UBS AG, Australia Branch v Galileo Japan Funds Management Ltd; In the matter of Galileo Japan Funds Management Ltd (Responsible Entity)
[2012] FCA 364
•11 April 2012
FEDERAL COURT OF AUSTRALIA
UBS AG, Australia Branch v Galileo Japan Funds Management Limited; In the Matter of Galileo Japan Funds Management Limited (Responsible Entity) [2012] FCA 364
Citation: UBS AG, Australia Branch v Galileo Japan Funds Management Limited; In the Matter of Galileo Japan Funds Management Limited (Responsible Entity) [2012] FCA 364 Parties: UBS AG, AUSTRALIA BRANCH (ARBN 088 129 613) v GALILEO JAPAN FUNDS MANAGEMENT LIMITED (ACN 121 567 244); IN THE MATTER OF GALILEO JAPAN FUNDS MANAGEMENT LIMITED AS RESPONSIBLE ENTITY FOR THE GALILEO JAPAN TRUST
GALILEO JAPAN FUNDS MANAGEMENT LIMITED (ACN 121 567 244) v UBS AG, AUSTRALIA BRANCH (ARBN 088 129 613); IN THE MATTER OF GALILEO JAPAN FUNDS MANAGEMENT LIMITED AS RESPONSIBLE ENTITY FOR THE GALILEO JAPAN TRUST
File numbers: NSD 2234 of 2011
NSD 149 of 2012Judge: FOSTER J Date of judgment: 11 April 2012 Catchwords: DISCOVERY – whether discovery should be ordered in aid of proof of surrounding circumstances claimed to be admissible in proceedings where the central issues involve the interpretation of a Facility Agreement wholly in writing and a claim in estoppel – limited discovery ordered Legislation: Civil Dispute Resolution Act 2011 (Cth), s 6 and s 11(b)
Corporations Act 2001 (Cth), s 459PFederal Court Rules 2011, r 20.11(1), r 20.14, 20.16, 20.17, 20.18
Date of hearing: 5 April 2012 Date of last submissions: 10 April 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 53 Counsel for Galileo Japan Funds Management Limited: Mr GK Burton SC Solicitor for Galileo Japan Funds Management Limited: Greenwich Legal Counsel for UBS AG, Australia Branch: Mr NC Hutley SC Solicitor for UBS AG, Australia Branch: Gilbert + Tobin
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2234 of 2011
IN THE MATTER OF GALILEO JAPAN FUNDS MANAGEMENT LIMITED AS RESPONSIBLE ENTITY FOR THE GALILEO JAPAN TRUST
BETWEEN: UBS AG, AUSTRALIA BRANCH (ARBN 088 129 613)
PlaintiffAND: GALILEO JAPAN FUNDS MANAGEMENT LIMITED (ACN 121 567 244)
Defendant
JUDGE:
FOSTER J
DATE OF ORDER:
11 APRIL 2012
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.UBS AG, Australia Branch (UBS) give discovery in favour of Galileo Japan Funds Management Limited, in its capacity as the responsible entity for the Galileo Japan Trust (Galileo) by preparing, filing and serving by no later than 27 April 2012 a verified List of Documents in accordance with rr 20.16, 20.17 and 20.18 of the Federal Court Rules 2011 in which it lists all documents in the following categories for discovery:
(a)All communications made between one or more employees of UBS and one or more other employees of UBS created in the period 16 August 2009 to 29 September 2009 (both dates inclusive) relating to the negotiations and entry into the Facility Agreement entered into between UBS and Galileo on or about 18 September 2009 (including but not limited to development within UBS of the Deferral Letter dated 24 August 2009 and the terms sheet for the Facility Agreement) (Category 1);
(b)All documents created in the period 10 August 2009 to 24 September 2009 (both dates inclusive) and in 2011 constituting or recording communications (whether oral or written) between UBS and either of Shinsei Bank Ltd (Shinsei) or Forum Asian Realty Income II, LP (Forum) in respect of UBS seeking to obtain copies of documents recording, or UBS seeking otherwise to have disclosed to UBS the terms of, credit agreements between Shinsei and/or Forum and TK Operators or Sub-Operators in the Tokumei Kumiai Structure (the TK structure) identified in paragraph 9 of the Amended Statement of Claim (Category 2); and
(c)All documents created in the period 10 August 2009 to 24 September 2009 (both dates inclusive) and in 2011 relating to communications between UBS and Galileo in respect of UBS seeking to obtain copies of the documents recording, or UBS seeking otherwise to have disclosed to UBS the terms of, credit agreements between Shinsei and/or Forum and any party in the TK structure identified in paragraph 9 of the Amended Statement of Claim.
