Tap (Harriet) Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed)
[2011] WASC 264
•30 SEPTEMBER 2011
TAP (HARRIET) PTY LTD -v- BURRUP FERTILISERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) [2011] WASC 264
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASC 264 | |
| Case No: | CIV:2462/2011 | 9 SEPTEMBER 2011 | |
| Coram: | LE MIERE J | 30/09/11 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Orders made | ||
| B | |||
| PDF Version |
| Parties: | TAP (HARRIET) PTY LTD KUFPEC AUSTRALIA PTY LTD BURRUP FERTILISERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) BURRUP HOLDINGS LTD (RECEIVERS AND MANAGERS APPOINTED) IAN MENZIES CARSON, DAVID LAURENCE McEVOY AND SIMON GUY THEOBALD (IN THEIR CAPACITIES AS JOINT AND SEVERAL RECEIVERS AND MANAGERS OF BURRUP FERTILISERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) AND BURRUP HOLDINGS LTD (RECEIVERS AND MANAGERS APPOINTED) |
Catchwords: | Practice and procedure Pre-action discovery against potential party Rules of the Supreme Court 1971 (WA) O 26A r 4 Relevant principles Turns on own facts |
Legislation: | Rules of the Supreme Court 1971 (WA), O 26A r 4 |
Case References: | Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2007] FCA 2065 The New South Wales Solicitors Mutual Indemnity Fund v Hancock Family Memorial Foundation Ltd [No 2] [2009] WASCA 146 Waller v Waller [2009] WASCA 621 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
KUFPEC AUSTRALIA PTY LTD
Second Plaintiff
AND
BURRUP FERTILISERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED)
First Defendant
BURRUP HOLDINGS LTD (RECEIVERS AND MANAGERS APPOINTED)
Second Defendant
IAN MENZIES CARSON, DAVID LAURENCE McEVOY AND SIMON GUY THEOBALD (IN THEIR CAPACITIES AS JOINT AND SEVERAL RECEIVERS AND MANAGERS OF BURRUP FERTILISERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) AND BURRUP HOLDINGS LTD (RECEIVERS AND MANAGERS APPOINTED)
Third Defendants
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Catchwords:
Practice and procedure - Pre-action discovery against potential party - Rules of the Supreme Court 1971 (WA) O 26A r 4 - Relevant principles - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 26A r 4
Result:
Orders made
Category: B
Representation:
Counsel:
First Plaintiff : Mr J Stoljar SC
Second Plaintiff : Mr J Stoljar SC
First Defendant : Mr J R B Ley
Second Defendant : Mr L Y T Lee
Third Defendants : Mr J R B Ley
Solicitors:
First Plaintiff : Mallesons Stephen Jaques
Second Plaintiff : Mallesons Stephen Jaques
First Defendant : Freehills
Second Defendant : Blake Dawson
Third Defendants : Freehills
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Case(s) referred to in judgment(s):
Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167
Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2007] FCA 2065
The New South Wales Solicitors Mutual Indemnity Fund v Hancock Family Memorial Foundation Ltd [No 2] [2009] WASCA 146
Waller v Waller [2009] WASCA 621
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1 LE MIERE J: The first plaintiff (Tap (Harriet) Pty Ltd) and the second plaintiff (Kufpec Australia Pty Ltd) are oil and gas exploration and production companies. The first defendant (Burrup Fertilisers Pty Ltd) is the owner and operator of a liquid ammonia plant on the Burrup Peninsula in the north west of Western Australia which produces and supplies ammonia to local and export markets. The second defendant (Burrup Holdings Ltd) owns 100% of the issued shares in Burrup Fertilisers. Mr and Mrs Oswal between them hold 65% of the shares in Burrup Holdings. The third defendants (Receivers) have been appointed as receivers and managers of shares in Burrup Holdings held by Mr and Mrs Oswal, the shares in Burrup Fertilisers held by Burrup Holdings and the whole of the assets and undertaking of Burrup Fertilisers.
