Smartec Capital Pty Limited v Centro (CPL) Limited

[2011] NSWSC 644

Supreme Court

New South Wales

Medium Neutral Citation:	Smartec Capital Pty Limited v Centro (CPL) Limited & Anor [2011] NSWSC 644
Hearing dates:	3 June 2011
Decision date:	03 June 2011
Before:	White J
Decision:	Refer to paras [16], [17], [27] and [30]
Catchwords:	CORPORATIONS - practice and procedure - appropriate orders to be made to give effect to reasons of Barrett J in Smartec Capital Pty Limited v Centro Properties Limited & Anor [2011] NSWSC 495 - costs
Legislation Cited:	Corporations Act 2001 (Cth)
Cases Cited:	Smartec Capital Pty Limited v Centro Properties Limited & Anor [2011] NSWSC 495 Wentworth v Rogers (No 3) (1986) 6 NSWLR 642
Category:	Costs
Parties:	Smartec Capital Pty Limited (Plaintiff) Centro (CPL) Limited (1st Defendant) CPT Manager Limited (2nd Defendant)
Representation:	J Stoljar SC with N Bender (Plaintiff) P W Flynn (Defendants) Atanaskovic Hartnell (Plaintiff) Freehills (Defendants)
File Number(s):	2011/101089

Judgment

1. HIS HONOUR : The first issue arising on the orders to be made to give effect to the reasons for judgment of Barrett J of 30 May 2011 ( Smartec Capital Pty Limited v Centro Properties Limited & Anor [2011] NSWSC 495) concerns the description of the documents of which inspection is to be allowed.

1. I do not accept that an order should be made limiting inspection to the six items of correspondence identified by the defendants' solicitor as being the items that fall within his Honour's reasons. That statement is based on information and belief, and if the information to which the defendants' solicitor deposed proved to be wrong, it would appear to me that the plaintiff would be without any remedy.

1. That having been said, for the reasons which emerged during the course of submissions, the description of the documents proposed by the plaintiff as the documents that should be made available for inspection was too wide. In particular, that description was not limited to communications between Centro and the ASX with respect to the US assets sale component of the transaction. Moreover, the reference in the plaintiff's proposed category of documents to documents referred to in communications other than those expressly excluded would have the potential to go well beyond the categories of documents evidently proposed by his Honour.

1. In the course of submissions the description of the appropriate category of documents to which inspection should be allowed was substantially resolved, save in respect of whether the defendant should make available for inspection not only correspondence between CNP and ASX on the question of the applicability or application of the listing rules to the US assets sale transaction, but whether there should also be produced for inspection any record of oral communications between CNP and ASX on that topic.

1. In para [43] of Barrett J's reasons, his Honour said that Smartec's submission that it has a genuine need of access to CNP's books for purposes related to the applicability of the listing rules boiled down to an assertion that it should be given such access so that it could investigate whether CNP had failed to give accurate and complete information to ASX for the purposes of ASX's decision-making. His Honour concluded that that was a proper purpose to pursue, that is, a purpose of seeking to be informed of the basis on which ASX reached its expressed conclusion about the listing rules (at [81]).

1. That would suggest that documents which recorded the communications between CNP and ASX in relation to that subject matter should be made available for inspection. These would include, but not be limited to, correspondence or documents passing between those entities.

1. Barrett J added (at [81]) that Smartec could properly pursue the purpose referred to in that paragraph and, to that end, could properly pursue the purpose of obtaining from CNP documents passing between CNP and ASX on that matter.

1. In para [83] his Honour contemplated that " there should be an order that Smartec be authorised to inspect the 'books' of CNP consisting of correspondence between CNP (or its advisers) and ASX on the [specified topic]".

1. The concluding part of para [81] and para [83] might suggest that his Honour had in mind a more limited class of documents than documents recording all communications on the relevant topic.

1. In para [91] his Honour concluded that there would be a limited order in favour of Smartec " as outlined at paragraph [83] ". I do not think that the expression " as outlined " is synonymous with " as defined by ". I was told that whilst Smartec's originating process sought the inspection of documents which extended to records of oral communications, the more precise definition of documents of the kind that I am now dealing with was not the subject of express consideration during the hearing.

