FEDERAL COURT OF AUSTRALIA

Hooke v Bux Global Limited (No 2) [2018] FCA 836

ORDERS

THE COURT ORDERS THAT:

1.    The defendant do forthwith provide to the plaintiffs disclosure and electronic copies of documents created before 1 January 2016 that are in the defendant's possession, custody or control and are within one or more of the categories listed in Annexure A to the orders of Barker J made 26 April 2018 and of which the defendant is aware after a reasonable search conducted in good faith.

2.    The defendant do forthwith provide to the plaintiffs disclosure and electronic copies of documents within one or more of the categories listed in Annexure B to the orders of Barker J made 26 April 2018 and of which the defendant is aware after a reasonable search conducted in good faith (save for documents in category 6 in Annexure B).

3.    The plaintiffs have leave to inspect the documents produced by Australia and New Zealand Banking Group Ltd and Commonwealth Bank of Australia Ltd in response to subpoenas issued in these proceedings.

4.    The defendant do pay the plaintiffs costs of and concerning the issues determined by these orders, including the costs of preparing written submissions, to be assessed if not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

COLVIN J:

1    The plaintiffs seek to wind up the defendant (Bux). The application is listed for hearing for four days commencing on 30 July 2018. Issues have arisen in relation to the extent of discovery and the inspection of documents produced by the Commonwealth Bank of Australia Ltd and Australia and New Zealand Banking Group Ltd in response to subpoenas issued at the request of the plaintiffs.

2    The plaintiffs delivered an amended concise statement on 23 May 2018. On 1 June 2018, I gave leave to the plaintiff to amend in terms of that document. However, at the same time as granting that leave I programmed a hearing for 8 June 2018 at which Bux may raise any objection to the standing of the plaintiff to raise the amended claims made on the basis that it is said to be a creditor of the defendant as well as any pleading objection to the form of the amendments to the concise statement. The amendments made by the plaintiffs to their concise statement add further claims. However, the claims as originally made remain. In those circumstances, I will deal with the issues that have been raised as to discovery and inspection of documents produced on subpoena on the basis of the issues raised by the plaintiffs' concise statement as it stood prior to the recent amendment together with the concise statement of the defendant in response to that document.

The issues raised by the plaintiffs' claim

3    The plaintiffs claim to be the holders of fully paid shares in Bux and that they are contributories who have standing to bring proceedings to wind-up Bux. I dealt with this aspect of the claim by the plaintiffs in refusing an application by Bux for summary dismissal of the winding up application: Hooke v Bux Global Limited [2018] FCA 740.

4    Broadly speaking, the plaintiffs raise two matters in support of their application. First, they make claims in respect of the circumstances in which there was a 'rollover' by which shares held in a company bux.com Global Limited (bux.com) were transferred to Bux. Second, they claim that representations have been made over a number of years by Bux and various related entities to the effect that an initial public offering or public listing on a stock exchange was imminent but there has never been a listing on a stock exchange of any of those entities.

5    The plaintiffs say that there have been contraventions of the Corporations Act 2001 (Cth) arising from those two matters.

6    The application is brought under s 461 of the Corporations Act, on the ground that the affairs of Bux have been conducted in way that is prejudicial to the interests of its shareholders or on the ground that it is just and equitable that Bux be wound up or both. The plaintiffs point to the relevant factors identified in Australian Securities and Investments Commission v ABC Fund Managers Ltd (No 2) [2001] VSC 383 as describing, in general terms, the matters that must be established on its application. Those factors were expressed in the following terms at [119]:

There are fundamental general principles applied by the courts with respect to an application on the just and equitable ground. First, there needs to be a lack of confidence in the conduct and management of the affairs of the company … . Second, in these types of circumstances it needs to be demonstrated that there is a risk to the public interest that warrants protection. Third, there is a reluctance on the part of the courts to wind up a solvent company (citation omitted).

7    As a result, the issues raised by the plaintiffs' claim may involve a general consideration of the financial circumstances of Bux.

