Incitec Limited
[2002] VSC 538
•20 November 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
No. 7118 of 2002
| IN THE MATTER OF INCITEC LIMITED | |
| INCITEC LIMITED | Plaintiff |
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JUDGE: | Hansen J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20 November 2002 | |
DATE OF JUDGMENT: | 20 November 2002 | |
CASE MAY BE CITED AS: | Incitec Limited | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 538 | |
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PRACTICE – Scheme of arrangement – Application to approve – Opposed – Discovery - Documents produced under subpoenas – Implied undertaking not to use documents thus produced except for purposes of the scheme application – Scheme application dismissed by consent – Application by opposing party to use documents in a new proceeding.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr K.W.S. Hargrave Q.C. with Ms E.J. Hollingworth | Minter Ellison |
| For the Respondent Applicant | Mr M. Hoffmann | Holding Redlich |
| For Orica Investments Pty Ltd | Mr P.R. Hayes Q.C. with Ms M.M. Gordon | Freehills |
| For UBS Warburg Australia Corporate Finance Ltd | Mr I.B. Stewart | Allens Arthur Robinson |
| For Grant Samuel and Associates Pty Ltd | Mr J. Delany | Clayton Utz |
HIS HONOUR:
On 6 November 2002 Incitec Limited withdrew its application for approval for a scheme of arrangement. It had been opposed by Acehill Investments Pty Ltd, which held 20.8 per cent of the issued shares in Incitec. The majority shareholder was Orica Ltd which held over 70 per cent of the issued shares.
When Incitec's counsel announced the withdrawal of the application, he stated that a revised scheme would be prepared. The proposed change was substantial; it removed the second step in the previous proposal, by which Industrial Chemicals was to be an unlisted entity wholly owned by Orica, the minority shares having been cancelled under a selective reduction.
It was said that Industrial Chemicals would now be a listed entity, with the minorities retaining their shares in the proportion presently held in Incitec. For this purpose, there have been some changes in the advisors to Incitec and the scheme is in preparation. I was informed that when it has been prepared, and the board determines to proceed with it, an application will be made to a court for an order convening a scheme meeting. It is impossible for me to speculate as to when, indeed if at all, such an application may be made.
The scheme proceeding was conducted with considerable urgency. The application for approval was initially fixed for hearing on 25 October 2002. Having regard to Acehill's opposition, I refixed the hearing for 6 November 2002. The timetable for procedural steps was very tight, and was managed only by the high degree of competence and willingness exhibited by all of the legal practitioners and other people involved.
There were applications for discovery and subpoenas for production of documents. Heavy burdens were imposed on Incitec, Orica and the companies associated with it, UBS Warburg Corporate Finance Limited and Grant Samuel & Associates Pty Ltd.
The documents included sensitive commercial information, and I made orders to protect the confidence of material in the documents produced, in particular, I ordered that the documents on the court file be, and remain, confidential. Those orders continue to operate. Even if an affidavit had been read in court, an order would have been required to permit any person to inspect the affidavit on the file, and that remains the case.
On 18 November 2002, Acehill filed an interlocutory process in the scheme proceeding which, by paragraph 1, sought leave to use the documents discovered or produced in the proceeding and information disclosed in them:
(a)by Grant Samuel & Associates Pty Ltd pursuant to a subpoena dated 23 October 2002;
(b)by UBS Warburg Corporate Finance Limited pursuant to a subpoena dated 23 October 2002;
(c)by Orica Limited, Orica Australia Pty Ltd and Orica Investments Pty Ltd pursuant to subpoenas issued on 23 October 2002 as varied by orders made 30 October 2002; and
(d) by Incitec Limited pursuant to the orders made on 28 and 30 October 2002;
for the sole purpose of preparing, instituting and prosecuting proceedings against Incitec Limited pursuant to sections 232 and 233, and possibly other provisions, of the Corporations Act 2001.
While this was the principal thrust and burden of the application today, the following further orders were sought by paragraphs numbered as follows:
2.That Acehill and its solicitors be at liberty to disclose the documents referred to in paragraph 1 above, to the Australian Securities and Investments Commission;
3.Notwithstanding the above, that the persons on behalf of Acehill who may inspect and make use of the documents and information in them for the purpose set out in paragraph 1 be limited to certain persons named on terms that they will keep the contents of the documents confidential and not disclose them to any person until the court otherwise determines;
4.In the event that Acehill institutes proceedings against Incitec Limited of the kind referred to in paragraph 1, Acehill shall use its best endeavours to ensure that any documents filed in the proceedings which disclose confidential ammonium nitrate pricing or fertiliser marketing information remain confidential to the parties;
5.That Incitec, Acehill and their solicitors are at liberty to disclose all reports and affidavits of Craig Edwards and Reginald Cooper addressing the report of Grant Samuel dated 13 September 2002, and the value of Incitec Limited's industrial chemicals business, to the members of Incitec and ASIC.
By arrangement, the application was returnable before me at 9:00 a.m. this morning. I have heard counsel for all parties mentioned.
