Oswal v Carson
[2013] VSC 355
•19 July 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
List D
S CI 2012 1995
| PANKAJ OSWAL | Plaintiff |
| v | |
| IAN MENZIES CARSON & ORS | Defendants |
| (according to the attached Schedule) |
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JUDGE: | FERGUSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8 May 2013 | |
DATE OF JUDGMENT: | 19 July 2013 | |
CASE MAY BE CITED AS: | Oswal v Carson | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 355 | |
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PRACTICE AND PROCEDURE – Appeal from Associate Judge narrowing scope of a subpoena on application to set it aside – Test for setting aside subpoena – Value of shares an issue in main proceeding – Unaccepted offer for shares made by recipient of subpoena – Apparent relevance of documents sought by subpoena to issue of value and other issues in the proceeding – Whether documents would materially assist party’s case – Whether documents sought in lieu of discovery or to plead case.
PRACTICE AND PROCEDURE – Adequacy of reasons – Detailed reasons not required when matter one of practice and procedure – Essential for reasons to enable an understanding of why and how decision reached.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R A Dick SC with Mr J M Ross | Kliger Partners (as agent for Watson Mangioni Lawyers) |
| For the Defendants | Mr R M Peters | Lander & Rogers |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 2
The issues in dispute......................................................................................................................... 3
The subpoena, the orders and the Associate Judge’s reasoning............................................... 5
Grounds of appeal and cross‑appeal.............................................................................................. 8
Does the principle in McDonald v Deputy Federal Commissioner of Land Tax (NSW) apply? (Appeal ground 1).............................................................................................................................................. 9
Legitimate forensic purpose, relevance, admissibility and the exceptions to McDonald (Appeal grounds 2, 3, Cross-appeal ground 1)........................................................................................... 10
Are the category 1 documents relevant to the issue of value of the shares?.................................... 11
Are any of the documents in categories 2 to 4 relevant to the issue of value of the shares?............ 13
Are any of the documents relevant to any other issue?.................................................................. 14
Should the category 1 documents have been excluded from production of documents falling within category 4? (Appeal ground 4)...................................................................................................... 21
Were the Associate Judge’s reasons adequate and should the subpoena have been set aside as an abuse of process? (Cross-appeal ground 2)............................................................................................ 22
Conclusion......................................................................................................................................... 27
HER HONOUR:
Introduction
The plaintiff, Pankaj Oswal, claims that he was the owner of approximately 30 per cent of the shares in Yara Pilbara Holdings Limited (‘YPHL’) which he mortgaged to Australia and New Zealand Banking Group Ltd (‘ANZ’)[1] and which were sold in late January 2012 by the first to third defendants (the ‘Receivers’). Mr Oswal claims that the Receivers and ANZ breached their duties with the result that the sale price of approximately $250 million obtained for the shares was less than it ought to have been. Mr Oswal also alleges that in early December 2010 (shortly before the Receivers were appointed), Wesfarmers Limited made a conditional[2] offer to him which implied a market value or best price for his shares which significantly exceeded the price that the Receivers obtained. In that context, Mr Oswal served a subpoena on Wesfarmers for production of documents. Wesfarmers applied to set aside the subpoena.[3] The application succeeded in part. The Associate Judge who heard the application narrowed the scope of the subpoena. The broad effect of the orders was that Wesfarmers was required to produce documents relevant to the integrity of the sale process but was not required to produce documents relating to any calculation, modelling or valuation by Wesfarmers of the value of the YPHL shares or its assets or those of two of its subsidiaries.
[1]ANZ is the fourth defendant.
[2]Although not pleaded as a conditional offer, on the hearing of the appeal, counsel for Mr Oswal accepted that the offer was subject to various conditions.
[3]See Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 42.04(1) which provides that the Court may, of its own motion or on the application of a party or of any person having a sufficient interest, set aside a subpoena in whole or in part, or grant other relief in respect of it. Wesfarmers also sought security for its costs of complying with the subpoena in the event that it was not set aside. The Associate Judge made orders in that regard. Those orders are not the subject of appeal.
Mr Oswal has appealed from the orders made by the Associate Judge and seeks production of all documents caught by the subpoena. Wesfarmers has filed a notice of cross-appeal to have the subpoena set aside in full. For the reasons which follow, both the appeal and cross-appeal must fail.
The issues in dispute
Before considering the terms of the subpoena and the decision arrived at by the Associate Judge, it is first necessary to understand the issues that are in dispute in the proceeding between Mr Oswal, the Receivers and ANZ insofar as they are relevant for this appeal. As I have noted previously, Mr Oswal claims to be the owner of approximately 30 per cent of the shares in YPHL. He alleges that he mortgaged his shares to ANZ, which appointed the Receivers on 16 December 2010. Mr Oswal alleges that the Receivers sold his shares for approximately $250 million on 31 January 2012 to Apache Fertilizers Pty Ltd (‘Apache’) and Yara Australia Pty Ltd (‘Yara’). He alleges that the price obtained was less than market value or the best price that could have been obtained. In part, he relies on the December 2010 conditional offer made by Wesfarmers which he says implied a value up to approximately $100 million more than the price obtained by the Receivers. Mr Oswal pleads that the Receivers were agents for ANZ. Among other things, Mr Oswal claims that the Receivers and ANZ breached their duties in relation to the sale of the shares by failing to act in good faith and failing to take reasonable care to obtain a proper price, to obtain market value or the best price reasonably available. So far as relevant for present purposes, at the time the matter came before the Associate Judge, the particulars of the breaches of those duties read as follows:
The plaintiff does not presently have full details of what occurred in the sale process. The plaintiff will provide full particulars after it has obtained discovery and issued subpoenas. In advance of obtaining discovery and issuing subpoenas, the best particulars the plaintiff can provide are as follows:
(i)…
(v)the Receivers effectively discouraged parties other than the Apache group of companies to make competitive bids for the Shares by suggesting that interested parties discuss and explore a settlement of the Existing Gas Dispute[4] … directly with Apache;
(vi)the Receivers effectively discouraged parties other than the Apache group of companies to make competitive bids for the Shares by treating any bid for the Shares that was conditional upon the outcome of the Existing Gas Dispute … as being non-complying; …
(ix)the Receivers negotiated and agreed upon Clause 9.4 of the Apache and Yara Share Sale Deeds ….
