ACP v Southdown

[2001] NSWSC 273

CITATION:	ACP -v- Southdown [2001] NSWSC 273
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50160/99
HEARING DATE(S):	9.4.01
JUDGMENT DATE:	12 April 2001
PARTIES :	ACP Magazines Pty Ltd -v- Southdown Publications Pty Ltd & Anor
JUDGMENT OF:	Hunter J

COUNSEL :	Applicant: S Gageler SC & I Pike Respondent: A J Meagher SC
SOLICITORS:	Applicant: Blake Dawson Waldron Respondent: Gilbert & Tobin
CATCHWORDS:	Practice & procedure - interlocutory injunction pending appeal - whether question of construction seriously arguable on appeal.
CASES CITED:	The Aboriginal Community Benefit Fund Pty Ltd -v- Batemans Bay Aboriginal Land Council (unreported, 29 October 1996)
DECISION:	Orders restraining inspection of records pending determination of leave to appeal.

IN THE SUPREME COURT

OF NEW SOUTH WALES

EQUITY DIVISION

COMMERCIAL LIST

HUNTER J

THURSDAY 12 APRIL 2001

50160/99 ACP MAGAZINES PTY LIMITED -v- SOUTHDOWN PUBLICATIONS PTY LIMITED

REASONS FOR JUDGMENT

1    In these reasons I have used the terminology adopted in my reasons for judgment of 14 March 2001.

2    The application on behalf of News has undergone some changes since it was first brought by notice of motion, filed 28 March 2001, seeking a stay of execution of orders made on 14 March 2001 (the orders). The orders were declaratory in nature and related to the entitlement of ACP to inspect records of the Business pursuant to cl 5 of the deed. I think it is accepted by News that the relief initially sought was inappropriate in relation to a declaratory order.

3    For that reason, News foreshadowed an amendment to the notice of motion in the following terms:

“2. Further or in the alternative, an order pending the determination of the appeal, restraining :

(a) the Chairman of the plaintiff or his nominee, when inspecting the books and records of TV Week in accordance with clause 5 of the Deed dated 6 August 1980 between Australian Consolidated Press Limited, News Limited and Southdown Publications Pty Limited, from acting with such assistance from any other person as he, she or they may reasonably require (“assistants”):

(b) such assistants from making notes (in either hard copy or electronic form, or by use of an electronic recording device) of or in relation to the information contained in such books and records; and

(c) such assistants from taking copies of such books and records in such manner and such form as may be convenient to them, including by the use of an electronic copying or recording device .”

4    That foreshadowed amendment was further subject to amendment when the competency of the appeal, brought without leave, was challenged on the basis that News required leave of the Court of Appeal. The further amendment sought a restraining order “pending the determination of the appeal or any application for leave to appeal”.

5    During the course of the hearing the orders were amended, by consent, by inserting the words “chairman, nominee and” before the word “such” where it first appeared on the first line of sub-pars (b) and (c) of the orders. The restraining orders sought were similarly amended.

6    Without conceding that leave was required, senior counsel for News undertook on behalf of News to bring an application for leave to appeal from the orders and to prosecute with expedition the hearing of such an application for leave. He further limited the application to restraining orders in terms of the amended par 2 only until such time as the Court of Appeal determined the application for leave.

7    The change in the nature of the application and the limitation of it in that manner has had the effect of saving the application from being dismissed. I did not entertain any doubt that a stay of execution was inappropriate and I would not have been prepared to make restraining orders of the kind sought for the period pending the determination of an appeal as of right from the orders.

8 I do not understand there to be any dispute that I have power to make appropriate restraining orders pursuant to s 66(4) of the Supreme Court Act 1970, pending the hearing of an application for leave to appeal from the orders. I have been referred only to the authority of McLelland CJ in Eq. in The Aboriginal Community Benefit Fund Pty Ltd -v- The Batemans Bay Aboriginal Land Council (unreported, 29 October 1996) which recognised the jurisdiction to make such orders and examined the authorities favouring the bringing of such an application, in first instance, before the trial judge.

