Centacom Superannuation Fund Pty Limited v Santos Limited

[1992] FCA 1096

JUDGMENT No. .---!-P%k../ ..S&

%i P

C A T C H W O R D S

Discovery - inspection of commercially sensitive documents - access limited to legal representatives of parties - whether

person acting as consultant to directors of applicant should

have access to documents to assist preparation of applicant's

case.

CENTACOM SUPERANNUATION FUND PTY. LIMITED v. SANTOS LIMITED

No. NG 3151 of 1992

BEAUMONT J.

SYDNEY

28 AUGUST 1992

IN THE FEDERAL COURT OF AUSTRALIA ) )

NEW SOU TH WALES DISTRICT REGISTRY ) No. NG 3151 of 1992

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GENERAL DIVISION )

BETWEEN: CENTACOM SUPERANNUATION

FUND PTY. LIMITED

Awwlicant

AND: $ANTOS LIMITED

Respondent

CORAM: BEAUMONT J.

PLACE : SYDNEY

DATE : 28 AUGUST 1992

REASONS FOR RULING ON ACCESS TO DISCOVERY DOCUMENTS l

By application dated 9 July 1992, the applicant seeks an order that s.701(5) of the Corworations Law does not apply in relation to the application. The applicant is the holder of 886,897 shares in Latec Investments Limited. The respondent made offers under its takeover scheme in respect of the acquisition of all the fully paid ordinary shares of 20 cents each and of all the fully paid stock units of 20 cents each in Latec. The offers remained open until 22 April 1992. The applicant and Robert John Charles Catto did not accept the offer but received notices dated 25 May 1992 pursuant to s.701(2) of the Corworations Law. By s,701(5) of the Corworations Law, it is provided as follows:

"Where a notice is given under subsection (2), the

offeror is entitled and bound, subject to this	l
section, to acquire the shares to which the notice

relates on the terms that were applicable in relation to the acquisition of shares under the takeover scheme or pursuant to the takeover announcement immediately before the end of the offer

period. "

In support of the application, the applicant has filed and served an affidavit sworn by Mr. Catto on 8 July ,

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1992. In his affidavit, Mr. Catto, who is there described as an economist, says that the principals of the applicant	1
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consult with him as to the composition of the applicant's	I
investment portfolio. Mr. Catto says that he himself was the
holder of 16,000 shares in Latec that are outstanding shares
by virtue of s.701(1) (c) of the Corworations Law. Mr. Catto
goes on to say in his affidavit that he believes that the
compulsory acquisition is unfair for a number of reasons, some	~
of which relate to matters of an accounting or valuation	1 l
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character. In his affidavit, Mr. Catto says that "[flurther	~
reasons will be provided following discovery, if anyw.
Discovery, but not inspection, has now taken place. A difficulty has now arisen with respect to inspection. On behalf of the respondent, it is contended that certain of the documents discovered by it are commercially sensitive and confidential. The respondent has indicated that it has no objection to access to these confidential documents being granted to the applicant or its solicitor on the footing that they assure the respondent that the material inspected will be treated on a confidential basis. However, on behalf of the applicant, it is requested that access also be granted to Mr. Catto on the same confidential footing. Mr. Catto has

indicated that, if granted access, he would execute an appropriate instrument in which he undertakes to maintain the confidentiality of the information in the material discovered. Notwithstanding this offer, the respondent has declined to permit access to Mr. Catto.

In support of the application for access by Mr. Catto and in resistance to that application, each of the parties has relied upon a significant body of affidavit evidence. In all, nine substantial affidavits were relied upon. However, I do not find it necessary to refer to much of

this material. ~

In an affidavit sworn on 18 August 1992, Stephen Mark Wright, a solicitor acting for the respondent in this proceeding, describes in para.6 of that affidavit the documents in respect of which the claim of confidentiality is made. I have not sighted these documents, but the description of them given by Mr. Wright in his affidavit indicates that, prima facie, they contain information which is commercially sensitive and thus confidential. However, I do not propose to make a specific finding that the documents now in question are, in fact, confidential. As has been said, the respondent is prepared to grant access to these documents to the applicant and its legal representatives. If, after inspecting this material, the applicant is advised that, in the opinion of its legal representatives, the material is not, in truth, confidential, then an application may then be made for the

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grant of access by Mr. Catto on that ground. This is not, of course, to say that the applicant would succeed in such an application. It is merely to note that the Court has not ruled on the issue of confidentiality at this stage. This is an open question that can be pursued later, if the need arises.

