Jonsson, in the matter of Hooper Holdings Pty Ltd v Hooper Holdings Pty Ltd
[2020] FCA 1870
•23 December 2020
FEDERAL COURT OF AUSTRALIA
Jonsson, in the matter of Hooper Holdings Pty Ltd v Hooper Holdings Pty Ltd [2020] FCA 1870
File number(s): QUD 167 of 2020 Judgment of: GREENWOOD J Date of judgment: 23 December 2020 Catchwords: CORPORATIONS – consideration of an application for an order that the respondents provide discovery of particular categories of documents Cases cited: DSE (Holdings) v Intertan Inc (2003) 127 FCR 499
Mann v Carnell (1999) 201 CLR 1
Division: General Division Registry: Queensland National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 41 Date of hearing: 25 November 2020 Counsel for the Applicant: Mr P Somers Solicitor for the Applicant: O’Connor Law Counsel for the Second and Third Respondents: Mr S Standing Solicitor for the Second and Third Respondents: Arns & Associates ORDERS
QUD 167 of 2020 IN THE MATTER OF HOOPER HOLDINGS PTY LTD ACN 008 769 515
BETWEEN: ANTHONY JAMES JONSSON AS TRUSTEE FOR ELEANOR CLARE HOOPER
Applicant
AND: HOOPER HOLDINGS PTY LTD ACN 008 769 515
First Respondent
WENDY MAY HOOPER
Second RespondentERIC DAVID HOOPER
Third Respondent
ORDER MADE BY:
GREENWOOD J
DATE OF ORDER:
23 DECEMBER 2020
THE COURT ORDERS THAT:
1.As to the documents described at paragraphs 1(a) and (c) of the applicant’s interlocutory application filed on 19 November 2020 (the “application”), the application is dismissed.
2.As to the documents described at paragraph 1(c) of the application, the respondents give discovery of any valuations of the properties owned by David Hooper Investments Pty Ltd as described in the affidavit of Mrs Wendy May Hooper affirmed on 25 September 2020, obtained during the period 1 January 2018 to the date of these orders.
3.As to the documents described at paragraph 1(d) of the application, the respondents give discovery of documents relating to the lease of the property situated at 889 Great Southern Highway, Woottating in the State of Western Australia between David Hooper Investments Pty Ltd and “Boyle Farms”, limited to documents relevant to that matter in the period 1 January 2018 to the date of these orders.
4.The costs of and incidental to the application are reserved.
5.Pursuant to s 23 and s 37P of the Federal Court of Australia Act 1976 (Cth), rule 1.32 and rule 1.36 of the Federal Court Rules 2011, these orders and the reasons for judgment in support of these orders are made and published from Chambers.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GREENWOOD J:
These proceedings are concerned with a dispute in relation to the discovery of documents.
The background to the present application is this.
On 29 November 2018, the applicant was appointed trustee in bankruptcy of the estate of Ms Eleanor Clare Hooper. Ms Eleanor Hooper is a shareholder in the respondent, Hooper Holdings Pty Ltd (the “company”), holding 619 “A” Class Shares. Those shares vested in the applicant on the date of Ms Eleanor Hooper’s bankruptcy.
The company was incorporated on 28 June 1973 by the Hooper Family Patriarch, Mr David Gerald Hooper (“DGH”).
There are 10 different classes of shares issued in the respondent classed “A” to “H” all of which are treated equally under the Articles of Association of the company. When the company was incorporated DGH was the Life Director and held one Life Director’s Share and Mrs Wendy Hooper was the Succeeding Director and held one Succeeding Director’s Share. The Memorandum of Association of the company provides that the Life Director’s Share shall have a certain number of votes equal to, put simply, eight times the aggregate number of votes conferred on other shareholders other than the Life Director. It also provides that the Succeeding Life Director’s Share, whilst Mrs Wendy Hooper remains the widow of DGH and is the registered holder of such share, shall have the rights, qualities and privileges attached to that share as set out in the Articles of Association.
The shares classed “A” to “H” are held by members of the Hooper family. Mrs Wendy Hooper is a director of the company. Her son, Mr Eric Hooper, was appointed a director in DGH’s place on 17 April 2008.
The company’s sole asset is all of the issued shares in a related company, David Hooper Investments Pty Ltd (“DHIPL”). DHIPL is said to own two substantial unencumbered farming properties on which it carries on the business of cattle grazing and farming; and shares in publicly listed companies which were said to be valued at 30 June 2019 at approximately $200,000.
