This case illustrates that care should be taken when drafting information access rights in shareholder agreements, remembering the possibility that a shareholder may become a competitor or opposing litigant of the company in the future.

Metallurg Inc (Metallurg) is part of a global group of metallurgical and engineering companies owned by AMG Advanced Metallurgical Group NV (AMG Group). Global Advanced Metals Pty Ltd (GAM) is the ultimate holding company of a global group of tantalum and other companies (Tantalum Group). This case concerns a dispute between Metallurg and GAM over the terms upon which Metallurg, a shareholder in GAM, could access information about GAM under the GAM Shareholders’ Deed (Deed).

Metallurg sought to access GAM’s books and records due to concerns about particular aspects of GAM’s accounts which, if correct, would require Metallurg to revalue its interest in GAM for its own reporting. GAM was concerned about providing access on the following grounds:

  • certain entities in the AGM Group carried on similar businesses to certain entities in the Tantalum Group so there was the potential for the information to be used by the AMG Group to obtain competitive advantage. GAM argued that regardless of any obligation not to use the information to the detriment of GAM, the information would remain with the officers of the AMG Group and could not be forgotten; and
  • AMG could misuse the information to gain a forensic advantage in existing litigation between AMG and GAM subsidiaries in the US. GAM argued that the mere reading of the confidential information amounted to using it “in a way which damages or is reasonably likely to damage” the Tantalum Group in contravention of the Deed.

GAM had advised Metallurg that it was only willing to provide the requested information subject to Metallurg executing a confidentiality agreement that would:

  • impose significant further confidentiality obligations in addition to the existing confidentiality provisions of the Deed; and
  • require certain information to only be provided to an appointed independent accountant who would review it and report (subject to certain content restrictions) to both GAM and Metallurg.

In granting the access orders sought by Metallurg, Chaney J in the Supreme Court of Western Australia agreed with Metallurg’s construction of the relevant access provisions of the Deed that it gave Metallurg 2 separate and independent rights:

  • an ‘access/inspection right’, being the right, on notice, to access GAM’s premises, to inspect GAM’s books and records and to discuss GAM’s affairs, finances and accounts with GAM’s officers, employees and auditors for the purposes of auditing or valuing the Tantalum group or for any other reasonable purpose. Because this right is exercised by individuals (some of whom may not be employees of Metallurg), the confidentiality provisions in the Deed will not bind them. The access provisions therefore existed to fill the privity gap by requiring such persons to enter into a separate confidentiality deed with GAM; and
  • an ‘information right’ being the right for shareholders to request such information about GAM’ and it subsidiaries and affiliates as was required in order to comply with their tax, accounting or regulatory filing and compliance requirements. The information right is not qualified by the access provisions but rather, where a shareholder makes use of this right, it is bound by the confidentiality provisions, and the access provisions cannot be used to impose additional confidentiality restrictions on Metallurg as the shareholder receiving the information. The reference in the access provisions to ‘access’ and ‘inspection’ supported this construction because those words were used only in relation to the access/inspection right and not the information right.

Chaney J also held that:

  • the fundamental flaw in GAM’s contention was that it equated access and inspection to use of information which “damages, or is reasonably likely to damage” the Tantalum Group. Chaney J did not accept that loss of confidentiality in respect of a Relevant Shareholder necessarily creates a reasonable likelihood of damage to the Tantalum Group;
  • GAM had bound itself to provide information, including commercially sensitive information, to Metallurg in its capacity as a shareholder and Metallurg obtained the rights to such information for valuable consideration. The fact that Metallurg was also a competitor was immaterial; and
  • while the use of the words “reasonable access” in clause 7.1 may involve consideration as to the mode and means of access, it does not limit the nature or content of the information which a shareholder may access. If it was the intention to limit the type of information, appropriate words of limitation could have been used.