[4]The Existing Gas Dispute is alleged to be a dispute in the Supreme Court of Western Australia involving both a subsidiary of YPHL and Apache together with other parties.
ANZ was not a party to the proceeding until after the hearing of this appeal. The statement of claim has also been amended.[5] The introductory paragraph to the particulars to paragraph 24 has been deleted, as has paragraph (vi). The relevant particulars now read:
[5]Mr Oswal and Wesfarmers did not take up the Court’s invitation to make further submissions in light of the joinder of ANZ and the amendments to the pleading.
(vii)the Receivers and/or ANZ effectively discouraged parties to make competitive bids for the Shares by:
A.treating any bid for the Shares that was conditional upon the outcome of the Existing Gas Dispute… as being non-complying;
B.requiring bidders to resolve the Existing GSA Dispute with Apache as a condition of any bid for the Shares;
C.requiring potential bidders to disclose the terms of any such resolution with Apache to the Receivers and/or ANZ as part of the bid process;
(viii)the Receivers and/or ANZ failed to provide all interested purchasers with sufficient information to enable them to reach an informed view as to the strength of YPFPL’s[6] position in the Existing GSA Dispute;
…
(xv) the Receivers and/or ANZ negotiated and agreed upon Clause 9.4 of the Apache and Yara Share Sale Deeds …; and
(xvi)further particulars may be provided prior to trial.
[6]YPFPL (Yara Pilbara Fertilisers Pty Ltd, formerly known as Burrup Fertilisers Pty Ltd) is alleged to be a wholly owned subsidiary of YPHL.
In relation to the particulars in paragraph (xv), Mr Oswal alleges that at the time the sale agreements were entered into, the purchasers (Apache and Yara) had potential claims against the Receivers. Mr Oswal alleges that clause 9.4 of the sale agreements required Apache and Yara to procure that neither YPHL nor its subsidiary would make any claim against the Receivers in respect of the conduct of the receivership (except for claims relating to fraud, gross negligence or wilful misconduct). Mr Oswal alleges that the negotiation of clause 9.4 and its inclusion in the sale agreements was inherently likely to and did reduce the sale price such that the Receivers and ANZ were in breach of their duties.
The Receivers and ANZ deny that they owed the duties as they are alleged by Mr Oswal and they also deny the allegations of breach.
The relevant issues (so far as the submissions made in this appeal are concerned) on the current form of the pleadings are:
(a)the value of the shares at the time they were sold;
(b)whether the Receivers/ANZ effectively discouraged parties (other than the purchasers) from making a competitive bid because:
(i)the Receivers treated as non-complying, bids that were conditional on the outcome of the existing gas dispute;
(ii)requiring bidders to resolve the existing gas dispute with Apache as a condition of any bid for the shares;
(iii)requiring bidders to disclose the terms of such resolution to the Receivers/ANZ as part of the bid process.
(c)whether Apache was in a significantly advantageous bargaining position which led to a reduced sale price.
The subpoena, the orders and the Associate Judge’s reasoning
The subpoena required production of the following categories of documents:
(1)All documents in the period June 2009 to February 2012 evidencing or relating to any calculation, modelling or valuation by Wesfarmers of the value of the assets of YPHL and its subsidiaries or the shares in YPHL.
(2)All documents in the period June 2009 to February 2012 evidencing or relating to potential or likely prices Wesfarmers was considering for the assets of YPHL and its subsidiaries or the shares in YPHL.
(3)All documents in the period June 2009 to February 2012 evidencing or relating to any actual or potential offer, expression of interest or bid by Wesfarmers for assets of YPHL and its subsidiaries or shares in YPHL.
(4)All correspondence in the period June 2009 to February 2012 between Wesfarmers and PPB Advisory, Flagstaff Partners Pty Ltd, ANZ, Atlas Advisors or YPHL concerning any actual or potential offer, expression of interest or bid by Wesfarmers for the assets of YPHL or the shares in YPHL.
The Associate Judge ordered production of the following categories of documents:
(a)the documents referred to in category 2 of the subpoena dated 25 October 2012, insofar as they came into existence for the purpose of making an actual or potential offer, expression of interest, or bid, but expressly excluding the documents referred to in category 1 of the Subpoena;
(b)the documents referred to in category 3 of the Subpoena, but expressly excluding the documents referred to in category 1 of the Subpoena unless they comprise internal correspondence of Wesfarmers discussing or recording, in the context of an actual or potential offer, expression of interest or bid, an offer price generated by any calculation, modelling or valuation by Wesfarmers of the assets and/or shares of Yara Pilbara Holdings Ltd (formerly Burrup Holdings Ltd), Yara Pilbara Fertilisers Pty Ltd (formerly Burrup Fertilisers Pty Ltd) and/or Burrup Nitrates Pty Ltd;
(3)the documents referred to in category 4 of the Subpoena, but expressly excluding the documents referred to in category 1 of the Subpoena.
Her Honour’s reasoning reads as follows:
A.I accept that the test for whether a subpoena is valid is as contended for by counsel for Wesfarmers (that is, the two stage test). I also accept that, prima facie, an unaccepted offer is generally not admissible as direct evidence on the question of the value of the asset for which the offer is made. For that reason I accept that there is no discernible legitimate forensic purpose in seeking to obtain Wesfarmers documents insofar as they relate to their own internal deliberations regarding the price that it might, or would be prepared to offer for the relevant shares or upon what conditions, except, for the reasons referred to later, in the context of making an indicative or binding offer.
B.Arguably, the same analysis would apply to all documents regarding unaccepted offers or negotiations with the plaintiff, other owners of the shares, the receivers and their agents and associates. However, I accept that, in the current case not only is the actual value of the asset relevant, but also, based on the pleadings, the integrity of the sale process has been called into question. Accordingly, the documents which evidence the degree of interest of an organisation such as Wesfarmers, the extent of interaction between Wesfarmers and other relevant parties, and the nature and extent of the enquiries made by Wesfarmers regarding the assets and the performance of the relevant business may well be relevant, and having access to such documents may well advance the plaintiff’s case at trial.
