Fibre-Tek (Gold Coast) Pty Ltd , Re [2000] QSC 182

F1 oo'D 1ol X oe oo( 13J. State Reporting Bureau TRANSCRIPT OF PROCEEDINGS Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION FRYBERG J No 5909 of 1999 IN THE MATTER OF THE CORPORATIONS LAW and REVISED COf>fES fS$UED State Reporting Bureau Date I I;)- I 61-() IN THE MATTER OF FIBRE-TEK (GOLD COAST) PTY LTD ACN 010 811 980 BRISBANE .. DATE 21/01/2000 JUDGMENT 1 llli 1'111 11 1', TIil: l.:m Courts. G.:11n!t: Slr,:cl, llrislt:111,:, O. -11100 Tcl.:11111111.:: rfl7l J2 ➔ 7 ➔ Jlifl F:,x: r07l J2 ➔ 7 55.12 -- 1 of 10 -- 21012000 Tl/SE25 M/T 6801/2000 (Fryberg J) HIS HONOUR: I am now giving reasons for orders which I made last night for the disclosure of documents. The disclosure application was made in the context of an application for leave to commence proceedings pursuant to lO section 459P(3) of the Corporations Law. Last Tuesday I dismissed an application by the respondent company, Fibre- Tek (Gold Coast) Pty Ltd, to strike out the application for leave for want of prosecution. There had been some delay in the leave proceedings, though the delay was at least in part explained. After making my order on Tuesday I proposed to give directions to ensure the expeditious resolution of the proceedings. Counsel advised me that the only outstanding pre-trial matter was a request for disclosure by the applicant with which the respondent refused to comply and orally sought an order for disclosure. The respondent resisted an immediate hearing of the matter as no notice had been given. I proposed to hear the application today but when counsel for the respondent said that today would be impossible for him personally, I agreed to list the matter at 6.00 p.m. last night. I ordered that the respondent forward a letter to the applicant setting out the form of order, if any, to which the respondent would be agreeable by 10.00 a.m. yesterday. 2 JUDGMENT io 20 40 50 60 -- 2 of 10 -- 21012000 Tl/SE25 M/T 6801/2000 (Fryberg J) On 19 January, the day before yesterday, the respondent's solicitors sent a letter to the applicant's solicitors in purported compliance with that direction. The letter did not in fact set out any form of order and the solicitor for the respondent made it clear to me yesterday in argument that it was intended to indicate that there was no agreement to any order for disclosure whatsoever. The letter made a number of proposals for the future disposition of the matter. It asserted great difficulty in identifying the issues in the proceedings and the grounds relied upon in the application for leave. It contended that the applicant could proceed for the winding up of the respondent in either section 246AA or section 461 and section 462 of the Corporations Law. It suggested that the applicant should file points of claim and that the application should be converted to one under either of the sections nominated. When the matter came on yesterday I refused an application for an adjournment by the respondent. That application was based on a number of grounds (including the unavailability of counsel) and I gave reasons at the time for refusing that application. As to the substantive issues argued last night, three grounds were put forward for resisting an order for disclosure. The first was that the policy of the rules 10 20 10 30 w 40 30 50 ,r') demonstrated that applications (as opposed to claims) were 60 3 JUDGMENT -- 3 of 10 -- 21012000 Tl/SE25 M/T 6801/2000 (Fryberg J) intended to be resolved expeditiously and cheaply and that the policy of the rules was against the ordering of disclosure save where it was absolutely necessary. I agree that the rules demonstrate an intention to save the incurring of unnecessary costs. However, it seems to me that where parties are genuinely in dispute and proceedings have been commenced by way of application mandatorily under the Corporations (Queensland) Rules, one must look at the particular nature of the proceedings to see whether an order for disclosure is warranted. In the present case the question of disclosure is related 10 20 to the question of insolvency. Indeed it is limited to 10 that question for reasons which I shall explain shortly. Solvency is a matter peculiarly within the knowledge of the respondent. The applicant would understandably have difficulty in advancing its case without disclosure. I do not, in saying this, mean to give any comfort to those who would wish to embark upon fishing expeditions. I agree with what was said on the subject of fishing by Justice Bryson in Re Kolbac Group Limited (1991) 4 Australian Companies and Securities Reports 165. However, the present case is one where, it seems to me, the applicant is genuinely entitled to discovery notwithstanding any policy discernible from the rules and it is one where the leave which the rules contemplate can be given, should be given. 4 JUDGMENT 30 w 40 30 50 60 -- 4 of 10 -- 21012000 Tl/SE25 M/T 6801/2000 (Fryberg J) The second argument advanced on behalf of the respondent against disclosure was that it was unnecessary. It was submitted that the section requires the applicant only to demonstrate a prima facie case of insolvency in order to prove the necessary element for the grant of leave. That 10 is no doubt true. It was argued that in the principal proceedings for leave, the evidence is all one way; that is, the applicant's evidence of insolvency is uncontradicted by any affidavit evidence from the respondent and therefore only one conclusion would be open. Hence, disclosure was unnecessary. The difficulty with that argument is that the respondent expressly refused to undertake not to contest the issue of insolvency and retained the right to cross-examine the applicant's witnesses on the topic. Plainly insolvency is still very much in issue between the parties, notwithstanding that the respondent has not put in any evidence on the topic. I should interpolate that the evidence is to be given by affidavits and all affidavits have now been filed. There is no need in the present case for me to decide whether the decision on the question of leave involves the exercise of a wider discretion than that involved in determining solvency. As to that point see the decision of Justice Lindgren in Bingham v. Iona Corporation Pty Ltd (1995) ·16 ACSR 436. 