TFS Corporation Ltd v Dellaverde - [2015] WASC 239

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: TFS CORPORATION LTD -v- DELLAVERDE [2015] WASC 239

CORAM: MASTER SANDERSON

HEARD: 11 MAY 2015

DELIVERED : 3 JULY 2015

FILE NO/S: CIV 1119 of 2015

BETWEEN: TFS CORPORATION LTD
Plaintiff
AND
ADAM PAUL DELLAVERDE
First Defendant
TAYLOR COLLISON LTD
Second Defendant

Catchwords:

Practice and procedure - Application for discovery to disclose identity of third party - Turns on own facts

Legislation:

Corporations Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff:     Mr M L Bennett
First Defendant             :     Mr M C J Hoffmann QC
Second Defendant         :     Mr M C J Hoffmann QC

Solicitors:

Plaintiff:     Bennett + Co
First Defendant             :     Iles Selley Lawyers
Second Defendant         :     Iles Selley Lawyers

Case(s) referred to in judgment(s):

Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 180 ALR 249

MASTER SANDERSON: This is the plaintiff's application for pre‑action discovery. It is brought pursuant to O 26A r 3 of the Rules of the Supreme Court 1971 (WA). The plaintiff seeks discovery of documents from the defendants which refer to the identity of:
1.1any person or persons or entity on whose behalf the PowerPoint presentation entitled 'TFS Corporation (TFC): A Foray into Sandalwood Accounting' dated 14 September 2014 (Presentation) was created or prepared by the Defendants; and
1.2any person or persons or entity who provided documents or other information to the Defendants used so as to create the Presentation.
There is no dispute between the parties as to the basic facts. The second defendant is an independent firm that specialises in institutional and private stockbroking and portfolio management services. At all relevant times the first defendant was employed by the second defendant as an equity analyst. In that capacity the first defendant authored a PowerPoint presentation entitled 'TFS Corporation (TFC): A Foray into Sandalwood Accounting' dated 14 September 2014. Throughout the submissions this document was referred to as the 'Presentation'. I will adopt that description throughout these reasons. It is the plaintiff's position the Presentation is 'saturated with false and misleading statements and omitted key information about the Plaintiff's financial affairs and business operations' (par 9 of the plaintiff's written outline of submissions). It is the defendants' position that the Presentation has been sourced from publicly available information published by the plaintiff and does not contain any errors of fact nor does it provide a misleading impression of the plaintiff's activities. A copy of the Presentation is found as part of exhibit FCW6 to the affidavit of Frank Cullity Wilson sworn 27 January 2015 and filed in support of this application.
There was no significant difference between the parties as to the applicable principles in a case such as this. The plaintiff must satisfy four conditions. These are:
1.the applicant wants to take proceedings against the potential party in the course of the action to which the applicant is a party;
2.the applicant has made reasonable enquiries;
3.the applicant has not been able to ascertain a description of the potential party sufficient for the purposes of taking proceedings against that potential party; and
4.there are reasonable grounds for believing that the non‑party had, has or is likely to have had or to have possession of information documents or any object that may assist in ascertaining the description of the potential party.
In addition both parties agreed an order would not be made if the prospective action was merely speculative. That is not to say it is necessary for the plaintiff to establish a prima facie case. Nor is it necessary to establish there is a serious question to be tried. Both parties agreed that the bar to be overcome by the plaintiff was set very low.
The defendants opposed the application on two grounds. First it was said any claim the plaintiff might advance was just speculative. It is to be remembered this is an application essentially designed to identify a party. The defendant says first there is nothing in the Presentation which could give rise to a cause of action and second there is nothing in the material to suggest third party involvement. It says the Presentation itself makes plain it was all the work of the first defendant. Second it is said no damage has been suffered by the plaintiff and no claim could lie for misleading and deceptive conduct or damages generally. The defendants maintained that was so whether or not the release of the Presentation had caused a dip in the plaintiff's share price.
It is convenient to deal with this second argument first. During the course of his submissions counsel for the plaintiff pointed out if the plaintiff took action against the defendants under the Corporations Act 2001 (Cth) for the equivalent of misleading and deceptive conduct the plaintiff could seek injunctive relief under s 1324. Further, the plaintiff could maintain a claim for an injunction under s 232 of the Australian Consumer Law. In neither case would it be necessary to establish a right to damages. Counsel submitted the application could not be dismissed on the basis that no remedy was available to the plaintiff and therefore any possible action was merely speculative.
In my view that point is well made. I accept the limitations on the plaintiff's capacity to seek damages if the actions of the defendants caused a fall in its share price: see Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 180 ALR 249. But injunctive relief would in my view remain a possibility. Given the low threshold test the plaintiff has to satisfy I am not able to conclude lack of a potential remedy means the plaintiff's claim is speculative.
The more difficult question is whether the materials establish the Presentation might be misleading and deceptive and whether or not there is anything to suggest the involvement of a third party. In his affidavit Mr Wilson does not say in what respects he believes the Presentation is or might be misleading or false. In par 24 of his affidavit Mr Wilson says he is 'concerned' that false and misleading information has been provided to the defendants. But he does not say what has led him to that belief. There is attached to Mr Wilson's affidavit a chain of emails and other correspondence passing between the plaintiff's solicitors and the defendants. There is nothing in that correspondence which could give rise to Mr Wilson's concerns. That really leaves the Presentation itself.
The form of the Presentation will be familiar to anyone who actively trades in listed securities and takes an interest in the advice of equity analysts. The Presentation is 57 pages in length. It is primarily directed at examining the plaintiff's accounts. It takes a sceptical tone. The Presentation is replete with quotes from press releases made by the plaintiff or extracts of annual reports. By way of example the Presentation contains the following:
Secondary Market for Sandalwood Growers
A part of its Beyond Carbon initiative TFS also intends to create a secondary market for existing Indian Sandalwood plantations managed by TFS.
Existing growers will have the opportunity to generate some liquidity in their investment by selling some or all of their holding to Beyond Carbon. The secondary market will be initiated by a commitment from Beyond Carbon to invest up to $15m to purchase existing Indian sandalwood plantations.
Further secondary market investment is expected as institutional investment expands.
Source: TFS Corporation Press Release July 1, 2009
The same release discloses an arrangement whereby EIG appear prepared to start purchasing existing plantations, establishing some kind of secondary market for trees.
This is highly curious since in 2009 many MIS grower plantation reports were highlighting issues as a result of higher-than-aboveaverage rainfall including tree death and the requirement for infilling (replanting).
What does this imply for the expected duration of non-MIS investors?
There is no indication in the Presentation where the author's information about tree death originated. However it has to be borne in mind the Presentation is not an article for a journal still less a legal judgment where conclusions have to be cross‑referenced and justified. It may well be the first defendant is experienced in examining plantation businesses. It can hardly be said there is anything in the above quote which could be seen as either misleading or deceptive or obviously a mistake.
Having examined the Presentation in detail I can find nothing in the document which could be regarded as misleading or deceptive. As I have said the tone is sceptical and it is clear the author was less than enthusiastic about the plaintiff as an investment. But that is a far cry from putting to a reader false information which in turn could lead to an adverse conclusion about the wisdom of investing in the plaintiff. Nor is there anything in the material which suggests the involvement of a third party.
In my view any claim the plaintiff might bring would be entirely speculative and accordingly I am not satisfied discovery as sought by the plaintiff ought be ordered. The originating summons will be dismissed. The plaintiff ought pay the defendants' costs of the summons including the reserve costs.