Supreme Court New South Wales Medium Neutral Citation: Aitken Mount Capital Partners Pty Ltd v Minemet Recycling Group Pty Ltd [2024] NSWSC 1377 Hearing dates: On the papers; submissions received 28 October 2024 Date of orders: 29 October 2024 Decision date: 30 October 2024 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Orders made for preliminary discovery Catchwords: CIVIL PROCEDURE – preliminary discovery – whether plaintiff may have cause of action against the defendants – whether plaintiff does not have sufficient information to make decision whether to commence proceedings Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Arnaout v Arnaout [2019] NSWSC 565 O'Connor v O'Connor [2018] NSWCA 214 Tabcorp Holdings Ltd v Entain Group Pty Ltd [2023] NSWSC 220 Category: Procedural rulings Parties: Aitken Mount Capital Partners Pty Ltd (Applicant) Minemet Recycling Group Pty Ltd (Prospective Defendant) Representation: Counsel: N Furlan (Plaintiff) Solicitors: HWL Ebsworth (Plaintiff) File Number(s): 2024/306897 JUDGMENT 1. By Summons filed on 20 August 2024, the applicant, Aitken Mount Capital Partners Pty Ltd ("Aitken") seeks orders for preliminary discovery against the prospective defendant, Minemet Recycling Group Pty Ltd ("Minemet") under rule 5.3(1) of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). 2. Minemet neither consents nor opposes the relief sought by the Summons and is content for the Court to consider the merits of the application on the basis of the material filed by Aitken. 3. There is no dispute about the relevant background. It is described in the submissions of Mr Furlan, who appeared for Aitken. What follows, as to that background, is drawn with gratitude from those submissions. Background 1. Aitken conducts an investment advisory business. Minemet conducts a metals recycling business. 2. In October 2022, Minemet engaged Aitken as lead manager in connection with a proposed Initial Public Offering, shareholder sell-down, and equity capital raising to raise approximately $27.5m at an issue price of $1.00 (the "Offer"). 3. The engagement was the subject of a written agreement dated 10 October 2022 which incorporated a set of "Standard Mandate Terms" (the "Agreement"). 4. The 10 October 2022 Agreement may have been replaced by a 31 October 2022 agreement, but nothing turns on that for the purposes of this application. 5. The specific services to be performed by Aitken were specified in the Agreement. 6. The fees to be paid to Aitken for those services were set out in clause 5 of the Agreement, relevantly: "In the event [Minemet] (or the entity to be listed) receives an offer to acquire all or part of the business from an external party that results in the cancellation of the IPO over the course of the transaction period up to the proposed listing date on the ASX (thereby negating the fees above), [Aitken] will be paid a fee equal to 2% of the acquisition transaction value, paid in cash." 1. The Agreement commenced on 10 October 2022, [1] and was to continue until the earlier of "completion of the Offer" or 24 months, unless it was terminated earlier in accordance with clause 15.3 or by mutual agreement. 2. No IPO took place and, in May 2023, Mr Hugh McKee, Minemet's Managing Director, made statements to Aitken, including: "…the IPO market is looking a little better and hopefully by end of year there may be some traction." And: "Do we consider making an updated media release… that whilst we are waiting from the IPO window to open the company has been focusing on growth and improving its underlying business…" 1. On 4 August 2023, Mr McKee stated that he would be "selling down around 60%, so still retaining around 40%" and was going to "move to exclusive DD with a different firm, their offer was just too good to pass up". 2. On 14 August 2023, Mr McKee sent an email to Mr Jamie Campbell, an Associate Partner at Aitken, stating "I am cancelling the mandate effective immediately". 3. On the same day, Mr Campbell responded to Mr McKee's email, in which he stated that the offer to acquire 60% of Minemet had the effect of cancelling the IPO and triggering Minemet's obligation, under clause 5 of the Agreement, to pay Aitken 2% of the "transaction value". 4. On 14 November 2023, Mr Campbell emailed Mr McKee in relation to a change in the directors of Minemet and asked whether an acquisition by a third party had occurred, and, if one had occurred, requested a copy of the terms of that transaction. 