FEDERAL COURT OF AUSTRALIA
Hislop v Paltar Petroleum Limited [2017] FCA 1078
File number: NSD 1383 of 2017 Judge: MARKOVIC J Date of judgment: 8 September 2017 Catchwords: PRACTICE AND PROCEDURE – application to set aside a notice to produce – where applicant alleges that notice to produce is oppressive, an abuse of process and seeks documents subject to a claim for legal professional privilege – where abuse of process is alleged on basis that documents sought in notice to produce do not relate to facts in issue – whether documents sought in notice to produce relate to facts in issue – application allowed Legislation: Corporations Act 2001 (Cth) s 237
Federal Court Rules 2011 (Cth) r 30.28
Cases cited: Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 3) [2012] FCA 61
Date of hearing: 7 September 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 26 Counsel for the Plaintiff: Mr A Leopold SC with Ms E Holmes Solicitor for the Plaintiff: Johnson Winter & Slattery Counsel for the Defendants: Mr M Henry SC with Mr D E Baran Solicitor for the Defendants: Dentons ORDERS
NSD 1383 of 2017 BETWEEN: JOHN HISLOP
Plaintiff
AND: PALTAR PETROLEUM LIMITED
First Defendant
ROBERT MADZEJ
Second Defendant
MICHAEL CAETANO (and others named in the Schedule)
Third Defendant
JUDGE:
MARKOVIC J
DATE OF ORDER:
8 SEPTEMBER 2017
THE COURT ORDERS THAT:
1.The notice to produce dated 29 August 2017 served by the first to fourth defendants on the plaintiff (Notice to Produce) be set aside.
2.The defendants pay the plaintiff’s costs of the application in paragraph 1 of the plaintiff’s interlocutory process filed on 5 September 2017 to set aside the Notice to Produce.
3.The interlocutory process filed on 5 September 2017 be otherwise dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(REVISED FROM TRANSCRIPT)MARKOVIC J:
On 11 August 2017 John Hislop commenced this proceeding by the filing of an originating process. At the time of commencement of the proceeding there were four defendants: Paltar Petroleum Ltd (Paltar), Robert Madzej, Michael Caetano and Darrel Causbrook. The proceeding was commenced on an urgent basis and orders were made for the abridgement of the time for service of, among other things, the originating process.
On 5 September 2017, on the application of Mr Hislop, Nation Energy (Australia) Pty Ltd (Nation Australia) was joined as the fifth defendant to the proceeding and leave was granted to Mr Hislop to file an amended originating process.
In his amended originating process Mr Hislop seeks an order pursuant to s 237 of the Corporations Act 2001 (Cth) (Corporations Act) that he have leave to bring proceedings against the first to fourth defendants on behalf of and in the name of Nation…
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- Case
- [2017] FCA 1078
- Decision Date
CaseChat Overview and Summary
The legal issues before the court included whether the documents sought in the Notice to Produce were relevant to the facts in issue, whether the Notice to Produce was unreasonably burdensome, and whether the documents were subject to a claim for legal professional privilege. Hislop's application was based on the premise that the documents sought were irrelevant, overly burdensome, and likely to be privileged. The court needed to determine whether these grounds were sufficient to warrant setting aside the Notice to Produce.
The court found that the documents sought in the Notice to Produce did not relate to the facts in issue, thus constituting an abuse of process. Additionally, the court agreed that the documents sought were likely to be privileged, which further supported the application to set aside the Notice to Produce. Given these findings, the court concluded that the alternative grounds raised by Hislop for setting aside the Notice to Produce did not need to be considered. Consequently, the court made orders setting aside the Notice to Produce and directed the defendants to pay Hislop's costs of the application.
The court's decision highlights the importance of ensuring that notices to produce are relevant and not oppressive or an abuse of process, particularly when dealing with privileged documents. The setting aside of the Notice to Produce underscores the need for parties to carefully consider the scope and content of such notices to avoid potential sanctions.
Orders
Orders of the court
1. The notice to produce dated 29 August 2017 served by the first to fourth defendants on the plaintiff (Notice to Produce) be set aside.
2. The defendants pay the plaintiff’s costs of the application in paragraph 1 of the plaintiff’s interlocutory process filed on 5 September 2017 to set aside the Notice to Produce.