1. This is the sort of question that is often debated when the Court is asked to make orders to give effect to the reasons for decision. I think, consistently with Wentworth v Rogers (No 3) (1986) 6 NSWLR 642, that I can make such orders as appear to me to be appropriate to give effect to his Honour's reasons so as to advance the purpose that his Honour identified as the proper purpose that Smartec was pursuing. In my view, Smartec should be allowed to inspect not only correspondence passing between CNP and ASX, but records of oral communications between those entities in relation to the particular subject matter described in para [83].

1. A further question was whether inspection of documents should be permitted to a Ms Marina Yu Lou, the director of the plaintiff. She was not a person who was named in the plaintiff's originating process as the person in respect of whom authority was sought, that she be allowed to inspect books of the defendants. However, it is common ground that inspection is to be allowed for the purpose of the plaintiff informing itself of the basis upon which ASX reached its express conclusion about the listing rules in relation to the US assets sale and for commencing and conducting proceedings, if appropriate, under s 793C of the Corporations Act 2001 (Cth). Those purposes could only properly be fulfilled if both directors of the plaintiff are given access. Accordingly, I will include Ms Marina Yu Lou as a person authorised to inspect the books.

1. The third question was as to the proper use that could be made of the inspection. That ultimately boiled down to a question whether, if the documents are to be used for the purpose of conducting and commencing proceedings, such proceedings should be confined to proceedings under s 793C of the Corporations Act, or whether they should extend as well to possible proceedings under s 1101B of the Corporations Act , or any other proceeding which the plaintiff may be advised to commence in this or any other court.

1. I understand that the only kind of proceeding expressly identified with any particularity in the plaintiff's evidence before Barrett J was potential proceedings under s 793C. I think there is substance to the submission for the defendants that a party who obtains access to documents under s 247A for what the Court finds is a proper purpose should be confined to that purpose in the use to be made of the documents, at least in the absence of further order.

1. The orders proposed by both parties as to the permitted use of documents are expressed in their proposed short minutes to apply until further order. There appears to be sufficient overlap between s 793C and 1101B of the Corporations Act that no practical purpose would be served in excluding potential proceedings under s 1101B from the permitted use of documents. However, I accept the submission for the defendants that the wider leave sought by the plaintiff (that the documents might be used for any other proceeding which the plaintiff might be advised to commence) goes beyond the scope of what Barrett J may be taken to have accepted was a proper purpose of the plaintiff in seeking access to the defendants' books.

1. For these reasons, I make the following orders:

1. Order pursuant to s 247A(1)(a) of the Corporations Act that the plaintiff is authorised to inspect (by the persons referred to in order 2) the following books of the first and second defendants ("the Books"), namely, correspondence and records of oral communications between the defendants or any person on their behalf and the Australian Securities Exchange (ASX) or persons on its behalf concerning the applicability or application of listing rules 11.1.2 and 11.2 to the US assets sale transaction referred to in the announcement released by the defendants to the ASX on 1 March 2011, entitled " Centro Announces US Assets Sale and Major Restructure Developments ".

2. Order pursuant to s 247A(1)(b) of the Corporations Act , but subject to any further order of this Court, that the following persons are the only persons authorised to inspect the Books on behalf of the plaintiff, namely, Margaret Ma Lou (director of the plaintiff); Marina Yu Lou (director of the plaintiff); Rebecca Yiting Lee (assistant to chief executive officer/financial analyst of the plaintiff); John Atanaskovic, Jeremy Kriewaldt and Michael Sophocles (partners of Atanaskovic Hartnell, solicitors for the plaintiff), Jeremy Stoljar SC and Nicholas Bender (counsel for the plaintiff); and Robert James Fenwick (business adviser to the plaintiff).

3. Order that the defendant provide a copy of all of the Books for each of the persons referred to in order 2 to the solicitors for the plaintiff by 5pm on 6 June 2011.

4. I make an order in terms of order 4 in the Short Minutes of Order which accompanied the defendants' submissions today on the form of orders to be made, but adding, in para (c)(ii), the words " or s 1101B ".

5. I give parties liberty to apply on one day's notice.

1. The remaining question concerns costs. It is agreed that there should be no order as to the costs of or costs occasioned by the intervention of the interveners. Accordingly:

6. I make the order which is para 6 of the Short Minutes of Order proposed by the defendants and which is also para 7 of the Short Minutes of Order proposed by the plaintiff.