8    Peter James Hooke, one of the plaintiffs, has sworn an affidavit that was provided in support of the application. Although the matter has since proceeded on the basis of a concise statement, the affidavit provides particulars of the matters that the plaintiffs seek to raise in these proceedings. In his affidavit Mr Hooke describes a chronology of events that commenced in 2007. Amongst other things, he deposes that:

(1)    in 2008 he was invited to become involved in Recharge Plus;

(2)    he was told that the business plan of Recharge Plus was to establish a micro payment money transfer and banking system for Filipino workers working abroad who did not have access to traditional banking services so they could send money home easily and cheaply;

(3)    he was told in 2008 that the then existing value of the Recharge Plus business was around US$100 million;

(4)    he had dealings with Raymond Webber and Michael van Rens;

(5)    he arranged for his superannuation fund to invest AUD$582,275 by paying that amount into an account nominated by Recharge Plus;

(6)    the trustee of the Hooke Family Trust entered into both a loan agreement with Globalbankplus Limited advancing AUD$1 million into an account nominated by Recharge Plus and a consultancy agreement with Rechargeplus Global Limited;

(7)    both companies were said to be incorporated in Malta;

(8)    there was default under both agreements and proceedings were commenced;

(9)    there were attempts to serve the proceedings at the address that had been given for the companies in Malta but it was a vacant block of land and subsequent inquiries had not produced a valid address;

(10)    the proceedings were not pursued because it appeared that it was not going to be possible to properly serve the defendants;

(11)    on 6 January 2012, he received an email from Mr van Rens referring to Rechargeplus and stating that 'shares are being issued in a new entity ... bux.com Global Limited in Hong Kong, which is the new parent Company for our structure' and asking for him to complete and return a form;

(12)    on 26 January 2012, he received a communication about being a convertible note holder with bux.com;

(13)    after that, the superannuation fund received a share certificate for shares in bux.com under cover of an email stating 'Please find attached your share certificate in bux.com Global Limited, relating to your investment in April 2008';

(14)    in 2012, he met with Mr van Rens and Mr Webber to seek repayment;

(15)    he was told by them that Recharge Plus was still aiming for a public listing and it was proposed that the loan that had been made be converted into shares in Recharge Plus;

(16)    between mid-2012 and mid-2015, he received very little communication from Recharge Plus and he did not know what to do to recover the money;

(17)    in 2014, he received a further share certificate in his name jointly with his daughter Claire Elizabeth Hooke for shares in bux.com;

(18)    on 2 February 2016, Mr Webber as Chairman of bux.com sent an email to him stating, amongst other things, that the share value at the year end 2015 was AUD$0.10cents per share;

(19)    on 16 February 2016, bux.com lodged an annual return which showed that it had 620 million shares on issue, all of which were owned by Shampagne Corporation Limited, a company incorporated in Antigua and Barbuda (Shampagne);

(20)    on 5 April 2016, he received an email from Mr Webber as chairman of bux.com addressed 'Dear Shareholder' and referring, amongst other things, to a determination by the Board of bux.com 'given that a significant number of BUX shareholders are located in Australia' that it 'will roll over shareholders' current proportionate beneficial shareholdings in bux.com Global Limited into a newly incorporated public unlisted company incorporated in Australia which will become the parent company in the group'. The email also referred to consent of all shareholders to the transaction being sought and that it was important for the consent to be completed as soon as received;

(21)    on 17 April 2016, he received an email from bux.com referring to the rollover and saying the consent forms would be sent by Boardroom Smart Business Solutions who had been engaged to send the consent form and stating that 'Your consent is required to proceed so please respond URGENTLY and favourably and any consent not received before 10 days will be considered a YES instruction';

(22)    on 20 April 2016, he received an email concerning bux.com enclosing a first draft of a constitution for Bux;

(23)    on 20 April 2016, bux.com lodged a return of allotment form showing that on 8 April 2016, bux.com had allotted 630 million shares to Shampagne;