2 Burrup Fertilisers, the plaintiffs and other companies which may conveniently be described as Apache, are parties to a gas sale and purchase agreement (GSA) under which the plaintiffs and Apache agreed to sell, and Burrup Fertilisers agreed to take and pay for, gas. The GSA contains a clause (cl 19) which requires the parties to the GSA not to disclose Confidential Information to any third party without consent. Confidential Information is defined to include the terms of the GSA and information provided pursuant to it.
3 Following their appointment the Receivers have invited bids for some or all of the property of which they are the receivers and managers. There is evidence that the Receivers proposed to sell the assets of Burrup Fertilisers or the shares held by Burrup Holdings in Burrup Fertilisers. There is also evidence that the Receivers have at some time considered the sale of the shares in Burrup Holdings held by Mr and Mrs Oswal.
4 The plaintiffs are concerned that Confidential Information has been disclosed, without the plaintiffs' consent, to or by the Receivers. By originating summons the plaintiffs seek orders pursuant to O 26A r 4 of the Rules of the Supreme Court 1971 (WA) that, on appropriate terms as to confidentiality being provided by the plaintiffs, the defendants give discovery of the documents or classes of documents in their possession, custody or power described in the schedule to the summons. The issue between plaintiffs and the second defendant (Burrup Holdings) has been resolved by consent. These are my reasons for determining the plaintiffs' applications against Burrup Fertilisers and the Receivers.
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Legal principles
5 The Court has the power under O 26A r 4(4) to order discovery of particular documents by a potential party, that is, a person against whom a person appears to have a cause of action.
6 The principles applicable to an application for discovery from a potential party pursuant to O 26A r 4 are conveniently referred to by McLure JA in The New South Wales Solicitors Mutual Indemnity Fund v Hancock Family Memorial Foundation Ltd [No 2] [2009] WASCA 146:
In order to enliven the discretion in O 26A r 4(4), the applicant must establish by evidence that:
(1) the applicant may have a cause of action against the potential party;
(2) the applicant wants to commence proceedings against the potential party or to take proceedings against the potential party in the course of an action to which the applicant is a party;
(3) the applicant, after reasonable inquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings;
(4) there are reasonable grounds for believing that the potential party had or has, or is likely to have had or to have, possession of documents that may assist in making the decision (the decision being whether to commence or take proceedings).
Whether an applicant may have a cause of action against a potential party is an objective question: Waller v Waller [2009] WASCA 61 [75]. So too is the question whether there are reasonable grounds for believing that the potential party has relevant documents.
However, O 26A r 4 contains a mixture of subjective and objective elements. Whether the applicant wants to commence proceedings, the inquiries made by the applicant and the information it has obtained, are all subjective matters. Whether the inquiries are reasonable imports an objective standard. The sufficiency of the information is an objective standard but it is determined by reference to the knowledge and circumstances of the particular applicant.
Sufficient information means no more than that which is reasonably necessary to enable the person to decide whether to commence or take proceedings. That is consistent with the construction of the Federal Court rule: Matrix Film Investment One Pty Ltd v Alameda Films LLC [2006] FCA 591 [16] - [18]. Ordinarily, what is reasonably necessary is unlikely to extend beyond documents constituting or contemporaneously recording
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- the material facts or information necessary to determine the material facts. It should not extend, for example, to the potential parties' subjective evaluation of its potential liability. That would exclude the documents in par (b) of the order made by the primary judge.
It is also necessary to consider the scope and relationship between the requirement that the applicant wants to commence or take proceedings against the potential party and the requirement that the applicant does not have sufficient information to enable a decision to be made as to whether to commence or take proceedings. The first of the two requirements (which has no equivalent in the Federal Court rule) places a limitation on the extent to which an applicant can fish for information. As the applicant must show that it wants to commence or take proceedings against the potential party, it follows that if the missing information supports its claim, proceedings would be commenced or taken. The conditions enlivening the discretion are not met if the applicant requires the information in order to determine whether or not it wants to take proceedings [12] - [16].