C.The documents concerned may also fall within the exceptions set out in Auxil Pty Ltd v Terranova (2009) 260 ALR 164, which provides that the general rule that an unaccepted offer is not admissible as direct evidence of value does not exclude evidence of an unaccepted offer in each and every case. Such evidence may be admissible in a particular case, for limited or general purposes including, among other things:
(i)the existence of a party who might be prepared to pay more than market value;
(ii)demand in the market in the context of evaluating whether a mortgagee (or in this case, a receiver) breached its duty of good faith in exercising its power of sale;
(iii)the special potentiality of an asset for a specific purchaser; and
(iv)it may provide some assistance in determining the lower limits of value or as a limited check of the methodology of expert witnesses.
D.For completeness, I do not accept that the documents are sought by the plaintiff merely to assist him to plead his case, or in lieu of discovery.
E.I would order that Wesfarmers produce the documents referred to in categories 3 and 4 of the subpoena, and any documents referred to in category 2 of the subpoena, insofar as they came into existence for the purpose of making an actual or potential offer, expression of interest or bid, but expressly excluding the documents referred to in category 1 of the subpoena.
Grounds of appeal and cross‑appeal
The appeal and cross-appeal are brought by notice under r 77.06 of the Supreme Court (General Civil Procedure) Rules 2005. Such appeals are no longer by way of rehearing de novo.[7]Instead, they are rehearings which, in the absence of further evidence or a change in the law, ordinarily require the appellant to show error on the part of the Associate Judge before appellate power may be exercised.[8] In addition, if the orders from which an appeal is brought relate to a matter of practice and procedure (as the orders in this case do), an appellate court will exercise particular caution in reviewing the decision.[9]
[7]The Rules in relation to appeals from orders of Associate Judges were changed with effect from 1 January 2013. Previously, such appeals were by way of rehearing de novo.
[8]Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission & Ors (2000) 203 CLR 194, [14].
[9]Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170, 177 (Gibbs CJ, Aickin, Wilson and Brennan JJ).
There are four grounds of appeal as follows:
(1)The Associate Judge erred in applying the principle that an unaccepted offer to purchase an asset is generally not admissible as direct evidence of the value of that asset in that McDonald v Deputy Federal Commissioner of Land Tax(NSW)[10] (from which the principle derives) ought to have been distinguished.
(2)The Associate Judge erred in holding that the admissibility of documents sought by the subpoena to Wesfarmers should be considered in determining whether Mr Oswal had a legitimate forensic purpose in seeking such documents.
(3)The Associate Judge ought to have held in accordance with the exceptions to the principle espoused in McDonald v Deputy Federal Commissioner of Land Tax(NSW) that the documents sought by the subpoena may have been admissible and that the documents sought had apparent relevance, or alternatively the plaintiff had a legitimate forensic purpose in seeking those documents.
(4)Having held that the integrity of the sale process was called into question through the pleadings and that documents evidencing the degree of interest of Wesfarmers, the extent of interaction between Wesfarmers and other relevant parties and the nature and extent of inquiries made by Wesfarmers regarding the assets and the performance of the relevant business may be relevant and may advance Mr Oswal’s case at trial, the Associate Judge erred in ordering that Wesfarmers produce the documents referred to in category 4 of the subpoena but excluding the documents referred to in category 1 of the subpoena.
[10](1915) 20 CLR 231.
There are two grounds of cross‑appeal as follows:
(1)The Associate Judge erred in concluding that there were documents described in the subpoena that were relevant to issues in the proceeding.
(2)The Associate Judge erred in concluding that the subpoena should not be set aside as an abuse of process due to the subpoena being used to obtain discovery.
Does the principle in McDonald v Deputy Federal Commissioner of Land Tax (NSW) apply? (Appeal ground 1)
In McDonald v Deputy Federal Commissioner of Land Tax(NSW),[11] the High Court held that an unaccepted offer to sell by the owner of land was not evidence of its value for the purposes of the Land Tax Assessment Act 1910-1911. The High Court also held that an accepted verbal offer to purchase that was withdrawn before being reduced to writing was not evidence of the value of the land, no binding contract having been made.[12]
[11](1915) 20 CLR 231.
[12]Ibid.
Mr Oswal submitted that the Associate Judge erred in relying on this decision and ought to have distinguished it on the basis that the case is only authority as to the admissibility of evidence as to value for the purposes of the Land Tax Assessment Act 1910-1911. Alternatively he submitted that there is doubt surrounding the correctness of the decision and argued that the question ought to have been left to the trial judge to determine. Mr Oswal pointed to New South Wales Court of Appeal decisions[13] in support of his contentions and to ABN Amro Clearing Sydney Pty Ltd v Primebroker Securities Ltd (Receivers and Managers Appointed) (in liq).[14]
[13]MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167, [84]-[94]; Commonwealth Custodial Services Ltd v Valuer General [2007] NSWCA 365, [6]. Compare Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48, [128]–[129] and Auxil Pty Ltd v Terranova (2009) 260 ALR 164, [133], [153], [155].
[14][2012] VSCA 287.
Whilst the Associate Judge undoubtedly was referring to McDonald in her reasons, as will be seen from what I say below, her Honour was not applying a test of admissibility but rather one of relevance. Indeed, Wesfarmers accepted that the test is not one of admissibility. Consequently, in my opinion it is not necessary on this appeal to determine whether McDonald is to be restricted to its facts nor whether the decision is authority for a broader proposition. Nor is it necessary to consider whether the New South Wales authorities should be followed, nor whether ABN Amro stands for the broad proposition that an unaccepted offer is admissible as direct evidence of value. This is because these authorities only deal with the admissibility of unaccepted offers. First, admissibility is not the proper test when considering whether a subpoena should be set aside. Secondly, even if it were, what Mr Oswal seeks by the subpoena is not the offer but rather documents that may have some connection to the offer or to Wesfarmers’ deliberations as to whether to make a bid or to Wesfarmers’ interactions with other entities in the sale process.