5 JUDGMENT 20 20 40 50 60 -- 5 of 10 -- 21012000 T2/SE25 M/T 6801/00 (Fryberg J) In the present case the applicant has made it clear in a letter dated 20 January 2000 that the only discovery which it seeks is limited to the issue of insolvency and the form of order which it proposed in its letter of that date makes that perfectly plain. Insolvency is, as I have said, a 10 relevant issue even if it is to be decided only at a prima facie level. It is an essential issue and it is one, having regard to the fact that it is an issue, upon which there ought to be disclosure of documents. Finally, the applicant argued that the application should be refused on the ground that the principal application, that is the application for leave, constituted an abuse of process of the Court. Interestingly enough, that argument was not advanced during the proceedings to dismiss the principal application heard by me earlier in the week. It was argued that disclosure should be refused because the principal application would at the trial inevitably be dismissed on the grounds that it was brought for a collateral purpose and was not bona fide. The collateral purpose was asserted to be the advertising of a winding up application and the possible acquisition of confidential information by a trade competitor. The applicant is a shareholder of the respondent and apparently is in competition with it to some extent. It was· argued that the application was not bona fide because the value of the applicant's shareholding as a 6 JUDGMENT 20 3G 50 60 -- 6 of 10 -- 21012000 T2/SE25 M/T 6801/00 (Fryberg J) contributory was purely nominal and the applicant had no standing as a creditor. It was inconceivable that the applicant should wish to bring proceedings under section 459P when it could bring proceedings under section 461(1) (e) or (k) or section 246K without the need to obtain 10 leave. Interestingly, however, the respondent did not concede that applications under any of those grounds would necessarily succeed, merely contenting itself with pointing out that the applicant asserted facts which might constitute such grounds and did not abandon those assertions. Reference was made in support of this argument to the Kolbac decision to which I have already referred. It was argued further that the application should be dealt with as a claim and that pleadings should be exchanged. That was a reference to rule 14, which provides that the Court may order that proceedings continue as if started by claim when they have been started by application. It was submitted that this course was necessary in order to enable the issues to be determined. As to the last point, it may be true that it is desirable to identify the issues. However, it is not necessary to do for the purposes of the present application. The one issue on which disclosure is sought is the issue of insolvency and that is undoubtedly one of the issues. There can be no argument on that. 7 JUDGMENT 20 20 40 50 60 -- 7 of 10 -- 21012000 T2/SE25 M/T 6801/00 (Fryberg J) It is interesting to note that the submission of the respondent that there should be an order under rule 14 is really inconsistent with its ultimate position that there ought to be no disclosure of documents, since, if the action is to proceed as though it were initiated by claim, 10 disclosure of documents would be an entitlement of the applicant without the need to make an application. As to the other arguments, it seems to me that I ought not on an application for disclosure, to pre-emptively resolve contested questions which will fall for resolution at the ultimate hearing, particularly when there has been an opportunity to bring an application to strike out the proceeding as an abuse of process which has not been taken advantage of. The fact that if leave is ultimately granted, the application may in due course be advertised is a consequence of the legislation. No doubt the trial Judge will be in a position to take that fact into account if it is relevant and give it such weight as he or she sees fit in deciding if leave should be granted. The other matters are not so overwhelmingly persuasive as to satisfy me that the principal application is inevitably doomed. I think that a Court should be slow to decide such matters pre-emptively on an application such as the present. Certainly the material does not induce in me the 8 JUDGMENT 20 3G 50 60 -- 8 of 10 -- 21012000 T2/SE25 M/T 6801/00 (Fryberg J) sense of inevitability which would be necessary in order to take that course. The fact that the applicant is a trade competitor is a material fact but that difficulty is overcome by making an order of the type made in Fielder v. Gillespie and the applicant did not resist an order being made in that form. That should ensure that there is no risk to the respondent from the disclosure process for that reason. There was an alternative argument advanced on behalf of the respondent that any discovery should be restricted to debts which the applicant should first be required to particularise. It seems to me that such an approach would be artificial. The question is whether or not there is a prima facie case for insolvency such as to warrant a grant of leave. On the face of things the requirement for leave would seem to be designed to prevent the advertising of insolvency by persons who did not have an immediate interest in the question of solvency unless the Judge was satisfied that it was an appropriate case for that to occur. The Judge ought 10 io t n 30 to have before him the full range of evidence on the issue so when he comes to decide that point. To restrict the issues to nominated debts already in the knowledge of the applicant would, in my view, be artificial. It does not seem to me that, in seeking 9 JUDGMENT ,.,.-, ·-~ j , 60 -- 9 of 10 -- 21012000 T3/SE25 M/T 6801/00 (Fryberg J) disclosure of documents, the applicant is embarking upon a fishing expedition but rather seeking to reinforce its case for leave on an essential point. For those reasons, I determined last night that there should be disclosure of documents. Counsel for the applicant was agreeable to the period of 14 days requested by the responc;:ient and to an order, as I have said, in the form proposed in Fielder and Gillespie. I determined last night that the costs of the application should be reserved to the Judge hearing the application for leave and requested the parties to bring in this morning an draft order giving effect to the determinations which I announced last night. Do we have the draft order? HIS HONOUR: There will be an order as per draft initialled by me and placed with the papers. 10 JUDGMENT 10 20 20 40 JO 50 4() 60 -- 10 of 10 --