2.Inspection of discovered documents take place between 30 April 2012 and 2 May 2012.
3.The Interlocutory Application filed by Galileo on 30 March 2012 otherwise be dismissed.
4.The costs of and incidental to that application be costs of the hearing fixed to commence on 14 May 2012.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 149 of 2012
IN THE MATTER OF GALILEO JAPAN FUNDS MANAGEMENT LIMITED AS RESPONSIBLE ENTITY FOR THE GALILEO JAPAN TRUST
BETWEEN: GALILEO JAPAN FUNDS MANAGEMENT LIMITED (ACN 121 567 244)
PlaintiffAND: UBS AG, AUSTRALIA BRANCH (ARBN 088 129 613)
Defendant
JUDGE:
FOSTER J
DATE OF ORDER:
11 APRIL 2012
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.UBS AG, Australia Branch (UBS) give discovery in favour of Galileo Japan Funds Management Limited, in its capacity as the responsible entity for the Galileo Japan Trust (Galileo) by preparing, filing and serving by no later than 27 April 2012 a verified List of Documents in accordance with rr 20.16, 20.17 and 20.18 of the Federal Court Rules 2011 in which it lists all documents in the following categories for discovery:
(a)All communications made between one or more employees of UBS and one or more other employees of UBS created in the period 16 August 2009 to 29 September 2009 (both dates inclusive) relating to the negotiations and entry into the Facility Agreement entered into between UBS and Galileo on or about 18 September 2009 (including but not limited to development within UBS of the Deferral Letter dated 24 August 2009 and the terms sheet for the Facility Agreement) (Category 1);
(b)All documents created in the period 10 August 2009 to 24 September 2009 (both dates inclusive) and in 2011 constituting or recording communications (whether oral or written) between UBS and either of Shinsei Bank Ltd (Shinsei) or Forum Asian Realty Income II, LP (Forum) in respect of UBS seeking to obtain copies of documents recording, or UBS seeking otherwise to have disclosed to UBS the terms of, credit agreements between Shinsei and/or Forum and TK Operators or Sub-Operators in the Tokumei Kumiai Structure (the TK structure) identified in paragraph 9 of the Amended Statement of Claim (Category 2); and
(c)All documents created in the period 10 August 2009 to 24 September 2009 (both dates inclusive) and in 2011 relating to communications between UBS and Galileo in respect of UBS seeking to obtain copies of the documents recording, or UBS seeking otherwise to have disclosed to UBS the terms of, credit agreements between Shinsei and/or Forum and any party in the TK structure identified in paragraph 9 of the Amended Statement of Claim.
2.Inspection of discovered documents take place between 30 April 2012 and 2 May 2012.
3.The Interlocutory Application filed by Galileo on 30 March 2012 otherwise be dismissed.
4.The costs of and incidental to that application be costs of the hearing fixed to commence on 14 May 2012.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2234 of 2011
IN THE MATTER OF GALILEO JAPAN FUNDS MANAGEMENT LIMITED AS RESPONSIBLE ENTITY FOR THE GALILEO JAPAN TRUST
BETWEEN: UBS AG, AUSTRALIA BRANCH (ARBN 088 129 613)
PlaintiffAND: GALILEO JAPAN FUNDS MANAGEMENT LIMITED (ACN 121 567 244)
Defendant
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 149 of 2012
IN THE MATTER OF GALILEO JAPAN FUNDS MANAGEMENT LIMITED AS RESPONSIBLE ENTITY FOR THE GALILEO JAPAN TRUST
BETWEEN: GALILEO JAPAN FUNDS MANAGEMENT LIMITED (ACN 121 567 244)
PlaintiffAND: UBS AG, AUSTRALIA BRANCH (ARBN 088 129 613)
Defendant
JUDGE:
FOSTER J
DATE:
11 APRIL 2012
PLACE:
SYDNEY
REASONS FOR JUDGMENT
There are currently two sets of proceedings in this Court between Galileo Japan Funds Management Limited (ACN 121 567 244) (Galileo) in its capacity as the responsible entity for the Galileo Japan Trust (the Trust) and UBS AG, Australia Branch, (ARBN 088 129 613) (UBS).
The first in time in this Court is proceeding NSD 2234 of 2011 (commenced on 12 December 2011) between UBS, as plaintiff, and Galileo, as defendant (the winding-up proceeding). In that proceeding, UBS seeks to wind up Galileo in insolvency pursuant to s 459P of the Corporations Act 2001 (Cth) (the Corporations Act). UBS contends that Galileo is in default of its obligations under a Facility Agreement entered into between UBS and Galileo, in its capacity as responsible entity for the Trust, on or about 16 September 2009 (the Facility Agreement) by reason of its failure to produce certain documents to UBS when requested. Those documents (the Japanese facility documentation) concern different loan facilities involving Japanese lenders. It is alleged by UBS that this default had the consequence of accelerating the repayment of the entire amount under the Facility Agreement (JPN ¥4,951,367,436). It is Galileo’s alleged indebtedness to UBS in this amount which is the foundation of UBS’ winding-up claim.
