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Court denies shareholders access to insurance documents in Dreamworld class action

  • Legal Development 07 October 2020 07 October 2020
  • Asia Pacific

  • Insurance & Reinsurance

The controversial issue of whether class action group members are entitled to have access to a respondent's insurance policies was again before the Federal Court in Ingram as trustee for the Ingram Superannuation Fund v Ardent Leisure Limited [2020] FCA 1302. Clyde & Co has previously reported on a similar issue in the matter of Evans v Davantage Group Pty Ltd (No 2) [2020] FCA 473

The basis of the application was different from Evans. The documents were sought under s247A of the Corporations Act 2001 (Cth) rather than s33ZF, 37M and 37P of the Federal Court Act

Derrington J refused the application on the basis that the request for documents was not for a proper purpose as required by s247A, and therefore not a valid exercise of shareholder powers. Her Honour made a number of observations that were pertinent to her decision, including that:

  • The respondent entity was solvent with significant net assets that exceeded the claimed quantum;
  • Insurance documents are commercially confidential between the insured and insurer, and the Court should be reluctant to break such confidence;
  • The Court expects that an insured will seek to enforce its rights to coverage and to contest any wrongful declinature;
  • Insurance documents will only be discoverable by one party where it has direct relevance to an issue arising on the pleadings;
  • Generally, an applicant has no right to examine the creditworthiness of a potential respondent ahead of commencing an action in an attempt to ascertain the commercial viability of pursuing the matter;
  • The fact that settlement of a class action requires judicial approval does not support the disclosure of insurance policies. If insurance becomes an issue during the settlement stage, the Court is capable of designing appropriate procedures to address the issue; and
  • The disclosure of an insurance policy would confer a commercial advantage on the applicants during settlement negotiations outside of any benefit acquired derivatively upon the application of the Court rules.


Ardent Leisure Limited (Ardent) is a corporate group that operates amusement parks, including Dreamworld at Coomera in Queensland. On 25 October 2016, a tragic incident occurred at Dreamworld's Thunder River Rapids Ride, killing four people. Following the incident, the price of Ardent's stapled securities fell from $2.55 to $2.00. 

The Applicants are group members in a shareholder class action. They allege that Ardent represented to the public that it maintained very high safety standards at the amusement parks and in particular at Dreamworld.  They allege that those representations were misleading or deceptive in contravention of s1041H of the Corporations Act and s12DA of the Australian Securities and Investments Commission Act 2001 (Cth) because the safety standards in respect of the amusement rides at Dreamworld fell below the standard represented. 

The Applicants also allege that Ardent was aware of information which created a material risk or likelihood that a malfunction would occur on the Thunder River Rapids Ride which might cause serious injury or death (Incident Information) and if such an incident occurred, there was a material risk or likelihood that there would be an adverse impact on the Ardent Leisure Group’s profits in current and future financial periods with a consequential decline in the value of the stapled securities (Incident Impact Information).  Central to the claim is the allegation that Ardent breached its continuous disclosure obligations pursuant to ASX Listing Rule 3.1 and s674(2) of the Corporations Act, in that it failed to disclose this information to the market. 

It is alleged that, had the Applicants known of the Incident Information and/or the Incident Impact Information, they would not have acquired the stapled securities. Further, they allege that as a result of Ardent's contravention of its continuous disclosure obligations, the Applicants acquired stapled securities at an inflated price.

The Applicants claim the loss of value in their securities, based on the quoted price of a stapled security of $2.55 at the opening of the market on 25 October 2016 and its closing price of $2.00 on the following day. The Group members estimate that the value of the claim is between $294M and $310M. 

The Applicants sought orders under s247A of the Corporations Act permitting them to inspect documents, including insurance documents and insurance related correspondence.

In making the application, the Applicants alleged that Ardent's economic position was worsening over time, due to closure of its theme parks as a result of COVID-19. They were concerned that Ardent's total assets would not be sufficient to meet a judgment in favour of the group members.  Both parties served evidence of the value of the companies in the Ardent Group. The Applicants' solicitor also informed the Court that a condition of the litigation funding agreement required the Applicants to obtain copies of all relevant policies of insurance and they risked termination of the funding agreement if they failed to obtain copies of these documents.

There was no evidence before the Court of the existence of insurance policies which might respond to the class action, although the Court accepted that the existence of such policies might be assumed. The Applicants were unaware of the insurance policy limits and it was this information which was at the heart of the application.

The Application

The application for access to the insurance documents was made pursuant to s247A of the Corporations Act. This section confers a discretionary power on the Court to permit a shareholder to inspect a company's books, but only if the applicant shareholder is acting in good faith and the inspection is made for a proper purpose.

