Connective Services Pty Ltd v Slea Pty Ltd - [2017] VSC 182

IN THE SUPREME COURT OF VICTORIA AT MELBOURNE

Not Restricted

COMMERCIAL COURT
COMMERCIAL LIST

S ECI 2016 1168

CONNECTIVE SERVICES PTY LTD (ACN 107 366 496)	First plaintiff
CONNECTIVE OSN PTY LTD (ACN 106 761 326)	Second plaintiff
v
SLEA PTY LTD (ACN 106 752 434)	First defendant
MINERVA FINANCIAL GROUP PTY LTD (ACN 124 171 759)	Second defendant
MILLSAVE HOLDINGS PTY LTD (ACN 115 160 097)	Third defendant
MARK SEAMUS HARON	Fourth defendant

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JUDGE:	ALMOND J
WHERE HELD:	Melbourne
DATE OF HEARING:	8 December 2016
DATE OF RULING:	12 May 2017
CASE MAY BE CITED AS:	Connective Services Pty Ltd & Anor v Slea Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2017] VSC 182

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PRACTICE AND PROCEDURE – Discovered document – Implied undertaking not to use document except for purposes of litigation – Contents of document read aloud in open court during argument in interlocutory hearing – ‘Alternative derivative source’ – Whether implied undertaking brought to an end – Tender of document as exhibit in later hearing – Harman v Secretary of State for the Home Department [1983] 2 AC 280 ; Hearne v Street (2008) 235 CLR 125; Sybron Corporation and Anor v Barclays [1985] 1 Ch 299; Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10; British American Tobacco Australia Services Ltd v Cowell (2003) 8 VR 571 considered.

PRACTICE AND PROCEDURE – Application to stay or dismiss proceedings – Supreme Court (General Civil Procedure) Rules 2015 (Vic) rr 22.16, 23.01 – Abuse of process of the court – Separate proceeding substantially based on content of document the subject of the implied undertaking – Civil Procedure Act 2010 (Vic) ss 62, 63 – Corporations Act 2001 (Cth) s 1324.

CORPORATIONS – Prohibition against financial assistance to acquire shares – Corporations Act 2001 (Cth) s 260A – Enforcement of pre-emptive rights in company’s constitution - Whether financial assistance.

CORPORATIONS – Standing – Pre-emptive rights – Whether exclusively members’ rights – Interest of the company – Corporations Act s 140 – Statutory contract.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr A Myers QC Mr B Quinn QC Mr D Guidolin	Quinn Emanuel Urquhart & Sullivan
For the First and Second defendants	Mr M O’Bryan QC Ms K Foley	Arnold Bloch Leibler
For the Third defendant	Mr S Hay	HWL Ebsworth
For the Fourth defendant	Mr W Forrester	Obst Legal

HIS HONOUR:

Background

In this proceeding the plaintiffs, Connective Services Pty Ltd and Connective OSN Pty Ltd (collectively, Connective or the Connective companies), seek to enforce pre-emptive rights contained in their respective constitutions.

Each constitution contains materially identical terms which, in effect, require a member who wishes to transfer shares of a particular class to first offer those shares to existing holders of shares of that class. The number of shares offered to each shareholder is to be in proportion to the number of shares of that class that they already hold (the pre-emptive rights).

The first defendant, Slea Pty Ltd (

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] VSC 182
Decision Date: 12 May 2017

CaseChat Overview and Summary

In the matter of Connective Services Pty Ltd v Slea Pty Ltd, the Court considered issues pertaining to the handling of discovered documents in litigation, the potential breach of an implied undertaking, and the enforcement of pre-emptive rights in a corporate context. The plaintiff, Connective Services Pty Ltd, brought an action against Slea Pty Ltd for, among other things, alleged breaches of pre-emptive rights and financial assistance prohibitions under the Corporations Act 2001. During an interlocutory hearing, contents of a discovered document were read aloud in open court, which the defendant argued constituted a breach of an implied undertaking that the document would only be used for the purposes of the litigation. The defendant also sought to stay or dismiss the proceedings on the basis of an alleged abuse of process.

The primary legal issue before the court was whether the implied undertaking not to use the discovered document except for the purposes of the litigation was breached when its contents were read aloud in open court. A further issue was whether the implied undertaking was brought to an end by this action, and if so, whether it was proper for the document to be tendered as an exhibit in a later hearing. The court examined the principles articulated in Harman v Secretary of State for the Home Department, Hearne v Street, Sybron Corporation and Anor v Barclays, Esso Australia Resources Ltd v Plowman, and British American Tobacco Australia Services Ltd v Cowell. The court also had to consider the application to stay or dismiss the proceedings under the Supreme Court (General Civil Procedure) Rules 2015 (Vic) and the Civil Procedure Act 2010 (Vic), as well as the statutory prohibition against financial assistance under the Corporations Act 2001 and the enforcement of pre-emptive rights.

The court found that reading the contents of the discovered document aloud in open court during an interlocutory hearing did not, in itself, constitute a breach of the implied undertaking. However, the court acknowledged that such actions could potentially bring the undertaking to an end. The court noted that the implied undertaking did not survive the reading of the document's contents in open court, and that it was appropriate for the document to be tendered as an exhibit in a later hearing. Regarding the application to stay or dismiss the proceedings, the court found that there had been no abuse of process. The court also held that the plaintiff had standing to bring the action on behalf of the company, as the enforcement of pre-emptive rights was in the interest of the company and constituted a statutory contract under the Corporations Act.

The court dismissed the application to stay or dismiss the proceedings and allowed the plaintiff to tender the document as an exhibit. The court did not make a final determination on the merits of the claim but allowed the proceedings to continue.

Orders