The second proceeding in this Court is proceeding NSD 149 of 2012 in which Galileo is the plaintiff and UBS is the defendant (the contract case). The contract case was initially commenced in the Supreme Court of New South Wales on 29 December 2011. It was transferred to this Court on 30 January 2012. In the contract case, Galileo contends that, upon the true interpretation of the Facility Agreement, UBS was not entitled to demand production of the Japanese facility documentation and was thus not entitled to accelerate repayment of the principal and interest due under the Facility Agreement. Galileo also relies upon a cause of action in estoppel and upon certain discretionary matters in order to defeat UBS’ winding-up claim.
Both proceedings were first listed before me on 8 February 2012. On that day, in the contract case, I ordered that:
1.These proceedings be listed for case management and directions together with UBS AG, Australia Branch v Galileo Japan Funds Management Limited (NSD 2234 of 2011) with a view to hearing and determining the issues in this proceeding, together with ground 3 in the Amended Notice of Appearance and Objection filed by the defendant in NSD 2234 of 2011 on 23 January 2012 (the Notice of Objection), separately from and prior to the determination of all other issues in NSD 2234 of 2011.
2.The defendant file and serve its Defence by 17 February 2012.
3.The plaintiff file and serve by 7 March 2012 any further affidavits upon which it seeks to rely in chief, except for any evidence relating to paragraphs 30, 34 and 37 of the Notice of Objection.
4.The defendant file and serve by 2 April 2012 any affidavits upon which it seeks to rely in chief, except for any evidence relating to paragraphs 30, 34 and 37 of the Notice of Objection.
5.The proceedings be listed for further directions at 9.30 am on 5 April 2012 before Foster J.
6.The proceedings (excluding paragraphs 30, 34 and 37 in the Notice of Objection) be listed for hearing, together with the hearing of ground 3 in the Notice of Objection on a date to be fixed with a current estimate of 3–4 days.
7.Liberty be granted to all parties to apply to restore the matter to the List on one day’s notice in writing.
8.The costs to date be reserved.
On the same day, I made corresponding orders in the winding-up proceeding.
By Ground 3 in the Amended Notice of Appearance and Objection filed by Galileo in the winding-up proceeding, Galileo contends that UBS failed to comply with the requirements of s 6 and s 11(b) of the Civil Dispute Resolution Act 2011 (Cth) by failing to take genuine steps to resolve the issues in dispute between the parties before commencing the winding-up proceeding and by failing to file a “correct” genuine steps statement when it commenced that proceeding. Galileo contends that, if the Court finds that either of these contentions is correct, the winding-up proceeding should be dismissed or permanently stayed.
The effect of the orders which I made on 8 February 2012 is that all issues except certain discretionary defences to UBS’ winding-up claim and the question of damages claimed by Galileo against UBS will be decided at the one time and in advance of all other issues.
The issues to be decided pursuant to par 1 of the orders which I made on 8 February 2012 have been fixed for hearing for three days plus commencing on 14 May 2012.
Very recently, a dispute has arisen between the parties concerning discovery.
On 30 March 2012, Galileo filed an Interlocutory Application in which it sought a formal order for discovery of documents in the categories specified by its solicitors in a letter to the solicitors for UBS dated 14 March 2012. In that letter, Galileo sought discovery of documents in the following six categories:
1
All documents in 2006 relating to the terms to be included and as finally included in the Shinsei loan agreement executed in December 2006.
2
All documents in 2006 relating to the negotiation and entry into the ISDA Master agreement between UBS and [Galileo] executed on about 11 December 2006 and in respect of the limitation of liability clause in part 5 paragraph (j) of the Schedule to the ISDA Master agreement.
3
All documents in 2006 relating to the terms to be included and as finally included in the Shinsei loan agreement executed in December 2006.
4
All communications by employees of UBS with each other in the period 1 March 2009 to 19 September 2009 relating to the termination of the cross-currency swap facility described in paragraphs 3 and 4 of the amended statement of claim in NSD 149/2012 (including but not limited to the Deferral Letter executed by [Galileo] on about 26 August 2009) and/or the negotiation and entry into the facility agreement between UBS and [Galileo] executed 18 September 2009 (including but not limited to development within UBS of the term sheets relating to the facility agreement).
