Armstrong Strategic Management v Expense Reduction

Judgment 1The proceedings were commenced by a Statement of Claim filed on 3 July 2013 and include, in particular, claims for relief under ss 233 and 461 of the Corporations Act 2001 (Cth) including a claim that the shares held by the First Plaintiff, North Coast Transit Pty Limited, in the Busways Group be purchased by other shareholders in that Group. 2The Eighth-Sixteenth Defendants ("Active Defendants") in these proceedings have caused a subpoena ("Subpoena") to be issued to the Proper Officer of Transport for NSW ("TfNSW") which requires production of, relevantly, copies of Sydney Metropolitan Bus Service Contracts ("SMBSC") 2, 3, 4 and 15 entered into by TfNSW with the successful tenderer in respect of each of those contracts. By way of background, the SMBSCs for regions number 1, 3, 12 and 14 were concluded between TfNSW and private bus operators in 2012 following a tender process and four further SMBSCs for regions 2, 4-5 and 15 were recently concluded (Glasson 6.11.2013 [16]). The First Defendant, Busways Blacktown Pty Limited ("Busways") was successful in its tender for SMBSC1 in 2012 but unsuccessful in tenders for several other regions. The Subpoena calls for production of SMBSC 3, as to which Busways was previously the incumbent operator but was unsuccessful in its tender in 2012, and Transit NSW (Liverpool) Pty Limited ("Transit Liverpool") was the successful tenderer. The Subpoena also calls for production of SMBSCs 2 and 4, as to which Busways was unsuccessful in its tender in the second round, and Ingleburn Bus Services and Hillsbus Co Pty Limited were the successful tenderers. The Subpoena also calls for production of SMBSC 15, as to which Busways was previously the incumbent operator but was unsuccessful in its tender in the second round, and Neville's Bus Service Pty Limited was the successful tenderer. 3By Interlocutory Process dated 6 November 2013, Transit Liverpool seeks orders to set aside the Subpoena in respect of SMBSC 3 under rule 33.4 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). By Interlocutory Process dated 6 November 2013, ComfortDel Gro Cabcharge Pty Limited ("CDC"), Hillsbus, Neville's Bus Service Pty Ltd and Ingleburn Bus Service ("Interested Parties") seek to set aside the Subpoena in respect of the SMBSCs to which they are party under rule 33.4 of the UCPRs. TfNSW also seeks orders setting aside the paragraphs of the Subpoena calling for production of each of the four SMBSCs under UCPR rule 33.4. 4The Interested Parties, Transit Liverpool and TfNSW also seek orders, in the alternative, that no party to the proceedings or their representatives be granted access to documents produced in response to the Subpoena, or alternatively that access be granted to documents produced that is restricted to external legal representatives and experts that have provided a confidentiality undertaking in a specified form. This judgment deals only with the question whether the Subpoena should be set aside. The question of an appropriate confidentiality regime, if the Subpoenas is not set aside, was deferred until after the issue whether the Subpoena should be set aside had been determined. The applicable principles 5I should first identify the applicable principles to determining whether the Subpoena should be set aside. Rule 33.4 of the UCPRs relevantly provides that the Court may, on the application of a party or any person having a sufficient interest, set aside a subpoena in whole or in part, or grant other relief in respect of it. The parties seeking to set aside the Subpoena have sufficient interest to bring that application for the purposes of UCPR r 33.4, where the documents referred to in relevant paragraphs of the subpoena relate to their respective SMBSCs with TfNSW and TfNSW has such an interest in respect of all of the relevant SMBSCs. The Active Defendants did not contend to the contrary. 6In Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 574-575, Jordan CJ observed that a subpoena may be set aside as an abuse of process if "great numbers of documents are called for and it appears that they are not sufficiently relevant". In National Employers Mutual General Association Ltd v Waind and Hill [1978] 1 NSWLR 372 at 382, Moffitt P observed that: "... it would be an improper use of the subpoena if it were not sought for the purpose of the litigation, but for some spurious purpose, such as to inspect the documents in connection with other proceedings, or for some private purpose, or in collusive proceedings to give them publicity. A witness might argue the documents must be sought for some undefined spurious reason, as they have no conceivable relation to the proceedings. The court would jealously consider any of such submissions having regard to the invasion of the private rights of the stranger occasioned by the operation of the subpoena." 7In Spencer Motors Pty Ltd v LNC Industries Ltd [1982] 2 NSWLR 921 at 926-927, Waddell J in turn referred to Commissioner for Railways v Small and observed that a subpoena should be held to be oppressive or an abuse of process if the production of the documents which it describes is excessively burdensome and the documents appear not to be sufficiently relevant to the proceedings, and also referred to Waind and Hill as authority that a document is "sufficiently relevant" if its production is reasonably likely to add, in the end, in some way or another, to the relevant evidence in the case. In Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 90 at 103, Beaumont J noted that the question whether a subpoena has a legitimate forensic purpose will depend on whether the material sought has adjectival, as distinct from substantive relevance, and that the test of adjectival relevance is satisfied if that material has "apparent" relevance in that it could "possibly throw light on the issues in the main case". 8In White and Tulloch v White (1995) 127 FLR 105; (1995) 19 Fam LR 696 at 703, the Family Court of Australia in turn referred to Waind and Hill and Spencer Motors in identifying the test as to whether a subpoena should be set aside as whether the documents were "sufficiently likely to 'add in the end to the relevant evidence in the case'". In Read v Chang [2010] FamCA 876 at [8], Cohen J cited that decision for the proposition that: "... if there is such relevance, any invasion of privacy will be insufficient to warrant a refusal to force disclosure. If the documents are insufficiently relevant or insufficiently likely to effect the ultimate outcome of the proceedings, the invasion of privacy inherent in disclosure and in some cases the inconvenience of deprival of working documents will be regarded as oppressive and disclosure should not be required." 