Arkin v Tridon Australia Pty Ltd [2002] FCA 1629 (24 December 2002)

Last Updated: 24 December 2002

FEDERAL COURT OF AUSTRALIA

Arkin v Tridon Australia Pty Ltd [2002] FCA 1629

Business Corporations Act 1990 (Ontario) s177(1), 178(4)

Corporations Act 2001 (Cth) s 290(1), (2), (4)

HARRY LEE ARKIN v TRIDON AUSTRALIA PTY LTD

N 3016 OF 2002

HELY J

24 DECEMBER 2002

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 3016 OF 2002

BETWEEN:	HARRY LEE ARKIN APPLICANT
AND:	TRIDON AUSTRALIA PTY LTD RESPONDENT
JUDGE:	HELY J
DATE OF ORDER:	24 DECEMBER 2002
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The matter be listed for directions on a date to be fixed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 3016 OF 2002

BETWEEN:	HARRY LEE ARKIN APPLICANT
AND:	TRIDON AUSTRALIA PTY LTD RESPONDENT

JUDGE:	HELY J
DATE:	24 DECEMBER 2002
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 The respondent ("TAPL") is a company incorporated in New South Wales. In 1988 shares in TAPL were held as to about 67 percent by Mr R W Lennox (or his associates) and as to about 33 percent by Tridon Ltd. Tridon Ltd later changed its name to ACD Tridon Inc ("ACDT"). ACDT is an Ontario Corporation registered under Corporations No 59314.

2 On 4 October 1988 a Distributorship Agreement was entered into between ACDT of the one part, and TAPL and Tridon New Zealand Ltd (a subsidiary of TAPL) ("TNZL") of the other part. Also on 4 October 1988 a Shareholders' Agreement was entered into between ACDT of the one part and Mr Lennox of the other part. Under the Shareholders' Agreement Mr Lennox had the power to appoint two persons to the board of TAPL, and ACDT had the power to appoint one member. If a person ceases to be a director of TAPL, the party which appointed him is entitled to appoint a replacement.

3 Clause 14 of the Shareholders' Agreement provides that each party shall not "transact" with its shareholding in TAPL except in circumstances which are not presently material. Clause 16 provides that on the occurrence of an event of default, the non-defaulting party may compulsorily acquire the shares of the defaulting party at a fair value. Included in the events of default is the passing of a resolution for the reduction of capital of the party concerned. Clause 17 of the Shareholders' Agreement provides that the rights and obligations of the parties to it are personal, and "no party may assign such rights and obligations" without the consent of the other.

4 Tomkins Canada Acquisition Corporation ("TCAC") held all of the shares in ACDT. Section 177(1) of the Business Corporations Act 1990 of Ontario ("BCAO") provides for the amalgamation of a holding corporation and one or more of its subsidiary corporations which may amalgamate and continue as one corporation.

5 On 30 August 1999 a Certificate of Amalgamation issued in relation to a purported amalgamation of ACDT and TCAC. The product of that amalgamation was ACDT Tridon Inc under Corporations No 1371372. I shall refer to the product of that purported amalgamation as "ACDT (1371372)" without prejudging whether the purported amalgamation was effective, and if so whether there is any difference in legal personality between ACDT, on the one hand, and ACDT (1371372) on the other.

6 On 13 August 2001, pursuant to the Shareholders' Agreement, ACDT (1371372) purported to appoint the applicant as a director of TAPL. Mr Lennox, on behalf of TAPL, lodged with the Australian Securities & Investments Commission ("the ASIC") a Notice of Change to Officeholders, which notified that the applicant was appointed as a director of TAPL.

7 It is common ground that since that date the applicant has acted in the position of a director of TAPL, whether or not he was validly appointed to that position. Thus, for example, on 8 November 2002 TAPL gave notice to the applicant of a board meeting of TAPL to be held on 2 December 2002 to adopt the financial accounts for TAPL for the year ended 30 September 2001.

8 As part of the amalgamation process, a resolution was purportedly passed by ACDT that all shares of ACDT should be cancelled on the endorsement of the certificate of amalgamation pursuant to s 178(4) of the BCAO "without any repayment of capital in respect thereof".