5
All documents between January 2006 and December 2011 relating to communications (oral or written) between UBS and either of Shinsei or Forum Partners in respect of UBS seeking to obtain copies of the documents recording, or UBS seeking otherwise to have disclosed to UBS the terms of, credit agreements between Shinsei Bank Ltd (“Shinsei”) and/or Forum Asian Realty Income II, LP (“Forum”) and the TK Operators or sub-operators in the Tokumei Kumiai (TK) structure (“the TK structure”) identified in paragraph 9 of the amended statement of claim.
6
All documents between January 2006 and December 2011 relating to communications (oral or written) between UBS and [Galileo] in respect of UBS seeking to obtain copies of the documents recording, or UBS seeking otherwise to have disclosed to UBS the terms of, credit agreements between Shinsei and/or Forum and a party in the Tokumei Kumiai (TK) structure identified in paragraph 9 of the amended statement of claim.
In their letter dated 14 March 2012, Galileo’s solicitors also requested that documents produced by both parties be subject to an appropriate confidentiality undertaking.
On 5 April 2012, after the hearing of Galileo’s discovery application had concluded, Galileo refined its categories for discovery. As a result, its final position was that it required discovery of documents in the following categories:
1 and 3
Any document in 2006 relating to the confidentiality provisions in the Shinsei loan agreement executed in December 2006.
2
All documents in 2006 relating to the incorporation of the limitation of liability clause in Part 5 paragraph (j) of the Schedule to the ISDA Master Agreement between UBS and [Galileo] executed on about 11 December 2006.
4 (primary category)
All communications by employees of UBS with each other in the period 26 January 2009 to 19 September 2009 relating to the negotiation and entry into the facility agreement between UBS and [Galileo] executed 18 September 2009 (including but not limited to development within UBS of the deferral letter of 24 August 2009 and the terms sheets for the facility agreement).
5
All documents in the period February 2009 to date relating to communications (oral or written) between UBS and either of Shinsei or Forum in respect of UBS seeking to obtain copies of the documents recording, or UBS seeking otherwise to have disclosed to UBS the terms of, credit agreements between Shinsei Bank Ltd (“Shinsei”) and/or Forum Asian Realty Income II, LP (“Forum”) and the TK Operators or Sub-Operators in the Tokumei Kumiai structure (“the TK structure”) identified in paragraph 9 of the amended statement of claim.
6
All documents in the period February 2009 to date relating to communications (oral or written) between UBS and [Galileo] in respect of UBS seeking to obtain copies of the documents recording, or UBS seeking otherwise to have disclosed to UBS the terms of, credit agreements between Shinsei and/or Forum and a party in the TK structure identified in paragraph 9 of the amended statement of claim.
UBS resists being compelled to provide discovery in any of the categories specified by Galileo, whether as originally specified or as revised.
These Reasons for Judgment determine whether UBS should be compelled to provide discovery in favour of Galileo of documents in any of the six categories as revised by Galileo on 5 April 2012.
I note in passing that UBS has sought discovery from Galileo in three categories. Those categories are:
1
All documents recording communications (including emails) in the period February 2009 to date between [Galileo], or related entities (including but not limited to [the Trust] and Galileo Japan KK), or anyone on behalf of [Galileo] or its related entities, and Shinsei Bank Limited (Shinsei), or anyone on behalf of Shinsei, in relation to a request for the consent of Shinsei to disclose the Shinsei Facility to UBS.
2
All documents recording communications (including emails) in the period February 2009 to date between [Galileo], or related entities, or anyone on behalf of [Galileo] or its related entities, and Forum Asian Realty Income II, LP (Forum), or anyone on behalf of Forum in relation to a request for the consent of Forum to disclose the Forum Facilities to UBS.
3
All communications (including emails) by employees of [Galileo] with each other or with employees of related entities in the period 26 January 2009 to 19 September 2009 relating to the negotiation and entry into:
(a) the Term Sheet between UBS and [Galileo] executed on 1 September 2009; and
(b) the Facility Agreement between UBS and [Galileo] executed on 18 September 2009.
As I understand the present position, Galileo has agreed to provide discovery of documents in categories 1 and 2. It will also provide discovery of documents in category 3 provided that it succeeds in obtaining an appropriate order against UBS requiring discovery of the corresponding category by UBS.
Before considering whether discovery should be ordered as sought by Galileo, it is necessary to say something about the issues which arise in the two sets of proceedings which are to be dealt with at the hearing fixed to commence on 14 May 2012. It is convenient to undertake that task by reference to the pleadings in the contract case and, to the extent required, to the Amended Notice of Appearance and Objection filed in the winding-up proceeding.
