Re Sementis Ltd - [2024] VSC 88

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2022 04853

IN THE MATTER of SEMENTIS LTD (ACN 138 550 811)

BETWEEN:

MAURICE O’SHANNASSY & ORS (according to the attached Schedule)	Plaintiffs
v
SEMENTIS LTD (ACN 138 550 811) & ANOR (according to the attached Schedule)	Defendants

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JUDGE:	Irving AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	20 February 2024
DATE OF RULING:	27 February 2024
CASE MAY BE CITED AS:	Re Sementis Ltd
MEDIUM NEUTRAL CITATION:	[2024] VSC 88

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PRACTICE AND PROCEDURE – Subpoena objection – Whether legitimate forensic purpose served by subpoena – Whether issue of subpoena is abuse of process – Legal professional privilege over documents – Application partially allowed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr A di Stefano of counsel	Buster Davidson
No appearance for the Defendants
For the Non-Party	Mr D Lorbeer of counsel	Charlotte Thomas

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

The test................................................................................................................................................. 2

The plaintiff’s legitimate forensic purpose.................................................................................. 3

Analysis................................................................................................................................................ 5

Privilege............................................................................................................................................... 8

HIS HONOUR:

Introduction

The plaintiffs are all shareholders in Sementis Ltd (Sementis). They have commenced a proceeding alleging that a series of share issues between June 2020 and October 2022 by Sementis have oppressively and unfairly diluted their shareholdings for an undervalue, while simultaneously increasing the shareholding of the second defendant, Fortitude Nominees Pty Ltd (Fortitude).

Michael Hickinbotham is the sole director and shareholder of Fortitude. Mr Hickinbotham was also a director of Sementis at all relevant times.

Martyn Evans was at all material times the Chairman of Sementis. Mr Evans is also the sole shareholder and director of Innovation Investors Pty Ltd (Innovation).

The plaintiffs’ statement of claim (SOC) pleads that from March 2020 to 29 March 2023 Mr Evans and Mr Hickinbotham acted in concert and not independently when acting as directors of Sementis (paragraph 10).

The plaintiffs also pleaded that:

(a) in September 2022, one month prior to the October 2022 share issue from Sementis to Fortitude, Innovation was incorporated (paragraph 56);

(b) on 10 October 2022, Fortitude transferred 58,500,000 shares in Sementis to Innovation (paragraph 60);

(c) on 18 October 2022, Sementis issued 166,600,000 shares to Fortitude at a price of $0.01 per share (paragraph 61); and

(d) by transferring the Sementis shares to Innovation, Fortitude attempted to avoid a contravention of s 606 of the Corporations Act 2001 (Cth) (Corporations Act) by having acquired the shares under the October 2022 share issue (paragraph 62).

Fortitude has filed a defence in which it denies Mr Evans and Mr Hickinbotham were acting in concert. Fortitude also pleads that its shareholdings in Sementis before and after the October 2022 share issue, even if the share transfer to Innovation did not occur, were not such as to contravene the Corporations Act.

The plaintiffs have issued a subpoena to Innovation seeking:

All documents… evidencing, referring or relating to:
(a)the incorporation of Innovation Investors Pty Ltd (Innovation Investors) on or…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Re Sementis Ltd

Details

AGLC: Re Sementis Ltd [2024] VSC 88
Case: [2024] VSC 88
Decision Date: 27 February 2024

CaseChat Overview and Summary

The case before the court was brought by Sementis Limited, a company, against the Commissioner of Taxation, who issued a subpoena requiring the production of certain documents. The central issue was whether the subpoena was legitimate, if the documents were subject to legal professional privilege, and if the subpoena was an abuse of process. The court had to determine whether the forensic purpose of the subpoena outweighed any privilege claims and whether the subpoena was an abuse of process.

The court began by considering the nature of the subpoena and the forensic purpose behind it. The Commissioner argued that the subpoena was necessary to investigate potential tax evasion, and the documents sought were essential for this investigation. Sementis contended that the subpoena was an abuse of process, as it was overly broad and not limited to relevant documents. The court found that while the forensic purpose was legitimate, the subpoena was overly broad and not sufficiently tailored to the specific documents required for the investigation. The court also considered the issue of legal professional privilege, which Sementis argued applied to some of the documents. After reviewing the evidence, the court concluded that some of the documents were indeed subject to legal professional privilege and should not be disclosed.

After careful consideration, the court ruled that the subpoena was partially justified but was also an abuse of process due to its overbreadth. The court ordered that certain documents be disclosed but quashed the subpoena in part, as it was overly broad and not sufficiently tailored. The court also found that some of the documents were protected by legal professional privilege and should not be disclosed. The decision provided guidance on the balance between the need for information in tax investigations and the protection of legal professional privilege, as well as the need for subpoenas to be narrowly tailored to avoid being an abuse of process.

Orders