FEDERAL COURT OF AUSTRALIA Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v The Sage Group plc (No 1) [2013] FCA 1029 Citation: Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v The Sage Group plc (No 1) [2013] FCA 1029 Parties: ARCHER CAPITAL 4A PTY LTD AS TRUSTEE FOR THE ARCHER CAPITAL TRUST 4A (ACN 123 463 749) AND OTHERS NAMED IN SCHEDULE 1 v THE SAGE GROUP PLC File number: NSD 1992 of 2011 Judge: WIGNEY J Date of judgment: 10 October 2013 Catchwords: PRACTICE AND PROCEDURE – application for standard discovery – whether documents sought directly relevant to issues raised by pleadings or anticipated evidence at trial – where inquiry would be complex and involve various assumptions and hypotheticals – overarching purpose under s 37M of Federal Court of Australia Act 1976 (Cth) DAMAGES – where documents sought may provide evidence as to tax consequences of alternative transaction – where alternative tax consequences might reduce damages arising from alleged breach of contract Legislation: Federal Court of Australia Act 1976 (Cth), s 37M Federal Court Rules 2011 (Cth), Div 20.2 Income Tax Assessment Act 1997 (Cth), s 6-5(3) Cases cited: Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v The Sage Group plc [2012] FCA 1476 Atlas Tiles Ltd v Briers (1978) 144 CLR 202 British Transport Commissioner v Gourley [1956] AC 185 Daniels v Anderson (1995) 37 NSWLR 438 Jindi (Nominees) Pty Ltd v Dutney (1993) 26 ATR 206 Masters v Cameron (1954) 91 CLR 353 Williamson v Commissioner for Railways (1960) SR (NSW) 252 Date of hearing: 10, 11 September 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 43 Counsel for the Applicants: Mr J Williams Solicitor for the Applicants: Allens Counsel for the Respondent: Mr G Rich and Mr A Shearer Solicitor for the Respondent: Allen & Overy IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1992 of 2011 BETWEEN: ARCHER CAPITAL 4A PTY LTD AS TRUSTEE FOR THE ARCHER CAPITAL TRUST 4A (ACN 123 463 749) AND OTHERS NAMED IN SCHEDULE 1 Applicants AND: THE SAGE GROUP PLC Respondent JUDGE: WIGNEY J DATE OF ORDER: 10 OCTOBER 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The Interlocutory Application filed by the Respondent on 29 May 2013 is dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1992 of 2011 BETWEEN: ARCHER CAPITAL 4A PTY LTD AS TRUSTEE FOR THE ARCHER CAPITAL TRUST 4A (ACN 123 463 749) AND OTHERS NAMED IN SCHEDULE 1 Applicants AND: THE SAGE GROUP PLC Respondent JUDGE: WIGNEY J DATE: 10 OCTOBER 2013 PLACE: SYDNEY REASONS FOR JUDGMENT 1 By Interlocutory Application filed 29 May 2013, the Respondent (Sage) applies for an order pursuant to r 20.13 of the Federal Court Rules 2011 (Rules) for standard discovery of certain specified categories of documents. The categories of documents sought are set out in Schedule 2 to these reasons. In general terms, the categories all relate to the tax affairs or liabilities of the First to Ninth Applicants from 19 August 2011 and documents that may bear upon those affairs or liabilities. In the alternative, Sage seeks discovery of the same categories of documents pursuant to r 20.15 of the Rules without the criteria in r 20.14(1)(a) and 20.14(2) applying. 2 The Applicants oppose discovery of any of the specified categories of documents primarily on the basis that they are not directly relevant to any pleaded fact in issue. The Applicants also contend that there is no utility in making the orders because they will not assist Sage in the way Sage asserts they will and that the discovery sought is out of all proportion to any possible relevance the documents might have. Background 3 These proceedings were commenced by Statement of Claim and Originating Application on 11 November 2011. In very general terms, the Applicants seek damages for breach of contract, equitable damages arising from an alleged estoppel and damages arising from alleged misleading or deceptive conduct. Each of the causes of action arises from dealings between the Applicants and Sage relating to the proposed sale to Sage by the Applicants of the Applicants' shares in MYOB Cayman Holdings Limited (MYOB). MYOB was the holding company of the MYOB Group which develops and sells accounting and business management software. 4 The Applicants allege that their acceptance, on 16 August 2011, of a written offer (the Final Offer) by Sage to purchase the shares in MYOB for $1.35 million gave rise to a binding contract. The written offer was stated to be "subject to contract." The Applicants contend that this is a case that falls within the first class of case considered in Masters v Cameron (1954) 91 CLR 353 at 360. It appears to be common ground that it was envisaged that the formal contract that would fully document the terms of the contract (the Share Sale Agreement) would be executed and entered into in the Cayman Islands. 5 On 18 August 2011, Sage communicated that it would not pay $1.35 million for the MYOB shares. The Applicants allege that this amounted to a repudiation of the contract which they accepted. On 19 August 2011, the Applicants agreed to sell their MYOB shares to a third party, Bain Capital (Bain), for $1.045 million in cash, together with the assumption of liabilities of $11 million and the provision of vendor notes with a face value upon issue of $150 million to the First to Ninth Applicants. The Applicants plead that their loss and damage from Sage's repudiation of the contract comprises the difference between the consideration it would have received from Sage ($1.35 billion) (the Sage consideration) and the "net value" of the consideration received by the Applicants from Bain (the Bain consideration): Amended Statement of Claim [69]. In oral submissions at the hearing of the Interlocutory Application, counsel for the Applicants submitted that the reference to "net value" was intended to reflect the fact that part of the Bain consideration comprised the vendor notes. 