This ground of appeal fails.
Legitimate forensic purpose, relevance, admissibility and the exceptions to McDonald (Appeal grounds 2, 3, Cross-appeal ground 1)
The Associate Judge (in my view correctly) accepted that there is a two‑part test for whether a subpoena should be set aside. A party may only use the subpoena process if it will serve a legitimate forensic purpose and if it is ‘on the cards’ that the documents will materially assist the party’s case.[15] To satisfy the test, some of the authorities refer to the need to establish that the documents have ‘apparent relevance’ (in the adjectival rather than substantive sense)[16] and distinguish between establishing apparent relevance and the admissibility of the documents as evidence.[17] Both Mr Oswal and Wesfarmers accepted that the test is not one of admissibility. However, they took opposing views as to whether the Associate Judge had applied a test of admissibility rather than apparent relevance.
[15]Shaw v Yarranova Pty Ltd [2011] VSCA 55, [26]; R v Saleam [1999] NSWCCA 86, [11].
[16]Trade Practices Commission v Arnotts Ltd(1989) 88 ALR 90, 102–103.
[17]National Employers’ Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372, 385.
Are the category 1 documents relevant to the issue of value of the shares?
I will first consider whether the Associate Judge’s decision in relation to the exclusion of the category 1 documents was correct.
Mr Oswal submitted that the test of ‘apparent relevance’ or forensic purpose is not high and is satisfied where the material sought ‘could reasonably be expected to throw light on an issue in the proceeding’ or is ‘reasonably likely to add, in the end, in some way or other, to the relevant evidence in the case’. Mr Oswal drew the Court’s attention to the decision of Nettle J (as his Honour then was) in Skrijel v Mengler & Ors.[18] In that case, his Honour held that it was sufficient that the documents could lead the plaintiff on a path of inquiry, either to advance his own case or to impeach the case that is made against him.[19] On this basis, Mr Oswal contended that the Associate Judge had erred because the documents sought by the subpoena, including the documents within category 1, satisfy the test of apparent relevance because they will contain evidence relevant to the value of the shares.
[18][2003] VSC 55.
[19]Ibid [5] referring to what was then the second leg of the test for whether a document was discoverable as described in Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55, 62-63. Under the current procedural rules, the scope of discovery has been narrowed: Supreme Court (General Civil Procedure) Rules 2005 r 29.01.1.
The Associate Judge first considered whether there was a legitimate forensic purpose in seeking the subpoenaed documents in relation to Mr Oswal’s claim that the shares had a higher value than the price obtained by the Receivers. Her Honour observed that prima facie an unaccepted offer for an asset is generally not admissible on the question of the value of that asset. On that basis, her Honour held that Mr Oswal did not have any discernable legitimate forensic purpose in seeking to obtain Wesfarmers’ documents relating to its internal deliberations regarding the price that it might, or would be prepared to offer for the shares and upon what conditions. In my opinion, having referred to the two‑stage test, her Honour understood that the question was whether the documents served a forensic purpose because they were apparently relevant and would materially assist Mr Oswal’s case such that they served a forensic purpose. True it is that her Honour used the term admissibility in paragraph A of her reasons. However, a fair reading of paragraphs A and B of her Honour’s reasons and her exclusion of the category 1 documents from production whilst requiring production of the other categories of documents, indicates to me that her Honour was focussed on relevance to the issues in dispute as the critical consideration and applied the correct test. It is coincidental that their lack of apparent relevance also meant that the category 1 documents would be inadmissible. It was not necessary for her Honour to consider whether the category 1 documents would materially assist Mr Oswal’s case because they failed to pass the first part of the test.
Mr Oswal already has the unaccepted offer. What he seeks are more remote documents. It is the lack of relevance of those documents to the question of value that the Associate Judge highlighted in her reasons. Category 1 seeks documents that concern any calculation, modelling or valuation by Wesfarmers of the value of the shares and assets. In other words, Mr Oswal seeks access to what I would describe as the tools used to arrive at the figure Wesfarmers offered and which might have been used to formulate a potential bid. In my opinion, there is no forensic purpose served in seeking such documents for the purpose of establishing the value of the shares because the documents are not relevant to that issue. It is the fact of the offer for a particular amount and on what terms that might be relevant for a reason other than as direct evidence of value. But, how the offer figure or other contemplated figures were arrived at does not matter. For the same reasons, if the test were one of ‘path of inquiry’ alone as described in Skrijel v Mengler & Ors,[20] I do not think that the documents sought in category 1 would satisfy such a test. The path of inquiry that the documents would lead to would be the offer itself and Mr Oswal already has that.
[20][2003] VSC 55. There may be some doubt about whether this remains the correct test in view of what the Court of Appeal said in Shaw v Yarranova Pty Ltd & Anor [2011] VSCA 55, [26].
Further, the calculations and methodology used by a third party who is not called as an expert witness are most unlikely to satisfy the second limb of the test — materially assisting the party’s case. Here, Wesfarmers’ calculations, modelling and valuation methods are unlikely to add anything that would make Mr Oswal’s case any better or any worse. The offer is what it is. Even more remote would be documents concerning other calculations, modelling and valuations that Wesfarmers may have undertaken but which did not result in an offer.
Hence, so far as the issue of value is concerned, the documents in category 1 fail both limbs of the relevant test.
Are any of the documents in categories 2 to 4 relevant to the issue of value of the shares?
Her Honour observed that arguably the same analysis would apply to all the other documents sought in the subpoena. Her Honour did not need to reach a concluded view about this because she found that some of those documents were relevant to other issues that funnel into the ultimate question of whether the shares were sold at an undervalue.[21] As will be seen from what I say below, I have come to the same conclusion.
[21]See paragraph B of her Honour’s reasons set out in [10] above.
