Nyles and Nyles

[2009] FamCA 1013

FAMILY COURT OF AUSTRALIA

NYLES & NYLES [2009] FamCA 1013

FAMILY LAW – PROPERTY – Application to obtain company documents

Corporations Act 2001 (Cth)
Family Law Rules 2004 (Cth)

Barro and Barro (1983) FLC 91-300

APPLICANT: Mr Nyles

RESPONDENT: Ms Nyles

FILE NUMBER: MLF 4247 of 2003

DATE DELIVERED: 28 October 2009

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Mushin J

HEARING DATE: 15 October 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr North SC

SOLICITOR FOR THE APPLICANT: James D Maplestone

COUNSEL FOR THE RESPONDENT: Mr Strum

SOLICITOR FOR THE RESPONDENT: Taussig Cherrie & Associates

Orders

1. That T Group Limited ACN … (“the company”) have leave to apply to be heard on the father’s Application in a Case filed 28 October 2009.

2. That the wife forthwith cause sealed copies of the following documents to be served upon the company by sending them by prepaid ordinary mail to its registered office (or by such other means as the company may agree):

   (a)this order;

   (b)the reasons for judgment delivered this day;

   (c)the husband’s Application in a Case filed on 28 October 2008;

   (d)the husband’s Affidavit in support of his Application in a Case sworn and filed on 28 October 2008;

   (e)the wife’s Response to an Application in a Case filed on 2 December 2008;

   (f)the wife’s Affidavit in support of her Response to an Application in a Case sworn and filed on 2 December 2008;

   (g)the order made on 21 April 2009 together with the annexure thereto; and

   (h)a copy of the written submissions filed on behalf of the husband on 11 May 2009 and on behalf of the wife dated 1 June 2009.

3. That within 28 days of service in accordance with paragraph 2 hereof, the company file and serve any application pursuant to paragraph 1 hereof together with an affidavit in support setting out the precise issues on which it seeks to be heard with particulars of same.

4. That any application pursuant to paragraph (3) hereof be set down for Mention before Justice Mushin for the making of all necessary orders and directions to prepare it for hearing.

5. That all questions of costs be reserved.

6. That general liberty to apply be reserved to both parties and the company.

IT IS CERTIFIED

1. Pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of Counsel including Senior Counsel.

IT IS NOTED that publication of this judgment under the pseudonym Nyles & Nyles is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 4247  of 2003

MR NYLES

Applicant

And

MS NYLES

Respondent

REASONS FOR JUDGMENT

1. On 10 March 2004 the parties consented to final orders ("the consent orders") and executed a Financial Agreement ("the financial agreement") altering their respective interests in their property pursuant to Part VIII of the Family Law Act 1975 ("the Act"). On 2 July 2004 the husband filed an application to set aside both the consent orders and the financial agreement ("the husband's substantive applications"). Those applications are made pursuant to sections 79A(1)(a) and 90K(1) of the Act respectively.

2. The essential issue in the husband's substantive applications is the assertion that the wife failed to make a full and frank disclosure of all relevant matters at the time of the making of the consent orders and the execution of the financial agreement.  At that time, the wife owned shares in the T Group Limited, previously known as J Company Pty Ltd (“the company”), of which she had also been a director. At the time of the making of the consent orders the wife had asserted that her shares in the company had a particular value.  However, as a result of a restructure of the shares subsequent to the consent orders and the financial agreement, they acquired a significantly higher value. The question of the extent of the wife's knowledge of that restructure at the time of the making of the consent orders and execution of the financial agreement is at the heart of the husband's substantive applications.

3. As part of the preparation for trial of the husband's substantive applications, the parties have undertaken various interlocutory processes.  For present purposes, the most important of those has been applications by the husband for full disclosure by the wife, particularly with regard to relevant documents from the books of the company.

