Trpezanovski v JCA Confectionary Pty. Limited [1999] NSWSC 16

New South Wales Supreme Court CITATION : Trpezanovski v JCA Confectionary Pty. Limited [1999] NSWSC 16 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 1238/98 HEARING DATE(S) : 01/02/99 JUDGMENT DATE : 1 February 1999

PARTIES : Tony Trpezanovski (P) JCA Confectionary Pty. Limited (D) JUDGMENT OF : Master McLaughlin

COUNSEL : Mr. W. Haffenden (P) Mr. T. McDonald (D) SOLICITORS : The Walker Group (P) Michael T. R. Binetter (D) CATCHWORDS : Mobil Oil Australia v Guina Developments Pty Limited [1996] 2 VR 34 CASES CITED : Telstra Corporation v Australis Media Holdings, McLelland CJ in Eq, (6 December 1996, unreported) Warner Lambert & Co v Glaxo Laboratories (1975) RPC 354 DECISION :

SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

MASTER McLAUGHLIN

Monday, 1 February 1999

1238 of 1998 TONY TRPEZANOVSKI & ANOR -v- JCA CONFECTIONERY PTY LIMITED & ORS

1 MASTER: By summons filed on 25 November 1998 the defendants JCA Confectionery Pty Ltd, Menka Tiricovski, Robert Tiricovski and Slavica Tiricovski seek, substantively, an order that the notice to produce served upon them by the plaintiffs and dated 14 October 1998 be set aside. That notice to produce requires the defendants to produce for inspection by the plaintiffs, Tony Trpezanovski and Anica Trpezanovski, the following documents: 1. Cash book of the first defendant from the date of its incorporation to the present. 2. All cheque butts, deposit books and bank statements of the first defendant from the date of its incorporation to the present. 3. All contracts with customers and invoices of the first defendant from the date of its incorporation to the present. 2 The substantive proceedings were instituted by summons filed by the plaintiffs on 29 January 1998. Those proceedings may compendiously be described as being in the nature of an oppression suit brought by the plaintiffs against the defendants. The plaintiffs were substantial shareholders in the first defendant. It is contended by the plaintiffs that as a result of further shares in the first defendant being issued at the instance of the second, third, fourth and fifth defendants, the shareholding of the plaintiffs in the first defendant has been considerably diluted and that the affairs of the first defendant have been conducted by the other defendants in a way which is oppressive to the interests of the plaintiffs. 3 Amongst the items of substantive relief sought by the plaintiffs in the summons is a prayer, in the alternative, for an order that the second, third, fourth and fifth defendants purchase the shares of the plaintiff in the first defendant. 4 The defendants resist the application by the plaintiffs for the production of the documents required in the notice to produce and seek that that notice be set aside upon the ground that for the defendants to be required to produce those items would be oppressive. The reasons why the production of those items would be oppressive upon the defendants is set forth in paragraph 2 of the affidavit of Robert Tiricovski, the fourth defendant, sworn on 23 November 1998. One of the reasons is that the plaintiffs are now in the character of trade rivals to the defendants in carrying on the business of the production of licorice, which is the main business of the first defendant. Another reason for which it is submitted that compliance with the notice to produce would be oppressive relates to the collation of the documents and to the cost to the defendants of that collation. 5 I have been taken to two decided cases relevant to the production of confidential documents to a commercial competitor. The first is the decision of the Court of Appeal of the Supreme Court of Victoria in Mobil Oil Australia Limited v Guina Developments Pty Ltd [1996] 2 VR 34. The leading judgment was that of Hayne J (with whom the President and Phillips J agreed). His Honour said, at 38, concerning an application for discovery: While it may readily be accepted that a party is ordinarily entitled to discovery and inspection of all discoverable documents in the possession or control of the opposite party (save those for which a valid claim for privilege from production is claimed) it is important to bear steadily in mind that discovery is but a tool only to be used in the pursuit of justice and that the rights to discovery and inspection is not without its limits. 6 His Honour later continued: Where it is said that the documents are confidential, it may be accepted that the fact that the documents are confidential will not ordinarily be a sufficient reason to deny inspection by the opposite party. In most cases, the fact that the documents may not be used except for the purpose of the litigation concerned will be a sufficient protection to the party producing them. But where, as here, the party obtaining discovery is a trade rival of the person whose secrets it is proposed should be revealed by discovery and inspection, other considerations arise. 