RinRim Pty Limited v Deutsche Australia Limited

The Evidence 8In support of its application, RinRim relied upon an affidavit sworn on 9 September 2013, of its solicitor, Peter Maxwell Carlisle, together with documents contained as an exhibit to that affidavit, tendered as Ex. P1. It supplemented that exhibit with a few additional documents (Ex. P2). At least some of the evidence contained in this affidavit was on information and belief. 9The Defendants objected to certain paragraphs ([31] and [39]) of Mr Carlisle's affidavit. The Plaintiff did not read paragraph [39] and it is unnecessary to say any more about it. Paragraph [31] related to the solicitor's statement regarding what information the Plaintiff required "to assist ... in determining whether or not to commence proceedings". 10I rejected the paragraph and provided reasons for doing so in a separate ruling on evidence. I shall not repeat those reasons. 11Without opposition, the Defendants, at the hearing, filed an affidavit of their solicitor, Denes Matyas Blazer, affirmed 31 October 2013, in opposition to the orders sought by RinRim. The Defendants, also, supplemented the affidavit evidence by the tender of a few additional documents (Ex. D1). 12Neither solicitor was cross-examined and, after the evidence was read, Counsel made oral submissions. 13The submissions were not completed until shortly after 4:00 p.m., at which time, I was informed that RinRim wished me to publish reasons as soon as possible as the limitation period expired in February 2014 and because, in the event that it was successful, time would be required by the Defendants to produce the documents. Bearing in mind the length of time that RinRim has had to bring this application, this was an unreasonable request. 14(I should mention that no application for expedition of the hearing has ever been made and that this is the second contested application that the Court has heard urgently at the behest of the Plaintiff: see RinRim Pty Ltd v Deutsche Bank Australia Limited & Ors [2013] NSWSC 1654.)

Background Facts 15The following facts appear not to be in dispute. I have taken these facts from the documents that have been relied upon in the application. (a) RinRim is a registered Australian proprietary company. In 2008, it had a registered office in Sydney, Australia. (b) In February 2008, RinRim was the registered holder of 2,500,657 shares in Primary Health Care Limited ("PHC"), which was a listed public company incorporated and operating in Australia. (c) PHC's ordinary share capital consisted of 371,215,077 fully paid ordinary shares, held by 5,512 individual shareholders. Of those shareholders, 103 held 100,001 shares or more, and 45 held between 50,001 and 100,000 shares. (d) RinRim held the shares in PHC as trustee, on trust for the Millenium Trust. Dr Alexander Volfneuk is the appointor to, and named primary beneficiary in, the Millenium Trust. He was the person who has provided instructions to Mr Carlisle in relation to this application. (He did not, however, provide any direct evidence read on the application.) (e) In the financial year ending 30 June 2007, the Plaintiff received in excess of $1.1 million in gross dividends from PHC. (f) The Plaintiff did not file any annual returns with ASIC between 2003 and 2008. It does not appear to have lodged, with ASIC, a financial and a directors' report from about 2003. (g) On 13 February 2008, PHC announced that it would undertake an equity capital raising of AUD$1,226 million, through an "accelerated shareholder entitlement offer". (h) In the Prospectus dated 18 February 2008, the Joint Lead Managers and Underwriters of the Offer ("the Underwriters") were identified as the second Defendant, the fourth Defendant and the fifth Defendant (as it was then named). They were identified as having "underwritten the Entitlement Offer", which term was defined, subsequently, as "an accelerated pro-rata entitlement offer to Eligible Shareholders conducted in four parts" (as to which see later). (i) In the "Glossary" to the Prospectus, certain terms were defined. "Eligible Institutional Shareholder" was defined as being: "A Shareholder (either directly or through a custodian) as at the Record Date, who is not an Ineligible Institutional Shareholder or a US Person or acting for the account or benefit of a US Person, and to whom Primary or a Joint Lead Manager has extended an offer to subscribe for New Shares under the Institutional Entitlement Offer on the basis of Primary or the Joint Lead Managers' belief that they were an Institutional Investor." (A slightly different definition is contained elsewhere in the Prospectus (Paragraph 2.4) as follows: "Eligible Institutional Shareholders are those persons who were registered as holders of Shares as at 7.00pm (Sydney time) on the Record Date with a registered address in Australia, New Zealand, Singapore, Hong Kong, the