THE PRESENT APPLICATION

1. The husband's present application was filed on 28 October 2008. On 5 February 2009 it came on before me for a defended hearing. The application seeks an order that I require the wife to exercise a statutory right pursuant to section 198F(2) and (3) of the Corporations Act 2001 (Cth), to obtain copies of an extensive range of documents allegedly held by the company. Those documents are described in the husband's application as follows:

   a)Any proposed or actual trade sale of the assets, business and/or undertaking (“trade sale”) of [J Company] Pty Ltd ACN […], [T Group] Limited ACN […] and/or any subsidiary thereof (“The [T] Group”) and/or initial public offering of shares in The [T] Group (“IPO”) at any time during the period 7 May 2002 to date inclusive;

   b)The re-naming, cancellation and/or re-classification of any classes of shares in The [T] Group as ordinary shares or otherwise at any time during the period 7 May 2002 to date;

   c)The sale and/or buy-back of any shares held by the wife in The [T] Group at any time during the period 7 May 2002 to date;

   d)The identification and quantification of the proceeds of any sale and/or buy-back of any shares held by the wife in The [T] Group at any time during the period 7 May 2002 to date;

   e)The retention and/or proposed retention by the wife of any shares in The [T] Group consequent upon the IPO of The [T] Group on 7 May 2004;

   f)Without limiting the generality of the foregoing, all documents relating to the trade sale and/or the IPO of The [T] Group for the period 7 May 2002 to date which fall within any of the following descriptions:

   i)     Correspondence and/or financial information provided to prospective financial advisors to the trade sale and/or the IPO including any such documents passing between The [T] Group and the financial advisors ultimately appointed to the IPO, namely [B Financial Advisors];

   ii)   Correspondence and/or presentation documents provided to The [T] Group Board from prospective financial advisors to the IPO who responded to the request for expressions of interest;

   iii)    All [T] Group financial statements for the financial year ending 2003, previous forecasts for the financial year ending 30 June 2004 and budget documents for the financial year ending 30 June 2005 as provided to prospective and/or actual financial advisors to the trade sale and/or the IPO;

   iv)   Letter and/or contract of engagement of [B Financial Advisors] as financial advisor to trade sale and/or IPO;

   v)    Correspondence and/or presentation materials and/or documents forwarded by [B Financial Advisors] to [T] Group prior to or consequent upon the appointment of [B Financial Advisors] as financial advisor to the trade sale and/or the IPO including but not limited to documents containing recommendations regarding:

   -Proposed “dual track” trade sale and IPO;

   -Proposals for appointment of lead managers and/or joint lead managers to IPO;

   -Proposals for the appointment of accountants and/or legal advisors;

   -Proposed financial advisor team from [B Financial Advisors];

   -Trade sale and/or IPO timetable;

   -Indicative view on value of The [T] Group;

   -Approach and proposals as to fees and financial advisor’s remuneration;

   -List of potential trade purchasers and rationale for section thereof;

   vi)   Correspondence and/or presentation documents and/or materials from [B Financial Advisors] and/or The [T] Group to prospective lead managers and/or joint lead managers (including the ultimately appointed joint lead managers [N Firm] and [G Firm]) including documents requesting responses addressing the following inter alia matters:-

   -Pricing of The [T] Group upon “float”;

   -Pricing rationale;

   -Benchmarks supporting pricing rationale including industry comparisons and competitor analyses;

   -Recommended extent of “sell down” by existing shareholders;

   -Escrow conditions including policy on share retention by continuing shareholders following IPO;

   -Proposed lead manager and/or joint lead manager team;

   -Work plan;

   -Capacity of lead manager team;

   -Selling approach;

   -Post IPO support;

   -Fees and costs;

   -Enterprise and/or equity value of The [T] Group;

   vii)Financial information in relation to The [T] Group attached to any and all correspondence and/or presentations referred to at sub-paragraph (vi) above including then current financial, forecast and budget positions for 2003, 2004 and 2005 financial years respectively;

   viii)Correspondence and/or presentations from prospective joint lead managers seeking appointment including responses to matters referred to at sub paragraph (vi) above;

   ix)Letters of appointment of joint lead managers [N Firm] and [G Firm], accountants [E Firm] and lawyers [L Firm];

   x)Information memoranda prepared for potential trade sale buyers by [B Financial Advisors] and The [T] Group including curriculum vitae of each of the directors of The [T] Group and detailed financial performance data in respect of The [T] Group;

   xi)Indicative trade bids received by [B Financial Advisors] and/or [T] Group from trade sale buyers;

   xii)Confirmed trade bids received by [B Financial Advisors] and/or [T] Group from trade sale buyers;

   xiii)Written analyses of trade sale bids (both indicative and actual) from [B Financial Advisors] to The [T] Group including analyses permitting assessment of equity value and enterprise value;

   xiv)Written analyses and recommendations from [B Financial Advisors] to [T] Group in respect of acceptance or rejection of trade sale bid(s) and/or progression with IPO;

   xv)Reports from Due Diligence Committee in respect of the IPO;

   xvi)All draft prospectuses prepared for The [T] Group Board including but not limited to first draft prospectus available to The [T] Group Board for review;

   xvii)All documents referred to at schedule 3 of the share buy-back agreement prepared pursuant to 27 February 2004 shareholders resolution and agreement to sell their shares to [T] Group Limited namely:

   -Independent financial advisor retainer;

   -Independent financial advisor success fees;

   -Joint lead manager and stamping fees;

   -ASX listing fees;

   -Printing and ancillary fees;

   -Registry costs up to despatch of initial shareholding;

   -Production costs;

   -Preparation of normalized historical accounts;

   -Investigating accountants report;

   -Legal fees;

   -Taxation advice for shareholders;

   -Media and communication fees;

   -Non recovery of GST;

   -Prospectus liability insurance;

   xviii)All correspondence, draft and/or original documents and/or presentations by joint lead managers as to underwriting of float including underwriting agreement (described as “offer management agreement’ in prospectus subsequently dated 24 March 2004);

   xix)All Minutes of The [T] Group Board meetings and proposed resolutions at any time between 7 May 2002 to date which relate in any way to the trade sale and/or IPO, including but not limited to all Minutes of Meetings as and from and including the date of The [T] Group resolution to appoint financial advisors in respect of the trade sale and/or the IPO;

   xx)Shareholders agreements for the period 7 May 2002 to date;

   xxi)Interim reports from [B Financial Advisors] and/or the joint lead managers [N Firm] and [G Firm] prepared at any time during 2003 and 2004 for The [T] Group including but not limited to reports which address the following inter alia matters:

   -The effective enterprise value of The [T] Group;

   -Analysis of dividend yields;

   -Actual or estimated IPO gross proceeds;

   -Implied retained equity value of The [T] Group;

   (xxii)Minutes of Meetings of the Due Diligence Committee in respect of the IPO at any time during 2003 and 2004 calendar years.

2. The present application is at least the third attempt by the husband to obtain documents from the company. Under sub-sections 198F(2) and (3) of the Corporations Act, a statutory right is given to a person who has been a director of a corporation to obtain certain documents from the corporation.  It is submitted on behalf of the husband that I should require the wife to exercise her statutory right ("the statutory right") and obtain certain documents such as would enable her to give what is asserted to be full and frank disclosure.

3. The existence of the statutory right is not challenged on behalf of the wife.  Nor is it submitted that I do not have the power to order the wife to avail herself of the statutory right referred to in the last paragraph.  The present application has been conducted on the basis of it being common ground that I have a discretion to make such an order.  However, it was submitted on her behalf that I should not exercise my discretion in the husband’s favour on the following bases:

   ·that the application is duplicitous in that the husband had previously sought orders in “almost identical terms”, such application being determined by Brown J on 9 November 2006. However I note that that application was not made pursuant to the statutory right;

   ·that the documents sought by the husband in Paragraph 1 of his application cannot be said to have ever been within the wife’s possession   or under her control;

   ·that the description of those documents lacked sufficient particularity in that they are ‘dramatically wide and extensive [in] number’ and as such is oppressive;

   ·that sub rules 13.22(2) and (3) of the Family Law Rules 2004 (Cth) do not support the making of the orders; and

   ·that the husband is able to, and should, seek the documents by other means.

4. In the course of drafting my reasons for judgement, I became concerned that certain issues had not been sufficiently canvassed in either the parties’ written material or in oral evidence and submissions. It was therefore necessary to give the parties the opportunity to consider those issues.  In particular, I was concerned with the following:

   ·in the event that I decided to accede to the husband's application, it was arguable that at least in the first instance, the husband should only be entitled to receive documents on the issue of the wife's knowledge of the restructure of the company at the time of the making of the consent orders and the signing of the financial agreement.  In the event that the husband were able to make out at least a prima facie case on that issue, it was then open to him to apply for the production of documents relevant to the issue of valuation consequent upon such restructure; and

   ·the company had not been given notice of such an order which had the potential to deny it natural justice.