6 The Applicants' pleaded estoppel and misleading and deceptive conduct causes of action rely on representations said to have been contained in the Final Offer. Essentially, the representations were that Sage would, subject only to the fulfilment of certain conditions, pay the Applicants $1.35 billion for the MYOB shares and that the Final Offer was "final, certain and capable of acceptance." In their estoppel case, the Applicants allege that as a result of these representations they assumed the existence of a particular legal relationship (essentially that the offer to pay was final, certain and capable of acceptance), that in reliance thereon they acted to their detriment by, amongst other things, terminating negotiations with other prospective purchasers, and that as a result of Sage's failure to fulfil the assumed legal relationship they suffered loss and damage. The Applicants' misleading and deceptive conduct case is that, by making the representations in the Final Offer, Sage engaged in conduct in trade or commerce that was misleading and deceptive. 7 Relevantly to this application, Sage's defence to the contract claim is that having regard to what passed between the parties, there was no binding contract between Sage and any of the Applicants and that, as a result, there was no repudiation or breach that could found a claim for damages. For essentially the same reasons, Sage contends that its conduct in relation to the making of the Final Offer could not give rise to any estoppel or actionable misrepresentation. Given Sage's denials and contentions in this regard, it does not specifically plead to the Applicants' particularisation of the alleged loss and damage. 8 There have been a number of interlocutory steps in these proceedings, most of which are not relevant to this application. Notably, however, on 1 March 2013 the parties were directed to provide standard discovery pursuant to r 20.14. Pursuant to this direction, lists of documents have been served and have been the subject of apparently voluminous correspondence between the parties. It is readily apparent that the list or lists served by the Applicants to date do not include documents that would fall within the categories of documents the subject of the discovery order now sought by Sage. That is presumably because the Applicants did not and do not consider such documents to be directly relevant to the issues raised by the pleadings or evidence. 9 On 30 October 2012, Sage sought interlocutory orders pursuant to rr 20.13 and 20.15 for non-standard discovery of certain categories of documents. Whilst the categories the subject of the earlier discovery application differ somewhat from the categories the subject of this application, like this application the categories broadly related to the tax affairs and liabilities of the Applicants arising from the Applicants' sale of the MYOB shares to Bain. In support of the earlier discovery application for tax-related documents, Sage contended that, because the alleged contract between the Applicants and Sage was entered into in Australia, whereas the sale to Bain was completed in the Cayman Islands, the Applicants may have received tax advantages from the actual contract with Bain that would not have arisen under the alleged contract with Sage. It was contended that any such benefits would reduce the damages arising from the alleged breach of contract. Reliance was placed on the forensic accounting expert retained by Sage, Mr Samuel, who was tasked to consider the quantum of damages should a breach of contract be found. 10 On 17 December 2012, Farrell J dismissed the earlier discovery application: Archer Capital 4A Pty Ltd as trustee for the Archer Capital Trust 4A v The Sage Group plc [2012] FCA 1476. Her Honour's reasons for dismissing the application, however, largely turned on the fact that Mr Samuel was not a tax expert. Her Honour said (at [15]): I would be prepared to reconsider this issue if a suitably qualified tax expert were to form the view that some or all of the material covered by the requests in the subpoenas and the Application for discovery were required to enable him or her to perform their task after the expert has considered the information currently available to them. 11 To a certain extent, this application is a re-agitation of the discovery application previously dismissed by Farrell J. Sage now relies on a "tax expert" in support of its discovery application. Evidence and submissions 12 The main thrust of Sage's argument for why the tax-related documents should be discovered is that they are required by its tax expert, Mr Cooper, who has been retained to consider the "tax consequences" of the sale by the Applicants of the MYOB shares to Bain. The tax consequences of the sale to Bain are said to be relevant to the assessment of the quantum of damages. Sage contends that to ascertain the difference between the Sage consideration and the Bain consideration, it is necessary to have regard to any different tax liabilities that might flow from the receipt of the consideration. Sage, in its written submissions, also advances an argument that the tax documents are relevant to the Applicants' state of mind at the time of the acceptance of the Final Offer because they would show that the Applicants intended, preferred, or had been advised to conclude, a binding contract in the Cayman Islands. Such a state of mind would be contrary to the Applicants' pleaded case that they believed or assumed, on the basis of the Final Offer, that Sage was bound to acquire the MYOB shares upon the terms of the Final Offer, which offer was made and accepted in Australia. This argument was not the subject of any significant attention in oral submissions. 