The group members submitted that their request for access to the documents was made for three reasons:

  • To assess the commercial viability of the class action;
  • To conduct the litigation proportionately and efficiently; and
  • To facilitate meaningful and early mediation.

Ardent resisted the application on the basis that this was not "a proper purpose", as the rights which the group members sought to advance in the class action were not the rights to which they derived in their capacity as shareholders. Further, Ardent submitted that even if the applicant's purpose was proper, the Court should not exercise its discretion to grant relief.


Justice Derrington reviewed a number of cases including Hanks v Admiralty Resources NL (2011) 85 ACSR 101, in which Gordon J referred to “proper purpose” being “a purpose connected with the proper exercise of the rights of a shareholder as a shareholder”. Justice Derrington said that in Hanks, her Honour was identifying that the purpose is one connected with a shareholder’s rights qua shareholder. Justice Derrington said that where a person who has a claim or potential claim against a company in which they are a shareholder, but which arises from events unconnected with their rights and entitlements as a shareholder, s247A affords them no avenue to obtain a litigious advantage by inspecting a company’s private and confidential documents.

Her Honour considered that in the present case, the Applicants' claim did not arise from their rights and entitlements as shareholders. The Applicants’ central allegation is that Ardent breached its obligations or failed to perform duties which caused them damage when they made the investment decision to acquire stapled securities in the Ardent companies. In that sense the alleged wrongs were done to them in their capacity as potential investors in the companies and not in their capacity as shareholders. Similarly, the duties or obligations which the respondent companies allegedly breached were not owed to the applicants in their capacity as shareholders. For these reasons, her Honour determined that the purpose of seeking the insurance documents was not "a proper purpose". It followed that, although the Applicants had standing to bring the application given that they were presently members of Ardent, the purposes for which they sought the documents in question were not proper purposes with the meaning of s247A.

Her Honour said that even if the Applicants had established a proper purpose, she would have exercised the discretion against granting the relief sought in relation to the insurance policies and the correspondence between Ardent and its insurer. 

In reaching that conclusion, her Honour was mindful of the following factors considered by Beach J in Evans, noting that the application in that case was made on a different basis and did not involve consideration of  s274A, identifying each of the matters set out earlier in this case note.

In addition to the considerations put forward by Beach J, her Honour also considered the evidence which showed that that Ardent was solvent and had net assets of approximately $290M, which exceeded the quantum of the claim in the class action. No evidence was presented to suggest that there was a risk the proceeds of the insurance policies would be dissipated, for example having been used to settle personal injury and wrongful death claims or for defence costs for any regulatory proceeding linked to the accident at Dreamworld.

Her Honour also considered the extent to which the application would, if granted, benefit third parties. While there was no evidence before the Court as to the proportion of the class who were no longer members of Ardent, her Honour considered a factor weighing against the exercise of discretion would be if it would confer benefits on numerous other persons who would not have been entitled to make the application of their own motion. As to the satisfaction of the condition in the litigation funding agreement, her Honour acknowledged that litigation funding is a necessary fact of life for litigants in class actions, and this fact would not have weighed against the exercise of discretion.

Justice Derrington noted that aside from the insurance policy, the Applicants sought copies of correspondence with Ardent's insurers concerning the notification of the claims made against the respondents and the insurers’ responses and communications concerning that notification. Her Honour said there were very good reasons why inspection of such documents would not be allowed on an application under s247A. Her Honour considered that there were unique public policy grounds to maintain the duty of utmost good faith between insured and insurers both under the Insurance Contracts Act 1984 (Cth) and at common law. Making such documents available to third parties who may wish to pursue a claim in respect of which the insurance policy might respond would severely and detrimentally affect the insurer/insured relationship as it would necessary prevent the parties to the policy corresponding in a manner consistent with their duties inter se. Her Honour said that such an intrusion into that relationship would have consequences beyond this case and would give rise to a public policy question. Her Honour stated that even where a proper purpose was established, an exceptional case would have to be advanced before the discretion would be exercised to permit inspection of correspondence between an insurer and insured. 


While this decision turned (and ultimately failed) on the narrow issue of whether the applicants were exercising rights in their capacity as shareholders, the Court nevertheless went on to consider the discretionary factors that would be relevant had the applicants been able to satisfy the Court they had a proper purpose in making the application.  In this sense the decision provides useful guidance about the likely attitude of the Court in future applications for the production of insurance policies and documents under s247A. 

The case also provides an insight into the considerations that litigation funders undertake in considering whether to fund such actions. Ascertaining prospects of recovery and the existence of adequate insurance remain a key consideration for litigation funders.  

Taking a step back from the particular legal basis for the application, the result could be viewed as another decision which indicates the reluctance of Federal Court judges to allow class action Applicants' access to the corporate Respondent's insurance documents. The judgment certainly throws up multiple obstacles to the successful outcome of such applications.


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