United Kingdom or any other member state of the European Union to whom the Joint Lead Managers extended an offer under the Institutional Entitlement Offer on the basis of the Joint Lead Managers' belief that they were an institutional or other professional or sophisticated investor. Shareholders with a registered address outside those jurisdictions, Shareholders who are US Persons or acting for the account or benefit of US Persons and those Shareholders (who, if they had a registered address in Australia, would be Institutional Investors) who Primary and the Joint Lead Managers agreed should not receive an offer, were not eligible to participate in the Institutional Entitlement Offer.") "Eligible Retail Shareholder" was defined as being: "A Shareholder as at the Record Date, who has a registered address in a Relevant Jurisdiction, is not a US Person or acting for the account or benefit of a US Person, and has not otherwise participated in the Institutional Entitlement Offer and is not an Ineligible Institutional Shareholder." "Ineligible Institutional Shareholder" was defined as being: "A Shareholder who, if they had a registered address in Australia would, in the reasonable opinion of Primary, be an institutional Investor, but who Primary and the Underwriters agree shall not receive an offer under the Institutional Entitlement Offer." "Ineligible Retail Shareholder" was defined as being: "A Shareholder who is not an Eligible Institutional Shareholder, an Ineligible Institutional Shareholder nor an Eligible Retail Shareholder." "Institutional Investor" was defined as being: "A person in a jurisdiction agreed between Primary and the Underwriters, to whom offers and issues of New Shares may lawfully be made without the need for disclosure to investors under Chapter 6D of the Corporations Act or without any other lodgement, registration or approval with or by a government agency (other than one with which Primary, in its absolute discretion, is willing to comply)." (j) PHC and the Underwriters entered into an Underwriting Agreement dated 13 February 2008 (not in evidence), under which the Underwriters agreed to act as joint lead managers and underwriters on certain terms and conditions and to underwrite the Entitlement Offer. PHC was to pay them fees in relation to the Underwriting Agreement of up to $41.5 million (excluding GST) plus various incidental, and out of pocket, expenses, incurred by them. (k) The offer of the shares by PHC was conducted pursuant to waivers and confirmations from the listing rules of the Australian Securities Exchange ("ASX"). In a letter dated 12 February 2008, the ASX relevantly stated: "1. Subject to resolution 2 and based solely on the information provided, ASX Limited ("ASX") grants Primary Health Care Limited (the "Company") waivers from the following listing rules to the extent necessary to permit the Company to issue securities in the Company pursuant to a capital raising consisting of an accelerated rencounceable [sic] entitlements offer of shares on a pro-rata basis with dual bookbuilds ("Renounceable Offer") and an institutional placement (the "Placement"), without shareholder approval and according to the timetable given to ASX. ... 1.1.2 On or before the Record Date, security holders who are believed by the Company or Credit Suisse (Australia) Limited, Deutsche Bank AG, and ABN AMRO Rothschild (together the "Underwriters") to be exempt investors in accordance with Chapter 6D of the Corporations Act 2001 ("Exempt Investors") may be invited by the Company to subscribe for a number of securities at least equal to their pro-rata allocation of the Renounceable Offer ("Institutional Offer"), unless listing rule 7.7.1 would permit the holder not to be included in a pro-rata offer." (l) According to PHC's Investor Presentation of 13 February 2008, its subsequent ASX announcements dated 15 and 18 February 2008, and a Prospectus dated 22 February 2008: (i) The offer was to be on an 8 for 5 basis, and for a price of $5.40 per share; (ii) There was to be an Institutional Entitlement Offer, to be taken up by 14 February 2008, by "Institutional Shareholders"; and a Retail Entitlement Offer, to be taken up by 13 March 2008, by "Retail Shareholders"; an Institutional Bookbuild (where shares not taken up by those offered shares in the Institutional Entitlement Offer, were offered to other institutional investors); and a Retail Bookbuild (where shares not taken up by those offered shares in the Retail Entitlement Offer, were offered to other investors); (iii) A printed copy of the Prospectus, together with a personalised entitlement and acceptance form, was required to be mailed to each Eligible Retail Investor by 22 February 2008; (iv) Each offer was for the same share price, but entitlements not taken up were to be placed under the separate "Bookbuild process"; and (v) If a Bookbuild process obtained a