13 The evidence relied on by Sage in support of the application is evidence relating to the views or opinions of its experts, Mr Samuel and Mr Cooper. In relation to Mr Samuel, Sage points to the fact that in his report, Mr Samuel comments that his consideration of the difference between the Sage Consideration and the Bain Consideration had been restricted by: …the absence of any information as to the tax consequences (if any) derived, or that would have been derived, by the applicants from the Actual Bain Consideration, the 16 August Bain Consideration, the KKR Consideration and the Sage Consideration. On this issue, I note that Mr Potter assumes, "…that the timing for completion and terms of any concluded transaction in respect of MYOB between Archer and Sage, Bain or KKR would have been similar to the transaction actually concluded between Archer and Bain, such that the only difference in value between each offer is the consideration amount and their terms of payments …". In my opinion, a difference in value could arise if the tax consequences differ between the various considerations. I have not been provided with sufficient information on which to conclude whether Mr Potter's assumption is a safe assumption. 14 Attention is also drawn to the fact that the Applicants' expert in relation to quantum, Mr Potter, essentially assumes that the tax consequences of the aborted sale to Sage and the actual sale to Bain would be the same, or at least does not factor in any potential difference in tax liability. It is relevant to observe that Mr Samuel does not express a view, one way or the other, as to whether it is likely that there are different tax consequences, or even whether there is any basis for thinking that there might be. 15 In relation to Mr Cooper, reliance is placed on the fact that, in a letter from Mr Cooper to Sage's lawyers (Ex RT-4.8), Mr Cooper said: You have asked me to prepare a written report ("Report") which, among other things will compare the tax consequences for the Applicants of the profit ("Profit") which they would have received from the sale of shares ("Sale") in the MYOB Cayman Holdings Ltd ("MYOB") to the Sage Group plc ("Alleged Sage contract") with the tax consequences of the profit which they did receive from the sale of MYOB to MYOB Acquisition Pty Limited (formerly Bain Capital Abacus Acquisition Pty Ltd) ("Actual Bain Contract"). In order to prepare the Report I need access to documents that will enable me to determine whether: 1. An Applicant would have been liable to pay tax on its Profit pursuant to the Alleged Sage Contract, and if so, then how much. 2. Such an Applicant paid tax on the Profit which they did receive pursuant to the Actual Bain Contract and, if so, then how much. 16 Mr Cooper indicates that the documents he would need are limited to documents relating to the First to Ninth Applicants because, unlike the other Applicants, the First to Ninth Applicants are entities formed overseas or trustees who did not beneficially own the MYOB shares. Any of the Applicants who held the MYOB shares as trustees would be "flow-through" entities for tax purposes. In the case of flow-through entities, Mr Cooper states that he would be required to ascertain the tax consequences for the underlying recipient of any profit from the sale. 17 It is readily apparent from Mr Cooper's letter that the answers to the questions which he has been asked to address are by no means straightforward and that the documentation that he says he would need to address the questions is potentially extensive. This is borne out by the list of issues that Mr Cooper states that he would need to address to perform the relevant analysis. The issues include: Issue 1 Whether an Applicant is a flow-through entity. Issue 2 Whether an Applicant, and where relevant any underlying recipient of Profit, is a non-resident of Australia for tax purposes. Issue 3 Whether the Profit was capital or revenue. If it was capital in nature, then the CGT provisions would apply and an Applicant, and where relevant any underlying recipient of Profit, which is a non-resident of Australia for tax purposes would not be liable to pay tax in Australia unless particular circumstances applied. Issue 4 If the profit was revenue in nature, then whether it had an Australian source. Issue 5 Whether an Applicant and where relevant any underlying recipient of Profit, has the benefit of any double tax treaty protection. Generally if the Applicant or an underlying recipient is resident for tax purposes in a treaty country, then they would not be liable to pay tax in Australia. Issue 6 Information relating to the price paid by the Applicant for their shares in MYOB and the date of acquisition of these shares. This will assist in calculating the Profit and hence the amount of any Australian tax liability. Issue 7 What tax, if any, actually was paid in respect of the Profit pursuant to the Actual Bain Contract. 18 Thus, in the case of some of the Applicants, Mr Cooper's analysis may have to trace the profit through a number of most likely foreign entities until the underlying recipient is ascertained. He would then have to address the tax residency of the underlying recipient and the potential application of double tax treaties, as well as the nature of the receipt (capital or revenue) and various other matters. Each of these issues may raise complex questions of fact and law, including foreign law. 19 Sage relies on the so-called Gourley principle (British Transport Commissioner v Gourley [1956] AC 185), which is to the effect that, where a person is to be compensated for a loss arising from the fact that they would not receive an amount that would have been taxed (for example, lost earnings), but the amount received by way of damages was not taxable, the amount of the award should be reduced by the amount of tax that would have been payable. Sage submits that the Gourley principle is not limited to cases involving the award of damages in personal injury cases, but rather is founded on the broad principle that the assessment of damages is governed by the cardinal principle of compensation. 