Elanor Operations Pty Ltd v Chief Commissioner of State Revenue

[2020] NSWSC 840

Supreme Court

New South Wales

Medium Neutral Citation:

Elanor Operations Pty Ltd v Chief Commissioner of State Revenue [2020] NSWSC 840

Hearing dates:

26 June 2020

Date of orders:

2 July 2020

Decision date:

02 July 2020

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

1.   Noting that the notices to produce issued by the defendant to the plaintiff have now been superseded by the application for discovery, dismiss the plaintiffs’ notice of motion filed 20 April 2020 (Notices to Produce Motion) with no order as to costs.

2.   Dismiss the plaintiffs’ notice of motion filed 20 April 2020 to set aside the subpoenas issued to third party subsidiaries of Elanor Investors Limited (Subpoenas Motion) but direct that production of documents in answer to the subpoenas be limited in accordance with the applicable paragraphs of the schedule attached to these reasons and list the matter in the subpoena list on 27 August 2020 for return of the subpoenas and production of subpoenaed documents.

3.   Order plaintiffs to provide discovery in accordance with the schedule attached to these reasons by no later than 27 August 2020.

4.   Reserve the question of costs of the Subpoenas Motion and Discovery Motion.

5.   List the matter for directions on 1 September 2020 at 8.30am.

Catchwords:

CIVIL PROCEDURE — Subpoenas — Application to set aside — Whether relevant to a fact in issue — Whether oppressive

CIVIL PROCEDURE — Discovery — Classes or categories of documents

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 56

Payroll Tax Act 2007 (NSW), ss 72, 79

Uniform Civil Procedure Rules 2005 (NSW), rr 21.1(1), 21.2(4), 34.1

Cases Cited:

Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250

Azzi v Volvo [2006] NSWSC 283

Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2019] NSWSC 410

Cessnock Tyres Pty Ltd v Chief Commissioner of State Revenue [2018] NSWCATAP 147

Conrad Linings Pty Limited v Chief Commissioner of State Revenue [2014] NSWSC 1020; (2014) 98 ATR 842

Grace v Grace (No 8) [2014] NSWSC 419

Graphite Energy Pty Ltd v Lloyd Energy Systems Pty Ltd [2014] NSWSC 1326

ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307

ICAP Pty Ltd v Moebes [2009] NSWSC 306

In the matter of Gerard Cassegrain & Co Pty Ltd [2011] NSWSC 241

In the matter of One.Tel Ltd (in liq) – Singtel Optus Pty Ltd v Weston [2010] NSWSC 1491

Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42; 96 ATR 315

Lowery v Insurance Australia Ltd [2015] NSWCA 303

Palavi v Radio 2UE Sydney Pty Limited [2011] NSWCA 264

Rinehart v Rinehart [2018] NSWSC 1102

Rinehart v Rinehart [2019] NSWSC 759

Sharpe v Grobbel [2017] NSWSC 1065

Xinfeng Australia International Investment Pty Ltd v GR Capital Pty Ltd [2020] NSWSC 620

Category:

Procedural and other rulings

Parties:

Elanor Operations Pty Limited (First Plaintiff)
193 Clarence Hotel Management Pty Ltd (Second Plaintiff)
Albany Hotel Management Pty Limited (Third Plaintiff)
Bell City Accommodation Management Pty Limited (Fourth Plaintiff)
Bell City Hotel Management Pty Limited (Fifth Plaintiff)
Byron Bay Hotel Management Pty Ltd (Sixth Plaintiff)
Cradle Mountain Lodge Management Pty Limited (Seventh Plaintiff)
Eaglehawk Hotel Management Pty Limited (Eighth Plaintiff)
Featherdale Management Pty Limited (Ninth Plaintiff)
JCF Management Pty Limited (Tenth Plaintiff)
Narrabundah Hotel Management Pty Ltd (Eleventh Plaintiff)
Parklands Resort Hotel Management Pty Limited (Twelfth Plaintiff)
Pavilion Wagga Wagga Hotel Management Pty Limited (Thirteenth Plaintiff)
Port Macquarie Hotel Management Pty Limited (Fourteenth Plaintiff)
Tall Trees Hotel Management Pty Limited (Fifteenth Plaintiff)
Woollongong Hotel Management Pty Limited (Sixteenth Plaintiff)
Chief Commissioner of State Revenue New South Wales (Defendant)

Representation:

Counsel:
C Harris SC with J Stuckey-Clarke (Plaintiffs)
S Balafoutis SC with A Byrne

Solicitors:
Kennedys (Plaintiffs)
NSW Crown Solicitor’s Office (Defendant)

File Number(s):

2018/00332881

Publication restriction:

Nil

Judgment

1. HER HONOUR: Before me for hearing on 26 June 2020 were three separate notices of motion: a notice of motion filed on 20 April 2020 by the plaintiffs in the present proceedings, seeking to set aside certain notices to produce issued to them by the defendant (the Notices to Produce Motion); a notice of motion also filed on 20 April 2020 by the plaintiffs, seeking to set aside certain subpoenas issued by the defendant to subsidiaries of the parent company in the plaintiff group of companies (the Subpoenas Motion); and a notice of motion filed on 19 May 2020 by the defendant, seeking an order for the provision by the plaintiffs of discovery of documents within essentially the same categories identified in the notices to produce the subject of the Notices to Produce Motion (the Discovery Motion).

2. As the Discovery Motion has in effect superseded the notices to produce that had been issued by the defendant (and hence the need for any determination of the Notices to Produce Motion), the hearing before me proceeded by agreement between the parties on the basis that I would deal only with the Discovery Motion and Subpoenas Motion, respectively (T 1.31-45). Moreover, the course of oral argument focussed largely on the Discovery Motion, it being accepted that the categories sought by way of discovery broadly mirrored those sought in the subpoenas the subject of the Subpoenas Motion (and hence at least that the same result would follow on that motion) (T 10.21).

3. For the reasons set out below, I will order the provision of discovery (with some amendments as discussed during the course of oral submissions) as sought by the defendant, and I will dismiss the application to set aside the impugned subpoenas. The Notices to Produce Motion will be dismissed with no order as to costs, it having been superseded by the Discovery Motion as explained above.

Background

4. The underlying dispute between the parties relates to payroll tax notices of assessment issued by the defendant (the Chief Commissioner of Taxation) to the second plaintiff (193 Clarence Hotel Management Pty Limited), a company within a group of companies referred to as the Elanor Investors Group, in respect of the tax years ended 30 June 2015 (TY 2015) and 30 June 2016 (TY 2016).

5. The proceedings (commenced by summons on 30 October 2018) concern the question whether the five groups of corporations referred to in the defendant’s assessment letter dated 31 August 2018 should be assessed as one “group” for the payment of payroll tax under Part 5 of the Payroll Tax Act 2007 (NSW) (the Payroll Tax Act). The plaintiffs argue that the defendant ought to have exercised his discretion under s 79 of the Payroll Tax Act to exclude from membership of a single and discrete “group”, for the purposes of Division 2 Part 5 of the Payroll Tax Act, the five separate “groups” of companies in question (each of which comprises only entities within the overall Elanor Investors Group).

