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[2024] QSC 37
An issue of considerable importance arose in this matter: whether the applicant was entitled to an order for the production of documents pursuant to rr 208C and 208D Uniform Civil Procedure Rules 1999 against the respondents. This is the first time the new preliminary disclosure rules have been the subject of judicial consideration. Justice Brown’s detailed reasons provide helpful commentary as to what matters a court needs to be satisfied of in the exercise of its discretion and how the reference to “prospective defendant” in r 208C UCPR must be construed.
Brown J
15 March 2024
The applicant is an ASX listed company which owns shares in the ASX listed company “Blue Sky Alternative Investments Limited”. [3]. The first respondent, a California-based company which undertook activist short selling, [4] published a detrimental report about Blue Sky Alternative Investments Limited. [5]. Thereafter, amongst other matters, the applicant claimed that as a result of the content of that report it had suffered a loss caused by alleged insider trading, being the reduction in value of its shares in Blue Sky Alternative Investments Limited, together with a loss of market confidence. [13]. In short, the applicant alleged that the information contained within the first respondent’s report was “information not generally available and, if it were generally available a reasonable person would have expected it to have a material effect on the price or value of Blue Sky shares, derivatives or other financial products”. [8].
The applicant sought orders for the production of documents pursuant to rr 208C and 208D UCPR against the first respondent and its director and president (the second and third respondents respectively). [2]. It also separately sought orders for the production of documents under r 208C UCPR against two brokerage firms (the fourth and fifth respondents) which it alleged had facilitated transactions based on insider information.
Consideration of the court’s power to make orders provided in r 208C UCPR
In considering whether the applicant had a right to relief under r 208C, her Honour provided guidance as to how the rule operates and identified certain criteria which must be met by a party seeking an order for preliminary disclosure. [16].
Her Honour explained the operation of r 208C as follows:
1.Whilst regard can be had to decisions in other jurisdictions which have considered similar, but differently worded regimes, a cautious approach needs to be taken in so doing. [19];
2.To establish that a party “may have a right to relief” the applicant must satisfy the Court that the applicant has a genuine positively held intention to commence proceedings against the prospective defendant, but which may depend upon the applicant acquiring information about the prospective defendant. [21];
3.The Queensland rule has a “slightly lower threshold” than the equivalent New South Wales’ rule, since it only requires that the information, document or thing “may assist in ascertaining the identity or whereabouts of the prospective defendant”, whereas New South Wales’ rule refers to “tends to assist”. [27];
4.In the event the pre-conditions are met and the processes in r 208C(2) are enlivened, there is scope to make an order. [28];
5.In identifying what is required to meet the threshold in r 208C(1)(b), the issue as to whether reasonable enquiries have been undertaken is an objective assessment. [24]–[25].
Consideration of the court’s power to make orders provided in r 208D UCPR
As to r 208D, her Honour made these observations:
1.To enable the court to exercise its discretion and make an order under r 208D(2) it is necessary that five conditions are met:
a.that an applicant may have a right to relief against a prospective defendant;
b.that it is impracticable for the applicant to commence a proceeding against that prospective defendant without reference to a document;
c.that there is an objective likelihood that the prospective defendant has, or is likely to have, possession or control of the document;
d.that inspection of the document would assist the applicant to decide whether or not to start the proceeding; and
e.that the interest of justice requires that the order be made. [30];
2.In the five conditions which must appear in order for the court to exercise its discretion and make an order under r 208D(2), tension exists between the reference to “prospective defendant” and to the second and fourth conditions. The logical way of resolving the tension is by construing the intention required for the purposes of r 208D to be a conditional one. That construction accords with the wording of the rule and gives effect to all of the requirements in a harmonious way (when read as a whole). It follows that it will suffice, as in the current matter, that there is evidence the applicant intends to commence proceedings against a prospective defendant if they are permitted to inspect the document; and the contents of the document itself supports the commencement of the proceeding. [32]–[33].
In the event, “notwithstanding the intrusive nature of the order, particularly when there [were] no proceedings on foot, Blue Dog … satisfied the Court that the preconditions for making the order pursuant to r 208C(2) [were] satisfied.”
Was leave of the court required to serve the originating application outside of Australia?
A further issue arose whether leave was required to serve the proceedings seeking preliminary disclosure against the parties in the United States. Rule 125 UCPR permits an originating process to be served without leave in circumstances where the relevant connection between the subject of the originating process and the jurisdiction is established. [50]. Her Honour held that the claim fell within r 125(d)(ii) and accordingly leave of the Court was not required for service outside the jurisdiction. [53].
Was leave required to serve the accompanying affidavit which was served with the application?
Rule 129C UCPR provides that “a document other than an originating process may be served outside Australia with leave of the court”. Her Honour observed that “there appears to be a lacuna in the rules insofar as it is anomalous that the originating application was required to be served without leave but leave is required in order to serve the accompanying affidavit which must be served with the application”.
In the circumstances, the Court granted leave to pro nunc tunc for the accompanying affidavit which was served with the application to be served upon the respondents in the United States. [58].
Whether rr 116 and 117 UCPR can apply to a proceeding abroad if personal service cannot be effected, or in the case of r 116, not effected in accordance with the law of the country in which the originating process is to be served?
Her Honour clarified that for substituted service under r 116, it is not enough to demonstrate that the method of service proposed would successfully bring the proceedings to the attention of those so served – rather, what is required is evidence that it is infeasible to serve the documents as prescribed by the rules. [104]–[105].
Disposition
The applicant obtained orders against the third, fourth and fifth respondents. The application against the first and second respondents was adjourned in circumstances where her Honour was not presently satisfied that they had been served.
A Jarro