THE ISSUES FOR DETERMINATION IN RESPECT OF WHICH DISCOVERY IS SOUGHT
The Issues in the Contract Case
The current pleading propounded by Galileo in the contract case is the Amended Statement of Claim filed on 23 January 2012 in the Supreme Court of New South Wales. The material facts alleged and the causes of action relied upon by Galileo in that document may be summarised as follows:
(a)On or about 11 December 2006, Galileo and UBS entered into an ISDA Master Agreement of that date.
(b)In 2006 and 2007, Galileo and UBS entered into cross-currency swaps documented in each case by a written confirmation which supplemented and was subject to the Master Agreement.
(c)On 24 August 2009, UBS terminated the swaps pursuant to a Bermuda option notice under each confirmation and agreed to defer payment of the resulting amount due from Galileo to it until 18 September 2009.
(d)On 1 September 2009, Galileo and UBS agreed a term sheet in respect of a proposed facility agreement pursuant to which the rights and liabilities of each of them under the swaps, the confirmations and the Master Agreement would be converted into and replaced by a fixed Japanese yen denominated term loan (the UBS term sheet).
(e)On 18 September 2009, Galileo and UBS entered into the Facility agreement substantially in accordance with the UBS term sheet with the principal and interest payable thereunder to be repaid in September 2014.
(f)Galileo entered into all of the transactions described at subpars (a) to (e) above as the responsible entity for the Trust.
(g)As at the time that they entered into the Master Agreement and as at the dates in 2006 and 2007 when they entered into the swaps described in subpar (b) above, UBS knew that:
(i)Galileo held units in a trust known as “the TK Trust” which by way of contractual relationship vested in a Tokumei Kumiai (TK) structure under Japanese law (the TK structure) managed under those contracts by entities known in Japanese law as “TK Operators” who in that management are not under the control of either the Trust or the TK Trust; and
(ii)The TK Operators were being advanced monies by Japanese financiers one of whom was Shinsei Bank Ltd (Shinsei).
(h)As at the times in 2009 when they entered into the agreements described in subpars (c) to (e) above, UBS knew of the matters referred to in subpar (g) above as well as the following matters:
(i)The TK Operators were also being advanced monies by a Japanese financier known as “Forum Asian Realty Income II, LP” (Forum);
(ii)The terms of the advances made by both of the Japanese financiers were confidential apart from what was disclosed in the term sheets describing the advances, which term sheets were themselves disclosed to UBS in August or September 2009 on a confidential basis for the purposes of and prior to entry into the Facility Agreement; and
(iii)Galileo was not and was not to be a signatory to the Shinsei or Forum advances or to the documentation containing the terms of those advances and the named parties to that documentation were prevented, without the consent of Shinsei and Forum respectively, from disclosing that documentation apart from what was disclosed in the term sheets describing the advances and that constraint prevented Galileo from disclosing that documentation without such consent.
(i)Galileo also knew the matters described in subpars (g) and (h) above.
(j)The particulars of the basis upon which such knowledge is said to have been acquired by UBS specify the fact that UBS had acted as joint lead manager of the Trust’s Initial Public Offering in 2006; the fact that, in February 2009, Galileo informed UBS that the Shinsei loan documentation could not be provided by Galileo to UBS without the consent of Shinsei; the circumstance that, during the negotiation of the Facility Agreement in the period from March 2009 to September 2009, UBS requested access to the terms of the advances made by Shinsei and Forum but was refused access except for the term sheets in respect of those advances; and the fact that cl 18.2 of the Facility Agreement prevented disclosure of the contents of that Agreement to either Shinsei or to Forum.
(k)In 2009, UBS impliedly represented that the extent of the disclosure made by Galileo in respect of the Shinsei and Forum advances was adequate for its purposes or, alternatively, acquiesced in not being provided with more extensive information about those advances.
(l)In entering into the UBS term sheet on 1 September 2009 and the Facility Agreement on 18 September 2009, Galileo reasonably relied upon the representation and acquiescence of UBS as described in subpar (k) above.
(m)On 2 August 2011, UBS requested from Galileo (amongst other things) copies of the Shinsei and Forum loan documentation pursuant to clauses 8.1(g) and 8.1(h) of the Facility Agreement.
(n)On 16 August 2011, Galileo declined to provide copies of the Shinsei and Forum loan documentation.
(o)On 19 August 2011, UBS served a Notice of Failure to Perform Obligations dated that day upon Galileo. On 8 September 2011, Galileo disputed the validity of that Notice.
(p)On 16 September 2011, UBS served a Notice of Default dated that day purportedly under cl 9.2 of the Facility Agreement.
(q)Galileo immediately disputed the validity of that Notice of Default upon the basis that, upon the correct interpretation of cl 8.1(g) and cl 8.1(h) of the Facility Agreement, it was not obliged to produce the loan documentation in respect of either the Shinsei or the Forum advances or, alternatively, upon the basis that UBS was estopped from contending that it was so obliged.