The affidavit evidence reveals that on 18 November 2002 Acehill filed a proceeding against Incitec under the oppression provisions of the Corporations Act in the Supreme Court of South Australia. The matter was mentioned before Justice Debelle yesterday and will be before His Honour again tomorrow. The application is based on Incitec's alleged discriminatory, prejudicial or oppressive conduct towards Acehill. Acehill raised such issues in the scheme proceeding. Acehill seeks relief of an extensive kind relating to the composition of the board, and investigation of the demerger proposal. It is unnecessary to refer to the full terms of the relief sought in the application. The application is supported by a 47 page affidavit of its secretary, Sadlon.
In the written submissions of Acehill and Orica I was referred to a number of authorities on the issue of releasing a party from the implied undertaking concerning the extraneous use of documents obtained on discovery or under a subpoena. No issue of principle arises on the resolution of the present application, in my view.
At an early point in Mr Hoffmann's submissions, I queried whether the application was not premature. That was in the sense that a great many documents had been produced from a variety of parties in the scheme proceeding and the documents may, to an extent, or as to subject matter, not be relevant to the oppression proceeding. At the present time, all that has happened in the oppression proceeding is that an application has been filed, supported by an affidavit of some elaboration. At this stage, the parties to the proceeding have not defined their positions. I do not know, of course, the manner in which a court in another State might conduct such a proceeding as that commenced, and there is an extent to which it might be indelicate for me to venture any view at all as to how I might anticipate another court in another State would proceed in the expeditious management of such litigation; practices vary. Even in this Court, from judge to judge, what I might do might not be done by another judge. The point is that, in the oppression proceeding thus commenced, neither a statement of issues or points of claim or whatever form of document which might come into existence, if at all, which indicates Acehill's position, nor any contrary or answering piece from the respondent to the application, Incitec, which indicates its position, have yet been prepared.
In the course of debate, Mr Hoffmann stressed the urgency of the situation. He claimed that, in the circumstances that are relevant to the matters pertaining to these parties, there is an urgency that required the present application to be made notwithstanding the infancy of the stage at which the oppression proceeding presently stands. He referred, in particular, on the point of urgency, to the shortness of time between now and May 2003, when statutory approvals for a further nitric acid plant expire. In other words, it is a matter of urgency that the oppression proceeding be tried, and that the court hearing it be fully informed of matters pertaining to the nitric acid plant and the decision not to proceed with it at present. The oppression proceeding seeks relief in relation to the composition of the board and a review of the decision not to proceed with the plant. It is also concerned with the arrangements for the supply of ammonium nitrate and other matters.
Mr Hargrave, in reply, said that the matter of the statutory approvals was being dealt with and that it was not as simple as Mr Hoffmann had submitted, Mr Hoffmann's submission having been to the effect that Incitec and Orica were simply permitting the nitrate plant not to proceed.
Other counsel opposed the application, although in varying terms and degrees.
Orica's position is the simplest to put: it opposed the application. Alternatively, it supported the submissions of counsel for Incitec.
Incitec's counsel submitted that if leave was to be given, it should be on the condition that the oppression proceeding be conducted in this Court. That was because this Court should control the use of documents produced under its own processes, and to ensure a greater ability to supervise use of the documents in question. It was also submitted that if leave was granted, it should be limited to a proceeding under the oppression provisions, and not extend to any other possible application that might be made under some other provision of the Corporations Act.
Incitec accepted the idea of the documents being disclosed to ASIC. Although, rather than have disclosure to ASIC on the terms proposed by Acehill, namely that Acehill and its solicitors be at liberty to make disclosure, Incitec proposed that the disclosure be by Incitec and Acehill.
Finally, Incitec opposed the proposal to send material to the shareholders of Incitec as distinct from ASIC, contending that the effect of doing so would be to disclose the information contained in the documents to the world at large.
I heard also from counsel for UBS Warburg and Grant Samuel; their positions were not identical, at least initially.
Counsel for UBS Warburg expressed a concern that, notwithstanding the terms of the order made in the scheme proceeding, which provided, upon the conclusion of the scheme proceeding, that Acehill return copies of UBS Warburg documents and destroy any notes or other documents creating, incorporating or referring to information contained in or obtained from the UBS Warburg documents, and that Acehill's solicitor provide a statutory declaration to that effect. Acehill has not provided a statutory declaration nor any evidence of compliance with that order.
Consequently, a concern was raised regarding the confidentiality of the documents in conformity with the order of this court. Counsel for UBS Warburg said that if leave was granted, the order should be limited to the oppression case, and limited to a proceeding in Victoria, in order to better enable supervision of the use of the documents. It was observed that ASIC has its own powers in relation to being able to call for documents, but that if I was to accede to the application of Acehill for the provision of documents to ASIC, any such order should not extend to the UBS Warburg documents.
Then, there was an objection by UBS Warburg to Sadlon seeing the documents, in accordance with the proposal of Acehill, and there were also objections to Acehill's applications, which I have referred to as paragraphs 4 and 5 earlier in this judgment.