6. The plaintiffs filed and served an amended summons and an Appeal Statement on 19 July 2019. In response, the defendant filed and served the Defendant’s Appeal Statement on 16 August 2019.

7. The parties have also filed their evidence in the substantive proceedings, bar any evidence in reply to be filed by the plaintiff. (Hence the plaintiffs’ complaint as to the notices to produce having been issued prematurely, and inconsistently with Practice Note Eq 11 in relation to disclosure, is no longer pressed.)

8. The plaintiffs’ affidavit evidence sets out the background, structure and operations of the Elanor Investors Group (see the affidavit sworn 12 February 2020 of Mr Glenn Willis, the chief executive officer and managing director of Elanor Investors Group and sole director of the relevant companies; and the affidavit sworn 12 February 2020 of Mr Symon Simmons, the chief financial officer and company secretary of Elanor Investors Limited (Elanor Investors) and the company secretary of each of the plaintiffs). Those affidavits were tendered by the defendant as exhibits on the present applications, being admitted as evidence for the fact of that to which the deponents have deposed; not for the truth of their contents.

9. In his affidavit sworn 12 February 2020 (Exhibit 3), Mr Simmons deposes that Elanor Investors is an ASX-listed company (see at [1]), with investment interests in a number of different portfolio types including retail property assets, commercial property assets and hotels, tourism and leisure assets (see at [19]). It is, as I understand it, the head company for the entities comprising the Elanor Investors Group.

10. Each of the second to sixteenth plaintiffs is (or was at the relevant time) the owner of a hotel or tourist-related business (save for the tenth plaintiff which owned a furniture business), with a single, common director (Mr Willis) and each of the businesses of the second to sixteenth plaintiffs is (or was) operated on land owned by a unit trust, the units of which are legally “stapled” to the shares in the respective companies. The shareholders of each of the plaintiffs (or of its holding company) are or were, I am informed, various sophisticated or experienced investors. The “investor” shareholders of the respective companies own the same proportionate number of units in the associated unit trust; and the shares and units cannot be sold separately.

11. The plaintiffs have explained that Elanor Investors, together with its subsidiaries including the first plaintiff, Elanor Operations Pty Ltd (Elanor Operations), acquires and develops hotel and tourist-related businesses for the purpose of then promoting those businesses for sale to investors; and that during the Relevant Period it had acquired and/or developed and then sold the businesses operated by the other plaintiffs and owned by the said investors. The day-to-day operation of the hotel or tourist related businesses in question was, it is said, usually sub-contracted to a specialist third party commercial hotel operator.

12. Elanor Investors’ business model thus involves, at least in part, acquiring investment assets (such as hotel or tourist-related businesses and the land on which those businesses operate), and then selling interests in those assets to sophisticated third-party passive investors who purchase shares in a company that operates the relevant business, together with “stapled” units in the trust that owns the land. Relevantly, Elanor Investors retains at least a minority interest in both the business and the land. Elanor Investors also retains control of the assets by appointing its managing director (Mr Willis) as the sole director of each of the aforesaid companies.

13. Elanor Funds Management Ltd (EFML), is a subsidiary of Elanor Investors as the corporate trustee for the all trusts (see the second affidavit sworn 6 May 2020 by the plaintiffs’ solicitor, Mr Justin Le Blond at [14], [17]; T 11.4).

14. Elanor Operations’ employees are said to “manage” (at least to some extent) the hotel and tourist-related businesses by, amongst other things, reviewing and approving their business plans, monthly financial reports, and requests for capital works (see Mr Simmons’ affidavit sworn 12 February 2020 at [33]).

15. The plaintiffs accept that the companies within each of the five separate groups of companies identified in Mr Simmons’ affidavit form a “group” for payroll tax purposes and they further accept that, because Mr Willis is a director of the first plaintiff and the sole director of each of the other plaintiffs, s 72 of the Payroll Tax Act would otherwise apply to constitute the 5 groups as together a single group; but they maintain that they are entitled to an exemption, under s 79 of the Payroll Tax Act, from the operation of Part 5 of the Payroll Tax Act (see T 2.41).

16. The plaintiffs have explained that, while the first company/unit trust “structure” of the kind here involved owned just one hotel, subsequent structures have since been formed and then “floated” with the ownership of several hotels (or tourist-related) businesses, such that the investors own shares and units in each. The plaintiffs accept that, where this occurs, the companies in such structures together constitute a group. However, the plaintiffs argue that the structures themselves should not be grouped together.

17. It is noted that the businesses and unit trusts operate under the umbrella of a similarly stapled public structure, in that Elanor Investors is a publicly-listed company, the shares of which are stapled to the Elanor Investment Fund, of which EFML is the responsible entity. EFML receives management and performance fees from each of the businesses that operate the hotels (see Mr Willis’ affidavit sworn 12 February 2020 at [59]-[67]).

18. A corporate structure diagram is helpfully annexed to the affidavit sworn 6 May 2020 by the plaintiffs’ solicitor, Mr Le Blond.

Plaintiffs’ submissions

19. The plaintiffs say that once a company/unit trust structure is “sold off” to a syndicate of investors it operates independently of other such structures developed by Elanor Investors, and that Elanor Investors’ subsidiary companies (including Elanor Operations): do not supply each other, or buy from each other; pay no fees, commissions or other payments to each other; have no common employees; are located in different geographic areas; make decisions which have no effect on the other companies; and that the success or failure of one has no influence on, or dependency on, the success or failure of another. It is said that each company pays a commercial arms’ length rent to the unit trust which owns the land on which its business operates, the terms of which are negotiated and agreed completely independently of the terms of the leases between the other companies and their unit trusts. (Pausing here, the position of the defendant on the current applications is that the evidence does not establish, and it should not be accepted, that the rent is a “commercial arms’ length rent” (see at T 11.48), this at least implicitly being one of the aspects of the matter that the discovery sought by the defendant is aimed at testing. The defendant here wishes to test the level of management and oversight Elanor Operations employees had over the companies (T 13.42).)

20. In their Appeal Statement filed 19 July 2019, the plaintiffs contend (at [33]) that:

The businesses in the 5 Groups are operated from different locations, and for different groups of investors. The success or failure of one business does not influence, or depend on, the success or otherwise of another business. The companies do not supply each other, or buy from each other nor do they pay fees, commissions or make any other payments to each other. They do not have common employees. They operate completely independently of one another and unconnected with each other.

21. The plaintiffs say that these structures are owned by completely different groups of investors (albeit that some investors might have interests in more than one such structure), and that all profits are distributed to those particular investors. It is said that in some cases Elanor Investors (or an “Elanor-style” subsidiary of Elanor Investors) is one of the investors, but that its interest is never greater than 49% and is usually much smaller.

22. The position of the plaintiffs, in essence, is that the circumstances of the case call for the application of the ‘grouping’ exemption in s 79 of the Payroll Tax Act. The plaintiffs assert that this follows because, while the businesses may have some common features, the nature of those businesses, the nature and degree of their ownership and control, and the structures in which they are established and operate, demonstrate that they are carried on independently of each other; and that there is no connection between the way they carry on their businesses.

