Plaintiff v Defendants

2 By Amended Originating Motion filed by consent on 25 February 2014, Adam Glezer (the prospective plaintiff) made an application for preliminary discovery pursuant to Rule 32.05 of the Rules.

3 The applicant says that there is reasonable cause to believe that he has or may have the right to obtain relief in the Court from persons whose description he has ascertained and he seeks preliminary discovery in aid of making a decision whether to commence a proceeding in the Court to obtain specified relief and that, after making all reasonable inquiries, he does not have sufficient information to enable him to decide whether to commence a proceeding. Accordingly, the applicant says that the Court should exercise its discretion in his favour to order discovery from the prospective defendants to assist him to make the decision as to whether to commence proceedings.

4 The application was heard by Zammit AsJ on 25 February 2014.

5 At the hearing of the application, the applicant relied on his affidavit sworn 12 December 2013 and a written outline of submissions dated 25 February 2014.

6 The respondents did not prepare any affidavit material in opposition to the application and did not prepare an outline of submissions.

7 Zammit AsJ reserved her decision and handed down judgment 13 March 2014.

8 Following short submissions as to the precise form of orders and as to costs, formal orders were agreed on 19 March 2014 and were authenticated on 1 April 2014.

9 Her Honour determined that an Order for preliminary discovery should be made in favour of the applicant, Mr Glezer pursuant to r 32.05 of the Rules. An Order was made that each of the defendants nominated in the schedule of parties to the application make discovery of and produce for inspection a range of documents described in 10 categories referred to in the Order made on 19 March 2014.

10 Rule 32.05 provides for discovery from a prospective defendant in the following terms:

Where

(a) there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description the applicant has ascertained;

(b) after making all reasonable inquiries, the applicant has not sufficient information to enable the applicant to decide whether to commence a proceeding in the Court to obtain that relief; and

(c) there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had in that person's possession any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist the applicant to make the decision -

the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).

11 The issue in this appeal centred on whether sub-paragraph (b) of r 32.05 had been satisfied and whether her Honour fell into appealable error in her consideration and application of r 32.05(b).

12 The first principle of application is that appeals of this kind from an Associate Justice ought to be approached with the necessary caution.

13 As stated by Ferguson J in Oswal v Carson:[1]

The appeal and cross-appeal are brought by notice under r 77.06 of the Supreme Court (General Civil Procedure Rules) 2005. Such appeals are no longer by way of rehearing de novo. Instead, they are re-hearings which, in the absence of further evidence or a change in the law, ordinarily require the appellant to show error on the part of the Associate Judge before appellate power may be exercised. In addition, if the orders from which an appeal is brought relate to a matter of practice and procedure (as the orders in this case do), an appellate court will exercise particular caution in reviewing the decision.

14 In support of the last sentence, Ferguson J cited Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc.[2] There are two particular passages of that case which are relevant to the present matter:

(a) The plurality of the High Court[3] referred to the following passage concerning matters of practice and procedure (as opposed to substantive matters):

The essence of [matters of practice and procedure] is described in terms which are sufficient for present purposes in Salmond on Jurisprudence 10th ed. (1947), p. 476: 'Substantive law is concerned with the ends which the administration of justice seeks; procedural law deals with the means and instruments by which those ends are to be attained. The latter regulates the conduct and relations of courts and litigants in respect of the litigation itself; the former determines their conduct and relations in respect of the matters litigated'.

We would merely repeat, with approval, the oft-cited statement of Sir Frederick Jordan in In re the Will of F. B. Gilbert (dec.) [1946] NSWStRp 24; (1946) 46 SR (NSW) 318, at p 323: '... I am of opinion that ... there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal.

It is safe to say that the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration.