9In Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1115 at [19]-[26], Brereton J in turn noted, in respect of a notice to produce, that it was sufficient to support relevance that the documents called for could "possibly throw light" on the issues in the substantive proceedings or that it is "on the cards" that they will do so, but noted that a notice to produce had traditionally been treated more liberally than a subpoena to a third party in that regard. The applicable principles in an application to set aside a subpoena were identified by Einstein J in the City of Sydney v Streetscape Projects (Australia) Pty Ltd [2011] NSWSC 364, where his Honour referred to the test for determining whether a party is required to produce documents pursuant to a subpoena as stated in R v Saleam [1999] NSWCCA 86 at [11] as that: "Before access is granted, or an order to produce made, the applicant must (i) identify a legitimate forensic purpose for which access is sought; and (ii) establish that it is 'on the cards' that the documents will materially assist his case." His Honour also observed at [10] that: "... The essential notion is that there is a reasonable chance that the material sought will assist the defence. If it is reasonable to infer that the material sought exists and that it is relevant to an issue, though its content is unknown, it will almost invariably be logically the case (as it seems to me) that such a chance exists, even though it might be thought to be unlikely. Seeking that material therefore seems to me to be a legitimate forensic purpose, providing of course that the factual issues and the character of the material sought are precisely identified." His Honour further observed at [12] that a subpoena should be permitted "where the Court forms the view that the material falls within the legitimate field of inquiry raised by the issues in contest and is reasonably likely to add in the end in some way or other to the relevant evidence in the case". In DCM Solar Pty Ltd (in liq) [2013] NSWSC 423, I adopted the test of "could possibly throw light" on the issues in the substantive proceedings or that it is "on the cards" that they do so as formulated in Portal Software above. 10It is, as I understand it, common ground between the parties that the fact that the relevant documents are confidential would not in itself be a basis to set aside the Subpoena, although confidentiality orders or restrictions on access could be made. The Interested Parties accept that their claim to commercial confidentiality is not itself an objection to disclosure but emphasise that the Court should more closely scrutinise the disclosure sought to ensure that it is material and not oppressive: NAK Australia Pty Ltd v Starkey Consulting Pty Ltd [2008] NSWSC 1136 at [10]. I did not understand the Active Defendants to contest the need for such scrutiny. The lay evidence in this application 11The Active Defendants rely on the affidavit of their solicitor, Mr McGregor, dated 18 November 2013. Mr McGregor's evidence, on information and belief from the Managing Director of the Busways Group, Mr Rowe, is that the Busways Group will shortly enter into negotiations with TfNSW in respect of Outer Metropolitan Bus Service Contract Region 6, in respect of which it is the incumbent operator and that, if those negotiations are unsuccessful, that contract will be submitted to tender; that, in late 2014, it is expected that there will be a negotiation process between the Busways Group and TfNSW regarding rural and regional bus contracts under which the Busways Group is the incumbent operator; that there are likely to be negotiations or a tender in respect of the services which are now subject to SMBSC 1 between TfNSW and the Busways Group; and that Busways Group does not know the price or range of prices that it would need to offer to secure new terms for either the Outer Metropolitan Bus Service Contract 6, the rural and regional contracts it presently holds or the renewal of SMBSC. Mr McGregor also indicates, on information and belief from Mr Rowe, that the "nature of the services required to be provided as part of the various contracts offered by TfNSW are very similar". Mr McGregor states, on information and belief from Mr Rowe, that the Busways Group and other bus operators allow for specified matters in formulating the price at which they are prepared to offer bus services. 12Mr McGregor was not cross-examined, in the context of an interlocutory application and where his evidence was given on information and belief. It might be noted, however, that the fact that the Busways Group does not "know" the price that it would need to offer to acquire new contracts in a tender process is self-evidently correct, but Mr McGregor (on information and belief from Mr Rowe) does not suggest that the Busways Group, as an experienced business in the relevant industry, has not sought to form a view as to that question so as to maximise its prospects of obtaining such contracts. The proposition that the services provided by bus operators are similar is also self-evidently correct in a limited sense, so far as they are bus services, but the other evidence led in this application indicates that there are substantial differences between the regions in which such services are provided including variously bus routes in rural areas, involving long runs down expressways; or through heavy traffic. Mr McGregor does not seek to address the use to which the documents sought by the Subpoena would be put, if produced to the valuation expert retained by the Active Defendants. I will refer to the evidence of that expert, Mr Wayne Lonergan, below. 13Hillsbus relies on evidence of its Chief Executive, Mr Glasson, who has extensive experience in the transport industry, initially holding senior positions with the State Government and as Chief Executive Officer of CDC since June 2009 and a director of Hillsbus. Mr Glasson gives evidence as to the significant differences in respect of the 15 contract regions in Sydney, which were introduced following reforms undertaken in relation to metropolitan bus contracts in 2003-2005. He notes that matters such as lengths of the runs, involving matters such as whether toll roads or more congested routes are available, the population mix and spread, the location of schools and facilities impact on the number of buses required to service a region, the operating costs and the profit that might be achieved from a metropolitan bus service contract. 14Mr Glasson notes that Hillsbus was successful in the tender for SMBSC 4 which comprises the Hills district and services to North Sydney and the central Sydney business district via the M2 toll road, and that contract will commence on 1 August 2014. He notes that Busways Blacktown was the successful tenderer in relation to SMBSC 1, the contract for which had previously been held by an entity in which Busways Blacktown had a 50% interest and a related entity of CDC had a 48% interest. He also notes that companies in the Busways Group currently operate the area covered by SMBC 15 but Neville's Bus Service was the successful tenderer in relation to SMBSC 15, which commences in June 2014. He notes that Ingleburn Bus Services was the successful tenderer in relation to SMBSC 2 and Transit Liverpool was the successful tenderer in respect of SMBSC 3. Mr Glasson points out that a proforma of the SMBSC is publicly available on the TfNSW website, but that proforma does not include schedules to particular contracts which include highly commercially sensitive information and additional incentives offered by bus companies in respect of their respective contracts, pricing and wage information, costs including maintenance and bid price details. Mr Glasson also gives evidence emphasising the confidentiality of the relevant material. 15Mr Glasson again emphasises the difference between different regions in his further affidavit dated 21 November 2013, having regard to his experience at the New South Wales Ministry of Transport and his experience at CDC, which operates SMBSC 4, two contracts in the outer metropolitan area and two contracts in the rural and regional area. Mr Glasson also takes issue with a view expressed by Mr Lonergan that there has been a change in market conditions since 2012, pointing out that the option to put contracts to tender or negotiation was a condition of contracts entered into by Busways and other operators with TfNSW in 2005 and that the uncertainties in the bus industry have now existed for a substantial period. 