9 Mr Lennox asserts that this resolution was a resolution for the reduction of capital of ACDT and an event of default under the Shareholders' Agreement, which entitled him to require that ACDT's one-third interest in TAPL should be transferred to him.

10 On 19 January 2002 entries were made in the register of members of TAPL to give effect to the claimed exercise by Mr Lennox of his rights under cl 16 of the Shareholders' Agreement to acquire ACDT's shares in TAPL.

Inspection is sought of TAPL's financial records

11 The applicant is a lawyer who resides in Denver, Colorado, USA. On 5 April 2002 he sought access to the financial records of TAPL and its controlled entities in company with a chartered accountant, Mr Max Donnelly, of Ferrier Hodgson. The applicant stated that he desired the assistance of an accountant because he was not familiar with generally accepted accounting practices in Australia. Proceedings were threatened in the event that inspection was refused.

12 On 9 April 2002 TAPL's solicitors advised the applicant's solicitors that TAPL agreed that the applicant as a director of the company, accompanied by Mr Donnelly, could examine the books of account and any and all financial records of TAPL and its controlled entities commencing on 16 April 2002, subject to the execution of a confidentiality agreement by Mr Donnelly. The confidentiality agreement was executed by Mr Donnelly on 15 April 2002.

13 On 14 April 2002 Mr Lennox advised the applicant that no access would be given until TAPL obtained legal advice from a Senior Counsel at the NSW Bar. The applicant was requested to state the purpose for which inspection was sought.

14 The applicant came to Sydney for the purpose of inspecting TAPL's books on 16 April 2002. On that occasion, access was refused to the applicant with Mr Donnelly present, but it was offered to the applicant on his own. Mr Donnelly had previously been retained by ACDT's lawyers, but ACDT terminated his retainer. Mr Lennox was informed of this by Mr Donnelly when inspection was sought on 16 April 2002. TAPL and ACDT were then involved in legal proceedings in the Equity Division of the Supreme Court of New South Wales on opposite sides. It will be necessary for me to return to those proceedings later in these reasons.

15 By letter dated 19 April 2002 the applicant's solicitors advised TAPL's solicitors that the applicant has been continually pressed by his fellow directors to sign off on TAPL's accounts and his reason for seeking access was to satisfy himself as to the accuracy of the accounts and not otherwise.

The course of these proceedings

16 These proceedings were commenced by an originating process filed on 22 April 2002. The application sought an order permitting the applicant to inspect the financial records of TAPL, and an order authorising Mr Donnelly to inspect those records, and to make copies of them.

17 On 31 July 2002, pursuant to a direction of Whitlam J, TAPL filed a document setting out the matters which would be relied upon in opposition to the application. The document is 16 pages long. It asserts that the applicant used his position as a director of TAPL to gain an advantage for ACDT and/or to cause detriment to TAPL. It also asserts that the applicant is seeking access to TAPL's documents for an improper purpose, namely to obtain information for the assistance of ACDT in the litigation against TAPL. The document did not include in the matters relied upon any contention that:

* the merger between TAPL and ACDT was ineffective;

* the applicant was not validly appointed as a director of TAPL; or

* the applicant was liable to removal as a director of TAPL by Mr Lennox as the sole shareholder.

18 On 31 July 2002 Jacobson J ordered that TAPL should file any affidavits and/or bundles of documents on which it relies to support the matters referred to in the document referred to in par [17] above on or before 20 August 2002.

19 On 26 August 2002 Jacobson J granted leave to file in Court a document headed "Notice" as notice of an additional ground of objection to the application.

