William Buck (WA) Pty Ltd v Faulkner [No 3]
[2013] WASC 40
WILLIAM BUCK (WA) PTY LTD -v- FAULKNER [No 3] [2013] WASC 40
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 40 | |
| Case No: | CIV:2995/2011 | 31 JANUARY 2013 | |
| Coram: | KENNETH MARTIN J | 13/02/13 | |
| 15 | Judgment Part: | 1 of 1 | |
| Result: | Leave to lead expert evidence refused Amendments into the amended statement of claim be disallowed Request for further and better discovery refused | ||
| B | |||
| PDF Version |
| Parties: | WILLIAM BUCK (WA) PTY LTD WILLIAM BUCK HOLDINGS (WA) PTY LTD CRAIG PETER FAULKNER LEDGER FAULKNER PTY LTD CSF CORPORATE PTY LTD MARK PETER COLLINS STEPHEN KENNETH BREIHL CHRISTOPHER JOHN BROWN FRANK DEL BORRELLO DAMON ALLAN HARRIS ROBIN BOYD JUDD |
Catchwords: | Expert evidence Leave Statutory oppression action Valuation evidence Objection to inspection Own case privilege Further and better discovery of documents |
Legislation: | Corporations Act 2001 (Cth) Rules of the Supreme Court 1971 (WA) |
Case References: | Alba Nominees Pty Ltd v Cecil Bros Pty Ltd (Unreported, WASC, 12 December 1997) Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 William Buck (WA) Pty Ltd v Faulkner [No 2] [2012] WASC 257 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- First Plaintiff
WILLIAM BUCK HOLDINGS (WA) PTY LTD
Second Plaintiff
AND
CRAIG PETER FAULKNER
First Defendant
LEDGER FAULKNER PTY LTD
Second Defendant
CSF CORPORATE PTY LTD
Third Defendant
(BY ORIGINAL ACTION)
CRAIG PETER FAULKNER
Plaintiff
AND
WILLIAM BUCK (WA) PTY LTD
First Defendant
- WILLIAM BUCK HOLDINGS (WA) PTY LTD
Second Defendant
MARK PETER COLLINS
Third Defendant
STEPHEN KENNETH BREIHL
Fourth Defendant
CHRISTOPHER JOHN BROWN
Fifth Defendant
FRANK DEL BORRELLO
Sixth Defendant
DAMON ALLAN HARRIS
Seventh Defendant
ROBIN BOYD JUDD
Eighth Defendant
(BY COUNTERCLAIM)
BETWEEN : CSF CORPORATE PTY LTD
- Plaintiff
AND
WILLIAM BUCK HOLDINGS (WA) PTY LTD
Defendant
Catchwords:
Expert evidence - Leave - Statutory oppression action - Valuation evidence - Objection to inspection - Own case privilege - Further and better discovery of documents
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Legislation:
Corporations Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA)
Result:
Leave to lead expert evidence refused
Amendments into the amended statement of claim be disallowed
Request for further and better discovery refused
Category: B
Representation:
CIV 2995 of 2011
Original Action
Counsel:
First Plaintiff : Mr D H Solomon
Second Plaintiff : Mr D H Solomon
First Defendant : Mr M Bruce
Second Defendant : Mr M Bruce
Third Defendant : Mr M Bruce
Solicitors:
First Plaintiff : Solomon Brothers
Second Plaintiff : Solomon Brothers
First Defendant : Bennett & Co
Second Defendant : Bennett & Co
Third Defendant : Bennett & Co
Counterclaim
Counsel:
Plaintiff : Mr M Bruce
First Defendant : Mr D H Solomon
- Second Defendant : Mr D H Solomon
Third Defendant : Mr D H Solomon
Fourth Defendant : Mr D H Solomon
Fifth Defendant : Mr D H Solomon
Sixth Defendant : Mr D H Solomon
Seventh Defendant : Mr D H Solomon
Eighth Defendant : Mr D H Solomon
Solicitors:
Plaintiff : Bennett & Co
First Defendant : Solomon Brothers
Second Defendant : Solomon Brothers
Third Defendant : Solomon Brothers
Fourth Defendant : Solomon Brothers
Fifth Defendant : Solomon Brothers
Sixth Defendant : Solomon Brothers
Seventh Defendant : Solomon Brothers
Eighth Defendant : Solomon Brothers
COR 174 of 2011
Counsel:
Plaintiff : Mr M Bruce
Defendant : Mr D H Solomon
Solicitors:
Plaintiff : Bennett & Co
Defendant : Solomon Brothers
Case(s) referred to in judgment(s):
Alba Nominees Pty Ltd v Cecil Bros Pty Ltd (Unreported, WASC, 12 December 1997)
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305
William Buck (WA) Pty Ltd v Faulkner [No 2] [2012] WASC 257
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1 KENNETH MARTIN J: These two actions, heard together, are set down for an eight day trial, commencing on 18 March 2013. They continue to generate high levels of interlocutory disputation seemingly unable to be resolved by the usual conferral processes.