20 At its heart, it seems that Sage's case in relation to discovery of the tax documents rests on the following contentions; first, that the taxation liability in respect of the (hypothetical) Sage consideration may have been different to the taxation liability in respect of the (actual) Bain consideration; second, that is because the Sage contract (if there was one) was entered into in Australia whereas the Bain contract was entered into, or at least executed in, the Cayman Islands; third, to fairly compensate the Applicants for any difference between the Sage consideration and the Bain consideration it is necessary to ascertain whether there are any different tax consequences and if so, what they are; fourth, to determine whether there are differences and what they are or might be, it is necessary to consider the tax actually paid by the Applicants (or the ultimate recipients of the consideration) in respect of the Bain consideration; and fifth, to ascertain that amount, it is necessary for Sage's tax expert to have access to the documents in respect of which discovery is sought. 21 The Applicants primary argument is that the documents sought by the Responent are not "directly relevant to the issues raised by the pleadings or in the affidavits" as required by r 20.14(1)(a). This submission is put on a number of levels. First, it is contended that the potentially different tax treatment postulated by Sage is not raised in the pleadings; the Applicants plead that the loss they suffered is simply the difference between the Sage consideration and the Bain consideration and in its Defence Sage simply denies this allegation. Nothing is said in the Defence about any loss or damage being reduced by different tax consequences. Second, and perhaps more fundamentally, the Applicants submits that the Gourley principle does not apply in the circumstances of this matter, given that it is common ground that any award of damages would be taxable and that the issue about potentially different tax consequences is at best uncertain. Reliance is placed, in particular, on Daniels v Anderson (1995) 37 NSWLR 438 at 581-586 and the authorities referred to in that decision in relation to the tax adjustment to damages. Third, it is submitted that in any event, there is no basis for Sage's contention that there may be different tax consequences flowing from the hypothetical receipt of the Sage consideration, on the one hand, and the actual receipt of the Bain consideration on the other. It is pointed out, in particular, that had Sage not repudiated the alleged contract, the formal contract would have been executed in the Cayman Islands, as was the case with the sale to Bain. Therefore, it is contended, the Sage consideration would have been taxed on essentially the same basis as the Bain consideration. 22 In support of the third submission, the Applicants rely on information and belief evidence of the Applicants' solicitor, Mr Harris. Mr Harris has retained a tax expert, Mr King, to compare the tax treatment of the sale to Sage had it been completed and the sale that did occur to Bain. Mr King has informed Mr Harris as follows: In the event that a share sale agreement in the form or substantially in the form of the Sage Sale Agreement had been executed in the Cayman Islands, Mr King is not aware of any basis upon which it could be contended that there would be any relevant difference in tax treatment for any Applicant in comparing the outcome of that transaction as compared with the transaction between the Applicants and Bain. 23 The Applicants also submit that the discovery sought should be refused on two other bases. First, it is submitted that there is no utility in ordering discovery of the tax-related documents because they would not enable Sage's expert, Mr Cooper, to reach any meaningful view on the questions that he has been asked to consider. In support of this submission, the Applicants rely on Mr Harris' evidence that Mr King has informed him of the following matters: The information sought by the respondent would not enable an exercise to be undertaken to compare the tax effect for any underlying recipients of trusts, funds or other investment vehicles maintained by members of the Applicant group between the consideration they received under the Bain Sale Agreement and the consideration they would have received under the Sage Sale Agreement. 24 A number of specific examples of the complexities of the exercise and the difficulties that would or might be encountered by Sage's expert are set out in paragraph 8 of Mr Harris' affidavit based on information or advice provided by Mr King. According to Mr King, to conduct the inquiry, in effect "a long series of hypotheticals would need to be considered in relation to each Applicant and underlying recipients of the trust in order to evaluate and ascertain any difference in tax treatment" (Harris 19/7/2013 at [8(e)]). 25 The final basis upon which the Applicants submit that discovery should be refused is that the scope of the discovery sought is out of all proportion to any possible relevance and should be refused in the exercise of the Court's discretion. Reference is made in particular to s 37M of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), which provides that the overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes as quickly, inexpensively and efficiently as possible. Section 37M is specifically applied in the Rules relating to discovery by r 20.11. Consideration 26 Having regard to all the circumstances, and on the basis of the evidence and material currently before the Court, I am not satisfied that the Applicants should be required to give discovery of the categories of documents specified in the Interlocutory Application. My reasons for so concluding are as follows. 