20 The "Notice" added the following ground of objection:

"Furthermore, and in any event TAPL states that in the discretion of this Court, it should not entertain this application decide this or grant access to Arkin and/or his nominee accountant until the issue is decided in the Supreme Court of NSW in case No 5738 of 2001, whether:-

1. ACDT is still a member of TAPL; and/or

2. Whether or not TAPL is precluded in law from removing Arkin as a Director of TAPL."

There followed a list of matters "In amplification of this remedy". One such matter was:

"(e) In the light of the fact that the issues:-

(i) Whether or not ACDT is still a member of TAPL;

(ii) Whether or not TAPL can properly terminate Arkin's Directorship in TAPL, and that these issues will be determined in the said proceedings or in an arbitration between them, and

(iii) the other facts set out in TAPL's grounds upon which our client will rely;

this Court in the exercise of its discretion should defer this application until those proceedings are first determined, as it would be inappropriate to risk different decisions on the same issues by two different tribunals."

21 The transcript of the directions hearing on 26 August 2002 records the following exchange between Jacobson J and Mr Jacobs, counsel for TAPL:

"MR JACOBS: I seek leave, your Honour, to file in court an interlocutory process. We ask that these proceedings before your Honour be stayed pending a determination of the same issues that are going to arise either in the Supreme Court or by way of arbitration.

HIS HONOUR: Why can't I just decide this on the application for final relief?

MR JACOBS: I have got no problem with that.

HIS HONOUR: Well then you don't need the motion, do you, you don't [need] any interlocutory relief because it's a matter that you would rely upon at the hearing of the section 290 application?"

The matter was fixed for hearing on 9 and 10 December 2002. No directions were given in relation to the filing of evidence in relation to the additional ground raised by the "Notice".

22 On 29 August 2002 an amended originating process was filed. It sought authorisation for either Mr Donnelly or David Watson of Walter Turnball, Chartered Accountants, to inspect the financial records of TAPL on behalf of the applicant.

The Supreme Court proceedings

23 On 29 November 2001 ACDT (1371372) issued proceedings in the Supreme Court of NSW in which it sought authorisation for it and its representatives, Mr David Goodman and Mr Donnelly, to inspect and copy the books of TAPL and its controlled entities. The respondents to those proceedings are TAPL, Mr and Mrs Lennox and TNZL.

24 The issues involved in those proceedings have expanded. The relief sought is as set out in the third further amended originating process. The relief sought in those proceedings includes:

* TAPL's winding up (par 167);

* a declaration that ACDT is entitled to terminate the Distribution Agreement in specified eventualities (pars 100-102);

* access to TAPL's books and records by ACDT and its representatives, Mr Goodman and Mr Donnelly (par 105 and 107);

* an injunction restraining the removal of ACDT's nominee, Mr  Arkin, as a director of TAPL (par 173(a); and

* rectification of the share register of TAPL by reinstating ACDT as a member (par 157A).

25 On 11 September 2002 ACDT sought an interlocutory injunction in the Supreme Court against TAPL and Lennox restraining the dismissal of Mr Arkin as a director of TAPL. That application was resolved on 7 November 2002, when Mr Lennox gave an undertaking to the Supreme Court not to take steps to remove Mr Arkin as a director of TAPL until the resolution of the Supreme Court proceedings or further order.

26 Paragraphs 3, 4, 5 and 6 of the Short Minutes of Order made on 7 November 2002 are as follows:

"3. The Court notes that ACDT undertakes to the Court:

(a) that it will not seek to obtain, directly or indirectly, any information, report or other document concerning the affairs of TAPL or its subsidiaries from Arkin or the solicitors, counsel and accountant retained by him in the Federal Court Proceedings.

(b) It will not cause or permit Arkin to give instructions to the solicitors or counsel retained by ACDT in these proceedings.

4. The Court notes that subject to para 6 below, that Arkin undertakes to the Court:

(a) not to communicate, reveal, disclose, provide, or in any other way whatsoever transmit any information concerning the affairs of TAPL or its subsidiaries (including oral information or information contained in any document (whether electronic or otherwise)) to any person other than:

(i) himself; and subject to the persons referred to below giving similar undertakings:

(ii) any nominated accountant and the staff of such accountant (other than an accountant retained or contemplated to be retained) by or on behalf of ACDT in the course of the disputes the subject of these proceedings or the arbitration before the Hon Mr John Clarke QC, and specifically including Donnelly);

