FEDERAL COURT OF AUSTRALIA

Noble Investments Pty Ltd v Southern Cross Exploration NL [2008] FCA 1756

NOBLE INVESTMENTS PTY LTD ACN 007 998 914 IN ITS OWN CAPACITY AND AS THE TRUSTEE FOR THE NOBLE INVESTMENTS AND CONSULTING SERVICES TRUST AND THE NOBLE INVESTMENTS SUPERANNUATION FUND, LEADENHALL AUSTRALIA LIMITED ACN 007 997 248 and CHI INVESTMENTS PTY LTD ACN 064 569 035 v SOUTHERN CROSS EXPLORATION NL ACN 000 716 012

SAD 165 of 2008

LANDER J

14 NOVEMBER 2008

ADELAIDE

IN THE MATTER OF SOUTHERN CROSS EXPLORATION NL ACN 000 716 012

THE COURT ORDERS THAT:

1.                  Mr Hoffmann QC, Mr Doyle, Mr Clarke, and Mr Leech and Ms Chutes be released from their confidentiality undertakings made to the Court and the defendant in action number SAD 10 of 2007 to the extent that they be permitted to disclose the contents of the statement of claim, exhibited as exhibit JCC1, and the documents included in exhibits JCC8, 9, 10 and 11 to the affidavit of Mr Clarke sworn on 23 September 2008, upon Mr Lebbon giving an undertaking in the terms of the confidentiality undertaking in exhibit JCC11 to the affidavit of Mr Clarke, being pages 170 and 171.

2.                  The defendant pay the plaintiffs’ costs of the application for release from the confidentiality undertakings.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE MATTER OF SOUTHERN CROSS EXPLORATION NL ACN 000 716 012

REASONS FOR JUDGMENT

1                     On 25 January 2007 the plaintiffs in the proceeding before me commenced a proceeding against the defendant (Southern Cross) seeking orders that Mr Timothy Lebbon be appointed a director of the defendant and consequential orders.  That proceeding changed its character as it progressed to a proceeding whereby the plaintiffs sought pre-trial discovery of documents from the defendant.  On 7 August 2007 Finn J made orders giving the plaintiffs access to, and inspection of, and the right to copy, a number of documents in the defendant’s possession, which are set out in schedule 2 to his Honour’s orders.  The orders were made on the basis that the plaintiffs’ solicitors give a confidentiality undertaking to the Court but allowed those solicitors to copy the documents to counsel in the proceedings and to a further solicitor, and to a secretary of the solicitors.  In due course, the documents were discovered, inspected and copied and, as a consequence, the proceeding which is presently before me was commenced on 2 October 2008.

2                     As can be seen from the orders which were made by Finn J, none of the plaintiffs’ officers were entitled to inspect the documents at any time prior to the commencement of the proceeding.

3                     This proceeding was commenced by the plaintiffs’ solicitor swearing an affidavit to which he exhibited, amongst other documents, the proposed statement of claim in this proceeding.  The originating application was filed together with that affidavit.  The originating application was redacted itself so as not to disclose the contents of any of the documents which had been discovered.

4                     The plaintiffs sought in an interlocutory application which was filed with the originating application, an order that counsel and their solicitors be released from their confidentiality undertakings so that they can disclose the contents of the originating application, the statement of claim, and the documents which have been discovered, to Mr Lebbon who is a director of each of the plaintiffs and, I think, might be described as the moving force of each of them.

5                     The application was opposed by the defendant.  The defendant, at an earlier hearing before me, informed me that it would make an application pursuant to s 31A of the Federal Court Act to have the proceeding dismissed for the grounds identified in s 31A.  The defendant also indicated that it would make an application to have the matter transferred to Sydney.  At the last hearing, the defendant consented to the originating application being made available to Mr Lebbon for the purpose of providing advice to Mr Lebbon and seeking instructions from him in this proceeding.

6                     The matter was adjourned until today so that the further aspect of the plaintiffs’ application in relation to the statement of claim, and to the documents which had been discovered, could be determined.