The directors of DHIPL are Mrs Wendy Hooper and her son, Mr Eric Hooper. Mr Eric Hooper carries on cattle grazing and farming operations on the farming properties owned by DHIPL.
The applicant, in his role as the trustee in bankruptcy of the estate of Ms Eleanor Hooper seeks to realise her shareholding in the company.
The applicant says that in accordance with Article 33 of the company’s Articles of Association, he has offered to sell the shares to Mrs Wendy Hooper, but she has declined to take up that offer, and he has offered to sell the shares to all of the other shareholders in the respondent, all of whom have declined to take up the shares. The applicant says that he is left with no option in realising Ms Eleanor Hooper’s shareholding in the respondent other than to seek an order for the winding up of the company on the just and equitable ground.
The just and equitable ground is said to be engaged because Mrs Wendy Hooper and her son, Mr Eric Hooper, are said to be acting contrary to the interest of the remaining shareholders or acting in a way which is oppressive to, or unfairly prejudicial to, those shareholders.
Accordingly, on 5 June 2020, the applicant commenced the principal proceeding seeking a winding‑up order and the appointment of Mr Hayden White and Mr Clint Joseph as joint liquidators of the respondent. The Concise Statement was filed on 21 August 2020.
An Amended Concise Response was filed on 30 October 2020 and without addressing all of the matters of denial and contention in response in that document, it is sufficient to note for present purposes that the company, Mrs Wendy Hooper, and Mr Eric Hooper, say that the applicant’s attempt to exercise the procedure set out in Article 33 of the Articles of Association was invalid and ineffective and, further or alternatively, involved “misleading and deceptive conduct and evidences a lack of clean hands on the part of the applicant”. The Concise Response contends that the applicant ought not be permitted to rely upon the attempt to exercise the Article 33 procedure for a range of reasons set out at para 18(a) to (f) of the response.
As to the relief sought by the Concise Response relevant to these matters, para 24 is in these terms:
24.[Mrs Wendy Hooper and Mr Eric Hooper] seek orders under ss 18, 237 and 243 of the Australian Consumer Law and/or the Australian Consumer Law (WA) and/or the Australian Consumer Law (Queensland) declaring that the Applicant’s purported notice under Article 33 was void ab initio or invalid, alternatively, that the Applicant’s application for winding up be permanently stayed, or such other relief as this Honourable Court thinks fit.
The question immediately in issue as to discovery arises out of the following correspondence and a paragraph of an affidavit sworn by Mrs Wendy Hooper on 30 October 2020.
As to the correspondence, the solicitors for the applicant by letter dated 1 April 2020 addressed to the solicitors for the company, Mrs Wendy Hooper and Mr Eric Hooper, asserted that the letter served as notice in accordance with Article 33 that the applicant intended to realise the shares that he now held in his capacity as trustee. The letter observes that Article 33 grants the Life Director, Mrs Wendy Hooper, an option to purchase the shares at a mutually agreed price. The letter notes that, in that regard, an offer had been previously put to Mrs Wendy Hooper. The letter observes that failing an agreement as to the price, the procedure contemplated by Article 39 would be invoked for determining a price.
On 7 April 2020, the solicitors for the company, Mrs Wendy Hooper, and Mr Eric Hooper, responded in these terms:
In relation to your client’s notice that he intends to sell the shares, we are instructed that neither Wendy Hooper nor Eric Hooper have any interest in purchasing the shares. Our client notes that the last transaction of H – class shares in the company occurred in 2009 and involved the sale of the shares at a nominal $1 per share. An extract of the Register of Members as at 30 June 2013 is enclosed.
On 8 July 2020, the solicitors for Mrs Wendy Hooper (et al) sent an email to the solicitors for the applicant advising that the Hooper interests did not wish to participate in a proposed mediation and further advised as follows: “Our client invites your client to invoke the process provided for by Article 33 of the Articles of Association”.
On 30 October 2020, Mrs Wendy Hooper swore an affidavit in which she made this observation at para 5:
When my solicitors sent me a copy of the letter dated 1 April 2020 from the Applicant’s solicitors (being Annexure WMH‑9 of my earlier affidavit), I did not review Article 33 of the Articles of the [company], and I did not seek, or receive, advice at the time regarding the content or effect of Article 33. I took the letter of 1 April 2020 at face value, and assumed that, as stated in the letter, an option to purchase the shares was an option to be exercised at a “mutually agreed price” or valuation referred to in the letter. At the time, I was unaware that (contrary to what was stated in the letter) an option under Article 33 could be exercised at the lesser of par or a mutually agreed fair value.