May have a cause of action
7 I find that the plaintiffs may have a cause of action against Burrup Fertilisers and the Receivers (together the defendants). The primary relevant cause of action is breach of confidence. There are two broad classes of action based on breach of confidence. First, there is jurisdiction in equity to provide relief in respect of the misuse of confidential information. Secondly, the terms of a contract may provide a foundation for an action for breach of confidence: Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167, 190 - 191 (Fullagar J). The relevant confidential information is the GSA and any information provided pursuant to it. It is common ground that that information has the necessary quality of confidence. There is evidence of the following things. First, information received by Burrup Fertilisers was received in circumstances which imported an obligation of confidence. Secondly, the Receivers came into possession of Confidential Information. That is to be inferred from the communications between the parties. By letter of 6 April 2011 to the plaintiffs the Receivers said that they proposed to commence a sale process in respect of Burrup Fertilisers and/or certain shares of Burrup Holdings and that they would like to disclose the GSA and information provided by the sellers under the GSA to Burrup Fertilisers pursuant to the GSA to a limited number of participants in the sale process who progress to the detailed due diligence phase. The Receivers said that any such disclosure would only be made where the recipient has agreed in writing to keep the relevant information confidential and to use it in connection with the sale process. The Receivers stated that Burrup Fertilisers requested that the plaintiffs
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- consent to the disclosure of the relevant information to participants in the sale process. It is implicit that the Receivers were in possession of the relevant Confidential Information. Thirdly, when the Receivers came into possession of the Confidential Information they were bound by separate obligations of confidentiality.
8 The principal issue in relation to whether the plaintiffs have, or may have, a cause of action against the defendants is whether the defendants have disclosed any of the Confidential Information to a third party. There is evidence from which it may be inferred that the defendants may have disclosed Confidential Information to third parties, specifically bidders in the sale process. The Receivers have proceeded with the sale process. There is evidence that the sale process proceeded to the detailed due diligence phase and that a number of final bids were submitted to the Receivers. As I have said, on 6 April 2011 the Receivers asked the plaintiffs to consent to the disclosure of Confidential Information to a limited number of participants in the sale process who progress to the detailed due diligence phase and on 10 May 2011, in a letter to the plaintiffs' solicitors, the defendants' solicitors said in effect that the plaintiffs' consent to the disclosure of the Confidential Information was requested so that the sale process could proceed in an orderly and efficient fashion. In their letter of 29 July 2011 to the defendants' solicitors the plaintiffs' solicitors observed that 'it is difficult to see how a third party bidder could have participated in the sales process to date or could proceed to the next phase of the bidding process without access to the confidential information relating to the GSA'. The defendants have led evidence on this application but have not led any evidence to the effect that confidential information has not been disclosed to the bidders or to explain how bidders could have participated in the sales process without access to confidential information relating to the GSA.
9 Whether an applicant may have a cause of action against a potential party is an objective question: Waller v Waller [2009] WASCA 621 [75]; The New South Wales Solicitors Mutual Indemnity Fund v Hancock Memorial Foundation Ltd [No 2] [13]. The court must form an opinion as to whether there is sufficient evidence before it that the applicant may have a cause of action against the potential party. It is not necessary that the applicant have a prima facie case. However, there must be material to establish that the applicant may have a cause of action against the potential party. There must be some tangible backing, or objective foundation, that takes the existence of the cause of action beyond a mere allegation, suspicion or assertion: Waller v Waller [75]. I find that the
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- plaintiffs may have a cause of action against the defendants for the purposes of O 26A r 4.
Wants to commence proceedings
10 The requirement that the applicant wants to commence proceedings against the potential party places a limitation on the extent to which an applicant can fish for information. As the applicant must show that it wants to commence or take proceedings against the potential party, it follows that if the missing information supports its claim, proceedings would be commenced or taken. The conditions enlivening the discretion are not met if the applicant requires the information in order to determine whether or not it wants to take proceedings: The New South Wales Solicitors Mutual Indemnity Fund v Hancock Memorial Foundation Ltd [No 2] [16].