However, in case I am wrong, I will set out my observations as to whether there is any legitimate forensic purpose (so far as the value of the shares is concerned) in seeking the documents in categories 2 to 4. In my view, those documents are irrelevant to that issue. The documents sought in those categories relate to prices Wesfarmers was considering, to actual or potential offers and the like and to correspondence between Wesfarmers and those having some connection with the sale. As I have noted, Mr Oswal already has the offer. Any other prices or offers that Wesfarmers might have ruminated about but which did not culminate in an offer cannot have any relevance to how much the shares were worth. Nor can the correspondence have any relevance to value. To the extent that there are documents in this category that relate to the figure that was offered (but which are not the offer itself), again for the reasons I have given in respect of category 1 documents, they are not relevant to the issue of value. Moreover, for the same reasons they would fail the second limb of the test because it is not ‘on the cards’ that they would materially assist Mr Oswal’s case.
In my opinion, insofar as the subpoena sought documents for the purpose of advancing Mr Oswal’s case about the value of the shares, the Associate Judge was correct in excluding them from the scope of the subpoena.
Are any of the documents relevant to any other issue?
I will deal first with categories 2 to 4. In relation to those documents, her Honour reasoned that the integrity of the sale process had been called into question. Her Honour observed that:
‘documents which evidence the degree of interest of an organisation such as Wesfarmers, the extent of interaction between Wesfarmers and other relevant parties, and the nature and extent of the enquiries made by Wesfarmers regarding the assets and the performance of the relevant business may well be relevant.’
Wesfarmers submitted that none of the documents are relevant to any of the issues in dispute and that the Associate Judge erred in respect of the orders that she made in respect of categories 2 to 4. Wesfarmers noted that Mr Oswal already has the conditional offer that it made to show that it was an interested bidder. It submitted that there is no general question about the integrity of the sale process. Rather, it says that the issues raised by the pleadings (as they stood at the time of the application before the Associate Judge and leaving aside the question of the value of the shares) were:
(a)whether Wesfarmers was ‘effectively discouraged’ from bidding for the Shares because the Receivers had ‘suggest[edl that [Wesfarmers] discuss and explore a settlement of the Existing Gas Dispute ... directly with Apache’; and
(b)whether Wesfarmers was ‘effectively discouraged’ from bidding for the Shares because the Receivers had ‘treat[ed] any bid for the Shares that was conditional upon the outcome of the Existing Gas Dispute ... as being non-complying.’ (emphasis added by Wesfarmers)
Wesfarmers noted that it is necessary for the party at whose request the subpoena was issued to identify expressly and precisely the legitimate forensic purpose for which access to the documents is sought.[22] Wesfarmers submitted that Mr Oswal has failed to do this. As an example taken from category 4, Wesfarmers asked how Mr Oswal says that:
correspondence between Wesfarmers and ANZ concerning a potential offer for the shares
appears likely to materially assist his case that the Receivers (after their appointment on 16 December 2010) breached their duty because:
Wesfarmers was ‘effectively discouraged’ from bidding for the Shares because the Receivers had ‘suggest[ed] that [Wesfarmers] discuss and explore a settlement of the Existing Gas Dispute ... directly with Apache.’
[22]Commissioner of AFP v Magistrates’ Court of Victoria & Ors [2011] VSC 0003, [28(a)] and the cases there cited.
Wesfarmers gave another example. Assume that there is a file note from June 2009 in which a Wesfarmers’ employee recorded that the shares in YPHL had a special interest to it. How, Wesfarmers asked, could that file note (which it says, and I agree, is not relevant to value for the reasons I have given) materially assist Mr Oswal’s case against the Receivers who were not appointed for another 18 months?
I accept Wesfarmers’ submission that so far as is relevant for this appeal, that at the time the matter came before the Associate Judge the integrity of the sale process was only in question insofar as it was alleged that parties other than Apache were effectively discouraged by two means from bidding. However, it seems to me that her Honour was simply using the phrase ‘integrity of the sale process’ as a shorthand expression for this. I do not take her Honour to have been referring to the integrity of the sale process at large and beyond the pleaded issues (as they then were). Indeed, her Honour referred to the issue arising ‘based on the pleadings’.
I do accept that it seems clear from the material on this appeal that Wesfarmers was an interested purchaser (at least in early December 2010) because it made the conditional offer (a copy of which Mr Oswal has). However, in my opinion, Wesfarmers’ submission ignores that part of Mr Oswal’s claim about the conduct of the Receivers in respect of prospective bidders. From the evidence given by Wesfarmers it is clear that there were discussions over many months between Wesfarmers and the Receivers. In respect of those documents, there can be no doubt that they are apparently relevant to the issue of whether the Receivers effectively discouraged some bidders and that it is on the cards that they will materially assist Mr Oswal’s case.
Wesfarmers’ submissions also do not have regard to the relevance of the level of Wesfarmers’ interest which almost certainly will be important in establishing that what the Receivers did or did not do, did or did not effectively discourage Wesfarmers. It is Wesfarmers’ interest in the purchase of the shares that is important — not from whom it may purchase them (whether Mr Oswal, ANZ as the secured creditor, or the Receivers). For example, if Wesfarmers was not particularly interested in purchasing the shares, the Receivers’ conduct may have had very little effect one way or the other. Conversely, if Wesfarmers was very interested over a long period of time in purchasing the shares, the Receivers’ conduct may have had more of an impact on Wesfarmers’ ultimate decision not to make a bid. It seems to me that this is what the Associate Judge meant when she stated that ‘documents which evidence the degree of interest of an organisation such as Wesfarmers, the extent of interaction between Wesfarmers and other relevant parties, and the nature and extent of the enquiries made by Wesfarmers regarding the assets and the performance of the relevant business may well be relevant’. Both of the examples raised by Wesfarmers are apparently relevant on this analysis.