5. During a hearing in chambers, I indicated that I was inclined towards making an order in accordance with the husband's application but restricted to the question of the wife's knowledge.  I also expressed concern that the company had not been afforded natural justice by way of being given a right to be heard on the application.  I provided the solicitors with a copy of proposed draft orders and sought their advice as to whether the parties wished to make further submissions thereon.  Those draft orders were in the following terms:

   (1) That within 28 days of the expiry of the time provided by paragraph (6) hereof the wife do all things and sign all documents necessary to arrange with the relevant officer of the [T] Group Limited ACN […] (formerly ‘[J Company] Pty Ltd’) (“the company”) to attend upon the office of the company for the purpose of inspection and copying of the books of the company pursuant to sections 198F(2) and (3) of the Corporations Act 2001 (Cth).

   (2)That upon the said attendance and inspection the wife obtain copies of all documents which are discoverable in these proceedings up to and including 10 March 2004 with regard to the following issues:

   (a)     The wife’s knowledge, if any, of the company’s May 2004 ‘book build’ and Initial Public Offering (“the IPO”), and the resultant listing on the Australian Stock Exchange on […]; and

   (b)     The wife’s knowledge, if any, of the valuation of the IPO.      

   (3)That within 14 days of the completion of the said inspection pursuant to paragraph (2) hereof the wife make, file and serve an affidavit of documents specifying all documents then in her possession and or under her control as a result of the said inspection.

   (4)That forthwith upon the wife’s compliance with paragraph (3) hereof, she forthwith make available for inspection and copying by the husband such discoverable documents not subject to any objection of production by virtue of privilege or any other cause specified in sub-paragraph (2)(a) hereof.

   (5)That the wife cause a sealed copy of this order to be served on the relevant officer of the company as soon as practicable.

   (6)That paragraphs 1 to 3 hereof be and are hereby stayed for a period of 28 days following service in accordance with paragraph (5) hereof.

   (7)Liberty be reserved to the company to apply to vary or set aside these orders, particularly with regard to any issue of confidentiality relating thereto and otherwise generally.

   (8)That liberty be reserved to the husband to apply to inspect the documents specified in sub-paragraph (2)(b) hereof and generally.

6. On 21 April 2009 I made orders for the filing of written submissions on behalf of each party in respect of those proposed draft orders.   

7. While I was on leave, the solicitors for the wife informed the company of the progress of this matter.  The company wrote to the wife's solicitors on 11 June 2009 expressing its wish to be heard in the following terms:

   “We have reviewed the proposed draft orders which you advised Justice Mushin has indicated he is likely to make upon judgment (the Proposed Orders). The Proposed Orders would likely involve the production and review of a large number of the [T] Group Limited’s ‘books’, many of which are confidential.

   We have also reviewed your client’s submissions and amendments to the Proposed Orders. If his Honour does not propose to make orders in the form of the Proposed Orders as amended by you which would entitle [T] Group to have liberty to apply to vary or set aside those orders, then [T] Group would like to be heard prior to any orders being made.”

8. Having considered the parties’ written submissions, I heard oral submissions on behalf of each party on 15 October 2009, particularly in relation to the issue of whether I should afford the company the right to be heard.  During that hearing I informed Counsel that I had reconsidered the merits of this matter and tentatively took a different approach to it.  On the assumption that any inspection sought by the husband would be disputed as to whether it had been thoroughly undertaken, it was arguable that I should dismiss the husband's application and require him to seek discovery directly from the company, presumably by way of subpoena.  I indicated that I would seek submissions on that matter in due course.

DISCUSSION

1. The question of whether the company should be given a right to be heard on this issue is, in my view, as fundamental as being afforded natural justice.  The question has been the subject of judicial determination on many occasions and it is not necessary to develop it in any detail here.  By way of illustration, I refer to the discussion of the Full Court of this Court in Barro and Barro (1983) FLC 91-300, pp 78,056 – 78,057. Particularly because I am aware that the company has been made aware of the issue and has expressed the wish to be heard, it is appropriate that I give them that opportunity.

2. It is not necessary for me to consider the basis on which the company would be heard if they make application in accordance with the orders which I will make.  If an application is made it will be considered on its merits at that time.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Mushin

Associate: 

Date:  28 October 2009