15 The second matter to consider is the approach to be taken to r 32.05, and in particular to r 32.05(b).

16 In Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd[5] Lindgren J considered an identical Federal Court rule to Rule 32.05 being Order 15A of the Federal Court Rules. His Honour set out a number of relevant propositions in relation to the rule, as follows:[6]

1. Para 6(a) and para 6(c) pose an objective test, the opening words 'there is' in each paragraph signifying 'there exists'; but the 'insufficiency test' of para 6(b) has both subjective and objective aspects.
2. Although I need not explore the subjective aspect fully, it seems clear that if the evidence went so far as to show that a particular applicant was already able to decide to commence a proceeding by, for example, showing that the applicant had in fact decided to do so, para 6b would not be satisfied even though the information available satisfied the objective aspect of the insufficiency test referred to below.
3. The fact that a particular applicant genuinely feels unable, because of a lack of information, to decide to commence a proceeding does not, without more, satisfy para 6(b); the objective aspect of the paragraph requires it to be shown as an objective fact that the applicant lacks 'sufficient information to enable a decision to be made whether to commence a proceeding'.
4. In my view, the objective aspect of para 6(b) invokes a notion of 'reasonable sufficiency', the question raised being whether it is reasonable that the applicant for an order be required to take its decision without having the information to become available from inspection of the document or documents of which discovery is sought.
5. If the insufficiency test is satisfied, a second question will arise, namely, whether the Court's discretion should be exercised in favour of the making of an order.
6. The questions posed by [the rule] and referred to above are to be answered in the context of an adversary system of forensic contest in which a proposed respondent is ordinarily entitled to withhold its evidence, certainly prior to the commencement of proceedings.
7. The questions are also to be answered in the light of the nature of the 'cause of action' contemplated and the range of information potentially available in respect of a cause of action of that kind.
8. Contrary to a submission of Eli Lilly, in my opinion r6 is not necessarily rendered unavailable by the fact that the applicant already has available evidence establishing a prima facie case for the granting of relief. This is made clear by the reference in para(a) to the existence of 'reasonable cause to believe that the applicant has ... the right to obtain relief ...'. It would impose an artificial constraint on r6, not supported by its terms or purpose, to exclude, a priori, all cases in which the insufficiency of the information possessed by the applicant to enable a decision to be made whether to litigate is due to a matter of 'defence' which would defeat the prima facie case.
9. Rule 6 does not provide a means by which an applicant will be enabled to have available to it every document which would assist it in deciding whether to litigate. If that were the intention, para (a) and para (c) would stand alone and the additional condition set out in para(b) would not be necessary.
10. Para6 (b) contemplates that after making all reasonable inquiries, the applicant has come up against a problem, namely, that it is lacking a piece of information or pieces of information reasonably necessary to enable it to decide whether to commence a proceeding.

17 The decision of Hollingworth J in Beston Parks Management Pty Ltd & Anor[7] was also referred to. In Beston Parks, in a passage which has since been cited with approval by this Court,[8] Hollingworth J said in relation to the application of Rule 32.05 (citations omitted):[9]

The following general principles are not controversial. The rule should be construed benevolently, because it is intended to assist an applicant who does not have sufficient, precise information to commence a proceeding, and to prevent the bringing of speculative suits. It must be given the fullest scope its language will reasonably allow.

It is not necessary to show precisely what cause of action the applicant may have, merely that the facts are such from which it may reasonably be believed that the applicant may have a right to obtain relief. The word 'may' indicates that the putative belief does not have to amount to a firm view that there is a right to relief. Although some 'fishing' enquiry is permitted, a 'flimsy foundation' or 'mere hunch' will not be sufficient to constitute reasonable cause. An applicant does not have to prove that there will be, only that there may be, a real benefit from making the order. The benefit may be the drawing of an appropriate pleading with proper particulars and the avoidance of substantial amendment after discovery, or, alternatively, the possible avoidance of unnecessary and fruitless litigation.

18 In Australian Football League v Stadium Operations Ltd[10] Warren CJ considered issues similar to the present, including in that case whether the prospective plaintiff, the AFL, already had sufficient information to enable it to decide whether to commence proceedings. Secondly, on the evidence, whether the AFL had already made up its mind, as a subjective fact, to commence proceedings.

19 In the course of her Honour's reasoning in the AFL case, Warren CJ said:[11]

SOL's [the prospective defendant's] argument on this point is contingent on my finding that the AFL had made up its mind to commence proceedings. I do not find this to be the case. Although there are strong intentions expressed by the AFL in the correspondence, a conclusion that it still lacked sufficient information of the kind contemplated by the rule, namely, information confirming a potential cause of action is open to the court. If I were to make a finding that the AFL had made a subjective decision to commence proceedings on the evidence, one would have to ask who, and for what?