3. The interlocutory process filed on 5 September 2017 be otherwise dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
In his amended originating process Mr Hislop seeks an order pursuant to s 237 of the Corporations Act 2001 (Cth) (Corporations Act) that he have leave to bring proceedings against the first to fourth defendants on behalf of and in the name of Nation Australia. The nature of the claim that Mr Hislop seeks leave to bring is set out in a draft document titled “Draft Outline of Proposed Claim (Revised)” (Proposed Claim) which is annexed to the amended originating process. The application before me for determination concerns a notice to produce dated 29 August 2017, issued pursuant to r 30.28 of the Federal Court Rules 2011 (Cth) and served on Mr Hislop by the defendants (Notice to Produce). By paragraph 1 of an interlocutory process filed on 5 September 2017 Mr Hislop seeks an order setting aside the Notice to Produce on the basis that it is oppressive; on the basis that it is an abuse of process because the documents sought do not relate to the facts in issue; or on the basis that it seeks documents which, on their face, will all be subject to a claim for legal professional privilege.THE PROPOSED CLAIM Before turning to consider the application it is necessary to say something briefly about the parties and the Proposed Claim which will be brought if Mr Hislop is successful in his application pursuant to s 237 of the Corporations Act. Mr Hislop and Paltar are shareholders in Nation Energy Inc (Nation Wyoming), which is a company registered in Wyoming in the United States of America (US). Nation Australia is a wholly owned subsidiary of Nation Wyoming. Marc Bruner is the majority shareholder and a director of Paltar, which is incorporated in Australia. In the Proposed Claim, in summary, it is alleged that:·in or about October 2013 Mr Bruner, Paltar, Mr Hislop and Nation Wyoming entered into an agreement that set out the parties’ rights and obligations in respect of the issuance to Paltar of 900 million earning agreement shares in Nation Wyoming. Certain terms relating to voting rights in the earning agreement shares are set out in the Proposed Claim: at [12];·there were certain voting restrictions on the earning agreement shares held by Paltar in Nation Wyoming (Voting Restrictions): at [13];·in or about May 2016 Paltar and Nation Australia entered into six earning agreements under which Nation Australia had valuable contingent rights to be issued with a Production Licence under the Petroleum Act 2009 (NT) in respect of six exploration permits. In turn, those permits gave it contingent rights to a potentially valuable revenue stream equating to 75% of an “overriding royalty” in petroleum produced from certain blocks. Those rights were, in effect, Nation Australia’s only valuable assets: at [14]-[16];·resolutions were passed on 27 April 2017 by Paltar, in its capacity as a shareholder of Nation Wyoming, which resulted in increasing the Nation Wyoming board from three to seven directors and in the appointment of Messrs Madzej and Caetano, Carmen Motito and Robert Buljevic as directors of Nation Wyoming (referred to as the April Board Stacking): at [22];·the purported majority resolution achieving the April Board Stacking was only possible if Paltar and Mr Bruner violated the Voting Restrictions: at [23];·on 19 June 2017 there was a meeting of directors of Nation Wyoming at which resolutions were passed to the effect that Nation Wyoming would convene a special general meeting of the members of Nation Australia to consider and, if thought fit, to pass certain ordinary resolutions, including that certain people, including Mr Hislop, be removed as directors of Nation Australia; that Messrs Causbrook, Madzej and Caetano be appointed as directors of Nation Australia; and that Mr Caetano be appointed as the chair and chief executive officer of Nation Australia: at [30];·the purported special general meeting of Nation Australia foreshadowed at the 19 June 2017 Nation Wyoming board meeting was held shortly thereafter and the foreshadowed actions were taken. Among others, Mr Hislop was removed as a director of Nation Australia and Messrs Causbrook, Madzej and Caetano were appointed instead (referred to as the June Board Stacking): at [31];·the June Board Stacking was achieved as a result of, and could not have been achieved without, the April Board Stacking and the violation of the Voting Restrictions by Paltar. It was carried out in furtherance of what is termed the “Asset Stripping Proposal”: at [32];·Paltar delivered a default notice pursuant to the earning agreements between Paltar and Nation Australia, which was invalid, in furtherance of the Asset Stripping Proposal. None of the individual defendants sought any legal advice in relation to the validity of the default notice or gave any attention to particular aspects of the earnings agreements and were accordingly recklessly indifferent to the validity or invalidity of the default notice: at [33]-[43]; and·as a result of meetings of the boards of Nation Wyoming and Nation Australia on 4 and 5 August 2017 respectively, Nation Wyoming, Nation Australia, Paltar and Officer Petroleum Pty Ltd, a wholly owned subsidiary of Paltar, entered into a “Settlement Agreement and Release of All Claims” and Nation Australia and Paltar entered into six “Surrender and Cancellation of Earning Agreements” by which Nation Australia lost and surrendered to Paltar the benefit of all of its valuable rights. This was the Asset Stripping which was achieved as a result of the April Board Stacking and the June Board Stacking; the violation by Paltar and Mr Bruner of the Voting Restrictions; and as a result of having issued an invalid default notice: at [44]-[49C].