higher share price than the $5.40 share offer price, the shareholders who did not take up all of their entitlements in that bookbuild would receive, for each share not taken up, the difference between the offer price ($5.40) and the higher price. (m) PHC's Investor Presentation, dated 13 February 2008, was directed to "sophisticated investors" as defined in s 708(8) of the Corporations Act 2001 (Cth) ("Corporations Act") or to "professional investors" as defined in s 708(11) of the Corporations Act. (n) The Institutional Entitlement Offer closed on 14 February 2008. In a letter, dated 18 February 2008, addressed to the ASX, PHC wrote: "Institutional Entitlement Offer The Institutional Entitlement Offer closed on 14 February 2008 raising approximately $958 million with over 80% of existing eligible institutional shareholders agreeing to take up their entitlement. Entitlements that were not taken up by eligible institutional shareholders and those of ineligible institutional shareholders were sold by way of an accelerated bookbuild process ("Institutional Bookbuild") that was undertaken on 15 February 2008. The accelerated Institutional Bookbuild process, which was conducted by the Joint Lead Managers being ABN AMRO Equity Capital Markets Australia Limited, Credit Suisse (Australia) Limited and Deutsche Bank AG, Sydney Branch, achieved a price of $6.60 per new share ("New Share"), which is $1.20 above the $5.40 offer price. Accordingly, relevant institutional shareholders who did not take up all of their entitlements, or who were ineligible to take up new shares, under the Institutional Entitlement Offer will receive $1.20 for each new Share not taken up. The allotment and quotation on a normal settlement basis of approximately 177.4 million New Shares under the Institutional Entitlement Offer and institutional Bookbuild is expected to occur on 22 February 2008." (o) The Retail Entitlement Offer closed on 13 March 2008. In a letter, dated 20 March 2008, addressed to the ASX, PHC wrote: "... Approximately 13.0 million new shares ("New Shares") were subscribed for under the Retail Offer raising approximately $70.0 million. Entitlements that were not taken up by eligible retail shareholders and those of ineligible retail shareholders were sold by way of a bookbuild process ("Retail Bookbuild") that was undertaken on 19 March 2008. The Retail Bookbuild process, which was conducted by the Joint Lead Managers being ABN AMRO Equity Capital Markets Australia Limited, Credit Suisse (Australia) Limited and Deutsche Bank AG, Sydney Branch, achieved a price of $5.50 per New Share, which is $0.10 above the $5.40 offer price. All relevant retail shareholders who did not take up all of their entitlements, or who were ineligible to take up New Shares, under the Retail Entitlement Offer will receive $0.10 for each New Share not taken up." (p) In the events that happened, the Institutional Bookbuild achieved a share price of $6.60 per new share, whereas the Retail Bookbuild achieved a share price of $5.50 per new share. Institutional Investors, therefore, received $1.20 for each share not taken up whilst Retail Investors received $0.10 for each share not taken up, with the result that an Institutional Investor who did not take up its entitlement received $1.10 more per share not taken up, compared with a retail investor who did not take up its entitlement. (q) RinRim was offered shares as part of the Retail Entitlement Offer, and not as part of the Institutional Entitlement Offer. On or about 22 February 2008, it received a copy of the Prospectus for the share offer lodged with ASIC by PHC on 18 February 2008. It did not take up any of the shares. 16In about March 2013, RinRim's solicitor sent a "Brief to Advise and Appear" to Mr L Gyles SC. A Memorandum of Advice appears to have been provided by Mr Gyles SC in about August 2013 (see RinRim Pty Ltd v Deutsche Bank Australia Limited, per Darke J, at [2]). 17There is no explanation provided by, or on behalf of, RinRim, for the delay between about March 2008 and March 2013, in seeking advice about its rights or about the matter generally. 18On 21 August 2013, a typewritten diary note by Mr Carlisle states: "He wants me to raise with Counsel issues of: 1. Preference given to Bateman Investors & not to him 2. Definitions of Ineligible Institutional investors in Announcements 1 & 2 & Prospectus, and RinRim apparently falling within that definition therefore should have been paid the $1.20 per share. We discuss this in depth. He says the three investment banks did not define or have to identify the persons who were within this class. He questions why we seek preliminary discovery → I say counsel recommend this course." 19Between March and August 2013, RinRim's solicitors made a number of requests for documents from PHC and from each of the Defendants. None of the parties requested provided any documents.

