Oswal, in the matter of Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Carson, McEvoy and Theobald (Receivers and Managers) (No 5)
[2013] FCA 1032
•4 September 2013
FEDERAL COURT OF AUSTRALIA
Oswal, in the matter of Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Carson, McEvoy and Theobald (Receivers and Managers) (No 5) [2013] FCA 1032
Citation: Oswal, in the matter of Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) v Carson, McEvoy and Theobald (Receivers and Managers) (No 5) [2013] FCA 1032 Parties: PANKAJ OSWAL v IAN MENZIES CARSON, DAVID LAWRENCE MCEVOY AND SIMON GUY THEOBALD (IN THEIR CAPACITIES AS RECEIVERS AND MANAGERS OF BURRUP FERTILISERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 095 441 151)) File number(s): WAD 370 of 2011 Judge(s): SIOPIS J Date of judgment: 4 September 2013 Catchwords: PRACTICE AND PROCEDURE – the plaintiff had a substantial asset within the jurisdiction – whether an order for security for costs should be set aside.
DISCOVERY – defendants had misapprehended the scope of the discovery required – whether orders for further and better discovery should be made.
Cases cited: Oswal v ANZ & Ors [2013] VSCA 156 Date of hearing: 4 September 2013 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 32 Counsel for the Plaintiff: Mr M Goldblatt Solicitor for the Plaintiff: Murcia Pestell Hillard Counsel for the Defendants: Mr K de Kerloy Solicitor for the Defendants: Herbert Smith Freehills
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 370 of 2011
BETWEEN: PANKAJ OSWAL
Plaintiff
AND: IAN MENZIES CARSON, DAVID LAWRENCE MCEVOY AND SIMON GUY THEOBALD (IN THEIR CAPACITIES AS RECEIVERS AND MANAGERS OF BURRUP FERTILISERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 095 441 151))
Defendants
JUDGE:
SIOPIS J
DATE OF ORDER:
4 SEPTEMBER 2013
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
Interlocutory application dated 17 July 2013
1.The orders made on 15 February 2012 (as amended on 1 March 2012) and 26 April 2012 are set aside.
2.The defendants pay the cost of this application.
Interlocutory application dated 31 July 2013
3.Each of the defendants file an affidavit stating whether, and, if so, which documents of the description identified below are, or have been in their control and, to the extent that any such documents or documents has or have been, but is or are no longer, in their control, stating when the document or documents were last in their control and what became of the document or documents:
(a)All invoices relevant to the payment entries in the column headed “Nature of Payment/Explanation”, in Annexure A, pages 3 to 12, to the Form 524 Presentation of Accounts, lodged by the Defendant with ASIC on 1 February 2013 (exhibit MJV7 to the affidavit of Montgomery James Vallve, sworn 22 July 2013, pp. 57-66) described as:
(i)Legal Fees;
(ii)Media Liaison;
(iii)Appointment costs;
(iv)Motor vehicle expenses;
(v)Executive contractors;
(vi)Staff amenities;
(vii)Employee reimbursements;
(viii)Training courses/professional subscriptions;
(ix)Travel and accommodation;
(x)Employee relocations; and
(xi)Consultation fee.
(b)All invoices relevant to the payment entries, in the column headed “Nature of Payment/Explanation”, in Annexure A, pages 3 to 12, to the Form 524 Presentation of Accounts, lodged by the Defendant with ASIC on 1 February 2013 (exhibit MJV7 to the affidavit of Montgomery James Vallve, sworn 22 July 2013, pp 57-66) that were not expenses incurred by the defendants for the purpose of carrying on the business of Burrup Fertilisers Pty Ltd.
(c)The documents evidencing the work undertaken by those persons whose time was charged for doing the work, in each of the invoices issued by PPB Advisory to Burrup Fertilisers Pty Ltd between 8 December 2011 to 31 January 2012 (inclusive).
(d)All documents relevant to the expenses and disbursements incurred by Melbourne based partners and staff in respect of travel, accommodation and related activities for the period 28 April 2011 to 1 February 2012 (inclusive).
(e)All documents comprising or evidencing communications between the defendants and other parties (including with the appointor and internal communications within PBB Advisory), prior to the acceptance of the appointment of receivers and managers of Burrup Fertilisers Pty Ltd, relevant to:
(i)The process or other means by which the defendants came to apply for and/or be selected for the appointment;
(ii)The means by which the defendants intended to carry out the appointment and by which the defendants intended to staff the appointment;
(iii)The negotiations and other communications in relation to the terms and conditions agreed with the appointor;
(iv)The acceptance of the appointment by the defendants.
