The key issue in London City Equities Ltd v Penrice Soda Holdings Ltd  FCA 674 was whether a shareholder of the defendant could obtain authorisation to inspect a wide range of the defendant's books under s274A of the Corporations Act 2001 (Cth).
Section 274A gives the court the discretion to order the inspection of a company's books if the applicant is acting in good faith and the inspection is to be made for a proper purpose.
Robertson J noted and considered previous cases in which orders were granted, to allow access to company books and accepted that this application by the plaintiff was brought in good faith and for a proper purpose since the plaintiff was considering pursuing legal proceedings against the directors of the defendant (including for non-disclosure of certain financial information) or bringing proceedings on behalf of the defendant.
The court considered each of the categories of information requested by the plaintiff and purpose for which inspection was sought, and granted authorisation for most of the documents sought. However, where the Court considered the time periods for which information was sought were too broad, the terms of the request were too imprecise or the documents requested did not appear to be relevant to the proposed proceedings, approval was not granted.
This case provides support for shareholders seeking to access a company's books, including D&O policies, to assist them in assessing whether there is a cause of action available and, importantly, whether there is insurance cover in place which may fund the result of any claim which is brought against directors.