Advent Investors Pty Ltd v Eromanga Hydrocarbons Nl

[1997] FCA 1379

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	SG 3014 of 1997

BETWEEN:	ADVENT INVESTORS PTY LIMITED APPLICANT
AND:	EROMANGA HYDROCARBONS NL RESPONDENT

JUDGE(S):	MERKEL
DATE:	6 NOVEMBER 1997
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

In this matter the applicant is seeking inspection of certain records of the respondent pursuant to s 319 of the Corporations Law. The central issue arising in the application is whether the applicant is acting in good faith and for a proper purpose in making the application. A great deal of evidence has already been filed by the parties on this issue.

At a directions hearing on 31 October 1997, I gave a fairly clear indication to counsel for the respondent that I was not disposed to order general discovery but would consider an application for limited discovery.  I also indicated that the categories of documents the subject of any order should be carefully formulated.  The respondent has made at least two attempts to formulate categories of documents.  Under the latest formulation, discovery is sought in relation to the following issues:

1. whether the applicant or any of the companies set out in the substantial shareholding notices exhibited to the affidavits filed in this proceeding have engaged in market manipulation in relation to shares in the respondent;

1. whether the applicant has threatened to take legal action, such as an application under s 319 of the Corporations Law, if the directors did not co-operate with the applicant’s intentions in relation to the Lebbon Group's shares in the respondent;

1. whether the applicant is seeking information about the affairs of the respondent’s affairs to assist it in selling its shares in the respondent or providing advice to third parties in relation to their acquisition of shares in the respondent.

The first two issues do not directly relate to the purpose of the application made under s 319. Rather, they appear to relate to an issue going to credit, and possibly to some background facts from which it is said that inferences might be drawn as to improper purpose. I am not satisfied that it is appropriate to order discovery on either issue. The discovery sought is more in the nature of a fishing expedition and does not appear to be sufficiently related to the fair trial of the issue of the purpose for which the discovery is said to be necessary.

The third category more directly relates to the alleged improper purpose, but as with the first two categories, assumes a purpose which is denied.  I am not satisfied that the discovery sought on the third issue is appropriate or warranted.  I add that it also appears to be in the nature of a fishing expedition. 

The primary problem with the respondent's approach to discovery is that it assumes that the Court will embark on a general investigation into the conduct of the applicant, because the respondent contends that it is relevant to the applicant's purpose, in relation to s 319.

On the material presently before me, I am not satisfied that the respondent's approach to s 319 is correct or permissible. Other than to indicate that it is appropriate that the respondent focus more carefully on the issues to be contested as to purpose under s 319, I say no more on that matter.

The respondent's fallback position was that if it is unsuccessful in obtaining an order for discovery in relation to the categories described above, it would be content for an order granting discovery in relation to the applicant's purpose in bringing the application pursuant to s 319.

It seems to me that such an order is appropriate, as there is sufficient material before me to indicate that the question of purpose is genuinely raised and contested by the respondent. Further, it is an issue which, of its nature, can only be established or disputed in the first instance by reference to material in the sole possession of the applicant. Accordingly, I propose to order that the applicant make discovery of all documents in its possession, custody or control relating to its purpose in making the application dated 19 June 1997 under s 319 of the Corporations Law.  I otherwise dismiss the respondent's application for discovery.

I will make the following orders:

1. I order that within 14 days, the applicant make discovery and provide inspection to the respondent of all documents in its custody, possession or control, relating to its purpose in bringing the application under section 319 of the Corporations Law, which application is dated 19 June 1997;

2. I otherwise dismiss the respondent's application for discovery;

3. I direct that the respondent file and serve all affidavits upon which it intends to rely at the hearing on or before 27 November;

4. The applicant file any responding material upon which it intends to rely at the hearing on or before 8 December 1997;

5. I will adjourn the matter for further directions on 12 December, 1997.

It seems to me that discovery has been a substantive application made by the respondent.  It is an application in which the respondent has substantially failed to establish its entitlement to discovery, and it follows in my view that the respondent should pay the applicant's costs of and incidental to the application for discovery, and I so order. 

I certify that this and the preceding two (2) pages are a true copy of the revised Reasons for Judgment herein of the Honourable Justice Merkel

Associate:

Dated:            

Counsel for the Applicant:	Mr C Maxwell
Solicitor for the Applicant:	Mallesons Stephen Jaques
Counsel for the Respondent:	Mr J I Fajgenbaum QC with Mr M Moshinsky
Solicitor for the Respondent:	Goldhirsch & Fixler
Date of Hearing:	6 November 1997
Date of Judgment:	6 November 1997