2 The latest disputation erupted shortly prior to a routine directions hearing fixed for 31 January 2013.
3 The present disputation concerns, broadly, three areas:
(a) opposed leave for the William Buck parties (plaintiffs in CIV 2995 of 2011 and defendant in COR 174 of 2011), to adduce expert valuation evidence by a report from a valuer as to the worth of the approximate 5% shareholding held by CSF Corporate Pty Ltd (CSF Corporate) (trustee of Mr Craig Faulkner's trust) in William Buck Holdings (WA) Pty Ltd. The expert valuation evidence is sought to be adduced in the statutory cause of action advanced by CSF Corporate for shareholder oppression and for consequent relief pursuant to the Corporations Act 2001 (Cth);
(b) objections by the William Buck parties to certain amendments recently introduced into the statement of claim (ASOC), filed 24 January 2013, in the statutory oppression action COR 174 of 2011. The defendant asserts that certain of the amendments introduced without leave (as permitted if made more than seven weeks before the commencement of trial) are objectionable and so should be disallowed pursuant to O 21 r 3(6) of the Rules of the Supreme Court 1971 (WA). The amendments impugned are said to:
(i) unduly expand the ambit of the Corporations Act oppression action at a late stage in the litigation (commenced late 2011);
(ii) carry a consequence of requiring the defendant to reproof witnesses, redraw or supplement its witness statements already prepared, to such a degree the exercise would be oppressive, particularly given limited time between now and the commencement of trial and existing burdens of other pre-trial tasks which have been programmed and are required to be carried out before 18 March 2013;
(iii) not be capable of being fairly or properly answered by the William Buck corporate defendant in the time available before trial and if not disallowed, require that defendant to
- seek an adjournment of the March trial on the basis of an overall unfairness to it, by reason of an inadequate time to prepare.
- (c) demands by the Faulkner entity, from the defendant, for inspection of further documents by further and better discovery, which are resisted by the William Buck parties. This opposition is for reasons explained in recent correspondence passing between the parties' solicitors. In one insistence, refusal is based on an invocation by the William Buck party of what is said to be the 'own case' privilege against inspection.
4 I deal with each of the three main areas of disputation, in turn.
A. Opposed leave sought by the William Buck corporate defendant to adduce expert valuation evidence in the Corporations action
5 CSF Corporate seeks as relief in the statutory oppression action:
the winding up (of the William Buck corporation defendant), alternatively orders requiring the purchase of the plaintiff shares in the defendant corporation at a value to be determined (my emphasis in bold).
6 For convenience, I refer to the alternate relief sought in the statutory oppression action as a 'buy out order', concerning the minority (approximately 5%) shareholding still held in the William Buck corporate defendant.
7 Bearing in mind that alternate relief, which has been clearly sought from the outset by CSF Corporate's pleading for a buy out order regarding its minority holding of shares, the expert valuation evidence as is sought to be adduced by the defendant under a 23 November 2012 report of Julie Anne Planinic (the Planinic report), is plainly relevant, indeed at the heart of the action.
8 Nevertheless, CSF Corporate says the timetabling directions made to date (essentially by consent between the parties) do not yet address the issue of the exchange of expert evidence between the parties. Consequently, the plaintiff says it has not yet even engaged its own expert valuer, let alone reached a point of being in a position to provide an expert report about the value its minority shareholding interest, in order to exchange a report prior to trial or permit a pre-trial expert conferral.