SOL's approach to this aspect of the AFL's application focused on key phrases and assertions in the correspondence. However, in my view, the kinds of benefits contemplated by the rule require the court to view all of the evidence rather than to clinically dissect material, for example, phrases in letters. Sometimes statements, even postures, are made in exchanges that warrant closer analysis and scrutiny before the boom of the writ comes down.

As stated by Gillard J in United Energy Limited v Energy Risk Management Pty Ltd,[12] a robust legal practitioner may consider that there is sufficient evidence to justify the bringing of a proceeding. On the other hand, nobody could possibly criticise a cautious lawyer seeking further information before making the decision.[13]

Similarly in FAI Home Security Pty Ltd v Price,[14] a conservative approach on the part of an applicant was approved by Byrne J, the gist of the rule is to enable a prospective plaintiff to obtain material sufficient to make a decision to commence a proceeding. Counsel for FAI maintained that, for a conservative litigant, the material presently available to it was not sufficient for this purpose. In the circumstances of this case I agree.[15]

The AFL is arguably seeking to take a cautious and conservative, even prudent, course. Having regard to the policy underlying the rule, that there may be a benefit, the court should not condemn the applicant for taking such an approach.

It would be wholly unsatisfactory if parties found themselves unduly constrained in correspondence because they may wish to preserve their potential right to obtain an order under the rule for preliminary discovery.

21 Her Honour quoted[17] from the judgment of Gillard J in United Energy Limited v Energy Risk Management Pty Ltd,[18] where his Honour said as to the basic objective of r 32.05:

The mischief which the rule seeks to address is the avoidance of a situation where a prospective plaintiff does not have all the relevant documentation to enable him and his advisers to make a decision whether he has a good cause of action or not, but nevertheless issues a proceeding and subsequently gains access to relevant documents in the possession of the opposing party, only to find he does not have a cause of action.

22 It should be noted that in the AFL case the Court found that, based on the correspondence, the proposed plaintiff in that case, the AFL, had not already made up its mind to commence proceedings at the time the application for preliminary discovery was made. However, the prospective defendants in the present case sought to distinguish AFL from the present case.

23 Gillard J in United Energy set out at some length a full rationale for the rule and an explanation as to its intended operation in the following terms:[19]

[29] Often in the past a proceeding was instituted in the expectation that the plaintiff had a good cause of action postponing a final decision as to the merits until all the discovery and inspection steps were completed.

[30] If it turned out upon a proper consideration of all relevant documents that the plaintiff did not have a cause of action, it causes, inter alia, much anguish, soul searching and results in wasted legal costs and time. It does nothing for the administration of justice that the party has to go down that path to determine whether he has a good cause of action.

[31] The object of the rule is to avoid that undesirable situation occurring and to enable a prospective plaintiff to see the relevant documents which the prospective defendant has or has had in his possession in order to make an informed decision as to whether he has a good cause of action.

[32] It is clear from the wording of the rule that the applicant does not have to show that he does have a good cause of action before he can obtain his order, and indeed to require him to do so would defeat the very object of the rule.

[33] On the other hand, an applicant would have to show more than a mere hunch, a hope or a suspicion that he may have a good cause of action. The fact that the end result of a successful application is a fishing expedition for evidence is not a ground for refusing relief. See Dunning v United Liverpool Hospitals (1973) 1 W.L.R. 586, 591 per Stamp LJ and Clarkson v DPP [1990] VicRp 65; (1990) VR 745, 758 per Murphy J.

[35] The prime object of the rule is to enable access to documents to enable an informed decision to be made. The fact that in the process the applicant gathers evidence also, is not a ground for refusing relief; it is an inevitable by-product of the procedure.

[36] The rule sets out what matters have to be considered and established on an application and places the onus on the applicant to establish the bases for an order. However, in my opinion the power should be exercised to give effect to the clear purpose of the provision which is to advance the administration of justice, namely, that a prospective plaintiff should be able to make an informed decision whether to proceed or not upon proper material before issuing his proceeding.