Further, I do not accept Wesfarmers’ suggestion that documents from 2009 (being a time well before the Receivers were appointed) cannot be relevant. That might be so if one looked at a document from that time in isolation. However, based on the evidence given by Wesfarmers, it is quite likely that the documents will assist in showing that Wesfarmers had a sustained interest in acquiring the shares from as early as 2009. On Wesfarmers’ evidence, some of its executives were involved in discussions about a possible acquisition of YPHL in late 2009 until early 2010; the conditional offer was made in December 2010 and was followed by discussions with the Receivers until August 2011. Again, it is the extent of Wesfarmers’ interest that is pertinent, and it is beside the point whether its interest was in purchasing the shares from Mr Oswal or from the Receivers once they were appointed.
If it matters, the recent joinder of ANZ and the amendment of the particulars of breach of duty reinforces the apparent relevance of the documents sought in categories 2 to 4 and the likelihood of it being on the cards that the documents will materially assist Mr Oswal’s claim.
In my opinion, the Associate Judge was correct to limit the scope of category 2 documents to be produced in the way that she did. It is a broad category without the limitations imposed by her Honour.
I will now turn to the category 1 documents and consider whether they are relevant to any issue (other than value, with which I have already dealt). Mr Oswal contended that the documents in category 1 fell within the exceptions to the general rule espoused in McDonald. In Auxil Pty Ltd v Terranova,[23] Buss JA (with whom Miller JA agreed) stated:
[23](2009) 260 ALR 164.
Several propositions in relation to proof of the value of land are discernible from my review of the authorities.
First, the general rule of admissibility is that an unaccepted offer to purchase land is not admissible as ‘direct evidence’ of its value.
Second, the general rule does not exclude evidence of an unaccepted offer in each and every case.
Third, where evidence of an unaccepted offer to purchase land is sought to be tendered, the purpose for which the tender is made should be ascertained and analysed.
Fourth, although an unaccepted offer to purchase land is not admissible as ‘direct evidence’ of its value, the evidence may be admissible, in a particular case, for limited or general purposes.
Fifth, the limited or general purposes for which evidence of an unaccepted offer may be admissible include establishing:
(a)that later sales sought to be relied on in assessing the value of the land were not forced sales;
(b)the existence of a person who might be prepared to pay more than the ordinary market value of the land;
(c)the demand in the market for the land in the context of evaluating whether a mortgagee of the land breached its duty of good faith in exercising its power of sale;
(d)the special potentiality of the land for a specific purchaser where the offer has been made by that purchaser and in respect of that land.
Also, an unaccepted offer to purchase land may be admissible for the general purpose of providing some assistance in determining the lower limit of the market value of the land in the case of a purchaser’s actual unconditional open offer to purchase at a specific price or for the limited purpose of checking the methodology adopted by an expert valuer in his or her evidence. The illustrations I have given are not, of course, intended to be exhaustive.
Sixth, evidence of an unaccepted offer to purchase land should not, ordinarily, be accorded any weight unless the trial judge has found that the offer was genuine. Factors to be considered in evaluating the genuineness of an offer include, for example, whether the purchaser was willing and able to complete the purchase in accordance with the terms of the offer, whether the purchaser was at arm’s length from the vendor, and why the offer was not accepted.[24]
[24]Ibid [45]–[51].
The Associate Judge did not find that the category 1 documents fell within any of the exceptions in Auxil. Mr Oswal contends that the Associate Judge erred in this regard. He submitted that although there was no forced sale of his shares, the allegations that he makes that the Receivers breached their obligation to act in good faith in selling his shares, in part as a result of the negotiation and inclusion of clause 9.4 in the sale agreements[25] are analogous to an allegation of forced sale. He contends that Apache was in a position of significant advantage over the Receivers in negotiating a sale price for the shares and that the Receivers discouraged parties in making bids. He says that the documents sought in the subpoena are admissible in relation to this issue and fall within exception (a) described by Buss JA in Auxil Pty Ltd v Terranova.
[25]See [3]–[5] above.
In my opinion, Auxil sets out some of the exceptions where evidence of an unaccepted offer may be admissible. As I have already said, admissibility of the documents sought is not the test for whether a subpoena should be set aside. Further, the documents that Mr Oswal seeks are not the unaccepted offer but a much broader range of documents. However, it seems to me that Auxil does provide examples of the types of issues that frequently arise where the question of value is concerned. Here the real question is whether the documents are sought for a forensic purpose in that they are apparently relevant to such issues and it is ‘on the cards’ that they will assist Mr Oswal’s case. Even if one assumes, for the purposes of the argument, that the figure that Wesfarmers offered is relevant to the issue of whether Apache allegedly had an advantageous bargaining position which led to a reduced sale price,[26] how Wesfarmers arrived at that figure or other figures is irrelevant to that issue. The category 1 documents, which are of this nature, certainly would not materially assist Mr Oswal’s case.
[26]See [3]–[5] above.
Mr Oswal also submitted that the category 1 documents sought on the subpoena fell within Auxil exceptions (b) and (d) — someone prepared to pay more than market value or for whom the asset had special potential. He submitted that documents within that category may well identify how Wesfarmers ascribed value including any reductions in value because of how the sale was conducted. He submitted, for example, that a model, or a calculation or a document that said ‘we think the value is X, but taking into account matters that we have identified, such as an issue relating to the gas sale agreement, we think that value should be reduced to Y amount’ then that document would be relevant to possibly three issues: (1) is there a market value, (2) does this potential purchaser ascribe a particular value unique to that purchaser, and (3) is there an aspect of what the Receivers have allegedly done in breach of duty that impacts on this potential purchaser’s view of the value of the shares? He submitted that as long as he could identify on the relatively broad approach established in the cases that the documents are apparently relevant to the issues, the legitimate forensic purpose test is satisfied. I do not accept that submission as it fails to take into account the requirement that it be ‘on the cards’ that the documents will materially assist his case. The category 1 documents are unlikely to take the three matters identified by Mr Oswal as relevant materially further than the offer itself.