16Ingleburn Bus Services relies on the affidavit of Mr Giuseppe Oliveri dated 6 November 2013. Mr Oliveri is a director of that company and has worked in the bus industry for 35 years and has been a director of that company for nearly 20 years. He gives evidence as to the tender process in respect of the SMBSCs, in which Ingleburn Bus Services was successful as to SMBSC 2 from June 2014 and also gives evidence as to confidentiality of the relevant contracts. Mr Oliveri also points to the differences between contract regions in the Sydney metropolitan area, including as to matters such as the number of buses which would be required in each region. Neville's Bus Services relies on the affidavit of Mr Giuseppe Calabro dated 6 November 2013. Mr Calabro is a director of that company and has worked in the bus industry since 1983 and has been a director of that company since 2001. Neville's Bus Services was awarded SMBSC 15 from June 2014. 17Transit Liverpool relies on the affidavit of Mr Clinton Feuerherdt, the Chief Executive Officer of the Transit Systems group of companies which includes Transit Liverpool. Transit Liverpool is the bus operator for region 3 pursuant to an SMBSC for that region executed in November 2012. Mr Feuerherdt's evidence is that the fifteen regions within the Sydney public bus service area are different in their operating environments, geography, location and size of bus depots and passenger numbers and that various factors have a bearing on the pricing at which a bus operator may tender for a contract in a particular region. Mr Feuerherdt also gave evidence as to the confidentiality of Transit Liverpool's contract with TfNSW. 18TfNSW relied on the affidavit of Mr David Overington affirmed 26 November 2013. Mr Overington is the Project Director, Sydney Metropolitan Bus Services Contracts Project, in the Service Procurement and Performance Branch of TfNSW and has been engaged in respect of the procurement of bus services since early May 2012. Mr Overington gave detailed evidence as to the Sydney metropolitan bus market; the importance of process integrity in respect of the tender process; the importance of confidentiality in respect of the first tranche of SMBSCs and the extensive steps which were taken by TfNSW to retain confidentiality in respect of that process; and the similar steps which were taken in respect of the second tranche of SMBSCs. Mr Overington also gave evidence of the importance to TfNSW of the maintenance of confidentiality in respect of the relevant contracts, and that TfNSW had to ensure that confidential information in respect of the commercial terms of relevant contracts, and particularly the terms contained in Schedule 3 of the SMBSCs, was kept confidential for reasons including the need for process integrity and to honour commitments made during the procurement process; the need to maintain market confidence so as to undertake future competitive tendering processes and to obtain the resulting gains for New South Wales taxpayers and bus users, and so that the price of an incumbent operator is not used against it to its commercial disadvantage. The determination of the market value of the Busways Group 19The first issue that arises in the application to set aside the Subpoena is whether it is "on the cards" that the production of confidential information of their parties in respect of four particular SMBSCs, as a subset of the eight SMBSCs concluded to date and the fifteen regions within the Sydney public service area, would assist in the determination of the "market value" of the Busways Group. It is clear that "market value" (which is a concept well-known in valuation practice and to the law) is the relevant concept, since the Originating Process seeks, inter alia, an order that the shares of North Coast Transit Pty Limited, in each of seven companies: "be purchased by the remaining members of each Company at a price equal to the market value of the shares as a whole without discount for the fact that the shareholding is a minority shareholding". 20The Active Defendants in turn emphasised the concept of market value in advising the parties who seek to set aside the Subpoena of the matters relied on to support it, by letter dated 1 November 2013 from their solicitors, pursuant to a direction made by the Court requiring them to provide an identification of the matters in issue to which the Subpoena relates. That letter relevantly stated that: "... A critical fact in issue in the proceedings will be the market value of [North Coast Transit's] shares in the Busways Group. This requires an assessment to be made as to the value of the Busways Group. That, in turn, will require an assessment to be made of the profits that the Busways Group can reasonably be expected to make in the future including with respect to routes which will or might be negotiated or submitted to tender in the future. This will necessarily require opinions to be formed as to the likely revenue which would be earned from providing services with respect to such routes. The contracts the subject of the Subpoena are directly relevant to this issue. If, for example, those contracts disclose the prices that [TfNSW] has agreed to pay (and the operators have agreed to receive) for the provision of bus services is relevantly less than the prices which have historically been paid, it would follow that the revenue (and therefore profits) that the Busways Group could reasonably be expected to make in the future would (ceteris paribus) be less than was historically the case. Such a conclusion would be relevant to any valuation of the Busways Group and in turn any valuation of the market value of [North Coast Transit's] shares in those companies." 21The classic formulation of the concept of "market value" is set out in Spencer v Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418 at 432, where Griffith CJ observed, in respect of the "market value" of land, that: "In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, ie, whether there was in fact on that day a willing buyer, but by inquiring 'what would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?' It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together." 