(24)    on 30 June 2016, he received a document described as '30th June 2016 Status Report to Shareholders'. It said that 204 shareholders (94.92%) had consented to the rollover, 46 shareholders (5.08%) did not respond and no shareholder had communicated that they did not consent and that the Board 'intends to effect the rollover by instructing its share registry, Boardroom to issue new shares into [a new Australian public unlisted company] which will be issued in exchange for the shares you currently beneficially own in [bux.com], in which your investment is currently held by Shampagne Corporation Ltd as nominee';

(25)    he never received any document in which he was asked to provide his consent for the proposed rollover;

(26)    a form lodged with the Australian Securities and Investment Commission in respect of Bux shows that 1,250,000 shares in Bux were allotted to Shampagne on 1 September 2016; and

(27)    on 22 September 2016 he received an email attaching electronic holdings statements for Bux showing 12,986,433 shares in his name jointly with his daughter and 6,506,169 shares in the name of the superannuation fund.

Discovery sought by plaintiffs

9    On 26 April 2018, Barker J made orders that Bux provide disclosure of documents created on or after 1 January 2016 that are within the following categories:

1.    A copy of the contract made between Shampagne Ltd and the defendant, dated 1 September 2016, pursuant to which Shampagne Ltd transferred to the defendant 1,250,000,000 fully paid ordinary shares in the issued capital of bux.com Global Ltd in exchange for the issue of 1,250,000,000 fully paid ordinary shares in the capital of the defendant.

2.    Documents that evidence(d) or constitute(d) the holding of Shampagne Limited of shares in bux.com Global Ltd as nominee for, or as trustee for, the plaintiffs collectively or any of them individually.

3.    Documents that evidence or constitute any request for the plaintiffs' consent to the transaction referred to in paragraph 1 above.

4.    Documents that evidence or constitute the plaintiffs' response to any request of the kind referred to in paragraph 2 above.

5.    Documents that evidence or constitute any sophisticated investor or professional investor certificate in respect of the plaintiffs or any of them received by the defendant in response to the defendant's request made on 30 June 2016.

6.    Documents that evidence or constitute the plaintiffs' agreement or refusal (or the agreement or refusal of any of the plaintiffs) to become a member of the defendant.

7.    Documents held by the defendant or Boardroom Pty Ltd evidencing or recording any interest of the plaintiffs, or any of them, in shares in the defendant, including documents containing or referring to communications between any representative of the defendant and any representative of Boardroom Pty Ltd in respect of any interest of the plaintiffs, or any of them, in shares in the defendant.

10    Directions were made for a hearing to determine whether disclosure should be given of documents within those categories created before 1 January 2016 (First List of Categories) and whether there should be disclosure of documents in the following categories (Second List of Categories):

1.    The documents upon which the directors of bux.com Global Ltd relied to form the opinion that the share value of that company was AUD$0.10 per share.

2.    All documents evidencing the nominee or trustee capacity relating to the holding by Shampagne Limited of shares in bux.com Global Limited as nominee or trustee for the 270 beneficial shareholders of bux.com Global Limited, other than the plaintiffs.

3.    All responses to the request for consent to the rollover of shares from bux.com Global Limited to Bux Global Limited (the Rollover).

4.    All sophisticated investor and professional investor certificates received in response to the request made on 30 June 2016, from parties other than the plaintiffs.

5.    All letters or emails (and any responses to letters or emails) sent to the 46 shareholders who did not respond to the request for consent to the Rollover.

6.    The loan agreement between the defendant and Shampagne Australia Pty Ltd, and any documents evidencing the forgiveness of any amounts advanced pursuant to the loan agreement.

7.    The current draft of the prospectus prepared for the purposes of listing the defendant on the Australian Securities Exchange.