9    The cornerstone of the application is that the refusal of the application would have the result of rendering nugatory any successful appeal by News from the orders. The gravamen of ACP’s opposition to the making of any restraining orders is, essentially twofold: namely, that there is no seriously arguable question arising out of the judgment of 14 March and that the undisputed entitlement of ACP through its chairman or the chairman’s nominee, to inspect the records of the Business pursuant to cl 5 of the deed would lead to the same alleged prejudice to News which it is claimed would flow from an inpection in accordance with the terms of the orders: albeit involving a protracted and highly inefficient process when compared with an inspection in accordance with the orders. I think that the latter contention is correct.

10    The questions to be tried have been identified by senior counsel on behalf of News as being:

(a) In par 66 of the reasons for judgment of 14 March 2001 it was acknowledged that the construction favoured in those reasons involved a departure from the literal terms of the deed.

(b) The terms of the deed cannot support the commercial purpose of the deed to which I had regard.

(c) The tests for implication of terms have not been satisfied, contrary to the separate and alternative approach to construction based upon implication of terms.

(d) The extrinsic evidence adduced by News in aid of construction was wrongly rejected.

11    I see little merit in those contentions. In relation to the rejection of extrinsic evidence, even if admissible in aid of construction, for the reasons given in the judgment of 14 March, the evidence does not assist in construing the deed.

12    The implication approach to construction is not the construction upon which the judgment of 14 March is based.

13    The commercial purpose of the deed, I think, is not seriously open to argument.

14    The departure from a literal construction of “inspection” within the meaning of cl 5 of the deed raises the central question of construction, in respect of which the authorities referred to in the reasons for judgment offer strong support for the interpretation of “inspection” as expressed in those reasons.

15    It is, I think, a valid contention on behalf of ACP that I have expressed firm and unqualified views as to the construction of cl 5 of the deed. I have had no reason to modify those views and am firmly of the opinion that News’ construction of the deed involves a commercial absurdity and, if applied to inspections under cl 5, would defeat, virtually, all of the purposes for which, I think, a cl 5 inspection was provided.

16    Accordingly, if the application was one pending the hearing of an appeal as of right, I would not regard it as reasonable to deprive ACP for that length of time of its entitlements under cl 5 as I have construed the deed: notwithstanding the many years that have passed since the inception of the deed, without ACP seeking an inspection of the kind now pressed by it.

17    My reasoning is brief: namely, that cl 5, in my view, is the only real protection that ACP has under the deed in relation to ensuring that the statements of profits and losses and the financial information provided to it by News in relation to the Business are correct and that the records that News is required to keep of the Business are properly kept. Further, in the exercise by ACP of its entitlements under the Savoy clause, or in the event that News sought to exercise its rights under that clause, I think it would be completely unreasonable to exclude ACP from access to the records the subject of cl 5 in the manner sought to be enforced by News.

18    Finally, over the time that it would take to determine an appeal as of right, I think the undisputed entitlement to inspection by ACP under cl 5 would lead to the same kind of erosion of News’ fruits of a successful appeal as would flow from an inspection in accordance with the orders.

19    The evidence of prejudice to News if inspection is permitted in accordance with the orders has been adduced through the affidavits of Hugh Douglas Hilton Keller sworn 28 March, 3 April and 6 April 2001.

20    I do not propose to address those matters in detail. I do observe that, in relation to the evidence that News has not kept separate records of the Business and that it is not practicable to mask the records so as to expose only records of the Business for the purposes of a cl 5 inspection, I think it approaches a concession that proper records of the Business, within the meaning of the deed, are not being kept. In any event, if there is any prejudice to News arising out of that impracticality, then I regard that prejudice as being of its own making.

21    Nor do I place much weight on the fact that the parties are competitors in the magazine and publishing industry. That factor is recognised in the deed. Each of the parties is free to compete with the Business and it cannot have been intended that ACP should be at a disadvantage to News in having access to the records of the Business in that context.