22The nature of a "market value" test was described in MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167 at [55], in the context of the purchase of shares on exercise of a call option, by Spigelman CJ (with whom Mason P and Hodgson JA agreed) as follows: "A test of a "market value", whether in a statutory or contractual context, usually invokes the test long established and frequently applied in Spencer v The Commonwealth of Australia (1907) 5 CLR 418 esp at 432 and 440-441 of a willing but not anxious purchaser and vendor, bargaining with each other. This approach was most recently expressed in a joint judgment of three judges of the High Court in Marks v GIO Australia Holdings Ltd [1988] HCA 69; (1998) 196 CLR 494 at 514: "... The value ... is to be identified according to what price freely contracting, fully informed parties would have offered and accepted for it." 23The Interested Parties contend that the relevant paragraphs of the Subpoena should be set aside because the Active Defendants have failed to demonstrate the forensic purpose of the documents sought. In oral submissions, Mr Lancaster, who appeared with Ms Fendekian for the Interested Parties, submitted that it was not "on the cards" that the production of the confidential information sought by the Subpoena, which would not be available to a buyer and seller in a voluntary transaction, would assist in determining the "market value" of the shares in the Busways Group, as follows: "The buy-out order seeks to attribute or seeks to align the price that should be paid as a market value of the shares. Market value of course is something that must be calculated in proceedings like the main proceedings as the amount, in the absence of the oppressive conduct if that is what is found, the shares would transact on market, neither the purchaser nor the vendor of shares in a market transaction has access to confidential information of the competitors in the industry. It is simply not material and not possibly material to the calculation of the relief that's sought because it does not speak directly in terms of market value for one of the parties to the proceedings to put forward evidence based not on what participants in the market might know, but the true underlying facts such as after some sort of Royal Commission into all the bus companies. That is perhaps one of the main reasons we say the legitimate forensic purpose is simply not achieved. Whatever [the expert accountant retained by the [Active Defendants] might say about it, what is required to be calculated on the pleadings in this case is the market value of the shares and confidential information of competitors not as part of the information taking place as part of that value." [T9] 24Transit Liverpool substantially adopted the submissions of the Interested Parties and also contended that there was no legitimate forensic purpose for the Subpoena and that the documents sought by it were unnecessary, at least at this point in the proceedings. Transit Liverpool also contended that the area which was the subject of SMBSC 3 was not an area in which the Busways Group had ever operated or was likely to operate in for any period relevant to any valuation, although no evidence by any party allows an assessment of that question. In oral submissions, Mr Bova, who appeared for Transit Liverpool, also adopted the submissions of Mr Lancaster and Ms Fendekian and contended that whether the Busways Group would obtain new contracts was a matter for lay evidence of persons associated with that Group, rather than for expert evidence of the valuation expert retained by the Active Defendants who, Mr Bova contended, would have no idea as to the identity of the other tenderers, the terms of any other tenders, or of developments within the contracting regime in the bus industry since 2005, which are not within the scope of documents sought to be produced under the Subpoena. 25TfNSW contends that the prejudice from disclosure of the relevant information would be irreparable and would far outweigh the utility of the provision of the relevant contracts in the proceedings. TfNSW also made submissions as to the form of confidentiality regime which should be adopted, if the subpoena was not set aside, which it is not presently necessary to address. In oral submissions, Ms Steele, who appeared for TfNSW, adopted the submissions of Mr Lancaster and Ms Fendekian who appeared for the Interested Parties and, in oral submissions, emphasised the significance of confidentiality and process integrity for the tender processes adopted by TfNSW. 26The Active Defendants respond that there can be no reasonable dispute that the documents "could possibly throw light on the issues" in the proceedings in that a critical fact in issue is the value of the Busways Group. The Active Defendants contend that a determination of the "market value" of North Coast Transit's shares in the Busways Group will necessarily require a consideration of the "value" of the Busways Group, which will require an assessment of the profits that the Busways Group might make in the future. The Active Defendants rely on an observation by Mr Hall, the valuation expert engaged by the Interested Parties, that: "A valuation of the Busways Group might involve an assessment of the probability of the Busways Group successfully obtaining ... new contracts and the broad terms on which those new contracts might be obtained." There is no doubt that that issue may be relevant to the determination of the market value of the Busways Group and it would also be correct that a proper assessment of the market value of the shares in the Busways Group could well take into account the likelihood of future earnings or cashflows from the provision of bus services including in connection with potential new contracts. The Active Defendants also contend that, in these circumstances: "Any document which could 'possibly throw light on' an assessment of 'the probability of the Busways Group successfully obtaining new contracts and the broad terms on which those new contracts might be obtained' will have a 'sufficient apparent connection to justify [the production or inspection] of that document." 27I do not accept that submission, so far as it extends to documents which are known or knowable to participants in the relevant market in the ordinary course. As I noted above, the matter in these proceedings is the market value of the shares in the Busways Group, which is to be determined in the context of a willing but not anxious purchaser and vendor bargaining with each other and by reference to what "fully informed parties would have offered and accepted" for those shares. Such "fully informed parties" would not have access to information that could only be obtained by the exercise of the Court's powers to issue subpoenas to third parties. Mr Robertson, who appeared with Mr Corbett for the Active Defendants, initially conceded that, in a voluntary negotiation between a buyer and seller, the only information that will be available to the parties would be confidential information of the Busways Group to the extent that it was voluntarily made available by that Group for the purposes of the sale negotiation and publicly available information concerning third parties. Mr Robertson later sought to withdraw that concession. While I will not hold his client to that concession, it seems to me that it was properly made because there is no basis in which it could be contended that the hypothetical parties to a voluntary transaction could obtain access to highly confidential information of the kind sought by the Subpoenas in such a negotiation. 28It should also be recognised that the approach for which the Active Defendants contend has the surprising result that the "market value" determined in an oppression case would not be consistent with that which were determined in a voluntary buy-out, because the value attributed to shares in an oppression case following the production of competitors' confidential information under compulsory process could well be different to that attributed to those shares by reference to the information to which the parties to a voluntary buy-out would have access. It seems to me that a valuation approach that seeks to determine the "value" of the shares in the Busways Group by reference to information that is confidential to third parties and could not lawfully be obtained other than by invoking the Court's compulsory processes and is, by its nature, not available to participants in the relevant market is, at best, marginally relevant to any matter in issue in the proceedings. 