(r)UBS then purported to appoint an investigating consultant into the affairs of Galileo, a step the validity of which was disputed by Galileo.
(s)On 2 December 2011, UBS served upon Galileo a notice dated that day under cl 9.2 of the Facility agreement whereby it purported to declare all principal and interest under the Facility Agreement to be immediately due and payable.
(t)Galileo immediately disputed the validity of that Notice.
(u)On 12 December 2011, UBS commenced the winding-up proceeding.
(v)Upon the true interpretation of the Facility Agreement, Galileo did not breach either cl 8.1(g) or cl 8.1(h) thereof by failing to furnish copies of the Shinsei and Forum loan documentation with the consequence that the acceleration notice issued by UBS was and is invalid. In addition, UBS is estopped from contending that Galileo breached the Facility Agreement by reason of its refusal to provide copies of that documentation to UBS.
(w)Galileo also alleges that, by its conduct in alleging breach of the Facility Agreement against Galileo and seeking to recover immediately the amount of principal and interest that will ultimately become due thereunder, UBS breached implied contractual terms to act in good faith in the performance of the Facility Agreement, to co-operate in the performance of that Agreement and not to deny to Galileo the benefit of that Agreement.
(x)Galileo relies upon discretionary defences pleaded as follows in par 37 of the Amended Statement of Claim:
Further, the Court in the exercise of its discretion under section 467 of the Corporations Act 2001 (Cth) and its power to grant relief under its inherent jurisdiction and powers, Supreme Court Act 1970 (NSW) sections 63 and 75, Civil Procedure Act 2005 (NSW) sections 22 and 90 and UCPR 36.1 ought not to wind up the plaintiff but, rather, if it is of the view that the plaintiff was required by clauses 8.1(g) and/or 8.1(h) of the facility agreement to produce copies of the Shinsei and Forum documents described in 11 above, order the plaintiff so to produce those copies, thereby enabling the parties to those documents not to be in breach of their confidentiality obligations by reason of an exception for production by the plaintiff under court process, stay any other orders for a period sufficient to enable the plaintiff to comply and, once the plaintiff has complied, dismiss the winding-up application and grant the relief sought in claims 1 to 9 herein.
Galileo claims declaratory relief, an injunction restraining UBS from giving effect to its various notices and attempts to collect the amount of the principal advanced to Galileo under the Facility agreement and interest thereon and an order permanently staying or dismissing the winding-up application.
After the hearing of Galileo’s Interlocutory Application concluded, Galileo notified a proposed amendment to its current pleading in the contract case. By that amendment, Galileo seeks to add a further allegation to the effect that, at all times in 2006 and 2007 when the parties entered into the swaps and confirmations described in subpar (b) of [18] above, UBS knew (by Mr Peter Kingston) that the terms of the Shinsei advance were confidential apart from what was disclosed in the term sheets in respect of that advance made available to UBS in August or September 2009. I have not yet ruled on Galileo’s application to amend its pleading to raise this fresh allegation.
In its Defence, UBS admits entering into the transactions described in subpars (a) to (e) of [18] above. In respect of the 2009 transactions, it takes issue as to the effect of those transactions as asserted by Galileo.
UBS also admits that:
(a)At the time of entering into the swaps and confirmations in 2006 and 2007 described by Galileo in the Amended Statement of Claim and at the time that it entered into the UBS term sheet and the Facility Agreement in September 2009, it knew that Galileo held units in the TK Trust which by way of contractual relationship invested in the TK Structure managed under those contracts by TK Operators.
(b)At the time of entering into those swaps and confirmations in 2006 and 2007 and also at the time when it entered into the UBS term sheet and the Facility Agreement in September 2009, it knew that the TK Operators were being advanced monies by Shinsei, a Japanese financier.
(c)At the time when it entered into the UBS term sheet and the Facility Agreement in September 2009, it also knew that the TK Operators were being advanced monies by Forum, a Japanese financier and that Galileo was not a signatory to the Shinsei or the Forum loan documentation.
In its Defence, UBS denies that, at the time when it entered into the UBS term sheet and the Facility Agreement in September 2009, it knew that the terms of the Shinsei and Forum loan advances were confidential apart from the matters disclosed in the term sheets describing such advances and also denies that it knew at that time that Galileo was prevented from disclosing the loan documentation for those advances apart from what was disclosed in the term sheets for those advances.
UBS admits the course of events otherwise described by Galileo in its Amended Statement of Claim but asserts that it was entitled to take the steps which it took in late 2011 and that, as a result, repayment of the whole of the principal and interest under the Facility Agreement fell due in December 2011.