The claim for relief RinRim says it may have 20The claim that RinRim asserts it may have can be summarised as follows: (a) The Underwriters made a decision to classify RinRim as a retail investor rather than an institutional investor. (b) Because RinRim held 2,500,657 shares in PHC at the time of the entitlement offer, by applying the 8 to 5 ratio, it was entitled to take up a maximum of 4,001,052 shares. RinRim elected not to take up any of its entitlements. (c) Because it had received the offer as a retail investor, RinRim received $0.10 for each of the shares that it held ($400,105.20). Had it been treated as an institutional investor, and had it not taken up the shares offered, RinRim would have been entitled to $1.20 for each new share not taken up ($4,801,262.40) with the result that it suffered a loss of $4,401,157.20. 21RinRim then alleges that: (a) It should have been treated as "an institutional or other professional or sophisticated investor". (b) It should have been classified as an institutional investor because, as at February 2008: (i) It held 1.75% of PHC's existing shares prior to the offer; (ii) The estimated value of that shareholding was over $20 million based on the then share price of $8.32 (on 13 February 2008); and (iii) It was receiving over $250,000 in dividends per annum through its shareholding in PHC. (iv) The definition of "professional investor" in the Corporations Act supports the view that it should have been classed in that way. Section 708(11) of the Corporations Act exempts a company from the usual requirements of disclosure for offers of security made under Part 6D of the Act if the offer was made to a "professional investor". Sections 708(11)(b) and s 9 include as a "professional investor" a person who controls as least $10 million, as the Plaintiff did through its shareholding in Primary. (c) In forming the belief on the question whether or not RinRim should have been characterised as "an institutional or other professional or sophisticated investor", the Defendants, as the Underwriters, fell short of the care and skill reasonably expected of professional financial managers in their position. (d) The Defendant's decision not to include RinRim in PHC's Institutional Entitlement Offer, amounted to a representation that the decision had been made by them with the care and skill reasonably expected of professional financial advisers in their position. (e) If RinRim had been offered shares as part of the Institutional Entitlement Offer and had elected not to take up any of the 4,001,052 new shares that it was entitled to take up, it would have received $1.10 more for each of those shares, compared with what it in fact received as a retail investor. (f) Its classification as a retail investor resulted in it receiving $4,401,157.20 less than what it would have received as an institutional investor which did not take up any new shares. 22RinRim submits that the purpose of the application for preliminary discovery is to obtain sufficient information to determine whether to commence proceedings against the Defendants, as Underwriters, for negligence and/or for misleading or deceptive conduct.

The Plaintiff's Case on the Application 23The broad thrust of RinRim's application appears to be as follows: (a) The Defendants, as Underwriters, or PHC, decided to which shareholders the offer to subscribe for New Shares under the Institutional Entitlement Offer was to be made "on the basis of [the Defendants'] belief that they were an Institutional Investor". (b) No information as to the decision-making process by which either made the decision, or by which the Defendants, as Underwriters, came to hold the relevant belief, can be discerned from the Prospectus, or from the other publicly available documents included in Ex. P1. (c) Alternatively, RinRim submits that the Defendants, as Underwriters, made the decision as to which shareholders an offer under the Institutional Entitlement Offer would be made "on the basis of [their] belief that [the shareholder was] an institutional or other professional or sophisticated investor". No information as to the decision-making process by which any of the Defendants, as an Underwriter, made the decision, or by which the Defendants, as Underwriters, came to hold the relevant belief, can be discerned from the Prospectus, or from the other publicly available documents included in Ex. P1. (d) Because there were separate bookbuilds for the shares not taken up by the Institutional Investors and by the Retail Investors respectively, whether a particular shareholder was classified as an "Institutional Investor" or as a "Retail Investor" might have affected the amount that the shareholder would, ultimately, receive for each share not taken up. (e) The Defendants should disclose documents going to all of these matters.