(f)All documents relevant to the rate at which partners and employees of the Perth office of PPB Advisory charged fees during the period 17 December 2010 to 1 February 2012 (inclusive).
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 370 of 2011
BETWEEN: PANKAJ OSWAL
Plaintiff
AND: IAN MENZIES CARSON, DAVID LAWRENCE MCEVOY AND SIMON GUY THEOBALD (IN THEIR CAPACITIES AS RECEIVERS AND MANAGERS OF BURRUP FERTILISERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 095 441 151))
Defendants
JUDGE:
SIOPIS J
DATE:
4 SEPTEMBER 2013
PLACE:
PERTH
REASONS FOR JUDGMENT
There are two interlocutory applications brought by the plaintiff before the Court.
By the first application, the plaintiff seeks orders discharging orders which I made on 15 February 2012 and 26 April 2012, that the plaintiff, who is outside the jurisdiction, provide security for costs.
By the second application, the plaintiff seeks further and better discovery in relation to the matters the subject of the investigation which I ordered on 26 April 2013.
DISCHARGE OF SECURITY FOR COSTS ORDERS
At the time that the orders for security for costs were made, there was no evidence before the Court that the plaintiff had any assets within the jurisdiction which were available to meet any orders the Court may make requiring that the plaintiff pay the defendants’ costs of these proceedings.
However, it has now transpired that the plaintiff does indeed have an asset within the jurisdiction which would be available to meet any costs orders made against him. That asset is a residual interest in the sum of USD20 million which has been paid into an escrow account by Yarra Australia Pty Ltd and Apache Fertilisers Pty Ltd as part of the share sale process. The amount is referred to as the “Holdback Amount”.
The plaintiff contended that in those circumstances there is an asset of sufficient value, within the jurisdiction which would be available to meet any order for costs awarded in favour of the defendants in this matter. Therefore, said the plaintiff, the orders for security for costs made on 15 February 2012 and 26 April 2012 should be discharged.
The question of whether the Holdback Amount is an asset of sufficient value to meet any costs orders against the plaintiff, has been considered in respect of proceedings which the plaintiff and his wife have brought in the Supreme Court of Victoria. The Victorian Court of Appeal has found in favour of the view advanced by the plaintiff before this Court (Oswal v ANZ & Ors [2013] VSCA 156).
The defendants opposed the making of the order on the basis that a circumstance might arise in which the plaintiff demands the payment of the residual amount, before any costs orders have been made, or before he had met any orders that may have been made. This contingency, said the defendants, puts them at risk of not recovering any costs ordered in their favour.
The defendants’ submission was made without reference to any evidence in relation to the likelihood of this apprehended risk coming to pass. As I mentioned to Mr de Kerloy, counsel for the defendants, during argument, if evidence did emerge which supported that apprehension, it would be open to the defendants to make, what would, in effect, be an application for a Mareva type order. If such an application was made, it would then fall for assessment by reference to the usual requirements for the making of that type of order.
In my view, the plaintiff has within the jurisdiction a valuable asset - at least relative to the amount of any potential costs order in this case. I am not satisfied that the asset will not be available to meet any costs orders made in favour of the defendants.
Accordingly, I will make orders setting aside the orders of 15 February 2012 and 26 April 2012 which required the plaintiff to provide a total of AUD55,000 by way of security for costs.
There was also argument about whether the order that the plaintiff pay the defendants’ costs of the security for costs application, should also be set aside.
In support of the contention that the costs order should be set aside the plaintiff criticised the defendants for bringing the security for costs application, given the existence of the Holdback Amount.
There was no evidence to suggest that the defendants had acted other than in good faith in making the application for security for costs. However, in my view, the costs order should also be set aside because, had the facts been fully appreciated by the defendants, there would have been no need to bring the application. In making this order, I intend no criticism of the defendants.
FURTHER AND BETTER DISCOVERY
The second interlocutory application before the Court is the plaintiff’s application for further and better discovery.
One of the bases on which further and better discovery can be ordered is if one of the parties has misapprehended the scope of the discovery which was ordered. It is clear that this has happened in this case.
This is unusual litigation. So, perhaps, it is not surprising that there is some confusion as to the scope of the discovery which should be given. The reason why it is unusual is because discovery has to be given by reference to the terms of the inquiry which I ordered on 26 April 2013. Therefore, the issues in respect of which discovery should be given, and the scope of that discovery, are perhaps not as clearly defined as in an ordinary contested application where there are pleadings.