[37] By providing this facility to assist the decision making process, speculative or baseless claims can be avoided with a consequential saving in cost and time.

[38] These conclusions lead to a conclusion that the rule should be liberally applied.

...

[43] The rule is to enable a prospective plaintiff to make an informed decision. If an order is not made the only course open to the prospective plaintiff is to issue the proceeding and then put in operation procedures available to gain access to the other party's documents. This may involve an application for an interlocutory injunction in which a subpoena is issued to produce the documents at court on the application. Another course is the discovery process during the interlocutory steps. The practical result will be inspection later rather than sooner and the incurring of legal costs. If a decision is then made to discontinue, costs will have been unnecessarily incurred and time wasted, factors which reflect upon the administration of justice. The pragmatic approach supports a sooner rather than a later decision and an approach by the court to readily facilitate the making of an informed decision by a prospective plaintiff on proper materials at an early stage.

(Citations in original)

24 In Optiver Australia Pty Ltd v Tibra Trading Pty Ltd and Others,[20] which concerned the [then] relevantly identical Federal Court Rule,[21] the Full Federal Court stated at [36]-[37]:

... The policy behind the rule is that even where there is a reasonable cause to believe that a person may have a right to relief, nevertheless that person may need information to know whether the cost and risk of litigation is worthwhile. As Hely J pointed out in St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147 at [26], the question does not concern the right to relief but rather 'whether to commence proceedings'. Inspection of documents in the possession of the proposed defendant may enable a properly informed decision to be made whether to commence a proceeding to obtain the relief. The 'bare pleadable case' approach diverts attention from the true purpose of the rule. A person may have a pleadable case, but still not sufficient information upon which to decide whether to embark upon litigation ...

At present, as his Honour observed, the case that Optiver has is a purely circumstantial one relying upon inference. For all it knows, there may be facts and circumstances which make it equally likely, or more probable than not, that Tibra obtained its software in ways that did not infringe any of Optiver' rights. In our opinion, Optiver has not sufficient information to enable a decision to be made whether to commence a proceeding.

25 In St George Bank Ltd v Rabo Australia Ltd and Another[22] Hely J said:

(f) the question posed by subpara (b) of the rule is not whether the applicant has sufficient information to decide if a cause of action is available against the prospective respondent. The question is whether the applicant has sufficient information to make a decision whether to commence proceedings in the court: Quanta Softwareat ALR 543 [33]-[34]; IPR 32-3, Alphapharm at 24-6. Accordingly, an applicant for preliminary discovery may be entitled to discovery in order to determine what defences are available to the respondent and the possible strength of those defences, or to determine the extent of the respondent's breach and the likely quantum of any damages award: CGU Insurance Ltd v Malaysia International Shipping Corp Berhad [2001] FCA 1223; (2001) 187 ALR 279, 285 [21]; Quanta Softwareat ALR 543 [33]-[34]; IPR 32-3, Alphapharm at 24-6, Airservices Australia at FCR 202-3 [5]; ALR 332

(g) whether an applicant has 'sufficient information' for the purposes of subpara (b) also requires an objective assessment to be made: Minister for Health at [44]; Alphapharm at 23-4, Hooper at FCR 12 [40]; ALR 367; IPR 31. The subparagraph contemplates that the applicant is lacking a piece (or pieces) of information reasonably necessary to decide whether to commence proceedings;

26 In Grocon Constructors (Vic) Pty Ltd v Biosciences Research Centre Pty Ltd[23] I considered the application of the Civil Procedure Act 2010 to r 32.05. I said:[24]

Pursuant to s 7 of the CPA, the overarching purpose of the Act is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.

Pursuant to s 8 of the CPA, the Court is required to give effect to overarching purpose, inter alia, in the exercise or its powers, or in the interpretation of those powers which arise from its procedural rules. Section 8 provides:

(1) A court must seek to give effect to the overarching purpose in the exercise of any of its powers, or in the interpretation of those powers, whether those powers -

(a) in the case of the Supreme Court, are part of the Court's inherent jurisdiction, implied jurisdiction or statutory jurisdiction; or

(b) in the case of a court other than the Supreme Court are part of the court's implied jurisdiction or statutory jurisdiction; or

(c) arise from or are derived from the common law or any procedural rules or practices of the court.