The present question for determination is whether access to the material which is claimed to be confidential should be granted, at this stage, to Mr. Catto.

In support of the application for access, Mr. Catto has sworn an affidavit on 19 July 1992 in which he says that the principals of the applicant consult with him, through Batoka Pty. Ltd., a company controlled by Mr. Catto, with respect to the composition of the applicant's investment portfolio. Mr. Catto says that the consultancy agreement with the applicant is oral and was made in 1989. In essence, he says, the consultancy arrangement involves the provision of advice to Vincent John Plummer, a director of the applicant. It appears that the practice is for Mr. Catto to give an undertaking to Mr. Plummer that he "maintain and retain" a parcel of shares in each investment made by the applicant and keep Mr. Plummer informed of "pertinent details of the investment as it progresses". This is done, it appears, in return for substantial fees. Mr. Catto says that the applicant has paid Botako more than $200,000 in fees over the last three years. The current value of the investments of the

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applicant made as a consequence of the consultancy agreement

is in excess of $1,400,000.

Mr. Plummer has also sworn an affidavit on 24 July 1992. He says that the applicant is custodian trustee of the

Centacom Group Staff Superannuation Fund. Mr. Plummer, his son and two other persons, are trustees of that Fund which is nominal owner of a portfolio of shares. Mr. Plummer says that the Fund's portfolio decisions are made by himself and by Mr. Catto. The portfolio exceeds $1,400,000 in value, and Mr. Plummer says, has within it a concentration of investments of shares in companies in which there is already a substantial owner. About 30 companies are involved.

In his affidavit, Mr. Plummer went on to say:

6.   The investment decisions are necessarily ones directed towards purchasing shares in companies in which there is a probability that a principal shareholder may at some future date be seeking more complete ownership.

7. Centacom Superannuation Fund Pty Ltd has joined at least five actions in the Supreme Court, in the Federal Court and in the High Court of Bermuda in the last three years in order that its rights as a holder of equities may be protected. In all of those matters Centacom has relied solely on the advices of M r Catto. In some of those matters Mr Catto was a joint applicant before the various courts, and in some matters Mr Catto was a litigant in person in regard to his application before those courts.

8. In this matter the Applicant is relying solely on Mr Catto's advice and it is essential for that purpose for Mr Catto to have access to all documents relevant to the matter.

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9.   It was decided for simplicity's sake that Mr Catto be not also an applicant. He has my complete confidence in regard to the progress of the company's right to have aspects of the recent takeover determined and interpreted. He liaises on a day-to-day basis with a number of firms of solicitors and in this matter it is his role on behalf of the Applicant to be in touch with Mr Stephen Blanks."

However, Mr. Catto's activities are not limited to his arrangement with the applicant.

There is material in the af fidavit evidence filed on behalf of the respondent from which, in my view, it may be inferred that Mr. Catto is a professional investor who, on his own account, uses a number of investment strategies, including the strategy of taking a minority interest which he considers some other person will have an interest in buying out.

In my opinion, the approach taken by Wilcox J. in Kanthal Australia Ptv. Ltd. v. Minister for Industry, Technoloav and Commerce (1987) 71 ALR 109 is appropriate here. It was there held that access to commercially sensitive material by a limited number of lawyers should be permitted, subject to each undertaking to keep the information confidential.