29A further difficulty with the approach proposed by the Active Defendants is that the particular selection of the SMBSCs required to be produced in response to the Subpoena is not supported by evidence or any apparent logical justification. The Interested Parties point out, relying on Mr Hall's second report, that Mr Lonergan has not identified why the information which he seeks could not be obtained, on the one hand, from SMBSC 1 which the Busways Group won in 2012, or on the other why access to four SMBSCs (for two of which the Busways Group was an unsuccessful tenderer) would assist where eight such contracts have been awarded and there are fifteen such regions within the Sydney public bus service area. The Active Defendants did not explain, by evidence or submissions, why the production of the SMBSCs for the particular regions sought would cast greater light on the future terms of SMBSCs for which they may be successful tenderers (as distinct from those for which they were unsuccessful in the past) or on the future market value of their business than other SMBSCs in respect of other Sydney metropolitan area regions which they do not seek to have produced. The selection of the SMBSCs sought to be produced undermines any prospect that the material sought to be produced would be probative of the "market value" of the shares in the Busways Group. 30The Active Defendants also contend that the Busways Group will shortly enter into negotiations with respect to outer metropolitan bus service contract ("OMBSC") 6 (McGregor 26.11.2013, Annexure A) and that the contracts sought by the Subpoena will "possibly throw light on", inter alia, "the probability of the Busways Group successfully obtaining [OMBSC6] and the broad terms on which [that contract] might be obtained". Neither the evidence led by the Busways Group nor that submission identifies how the terms of the successful tenders for SMBSCs 2-4 and 15 would be predictive of the Busways Group's likelihood of success in respect of another region in the Sydney outer metropolitan area. The evidence as to the variability between different regions led by the Intervening Parties strongly to the contrary. 31The Active Defendants also rely on a letter dated 23 April 2013 from TfNSW to seek to support that submission, which observed that: "One of TfNSW's key objectives in negotiating will be to achieve value for money. To determine if the negotiation process is achieving value for money, TfNSW will take into account pricing achieved in the competitively tendered Sydney Metropolitan Bus Service Contracts ("SMBSC") and other relevant matters and benchmarks ... if TfNSW determines that value for money is unlikely to be achieved through further negotiations, TfNSW will proceed to contract award through an open competitive tender market process. In either case, negotiated or competitively tendered, the terms and conditions of the new contracts will be similar to those of the SMBSC contract." The Intervening Parties and TfNSW respond, and I accept, that this letter indicates no more than that TfNSW will have regard to the pricing which it has achieved, across the eight contracts which it has previously tendered, in determining whether to negotiate with incumbents or proceed to tender in respect of contracts in the outer metropolitan area. It is notable that, to the extent that TfNSW has indicated that it will have reference to the SMBSCs, it is referring to all contracts awarded to date, whereas the Subpoena is limited, as I noted above, to the four SMBSCs to which I have referred above. 32It does not seem to me that it is "on the cards" that the review of the terms of four SMBSCs out of the eight so far awarded would provide any rational basis for prediction of the likelihood that a particular operator would gain or loose the contract in a different area in the outer metropolitan area. Even if such a prediction were rationally possible on that basis, it does not seem to me that it is on the cards that the Subpoena will produced admissible evidence where Mr Lonergan, the valuation expert retained by the Active Defendants to whom they seek to make available the documents produced, has not been shown to have the expertise or qualifications necessary to give admissible evidence as to predictions of that character. I will refer address that issue further below. The proper scope of the valuation evidence 33A further difficulty with the Subpoena is that it is sought to be justified by the proposed analysis of the documents produced by an accounting expert retained by the Plaintiffs which would to a substantial extent, in my view, be outside the scope of his expertise. I should here refer briefly to several well-known principles, although the parties did not refer to the relevant case law in addressing this issue in general terms in submission. Section 79 of the Evidence Act 1995 (NSW) provides an exception to the hearsay rule in respect of evidence where a person has specialised knowledge based on his or her training, study or experience and that person's opinion is wholly or substantially based on that knowledge. In HG v R [1999] HCA 2; (1999) 197 CLR 415 at 427, Gleeson CJ drew attention to the need for an expert to differentiate between the assumed facts on which his or her opinion was based and the opinion in question. His Honour also noted that: "Experts who venture "opinions" (sometimes merely their own inference of fact), outside their field of specialised knowledge may invest those opinions with a spurious appearance of authority, and legitimate fact-finding may be subverted." 34In Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705, Heydon JA (as his Honour then was) identified the following principles: "In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialist knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witnesses become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration of examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience" and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these factors are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the Court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight." 35In Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 24 CLR 588, the majority in turn emphasised the need to connect the opinion expressed by a witness with the witness's specialised knowledge based on training, study or expertise and observed (at [42]) that: "A failure to demonstrate that an opinion expressed by a witness is based on the witness's specialised knowledge based on training, study or experience is a matter that goes to the admissibility of the evidence, not its weight". 36The Interested Parties rely on the affidavit dated 6 November 2013 of an experienced accountant and valuer, Mr Hall, which indicates the manner in which he considers a valuer would proceed in assessing the value of the Busways Group, and the sources of information to which a valuer would have access, and on his further affidavit and report dated 21 November 2013 responding to Mr Lonergan's report to which I will refer below. Mr Hall's evidence is that a valuer would, in determining the market value of the Busways Group's business, rely on assumptions incorporated into the current budget and forecast documents prepared by senior management; senior management's knowledge and experience and judgment regarding the terms and conditions on which contracts might be renewed; opinions and judgments of industry analysts and other experts; and, if necessary, his experience and judgment regarding the credibility of such estimates and their appropriate use. The Active Defendants respond, in effect, that this is only one means by which the shares in the Busways Group could be valued, and the correct or preferable method for valuing the Busways Group is a matter for the final hearing. 