Consistently with giving full effect to the overarching purpose of the CPA and to the observations in the case law (such as those of Hollingworth J in Beston Parks cited above), it is accepted that r 32.05 should be construed benevolently, and in its exercise should be given the fullest scope its language will reasonably allow.

However, that does not mean that the plain language of the requirements of the Rule should be eroded to the point where the prescribed tests are sucked dry of meaningful content. The tests remain as the defined gateways to the application of the Rule.

27 I will apply these principles in consideration of this appeal.

Factual Basis for the Application and the Appeal

28 Two letters and one piece of affidavit evidence assumed central importance in the appeal.

29 The first letter was that of the prospective plaintiff's solicitors, Sackville Wilks, dated 15 November 2013 sent to the lawyers acting for the prospective defendants, Charlesworth Josem. The letter read in material parts:

The purpose of this letter is to advise that, based on instructions which we have received from Glezer and documents we have obtained from ASIC, we believe that the acquisition of Glezer's shares in Deals by Arbitrage Holdings Pty Ltd (AH) owned by Adam Schwab (Schwab) and the National Victorian Conglomerte Pty Ltd (NVC), owned by Jeremy Same (Same) was procured by the fraudulent misrepresentations of Schwab and same. In particular, we refer to the representations given by Schwab and Same to Glezer, through a valuer, Peter Colliver, in respect of the on-going involvement of Mark Hoenig (Hoenig) with Deals

The documents we have obtained from ASIC demonstrate that there was a transfer of shares by Schwab and Same, through their companies, to Hoenig through his company Zaycorp Pty Ltd (Zaycorp) on 30 April 2013, one day after the purported transfer of shares by Glezer to AH and NVC. It is clear that the statements made by Schwab and Same regarding the on-going involvement of Hoenigwere deliberately false and were made in order to reduce the value of Glezer's shares and obtain a maximum possible benefit for themselves. Our client's view in this regard is strengthened by the fact that Glezer sold at a value of approximately $15 the shares that were sold to Zaycorp a day later for substantially more, and our client believes for about double that price, and a selective buy-back of Borenstein's shares was undertaken by Deals a few weeks later at $50 per share.

As directors of Deals, it is well established law that Schwab and Same at all times owed fiduciary duties to Glezer as a shareholder both during the negotiation and share sale process. They have breached their duties in a most profound way by deliberately making false statements and offering up a valuation which is based, in part, on false information. To make matters worse, the gains which were realised by operation of the false statements were realised by Schwab and Same themselves.

We believe the share sale agreement should be set aside and Glezer reinstated as a shareholder. We also believe that there is strong evidence to suggest that Schwab and Same have breached their duties as directors and we are taking advice as to whether to report this conduct to ASIC. In order to consider Glezer's position further we intend to make an application for pre-trial discovery (draft Orders attached) as a pre-cursor to commencing proceedings against Schwab Same Hoenig and their respective companies and Deals (prospective defendants). The proceedings will seek to have the share sale set aside and will seek declaratory relief against some or all of the prospective defendants together with damages.

The attached document sets out the categories of discovery which will be sought at the application. In order to avoid this application being made, could you send us the documents in electronic form, or alternatively provide us with copies of such documents, by no later than 4 pm on Friday 29 November 2013.

We look forward to receipt of the documents.

30 The second letter was also that of the prospective plaintiff's solicitors, Sackville Wilks, dated 3 December 2013 sent to the lawyers acting for the prospective defendants, Charlesworth Josem. This second letter read in material parts:

We refer to the above matter and to our email letter to you dated 15 November 2013 (first letter) together with your response dated 29 November 2013. In the passages of our first letter which you have reproduced in your response, you have conveniently omitted words from the first main paragraph. When read without any such omission, you will note that the paragraph states as follows:

The purpose of this letter is to advise that, based on Instructions which we have received from Glezer, we believe that the acquisition of Glezer's shares in Dea/s.com.au Pty Ltd (Deals) by Arbitrage Holdings Pty Ltd (AH), owned by Adam Schwab (Schwab), and National Victorian Conglomerate Pty Ltd (NVC), owned by Jeremy Same (Same), was procured by the fraudulent misrepresentations of Schwab and Same.