Mr Oswal submitted that the documents sought in the subpoena fell within the last exception identified in Auxil. Wesfarmers gave evidence that it uses a unique asset valuation model which contains a detailed valuation methodology and assumptions to assess prospective business acquisitions. The model itself is a computer‑based tool. Mr Oswal observed that the parties will obtain expert valuation evidence. He submitted that the assumptions that Wesfarmers used for modelling purposes or calculation purposes might inform what the experts analyse for the purpose of determining value and will assist in determining the lower limit of the value of the shares. Depending upon what other evidence is available, the price that Wesfarmers offered may be of some use in setting the outer limits of the value of the shares, but how Wesfarmers arrived at a particular figure is of no evidentiary assistance in this regard. Similarly, whilst the price offered might be used as a guide to whether an expert has arrived at the appropriate valuation, I am not persuaded that the tools used by Wesfarmers would materially assist Mr Oswal’s case. It seems to me that their evidential worth for the purpose of testing the expert valuer is at the lower end of the scale.
As I have found that the category 2 to 4 documents satisfy the relevant subpoena test for other reasons, it is not necessary for me to consider whether the Associate Judge erred in finding that they may fall within the Auxil exceptions.
Appeal grounds 2 and 3 and cross-appeal ground 1 fail for the reasons I have given in this section.
Should the category 1 documents have been excluded from production of documents falling within category 4? (Appeal ground 4)
Category 4 of the subpoena seeks correspondence concerning bids for the shares between Wesfarmers, ANZ, the Receivers’ firm and other entities said to be associated with the sale process. As noted above, the Associate Judge observed that Mr Oswal has called into question the integrity of the sale process of the shares. Accordingly, her Honour determined that the documents falling within category 4 (excluding category 1 documents) should be produced by Wesfarmers.
Mr Oswal submitted that there is no basis for the exclusion of category 1 documents and that it leads to absurd results. He gave as an example correspondence from Wesfarmers to the Receivers stating that, based on Wesfarmers’ calculations, it has valued the shares at US$750 million, and is therefore prepared to pay that amount for them but no more — he says that the email would fall within category 1, but would be excluded because it would also fall within category 4. It seems to me that if Mr Oswal’s interpretation of the orders is correct (and I am not certain that it is), then the difficulty is one of his own making because of the breadth of the description of documents in category 1. As Wesfarmers submitted, the Associate Judge clearly determined that category 1 documents were not to be produced and her Honour was not allowing Mr Oswal to access them by an alternative route. In my view, that was the correct approach and this appeal ground must fail.
Were the Associate Judge’s reasons adequate and should the subpoena have been set aside as an abuse of process? (Cross-appeal ground 2)
Wesfarmers submitted that the Associate Judge erred in concluding in paragraph D of her reasons[27] that the subpoena should not be set aside as an abuse of process due to it being used to obtain discovery. Wesfarmers submitted that the error was that her Honour did not give reasons for reaching that conclusion. In my view, this ground of appeal is misconceived.
[27]See [10] above.
It is trite law that judges must provide reasons for the decisions that they make.[28] But that does not mean that lengthy reasons are required. Indeed, sometimes it is more difficult to discern the path of reasoning in longer and meandering reasons than in short, logical reasons. The trend in more recent times has been for more lengthy reasons to be provided. I am far from persuaded that this is either necessary or beneficial to the parties, an appeal court or more generally the efficient and proper administration of justice. Of course, there will be some cases where detailed, lengthy reasoning is required because of the nature and complexity of the issues for determination and the type of proceeding concerned. However, when, as here, the application at first instance is one concerning a matter of practice and procedure, more often than not the reasoning need not be in-depth. In some such instances, the judge’s reasoning may be apparent from the exchange with counsel during submissions and a review of the transcript will disclose the reasoning. In summary, all that is required is reasoning which explains in short compass how and why one party succeeded and the other lost.
[28]For a recent and useful review of the principles, see: R&P Boland Nominees Pty Ltd v Hobbs [2013] VSCA 66, [57]–[63] (Kyrou AJA with whom Neave and Redlich JJA agreed).
The Associate Judges in this Court are required to deal with a heavy workload. In part, their role involves determination of procedural applications of the type in question here. It is very important for the efficient operation of the Court in the administration of justice that they deal with such applications in a timely and efficient manner. There is no need for them to be burdened with an expectation that they must produce word perfect, lengthy and impeccable reasons in respect of every application that they hear. It is simply unnecessary. The additional time that would be required to produce flawless reasons is not available if the Associate Judges are to perform their important role efficiently.
In my view, the reasoning of the Associate Judge in this case is sufficient when regard is had to the whole of her Honour’s reasons (not just to paragraph D). It is clear that her Honour was of the view that some of the documents sought were relevant to the issue of the integrity of the sale process such that there was a legitimate forensic purpose — in other words, it is implicit in her Honour’s reasons that Mr Oswal is not seeking the documents to plead his case, he is not on a ‘fishing expedition’ and he is not seeking discovery from Wesfarmers. In my opinion, the reasons of the Associate Judge, when taken as a whole, disclose how she reached her conclusion that the documents were not sought in lieu of discovery or for pleading purposes. In paragraph D of her reasons, I take her Honour to mean that for completeness it followed from what she had said previously that she did not accept Wesfarmers’ argument on this point.
However, in case I am wrong, I will consider Wesfarmers’ submissions that the subpoena should be set aside in whole because it is seeking discovery or it is to be used for the purposes of Mr Oswal pleading his claims.
Wesfarmers submitted that a subpoena will be set aside as an abuse of process if it is seeking to achieve discovery because r 32.07 of the Supreme Court (General Civil Procedure) Rules 2005 is the correct procedure for obtaining discovery from a non‑party. Wesfarmers relied on Kennedy Taylor (Vic) Pty Ltd v Grocon Pty Ltd.[29] That case concerned a building dispute between an electrical contractor and the builder of Crown Casino, Melbourne. The electrical contractor served subpoenas on non‑parties who had a role in the project. Gillard J observed that the rules provide for two different procedures by which a party may obtain production and inspection of relevant documents in the possession of non‑parties. The first is an application for non‑party discovery under r 32.07, and the second is by way of subpoena under the rules requiring the non‑party to produce documents to the Prothonotary.[30] His Honour observed that there is nothing in the rules which precludes a party pursuing either course to obtain production and inspection.[31] His Honour concluded that the purpose of the subpoena rules is to enable a party to obtain documents that may be required for evidence at trial.[32] However, as his Honour noted, that:
‘is not to say that the procedure is not available if in the end result the document is not adduced into evidence but it is available to enable a party to inspect a document in order to make a decision whether or not to adduce in evidence.’[33]
The rule has since been widened to permit use of the procedure for production of documents for evidence on applications as well as at trial.