(iii) his personal legal representatives, where such persons are not engaged and are not to be engaged by or on behalf of ACDT in these proceedings;

(iv) a member of the staff of Arkin & Associates;

(v) a duly authorised officer of a statutory authority with jurisdiction over or in respect of TAPL or its subsidiaries (in the course of fulfilment of any duty incumbent upon Arkin as director of TAPL);

(b) not to be party, whether directly or indirectly, to any breach of the undertaking given in 3 above;

(c) that in the course of his undertaking of his role as director of TAPL (with the exception only in the course of his role as applicant in the Federal Court proceedings), not to engage, retain, or other communicate or co-operate with any expert or other person retained (or proposed to be retained) by ACDT or any person associated with it, whether in the course of these proceedings or otherwise;

(d) that he shall not be involved, directly or indirectly, with instructing ACDT's lawyers (whether in Australia or elsewhere) in these proceedings and shall not provide counsel and/or advice to ACDT or any person associated with it in respect of these proceedings.

5. The above undertakings in paras 2 and 3 apply subject to further or other order of this Court, where the same shall be reserved to his Honour, Mr Justice Austin (or such other Justice of this Court as having carriage of this matter from time to time), and in the course of the same, any documents subject to an application for such order shall be treated as confidential and the papers treated as sealed until or at the further direction of this Court.

6. The undertakings in para 4 apply subject to further or other orders of the Federal Court, where the same shall be reserved to a Justice of that Court, and in the course of the same, any documents subject to an application for such orders shall be treated as confidential and the papers treated as sealed until or at the further direction of that Court."

27 Both the Distribution Agreement and the Shareholders' Agreement contained arbitration clauses. Application was made to the Supreme Court by the defendants in those proceedings for a stay of proceedings because the dispute or part of it was capable of settlement by arbitration pursuant to the arbitration clauses. TAPL's stay application was filed on 1 May 2002.

28 On 4 October 2002 Austin J concluded that some of the matters involved in the Supreme Court proceedings fell within the arbitration clauses, but others did not. ACDT's statutory claims (in particular the claims under the Corporations Act 2001 (Cth) ("the Corporations Act") and its claims based upon equitable principles were outside the scope of the arbitration clauses.

29 After considering various possible alternatives, Austin J dismissed the stay applications by consent, and referred the whole of the Supreme Court proceedings to the Hon M J R Clarke QC pursuant to Part 72 r 2(1) of the Supreme Court Rules for enquiry and report. Mr Clarke QC had previously been appointed as arbitrator under the Distribution Agreement.

30 On 4 December 2002 Mr Clarke QC informed the parties that for various reasons he felt unable to embark upon the reference, but he made various interlocutory orders including an order for discovery to be given by 16 January 2003, and a direction that subject to the convenience of the arbitrator/referee, the matter be listed to commence in April 2003.

Problems with parties

31 Mr Arkin is not a party to the Supreme Court proceedings. ACDT is not a party to these proceedings.

32 In a letter of 20 March 2002, Bruce & Stewart, the solicitors acting for Mr Lennox in the Supreme Court proceedings, advised Mr Arkin's solicitors that the issue of the possible joinder of Mr Arkin to the Supreme Court proceedings "can be held over, provided that your client acquits his obligations as a director of TAPL in the meantime". On 30 April 2002 the solicitors for TAPL advised Mr Arkin's solicitors that they had instructions to move for the Federal Court proceedings to be cross-vested to the Supreme Court to be run in conjunction with the pending proceedings in that court. No cross-vesting application was ever made.

33 On 28 June 2002 application was made for leave to join Mr and Mrs Lennox as respondents to these proceedings, and to bring a claim against them for damages for misleading and deceptive conduct in connection with alleged misrepresentations that Mr Donnelly would be permitted to inspect TAPL's financial records. That application was dismissed on 19 July 2002.