27 First, on the basis of the evidence as it currently stands, I am not satisfied that the documents sought are directly relevant to the issues raised by the pleadings or the anticipated evidence at trial. My finding in this regard is based not so much on the narrow pleading point raised by the Applicants, but rather on the basis that, in my opinion, the contention that there may be a different tax treatment, or different tax consequences, between the hypothetical receipt of the Sage consideration and the actual receipt of the Bain consideration rises no higher than conjecture, at least on the basis of the evidence currently before the Court. It is difficult to see how there could be any materially different tax consequences if, like the sale to Bain, the sale to Sage had ultimately proceeded pursuant to a formal written contract entered into in the Cayman Islands. It is common ground that the alleged contract between Sage and the Applicants envisaged that the terms of the share sale would be formalised in a written agreement, the Share Sale Agreement. It also appears to have always been envisaged that the Share Sale Agreement would be executed in the Cayman Islands. Had that occurred, it is by no means clear why it would necessarily follow that the Commissioner of Taxation would assess the tax consequences of the sale on the basis that the sale occurred pursuant to a contract that was entered into in Australia. 28 In oral submissions, counsel for Sage submitted that "the proposition that the Commissioner of Taxation wouldn't have a difficulty with the idea that even though a binding contract was made in Sydney, because it was subsequently restated in more fulsome terms and executed in the Cayman Islands, that it was actually a Cayman Islands contract is, at best, highly contestable." No authority or evidentiary basis for this submission was advanced. Mr Cooper says nothing on this topic in his letter to Sage's lawyers. It is a submission that is contrary to the information and belief evidence of Mr Harris that the Applicants' tax expert, Mr King, was not aware of any basis upon which it could be contended that there would be any relevant difference in the tax treatment. 29 There is nothing in Mr Cooper's letter to Sage's lawyers to support the proposition that the sale to Sage, had it proceeded as agreed or envisaged, would have been taxed on a different basis. Indeed, Mr Cooper's letter appears to proceed on the basis that, at least in the case of the 10th to 51st Applicants, the Applicants would be liable to pay tax in Australia and New Zealand on the same basis under both the alleged Sage contract and the actual Bain contract. If that is the case with the 10th to 51st Applicants, it is not entirely clear why there would be any different tax treatment with the other Applicants. 30 Sage's submission on this issue depends on the proposition that the relevant sale contract (in the case of any sale to Sage) would be considered to have been executed in Australia. It is then submitted that, because the First to Ninth Applicants are either foreign entities or flow-through entities, any ordinary income derived from Australian sources would be assessable income in Australia: Income Tax Assessment Act 1997 (Cth), s 6-5(3). A relevant consideration in determining whether any income derived from an Australian source is said to be where any relevant purchase and sale contracts are executed. Sage relies in this respect on Taxation Determination 2011/24 (TD 2011/24). As TD 2011/24 records, however, the question whether income is from an Australian source is a potentially complex question of fact. The place of execution of contracts is only one of many potentially relevant considerations and is certainly not determinative. Nothing said in Mr Cooper's letter suggests that he considered the place of execution of contracts to be an important, let alone determinative, consideration here. He does not refer to TD 2011/24. According to Mr Cooper's letter, the issue of whether any profit from the sale might be considered to be from an Australian source only arises if the profit is considered to be revenue in nature, as opposed to capital in nature. Even then, it would not necessarily follow that the profit would be taxable in Australia given the potential operation of double tax treaties. 31 To justify an order for discovery of documents relating to the tax affairs of the Applicants, or some of them, Sage must be able to point to some firm basis upon which it can be concluded that the documents are directly relevant to the issues raised by the pleadings or evidence. It has not done so. There is no firm legal or evidentiary basis for concluding that the documents sought will or even might reveal a different tax treatment that will or even might be relevant to the quantum of damages. It is unclear whether the Commissioner of Taxation would, or would have a basis to, consider that any sale to Sage, had it occurred as envisaged, would have been pursuant to a contract executed in Australia. Even if that was clear, it still would not necessarily follow that any profit from the sale would be taxed or taxable in Australia. 