23. Relevant to the question of oppression, more generally, the plaintiffs’ evidence is that Elanor Investors, its subsidiaries, and each of the operational plaintiffs, were and continue to be detrimentally impacted by the economic consequences of the COVID-19 pandemic. It is said that the financial situations of all the operational plaintiffs are “in flux”, and that the businesses remain in “hibernation” with reduced staff (although it is noted that one of the businesses, Featherdale Wildlife Park, has recently reopened to the public).

24. Mr Le Blond has annexed to his affidavit sworn 23 June 2020 tables in which he has estimated of the numbers of documents sought and the time and costs of retrieval, taking into account the effect of the COVID-19 pandemic on the plaintiffs’ ability to do this, as well as other impediments to production of documents, including technological difficulties.

25. The plaintiffs make broadly the same submissions in relation to the subpoenas as are made in response to the defendant’s application for disclosure. However, it is submitted that, in circumstances where the entities subpoenaed (though associated companies) are not involved in the businesses carried on by the other plaintiffs it is incumbent on the defendant, if it wishes to seek documents from those parties, to do so with “even greater discernment” than is required in a notice to produce to a party to the proceedings.

26. The plaintiffs also invoke the statutory mandate in s 56 of the Civil Procedure Act 2005 (NSW), to facilitate the just, quick and cheap resolution of the real issues in the proceedings, in circumstances where it is said that there is “tangential” relevance of the documents and production would be burdensome both as to the costs and time which would be involved.

Defendant’s submissions

27. The defendant contends (in his Appeal Statement filed 16 August 2019 at [39]-[40]) that: relevant entities and trusts within Elanor Investors Group, and the businesses of those entities and trusts (the trustee for each of which was EFML), were, in TY 2015 and TY 2016, controlled and managed by a small number of key executives and managers with a shared strategy and governance framework and shared resources; where companies and assets were owned in part by third parties during TY 2015 or TY 2016, those key executives and managers (including, in particular, Mr Willis) held significant decision-making roles and powers through trusts and entities associated with (and are thereby able relevantly to assert control over) those companies and assets; during TY 2015 and TY 2016, entities within the Elanor Investors Group provided assistance to, and shared resources with, each other, and reporting and decision-making were concerned with, and directed at, the overall performance of the Elanor Investors Group; and that the governing documents of the trusts and entities within the Elanor Investors Group contemplate, and make special allowances for, entities and trustees within the Elanor Investor Group dealing with each other.

28. The defendant contends (at [41] of his Appeal Statement filed 16 August 2019) that, in TY 2015 and TY 2016, there were numerous material connections between the businesses carried on by the plaintiffs; and that those connections were meaningful in a commercial sense, and not immaterial or inconsequential to the carrying on of the businesses.

29. In Section D of the defendant’s Appeal Statement filed 16 August 2019, the defendant identifies various factual matters in support of those contentions, including: the “stapling” of entities and trusts; the common directors of those entities and the common corporate trustee of the trusts, EFML (see at [9], [14], [18], [23], [24]); the terms of the constituent and governing documents of the entities and trusts (see at [14], [16], [18], [19], [23], [26], [30]); combined reporting in relation to the entities and trusts (see at [31]); indications in those combined reports that the entities and trusts were controlled and managed by a small group of executives and managers using common resources (see at [32]); and the provision of funding and other benefits and assistance between entities and trusts within the Elanor Investors Group (see at [32]).

27. The defendant says that these matters (and others identified in the Appeal Statement) are relevant, for the purposes of s 79(2) of the Payroll Tax Act, to the nature and degree of ownership and control of the businesses carried on by the entities comprising the “Agreed Groups”; and the nature of those businesses; and that they are also “other relevant matters”, for the purposes of s 79(2) of the Payroll Tax Act.

Section 79 of the Payroll Tax Act

31. Section 79 of the Payroll Tax Act, relevantly, provides that:

(1)    The Chief Commissioner may, by order in writing, determine that a person who would, but for the determination, be a member of a group is not a member of the group.

(2)    The Chief Commissioner may only make such a determination if satisfied, having regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the Chief Commissioner considers relevant, that a business carried on by the person, is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of that group.

…

32. The parties in the present proceedings accept that the issue in the substantive proceedings is as to whether, and to what extent, the business carried on by each plaintiff is carried on in a way that is connected with the carrying on of a business carried on by another plaintiff.

33. That issue falls to be determined having regard to the nature and degree of ownership and control of the businesses, the nature of the business, and any other relevant matters. For the purposes of s 79(2) of the Payroll Tax Act (the pre-condition for the exercise of the power in s 79(1) of the Payroll Tax Act), one asks whether, having regard to the nature of connections between group businesses, it can nevertheless be said that the businesses are independent and not connected; the question being one of fact and degree (see Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42; 96 ATR 315 (Lombard Farms) at [50]-[51]).

34. As the defendant has noted, the control referred to in s 79(2) of the Payroll Tax Act includes both actual control as well as the inherent (or theoretical) ability of the owner of a business to control the business, whether or not actually exercised during the relevant period (the defendant citing Lombard Farms at [63]; and Cessnock Tyres Pty Ltd v Chief Commissioner of State Revenue [2018] NSWCATAP 147 at [68]-[69]).

35. The defendant points out that significant relevant indicia of connectedness between group members include: the existence of common directors; substantial commonality of ownership; intra-group loans; the same place of business; and intra-group provision of administrative services (citing Conrad Linings Pty Limited v Chief Commissioner of State Revenue [2014] NSWSC 1020; (2014) 98 ATR 842 at [51]-[57]).

Documents sought by the defendant

36. The documents sought by the defendant: first, by way of the notices to produce that were issued to the plaintiffs under r 34.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) and from the subpoenaed parties under the impugned subpoenas, and which are now also sought from the plaintiffs by way of discovery under r 21 of the UCPR, have been narrowed in scope from those initially sought in the notices to produce and subpoenas (and they are proposed to be further narrowed in accordance with the submissions made on the present applications). Broadly speaking, those documents are set out in the schedule to the defendant’s submissions on the present applications as follows:

1.   The constituent documents (including the constitutions, trust deeds, fund deeds, stapling deeds, and any shareholders agreements) for any of the Relevant Companies or Relevant Trusts.

2.   Notices of meeting and minutes of meeting for directors meetings and general meetings for any of the Relevant Companies in the period from 1 July 2014 to 30 June 2016, and board reports provided to directors for those directors meetings.

3.   [Disclosure sought by Elanor Operations only] All correspondence (including emails) between employees of Elanor Operations Pty Ltd and any of the following entities (including their employees or consultants) during June and July in the Relevant Period:

(a)   any of the Relevant Companies;

(b)   Mantra Management Pty Ltd;

(c)   Peppers Leisure Pty Ltd; or

(d)   AAPC Properties Pty Ltd,

excluding correspondence enclosing daily flash reports.

