Effect of receiverships on a director’s right to access company documents

Dec 2016 |

Introduction

There are several precisions within the Corporations Act 2001 (Cth) (Corporations Act) which entitle a director access to documents of the company of which they are director.1

One would think that directors’ access to company documents is clear cut. The recent reported decision of Navarac Pty Ltd v Cassello [2016] WASC 327 (Navarac case) indicates that directors shouldn’t take their right of access for granted.

The relevance of Navarac’s case

The right of access given to directors under the Corporations Act where a receiver is appointed is subject to the distinction that:

  1. That receiver creates books and records during the receiver’s administration which are not directly accessible by a director.
  2. Books and records created by the company, pre the receivership, are taken into possession by the receiver and it is only those books and records, to which a director has clear access rights.

There will be certain books and records referred to in paragraph (1) that will be regarded as part of the company’s books. The access exclusions are those books and records prepared for the receiver’s own benefit and protection or those relating to the receiver’s relationship with the secured creditor appointing the receiver (Boulos v Carter [2005] WSWSC 89 cited with the presiding judge’s approval).

Against these principles, in the Navarac case, Ms Cathcart, a director of Esperance Cattle Company Pty Ltd (Receivers and Managers Appointed) (Esperance) made a claim against the receiver for access to certain Esperance documents which were classified into categories to which access was objected to.

Documents sought included:

Conclusion

In the Navarac case, the director, Ms Cathcart, initially sought access to 19 separate categories of documents. The receiver responding to her claims has obviously tried to limit the amount of court time spent on the case by allowing access to 16 categories of documents and only disputing three categories.

In the Navarac case, the presiding judge seemed very much to be in favour of allowing access to documents unless the receiver had a strong and valid case for rejection.

The Navarac case highlights the need for receivers to be aware that their files and notes can be made available to potential claimants, such as directors.

.....

1 Section 198F – confers a right to access to books for the purposes of a legal proceeding. Section 290 – confers a right to access financial records. Section 421 – allows directors to access records kept by a managing controller (e.g. receiver) unless the court otherwise orders.

This article may provide CPD/CLE/CIP points through your relevant industry organisation.

Carter_Icons