5. On 16 November 2023, Mr McKee responded by email in which he said, amongst other things, "I did a share sale". He did not provide the terms of that sale, or any other details. 6. On 13 March 2024, Aitken's solicitors wrote to Minemet requesting documents in order to determine the amount Minemet owed to Aitken, indicating that Aitken would seek preliminary discovery if the request was not complied with. 7. On 27 March 2024, Minemet's solicitors sent a letter in response, in which they said: 1. In or about March 2023, Minemet and Aitken agreed not to further pursue any potential investors or the IPO; 2. "[M]uch later in 2023", Mr McKee "in his personal capacity entered into discussions with a third party [Infragreen Group Pty Ltd ("Infragreen")] … about the sale of some of Mr McKee's own shares in Minemet"; 3. Minemet disputed Aitken's claim for payment under clause 5 of the Agreement, describing it as "misconceived"; and 4. Minemet was not willing to provide a copy of "the share sale agreement and associated documents" and would not be able to, in any event, in the absence of a court order due to "confidentiality provisions in the relevant agreement". 1. On 26 May 2024, Aitken's solicitors wrote to Minemet's solicitors repeating Aitken's request for documents and offering to give undertakings not to use documents produced other than for the purposes of considering whether to commence proceedings against Minemet. 2. On 4 June 2024, Minemet's solicitors responded by asserting that Aitken's claim was "doomed to fail" and, for that reason, Minemet would not seek the consent of Infragreen to provide copies of the transaction documents to Aitken and declined to address the confidentiality regime proposed by Aitken's solicitors in their letter of 26 May 2024. 3. The documents sought by Aitken are, in substance, offers and transaction documents concerning any sale of shares in Minemet to Infragreen. Principles 1. Rule 5.3(1) of the UCPR provides: "(1) If it appears to the court that— (a) the applicant may be entitled to make a claim for relief from the court against a person (the prospective defendant) but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and (b) the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and (c) inspection of such a document would assist the applicant to make the decision concerned, the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person's possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief." (Emphasis in original.) 1. To order preliminary discovery against a prospective defendant, all five of the circumstances set out in UCPR r 5.3(1) must exist, that is: [2] 1. the applicant may be entitled to make a claim for relief against the prospective defendant; 2. the applicant has made reasonable inquiries to obtain sufficient information to decide whether or not to commence proceedings; 3. having made those inquiries, the applicant is unable to obtain sufficient information to make that decision; 4. the prospective defendant may have or have had possession of a document or thing that could assist in determining whether the applicant is entitled to make a claim for relief; and 5. inspection of such a document would assist the applicant to make the decision (that is, the decision whether or not to commence proceedings). 1. The threshold set by UCPR r 5.3(1) is low. [3] 2. I was satisfied that the requirements of UCPR r 5.3(1) were satisfied here and, on 29 October 2024, made the orders sought by Aitken. 3. I was satisfied that Aitken had established that: 1. it has a prima facie case for relief against Minemet; 2. it has made reasonable enquiries; 3. having made those inquiries, it is unable to obtain sufficient information to enable it to decide whether to commence proceedings against Minemet; 4. it has established that Minemet has possession of documents that can assist it to make that decision; and 5. inspection will assist it to decide whether to bring proceedings. 1. For these reasons, on 29 October 2024, I made the orders for preliminary discovery sought in the Summons filed on 20 August 2024. ********** Endnotes 1. Or 31 October 2022, see above [7]. 2. See my summary of the principles in Tabcorp Holdings Ltd v Entain Group Pty Ltd [2023] NSWSC 220 at [35], citing O'Connor v O'Connor [2018] NSWCA 214 at [21] (Simpson AJA, McColl and Macfarlan JJA agreeing). 3. Arnaout v Arnaout [2019] NSWSC 565 at [32(c)] (Lindsay J). 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