37The Active Defendants point out that the Plaintiffs have served a valuation report that, on their case, overestimated the "value" of the Busways Group, and that Mr Lonergan considers the documents sought by the Subpoena will be relevant to the preparation of his report. The Active Defendants rely on Mr Lonergan's evidence that the value of any business is determined by reference to future earnings and/or cashflows of the business; that in some circumstances, the business' historical performance can assist in forming a view as to future performance; and that is not, in his view, the case in respect of the Busways Group where there are significant changes in the market conditions in which it operates. Mr Lonergan expresses the view that, in order to prepare his final report: "It will be necessary for me to make some assumptions and draw some conclusions regarding the current and future market conditions for Busways. This will allow me to form a view as to likely future performance of the Busways Group which in turn will significantly influence my assessment of value." 38Mr Lonergan also expresses the view that: "Obtaining access to some of the actual Contracts which have been entered into is important evidence in forming any conclusion as to the 'broad terms on which ... new contracts might be obtained'." He also suggests that: "More generally, the Contracts would provide me with important information which will inform the assumptions and conclusions that I should make regarding the new market conditions in the NSW bus industry. Those Contracts will provide recent evidence regarding the price and other commercial terms on which other operators have been prepared to offer to provide bus services and the clustering or otherwise of these tendered prices. In my assessment, the information will be likely to permit me to draw some conclusions as to what might occur in the future." 39With respect, I do not accept that Mr Lonergan, who is well qualified as an accountant and valuer, has appropriate expertise to draw conclusions, by the application of accounting or valuation expertise, as to market conditions in the New South Wales bus industry or what might occur in the future in that industry. These are properly matters of assumption. In particular, I do not accept that it will be open to Mr Lonergan, in the exercise of his expertise, to form conclusions as to the price which Busways Group would in fact tender for the renewal of existing contracts or obtain new contracts from confidential information which is produced on Subpoena and would not otherwise be available to the Busways Group. 40Mr Lonergan acknowledges that there are "some differences" between regions which are subject to TfNSW contracts, but expresses the view that the differences between contract areas "are not significant enough" to prevent the Contracts from being highly relevant to the valuation exercise that he has been asked to perform. Mr Lonergan also recognises that senior executives of the Intervening Parties have given evidence emphasising the different operating environments and operate costs structures in each of the regions in which Sydney Metropolitan Bus Services are provided, and expresses the view that: "I do not consider the different operating environments to be an impediment to using the Contracts for the purposes of drawing conclusions about the likely future market conditions in the NSW bus industry." Mr Lonergan does not further explain the basis on which he has formed that view nor does he explain how it involves an application of his expertise as accountant or valuer, and I do consider that I should give any substantial weight to that view. 41Mr Lonergan's evidence that he will seek, from a review of the contracts produced on Subpoena, to "estimate the above key integers for the other contracting parties" and then "use that information to extrapolate the prices at which future contracts might be concluded even if those other contracts relate to different amounts of kilometres, hours of buses". It must again be noted that none of that information would be available to a willing purchaser or willing vendor of the Busways Group, other than to the extent that it may be derived from publicly available information. Mr Lonergan's report itself recognises (at paragraph 31) that having regard to the confidential manner in which the tender process was undertaken, the information as to competitive contracts is not known to Busways Group management and not in the public arena. This seems to me to emphasise the artificiality of seeking to determine the market value of the Busways Group by reference to information which would not be known to vendors or purchasers in a market transaction, to which I have referred above. 42In my view, Mr Lonergan's evidence highlights the absence of probative value of the information that is sought, even on the most undemanding standard applicable to a subpoena. First, as I have noted above, to the extent that the question is the market value of the relevant shares, Mr Lonergan would be asked to determine that value by access to information that would not have been available to vendors and purchasers in the relevant market. Second, he would determine the "clustering or otherwise" of tender prices but only in four of the eight regions as to which SMBSCs have to date been entered or of the fifteen regions in the Sydney metropolitan region. Third, Mr Lonergan has also not been shown to have the qualifications or experience necessary to make predictions as to the probability of Busways' success in renewed or new contracts, which must depend at least on which other bus operators might tender for those contracts and the terms on which they might do so. Whether the Subpoena can be supported by reference to s 233(1)(d) of the Corporations Act 43The Active Defendants submitted that they were caught by surprise by the emphasis placed by the Interested Parties in oral submissions on the fact that the content of the four SMBSCs sought by the Subpoena would not be available to vendors or purchasers of shares in the Busways Group in dealings in the market and I allowed them an opportunity to lead further evidence and make further submissions as to that matter. The Active Defendants did not seek to lead further evidence, including from Mr Lonergan, as to that matter. In their supplementary submissions, the Active Defendants indicated that: "In general terms (but without admissions) the Active Defendants do not cavil with the logic of the suggestion that, in determining 'market value' one generally cannot consider something which is not known and not imputed to be known by the participants in the 'market' referred to." They submitted, however, that that proposition did not support a conclusion that the contracts had insufficient apparent relevance to support the Subpoena. 