11 The defendants submit that there is no evidence 'which says or suggests that the plaintiffs want to commence proceedings against the defendants or any of them'. Whether the plaintiffs want to commence proceedings against the defendants must be assessed having regard to the relationship and dealings between them including the correspondence and the affidavits adduced on behalf of the plaintiffs. The Confidential Information is, or included information that is, commercially sensitive. The plaintiffs are well resourced corporations with substantial commercial interests at stake. The correspondence discloses that they have expressed concern at the unauthorised disclosure of confidential information, reserved their rights to bring proceedings against the defendants for relief in respect of breach of contract or breach of the duty of confidence in disclosing confidential information. The plaintiffs have sought from the defendants' assurances that they will not disclose Confidential Information to any bidders and sought explanations as to how the Receivers were in possession of the GSA and related information. The plaintiffs have sought information from the defendants 'to ascertain whether a breach of the GSA has occurred or will likely occur'. Prior to making the present application the plaintiffs sought from the defendants information they had previously requested and stated that if it was not provided they would make an application under O 26A, that is, an application by a party who wants to commence proceedings against a potential party. Having regard to all of the circumstances I find that the condition in O 26A r 4(1) that the plaintiff wants to commence proceedings against the defendants is satisfied.
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Reasonable enquiries made
12 The plaintiffs have asked the defendants on a number of occasions to provide the information which is now sought to be obtained by this application. I find that the plaintiffs, after reasonable enquiries, have not been able to obtain sufficient information to enable a decision to be made as to whether to commence proceedings. The plaintiffs require information about the specific Confidential Information that has been disclosed by the defendants, to whom it has been disclosed and in so far as the information has been disclosed by the Receivers then it what capacity they have disclosed that information, that is as receivers of the shares in Burrup Holdings held by Mr and Mrs Oswal, as receivers of the shares in Burrup Fertilisers held by Burrup Holdings or as receivers of the assets and undertakings of Burrup Fertilisers.
Possession of documents
13 The defendants concede that there are reasonable grounds for believing that they have, or are likely to have had, possession of the documents of which discovery is sought. It is not necessary to consider that matter further.
Court discretion
14 I find that each of the matters requiring to be established to enliven the discretion of the court to make an order under O 26A r 4 is established. The court then has a discretion whether or not to make an order.
15 The court must be satisfied that it is appropriate to exercise its discretion to make the order for preliminary discovery. In Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2007] FCA 2065 Tamberlin J said:
Orders of preliminary discovery are not intended to convey a forensic or tactical advantage, but rather to clarify whether litigation is warranted. While preliminary discovery will be beneficial to an applicant to the extent it crystallises their cause of action, or in some cases the availability of a defence to an anticipated claim, it should not be oppressive to a prospective defendant. Preliminary discovery is a one-way transaction, in the sense that there is no reciprocal obligation to produce documents. Only the applicant receives documents, which is markedly different to ordinary discovery in the course of a legal proceeding. In practical terms, the handing over of information which may be highly sensitive can be commercially damaging to a business. It is appropriate to exercise caution not to unnecessarily burden a prospective defendant to the point where its unilateral disclosure of information in
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- preliminary discovery injures its commercial position vis-à-vis a competitor, or confers an unfair advantage on that competitor [29].
16 The discovery sought in this case is to provide the plaintiffs with sufficient information to enable a decision to be made as to whether to commence proceedings and to commence those proceedings if warranted. There is no evidence that the discovery sought would be oppressive to the defendants. Some of the information sought from the defendants is itself confidential and commercially sensitive. The court frequently orders the production of confidential or commercially sensitive documents. In such circumstances it is not unusual for the court to provide that the production be made under a suitable confidentiality regime. In this case it is appropriate that the discovery be subject to an appropriate confidentiality regime.
17 The defendants submit that the court should not exercise its discretion to make an order for discovery because the plaintiffs have not brought this application in order to obtain sufficient information to enable them to decide whether or not to commence proceedings which they may have against the defendants but they have brought the application for a completely different purpose. In their written submissions the defendants say that the plaintiffs have brought this application for two purposes. First, the defendants say that the plaintiffs' purpose 'is purely commercial, and is to obtain as much information as they can about the sales process'. Secondly, the defendants say that alternatively, the plaintiffs' purpose 'may be to obtain information to enable them to decide whether or not to terminate the GSA'. I have considered the communications and dealings between the plaintiffs and the defendants and the commercial context or contexts in which they have occurred. There is no evidence from which it may be inferred that the plaintiffs have brought this application for either of the two ulterior purposes referred to by the defendants in their written submissions.