9 On 7 December 2012 lengthy objections to the admissibility of the proposed evidence of the William Buck parties witness statements were
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- delivered. These comprise 28 pages of objections. At page 25 reference is made to the 'witness statement of Julie Anne Planinic dated 23 November 2012'. Objections taken were expressed in regard to 'all of that report'. The basis of the first objection to the Planinic report was that 'no leave to file expert evidence has been granted to the William Buck parties'.
10 A further objection was taken on the basis that underlining facts forming the foundation of the opinion had not been established in accord with principles explained by Heydon JA (as he then was) in Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305.
11 Parties' subsequent conferral efforts have failed to resolve the plenary objection to the receipt of Ms Planinic's report at the looming trial.
12 I was told without objection at the directions hearing on 31 January 2013 that CSF Corporate had already caused a subpoena to be issued to Ms Planinic's firm, Lonergan Edwards & Associates Limited (of George Street, Sydney). That subpoena sought production of Ms Planinic's draft valuation reports. A copy of the subpoena was handed to me without objection.
13 Hence it was argued that, as appears, some active steps were being taken on behalf of CSF Corporate to engage upon the expert evidence proposed to be led from Ms Planinic. Nevertheless, CSF Corporate contends that it would now be prejudiced if the trial were allowed to proceed on a basis of receiving the Planinic expert evidence, in circumstances where leave has not yet been sought or given pursuant to O 36A of the Rules of the Supreme Court for that expert evidence to be adduced at trial.
14 It is apparent that leave to adduce expert evidence at the trial is required. Ordinarily, the exchange and receipt of such evidence would be routine and uncontentious, provided the issue is dealt with a reasonable period before trial, sufficient to allow each party the opportunity to secure the services of an expert, to obtain a report and for the experts to confer before trial in an endeavour to distil and crystallise true issues between them (if any).
15 That CSF Corporate, as plaintiff in a statutory oppression action, is not currently in a position to adduce expert evidence as to the value of its minority shareholding in the defendant is surprising. This is particularly so in circumstances where Mr Faulkner is himself an accountant. He and
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- his advisers should have had an appreciation that the 'sharp edge' of his statutory oppression action is all about the assessed value of the minority shareholding (at various particular point(s) in time).
16 Mr Faulkner cut his ties with the William Buck Group in September 2011 in contentious circumstances. These events essentially form the underlying disputes in the action CIV 2995 of 2011.
17 Mr Faulkner not having yet engaged an expert to advise him as to the likely value of his minority shareholding in the corporate defendant is unhelpful.
18 In early 2012, the parties engaged at my direction in efforts to resolve both actions by a court sponsored mediation. I am, of course, not at all privy to what occurred, other than to observe the obviously unsuccessful outcome. But, for a meaningful mediation to be engaged over what involves a buy out order dispute, it surprises me that Mr Faulkner would not have caused CSF Corporate to have the benefit of some independent expert valuation concerning the 5% minority parcel of shares in the William Buck corporate defendant. From a distance it is difficult to see how any meaningful settlement discussion could occur in circumstances where the base value issue had not been professionally evaluated on both sides.
19 Counsel for CSF Corporate told me that were the court to conclude a buy out order for the minority holding of shares was the appropriate remedy (rather than winding up) that the hearing should stop at that point and an expert report commissioned, then for the matter to be brought back later for a subsequent value determination.
20 Unfortunately, that procedural assumption was not canvassed with me at an earlier time, nor indeed immediately after the Planinic report was exchanged on 23 November 2012. At an earlier point I did reject an (opposed) application by the William Buck parties seeking a determination of preliminary issues, as regards what looks to be a messy issue over partnership, or quasi-partnership, to be assessed in a labyrinth of underlining corporations forming components of a so called William Buck Group. I rejected the preliminary issue application. A ground of rejection was that I saw more utility in the parties sorting out all their disputes at the one time, via the medium of one trial. I remain of that view.
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21 I am not attracted to the prospect of there being utility in carving off a valuation aspect of the present dispute for separate and later determination.