[29][1999] VSC 242.
[30]The rule at the time of Kennedy Taylor (Vic)Pty Ltd v Grocon Pty Ltd was r 42.10. The equivalent current rule is r 42A. Rule 42A has extended the scope of the rule so that it may be used for production of documents for evidence not only at trial but also for any interlocutory or other application.
[31][1999] VSC 242, [44]–[46].
[32]Ibid [71].
[33]Ibid [72].
In the case before Gillard J, the defendant took the view that the amended statement of claim was defective and there was a threat that it would make application to strike out the pleading. Counsel for the plaintiff in that case accepted that the reason that subpoenas had been issued was to enable the plaintiff to gather information so that it could properly and adequately plead its case, rather than to gather evidence for the trial.[34] His Honour set the subpoenas aside.
[34]Ibid [79].
Wesfarmers submitted that it is plain that the subpoena served on it is ‘not for evidence’ but seeks to obtain documents with which to make a case or is a substitute for discovery. First, Wesfarmers relied on the introductory words to the particulars of breach of duty which stated that Mr Oswal ‘will provide full particulars after [he] has obtained discovery and issued subpoenas’.[35]
[35]See [3] above. Those words have been deleted from the current particulars. Paragraph (xvi) now provides that further particulars may be provided prior to trial: see [4] above.
Secondly, Wesfarmers submitted that the documents are not relevant to the issues raised on the pleading.
Thirdly, Wesfarmers points to the width of the documents sought — ‘all documents’ or ‘all correspondence’ ‘relating to’ or ‘concerning’ ‘value’, ‘potential or likely prices’, ‘any actual or potential offer’ in the 20‑month period ‘June 2009’ to ‘February 2012’.
Wesfarmers submitted that all of these matters must lead to the conclusion that what Mr Oswal seeks is wide‑ranging discovery rather than the production of documents for use in evidence.
In my view, the subpoena has not been used for the purpose of discovery nor to enable Mr Oswal to plead his case. The facts are distinguishable from Kennedy Taylor (Vic) Pty Ltd v Grocon Pty Ltd.[36] There has been no concession here that the documents sought by the subpoena are required for the purpose of pleading Mr Oswal’s case. Rather, his case has already been pleaded and particularised. So far as I am aware, there is no current suggestion of any application to strike out the pleading. It seems to me that there was nothing sinister in the pleading referring to further particulars being provided after the issue of subpoenas. It simply reflects Mr Oswal’s position that if he obtains documents from Wesfarmers which might be used in evidence, he will provide full particulars. Wesfarmers’ contention might be tested in this way — if the pleading had been silent about the provision of further particulars and a subpoena was served which resulted in the production of documents that enabled Mr Oswal to further particularise his claim and he did so, would the service of the subpoena be characterised as an abuse of process? It would seem unlikely unless there were other factors in addition to the provision of the further particulars.
[36][1999] VSC 242.
As to Wesfarmers’ second contention, for the reasons which I have already given,[37] some of the documents sought are relevant.
[37]See [33]–[37] above.
As to Wesfarmers’ third submission, a subpoena must state with reasonable particularity the documents which are to be produced.[38] However, use of broad terms, such as ’relating to’, in setting the scope of documents to be produced in response to a subpoena, does not necessarily lead to the conclusion that the subpoena is oppressive and thus an abuse of process, nor does it lead to the conclusion that the subpoena is being used to seek discovery. Not surprisingly, it depends upon the context in which the words are used.[39] As Kaye J said in McColl v Lehmann, when considering a situation where a recipient of a subpoena ought to recognize the documents to be produced:
To reject as oppressive or as an abuse of process a subpoena because it directs production of documents by reference to those relating to a specific subject matter within the recipient's knowledge, suggests an excessive indulgence in legalism. Determination of whether the description of documents by that mode satisfies the required test of specification by reasonable particularity ought to be made by taking into account the facts and circumstances within the knowledge of the party to whom the subpoena is addressed. It ought to be expected of the addressee, being mindful of the facts about the subject matter known to him, that he will read the subpoena sensibly.[40]
[38]McColl v Lehmann [1987] VR 503, 511–513.
[39]Ibid 512, adopting the opinion of Smithers J in Lucas Industries Ltd v Hewitt (1978) 18 ALR 555, 570.
[40]Ibid 513.
Here, Wesfarmers knows that in broad terms the claim brought by Mr Oswal against the Receivers is one for loss arising from the sale of his shares in YPHL at an undervalue. As I have already observed, Wesfarmers acknowledges that in late 2009 and early 2010 some of its executives were involved in discussions about a possible acquisition of YPHL; that in December 2010 Wesfarmers made an indicative offer for the shares held by Mr Oswal and his wife, and that there were then further discussions with the Receivers until August 2011. Wesfarmers, in my view correctly, does not argue that the subpoena is oppressive — Wesfarmers is not a small enterprise that might be overburdened by the task of responding to the subpoena and it is able to identify the documents falling within the scope of the subpoena. Taking all of this into account, although the subpoena is cast in broad terms, that does not lead to the conclusion that it is being used as a substitute for discovery against Wesfarmers as a non-party.
Consequently, in my view, the Associate Judge’s conclusion that the subpoena is not being used in lieu of discovery nor to enable Mr Oswal to plead his case is not wrong.
This ground of cross-appeal must fail.
Conclusion
In my view, the appeal and cross-appeal should each be dismissed.
- - -
Schedule of Parties
BETWEEN
PANKAJ OSWAL
Plaintiff
AND
IAN MENZIES CARSON
First Defendant
AND
DAVID LAURENCE McEVOY
Second Defendant
AND
SIMON GUY THEOBALD
Third Defendant
AND
AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
Fourth Defendant
90
14
0