44The Active Defendants submitted, first, that the four SMBSCs sought to be produced were apparently relevant to the valuation exercise under s 233(1)(d) of the Corporations Act whether or not they informed the question of "market value". The Active Defendants drew attention to the fact that s 233(1)(d) of the Corporations Act provides that the Court can make any order it considers appropriate in relation to a company, including an order for the purchase of any shares by any member. They also drew attention to the observations of the plurality in Campbell v Back Office Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [178]; (2009) 73 ACSR 1 that that section does not identify the basis upon which the price for the shares is to be fixed if an order for compulsory purchase is made; that the Court had power to make orders at a price fixed at the commencement of the proceedings but for the effect of oppressive conduct, or at a date other than the date of commencement of the proceedings; and that the power given to the Court by that paragraph "should not be hedged about by implied limitations". They also refer to the observation of the Supreme Court of Victoria in Wain v Drapac [2013] VSC 381 at [39] that: "The price to be paid will not always reflect the actual or real worth of the shares that might be obtained on the open market." 45The Interested Parties responded that this submission went beyond the leave that I granted to the Active Defendants to file further evidence and make submissions concerning the question which information would be available to determine the market value of the companies' shares. Transit Liverpool also contended that the Active Defendants' supplementary submissions travel beyond the leave that was granted. The Active Defendants in turn indicated that they would seek leave to make those further submissions, if such leave was required and the Interested Parties indicated that they would oppose such leave. Without having heard substantive further submissions as to this matter, my preliminary view is that this submission was outside the scope of leave for further submissions that the Court had granted. However, it seems to me that there was no prejudice to the Interested Parties, Transit Liverpool or TfNSW from the making of this limited further submission concerning this question of law, which could readily be and was addressed by their submissions in reply; and the Court should therefore grant leave for the further submission to be made. It does not seem to me, given the conclusion which I have reached below, that there would be any utility in the parties incurring further costs in respect of a debate as to whether such leave should be granted. However, I will hear any party that requires a further opportunity to be heard as to that matter. 46The Interested Parties in turn emphasise that, as I have noted above, the relief sought by the Plaintiffs in the Originating Process and Statement of Claim is a buy-out order at a price equal to the market value of the shares as a whole without discount for the fact that the shareholding is a minority shareholding, and that the Active Defendants had in turn relied on the issue as to "market value" in identifying the matter to which the Subpoena related and had instructed Mr Lonergan that: "An issue in the proceedings is the market value of the First Plaintiff's 10% shareholding in various Busways companies." The Interested Parties also point out that the Active Defendants have not pleaded or suggested any alternative valuation methodology than that of "market value" nor suggested that they would lead expert evidence on any different basis. Transit Liverpool also points to the emphasis on market value in the Originating Process and the correspondence from the Active Defendants identifying the basis on which the Subpoena was supported. It also contends that, even if the relevant issue was the "fair" value of the shares in the companies rather than their market value, there is no evidence to suggest that the SMBSC between Transit Liverpool and TfNSW is relevant to that matter and, in particular, the Active Defendants did not call further evidence from Mr Lonergan addressing that matter although they had leave to do so. TfNSW in turn adopted the further submissions prepared by the Interested Parties and Transit Liverpool in respect of this issue. 47I accept that the Court's power under s 233(1)(d) of the Corporations Act is not confined by any specific requirement that a buy-out order be made at "market value", although I have noted above that that is the order that the Plaintiffs seek. I accept that such a value might well be adjusted, for example, to exclude the effect of any oppressive conduct or to require that a buy-out take place at a value determined at a particular date. It may be unlikely, although it is perhaps not inconceivable, that such an adjustment would reflect matters that are not known or knowable to the parties or participants in the relevant market, so that the value attributed to the company's shares in an oppression suit would diverge from that attributed to them in a voluntary transaction, for reasons other than those arising from the conduct of the particular parties. In any event, this submission does not, in my view, address the lack of probative value in evidence derived from the four SMBSCs sought to be produced, given the lack of apparent basis for the focus on those four contracts and the fact that the conclusions sought to be derived from them would be outside the expert valuer's expertise for the reasons noted above. Whether the content of the four SMBSCs was known to or imputed to participants in the relevant market 48In their supplementary submissions, the Active Defendants also contend that the four SNBSCs to which the Subpoena is directed were in fact known or would be imputed to be known by the participants in the hypothetical "market" contemplated by the term "market value". They submit that even if, contrary to their submissions, the correct test is to determine whether those four SNBSCs would be available to the "market" contemplated by a test of "market value", the SNBSCs required to be produced under the Subpoena satisfy the test in that, for example, CDC and its associated entities have access to three of those SNBSCs and therefore have knowledge of the terms and prices in them and TfNSW has knowledge of the remaining contract. 49The Active Defendants also refer, in their supplementary submissions, to the observation of McHugh J in Kenny & Good Pty Ltd Re MGICA (1992) Ltd [1999] HCA 25; (1999) 199 CLR 413 at 436 that there must, for the purposes of the definition of market value in Spencer v Commonwealth above, "be attributed to the parties a knowledge of all matters that affect [the subject's] value". They did not refer to his Honour's further observation that: "The market for the property is, therefore, assumed to be an efficient market in which buyers and sellers have access to all currently available information that affects the property." [emphasis added] I understand his Honour's observations to be consistent with determining market value by reference to what is known and knowable to vendors and purchasers in the relevant market, without access to information that would not be currently available to them. I do not understand that proposition to require the Court, in assessing the value in a particular marketplace, to engage in a process by which matters which are in fact not known or knowable to vendors or purchasers are to be treated as known to them, so as to derive a value inconsistent with that which would in fact be derived in a voluntary transaction within that market. 