Wilcox J. said (at 115):

"Dealing first with the lawyers; they are not involved in making commercial decisions on behalf of Kanthal. There could be no unwitting use by them of the information, to the disadvantage of the suppliers. For damage to occur there would have to be a deliberate disclosure by one or more of them of

the information obtained. In practice it is highly unlikely that, if appropriate undertakings were given, there would be such a disclosure. On the other hand access by the lawyers may well suffice to enable decisions to be taken as to what documents should be tendered on behalf of the applicant in support of the case which it seeks to make."

However, access by an accountant was refused at that stage. Wilcox J. said (at 115-116):

"Counsel for the applicant submits that a similar view ought to be taken about the position of Mr Day. The affidavit of Mr Day shows that he is a qualified accountant who has given independent expert evidence in a number of courts and tribunals. On some occasions he gave, and had accepted, undertakings of confidentiality. Mr Day offers a similar undertaking in relation to any information which might be disclosed to him in the present case. Counsel for the applicant seeks access by Mr Day to the documents upon the basis that, as an experienced trade consultant, he is likely to be able to assist the lawyers in their comprehension of those documents.

Nothing has been put before the court to reflect adversely upon Mr Day's integrity. I have no reason to doubt that he would abide by the constraints of any undertaking which he might give. Counsel for the Minister does not suggest otherwise. But he does submit that, nevertheless, Mr Day stands in a different position to that of the lawyers acting for the applicant. Mr Day is engaged full-time in advising a variety of clients upon trade matters. He is available to all and he may be called upon to advise a client whose interests conflict with those of the suppliers of the confidential information. As a trade professional, it is suggested, he would be more likely to recall the substance of the information than lawyers would be. Once that information became part of his general knowledge it might be difficult, counsel submits, for him to recall its source or to ensure that it was not used for the benefit of others.

Without casting any aspersion upon Mr Day, the apprehensions voiced by counsel cannot, I think, easily be dismissed."

Wilcox J. went on to say (at 116):

"I would find it necessary, before ordering any disclosure to Mr Day, to know more than I presently do about the nature and range of his consultancies and, perhaps, to obtain from him some undertaking excluding certain consultancies for an appropriate future period. (I emphasise that in saying this I intend no disrespect to Mr Day. I would take the same view about anyone in his position.) However, as it seems to me, it is not presently necessary to reach A firm view about this matter or to put M r Day to the trouble of providing this information or any such undertaking. It is not yet apparent that it will be necessary for the applicant's legal advisers to have the assistance of a person such as Mr Day in interpreting the relevant documents. It seems likely that much of the relevant material will be in the form of lists of quantities, prices, etc. There are lilcely to be reports of officers of the Service analysing this material. Some interpretation of abbreviations or trade jargon may be necessary, but I am confident that the solicitor for the Minister will assist in this regard, as he has done already in relation to some of the documents produced. If, after full consideration by the applicant's lawyers, there remains a problem of comprehension, this will be the time to consider whether Mr Day's assistance is neclessary; and access could then probably be confined to the specific documents or parts of documenlts in relation to which there was a problem. I think that the appropriate course is for me to decline! to order that Mr Day have access at this stage but to grant leave to the applicant to make an applicaltion in respect of access to particular

documen~ts if so advised. "

A similar, perhaps more robust, approach was taken by Lockhart J. in Palmer Tube Mills Ltd. v. Tubemakers of Australia L& 10 December 1991, unreported, in refusing access by a director of one of the parties.

1n.spection of the documents discovered by the respondent lhas not yet taken place. Until this has taken place, it is premature to attempt an assessment of the need, or otherwise), of Mr. Catto to know of the material in question in order thist the applicant's case may be properly presented

at the final hearing.

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I propose to refuse to grant access by Mr. Catto at this stage but reserve liberty to the applicant to renew the	i
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application for access by Mr. Catto on 7 daysf notice.	Costs	~
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of this application will be reserved.

I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of his Honour

Mr. Justice Beaumont. 1

Associate //hrd	l
Dated: 28 August 1992	i

Solicitors for Applicant:	Stephen Blanks & Associates
Solicitors for Respondent:	Freehill Hollingdale & Page
Date of hearing:	20 August 1992
Date Judgment delivered:	28 August 1992