The remainder of our first letter then sets out the basis on which those allegations are made based on the materials we have to hand. We do not pretend to have a full set of documents or a full set of facts which puts us in the position to decide: (a) whether to issue proceedings; (b) on what causes of action; or (c) if so against whom. We intend to take the necessary steps to obtain the 'complete picture' before Issuing a writ. There are approximately 10-12 parties which could possibly be the subject of litigation and we need the documents which we have asked for in order to narrow the possible scope of the parties and the dispute. This approach fits neatly within the scope of rule 32.05 of the Supreme Court (General Civil Procedure) Rules 2005: see, for example, United Energy Ltd v Energy Risk Management Pty Ltd [1998] VSC 133. Our client is entitled to a beneficial construction of Rule 32.05; that is, one which permits our client to obtain information necessary to allege with proper particulars, the nature of the dispute against the chosen Defendants. This careful approach conformant with the overarching obligations of this firm, an our client, pursuant to the Civil Procedure Act 2010.

Therefore, with respect, your bare denial of the serious matters in our first letter and refusal to provide any cooperation is surprising in the circumstances. If your clients have good grounds to deny the contents of our first letter, we invite you to provide us with documents and/or an explanation which might help us understand the basis of the denial.

31 The affidavit material of relevance comprised the following extracts from the affidavit of the prospective plaintiff, Mr Glezer, sworn 12 December 2013, being paragraphs [18]-[19] and [24]:

Para 18:

I have reasonable cause to believe that I have the right to obtain relief from one or more of the Defendants; however, I do not currently possess sufficient information to enable me to decide which one or more of the Defendants to commence proceedings against and/or the quantum of my claim. I do not wish to issue proceedings until I have information which would enable me to properly identify and defendants and properly particularise a claim against such defendants. I am informed by my lawyers and believe that this approach is consistent with the overarching obligations which apply to litigants and lawyers under the Civil Procedure Act 2010.

Para 19:

Accordingly, on 15 November 2013 Sackville Wilks wrote to Bruce Josem of Charlesworth Josem (who acted for Deals and the aggrieved shareholders in the Dispute and for Schwab, Same, Arbitrage and National in their purchase of my shares) requesting various documents which would hopefully assist me in deciding which one or more of the Defendants to commence proceedings against and also assist me in establishing the quantum of my claim. The letter called for response by 4.00 pm on 29 November 2013.

Para 24:

Given the lack of cooperation by the potential defendants through their lawyers Charlesworth Josem, I believe I have no alternative but to issue a summons seeking the information set out in the originating process, which is necessary to enable me and my solicitors to properly decide on any available causes of action and the appropriate defendants to such an action.

32 Her Honour reasoned on the central issue as follows:

(a) At [10] of her Honour's reasons she set out paragraphs [18] and [19] of the proposed plaintiff's affidavit. In both those paragraphs the proposed plaintiff expresses his concern about whom the proper defendants should be. In [18] he expresses his concern as to whether he can properly particularise the claim and the quantum of the claim, which is repeated in [19].

There is nothing in the letter dated 15 November 2013 about the prospective defendants or the need to identify further defendants. The applicant's solicitors, based on their client's instructions and documents obtained, were able to identify three causes of action and provide at least in summary form the material facts that would be relied upon to plead the three causes of action. In addition, the applicant identifies the potential relief which includes seeking to have the share sale set aside; declaratory relief against some or all of the prospective damages (sic); 'together with damages'.

... Having considered all of the evidence I cannot conclude that the applicant had decided to commence proceedings by 15 November 2013 and that he will commence proceeding (sic) even [if unsuccessful in this application]. The totality of the correspondence is that there was still some uncertainty based on the enquiries the applicant had made as to whether he would commence the proceedings. The uncertainties included the potential quantum and the ability to properly particularise the claim.

33 Centrally, it was submitted on behalf of the prospective defendants that the proposed plaintiff failed to satisfy the requirements of Rule 32.05(b) because he had decided to commence a proceeding.

