Litig8: Shareholders inspecting books

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Each month as a part of Mills Oakley’s Litig8, we bring to you snapshots of eight key cases, legislative changes or other legal events. The summaries are not comprehensive and do not constitute legal advice. You should seek professional advice before taking any action based on the content of this email.

Part 8 of the March edition of Litig8

Shareholders have access to rights to inspect the books and records of a company on a Court order provided a Judge is satisfied that the applicant is acting in good faith and that the inspection is to be made for a proper purpose under s 247A of the Corporations Act.

In a recent decision of the Federal Court of Australia in Mesa Minerals Limited v Mighty River International Limited [2016] FCAFC 16, the Court set out clearly the considerations in determining an application for access to the books and records of the company primarily surrounding the good faith aspect of this statutory right.

There had been long standing hostility between the corporate shareholders, Mighty River sought inspection and copying of certain parts of Mesa’s books.

The appeal related to alleged errors in the trial judge’s consideration of the application (which was granted) and the exercise of discretion. The Court upheld the decision.

As an insight into the method the Appellant Court use in considering the substance of an appeal, the Court observed that where there cannot be said to be one truly correct answer, the availability of a different view or a preference for a different view is unlikely to be sufficient to justify an overturning of the initial decision.

This principle means that reasonable minds may differ. Merely because an appeal judge may have come to a different result applying His or Her discretion is not, in the interests of justice, enough to necessarily overturn the trial judge’s decision. The views of the trial judge have to be shown to be wrong. In this case the appellant failed.

If you are considering an application to access the books and records of a company, this case is a concise summary of relevant principles and requirements.

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