The point of this sequence of events is that the applicant contends that Mrs Hooper could not have been misled or deceived whilst represented by lawyers advising her on these matters. The applicant says that in essence, there could be no reliance on anything misleading or deceptive in the letter of 1 April 2020 because Mrs Wendy Hooper was being advised by solicitors, and it is “reasonable to infer” that she was advised on her rights under Article 33. The applicant says that by giving the evidence at para 5 quoted above, Mrs Wendy Hooper has attempted to obtain forensic advantage by “relying upon the advice (or lack thereof) she received on this issue”. The applicant says that doing so is inconsistent with the maintenance of a claim of privilege over advices she received. The applicant contends that it would be unfair for the Hooper interests to gain an advantage by “relying upon part of the advice”, without having to disclose, through the discovery of all relevant documents, the full effect of the advice she has been given.
The great difficulty with these propositions is that there has been no partial disclosure of advice by Mrs Wendy Hooper and there is no evident conduct by which she seeks to rely upon aspects of advice, on the one hand, and partially disclose other aspects of it, on the other hand.
In fact, there has been no disclosure of any advice at all.
At para 5 of the affidavit, Mrs Wendy Hooper says that she did not seek or receive advice at the time regarding the content or effect of Article 33. The reference to “at the time” is at or about the time of 1 April 2020. Counsel for the Hooper interests observes that it is not in dispute that Mrs Wendy Hooper deposes to her state of mind at that point in time regarding Article 33, and accepts that it would be inconsistent or unfair for Mrs Wendy Hooper to put in issue her state of mind and at the same time maintain privilege over communications that were relevant to the formation of her state of mind. The point of departure they make with the applicant’s contentions is that Mrs Wendy Hooper has said on oath that she did not seek or receive advice regarding the content or effect of Article 33 and thus there are no documents relevant to the formation of her state of mind. There is no express, implicit or inferential inconsistency with the maintenance of the confidentiality of the relevant privilege because no advice was sought or obtained.
In Mann v Carnell (1999) 201 CLR 1, the plurality at [29] observe that waiver may be express or implied and that disputes as to implied waiver usually arise from the need to decide whether “particular conduct” is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. The plurality observe that “[w]hat brings about the waiver is the inconsistency, which the Courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large” [emphasis added]: see also the observations of Allsop J at [24] and the last sentence of [61] in DSE (Holdings) v Intertan Inc (2003) 127 FCR 499.
Accordingly, I am satisfied that no basis is made out for an order for the discovery of “all documents relating to communications passing between the Respondents and their legal advisors, including Counsel, including any and all advices whether in writing or otherwise, passing between the Respondents and their legal advisors”, as sought.
Mrs Wendy Hooper, in her affidavit, also said this at para 6:
… I knew that the Applicant had previously (via a letter to Hooper Holdings Pty Ltd dated 26 February 2020 from his solicitors and a true copy of which letter is annexed hereto marked WMH‑14) referred to the market value of the shares, and had also made a without prejudice offer of the same date to purchase the shares for an amount which I could not afford. I did not have the financial resources to pay market value (or anything approaching market value) for the shares.
By the interlocutory application, the applicant seeks the following documents:
a.…
b.Documents relating to the market value of the shares, including any valuations of the properties owned by David Hooper Investments Pty Ltd.
c.[Mrs Wendy Hooper’s] financial status and capacity, including bank account statements, loan accounts, and documents relating to [Mrs Wendy Hooper’s] assets and liabilities.
d.All documents relating to the lease of the property situated at 889 Great Southern Highway, Woottating in the State of Western Australia between David Hooper Investments Pty Ltd and Boyle Farms.
As to the Category (b) documents relating to valuations, this topic has a relationship with a letter written by the solicitors for the applicant to the company dated 26 February 2020.
In that letter, propositions are set out about an appropriate way of determining the actual value of the shares in the company held by the trustee by ascertaining the “market value” of the shares in DHIPL held by the company. The letter observes that in order to ascertain that value, the matters at points 1, 2 and 3 on page 1 of that letter were to be noted and that as to the balance sheet of DHIPL, it was to be noted that that company is the registered owner of a property at 889 Great Southern Highway, Woottating in the State of Western Australia. As to that, the letter observes that the applicant has carried out an online appraisal of this property which evidences a range in the market value of the property between $1,750,000.00 and $2,160,000.00. It also observes that when the issued shares in DHIPL are viewed “on a market value perspective rather than a cost value perspective, the net asset position of the company substantially increases”.