34 They submitted that the evidence which showed that the proposed plaintiff had, by 15 November 2013, unequivocally decided to commence a proceeding against each of the defendants was to be found in a letter from the plaintiffs solicitors, Sackville Wilks, to the defendants' solicitors on 15 November 2013. Subsequent correspondence from the plaintiff's solicitors, including the letter of 3 December 2013, was an unsuccessful qualification of the first-stated position.

35 They contended that the proposed plaintiff's assertion (at [18] and [19] in his affidavit in support of the application), and the finding of the Associate Judge's reasons (at [33]), that the plaintiff had not come to a decision to commence a proceeding as he could not properly particularise the claim or assess the quantum of a claim, is contrary to both the contents of his affidavit and the correspondence exhibited to the affidavit.

36 The prospective defendants placed particular emphasis on the following parts of the letter of 15 November 2013 exhibited to the affidavit:

[2] The purpose of this letter is to advise that, based on instructions which we have received from Glezer and documents we have obtained from ASIC we believe that the acquisition of Glezer 's shares in Deals by ... was procured by the fraudulent misrepresentations of Schwab and Same. In particular, we refer to the representations given by Schwab and Same to Glezer, through a valuer, Peter Colliver, in respect of the on-going involvement of Mark Hoenig (Hoenig) with Deals.

[3] ... It is clear that the statements made by Schwab and Same regarding the on-going involvement of Hoenig were deliberately false and were made in order to reduce the value of Glezer's shares and obtain a maximum possible benefit for themselves. Our client's view in this regard is strengthened by the fact that Glezer sold at a value of approximately $15, the shares were sold to Zaycorp a day later for substantially more, and our client believes for about double that price, and a selective buy-back of

Borenstein's shares was undertaken by Deals a few weeks later at $50 per share.

[4] As directors of Deals, it is well established law that Schwab and Same at all times owed fiduciary duties to Glezer as a shareholder both during the negotiation and shares sale process. They have breached their duties in the most profound way by deliberately making false statements and offering up a valuation which is based, in part, on false information. To make matters worse, the gains which were realised by operation of the false statements were realised by Schwab and Same themselves.

[5] We believe that the share sale agreement should be set aside and Glezer reinstated as a shareholder. ... In order to consider Glezer 's position further, we intend to make an application for pre-trial discovery (draft Orders attached) as a pre-cursor to commencing proceedings against Schwab, Same, Hoenig. their respective companies and Deals (prospective defendants). The proceedings will seek to have the share sale set aside and will seek declaratory relief against some or all of the prospective defendants together with damages. (Emphasis added).

37 The prospective defendants referred to the fact that on 29 November 2013, the defendants' solicitors, Charlesworth Josem, replied to Sackville Wilks stating that it was clear from the letter that the plaintiff had already formed a belief that he had a cause of action against the defendants and therefore pre-trial discovery was not available to him.

38 They also referred to the fact that on 3 December 2013, Sackville Wilks responded to Charlesworth Josem. That letter, amongst other things, raised as issues who should be the defendants to a proceeding and the lack of a full set of documents or the full facts to obtain the 'complete picture'· before issuing a writ. However, as Lindgren J remarked in Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd:[25]

Rule 6 does not provide a means by which an applicant will be enabled to have available to it every document which would assist it in deciding whether to litigate...

39 The prospective defendants also referred to the fact that r 32.05 is not concerned with the exercise of ascertaining the appropriate defendant or defendants.

40 It is accepted that the letter of 15 November 2013 goes beyond stating that the prospective defendants misled the proposed plaintiff. It states that the defendants were fraudulent. This is a serious allegation and may be taken to have been made on appropriate instructions. Further, the solicitors for the proposed plaintiff, Sackville Wilks, would have been aware of the serious nature of making an accusation of fraud and the requirement of the need to have factual material to support such an allegation, and therefore it may be inferred that they had sufficient information to at least make the allegation in a pre-action letter.

41 It is further accepted that the letter of 15 November 2013 defined the relief proposed to be sought if an action was commenced, being relief to have the share sale set aside and will seek declaratory relief against some or all of the prospective defendants together with damages.

42 It is noted that no uncertainties other than quantum or the ability to particularise the claim have been raised in any of the material before the Court in this application.

