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This case involved an application by a shareholder to access certain documents of a company, pursuant to s 247A of the Corporations Act 2001 (Cth). Crow J found that, in seeking to access the documents to investigate any potential claims he may have (including as part of a class action), the applicant was acting in good faith and for a proper purpose. Further, it was appropriate to permit access to insurance policies held by the company, since this would be relevant to the potential quantum of any claim and its realistic prospects of recovery. Accordingly, the application was granted.
19 March 2021
The applicant is an accountant who, in January 2018, purchased 722 shares for the sum of $9,963.60 in Blue Sky Alternative Investments Limited (“Blue Sky”). . In May 2019 Blue Sky was placed into receivership and voluntary administration, with the result that his shares in the company are now “practically worthless”. , .
The applicant applied, pursuant to s 247A of the Corporations Act 2001 (Cth) (“the Act”), for access to: (1) certain investment and audit documents of Blue Sky; and (2) insurance policies held by the company. , . The purpose of his application was to “investigate and determine whether he would have a potential claim against Blue Sky, its directors or officers, or its auditors”. . In particular, it was suggested that a claim might be pursued as a class action. .
Why the application for access to the documents was successful
Section 247A of the Act provides that, on application by a member of a company, the Court may make an order “authorising the applicant to inspect books of the company”, but only if it is satisfied that “the applicant is acting in good faith and that the inspection is to be made for a proper purpose”. .
Crow J observed that in Mesa Minerals Ltd v Mighty River International Ltd (2016) 241 FCR 241, Katzmann J listed a number of principles to consider when applying s 247A including the principle that “[p]ursuing a reasonable suspicion of breach of duty is a proper purpose” (see also McNeill v Hearing & Balance Centre Pty Ltd  NSWSC 942, per Hammerschlag J). , . In this case there was “substantial support” for a finding that there was a “case for investigation”. . Crow J accepted the applicant’s evidence that he was pursuing a reasonable suspicion of a breach of duty, and accordingly that there was a proper purpose for seeking inspection, and that he was acting in good faith. . It did not matter that the applicant held only a small number of shares; “the nature and content” of the rights he held as a shareholder were the same. .
Apart from access to investment and audit documents, Crow J also considered that access to the insurance policies of Blue Sky should be granted. . The purpose of seeking access to those documents was similar to the purpose of the plaintiffs in the case of Snelgrove v Great Southern Managers Australia Ltd (in liq) (recs and mgrs apptd)  WASC 51, where Le Miere J said (extracted at –):
“The purpose of the plaintiffs in seeking access to the relevant insurance policies is to assist them in considering the economic viability of pursuing their proposed action against the company. That is a proper purpose … It is an appropriate exercise of the discretion of the court to make an order granting access to the plaintiffs to the company’s relevant insurance policies.”
A number of other cases also established that it was appropriate for there to be “disclosure of documents relevant to the ability to recover judgment from the respondent in order to ensure that justice is done in the proceeding” (e.g. Simpson v Thorne Australia Pty Ltd t/a Radio Rentals No 4  FCA 1229). .
The applicant having established that he was acting in good faith and for a proper purpose (to examine the possibility of a claim, and the economic viability of pursuing any such claim), it was “appropriate to exercise the discretion pursuant to s 247A” to order that access to the documents be provided. . It is worth noting that, for the purposes of exercising the discretion, his Honour was satisfied that the access sought was not “unduly broad” such as “may be oppressive”. –.