Where Have You Spent My Money?

A recent Federal Court decision threw light on the circumstances under which a shareholder would be granted access to the books and records of a company.

Justice Barker in the recent case Yara Australia Pty Ltd v Burrup Holdings Ltd discussed the interim relief application and the final relief application under section 247A of the Corporations Act.

Facts:

In the present case, BHL was the holding company of Burrup Fertilisers Pty Ltd (BFPL). BFPL owned and operated a liquid ammonia plant.

Yara Australia Pty Ltd (Yara) and Pankaj Oswal and his wife Radhika Oswal were shareholders of Burrup Holdings Ltd (BHL). Major parts of the shares were held by Pankaj Oswal and his wife Radhika Oswal.

Yara’s concern about a matters relating to the management of the companies led to the filing of an application to the Federal Court of Australia. Yara sought access to the books and records of BHL and BFPL on the following two main grounds:

I.  Urgent interim relief pertaining to a Shareholders Deed; and

II. Urgent final relief under section 247A of the Corporations Act.

Decision:

Justice Barker refused to grant access on the basis of urgent relief but granted access under sec 247A. His Honour made the following observations:

A. It was not justified to grant access on the basis of urgent relief in relation to the shareholders deed as:

1. The courts were not satisfied that both the necessary preconditions to grant such access were complied with by Yara.
2. Also grant of the urgent relief would allow the final claim for relief under the Deed without a full hearing.

B. Yara was entitled to an access order under section 247A as:

1. The application was made in good faith and for the right purpose;
2. The proper purpose will limit the access to those limited records of their concern and not to conduct any general audit of the company’s books;

Justice Barker thus passed the order granting access.

Lessons:

This case explores the provisions of section 247A explaining in detail the circumstance, preconditions and limitations involved in a grant to access a company’s records.