32 The second reason for refusing the discovery order sought is that, even if there was some proper basis for contending that any sale to Sage would have been assessed by the Commissioner of Taxation on the basis that the relevant sale contract had been entered into in Australia and therefore there might be some differential tax treatment, in my opinion the broad and wide ranging type of inquiry that Sage has engaged its tax expert to conduct is not warranted in any event. The inquiry envisaged by Mr Cooper is complex and involves a number of assumptions and hypotheticals. It involves, in relation to the First to Ninth Applicants, an inquiry into the hypothetical (in the case of the alleged Sage contract) and actual (in the case of the Bain contract) Australian and international tax treatment of the consideration received by potentially many entities (depending on how many "flow through" entities are involved) having regard to tax residency, the potential application of double tax treaties, the nature of any income or profit (whether it was capital or revenue in nature) and other matters. 33 Whatever the precise scope and operation of the Gourley principle, it does not mean that the potential tax consequences of the loss complained of must or should be taken into account in all circumstances in the assessment of damages, particularly if the damages to be awarded to a plaintiff are taxable. In particular, the principle does not extend to cases where the potential tax consequences are uncertain or depend upon imponderables, or where the added complexity involved in taking tax into account, or the remoteness of the potential differential tax treatment, would outweigh any gain to fairness of compensation. 34 The authorities relating to the adjustment of damages to take into account tax implications were reviewed by the New South Wales Court of Appeal in Daniels v Anderson (1995) 37 NSWLR 438 at 581-586 (Daniels). In Daniels, the trial judge had made orders that were designed to adjust the amount of the verdict to take into account a change between the company tax rate that the plaintiff would have paid tax on and the tax rate that would be applied to the verdict. The Court allowed an appeal against those orders. Clarke and Sheller JJA referred to the judgment of Walsh J in Williamson v Commissioner for Railways (1960) SR (NSW) 252, where his Honour said (at 280): But neither in Gourley's Case nor in the other cases in which it has been considered, has there been an extension of its principle beyond cases where the claim is that earnings or profit which would otherwise have been made have been lost, and where it is evident that such earnings or profits, if made, would have attracted a direct liability for the payment thereon of income tax. I am not disposed to extend the principle beyond such cases, The attempt here made is to extend it so as to take taxation into account in every situation where it appears that it is possible to say that if the loss complained of had not occurred, or if, when it occurred, the plaintiffs had made it good, there would have been some consequential difference in the tax payable. Gourley's Case stresses the importance of the principle of remoteness under which it is not all the consequences of the loss which are to be taken into account. 35 In relation to the orders made by the trial judge, Clarke and Sheller JJA concluded as follows (at 585-586): As Walsh J said in Williamson the principle of remoteness means that not all the consequences of the loss complained of are to be taken into account in assessing damages. The need after judgment for inquiry about the consequences of the changed rate of company tax is a telling indicator that they are too remote to be taken into account. Even if a judicious blend of principle and expediency should determine the account to be taken of the impact of tax, in our opinion such an adjustment cannot be supported in the present case. AWA has adverted to circumstances which would make it difficult if not impossible to arrive at an amount which would allow appropriately for the tax consequences of the reduction in the company rate. In most cases if damages to be awarded to a plaintiff are taxable, taxation should not be taken into account in their assessment. There may be exceptions, but this case is not one. 36 The reference in this passage to the "judicious blend of principle and expediency" is a reference to the judgment of Stephen J (in dissent) in Atlas Tiles Ltd v Briers (1978) 144 CLR 202. Stephen J said (at 235-236) that the so-called conditions precedent to the application of the Gourley principle, loss of income subject to tax and a verdict that was not, represented a judicious blend of principle and expediency that must determine when, in the assessment of damages, the incidence of taxation is to be taken into account. His Honour continued (at 235): In that blend the principle in question is that damages should be no more than compensatory, the expediency is concerned with the degree of added complexity which attainment of that principle may involve. It is easy to imagine a particular taxing provision the effect of which, if not taken into account in the process of assessment, will nevertheless have but little effect upon attainment of the desired goal of just compensation. In such a case the added complexity involved in taking tax into account may outweigh the relatively slight gain in fairness of compensation. 37 Counsel for Sage referred to the decision of Moynihan J in Jindi (Nominees) Pty Ltd v Dutney (1993) 26 ATR 206 (Jindi), a case where tax was taken into account in assessing damages. That case, however, appeared to involve a fairly straightforward exercise of taking into account, in assessing damages on the particular facts of the case, the fact that returns on investments that would have been made, but for the acts or omissions of the defendants, would have been taxable. The scenario considered in Jindi is distinguishable from the complex exercise and analysis envisaged by Sage through Mr Cooper. Jindi was also decided prior to Daniels. 