7                     The defendant has maintained its opposition to the plaintiffs’ application.  The defendant asserts that the plaintiffs, through Mr Lebbon, have brought this proceeding for a commercial advantage.  They say the plaintiffs, which have 25% of the issued capital of the defendant, are seeking to obtain a commercial advantage in relation to the sale of its shares either to Mr Ganke, a director of the plaintiffs, or by way of reduction of capital of the defendant.  They say in those circumstances it would be inappropriate for Mr Lebbon to have access to the documents.  They contend that Mr Lebbon is, in his own description, a very experienced businessman who has considerable advantage in relation to commercial matters and, in those circumstances, does not need either to see the statement of the claim or the discovered documents in order to instruct his solicitors and counsel.

8                     A consideration of this application can be addressed by assuming it to be the case that each of the documents which have been discovered is relevant to the proceeding which has been commenced.

9                     The plaintiffs and the defendant are not in a position of commercial rivalry.  It may be, as Mr Kunc SC has argued for the defendant, that the plaintiffs and Mr Ganke are in a position of commercial rivalry but that is another matter.  The plaintiffs and the defendant are not.  The information which is enclosed in the documents is not price sensitive.  Mainly, it is information which discloses, historically, a transaction which took place in the order of 24 years ago, which has led to the acquisition by the defendant of an asset.

10                  It would be inappropriate for me in these reasons to disclose the nature of the transaction or the contents of the documents, because to do so would effectively mean that the defendant’s right to seek leave to appeal from this decision would have been rendered nugatory, because the information would have become public by the reasons themselves.  I will disclose only such information which I think is relevant for the purpose of determining why I have reached the decision which I have and not disclose the contents of the documents which are said to be confidential.

11                  The defendant owns about 20% of the capital of Nadi Bay Beach Corporation Limited (Nadi Bay Beach Corporation).  The defendant owns the whole of the capital of Northern Star Investment Pty Limited (Northern Star), which also owns about 20% of the capital of Nadi Bay Beach Corporation.  Nadi Bay Beach Corporation is incorporated in Fiji and has its registered office in Fiji.  It is the owner of apparently quite valuable real estate at Nadi Beach.  The directors of Nadi Bay Beach Corporation are Mr Ganke and Ms Goh.  Mr Ganke and Ms Goh are also two of the directors of the defendant.

12                  At one stage, Nadi Bay Beach Corporation Limited was indebted to Aureole.  At some stage in 1988, Aureole transferred its interest in the mortgage to Mr Ganke.  Mr Ganke, in turn, transferred his interest in the mortgage to, as to 25%, Southern Cross and, as to 25%, Northern Star.  The remaining 50% was held by Mr Ganke and the two companies controlled by Mr Ganke.  The mortgage which was originally given by Nadi Bay Beach Corporation was given on 30 November 1984.

13                  The document, which is one of those documents to which objection is taken, appears to be a mortgage which has been registered at the Registrar of Titles in Fiji.  However, Mr Kunc SC told me his instructions were that the document was not available to the public.  Whilst, of course, accepting those to be his instructions, it would seem to me strange that a mortgage which is apparently registered under the Torrens system would not be available for inspection.  But, in any event, that is said to be the case.

14                  There are a series of documents which evidence the transactions from Aureole to Mr Ganke to Southern Cross, including some documents to which Southern Cross is not a party.  It is difficult to understand how Southern Cross would claim that those documents are confidential to it when it is not a party to them.  Mr Ganke, who swore an affidavit on behalf of Southern Cross in opposition to the plaintiffs’ application, did not indicate how they had come into the possession of Southern Cross or claim that Southern Cross was under any obligation to any other party, including himself, to keep the documents confidential.  He also did not in his affidavit ask that the documents be kept confidential for himself.  However, Mr Kunc SC said that his instructions from Mr Ganke, who was in court, were that the documents are to be kept confidential.