4.   [Disclosure now sought by Elanor Operations only] With respect to persons employed by Elanor Operations Pty Ltd during any part of the Relevant Period:

(a)   their contracts of employment; and

(b)   any other documents which state their job descriptions.

5.   Financial statements for the Relevant Companies and Relevant Trusts for the years ending 30 June 2015 and 30 June 2016, including, without limitation, combined financial statements covering any of those companies or trusts.

6.   Documents identifying the services to be provided by Elanor Funds Management Limited, during any part of the Relevant Period, to any of the Relevant Companies or Relevant Trusts in exchange for payment of management fees, limited to information memoranda, marketing material and constitutions.

7.   Engagement letters for accountants or lawyers who provided services to or for any of the Relevant Companies or Relevant Trusts during the Relevant Period.

8.   [This category applies only in the Notices to Produce and in each case refers to a different paragraph of the relevant affidavit] The leases for the leasing arrangements referred to in […] the affidavit of Glenn Norman Willis sworn on 12 February 2020.

37. The schedule then sets out the applicable definitions, namely: “Relevant Companies”, as meaning some 25 separate companies, including Elanor Investors, EFML, and Elanor Operations; “Relevant Period”, as meaning the period from 10 October 2014 to 30 June 2016; and “Relevant Trusts”, as meaning four separate named trusts.

38. I consider each of those categories of documents (and the objections raised thereto) in due course. First, however, I summarise the applicable legal principles (about which there was no dispute between the parties).

Legal Principles

39. As to the principles applicable in relation to an application for discovery, r 21.2(4) of the UCPR requires that the documents sought must be relevant to a fact in issue (see also r 21.1(2) of the UCPR). In Graphite Energy Pty Ltd v Lloyd Energy Systems Pty Ltd [2014] NSWSC 1326, Brereton J, as his Honour then was, said (at [21]-[22]):

21. Aside from necessity, the touchstone for discovery is relevance to a fact in issue in the proceedings. UCPR r 21.2(2) provides that a class of documents must not be specified in more general terms than the Court considers to be justified in the circumstances, and UCPR r 21.2(4) provides that an order for discovery may not be made in respect of a document unless the document is relevant to a fact in issue.

…

22.   Thus, while r 21.2(1) permits classes of documents to be specified, not only by relevance to one or more facts in issue, but alternatively by description of the nature of the documents and the period within which they were brought into existence or in such other manner as the Court considers appropriate in the circumstances, nonetheless discovery cannot be ordered except in respect of documents that are relevant to a fact in issue. This means that it must always be possible to show a connection between the class and a fact in issue, and where a class is specified in some other manner than by relevance to a fact in issue, it must be apparent that the class so described will capture only documents that are relevant to a fact in issue. For this reason, it is highly preferable that classes be specified by relevance to a fact in issue - unless it is self-evident that the class is a sub-class of documents that relate to a fact in issue.

40. The relevant Practice Note issued in March 2012 makes clear that an order for disclosure of documents will not be made until the parties to the proceedings have served their evidence, unless there are exceptional circumstances necessitating disclosure. Here, as noted earlier, other than evidence in reply, the parties have now served their evidence. The Practice Note also makes clear that there will be no order for disclosure in any proceedings in the Equity Division unless it is necessary for the resolution of the real issues in dispute in the proceedings. (See, in that regard, In the matter of Gerard Cassegrain & Co Pty Ltd [2011] NSWSC 241 at [20]ff.)

41. If compliance with an order for discovery would be too onerous, then limitations may be placed on it (see, for example, Palavi v Radio 2UE Sydney Pty Limited [2011] NSWCA 264 at [101], per Allsop P, as his Honour then was).

42. As to the applicable legal principles on an application to set aside a subpoena or a notice to produce it is not here disputed that, for a subpoena or notice to produce to be issued there must be a legitimate forensic purpose and that the party issuing the subpoena or notice to produce bears the onus of establishing that legitimate forensic purpose (see, for example, Rinehart v Rinehart [2018] NSWSC 1102 at [43]-[50] (Rinehart); Broadway Plaza Investments Pty Ltd v Broadway PlazaPty Ltd [2019] NSWSC 410 at [52]; and Xinfeng Australia International Investment Pty Ltd v GR Capital Pty Ltd [2020] NSWSC 620 (Xingfeng) at [35]-[41]).

43. It must be able to be concluded that the documents sought could “possibly throw light” on the issues in the case, or that it is likely that the documents will materially assist on an identified issue or that there is a reasonable basis, beyond speculation, that it is likely that they will materially assist (see, for example, ICAP Pty Ltd v Moebes [2009] NSWSC 306 at [28]-[30], per Nicholas J, affirmed on appeal in ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307 at [27], per Tobias JA, Basten JA and Handley AJA agreeing) Elsewhere it has been said that the question is whether there is a reasonable basis for supposing that the material called for will likely add in some way to the relevant evidence in the case (including whether the documents called for are capable of providing a legitimate basis for cross-examination) (see Sharpe v Grobbel [2017] NSWSC 1065 at [35], per Brereton J, as his Honour then was).

44. It is accepted that a subpoena or notice to produce will be set aside if it is being used as part of what is commonly referred to as a “fishing expedition” (see Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250 at 254, per Owen J, Street CJ and Herron J agreeing) or where it is oppressive (the question of oppression to be determined as part of a multifactorial balancing exercise – i.e., balancing the degree of apparent relevance to issues in the proceedings against the likely cost or burden of production; see for example Azzi v Volvo [2006] NSWSC 283 at [6], per Brereton J, as his Honour then was; and Rinehart at [49]). (See generally on the issue: In the matter of One.Tel Ltd (in liq) – Singtel Optus Pty Ltd v Weston [2010] NSWSC 1491 at [31]-[40].)

45. It is noted by the plaintiffs that, where a subpoena or notice to produce is drafted in a manner which is objectionable, it is ordinarily not for the Court to redraft it (see Xinfeng at [41]; Lowery v Insurance Australia Ltd [2015] NSWCA 303 at [25], per Basten JA; Rinehart v Rinehart [2019] NSWSC 759 at [38). However, the same issue does not arise, for obvious reasons, to the extent of discovery that should be ordered to be provided; nor is it necessarily an inflexible rule, when approaching the extent to which compliance will be ordered in relation to a subpoena (see for example, how the matter was approached in Rinehart).

Particular categories of documents here sought

46. Turning to the particular categories of documents that have here been sought (and noting that the defendant has, in the schedule annexed to his submissions and also in oral argument, narrowed the scope of what was initially sought under the notices to produce), they are as follows.

Category 1

1.   The constituent documents (including the constitutions, trust deeds, fund deeds, stapling deeds, and any shareholders agreements) for any of the Relevant Companies or Relevant Trusts.

47. Objection to category 1 (and, similarly, objection to categories 5-7) is now limited to the inclusion of reference to the “Relevant Trusts”. There is no opposition to the production of such documents for the Relevant Companies (see T 6.6).

48. The plaintiffs submit that documents relating to the said trusts have no relevance to the issues, or facts in issue, in these proceedings (even allowing for the “relatively broad latitude” that it is acknowledged is given for discovery); and hence they submit that there is no legitimate forensic purpose in the defendant seeking to have them produced.