43 However, in my opinion, on the material before the Court, the Proposed plaintiff has satisfied the requirements of r 32.05. It is not accepted that the evidence points to the conclusion that the proposed plaintiff had by 15 November 2013 unequivocally decided to commence a proceeding against each of the defendants.

44 The letter of 15 November 2013 was written in robust and definitive terms and was carefully framed. It made serious allegations of misrepresentation, fraud, and breaches of fiduciary and directors' duties on behalf of the named prospective defendants. The factual basis in support of the allegations was also summarised. It adopted a posture designed to put Mr Glezer's case in the strongest possible way as it was then known to him and to his legal advisers.

45 However, adopting such a posture does not necessarily point to a decision having already been made to commence such a proceeding. The writing of pre-action letters of this kind in an adversarial process can serve a number of purposes, including bringing the parties together for settlement discussions prior to a decision being made to commence proceedings.

46 Further, and in any event, the relevant date for the purposes of making an assessment under r 32.05(b) is the position as at the date of making the application for preliminary discovery. A person is entitled to change his or her mind in making the important decision as to whether to commence litigation, and particularly in this case where potentially at least multiple defendants may be joined and where allegations of serious impropriety may be made. Further, the proposed plaintiff in this case ought to be in a position to assess potential defences which may be raised against his possible claims before making a decision to issue proceedings.

47 Further, I am satisfied that objectively speaking, the proposed plaintiff did not have sufficient information to decide whether to commence a proceeding in this Court, given the very serious allegations which are likely to be the foundation of his claims. Such proceedings ought not to be commenced lightly, particularly in the light of the overarching obligations on parties and legal practitioners imposed by the Civil Procedure Act 2010.[26]

48 In the light of the later letter of 3 December 2013 and the contents of Mr Glezer's affidavit filed in support of the application, I am further satisfied that, by the time of him making the application before Zammit AsJ, it was open for her Honour to find that the requirements of r 32.05(b) had been satisfied.

49 To my mind, this finding will result in an outcome which avoids the mischief which r 32.05 is designed to grapple with, as described by Gillard J in United Energy Limited v Energy Risk Management Pty Ltd above.[27]

50 For these reasons, the appeal against the Order of 19 March 2014 must fail and be dismissed with costs, and I will make Orders accordingly.

[1] [2013] VSC 355, [11] (footnotes omitted).

[2] [1981] HCA 39; (1981) 148 CLR 170.

[3] Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 176 (Gibbs CJ, Aickin, Wilson and Brennan JJ).

[4] Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 177.

[5] [1996] FCA 1500 (Unreported, Federal Court of Australia 24 May 1996).

[6] Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 1500 [41].

[7] [2008] VSC 392.

[8] See eg Australian Football League v Stadium Operations Ltd [2009] VSC 264 [3] and D.C. Payments Pty Ltd and anor v Ardon [2013] VSC 277, [38] (Zammit AsJ).

[9] Beston Parks [2008] VSC 392, [52]-[53].

[10] [2009] VSC 264.

[11] Australian Football League v Stadium Operations Ltd [2009] VSC 264, [59]-[62].

[12] [1998] VSC 133 ('United Energy').

[13] United Energy [1998] VSC 133 [103].

[14] [1999] VSC 274.

[18] [1998] VSC 133, [28].

[19] United Energy [1998] VSC 133, [29]-[43].

[20] [2008] FCAFC 133; (2008) 249 ALR 495.

[21] Order 15A Rule 6 of the Federal Court Rules 1979. This has since been superseded by the Federal Court Rules 2011, Rule 7.23, which has introduced several important differences in respect of rules governing discovery.

[22] [2004] FCA 1360; (2004) 211 ALR 147, 154.

[23] Grocon Constructors (Vic) Pty Ltd v Biosciences Research Centre Pty Ltd (2014) VSC 204.

[24] Grocon Constructors (Vic) Pty Ltd v Biosciences Research Centre Pty Ltd (2014) VSC 204 [56]-[59].

[25] Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 1500, 41 [9].

[26] See Civil Procedure Act 2010 s 7.

[27] [1998] VSC 133, [28].