38 There could be little doubt that the exercise involved in attempting to calculate the amount of tax paid or payable by the Applicants arising from the sale to Bain and comparing it to the amount of tax that would have been payable if the MYOB shares had been sold to Sage would be difficult and complex, if not uncertain and dependent on many imponderables. That is the effect of the information and belief evidence of Mr Harris based on his discussions with the Applicants' tax expert Mr King. The difficulty and complexity is also self-evident from the terms of Mr Cooper's letter, relied on by Sage. Mr King's opinion is also that the documents sought by Sage would not enable Mr Cooper to compare the tax consequences of the two scenarios. In this respect, it is highly doubtful that any different tax consequences are readily identifiable or quantifiable. It is also highly likely that "the added complexity involved in taking tax into account may outweigh the relatively slight gain in fairness of compensation" and that any potential difference in tax consequences is likely to be too remote (in the Williamson sense) to take into account in relation to the assessment of damages. The extensive discovery sought by Sage is accordingly not warranted or justified by the Gourley principle. In this respect, the documents sought are not directly relevant to the issues raised by the pleadings or in the anticipated evidence at trial. 39 The third reason for my refusing to order the discovery sought is related or similar to the second reason, but rests on more discretionary considerations. Rule 20.11 of the Rules provides that a "party must not apply for an order for discovery unless the making of the order sought will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible." This rule reflects the overarching purpose of the civil practice and procedure provisions found in s 37M of the Federal Court Act. That purpose is also reflected in Practice Note CM 5. 40 Even if I was satisfied that there was some concrete legal or evidentiary basis for Sage's contention that there may be relevant and material differences between the way the Sage consideration would have been taxed and the way the Bain consideration was taxed, and that those differences were readily ascertainable and quantifiable and not too remote, I accept the Applicants' submission that the burden of giving the discovery sought is out of all proportion to any potential relevance the discovered documents might have. Whilst there is no evidence from the Applicants in relation to the extent of the searches that would be required to comply with the discovery orders sought, or the cost or burden of such searches, or the volume of documents likely to be discovered, it can in my view be inferred from the very breadth and scope of some of the categories of documents sought that compliance would be difficult, time consuming and expensive. 41 In this regard, I also take into consideration that this matter has been set down for hearing to commence on 25 November 2013 with an estimate of 20 days. I have difficulty in seeing how the discovery order sought, if made, would not imperil the hearing date. I have even more difficulty in seeing how, in the relatively short time before the hearing is to commence, documents caught by such a discovery order could be discovered, inspected, analysed by Sage's expert and a report prepared in relation to the taxation consequences on the basis of those documents. Even if that was possible, some provision would then have to be made for a report in reply by a tax expert retained by the Applicants. If there was no agreement between the experts, that would result in effectively a trial within a trial: the consideration and determination of what could be a potentially difficult and complex tax question as part of the assessment of damages. In all the circumstances, I am not satisfied that the discovery sought is necessary to facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible. The application should be refused in the exercise of the Court's discretion on that basis. 42 As I adverted to earlier in this judgment, Sage also sought to justify the discovery order, at least in its written submissions, on the basis that the documents sought would be relevant to the state of mind of the Applicants. I reject this justification for the discovery sought for a number of reasons. First, Sage's case in this respect is that it was the Applicant's plan and intention that any contract for the sale of MYOB would be entered into in the Cayman Islands, not in Sydney, and that the reasons for this included securing a tax benefit for certain Applicants. Yet it is readily apparent that the Applicants do not dispute that it was their intention for any formalised contract for the sale of the MYOB shares to be executed in the Cayman Islands. The discovery sought could not be justified on the basis of making out a fact or facts not in dispute, or not likely to be in dispute. Second, even if this was a fact in issue, it could perhaps warrant discovery of a narrow category of documents relating to the reasons for wanting to have the sale contract executed in the Cayman Islands. It would not justify the extensive discovery sought. Conclusion 43 For all the above reasons, I would decline to order discovery of the categories of documents sought by Sage, whether that discovery is sought pursuant to r 20.13 or r 20.15. Accordingly, the Interlocutory Application filed by Sage on 29 May 2013 should be dismissed with costs. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wigney. Associate: Dated: 10 October 2013 SCHEDULE 1 Second Applicant: ARCHER CAPITAL 4B PTY LTD AS TRUSTEE FOR THE ARCHER CAPITAL TRUST 4B Third Applicant: ARCHER CAPITAL 4C PTY LTD AS TRUSTEE FOR THE ARCHER CAPITAL TRUST 4C Fourth Applicant: HARBOURVEST PARTNERS 2007 V-DIRECT B.V. Fifth Applicant: HARBOURVEST INTERNATIONAL PRIVATE EQUITY PARTNERS V-DIRECT FUND L.P. Sixth Applicant: HARBOURVEST PARTNERS 2007 DIRECT FUND L.P. Seventh Applicant: LENTESCO PACKAGING PTY LIMITED IN ITS CAPACITY AS TRUSTEE OF THE MYOB UNIT TRUST Eighth Applicant: SQUADRON ASIA PACIFIC II NV Ninth Applicant: SQUADRON NE ASIA HOLDINGS II LIMITED Tenth Applicant: ADAM FERGUSON Eleventh Applicant: ALEXANDER BRUCE CAMERON IN HIS CAPACITY AS TRUSTEE OF THE HIGHLAND INVESTMENT TRUST Twelfth Applicant: ALLISON WATTS Thirteenth Applicant: AMBA DARLA HOLDINGS PTY LIMITED ACN 136 023 517 IN ITS CAPACITY AS TRUSTEE OF THE LA FAMILIA MUNOZ TRUST Fourteenth Applicant: ANDREW BIRCH Fifteenth Applicant: ANDREW BIRCH AND CHERYL SING IN THEIR CAPACITY AS TRUSTEES OF THE BIRCH SING SUPERANNUATION FUND ABN 85 093 663 531 Sixteenth Applicant: BIGGLES ENTERPRISES PTY LTD AS TRUSTEE FOR THE KATZEFF FAMILY TRUST ABN 64 417 131 510 Seventeenth Applicant: BIRCHSING PTY LTD ACN 075 688 934 IN ITS CAPACITY AS TRUSTEE OF THE BS3 TRUST Eighteenth Applicant: CHRISTOPHER TRACEY Nineteenth Applicant: DOMINIC O'HANLON Twentieth Applicant: DOMINIC O'HANLON IN HIS CAPACITY AS TRUSTEE OF THE O'HANLON SUPERANNUATION FUND Twenty First Applicant: ELENA GREENWELL Twenty Second Applicant: ESTELA RODRIGUEZ Twenty Third Applicant: FERGATRON CONSULTING PTY LIMITED ACN 128 273 389 IN ITS CAPACITY AS TRUSTEE OF THE FERGUSON CONSULTING FAMILY TRUST Twenty Fourth Applicant: GARRY JOHN DOWD & JULIE ANNE DOWD IN THEIR CAPACITY AS TRUSTEES OF THE GAJU SUPERANNUATION FUND Twenty Fifth Applicant: GIOVANNA MARIA OSTACCHINI Twenty Sixth Applicant: GJED PTY LTD ACN 125 789 111 IN ITS CAPACITY AS TRUSTEE OF THE DENT & EDMEADS SUPERANNUATION FUND Twenty Seventh Applicant: GRANT LINGWOOD-SMITH Twenty Eighth Applicant: IAN BOYLAN Twenty Ninth Applicant: INFOTREK INVESTMENTS PTY LIMITED ACN 136 379 336 IN ITS CAPACITY AS TRUSTEE OF THE AD STEVENSON FAMILY SUPER FUND Thirtieth Applicant: JEAN MULLIGAN Thirty First Applicant: JEMATE PTY LIMITED ACN 114 290 845 IN ITS CAPACITY AS TRUSTEE OF THE JST SUPERANNUATION FUND Thirty Second Applicant: JGDE PTY LIMITED ACN 136 366 393 IN ITS CAPACITY AS TRUSTEE OF THE DENT & EDMEADS FAMILY TRUST Thirty Third Applicant: JOHN MOSS Thirty Fourth Applicant: JOHN RICHARD MOSS AND ELAINE JANE MOSS AS TRUSTEES OF THE MOSS FAMILY TRUST Thirty Fifth Applicant: JULIE STELLA TASSONE Thirty Sixth Applicant: KAREN O'HANLON Thirty Seventh Applicant: KEVIN RAWLINGS Thirty Eighth Applicant: LISA BELL Thirty Ninth Applicant: MATTHEW MULLIGAN Fortieth Applicant: MATTHEW JAMES TOMLINSON Forty First Applicant: MYOB FINANCE 2 PTY LTD Forty Second Applicant: PAUL GREENWELL Forty Third Applicant: SCOTT GARDINER Forty Fourth Applicant: SHOWER INNOVATIONS PTY LIMITED ACN 093 605 228 IN ITS CAPACITY AS TRUSTEE OF THE FINNIN SUPERANNUATION FUND Forty Fifth Applicant: SIMON MARTIN Forty Sixth Applicant: SIMON RAIK-ALLEN Forty Seventh Applicant: SUZANNE DAMMS Forty Eighth Applicant: TIMOTHY MOLLOY Forty Ninth Applicant: TIMOTHY REED Fiftieth Applicant: TREVOR FAIRWEATHER AND NICOLE FAIRWEATHER IN THEIR CAPACITY AS TRUSTEES OF THE FAIRWEATHER FAMILY TRUST Fifty First Applicant: TREVOR FAIRWEATHER IN HIS CAPACITY AS TRUSTEE OF THE FAIRWEATHER SUPERANNUATION FUND SCHEDULE 2 (a) the first to ninth Applicants give standard discovery of the following documents: (i) all tax returns (including tax return schedules, tax return working papers and any requests for amendments to any tax returns), lodged by them or on their behalf with a revenue authority of any jurisdiction since 19 August 2011 that record or evidence consideration received in exchange for the sale of shares in MYOB Cayman Holdings Ltd (MYOB) to MYOB Acquisition Pty Limited (formerly Bain Capital Abacus Acquisition Pty Limited (Bain) (Sale); (ii) all tax assessments (including objections to tax assessments and any requests for amendments to any tax assessments) received by them or on their behalf since 19 August 2011 that record or evidence the tax paid or payable on consideration received in exchange for the Sale; (iii) all documents that record or evidence any financial or taxation benefit to be derived from including vendor loan notes as part of the consideration for the Sale; (iv) a document or documents that record or evidence each date on which any one or more of them acquired shares in MYOB, the number of shares acquired and the consideration provided. (b) the first, second, third and seventh Applicants give standard discovery of any notices of distribution to their respective beneficiaries issued since 19 August 2011 which record or evidence a distribution of consideration received in exchange for the Sale; (c) the fourth, fifth, sixth, eighth and ninth Applicants give standard discovery of the following documents: (i) documents recording or evidencing whether any of them has a permanent establishment (as defined in Section 6 of the Income Tax Assessment Act 1936 (Cth)) in Australia; (ii) documents recording or evidencing the country (or countries) in which each of them is resident for tax purposes; (iii) all board minutes or similar documents recording or evidencing decisions made by their board members or equivalent senior management during the period 1 January 2009 to 1 September 2011 in respect of: (A) fund raising activities; (B) the making or divesting of investments; (C) the management of investments; (D) the making of any distributions or paying of any dividends. (iv) all documents recording or evidencing any dividends or distributions made since 19 August 2011 which relate to consideration received in exchange for the Sale; (v) all documents recording or evidencing the basis upon which any of the shares in MYOB (i.e. whether those shares were held beneficially, as a trustee of a trust or in some other capacity). (d) the fifth and sixth Applicants give standard discovery of any partnership deed that applied to each of them as at 29 September 2011; (e) the seventh Applicant give standard discovery of any trust deed for the MYOB Unit Trust that was in force as at 29 September 2011.