7 His Honour then referred to relevant considerations in the case of material being revealed to a trade rival. 8 The other decided case to which I have been referred was the decision of McLelland CJ in Eq in Telstra Corporation v Australis Media Holdings (6 December 1996, unreported). His Honour said: The general principle is that the compulsive processes of discovery should not be permitted to invade the privacy and confidentiality of a litigant's affairs except to the extent that the interests of justice requires such a course in the circumstances of the particular case. The relevant circumstances will vary from case to case and a variety of different methods have been adopted in the reported decisions for the purpose of avoiding injustice - see particularly the discussion in Mobil Oil Australia v Guina Developments (1995) 33 IRR 82 and Warner Lambert & Co v Glaxo Laboratories (1975) RPC 354. 9 His Honour then quoted the passage which I have earlier set forth from the judgment of Hayne J in the Mobil Oil Australia case. 10 It seems to me that the circumstance of trade rivals, which has been considered not only by the Court of Appeal of the Supreme Court of Victoria but also by McLelland CJ in Eq, is one which is not directly applicable to the facts of the present application. Here the proceedings are brought by the plaintiffs not in their capacity as trade rivals of the defendant, but in their capacity, allegedly, as oppressed minority shareholders of the first defendant who have suffered that oppression at the hands of the second, third, fourth and fifth defendants. It is only since the alleged conduct of those defendants constituting the oppression has taken place that the plaintiffs have found themselves in the position of commercial rivalry with the defendants. It must also be borne in mind that the plaintiffs have made an offer of confidentiality concerning any material that might be revealed to them. 11 The plaintiffs submit that they require the material referred to in the notice to produce for two reasons. Firstly, to enable an expert to conduct a valuation of the shareholding in the first defendant. That valuation will be of relevance if the plaintiffs are successful in their oppression suit and if the Court reaches a position where it requires the second, third, fourth and fifth defendants to purchase the shares of the plaintiff in the first defendant. In that regard it should be noted that the suit has already been set down for hearing and that the plaintiffs at the hearing propose to request the trial judge himself to arrive at a valuation of the shareholding in the first defendant rather than have that question of valuation referred for determination by a Master. 12 Secondly, the plaintiffs submit that the material is necessary for the purposes of establishing the substantive entitlement of the plaintiffs to relief; that is, for establishing that there has been conduct on the part of the second, third, fourth and fifth defendants which constitutes oppression against the plaintiffs in the carrying on of the conduct of the first defendant. 13 It seems that for each of these reasons that the plaintiffs are prima facie entitled to have the material referred to in the notice to produce made available to them. It is only if the interests of justice for some reason would require that the material be withheld that the Court should not allow the plaintiffs to have access to that material. During the course of correspondence between the solicitors the plaintiffs on 16 March 1998 (that is, the best part of a year ago) put the defendants on notice that they would be requiring to have material produced and that they would be requiring to have a valuation of the shareholding in the first defendant performed as one of the matters in issue in the proceedings. Further, on 25 August 1998 the solicitor for the defendants in a letter of that date said that he had been instructed that the cheque books, deposit books, bank statements and cash books to the extent existing in relation to the balance sheets provided would be available for inspection. At that stage there appeared to be no problem concerning the documents being made available to the plaintiffs. 14 It seems to me that in the interests of justice the plaintiffs are entitled to have the notice to produce complied with, subject to the appropriate undertaking as to confidentiality. It follows therefore that I do not propose to set aside that notice, as the defendants now request. I propose therefore to dismiss the defendants' notice of motion. 15 I make the following orders: 1. I order that the notice of motion filed by the defendants on 25 November 1998 be dismissed. 2. I order that the defendants pay the costs of the plaintiffs of the aforesaid notice of motion. 3. I grant leave to the plaintiffs to proceed forthwith to assessment of the foregoing costs. 4. I reserve liberty to the parties to apply on seven days' notice in respect to the form of the undertaking as to confidentiality.