22 Regrettably, however, I assess it overall to be unjust to allow only one side to adduce expert evidence at trial, or to effectively deprive the other party of that opportunity. The necessary leave to adduce expert evidence has not been granted to this point. I accept that forcing CSF Corporate to scramble to engage and obtain a report from an expert would require access to financial documentation from the William Buck parties, not yet sought. (I note counsel for the William Buck parties' expression of an amenability to make that financial information available when requested.)
23 In what are unsatisfactory circumstances overall, an unfairness in giving leave to adduce expert evidence in a practical sense to only one side now, leaving the other side vulnerable, is the prevailing consideration. To possibly ameliorate an inefficient and undesirable interruption to bringing the trial to completion, I am attracted by a potential to engage an independent assessor, if necessary, to make the determination between the parties as to an appropriate buy out value for CSF Corporate's minority shareholding in the William Buck corporate defendant.
24 I asked counsel for CSF Corporate to obtain instructions about that option during the course of the directions hearing on 31 January 2013. I have subsequently been advised that it is amenable. Counsel for the William Buck corporate defendant accepted that course, were it the only option if statutory oppression is established. He made it clear, however, that the underlining basis for relief, namely statutory oppression under the Corporations Act, is refuted.
25 Accordingly, the option of an independent assessor's report, depending upon outcomes in the trial, presents as a way of advancing the issue of the valuation exercise, if necessary. I will keep that option 'on the table' as the trial unfolds. I will revisit its implications and a more precise formulation of orders subsequently, if and when appropriate.
26 In the end then, I am not amenable to what would be a grant of unilateral leave for the William Buck corporate defendant in COR 174 of 2011 to lead the expert opinion evidence of Ms Planinic at the trial commencing on 18 March 2013. Leave to adduce expert evidence,
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- generally, is a matter that may arise at a future time and will then be dealt with on a bilateral basis.
27 Accordingly, expert valuation issues concerning a 5% plaintiff's minority shareholding, if they arise, must be held over. The present application concerning leave, just for Ms Planinic's report, is refused.
28 The costs assessment with this aspect of the application should be reserved.
B. Objections to aspects of the ASOC amendments of 24 January 2013
29 The application for disallowance, concerns:
(a) amended paragraphs 6.5A and 12.6 (raising issues about the William Buck corporate defendant arranging and paying for life insurance and 'key man' insurance for each equity partner/director and subsequently the cancellation of policies put in place concerning Mr Faulkner, after he severed ties with the William Buck Group in September 2011.
Mr Faulkner was advised of cancellation of these policies by Ms Helen Withers on behalf of the William Buck corporate defendant on 18 November 2012.
(b) amendments under ASOC, being pars 6A, 8 and 12.5, concerning the 'GNS' Group and an assertion of a 'position of conflict' by each of 'GNS' William Buck Partners, so called.
30 I am of a view the first tranche of amendments is unobjectionable, but the second must be disallowed.
31 The amendments concerning life insurance and key man insurance, are, viewed overall, relatively minor in my assessment. The contentions as to failure to continue life insurance and key man policies concerning Mr Faulkner ought not, as I assess the allegations, generate an undue hardship, or undue resourcing concerns by their investigation and answer at trial. Such amendments should be capable of being addressed by Ms Withers (a witness for the defendants at trial). As well, I would think the recent expense records of the William Buck corporate defendant would determine whether or not, as is contended, these policies were not renewed concerning Mr Faulkner or were cancelled, around November 2011.
(Page 11)
32 If those underlying facts are established then a more important underlying question to be resolved is basically one of law, concerning whether such conduct is capable of being assessed as oppressive against a shareholder, or possibly some component of an overall statutory oppression.
33 I would not in the end interfere with this tranche of amendments, on their relatively minimal impact, which I assess they carry, in the preparing for this trial, overall.
34 On the other hand, my assessment of the amendments concerning the 'GNS' Group, is different. I do assess the potential repercussions towards the trial as regards what is sought to be carried under these amendments as being far more extensive. This carries serious potential to derail a timely completion of the eight-day trial.
35 Of course, reference to the 'GNS' Group is already raised under CSF Corporate's pleading, by averments as to Mr Faulkner's 'concerns' about that entity and its dealings with the William Buck corporate defendants, 'not being addressed'.