34 On 28 November 2002 TAPL's solicitors forwarded a copy of their written submissions in these proceedings to Allens Arthur Robinson, the solicitors for ACDT in the Supreme Court proceedings. Those submissions identified "threshold issues" which are common to these proceedings, and the Supreme Court proceedings. The letter asserted that Mr Arkin is ACDT's privy who would be bound by any determination by the Federal Court of the "threshold issues", should this Court decline to grant a stay of those proceedings pending the resolution of the proceedings in the Supreme Court, which the written submissions foreshadowed. The information contained in the letter was stated as being provided "in the event that ACDT wishes to join the Federal Court proceedings to present its own arguments".

35 On 29 November 2002 Allens Arthur Robinson responded to that letter. They did not accept the assertion of privity or that any determination by this Court would bind ACDT in the Supreme Court proceedings. The letter concluded:

"If your client intends to ask the Federal Court to make a finding which would bind our client in the Supreme Court then the proper course for your client is to seek orders joining our client to the Federal Court proceedings."

36 No such application has been made.

Open offers

37 On and after 9 September 2002 a series of letters passed between the solicitors for the parties to these proceedings containing "open offers" as to the terms and conditions on which access to the financial records of TAPL might be afforded to the applicant and Mr Watson without prejudice to the parties contentions in the Supreme Court proceedings. Agreement was not reached. A major stumbling block was that Mr Arkin did not accept that a copy of his instructions to Mr Watson, and a copy of Mr Watson's report, be provided to TAPL, that being a non-negotiable requirement of TAPL.

The "threshold issues"

38 TAPL's outline of submissions of 25 November 2002 outlines threshold points which TAPL contends are common to the proceedings in this Court and the Supreme Court:

(i) whether ACDT (1371372) exists, ie whether the amalgamation failed;

(ii) whether, even if the amalgamation has not failed, clause 14.1 of the Shareholders' Agreement prevented the transmission of ACDT (59314)'s shares to ACDT (1371732) on the basis that such a transmission constitutes an impermissible transaction under that clause; and

(iii) whether Mr Lennox has lawfully acquired the shares in TAPL from ACDT (59314) pursuant to clause 16.1 of the Shareholders' Agreement.

39 TAPL's outline of submissions asserts that the resolution of those threshold points will determine whether Mr Arkin was validly appointed a director (as he was appointed by ACDT (1371372) and whether he should remain a director.

Expert evidence

40 TAPL filed affidavits in these proceedings from Professor Welling of 3 October 2002 and 18 November 2002 as to whether the attempted amalgamation between ACDT and TAPL failed. In his opinion, it did.

41 The applicant responded with affidavits from H Garfield Emerson QC of 7 November 2002, 3 December 2002, 5 December 2002 and 7 December 2002. In the first of those affidavits, the opinions of Professor Welling were described as "manifestly incorrect". I was informed by Mr Jacobs QC (without dissent on the part of counsel for the applicant) that the affidavit of 3 December 2002 was not served; that a copy of the affidavit of 5 December 2002 (without annexures) was received by him at about 5.30 pm on Friday 6 December 2002; and that the affidavit of 7 December 2002 was received by him on the day of the hearing, and he had not had time to read it. The affidavit of 5 December 2002 is substantial, and both it and the affidavit of 7 December 2002 contain assertions as to the operation of Ontario law. I was informed by Mr Jacobs QC that he had not had time to consult with Professor Welling on these affidavits, and he was not in a position to cross-examine Mr Emerson QC, which was provisionally scheduled to occur by video link on 10 December 2002.

42 In addition, the applicant filed two substantial affidavits sworn on 3 December 2002 by John T Evans, a Canadian lawyer, in support of the opinions expressed by Mr Emerson QC. Those affidavits were filed on 4 December, only two working days prior to the scheduled hearing on 9 December 2002.

43 In addition, expert evidence was given by Mr Paul Carter in affidavits of 27 September and 20 November 2002 as to whether there was a reduction in the share capital of ACDT triggering the operation of clause 16.2 of the Shareholders' Agreement. An affidavit of Leslie Rose of 1 November 2002 was filed in the Supreme Court proceedings by ACDT which contraverted evidence given by Mr Carter in the Supreme Court proceedings on that topic.