The Defendants' Evidence 24I shall not set out all of the detail of the evidence given by Mr Blazer, on information and belief, as to the vast array of documents concerning the Institutional Entitlement Offer in the possession of the Defendants that are being sought by the Plaintiff. 25I am satisfied that a fair description of the number of documents is "voluminous" and that to locate and collect the documents sought would be "a time consuming exercise" (perhaps up to several months, although in the case of some an estimate of the time required cannot be calculated). The Defendants' response to the claim for relief RinRim says it may have 26The Defendants' submissions may be summarised as follows: (a) The foreshadowed claim in tort is unsustainable. RinRim proceeds from a fundamental flawed basis, namely that the Defendants, as Underwriters, had some obligation to consider, and decide, whether each and every shareholder in PHC should be classified as an "institutional investor" and then offer to all such investors the opportunity of subscribing as part of the Institutional Entitlement Offer. (b) The Institutional Entitlement Offer in fact, was conducted pursuant to the waivers and confirmations contained in the ASX Decision, which relevantly, stipulated for PHC to invite shareholders to subscribe. Even if RinRim were an Eligible Institutional Shareholder, there was no absolute requirement imposed upon PHC, or upon the Defendants, as Underwriters, to agree to invite all such Shareholders to participate in the Institutional Offer. (c) The authorities recognise the adoption of a multi-factorial, or salient factors, approach in pure economic loss cases: Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649, per Allsop P (Simpson J agreeing) at [103]. Nothing in the Plaintiff's evidence suggests that any of the seventeen "salient features" identified by Allsop P may be applicable to the Plaintiff's case. (d) There is no evidence to suggest (in the sense of leading to "an inclination of the mind") that any loss sustained by RinRim was reasonably foreseeable. Whether the premium payable is higher in respect of unsubscribed entitlements in the Institutional Entitlement Offer as opposed to unsubscribed entitlements in the Retail Offer was dependent upon the amounts offered by institutions for the unsubscribed entitlements in each of the corresponding Institutional and Retail Bookbuilds. In the present case, amounts offered in the Institutional Bookbuild were higher than those under the Retail Bookbuild with the result that a higher premium was payable. There is no evidence to suggest that this was reasonably foreseeable prior to the two bookbuilds undertaken. It could have been the case that a higher premium might have been obtained following the Retail Bookbuild. (e) There was no evidence of any breach of a duty of care owed by the Underwriters to RinRim to suggest that RinRim may be entitled to make a claim in negligence. (f) RinRim is uncertain as to every element of the asserted potential claim. In reality, that potential claim in nothing more than mere assertion, suspicion or conjecture. (g) The Trade Practices Act, cannot apply to the relevant conduct alleged by RinRim. Part V of that Act does not apply to the supply, or possible supply, of services that are financial services: s 51AF. (In this regard, "financial service" has the same meaning as in Division 2 of Part 2 of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act"). (h) Having regard to the definitions of "financial service" and "financial product" (which includes a security) in ss 12BAA and 12BA of the ASIC Act, s 51AF is triggered with the result that Part V of the Trade Practices Act (including s 52) does not apply. (i) There is no evidence of any relevant representation having been made by PHC or by any of the Defendants. The evidence goes no higher than RinRim considering "it possible that the [Underwriters'] decision not to include [RinRim] in [PHC's] Institutional Offer amounts to, in the circumstances, a representation that the decision had been made with care and skill reasonably expected of a professional financial advisers in their position". Alternatively, that that there may be a claim available based on an allegation that the Defendants, as Underwriters, "in proceeding to make their decisions and form their beliefs in effect represented to all shareholders in [PHC] that they had done so with due skill and care". (j) RinRim has not identified when, where, or in what form, the alleged representation was made and there is nothing in Mr Carlisle's evidence to suggest any reliance, by RinRim, on any representation alleged to have been made.

The Defendants' Case on the Application 27In light of their earlier submissions, the Defendants submitted that there is no "reasonable cause to believe" that RinRim has a claim in negligence, or for misleading or deceptive conduct, leading to "an inclination of the mind" towards assenting to, rather than rejecting, the existence of such claims. The present circumstances may not even give rise to suspicion, or conjecture, as to such claims. They further submitted: (a) RinRim is required to demonstrate that it is "unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant". It has not done so. (b) The measure of any preliminary discovery ordered is limited to the extent of information that is necessary, but no more than that which is necessary, to overcome the insufficiency of information already possessed by the applicant after the making of all reasonable inquiries, to enable a decision to be made whether to commence a proceeding. The overly broad nature of the categories referred to in the amended Summons, self-evidently, demonstrates the trawling exercise inherent in the application and that more than that which is necessary to enable a decision to be made. If preliminary discovery were ordered, only limited documents should be ordered to be provided. (c) RinRim did not commence the proceedings for preliminary discovery until about 5 years and 7 months after the relevant events occurred, and at least 6 months after its present solicitors were engaged. It had not provided any explanation for the delay. (d) If an order were made, the Court, pursuant to UCPR rule 5.8, may make orders for costs in favour of the person against whom an order for preliminary discovery is made or sought. Those costs may include the costs of preparing the affidavit of discovery and the costs of production. The accepted practice, consequent upon making a preliminary discovery order, is that the party subject to the order, is entitled to an order for their costs of production and preparation of the affidavit of discovery and producing the documents at the time the preliminary discovery order is made. Those costs are recoverable on a special basis, similar to the costs entitlement of a subpoenaed party. If preliminary discovery is ordered, such a costs order should be made. (e) If an order were made, the Court, pursuant to UCPR rule 5.6, may make the order subject to a condition requiring the applicant to give security for the costs of the person against whom the order is made. In this case, the order should be made subject to the Defendants being given an opportunity to make an application for security within 10 days and then subject to the resolution of any such application.