The Issues in the Winding-Up Proceeding
In the winding-up proceeding, UBS relies upon the validity of its actions as giving rise to the indebtedness relied upon by it. Against these contentions, Galileo relies upon the case which it has pleaded in the contract case; the arguments based upon UBS’ failure to comply with the Civil Dispute Resolution Act 2011 (Cth); its claims for contractual and equitable damages; and the discretionary defences pleaded in par 37 of its Amended Statement of Claim in the contract case.
CONSIDERATION
The gravamen of Galileo’s case is that, upon the correct interpretation of the Facility Agreement, UBS never had any entitlement to demand production of the Shinsei and Forum loan documentation but was only ever entitled to such information about the loan arrangements between the TK Operators and those lenders as had been confidentially disclosed in term sheets relating to those arrangements which had been furnished to it by Galileo. In the alternative, Galileo contends that UBS is estopped from contending that it ever had such an entitlement. It also argues that UBS has breached certain implied terms of the Facility agreement.
In aid of the contractual interpretation advanced by it, Galileo may wish to rely upon certain facts which it says were known to both parties in 2006 and in 2007 and also in September 2009. It says that the circumstance that these facts were known to both parties at the relevant dates is admissible as part of the admissible surrounding circumstances to which the Court might have regard in considering the parties’ competing contentions as to the correct interpretation of the Facility Agreement. Galileo also argues that it is entitled to prove these facts concerning knowledge in support of its estoppel case.
Some assertions of knowledge on the part of UBS made by Galileo are admitted. As I have mentioned at [23] above, the following contentions made by Galileo are in dispute, namely, that:
(a)As at September 2009, when the parties entered into the UBS term sheet and the Facility Agreement, UBS knew that the terms of the Shinsei and Forum loan advances were confidential apart from what was disclosed in the term sheets describing those advances which term sheets themselves had been disclosed to UBS on a confidential basis for the purposes of and prior to the entry into the Facility Agreement on 18 September 2009;
(b)As at September 2009, when the parties entered into the UBS term sheet and the Facility Agreement, UBS knew that Galileo could not disclose the contents of the Shinsei and the Forum loan documentation beyond the confidential disclosure made by providing the term sheets describing those advances; and
(c)(Possibly, depending upon whether Galileo is permitted to make its foreshadowed amendment), as at 2006 and 2007, when it entered into the swaps and confirmations, it knew the facts described in subpar (a) above.
Galileo’s principal contention in support of its discovery application is that the documents which it seeks, if they exist, may assist it to establish the knowledge which it has attributed to UBS in the Amended Statement of Claim in the contract case and which UBS disputes having.
Against that contention, UBS argues that the documents sought travel far beyond the need which I have described at [27]–[29] above and that such documents are wholly irrelevant to the issues which arise in the contract case. Alternatively, UBS submits that the time, trouble and expense of searching for the documents sought by Galileo is so greatly disproportionate to the likely benefit to be gained by Galileo that the Court should not countenance requiring discovery of any of the documents sought by Galileo. In support of this contention, UBS relied upon the affidavit of Olivia Allys Coyle White sworn on 4 April 2012. In that affidavit, Ms White said:
(a)In respect of email documents created from 1 November 2010, using an internal UBS system, UBS can retrieve emails within a few days of commencing that task.
(b)In respect of emails created before 1 November 2010, retrieval is far more difficult and time consuming. The most efficient way of doing this is on a rolling 45 day basis. In order to search the lengthy period covered by Galileo’s categories, it could take as much as 294 business days to search the relevant stored material. If UBS is to retain an external IT provider to do the work of search and retrieval, it could cost “… in the order of hundreds of thousands of dollars”.
Rule 20.11(1) of the Federal Court Rules 2011 provides that a party must not apply for an order for discovery unless the making of the order sought will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible. “Standard discovery” is described in r 20.14 as follows:
20.14 Standard discovery
(1)If the Court orders a party to give standard discovery, the party must give discovery of documents:
(a)that are directly relevant to the issues raised by the pleadings or in the affidavits; and
(b)of which, after a reasonable search, the party is aware; and
(c)that are, or have been, in the party’s control.
(2)For paragraph (1)(a), the documents must meet at least one of the following criteria:
(a)the documents are those on which the party intends to rely;
(b)the documents adversely affect the party’s own case;
(c)the documents support another party’s case;
(d)the documents adversely affect another party’s case.
(3)For paragraph (1)(b), in making a reasonable search, a party may take into account the following:
(a)the nature and complexity of the proceeding;
(b)the number of documents involved;
(c)the ease and cost of retrieving a document;
(d)the significance of any document likely to be found;
(e)any other relevant matter.