The motion for a stay

44 When the matter was called on for hearing, TAPL sought leave to file in Court, and to have made returnable forthwith, a motion seeking that these proceedings be stayed until the matters identified as threshold points have been determined by the referee in the Supreme Court proceedings. The applicant's counsel did not oppose the grant of leave, but did oppose the grant of a stay.

45 The stay application occupied the whole of 9 December. During the course of the day several things emerged. First, if the proceedings were not stayed and the threshold issues were argued, the hearing would take a lot longer than the two plus days estimate given to Jacobson J when the matter was originally fixed. That is all the time which I had available. Second, counsel for the applicant ultimately accepted that he could not oppose an adjournment of the proceedings for a limited period of time, having regard to the late service of the affidavits of Mr Emerson of 5 and 7 December. If those affidavits went to matters which are truly in issue in these proceedings that concession was plainly correct.

46 In the result, even if I refused the stay motion, the hearing could not proceed in the time allotted for it if, as Mr Jacobs asserted, the threshold issues fell for determination. I reserved my decision on the stay motion because I wanted to consider the large number of documents which were presented to me by both parties which I had not seen before, or had the opportunity of reading, and because I wanted to consider what really are the issues in these proceedings, and the proper relationship between these proceedings and the Supreme Court proceedings.

The issues in these proceedings

47 Section 290(1) of the Corporations Act provides that a director of a company has a right of access to the financial records at all reasonable times. Section 290(2) provides that on application by a director, the Court may authorise a person to inspect the financial records on the director's behalf. Section 290(4) enables the Court to make any other orders it considers appropriate.

48 "Director" is defined in s 9 as meaning a person who is appointed to the position of a director and, unless the contrary intention appears, a person who is not validly appointed as a director if they act in the position of a director. It has not been contended that s 290 exhibits a contrary intention.

49 It is common ground that the applicant is a person who acts in the position as a director of TAPL, and Mr Lennox has given an undertaking to the Supreme Court not to remove him from that position pending the determination of those proceedings. If on the resolution of those proceedings the applicant is removed as a director, then the right or power conferred upon him by s 290 would come to an end, as would any entitlement of a person to inspect the records on the applicant's behalf. Any order authorising inspection by another person could be framed so as to make that limitation explicit.

50 Accordingly, the issues identified by TAPL as "threshold issues" in these proceedings are not threshold issues at all. The applicant may obtain an order under s 290 even if his original appointment as a director of TAPL is invalid, and the possibility that he may later be removed as a director, or that TAPL may be wound up, do not disentitle the applicant to an order under s 290.

51 TAPL may wish to contend that the pendency of the Supreme Court proceedings provides a discretionary ground on which relief should be refused under s 290, or provides the foundation for the imposition of conditions. It is free to do so. But that does not require this Court to determine the "threshold issues". All that is required is that this Court determines the extent of its discretion to grant or refuse relief, and whether the pendency of the Supreme Court proceedings affects the exercise of any such discretion.

A problem of case management and judicial resources

52 TAPL may contend that the "threshold issues" have become issues in these proceedings, because it has made them issues by the "Notice" filed on 26 August 2002. I do not think that this is so. It is unlikely that Jacobson J would have allowed an amendment and simultaneously fixed the case for hearing, without making any orders for the filing of further evidence, if his Honour had been told that unless either these proceedings or the Supreme Court proceedings were stayed, then the consequence of the amendment would be that two Australian courts would have to decide issues involving the operation of Canadian laws, with all the waste of money and resources associated with that process and with the risk of inconsistent findings.

53 The "Notice" is not drafted with conspicuous clarity. It asserts that these proceedings should be adjourned until after the Supreme Court proceedings, or the Court should refuse relief in the exercise of its discretion having regard to the pendency of those proceedings. The notice does not, or does not with any clarity, raise for determination in these proceedings the "threshold issues" which are issues in the Supreme Court proceedings. The written submissions lodged by Mr Jacobs, whilst contending that these proceedings should be stayed pending the determination of the threshold issues by the referee, do not contain any submissions as to how the threshold issues should be decided by this Court in the event that a stay is refused.