First List of Categories: Documents created before 1 January 2016

11    As to the first list of documents, Bux says that:

(1)    the plaintiffs seek disclosure of documents relating to persons and entities other than the defendant and predating its existence;

(2)    the plaintiffs have not demonstrated the reason why the documents are relevant to the case as articulated in the plaintiffs' concise statement;

(3)    the plaintiffs have not demonstrated that the documents have the utility, relevance or importance of the kind described in the para 10.6 of the Central Practice Note: National Court Framework and Case Management (CPN-1); and

(4)    the plaintiffs are engaging in a 'fishing expedition'.

12    Fishing refers to instances where documents are sought in order to be able to plead or establish a case that is not alleged in the proceedings: Bailey v Beagle Management Pty Ltd [2001] FCA 60; (2001) 105 FCR 136 at [27]-[32]. To seek documents in order to be able to express a case in greater detail or to establish a case as alleged is not to fish for documents.

13    Therefore, the complaints raised by Bux reduce to a complaint that the documents are not sufficiently relevant to require their disclosure.

14    For the following reasons, I am satisfied that documents created before 1 January 2016 as to each of the categories have direct relevance to the issues raised by the plaintiffs and are likely to have probative value.

15    The defendant has raised no objection to the categories insofar as they relate to the period prior to 1 January 2016. The categories of documents sought are quite specific. They identify documents of a kind that might be expected to be in existence having regard to the nature of the claims made by the plaintiffs. It is not to the point that the documents relate to persons and entities other than the defendant and which predate its existence. As I have summarised above, the affidavit in support of the application and the concise statement rely upon a course of events prior to the rollover transaction to support its claim.

16    The affidavit in support of the application refers to events from 2012 relating to the shareholding in bux.com. The complaint made is that the rollover transaction was undertaken in a manner that involved contraventions of the Corporations Act. Amongst other things, factual issues are raised by the affidavit as to the circumstances in which the plaintiffs came to hold shares in bux.com, the capacity in which bux.com was registered as the holder of those shares even though certificates were issued to the plaintiffs, the allotment of further shares in bux.com to Shampagne thereafter, the completion of the rollover without the consent of the plaintiffs and the ongoing representations about a public listing that has not been brought to fruition.

17    Further, the fact that the documents may have been brought into existence before Bux does not mean that they are not properly the subject of an order for disclosure. On the evidence before me, Bux was established to be the new parent of the group and to reflect the fact that most of the investors in the group are Australians. As the new parent entity, it may be expected to hold relevant documents, to have access to them or to be able to call for documents held by its now subsidiary bux.com and external parties who were engaged to assist in the rollover transaction. The date of incorporation of Bux is not a reason to confine disclosure to documents brought into existence after 1 January 2016.

18    Therefore, the documents are directly relevant (as has been accepted by the requirement to provide disclosure in respect of documents from 1 January 2016 in the same categories) and, if they exist, are likely to have probative value.

Second List of Categories

19    Bux claims that each category in the second list has no direct relevance to the matters in issue and amounts to fishing. Further, category 7 which seeks the draft of any prospectus prepared for the purposes of listing would require the production of documents protected from disclosure by legal professional privilege. No affidavit is provided to support this assertion.

20    Further submissions have been made to the effect that the second list is expansive and unjustified, will not facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible, the plaintiffs have not demonstrated the utility of the requested disclosure and cannot demonstrate that the documents are likely to be probative in nature.

21    All these submissions are advanced by way of assertion. There has been no attempt by the defendant to engage with the particular categories and provide a basis for the submission.

22    It is also said that the plaintiffs are seeking leave to amend and therefore the request is premature. Given that I have approached the application on the basis of the unamended concise statement and there is no indication that the plaintiffs are not pressing all of those allegations, this submission falls away.

23    As to category 1, the affidavit of Mr Hooke refers to the opinion of directors that shares in bux.com were worth AUS$0.10cents per share as at 31 December 2015. There is also evidence about 620 million shares in bux.com being held by Shampagne as nominee. The concise statement makes a claim about a further 630 million shares allotted by bux.com prior to the rollover (but after it was announced) which are said to have been allotted in consideration of HKD$630,000, valuing the whole of bux.com at HKD$1,250,000 or approximately AUD$212,500 at the time. These matters are relied upon to support the claim that there were contraventions of the Corporations Act in relation to the rollover transaction. Documents sought in category 1 are directly relevant to these issues.