18 I find that having regard to all the circumstances, the court should exercise its discretion to order discovery to enable a decision to be made by the plaintiffs as to whether to commence proceedings.
Form of order
19 The plaintiffs seek discovery of the following classes of documents:
1 All Documents being, showing or tending to show communications between the Receivers and any other person or entity (including file notes or minutes of meetings) which contain, comprise, refer to, summarise or describe:
- (a) the terms of the GSA;
(b) the price which has been, is currently or may in the future be, paid or payable for gas under the GSA;
(c) the methodology for determining the price referred to in (b), including without limitation the quantification or calculation of, or adjustments to, the Base Gas Price or the Ammonia Adjustment Amount (each as defined in the GSA);
(d) any HJV Gas Reserves Reports (as defined in the GSA), including without limitation any correspondence in relation to any such report;
(e) any information disclosed pursuant to the GSA by any party to the GSA to any other such party.
- 2 Information memoranda issued by Burrup, Burrup Holdings or the Receivers to any person or entity concerning the sale of:
(a) Burrup's assets; or
(b) Burrup Holdings' 100% shareholding in Burrup; or
(c) the Oswal Shares.
3 Any index of the documents in the Burrup and Burrup Holdings' data rooms including any access logs.
4 Any financial models (including spreadsheet based modelling) provided by Burrup Holdings, Burrup or the Receivers to any person or entity including without limitation the inputs (including the assumptions) and internal company specific variables.
5 Any offer (conditional or unconditional), made by any person or entity for:
(a) Burrup's assets; or
(b) Burrup Holdings' 100% shareholding in Burrup; or
(c) the Oswal Shares.
Burrup means Burrup Fertilisers.
20 The defendants concede that if discovery is to be ordered against the defendants then an order in terms of [1] is appropriate. I find that an order in terms of [2] is also appropriate. The information memoranda are referred to by the plaintiffs and the defendants in their correspondence.
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- The memoranda are the sort of documents that may contain Confidential Information. The defendants resist discovery of [3] documents and in particular say that discovery of the access logs is not necessary. I find that it is appropriate to order discovery of [3] documents, including the access logs. The access logs are likely to disclose what information has been disclosed to bidders and to whom it has been disclosed. That information is information reasonably required to enable the plaintiffs to make a decision as to whether to commence proceedings.
21 I find that an order in terms of [4] should be made. Financial models provided by Burrup Holdings, Burrup Fertilisers or the Receivers in relation to the bidding process are likely to contain information relating to the supply of gas to Burrup Fertilisers, including price and matters related to security of supply. That may reveal, or provide evidence from which it may be inferred, that Confidential Information has been disclosed to the persons provided with the financial models.
22 I decline to order discovery of [5] documents. Sufficient information means no more than that which is reasonably necessary to enable the person to decide whether to commence or take proceedings: The New South Wales Solicitors Mutual Indemnity Fund v Hancock Family Memorial Foundation Ltd [No 2] [15]. The plaintiffs submit that offers made by persons during the bidding process may disclose the use made by the defendants of the Confidential Information and evidence relating to the loss or detriment thereby caused to the plaintiffs. That is not a sufficient reason for exercising the discretion in favour of the plaintiffs. The [5] documents contain, or are likely to contain, commercially sensitive information which is confidential to the person making the offer. It is not reasonably necessary in the interests of justice that that information be disclosed to the plaintiffs.
Conclusion
23 The defendants should give discovery on affidavit of the documents or classes of document in [1] - [4] of the schedule to the originating summons. That should be subject to an appropriate confidentiality regime. In the first instance, the parties should confer with a view to agreeing upon an appropriate confidentiality regime. If that cannot be agreed then I will receive further submissions in relation to what is an appropriate confidentiality regime.
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