law that a shareholder should not ordinarily have recourse to the courts to challenge a managerial decision made by or with the approval of the directors. Since every shareholder has a right to apply under the section for an inspection order, it is no answer to an application that, if an order is made, the applicant may acquire information not available to other shareholders and thereby be in a more advantageous position than those shareholders. Applicants do not necessarily lack a proper purpose merely because (a) they are hostile to other directors; or (b) they will, after inspection, have more information than other members. The procedure under s 247A is not intended to be a process as wide-ranging as the process of discovery of documents so that, as a general rule, inspection will be confined to, say, the results of decisions of directors rather than all the documents such as board papers leading to decisions... I emphasise that this is a general rule. There may be occasions where it is proper to admit inspection of board papers ... Even where an applicant is acting bona fide and has shown a proper purpose, the court has a discretion whether to order inspection. " [citations omitted] Mr Yunghanns said that he has sought information from Style in relation to various matters, including the application of the funds acquired through the capital raising and the settlement of the debt recovery proceedings, and that, in particular, he has not received a substantive response to the request contained in his email of 4 July 2008. That proposition is not disputed by Style. In answer to a question from me, whether Mr Yunghanns had received an answer to his queries, counsel for Style replied "Not comprehensively". I am satisfied Merim has not received an answer to the questions raised in Mr Yunghanns' email of 4 July 2008, nor has Merim received answers to a number of the questions and issues raised in subsequent emails and letters sent to Style and its officers. Style's explanation for not responding to, and answering these queries is partly, as Style's counsel put it: "...he [Mr Yunghanns] has to establish some reason to suspect that the funds have been used other than properly ... and there is nothing to suggest that it [money] has been taken by the directors or used improperly."