15                  The remaining documents include a deed between Southern Cross, its subsidiary Northern Star, and Mr Ganke in relation to the acquisition of the interest in the mortgage, to which I have referred.  The other documents can be bundled together and described quite quickly.  They include correspondence and ledgers which indicate the amount of the mortgage from time to time, the rate of interest payable under the mortgage, and the dates upon which the mortgage is repayable.  All of the information which is contained in those documents is also contained in the financial statements of the defendant, which are a public record, except for one piece of information.  Over the period of time since the defendant has had an interest in the mortgage, the interest rate charged under the mortgage has varied.  The financial statements show that the interest rate varied on two occasions.  The original interest rate and the first variation are disclosed in the financial statements.  The second variation, which was the last variation, apparently, is not disclosed in the financial statements.  That is the only piece of information which is not known publicly.

16                  The defendant contends that Mr Lebbon ought not to be given the advantage of knowing that piece of information and of viewing the documents which evidence the transactions mentioned earlier.  In my opinion, the plaintiffs ought to be given the opportunity to inspect all of the documents which were discovered to the plaintiffs pursuant to Finn J’s order.  Although the documents were discovered on the undertaking given by the solicitors and their counsel at the time, it seems to me that the contents of the documents are such that there is no reason why the documents ought not be disclosed to Mr Lebbon, provided he gives the same undertaking as to confidentiality as the solicitors and counsel have given so that he may instruct his solicitors and counsel in relation to an application which is to be heard on 24 November by the defendant to strike out the plaintiffs’ claim.

17                  If Southern Cross’ contention were accepted, it would mean that the plaintiffs would have to resist that application in circumstances where they could not make the same assessment of the strength of their case as their solicitors and counsel.  That would seem to me to be inappropriate, having regard to the fact that these documents only really disclose historical information which is not sensitive to the defendant and to contemporary information, all of which, except for the fact of one interest rate, has been disclosed in their financial statements.

18                  Both counsel referred to Mackay Sugar Co-operative Association Limited v CSR Limited (1996) 63 FCR 408, a decision of Spender J in relation to access to confidential documents.  In that case, his Honour said, having discussed the authorities at 414:

I agree that each case does fall for determination according to its own facts, and the question in the present case is: is the disclosure to the applicants or some nominated officers of them necessary for the proper preparation of their case?

19                  In this case, as Mr Kunc SC has mentioned, it is not a question of preparation with which the plaintiffs are concerned but it is a question as to their having access to documents in circumstances where, if Southern Cross’ application is successful, their claim will be struck out without them ever having seen the documents upon which the claim is based.

20                  It seems to me that the obligation to make discovery has the consequence Lord Keith identified in Harman v Secretary of State for Home Department (1983) 1 AC 280 at 308:

Discovery constitutes a very serious invasion of the privacy and confidentiality of a litigant’s affairs.  It forms part of English legal procedure because the public interest in securing that justice is done between parties is considered to outweigh the private and public interest in the maintenance of confidentiality. But the process should not be allowed to place upon the litigant any harsher or more oppressive burden than is strictly required for the purpose of securing that justice is done.

21                  As I said earlier in these reasons, it may be assumed that the documents which have been discovered are relevant to the proceeding and it seems to me, on an examination of the statement of claim, that they are.  In those circumstances, and having regard to the fact that they are historical rather than contemporary, and are not confidential to the defendant, the documents ought to be provided upon the undertaking which has been offered.  For those reasons, I am prepared to make an order releasing the plaintiffs from the confidentiality undertaking given to Finn J at the time that his Honour made his orders.  The orders that I would propose are that:

(1)        Mr Hoffmann QC, Mr Doyle, Mr Clarke, and Mr Leech and Ms Chutes be released from their confidentiality undertakings made to the Court and the defendant in action number SAD 10 of 2007 to the extent that they be permitted to disclose the contents of the statement of claim, exhibited as exhibit JCC1, and the documents included in exhibits JCC8, 9, 10 and 11 to the affidavit of Mr Clarke sworn on 23 September 2008, upon Mr Lebbon giving an undertaking in the terms of the confidentiality undertaking in exhibit JCC11 to the affidavit of Mr Clarke, being pages 170 and 171.

(2)        The defendant pay the plaintiffs’ costs of the application for release from the confidentiality undertakings.

Associate:

Dated:         25 November 2008