49. The plaintiffs note that the issue in the proceedings is whether the carrying on of the businesses by corporations in any one of the 5 groups is “connected with” the carrying on of a business by a corporation in another group. As noted above, with limited exceptions it is said that the businesses carried on are hotel businesses (the exceptions being that of Elanor Operations, which it is said is involved in the business of initiating and developing businesses for sale to investors; the ninth plaintiff, which carries on business as the operator of a wildlife park; and the tenth plaintiff, which had previously carried on business as a furniture retailer but which business has now closed).

50. The Relevant Trusts are identified as being the corresponding unit trusts which own the lands on which those businesses (with the exception of Elanor Operations) are or were located. It is said by the plaintiffs that the unit-holders of these trusts are disparate groups of investors who are the beneficial owners of diversely located parcels of the real estate on which the hotel and other businesses operate and that, in those circumstances, there could not be any documentation within the administration of those trusts which would shed any light on the extent to which the businesses conducted on the properties, businesses which the trusts do not own or control, might be carried on in a way that is “connected”.

51. Thus, it is submitted that the Relevant Trusts have no sufficient involvement or connection to the operation of the businesses by the companies to justify them being the subject of production in any way; rather the relevant connection is between the businesses owned by the companies. It is said that there is no relevant connection between the Relevant Trusts and the corporations (see at T 6.20).

52. The plaintiffs argue that the seeking of documents in relation to the Relevant Trusts is thus a classic “fishing” exercise (i.e., where the defendant has “no evidence that fish of a particular kind are in a pool [but] desires to be at liberty to drag it for the purpose of finding out whether there are any there or not” – see Associated Dominions at 254, per Owen J, Street CJ and Herron J agreeing); where the defendant has no cause to believe that the Relevant Trusts’ documents show any connection between the carrying on of the companies’ businesses but the defendant wishes to inspect those documents to see whether something of assistance can be found. It is submitted that the fact that such a document might exist in the Relevant Trusts’ documents is mere speculation.

53. As to EFML, it is noted that EFML is the responsible entity for Elanor Investors, and is the trustee of each of the unit trusts. The plaintiffs say that its administration is one step further removed from the operation of the businesses by the corporations, and is even less relevant to the “connectedness” of the businesses than the trusts. Thus, the plaintiffs say that the argument against requiring the Relevant Trusts to provide documents (on the basis that this is “fishing”) applies with even greater force in the case of EFML.

54. The defendant, in response, notes that the Plaintiff’s Appeal Statement filed 19 July 2019 contains various general references to the use of trusts within the Elanor Investors Group (by way of example referring to [9]-[11], [28], [35]); and that the plaintiffs’ affidavits address the Elanor Investors Group’s use of trusts (stapled to entities), and the four trusts in question (i.e., the “Relevant Trusts”, along with an additional trust, referred to as “EMPR Fund”), referring to Mr Willis’ affidavit sworn 12 February 2020 at [20]-[22], [26]-[27], [56], [66], [69], [72]-[74], [76], [84], [86], [91], [92], [94]-[96], [101], [185], [191]; and Mr Simmons’ affidavit sworn 12 February 2020 at [21]-[24], [76], [84], [94], [114]-[117], [127], [132], [405].

55. The defendant also points to express allegations that are made by him in relation to the Relevant Trusts in his Appeal Statement filed 16 August 2019 at [14(b)(i)]-[14(b)(ix)]; [18(a)(ii)]-[18(a)(ix)]; [18(b)(ii)]-[18(b)(ix)]; and [24(b)(i)], respectively.

56. The defendant submits, by reference to those contentions in the respective Appeal Statements (which identify connections between relevant entities and businesses by their involvement in or through the trusts, and commonality of control arrangements across the trusts and entities), as well as the evidence filed by the parties concerning the structure and governance of the Elanor Investors Group, that documents concerning the trusts are directly relevant in the assessment of connections between relevant businesses, for the purposes of s 79 of the Payroll Tax Act, and thus that there is a legitimate forensic purpose to the production of the documents (and the documents sought are relevant to issues, or to a fact in issue, in the proceedings).

57. The defendant’s position is that the plaintiffs are connected with each other through their relationship to the Relevant Trusts, noting that: the corporate trustee for each of the Relevant Trusts (EFML) engages in transactions with the other plaintiffs (such as leasing the land to those entities on which they operate the relevant businesses); the corporate trustee of the Relevant Trusts has a common sole director (Mr Willis), who is also the sole director of the plaintiffs; the corporate trustee is governed by constituent documents (in its constitution and trust deeds) that expressly contemplate that it will engage in transactions with entities within the Elanor Investors Group; and the relationship between the Relevant Trusts and the plaintiffs is part of a shared model being implemented by Elanor Investors across the group.

58. It is submitted that documents concerning the Relevant Trusts will assist in defining the scope and nature of the connections between the plaintiffs.

59. In oral submissions, the defendant’s position in relation to each of the categories in which reference to Relevant Trusts was made (and to which there was objection) in summary was that the businesses form part of a “broad interconnected group” and are connected in numerous ways; one of which is that all of the businesses which are operated by numerous different companies are all controlled by one director, that is, Mr Willis; second, that all of the businesses operate on land owned by unit trusts, where the corporate trustee is EFML; each member of the board of directors of Elanor Investors is also a director of EFML (and that includes Mr Willis). Thus it is said that the evidence shows that Mr Willis is not only the sole director of each of the relevant companies, but also one of the directors of the trustee company that operates each of the trusts (see T 11.1-44).

60. As to the submission made by the plaintiffs that rent is paid on commercial terms between the operating companies and the trusts, the defendant referred to [20] of Mr Willis’ affidavit sworn 12 February 2020 (where there is reference to the payment of rent, but not that it is paid on commercial terms). As noted above, the defendant urged that this proposition not be accepted without an evidentiary basis (see at T 11).

47. The defendant also, by way of example, points to the example of one of the relevant funds, the Clarence Hotel Fund, consisting of a corporation and a stapled trust; the shareholders of the company and the unit-holders in the trusts being the same, and holding interests in each of those entities in the same proportion. The defendant says that there is a unity of ownership between the corporation and the trust, and that they are considered together as a fund. The defendant also emphasises that each of the funds pays management fees to EFML (referring to [59]ff of Mr Willis’ affidavit sworn 12 February 2020). Reference is also made to the calculation of fees paid to EFML for its role as trustee and manager (from [63] of Mr Willis’ affidavit sworn 12 February 2020), including a management fee calculated on the gross asset value of the fund (the trust and the corporation together); and a performance fee calculated as a percentage of the total fund returns (again, the trust and the corporation together) (see T 12).

48. The defendant points to this as indicating the unity between the trusts and the companies (i.e., that they are effectively operating as an interconnected entity). It is noted that a further element of Elanor Investors’ business is that it retains an interest in each of the companies sold to private investors and it continues to control those companies through its sole director being on the board of each of them and through Elanor Operations’ employees supervising or managing the companies in exchange for a management fee; and continues to gain a profit or earn a fee from each of those companies. To the extent that those companies are retained within the Elanor Investors Group, controlled by a company or companies in the group, and paying fees to a company or companies in the group, the defendant says that this is relevant in determining whether there is a connection between each of these businesses (see T 12).