36 Prior to the amendments under ASOC as regards the 'GNS' Group which are now challenged, the pleaded relevance of the 'GNS' Group was, in a context of Mr Faulkner's assertion there should be an investigation about matters concerning that group and, beyond that, when Mr Faulkner raised his concerns about 'GNS' matters, including at directors' meetings, his concerns had not been addressed, or at least not addressed to his satisfaction. That aspect of the oppression case remains.
37 But the presently challenged amendments as to the 'GNS' Group escalate to the level of an asserted 'conflict of interest'. This pushes matters considerably further. I am also concerned that at a late stage of the action, no proper particulars of the asserted conflict are provided under the amendment concerning the assertion, see par 6A.3.
38 The plaintiff says that these amendments concerning conflict arise out of what is in the defendant's exchanged witness statements concerning 'GNS'. But my view is that the range of wider issues delivered under the amendments and their likely trial repercussions as regards raising acquiescence defences or the like, as explained to me by counsel for the William Buck corporate defendant, delivers genuine potential to derail the trial, if they stand.
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39 Furthermore, excursions into the merits or demerits of the asserted conflict of interest seem to me to carry potential to inappropriately shift focus from what is, at root, a statutory oppression action concerning a minority shareholding interest of approximately 5% (in circumstances where Mr Faulkner has severed ties with the William Buck Group in September 2011, but was left with a residual shareholding via CSF Corporate) to a full blown fiduciary duty breach battle. The proper focus of the statutory oppression action should be upon winding up relief (as the plaintiff says it is the primary relief it wants) or upon just exit terms for buying out the minority share.
40 This trial must not degenerate towards the hour by hour canvassing of old partnership events concerning non-addressed grievances within workings of an accounting partnership, or quasi partnership. The exercise must be one of evaluating a pragmatic and just severance of ties, rather than some over-indulgent therapy trailing over unforgiven business relationship traumas of past days.
41 The plaintiff remains at liberty to pursue its original plea concerning the 'GNS' Group, to the extent that he can demonstrate that this relevantly bears upon statutory relief or oppression, but the conflict allegations go too far, too late.
42 In the end, I will not interfere with the ASOC amendments which are pars 6.5A and 12.6. However, I disallow the ASOC amendments at pars 6A, 8 and 12.5.
43 Costs associated with these orders should be in the cause of COR 174 of 2011.
C. Further and better discovery requested by CSF Corporate and resisted by the William Buck corporate defendant
44 Correspondence passing between the parties' solicitors upon this issue is found at the end of the affidavit of Douglas H Solomon, affirmed 21 January 2013, between pages 90 to 96. Four broad categories of requested further discovery or inspection are sought emerging from that correspondence. One category, as to the final version of a document called the 'Bishop Exit Deed', is no longer contentious as between the parties. It has been made available.
45 That concession leaves the residual disagreement over further documents set out in the plaintiff's minute of proposed orders of 29 January 2013, being:
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- (a) documents concerning loan transactions with 'GNS';
(b) employment contracts, for all equity partners/directors of the William Buck Group; and
(c) employment contract of Andrew William Frontino.
46 Categories (b) and (c) may be dealt with together assessed, on the basis of common underlying considerations.
47 Historically, for these two actions categories of discovery have been agreed between the parties. Discovery and inspection proceeded on that basis. To the extent that there have been a few minor disagreements over disputed categories of documents, I resolved such matters (see my earlier 2012 reasons (William Buck (WA) Pty Ltd v Faulkner [No 2] [2012] WASC 257).
48 For 'GNS' loan transactions, the documents sought are said to arise out of what is found in certain paragraphs found in exchanged witness statements of the defendant's witnesses Messrs Collins, Judd, Del Borello and Brown (who are referred to as 'GNS' directors). The loan documents are being sought on a basis that witness statements assert that 'on various occasions' the above witnesses 'lent money to GNS to pay outstanding fees due to William Buck'.