50The Interested Parties contend that this submissions also went beyond the leave that I granted to the Active Defendants to file further evidence and make submissions, but also indicate their substantive response to the submission. Without having heard further submissions as to the parties as to the matter, my preliminary view is that this submission was also outside the scope of leave for further submissions that the Court had granted to the Active Defendants, but that leave should be granted and this submission should also be addressed on its merits for the reasons noted above. Again, I will hear any party who requires a further opportunity to be heard as to that matter. 51The Interested Parties submit that: "[I]f [the Active Defendants'] submission is that because all of the participants in the public passenger bus service market in New South Wales have, between them and TfNSW, access to all of the contracts for passenger bus services, that the four Contracts sought by the Subpoena are therefore 'available' to the market, then that submission should be rejected as illogical. Participants in the bus industry will obviously have access to their own contractual arrangements but it does not follow that their competitors, including others who might be in the market to buy shares in a bus company, will have access to all that contractual information. In fact, it must be assumed that they will not, unless those arrangements are publicly available." The Interested Parties also submit that, other than for CDC and Hillsbus, they are independent entities and not part of a corporate group and do not have access to each other's contracts. Neither party led evidence as to that matter, where it was first raised as a possibility in the Active Defendants' supplementary submissions, and I do not consider it necessary to, or possible to, reach any finding in that regard. Transit Liverpool also points out that there is no evidentiary basis for any submission that the parties to the SMBSCs with TfNSW have access to each other's contracts and that the parties to the existing SMBSCs with TfNSW are not the only participants in the market. TfNSW also adopted the further submissions prepared by the Interested Parties and Transit Liverpool in respect of this issue. 52It does not seem to me that TfNSW's knowledge of the terms of the SNBSCs assists the Active Defendants. No doubt, TfNSW has knowledge of all the bus service contracts to which it is counterparty, but there is no suggestion that it is a potential purchaser of private bus companies such as the Busways Group, as distinct from a party that contracts with them for the provision of transport services. It also does not seem to me to follow from the proposition that one party (or one corporate group) that is a market participant has knowledge of confidential information concerning its particular contract that such information should be treated as available to the market generally. No suggestion was made that the knowledge of CDC and its associated entities of the particular contracts to which they were party had any more immediate relevance in the sense that they were, for example, a potential purchaser of the Busways Group's business in the relevant market. 53For completeness, I should note that the Active Defendants also contended that their supplementary submissions raised issues of valuation practice and law, and that it would be inappropriate for the Court to determine the merits of those issues at this interlocutory stage, assuming that the Court concluded that those submissions are arguable. I do not accept that submission. The production of the documents sought by the Subpoena would, as I have noted, impose significant detriment upon TfNSW and the parties to those contracts and I must now determine those matters that are necessary to determine whether the Subpoena should be set aside. Whether the Subpoena should be set aside by reason of Practice Note SC Eq 11 54The Intervening Parties alternatively submitted that the subpoenas should be set aside by reference to Practice Note SC Eq 11 which relevantly provides that the Court: "Will not make an order for disclosure of documents ("Disclosure") until the parties of the proceedings have served their evidence, unless there are exceptional circumstances necessitating disclosure." 55The policy underlying Practice SC Eq 11 was identified by Bergin CJ in Eq in Armstrong Strategic Management v Expense Reduction [2012] NSWSC 393 as to require a more disciplined analysis of the need of disclosure by reference to the real issues in the proceedings, so as to avoid the need for review of large volumes of documents in the absence of knowledge of the proposed evidence. It is common ground between the parties that Practice Note SC Eq 11 does not, in terms, apply to either notices to produce or to subpoenas because they do not seek an order for "disclosure of documents": Re Mempoll Pty Ltd [2012] NSWSC 1057 at [12]. The parties also accept that a notice to produce or subpoena could be set aside if it involved an attempt to subvert the operation of the Practice Note, by seeking what was in substance disclosure within the scope of the Practice Note: Re Mempoll Pty Ltd above at [13]. In my view, a subpoena issued to a third party requiring the production of four identified documents would not, in the ordinary course, be inconsistent with the objectives of Practice Note SC Eq 11, such that it could be characterised as subverting those objectives. 56Given the conclusion that I have reached above that the Subpoena should be set aside as oppressive or an abuse of process, it is not necessary for me to decide whether the Court has a wider discretion, for example, to set aside the Subpoena on the basis that its issue is premature. I should nonetheless observe that I see considerable force in the reasoning of McDougall J in New Price Retail Services Pty Ltd v Hanna [2012] NSWSC 422, where his Honour expressed the view (at [19]) that similar considerations to those underlying Practice Note SC Eq 11 attend to the issuing of subpoenas, and that: "In the ordinary way, where documents are required from third parties, it should be possible to demonstrate, from the pleadings and from the evidence, the precise issues in respect of which production of documents is required." Summary and orders 57In my view, the authorities to which I have referred contemplate that the Court will have regard, on the one hand, to the detriment to the subpoenaed party of production of the relevant documents, which can arise but need not arise only because of the volume of documents involved, and the likely relevance of those documents in the proceedings. The evidence to which I have referred establishes that the production of the relevant contracts would involve a substantial detriment for TfNSW, Transit Liverpool and the Interested Parties, which may be reduced but not eliminated by confidentiality undertakings. On the other hand, I am not satisfied, for the reasons that I have indicated above, that the documents could possibly throw light on the issues in the proceedings as properly understood. 58For these reasons, the Subpoena should be set aside. My preliminary view is that the Active Defendants should pay the costs of the Interested Parties, Transport Liverpool and TfNSW of and incidental to the application, as agreed or as assessed. However, I will hear any party which contends for a different order as to costs. The parties should bring in short minutes of order to give effect to this judgment by no later than 7 February 2014.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 January 2014