24    As to category 2, it is alleged by the plaintiffs that shares held by Shampagne which were involved in the rollover were held on behalf of the plaintiffs. The documents sought relate to Shampagne holding shares in bux.com as nominee or trustee of shareholders in bux.com. Therefore, those documents are relevant and probative.

25    As to category 3, it is alleged that the rollover transaction occurred without the consent of the plaintiffs. The third category of documents seeks all responses to requests for consent to the rollover of shares. The affidavit of Mr Hooke produces communications in which there is reference to how many shareholders in bux.com are said to have provided their consent. In circumstances where the plaintiffs raise an issue about the consent process in relation to the rollover I am satisfied that the documents may be probative of an issue raised as to whether there were contraventions of the Corporations Act in relation to the rollover.

26    As to category 4, it seeks all sophisticated investor and professional investor certificates received in response to a request made on 30 June 2016 from parties other than the plaintiffs. The plaintiffs submit that the documents are relevant to whether there is a risk to the public if Bux is not wound up. They say that if it can be demonstrated that the defendant has proceeded with the rollover without any disclosure documents where they were required then that is an indication that investors in Bux and the public in general require protection.

27    The plaintiffs also say that such documents have been required to be produced in respect of the plaintiffs under the first list.

28    There is a specific claim that there have been contraventions of the Corporations Act by reason of a failure to comply with disclosure requirements despite Bux knowing that disclosure was required as evidenced by the request for investors to provide sophisticated investor certificates. Therefore, I would require disclosure of category 4.

29    As to category 5, an issue has been raised concerning consent to the rollover. The affidavit filed adduces evidence of communications in which it was said that there was consent from most shareholders in bux.com. The position in relation to consent by other shareholders is relevant to the claim that there was no consent from the plaintiffs; a claim that is placed in issue by a general denial from Bux. Therefore, the documents sought are probative and relevant.

30    As to category 6, it seeks a loan agreement between the defendant and Shampagne Australia Pty Ltd and any documents evidencing the forgiveness of any amounts advanced pursuant to the loan agreement. The plaintiffs say that the document is relevant to solvency issues being a matter to be taken into account under the just and equitable ground relying on Australian Securities and Investment Commission v CME Capital Australia Pty Ltd (No 2) [2016] FCA 544 at [21].

31    However, even accepting that such matters may be raised, there is no claim as to such matters in the concise statement and no position is raised concerning the financial circumstances of Bux in its concise statement. There is no reference to the loan agreement in the concise statement. Nor is there any development of those issues in the affidavit of Mr Hooke. Therefore, the document sought is not directly relevant to the issues raised. I would not require disclosure of category 6.

32    As to category 7, it seeks the current draft of the prospectus prepared for the purposes of listing Bux on the Australian Securities Exchange. The concise statement claims that there has been a contravention of the Corporations Act by reason that there have been statements over a long period to the effect that an initial public offering or public listing on a stock exchange was imminent, but that has not occurred. The request for a specific document, being the current draft of a prospectus, is directly relevant to that claim.

33    The submission that such a document is subject to legal professional privilege is not a reason why there should not be disclosure. I have made directions requiring any claim to privilege in respect of documents that answer categories of disclosure be provided by way of affidavit. If Bux maintains such a claim then the claim and the basis for it can be stated by way of affidavit.

34    As to all categories, there is no evidence before me to suggest that it would be overly onerous to provide the documents in the categories that I have indicated should be the subject of disclosure. There is nothing in the categories themselves that would indicate that to be the case. Therefore, as the documents are directly relevant and would be probative, they should be disclosed.

Subpoenas

35    Documents have been produced on subpoena by the Commonwealth Bank and ANZ Bank. Bux says that leave to inspect should not be given unless the documents, on their face, have some potential relevance.