54 Had the "Notice" raised the "threshold issues" as matters requiring determination in these proceedings, the issue of a stay of these proceedings would have required at least consideration. At the directions hearing held on 26 August 2002 Mr Jacobs acquiesced in the proposition that it was unnecessary for the Court to consider the question of a stay, as TAPL could rely on the "matter" on the application for final relief. The "matter" identified in the "Notice" is whether this Court should, in the exercise of its discretion, refuse to grant access to TAPL's financial records until after the determination of the Supreme Court proceedings. The notion that these proceedings should be adjourned, rather than fixed for hearing, was not pursued.

55 It follows that it was neither necessary nor appropriate for expert evidence to be filed in these proceedings on the issue of the efficacy of the merger, or on the issue of a reduction of capital. My attention has not been directed to any direction made by the Court requiring or permitting the filing of that evidence. It would be contrary to the ordinary practice of this Court to permit expert evidence to be adduced without any stipulation being made as to the experts conferring, and isolating the areas of difference between them.

56 On the materials which I have seen, there is nothing to suggest that Austin J was informed that it is TAPL's contention that the "threshold issues" are issues in these proceedings. The short minutes of order made by Austin J on 7 November 2002 appear to contemplate that these proceedings and the Supreme Court proceedings will proceed in tandem.

57 The Supreme Court proceedings cover a broad canvass. The proceedings in this Court are much narrower in their scope. In my view, the proceedings in this Court are confined to the question of whether this Court should enforce inspection of TAPL's financial records by the applicant as a person falling within the description of a director for the purposes of s 290 having regard to the complaints which TAPL makes as to his conduct and connections, and whether this Court should authorise Mr Watson or Mr Donnelly to inspect those records on the applicants' behalf.

58 As presently advised, I would dismiss the motion for a stay for the following reasons:

- Mr Arkin is not a party to the Supreme Court proceedings, and may not be bound by any determination made in those proceedings as to the efficacy of the merger and its impact on the validity of his appointment;

- it would not be appropriate to stay these proceedings just because a possible outcome of the Supreme Court proceedings is that Mr Lennox may be in a position to remove Mr Arkin as a director in the future, or the position of Mr Lennox as the sole member of TAPL may be confirmed. That is particularly so where, by arrangement between the parties, Mr Arkin has duties to perform as a director of TAPL pending resolution of the Supreme Court proceedings, including consideration of resolutions for the adoption of annual accounts;

- the so-called "threshold issues" are not properly regarded as issues in these proceedings, and the issues in these proceedings are confined in the way which I have indicated. If, for some reason the issues are not so confined, then directions necessary to secure that outcome should be given; and

- the case was fixed for hearing on the basis that it was unnecessary for this Court to address the question of a possible stay, but the issue of whether and in what way the pending Supreme Court proceedings might impact on any discretion to grant relief is a matter for debate at the final hearing. That was the course which TAPL charted at the directions hearing of 26 August 2002. TAPL should not now be permitted to change course.

59 It follows that there will be no resolution in these proceedings of the threshold issues, nor will evidence be received on the issue of failure of the merger or reduction of capital. Those are matters to be determined in the Supreme Court proceedings.

60 To some extent the matters covered in these reasons have gone beyond the submissions made by the parties. I will defer making any orders to enable the parties to give consideration to the views which I have provisionally formed as to the way in which these proceedings should go forward. If the applicant wishes to contend that these proceedings are not or should not be confined as I contemplate, then I will need to reconsider the question of a stay. If TAPL wishes to contend that there is some unfairness to it in the proceedings being confined in that way, I will hear any submissions which it wishes to put before coming to a concluded view on the matter.

61 The matter should be listed for further directions on a date to be fixed.

I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.

Associate:

Dated: 24 December 2002

Counsel for the Applicant:	Mr G Turner/ Mr F Assaf
Solicitor for the Applicant:	Brock Partners
Counsel for the Respondent:	Mr M S Jacobs QC/ Mr P J Bambagiotti
Solicitor for the Respondent:	Cutler Hughes & Harris
Date of Hearing:	9 December 2002
Date of Judgment:	24 December 2002