1. Both parties sought their costs of these proceedings. The plaintiff accepted (as of course it had to) that it was not wholly successful in the proceedings. It said nonetheless that it had a measure of success and it was necessary to bring the proceedings in order to obtain the measure that it did obtain.

1. The defendants said that they were the parties who were substantially successful. They also relied upon correspondence between the solicitors prior to the proceedings being commenced and, in particular, upon a letter from Freehills, solicitors for the defendants, to Atanaskovic Hartnell, solicitors for the plaintiff, of 24 March 2011. In that letter, Freehills made an offer that:

" Subject to your client entering into an appropriate confidentiality agreement and agreeing not to bring a s 247A application, our client is prepared to allow your client confidential access to:

- correspondence between ASX and CNP in relation to whether CNP securityholder approval is required for the US assets sale; and

- the Governance Protocols (subject to board approval), the pro forma Due Diligence Planning Memorandum (referred to in the governance protocols) and the memoranda of understanding. "

1. Mr Flynn for the defendants submits that the second dot point proposed making available documents to the plaintiff which went beyond the documents which Barrett J found the plaintiff was entitled to inspect.

1. On the other hand, there is force in the submission for the plaintiff that acceptance of the offer would have required the plaintiff to surrender any right to bring a s 247A application. Therefore it would not have been entitled to make an application under that section to inspect correspondence between ASX and CNP which post dated the letter. That may be so, but it would be at least strongly arguable that the offer, if accepted so as to give rise to a binding agreement, would have applied to correspondence which both predated and post dated the offer. However, the plaintiff also rightly says that I have found that the documents which the plaintiff is entitled to inspect go beyond correspondence. I do not know whether there would be any file note or other documentary record of an oral communication between ASX and CNP, but if there is, it is the subject of the orders that I have just announced and will go beyond what was offered.

1. A further difficulty with the defendants' reliance on the letter of 24 March 2011 is that the terms of the agreement to be made in relation to confidential access were not proposed, let alone settled. In correspondence before me today, but after Barrett J gave his reasons for judgment, the defendants initially did not accept that a proper use of the documents allowed to be inspected would include use of documents for the commencement of proceedings. Moreover, there has been debate between the parties as to the identity of the persons who should be allowed to inspect documents. That debate was wider initially than it ultimately proved to be. I have accepted the plaintiff's submission that Ms Marina Yu Lou should be allowed to inspect the documents.

1. I have no confidence that a confidentiality agreement acceptable to both parties would have been made had the plaintiff been minded to agree to the defendants' proposal. In my view, the decision as to costs should be based upon my assessment as to which party was substantially successful.

1. The documents for which the plaintiff sought access in its further amended originating process went far beyond the limited class of documents in respect of which it has succeeded in obtaining access. These documents were referred to in a summary way in para [5] of Barrett J's reasons, but the range of " collateral, associated and incidental documents " which the plaintiff sought to inspect was vast.

1. The plaintiff failed on a number of matters, as set out in his Honour's judgment. Some of these matters must have substantially increased the costs of the proceedings. Thus, an affidavit prepared for the defendants which comprises, with exhibits, some three volumes of the court book related to concerns about ringfencing, on which the plaintiff wholly failed.

1. In my view, notwithstanding its limited success, the plaintiff has not substantially succeeded in the proceedings. To the contrary, I think the defendants have substantially succeeded in greatly limiting the documents which it has been found the plaintiff is entitled to inspect. I think costs should follow the event, save for a modification of the usual costs order to reflect the fact that the plaintiff has had some success.

1. The assessment of an appropriate proportion of the defendants' costs that the plaintiff should pay is not something that can be approached with any precision. In my view, the appropriate order is that the plaintiff pay 50 per cent of the defendants' costs of the proceedings.

1. Subject to any final submissions that the parties' counsel may have as to the form of the orders which I have announced, I will formally make those orders.

[Parties addressed.]

1. I make those orders.

1. I will add to these orders as well, that the exhibits are to be dealt with in accordance with the rules. The volume of defendants' confidential exhibits should be returned to the defendants' solicitors, but should be retained pending the expiry of any time for appeal and, if any appeal is brought, should be retained pending the determination of any appeal.

Decision last updated: 29 June 2011