Grant Samuel's position was a little different. It had indicated its consent to the use of its documents in deciding to bring a proceeding and, if a proceeding was brought, for use in that proceeding. Grant Samuel had also indicated that it would consent to the provision of its documents to ASIC. It was not made clear to Grant Samuel, counsel said, that the use was to be for a proceeding in another court, that is to say, another court in another state, and if I may interpolate here, that position was common to all the respondents to this application. Acehill had not been frank in that respect. It should have been.
Counsel for Grant Samuel further said that it was Acehill's application (by paragraph 5) for leave to provide information to Incitec's members that brought Grant Samuel to the court today. They had not been asked to consent to such a use of the information and they opposed any such use of the information. A concern was expressed, again by counsel for Grant Samuel, but consistently with other counsel, as to how use of the documents in a court in another state could properly be supervised by this court. In the circumstances, as they had unfolded, Grant Samuel opposed the application.
That, I think, is a sufficient outline of what was said by counsel for the respondents. As I say, there was a general complaint from them. I should say, in addition, there was a general complaint from the respondents that Acehill had broken the confidentiality requirements in using information in the documents in the oppression proceeding. Mr Hoffmann denied that this was so. While it appears that the respondents may be correct I do not consider the issue further and make no conclusion on it. The issue is not critical to the decision that I make.
Some things I can say at once about the application. I would limit any leave to use the documents to the oppression proceeding. I do not consider it appropriate to make an order granting leave to an application of an unspecified type under an unspecified provision of the Corporations Act. I would limit the disclosure to ASIC.
I would not make the order in respect of disclosure to the shareholders generally. I am much affected in that respect by the impression which I have of the litigation. I saw the parties a lot over a very short period of time, and I got a sense of the agitation, in a litigious sense, passing between them. I have read many papers in the case concerning and reflecting that agitation. I had references in the course of counsel's argument to statements in newspapers and in press releases. I am not concerned with that at all, I am concerned only with the in-court situation and it seemed to me, as I said to Mr Hoffmann, that to release the information Acehill proposes to release to members of the company is to release, on the one hand, concerning the report or affidavits of Edwards, a document very much prepared in a party/party litigation context. I cast no adverse reflection on Mr Edwards, but in my experience, an expert for one side would usually be matched by an expert for another side, and it could not necessarily conduce to a better informed shareholder to receive party/party work of that nature.
As to the affidavit of Cooper, that was prepared and filed in connection with a discovery or subpoena application. Again, I think that it is unwise to take a document prepared for a particular purpose in contested litigation and, without more, have that made available to shareholders.
A query was raised, as I have mentioned, about Sadlon being included in the group of persons who may inspect documents. I do no more than refer to that at the moment.
There was also the query concerning the urgency of the matter. Urgency is a relative issue, to be assessed in the overall circumstances of the proceeding. I have said something about the urgency already. I have what I might call only a relative degree of satisfaction on the matter of urgency. I am not sure as to the urgency of the matter; I am not sure when, if at all, another scheme is going to come in. That is only one aspect.
Mr Hoffmann might be right in saying, "look, here is something very important with this nitric acid plant", but oppression is oppression and his oppression on that aspect, if it is to be made out, would seem at least at the moment, to me, as presently advised, to be made out whether the plant proceeds or not. But it is very difficult for me to do more than speculate on a matter such as that. All I am saying is that at the moment I am not at all sure what the relative urgency is. I think that events have to unfold a little more in the commercial context and that the relative urgency may be clarified in the immediate future in the oppression proceeding itself because as I say, as it seems to me, some clarification has to come about as to what is in issue.
I arrive at the conclusion overall, for reasons that I have already adverted to, that the application is made too soon. Acehill has been able to commence the oppression proceeding. There is a very substantial affidavit that has been sworn in support. In the urgency of the present application and the weight of the papers that have been placed before me, I have not been able to study and analyse the Sadlon affidavit in support. I have been able to look through it, but it is a significant exercise that has been engaged in.
It seems to me that the present application ought rather to be made, if at all, when the issues in the oppression proceeding have been defined or have at least reached a stage of such clarity that I am better able to work out the application for leave with reference to particular documents or parties' documents as distinct from the blanket application which is now made.
I do not think it appropriate at this stage to limit use to a proceeding in this Court. I do recognise the point of difficulty in supervision of what happens in another jurisdiction and, if I may say so, I think that paragraph 4 of Acehill's application may need some greater degree of thought, but I make no further comment about that at the moment.
For the present, I decline to make an order in the blanket terms proposed before identification of the issues in the oppression case enable, with some precision, the issue for leave to be considered.
I will make an order, if it is desired, in terms of paragraph 3 of Incitec's draft minutes, but otherwise it seems to me, for the reasons I have stated, that that is as far as I would go today.
[After discussion, no order was made in terms of paragraph 3 of Incitec’s draft minutes.]
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CERTIFICATE
I certify that this and the 10 preceding pages are a true copy of the reasons for Judgment of Hansen J of the Supreme Court of Victoria delivered on 20 November 2002.
DATED this twentieth day of November 2002.
Associate
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