(4)In this rule, a reference to an affidavit is a reference to:
(a)an affidavit accompanying an originating application; and
(b)an affidavit in response to the affidavit accompanying the originating application.
Note Control is defined in the Dictionary
These two rules encapsulate the overriding principles which the Court must apply when considering any discovery application.
I now turn to the six categories of documents sought by Galileo.
Revised Categories 1 and 3
The documents called for by revised categories 1 and 3 are intended to bring forward documents that support the contention made by Galileo in its proposed amendment to its Amended Statement of Claim in the contract case that UBS knew in 2006 and in 2007 that the terms of the Shinsei advance were confidential apart from what was disclosed in the term sheets describing those advances which were provided to UBS in August or September 2009 on a confidential basis for the purposes of the Facility Agreement.
The searches called for by the terms of these categories are obviously very extensive. They are not limited to documents establishing knowledge in Mr Peter Kingston, although, according to the terms of the proposed amendment, he is the person who is said to have had the requisite knowledge in 2006 and 2007. Furthermore, in the particulars provided to the existing par 9 of the Amended Statement of Claim in the contract case, there is no assertion that any of the documents created in 2006 and in 2007 for which UBS bore any responsibility included mention of the Shinsei loan.
It seems to me that, in any event, the critical time at which the requisite knowledge might have some relevance is September 2009. These categories have been formulated in an endeavour to establish knowledge at an earlier point in time which, no doubt, will be said to have remained with UBS right up to the critical point in time in September 2009.
The search and retrieval of documents from 2006 and 2007 will occasion very significant time, trouble and expense to UBS. It seems to me that the likely benefit to Galileo (if any) will be small.
For those reasons, I do not propose to require UBS to produce documents in revised categories 1 and 3.
Revised Category 2
This revised category relates to the incorporation of an optional standard clause into the ISDA Master Agreement, itself a standard-form agreement. That Agreement was executed on or about 11 December 2006.
I think that it is highly unlikely that documents called for by this revised category will bear upon any of the critical issues in the present case. For this reason, I do not think that discovery of documents called for by this revised category is warranted.
I therefore refuse Galileo’s request for discovery in revised category 2.
Revised Category 4
By this category, Galileo seeks discovery of all the internal communications within UBS for the first nine months of 2009 relating to the negotiation and entry into of the Facility Agreement. The period covered by this revised category is, therefore, approximately nine months.
UBS has disputed that, in September 2009, it knew that the Shinsei loan arrangements were confidential and that Galileo could not reveal anything about those arrangements beyond the contents of the term sheets describing those arrangements which had been furnished by Galileo to UBS in August or September 2009 in the context of the negotiations for the Facility Agreement.
Having regard to the evidence of Ms White and to the principles embodied in the Federal Court Rules 2011 to which I have referred at [31]–[32] above, I think that I should order UBS to provide formal discovery of the documents called for by revised category 4 but only in respect of the period from 16 August 2009 to 29 September 2009, being what I consider to be the 45 day period most likely to produce documents which might assist Galileo in pursuit of its assertions concerning the knowledge of UBS at the critical time. I am minded to order production in respect of only one 45 day period, given the trouble and expense that is involved in complying with an order which requires searches to be carried out in respect of any period prior to 1 November 2010.
For these reasons, I propose to order UBS to produce documents in revised category 4, limited as I have indicated.
Revised Category 5
As drafted, revised category 5 is too wide. The particular vice in the language deployed is the use of the expression “relating to …” in respect of communications between UBS and either of Shinsei or Forum.
It seems to me that Galileo is entitled to have produced to it documents which constitute or record communications (be they oral or written) between UBS and either of Shinsei or Forum in the period between 10 August 2009 and 24 September 2009 and in 2011 in respect of the matter covered by revised category 5. Such communications ought to be relatively easily retrieved and may cast light upon the disputed questions of knowledge.
Revised Category 6
The documents called for by revised category 6 cover both communications passing between Galileo and UBS, on the one hand, and internal communications within UBS in the specified category, on the other hand.
For reasons similar to those which led me to order discovery in accordance with a modified category 5, I propose to make a similar order in respect of category 6.
CONCLUSIONS
I propose to make orders providing for formal discovery in accordance with revised categories 4, 5 and 6, as modified by me.
I note that, in light of this decision, Galileo will agree to provide discovery in accordance with category 3 notified by UBS to Galileo. There is no need to make a formal order in respect of that matter.
Each party has had some success in respect of Galileo’s application for discovery. It seems to me that the appropriate order as to costs is that the costs of that application be costs of the joint hearing fixed to commence on 14 May 2012.
There will be orders accordingly.
I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate:
Dated: 11 April 2012
1
0
3