49. Reference is made to the annual financial return of Elanor Investors for the relevant year in this regard (Exhibit 1). The defendant notes that, in a note to the accounts, it is said that although the group has less than 20% of the equity in a particular fund (which is one of the present funds), the group has significant influence by virtue of its role as trustee and manager of the fund and its ability to participate in the financial and operating policy decisions of the fund.

50. Thus, the defendant says that, in order to understand the connection between the relevant companies (which is the issue in the present case), one needs to understand how the group functions as a whole and how each part relates to the other. It is submitted that, to understand the relationships between each member of the group, one needs to understand how the trusts fit within that group and that, by resisting discovery of the documents relating to the trusts, the plaintiffs are seeking to hide a critical part of the entire group (T 13.10). It is said that the Court will be unable to understand the connections between each member of the group if the trust documents are not disclosed; and that this is the reason that the Relevant Trust documents are sought.

51. The defendant notes that no argument is made that production of constituent documents, such as constitutions, is oppressive. (It was accepted in oral argument that the issue of oppression was not strong in relation to the request for constituent documents for the four trusts (see T 7.10).)

Category 2

2.   Notices of meeting and minutes of meeting for directors meetings and general meetings for any of the Relevant Companies in the period from 1 July 2014 to 30 June 2016, and board reports provided to directors for those directors meetings.

66. There is no dispute as to the production of documents in this category (T 13.29).

Category 3

3.   All correspondence (including emails) between employees of Elanor Operations Pty Ltd and any of the following entities (including their employees or consultants) during June and July in the Relevant Period:

(a)   any of the Relevant Companies;

(b)   Mantra Management Pty Ltd;

(c)   Peppers Leisure Pty Ltd; or

(d)   AAPC Properties Pty Ltd.,

excluding correspondence enclosing daily flash reports.

67. As noted in the schedule, this category is now only sought to be the subject of discovery by Elanor Operations only. The relevant period is a three month period in all (i.e., June-July 2015 and June 2016), having regard to the definitions in the schedule.

68. The plaintiffs say that, even though category 3 has now been reduced to requiring documents created during a period of only three months, the amount of such documentation remains prodigious and that it would be oppressive to require Elanor Operations to go through the process of searching for, and producing, such documents.

69. The plaintiffs note that what is sought is all correspondence (including emails) between employees of Elanor Operations (of whom there were between 18 and 36 during the Relevant Period), and employees or consultants of some 32 separate entities. It is submitted that it would be a huge exercise to identify all such correspondence, even for the limited period now sought, and that Elanor Operations should not be required to go through this exercise. (Complaint was also made in the written submissions that category 3 has not been drawn with sufficient particularity, although that complaint does not seem now to be pressed in light of the discovery prism through which the applications for disclosure of documents are now effectively being made.)

70. The plaintiffs’ solicitor, Mr Le Blond, has prepared a table of the estimated work and time involved in producing the documents sought and the defaults associated with that test (annexure C-1 of his affidavit sworn 23 June 2020). Mr Le Blond’s table indicates that 24 of the 37 employees of Elanor Operations as at 30 June 2016 are no longer employed by Elanor Operations, and it is said that it would be difficult to identify any correspondence that they previously held and which was not contained in electronic backups or hard copy documents.

71. In relation to this category, Mr Le Blond’s table suggests that there would be “potentially voluminous unknown items” that could not be identified “without significant interrogation of the physical and electronic documentation held in hard copy on staff computers, on the network and in archive”. He estimated that approximately 2,000 documents could be captured by the request and that approximately 100 hours would be required to sort the information. It was thus submitted (see T 8.38) that the request was of such magnitude as to constitute oppression.

72. When the nub of that submission was explored in oral argument, it seemed to me that the complaint was largely, if not wholly, as to the difficulty of identifying documents that had been electronically stored on computers used by staff no longer employed by Elanor Operations (see T 9.6ff; 16.23ff), in circumstances where those documents may not have been “backed up” to a central server.

73. As to the concern raised in relation to former employees’ files, there appears to be an acceptance by the defendant that the defendant will not press for documents held or retained by former employees (i.e., is prepared to exclude from discovery documents held or retained by former employees) and also would be prepared to exclude documents on devices used by former employees and not backed up to a central server (T 16.41).

74. The defendant says that there is no dispute that this category captures relevant documents. The defendant alleges that one basis for finding a connection between the companies in the “Disputed Group” is that the employees of Elanor Operations provide services to each of the businesses in the “Disputed Group”. It is said that the documents produced in response to this category will evidence the nature of those services and the degree of involvement of the employees of Elanor Operations.

75. The relevance of category 3 was explained in oral submissions (see T 13) as being that a further aspect of the connection between the companies (beyond the fact that Mr Willis as a director controls the relevant companies) is that the employees of Elanor Operations are in effect the managers of each of these companies and receive a management fee for that. The defendant points to Mr Simmons’ evidence about this issue in his affidavit sworn 12 February 2020. The defendant says that it is relevant to test to what degree Elanor Operations employees supervise these companies (i.e., whether it is “an occasional hands‑off remote sort of process” or whether they “get involved in the nuts and bolts”; and how involved and how frequent their management is). The defendant says he wishes to gain evidence in this category of documents to test this.

76. It is also noted that Mr Simmons gives evidence about the supervision provided by Elanor Operations employees (starting at [27] of his affidavit sworn 12 February 2020) canvassing: the three teams within Elanor Operations that have involvement in the hotel, tourism and leisure portfolio (the hospitality, tourism and leisure team, the managed funds finance team and the group finance team); the responsibilities of the hotel, tourism and leisure team from which it is apparent that there is some supervision being given; and that the managed funds finance team reviews and assesses the business plans. Reference is made to the evidence at [51] of his affidavit to the effect that in particular circumstances, the employees did not concern themselves further with the decision taken by the operator (rather, the employees limited themselves to reporting to investors), but says that this leaves open what happens when a third‑party hotel operator does not meet its financial performance or its business plans. The defendant says that there is little evidence about that; and that discovery is sought for that purpose.

77. The defendant also wishes to test through discovery the evidence of Mr Simmons at [53] of his affidavit sworn 12 February 2020 that “such oversight has not extended to involvement in operational matters”.

78. Similarly, reference is made to the evidence given by Mr Simmons at [55] of his affidavit sworn 12 February 2020 about the process undertaken; at [61] about the managed funds finance team’s responsibilities with respect to individual investments (suggesting that they monitor the investments and make distributions out of the owners’ accounts of each business to the owners); and at [72] as to the group finance team and their role with respect to these hotel assets (including the provision of “financial oversight to the hotel”; see at [73]).

79. The defendant says he seeks these documents because he seeks evidence as to the frequency and nature of communications between the Elanor Operations employees and the operating companies; and the defendant maintains that this is directly relevant to the nature and degree of control of the businesses.