It seems to be suggested that by making reference to the “market value of the shares” in para 6 of Mrs Wendy Hooper’s affidavit, she is identifying valuations or documents relating to the market value of the shares. However, it seems clear enough that Mrs Wendy Hooper is addressing the matters put to her in the letter of 26 February 2020 and, in particular, the market value of the shares the subject of the observations in that letter.
I am not satisfied that any basis has been made out for seeking an order relating to documents said to be held by Mrs Wendy Hooper concerning the market value of the shares.
To the extent that there are valuations of the properties which would be relevant to the value of the shares, those documents would be relevant to the overall question of whether, on the facts, it is just and equitable that the company be wound up (in the context of the controversy on the facts as to conduct and related matters).
However, the applicant seeks, it seems, valuations in an unlimited way as to time. Paragraph 6 of Mrs Wendy Hooper’s affidavit is addressing the matters put at 26 February 2020 and para 7 of her affidavit addresses the particular topic at about the time of the letter of 1 April 2020. It seems to me that valuations of the properties obtained in the period 2018 to 2020 would be relevant in the temporal sense.
As to Category (c), the applicant seeks discovery of Mrs Wendy Hooper’s financial status and capacity, bank account statements, loan documents and a statement of assets and liabilities. In an affidavit sworn by her on 25 September 2020, she said this:
My financial position
35. I am 78 years old and retired.
36.I own no property. I own two motor vehicles. I have a bank account with approximately $1,500 in it. I have no superannuation. The only shares I own are the two shares I have in the Company. I own no other assets of value.
37.I am entirely reliant on the Company for my income and my housing. I live at the Farm and have lived there for 47 years, since February 1973.
38.The only income that I receive from any source is from the Company as a result of the lease of the farm and repayment of a loan made to Eric David Hooper. I do not receive any pension.
39.I am informed that if the Company was put into liquidation, the Farm (and my home) would be sold. I do not want to leave my home. There are services offered by the Shire and State government which will continue to allow me to live here with assistance. If my home was sold, I could not afford to purchase it (or any residence) from the Company.
40.As I only hold two of the 5,002 shares in the Company, I would receive virtually nothing if the Company was wound up.
It is not clear to me how the financial position of Mrs Wendy Hooper is directly relevant to the issues in the proceeding. However, if the financial position of Mrs Wendy Hooper is thought to be relevant to a question in issue, I would not be willing to make an order for discovery as sought, as a matter of discretion.
Having regard to the financial disclosure made on oath, I am satisfied that sufficient information has been provided on oath as to Mrs Wendy Hooper’s financial circumstances. In any event, counsel for the Hooper interests in the course of the hearing observed that he was instructed that on 24 November 2020, Mrs Wendy Hooper gave informal discovery of a bank statement which confirms her financial position. The bank statement is as at the end of March 2020 and addresses the quarter year from January to March 2020.
Category (d) addresses the topic of a lease of the property as between DHIPL and Boyle Farms.
Counsel for the Hooper interests says that the lease is an oral lease. Counsel observes that he has no knowledge of what documents might relate to the existence of an oral lease. Counsel observes that on 24 November 2020, his instructing solicitors sent copies of bank statements to the solicitors for the applicant which refer to transfers of funds to the respondents in these terms: “Transfer from Boyle Farms, Woottating lease”. An amount of $2,200 is shown on the statements and there are three statements showing such transfers. These documents have been provided by way of informal discovery. The documents evidence the existence of the lease.
In Mrs Wendy Hooper’s affidavit of 25 September 2020, at para 19, she says that the farm (which is the property at Woottating) “is currently leased to Boyle Farms for an annual rent of $24,000 plus GST”.
Notwithstanding the submissions of counsel for the Hooper interests, I propose to make an order that the respondents provide discovery of documents relating to the lease of the property. It is not clear from the evidence when the property was leased, orally or otherwise. Presumably there are letters evidencing the oral lease or emails relating to it. I propose to limit that order to documents in the period 1 January 2018 to the date of these orders. Discovery of documents in that period may reveal other documents. However, for present purposes, the order ought to be limited. An unlimited order could simply be oppressive.
The costs of and incidental to the application are to be reserved for later determination.
I certify that the preceding forty‑one (41) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Greenwood. Associate:
Dated: 23 December 2020
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