The scope of the discovery in relation to the order for the inquiry into the fees and expenses which were charged and incurred by the defendants in the last six weeks of the receivership has been the subject of some misunderstanding.
The object of the inquiry, obviously, is to determine whether the fees and expenses that were charged and incurred by the defendants were properly charged and incurred. I anticipate that an expert witness will need to examine the work product of the persons from the defendants’ firm, who were engaged on the receivership in its last six weeks, with a view to determining whether the amounts charged for that work were, in all the circumstances, proper and reasonable. Accordingly, the discovery will need to extend to discovery in respect of the items of work referred to and charged in each of the invoices rendered for that period, so that an expert can make an assessment as to whether the amount charged was proper and reasonable, having regard to the nature of the task undertaken by each of the employees, fee earners and partners in question.
In practical terms, that may well mean that the files of those persons who worked on the receivership for that period will need to be discovered. Of course, the question of the content of the discovery is ultimately one for the solicitors advising the defendants. They will be able to make an assessment of the extent to which the materials in the files should be discovered so as to discharge their duties as officers of the Court. Such discovery will, of course, be subject to the ordinary rules and legal professional privilege will be able to be claimed.
There was also concern expressed by Mr Goldblatt, counsel for the plaintiff, in relation to the extent of the discovery which has been given in respect of the expenses incurred by the defendants which were paid and then reimbursed during the relevant period. Mr Goldblatt pointed out that there were several entries in those documents which have been discovered, which showed that the defendants had engaged service providers such as lawyers, or, in one instance, a media liaison company, and had during the last six weeks of the receivership, paid those service providers’ invoices. However, said Mr Goldblatt, there had been no discovery of the relevant documents relating to those expenses.
There has also been a misapprehension by the defendants in relation to the discovery of those documents.
The scope of the inquiry includes the question of whether the expenses incurred, which were paid and reimbursed in the last six weeks of the receivership, were properly incurred.
The rationale for the making of the order for the inquiry is to determine whether the defendants acted properly and in accordance with their professional duties in the fees they rendered, and the expenses they incurred and reimbursed, during the last six weeks of the receivership. An underlying consideration is whether the defendants subjected the chargor, being the person who ultimately bears the costs of the receivership, to unwarranted burden and prejudice, by improperly charging fees and incurring expenses during that period. That consideration should provide some guidance to the parties in determining whether a document is discoverable or not.
Accordingly, I will also make orders for further and better discovery in respect of the expenses.
I will make those orders in chambers because they need to be crafted more precisely than the draft orders sought by the plaintiff in his application. However, I will mention the general ambit of the orders I propose to make.
As to the fees rendered, sufficient documents should be discovered in relation to the items of work which are identified in each of the invoices rendered by the defendants, dated from 8 December 2011 to 31 January 2012, so that an assessment can be made as to whether those fees were properly rendered or not. As I have said, that may well involve the discovery of work files, or at least portions of them.
As to expenses, the tenor of the orders I will make will require the giving of discovery of the documents associated with the expenses which are listed as having been paid in an annexure to the presentation of accounts document, which is in turn Annexure A to Mr Vallve’s affidavit of 22 July 2013.
In relation to the plaintiff’s complaint about the inadequacy of the discovery in relation to the travel expenses and disbursements which were incurred by the defendants’ Melbourne based partners and staff, Mr de Kerloy has said this morning that the defendants had filed affidavits of further discovery which deal with the plaintiff’s objections. However, I will make the order sought by the plaintiff anyway. If it transpires that the late affidavits provide adequate discovery, then the order will be regarded as having been satisfied.
In relation to the question of the propriety of the defendants’ conduct in accepting the appointment when they were Melbourne based, the scope of the discovery has again been misapprehended.
In order to determine the propriety of the defendants’ conduct in accepting the appointment, plainly, all the documents which led to their appointment are relevant. This would include the documents which led to their appointment as “permitted person” investigators on 3 November 2010 insofar as they bear upon the subsequent appointment of the defendants as receivers and managers on 1 December 2010. Also included within the scope of that discovery will be any communications within the defendants’ firm prior to the acceptance of the appointment as receivers and managers, as to the potential deployment of the firm’s Perth partners or staff on this particular receivership.
Accordingly, I will make orders for further and better discovery by the defendants.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. Associate:
Dated: 9 October 2013
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