80. While the defendant acknowledges that it may be that 2,000 documents are required to be produced in this category, he says that one aspect of oppression is the degree of relevance of the documents; and that these documents are highly relevant to the central issue in the case (T 15.5).

81. As to the complaint made as to lack of specificity, it is said that a category of this nature was held to be permissible in Grace v Grace (No 8) [2014] NSWSC 419, and that lack of specificity is no objection to a category of discovery.

Category 4

4.   With respect to persons employed by Elanor Operations Pty Ltd during any part of the Relevant Period:

(a)   their contracts of employment; and

(b)   any other documents which state their job descriptions.

82. Again, disclosure of documents in this category is now only sought from Elanor Operations.

83. The complaint as to this category (which has been narrowed to remove reference to the persons’ “job tasks”, to address a complaint made about this in correspondence between the solicitors) is that, even though this category is sought now only against Elanor Operations, it is not limited to Elanor Operations’ hotels, tourism and leisure team but would include persons employed in the managed funds finance team and the group finance team (who it is asserted have no relevance to the issues in these proceedings). No complaint is made as to the request for documents in relation to the hotels, tourism and leisure team employees.

84. Mr Le Blond’s schedule estimates that there would be approximately 60 documents if confined to employment contracts and job descriptions (but approximately 1,000 if not so confined), and provides an estimate of 30 hours if so confined (but at least 150 hours if not so confined).

85. Difficulty was also raised as to the production of documents in this (and the third category) as a result of the COVID-19 pandemic and the ensuing remote working conditions and difficulty in retrieving information in hard copy.

86. The defendant alleges that one basis for finding a connection between the plaintiffs is the provision of management services by the employees of Elanor Operations. It is submitted that this category will capture documents that describe the nature of the services provided (T 17.5). It is noted that those services are provided by employees across a number of different areas of Elanor Operations, the defendant referring to what is said by Mr Simmons in his affidavit sworn 12 February 2020 at [25]-[27] in this regard:

25.   All staff working at Elanor’s Head Office are employed or contracted by Elanor Operations.

26.   The role of ‘fund manager’ for each of the managed funds is performed by Elanor Operations’ employees.

27.   There are three ‘teams’ within Elanor Operations that have involvement in the HTL [hospitality, tourism and leisure] portfolio. They are as follows:

a.   HTL team. I discuss the responsibilities of the HTL team further commencing in paragraph 32 below;

b.   Managed Funds Finance team. I discuss the responsibilities of the Managed Funds Finance team further commencing in paragraph 61 below; and

c.   Group Finance team. I discuss the responsibilities of the Group Finance team further commencing in paragraph 72 below.

87. It is noted that in his affidavit sworn 12 February 2020 at [28]-[29], Mr Simmons indicates that, between October 2014 and June 2016 (the period covered by the payroll tax assessments in dispute), Elanor Operations employed between around 18 and 36 staff (and provides the “Title” and “Division” for each). It is said that, as such, the number of contracts should be limited to around 36. It is submitted that it can reasonably be anticipated that the number of documents to be produced is very limited, and, given the nature of the materials being sought, held in files that can be identified easily and accessed. As to any difficulties that may be caused by COVID-19, it is submitted by the defendant that these can be appropriately addressed by providing such time as Elanor Operations may reasonably require to produce the materials (in oral submissions it was suggested for the plaintiffs that eight weeks would be required for this purpose – T 19.53).

88. The defendant says that, similarly to category 3, in order properly to understand the nature of the supervision that the employees of Elanor Operations engaged in with respect to each of these relevant companies, one relevant source is their contracts of employment or any other document which states their job description. It is noted that the employees of Elanor Operations involved in the management and supervision of these companies were not simply the employees in one team; they extended across three teams (and included Mr Willis and Mr Simmons). That is said to be the purpose of the category.

Category 5

5.   Financial statements for the Relevant Companies and Relevant Trusts for the years ending 30 June 2015 and 30 June 2016, including, without limitation, combined financial statements covering any of those companies or trusts.

89. The complaint as to category 5 is the same as with category 1, namely that it extends to the Relevant Trusts.

90. The defendant notes that in relation to this category 5 (financial statements), no argument is made that production of those documents is oppressive.

Category 6

6.   Documents identifying the services to be provided by Elanor Funds Management Limited provided, during any part of the Relevant Period, to any of the Relevant Companies or Relevant Trusts in exchange for payment of management fees, limited to information memoranda, marketing material and constitutions.

91. The complaint made as to category 6 (having regard to the most recent amendments to the schedule) is again solely as to the inclusion of the Relevant Trusts.

Category 7

7.   Engagement letters for accountants or lawyers who provided services to or for any of the Relevant Companies or Relevant Trusts during the Relevant Period.

92. Complaint is made in relation to this category that it seeks documents relating to the Relevant Trusts. Complaint is also made that it is oppressive in that it seeks engagement letters for accountants or lawyers who provided services to any one of the 25 companies. It is said that this would “pick up any lawyers or accountants who are appointed to do anything, whether it related to a connection or a potential connection between these companies or otherwise” (see T 10.10). For example, it is said that it might have something to do with a problem that one of the companies or the businesses had with the local council because there was noise at night outside the premises; and that it could involve a significant number of legal and accounting services that are of no relevance whatsoever to the issues in these proceedings (see T 10.15ff). It is submitted that this category should be rejected unless there was some sensible way to confine it to ensure that it has some application to the issues in the case.

93. The defendant submits that category 7 (engagement letters for accountants or lawyers) is not oppressive in that it is estimated by Mr Le Blond that the search will take about 10 hours for each entity.

94. With respect to this category 7, the defendant says that the documents are relevant because they show the extent to the plaintiffs shared services. For example, it is said that if there is one accountant who provided services for all the plaintiffs, that is a relevant connection between the group; and that, similarly, one lawyer providing services to all the plaintiffs also gives rise to a connection between the group. It is submitted that the category is not oppressive given the number of documents the plaintiffs have said would need to be produced (T 18.10ff).

95. Ultimately, in oral argument the defendant appeared prepared to accept that the category could be confined to “Engagement letters from accountants or lawyers who provided services to two or more of the relevant companies”.

Category 8

8.   The leases for the leasing arrangements referred to in [the relevant paragraph of] the affidavit of Glenn Norman Willis sworn on 12 February 2020.

96. There is no objection to this category of documents (T 19.12).

Determination

97. As to the complaint in respect of discovery categories 1, 5, 6 and 7, to the extent that they require provision of documents of the Relevant Trusts, I am satisfied that there is a legitimate forensic purpose of the defendant in seeking the production of documents in relation to the Relevant Trusts. Given that the defendant’s position is that the plaintiffs are connected with each other through their relationship to the Relevant Trusts, the requested documents may well throw light on the issues in dispute, and are thus relevant to a fact in issue. In particular, I accept that such documents are likely to be relevant to test the issue as to the degree and nature of the connection between the relevant businesses, for the reasons articulated in oral submissions by Senior Counsel for the defendant. I do not accept that this can be dismissed as a mere “fishing expedition”.