22    I note in par 9 of Mr Keller’s affidavit of 18 March 2001, that reference is made to par 48 of my reasons for judgment in which I expressed the view that the operation of the confidentiality provisions of cl 10 was not entirely clear. I think that should be put in context. There is no ambiguity in the provision of cl 10 that entitles either party to disclose to independent consultants information obtained in relation to the deed and the Business “for the purpose of assisting that party in relation to any matter arising [thereunder]”.

23    The inelegance in drafting lies in the proviso which requires that disclosures pursuant to cl 10 (a), (c) and (d) should only be made to a person who covenants and agrees that the “relevant information shall not be disclosed to any other person for any other purpose whatsoever” (emphasis added). When one looks at sub-par (a) which entitles disclosure “by a party to its related corporations”, there is no purpose stated for such disclosure, so it is very difficult to see how that proviso would work in such a situation. In my view, that lack of clarity has no bearing on the conclusions I have expressed in the reasons for judgment of 14 March 2001.

24    In opposition to the application ACP has read the affidavit of Mark Geoffrey O’Brien sworn 4 April 2001 which, in substance, sets out the history of ACP’s endeavour to obtain inspection of the records pursuant to cl 5 since October 1999. I have not found it necessary to consider that material in any detail.

25    During the course of the hearing I invited the parties to consider conditions upon which restraining orders might be imposed. That exercise proved unproductive.

26    However, if any restraint were to be imposed beyond the granting of leave to appeal or any determination that leave to appeal was not required, with one rider, I would favour that preferred on behalf of ACP in the “Note of Argument For Respondent”, which I have marked for identification ‘2’. Having regard to the evidence of impracticality of masking records unrelated to the Business, the undertakings referred to in that document should be extended to one by the nominee and the assistants not to disclose that unrelated information to any other person.

27    At the conclusion of the addresses, senior counsel for ACP tendered a stock exchange announcement of 1 March 2001 referring to merger plans of PMP Limited and Independent Print Media Group. It was said that PMP Limited was the parent corporation of the applicant. The tender was objected to. It was submitted on behalf of ACP that the relevance of the announcement lay in the potential commercial impact on the operation of the deed arising out of “an effective change in the control of …and … identity of the parties” to the deed. I deferred the ruling on its admissibility undertaking to examine the relevance during the course of disposing of the application. In my view, the tender should be rejected as irrelevant to the considerations going to the exercise of my discretion in this matter.

28    Notwithstanding the views I have expressed as to the substance of the questions sought to be argued on appeal, it should be recognised that in questions of construction minds differ. Since I assume the Court of Appeal will be required to consider, on News’ leave application, whether the questions sought to be raised are seriously arguable, I think the appropriate course is to impose a restraint on the conditions of inspection of the nature, in substance, sought by News, pending determination of that leave application. The period within which a leave application will be determined is comparatively short and, for that reason, the imposition of such a restraint will impose no hardship on ACP and protect News from the prejudice of a prolonged inspection under cl 5 in accordance with the terms of the orders.

29    The order I make is as follows: Upon the usual undertaking as to damages, and upon the further undertakings to seek leave to appeal from the orders and prosecute that application with expedition, I order, that pending the determination of the application for leave to appeal :

“(a) the plaintiff, by its Chairman or his nominee, when inspecting the books and records of TV Week in accordance with clause 5 of the Deed dated 6 August 1980 between Australian Consolidated Press Limited, News Limited and Southdown Publications Pty Limited, be restrained from acting with assistants;

(b) the plaintiff, by such Chairman or nominee be restrained from making notes (in either hard copy or electronic form, or by use of an electronic recording device) of or in relation to the information contained in such books and records; and

(c) the plaintiff, by such Chairman or nominee be restrained from taking copies of such books and records in such manner and such form as may be convenient to either of them, including by the use of an electronic copying or recording device.”

30    I note that senior counsel for the application has given those undertakings.

31    I think the appropriate order as to costs is that the applicant should pay the respondent’s costs of the application, which in my view underwent significant changes in the hearing and has been successful only upon a limited basis.

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Last Modified: 04/18/2001