36    Leave to issue the subpoenas in the terms in which they were issued was given by Barker J on 26 April 2016. The defendant says that Barker J said that the subpoenas could issue and their ultimate relevance would be a question for later, or trial. When giving leave to issue the subpoenas, Barker J said in response to a submission from Bux that the subpoenas should not issue:

Well I, at this stage, broadly accept the proposition where the ground of winding up is as it is and however we want to describe it, some sort of sequence of corporate entities in relation to equity held by different people in which notice is given by different entities at different times suggest that there were transactions being effected or share registrations being invited or paid for that it's not irrelevant. What the ultimate relevance is would be a matter for trial but I think for subpoena purposes at this stage I wouldn't say no to the subpoena…

Look I do understand the submission you make and it might turn out to be at trial that it becomes compelling but at the moment I think the nexus is sufficiently arguable for subpoenas to go and for the issue of admissibility of evidence and its relevance and so on to be dealt with if it's necessary.

37    It is clear that Barker J was determining that the subpoenas should issue and there was sufficient relevance for that to occur. There is no application to vacate that order or to set aside the subpoenas.

38    A subpoena must have a legitimate forensic purpose and the documents sought must have apparent relevance and the onus of demonstrating these matters is on the issuing party: Wong v Sklavos [2014] FCAFC 120 at [12]. The test of apparent relevance is a low threshold. It is enough if a document or class of documents gives rise to a line of enquiry relevant to the issues before the trier of fact: Boase v Axis International Management Pty Ltd [No 3] [2012] WASC 498 at [11].

39    Further, if a subpoenaed document is apparently relevant, inspection will usually be permitted even where a claim of commercial confidentiality is made: Apache Northwest Pty Ltd v Western Power Corporation [1998] WASCA 127; (1998) 19 WAR 350 and Stanley v Layne Christensen Company [2004] WASCA 50 at [13].

40    Both subpoenas seek the production of all bank statements and documents evidencing withdrawals from a nominated account. In the case of the ANZ Bank it is an account in the name of Rechargeplus Australia Pty Limited from 1 January 2010. In the case of the Commonwealth Bank it is an account in the name of GWC Asia Pacific Pty Limited and an account in the name of bux.com Pty Ltd both from 1 January 2007.

41    No issue of prejudice or oppression has been raised as to compliance with the subpoenas and the documents sought have been produced.

42    There is no affidavit evidence before me to suggest that the entities named as the account holders are not part of the Bux group of companies of which Bux is now the parent.

43    Before Barker J, the plaintiffs justified the issue of the subpoenas on the basis that they relate to bank accounts into which investors in the Bux group of companies other than the plaintiffs were invited to deposit their funds. This position was supported by reference to affidavits filed by the plaintiffs producing documents in which investors were asked to deposit funds into the bank accounts.

44    On the claims made in the concise statement, there have been a number of other investors who have also participated in the rollover. On the claims made, just prior to the rollover there was a substantial dilution of the shareholdings of investors by the allocation of 630 million shares in bux.com. It will be relevant at least to that claim to know the extent of investor contributions that were ultimately dealt with in a similar manner to the plaintiffs.

45    For that reason, I am satisfied that they have potential relevance to the claim made by the plaintiffs and that the plaintiffs should be allowed to inspect the documents produced in answer to the subpoenas.

46    In further written submissions, the plaintiffs also say that there is a discrepancy between statements made about the level of investment in the Bux group and the audited financial statements of Bux. There is no specific claim of that kind made in the concise statement nor is it apparently raised in the affidavit of Mr Hooke. If that had been the only basis to support the inspection of documents produced on subpoena I would have been inclined to refuse inspection given the terms in which the concise statement is expressed.

47    As the plaintiffs have been substantially successful on the issues reserved for determination on the papers, the defendant should pay the defendants costs relating to those issues.

Associate:

Dated:    5 June 2018