97. Nor do I accept that there is any relevant degree of oppression in the requirement to produce the relatively limited documents in categories 1, 5 and 6. While I accept that there may be continuing “logistical difficulties” in the face of the COVID-19 pandemic (and the plaintiff says this will have an impact on the timeframe within which it can produce the documents), this is not enough in itself to make the production of documents oppressive. The production of the requested documents has a legitimate forensic purpose and is relevant to a fact in issue.

98. As to category 7, the objection to which goes beyond the inclusion of reference to “Relevant Trusts”, I accept that a specified retainer on a discrete legal issue is or may be unlikely to shed light on the connectedness between the businesses one or more of the relevant corporations but that a general retainer or a succession of related retainers might do so. The limitation suggested by the plaintiffs in the course of argument would adequately address the former issue.

99. As to category 3, I accept the relevance or potential relevance of the document sought. With the limitation to deal with former employees’ documents, I consider that it is not oppressive for the documents to be produced.

100. I have reached the same conclusion in relation to category 4. There is a legitimate forensic purpose in seeking documents relating to employees of the other “teams” within Elanor Operations insofar as this may be expected to shed light on the nature and degree of connectedness between the respective businesses.

Conclusion

102. I am therefore satisfied that it is appropriate for discovery to be provided of the documents sought by the defendant (as confined in the schedule and as further confined in the course of oral argument); and that it is not oppressive to require this to be done (provided that sufficient time is allowed for that purpose). I am also satisfied that there is a legitimate forensic purpose to the subpoenas and that it is not oppressive for them to be complied with, to the extent narrowed by reference to the schedule and in oral submissions.

103. I make the following orders:

1. Noting that the notices to produce issued by the defendant to the plaintiff have now been superseded by the application for discovery, dismiss the plaintiffs’ notice of motion filed 20 April 2020 (Notices to Produce Motion) with no order as to costs.

2. Dismiss the plaintiffs’ notice of motion filed 20 April 2020 to set aside the subpoenas issued to third party subsidiaries of Elanor Investors Limited (Subpoenas Motion) but direct that production of documents in answer to the subpoenas be limited in accordance with the applicable paragraphs of the schedule attached to these reasons and list the matter in the subpoena list on 27 August 2020 for return of the subpoenas and production of subpoenaed documents.

3. Order plaintiffs to provide discovery in accordance with the schedule attached to these reasons by no later than 27 August 2020.

4. Reserve the question of costs of the Subpoenas Motion and Discovery Motion.

5. List the matter for directions on 1 September 2020 at 8.30am.

**********

Schedule of documents required to be produced on discovery and (as applicable) in answer to the subpoenas issued by the defendant

Adopting the definitions provided immediately after the following numbered paragraphs and excluding documents already produced as exhibits or annexures to affidavits filed in the proceedings:

1. The constituent documents (including the constitutions, trust deeds, fund deeds, stapling deeds, and any shareholders agreements) for any of the Relevant Companies or Relevant Trusts.

2. Notices of meeting and minutes of meeting for directors meetings and general meetings for any of the Relevant Companies in the period from 1 July 2014 to 30 June 2016, and board reports provided to directors for those directors meetings.

3. [Disclosure now sought by Elanor Operations only]

All correspondence (including emails) between employees of Elanor Operations Pty Ltd and any of the following entities (including their employees or consultants) during June and July in the Relevant Period [i.e., June-July 2015 and June 2016]:

1. any of the Relevant Companies;

2. Mantra Management Pty Ltd;

3. Peppers Leisure Pty Ltd; or

4. AAPC Properties Pty Ltd,

excluding correspondence enclosing daily flash reports and excluding documents held or retained by former employees or documents on devices used by former employees and not backed up to a central server.

4. [Disclosure now sought by Elanor Operations only]

With respect to persons employed by Elanor Operations Pty Ltd during any part of the Relevant Period:

1. their contracts of employment; and

2. any other documents which state their job descriptions

5. Financial statements for the Relevant Companies and Relevant Trusts for the years ending 30 June 2015 and 30 June 2016, including, without limitation, combined financial statements covering any of those companies or trusts.

6. Documents identifying the services to be provided by Elanor Funds Management Limited, during any part of the Relevant Period, to any of the Relevant Companies or Relevant Trusts in exchange for payment of management fees, limited to information memoranda, marketing material and constitutions.

7. Engagement letters for accountants or lawyers who provided services to two or more of the Relevant Companies or Relevant Trusts during the Relevant Period.

8. [This category applies to documents sought in the Notices to Produce and in each case refers to a different paragraph of the relevant affidavit]

The leases for the leasing arrangements referred to in […] the affidavit of Glenn Norman Willis sworn on 12 February 2020.

Definitions

“Relevant Companies” means the following companies:

(a)   193 Clarence Hotel Management Pty Ltd (ACN 601 516 821)

(b)   AAPC Properties Pty Ltd (ACN 065 560 885)

(c)   Albany Hotel Management Pty Limited (ACN 601 117 202)

(d)   Bell City Accommodation Management Pty Limited (ACN 602 663 758)

(e)   Bell City Hotel Management Pty Limited (ACN 602 663 230)

(f)   Cradle Mountain Lodge Management Pty Limited (ACN 169 805 958)

(g)   Eaglehawk Hotel Management Pty Limited (ACN 169 309 460)

(h)   EHAF Management Pty Limited (ACN 609 090 422)

1. Elanor Asset Services Pty Limited (ACN 614 679 622)

(j)   Elanor Funds Management Limited (ACN 125 903 031)

(k)   Elanor Investment Holdings Pty Limited (ACN 609 088 931)

(l)   Elanor Investment Nominees Pty Limited (ACN 602 165 971)

(m)   Elanor Investors Limited (ACN 169 308 187)

(n)   Elanor Management Pty Limited (ACN 155 119 538)

(o)   Elanor Operations Pty Limited (ACN 169 520 218)

(p)   Featherdale Management Pty Limited (ACN 163 915 008)

(q)   JCF Management Pty Limited (ACN 155 119 645)

(r)   Mantra Management Pty Ltd (ACN 107 791 695)

(s)   Parklands Resort Hotel Management Pty Limited (ACN 610 481 779)

(t)   Pavilion Wagga Wagga Hotel Management Pty Limited (ACN 610 481 751)

(u)   Peppers Leisure Pty Ltd (ACN 087 741 599)

1. Port Macquarie Hotel Management Pty Limited (ACN 609 154 476)

(w)   Tall Trees Hotel Management Pty Limited (ACN 609 154 565)

1. Wiltex Wholesale Pty Ltd (ACN 000 461 245)

(y)   Wollongong Hotel Management Pty Limited (ACN 167 079 487).

“Relevant Period” means the period from 10 October 2014 to 30 June 2016.

“Relevant Trusts” means the trusts known as:

(a)   193 Clarence Hotel Syndicate

(b)   Bell City Hotel Syndicate

(c)   Bell City Accommodation Syndicate

(d)   Elanor Hospitality and Accommodation Fund.

Decision last updated: 02 July 2020