49 The request for these documents was issued on 24 January 2013. A response from the defendant's solicitors the next day was to resist, on the basis of 'own case' privilege. Supporting that principle as still being presently alive in Western Australia, so as to deny inspection, I was referred to the unreported decision of Parker J in Alba Nominees Pty Ltd v Cecil Bros Pty Ltd (Unreported, WASC, 12 December 1997) see pages 12 - 13. I accept the principle has not been abolished in Western Australia, as it has been in some other Australian jurisdictions.
50 Resisting inspection, it is said by the William Buck corporate defendant that documents relating to loan transactions with 'GNS' by the directors concerned, do not support the Faulkner parties' case (including in the case of CSF Corporate), or would not impeach the William Buck Group parties' case. It was also said that providing the documents was disproportional in a resourcing sense, applying principles applicable to modern case flow management from O 1 r 4B of the Rules of the Supreme Court.
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51 On 25 January 2013, the Faulkner parties' solicitors expressed disagreement over the inspection refusal stance concerning 'GNS' loan documents. Relevance was pressed, by reference to a defence plea in par 6.2 to the effect all William Buck Group 'equity directors' (a concept somewhat curious in its own right) would be given disclosure of the relationship between the Asian based 'GNS' and the William Buck Group, on a regular basis, at various times. (By this plea it is contended Mr Faulkner was kept appraised of relevant details concerning the business relationship between 'GNS' and the William Buck Group.)
52 The plaintiff's solicitors also assert 'issues of conflict inherent in the relationship between William Buck and 'GNS' are central to the issues to be tried in the action'. Clearly now, I do not accept this latter assertion. My rejection of the amendments to that end in the ASOC, expanding the 'GNS' relationship towards a conflict of interest case, dictates my conclusion at this level. The amendments go well beyond Mr Faulkner's unaddressed concerns at director's meetings or the like, in an underlying context of arguments as to statutory oppression.
53 Nevertheless, witness statements as exchanged from the William Buck corporate defendant in the statutory oppression action do appear themselves to raise a sub-issue as to payments, so William Buck (WA) fees could be met. In that circumstance I think it appropriate that the underlying documents, even those which go to support that assertion, be provided. I do not assess the abiding principle of own case privilege against inspection to inhibit this result. If it did the consequence would be a denial of transparency by proper verification of a verbal assertion about payments being made. It is not difficult to hypothesise at a point prior to trial, a possible basis upon which such documents could be used by the Faulkner party at trial to diminish the William Buck parties' case concerning an asserted stance as to full disclosure over 'GNS' and these loans. The own case privilege claim is not applicable.
54 These loan related documents should be provided for inspection. Assertions as to own case privilege are rejected. So also is the allied as asserted disproportionality of the resources involved argument. From what is before me I do not envisage a document inspection exercise limited to documentation concerning loans made by four men concerned with 'GNS' would be a too onerous task to assemble and provide for inspection, even at this time.
55 Remaining categories (b) and (c) concern employment contracts of some existing and the one former William Buck director/partner. By way
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- of objection there is said to be an absence of relevance and a disproportionality in provision of these documents as further and better discovery (par 3 of the correspondence of 25 January 2013).
56 The plaintiff's solicitor's correspondence of 24 January 2013 asserts as regards these employment contracts, that just those of Mr Faulkner and a Mr Peter Hills, have been discovered to date. Seemingly, it seems to be suggested that the employment contracts of all other parties is required, automatically.
57 Assessing the pleadings and passing correspondence provided to me, I accept the opposition stance of the William Buck corporate defendant. In a context of what is already a very considerable volume of documentation turned over between the parties to date, the request for provision of these employment contracts, on a basis they are self evidently relevant and should be produced, with no further explanation, is not sufficient.
58 In the circumstances, I refuse this aspect of the request.
Implementation of these reasons
59 These reasons will be provided to the parties electronically. They can then confer over appropriate orders, in consequence. In an absence of agreement, the William Buck corporate defendant should within 48 hours prepare and submit a minute of proposed orders giving effect to the reasons.
60 As to costs, I am of the prima facie view that they should lie in the cause of the statutory oppression action, save where I reserved the costs concerning the Planinic Report.
61 As is apparent, there has been a measure of success and failure between the parties across various issues canvassed on this application. Save for the Planinic Report I am of the view 'costs in the cause' is, prima facie, the appropriate order.
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