Some other Matters 28The Corporations Act, s 9, defines "professional investor" as meaning: "a person in relation to whom one or more of the following paragraphs apply: (a) the person is a financial services licensee; (b) the person is a body regulated by APRA, other than a trustee of any of the following (within the meaning of the Superannuation Industry (Supervision) Act 1993 ): (i) a superannuation fund; (ii) an approved deposit fund; (iii) a pooled superannuation trust; (iv) a public sector superannuation scheme; (c) the person is a body registered under the Financial Corporations Act 1974; (d) the person is the trustee of: (i) a superannuation fund; or (ii) an approved deposit fund; or (iii) a pooled superannuation trust; or (iv) a public sector superannuation scheme; within the meaning of the Superannuation Industry (Supervision) Act 1993 and the fund, trust or scheme has net assets of at least $10 million; (e) the person controls at least $10 million (including any amount held by an associate or under a trust that the person manages); (f) the person is a listed entity, or a related body corporate of a listed entity; (g) the person is an exempt public authority; (h) the person is a body corporate, or an unincorporated body, that: (i) carries on a business of investment in financial products, interests in land or other investments; and (ii) for those purposes, invests funds received (directly or indirectly) following an offer or invitation to the public, within the meaning of section 82, the terms of which provided for the funds subscribed to be invested for those purposes; (i) the person is a foreign entity that, if established or incorporated in Australia, would be covered by one of the preceding paragraphs." 29The Corporations Act, s 708(8) provides: "Sophisticated investors (8) An offer of a body's securities does not need disclosure to investors under this Part if: "(a) the minimum amount payable for the securities on acceptance of the offer by the person to whom the offer is made is at least $500,000; or (b) the amount payable for the securities on acceptance by the person to whom the offer is made and the amounts previously paid by the person for the body's securities of the same class that are held by the person add up to at least $500,000; or (c) it appears from a certificate given by a qualified accountant no more than 6 months before the offer is made that the person to whom the offer is made: (i) has net assets of at least the amount specified in regulations made for the purposes of this subparagraph; or (ii) has a gross income for each of the last 2 financial years of at least the amount specified in regulations made for the purposes of this subparagraph a year; or (d) the offer is made to a company or trust controlled by a person who meets the requirements of subparagraph (c)(i) or (ii)." 30"Sophisticated investor" is not defined in the Corporations Act. 31The Corporations Act, s 708(11) provides: "An offer of securities does not need disclosure to investors under this Part if it is made to: (a) a person covered by the definition of professional investor in section 9 (except a person mentioned in paragraph (e) of the definition); or (b) a person who has or controls gross assets of at least $10 million (including any assets held by an associate or under a trust that the person manages)." 32The ASIC Act, s 12DA(1) and other provisions mirror the Trade Practices Act: "(1) A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive." 33The ASIC Act, s 12GF is concerned with conduct done in contravention of other sections there identified, including s 12DA. Section 12GF(1) provides, relevantly, that a person who suffers loss or damage by conduct of another person that contravenes a provision of Subdivision D may recover the amount of the loss or damage by action against that other person.

The Legislative Framework for the application 34UCPR rule 5.3 provides: "(1) If it appears to the court that: (a) the applicant may be entitled to make a claim for relief from the court against a person ("the prospective defendant") but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and (b) the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and (c) inspection of such a document would assist the applicant to make the decision concerned, the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person's possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief. (2) An order under this rule with respect to any document held by a corporation may be addressed to any officer or former officer of the corporation. (3) Unless the court orders otherwise, an application for an order under this rule: (a) must be supported by an affidavit stating the facts on which the applicant relies and specifying the kinds of documents in respect of which the order is sought, and (b) must, together with a copy of the supporting affidavit, be served personally on the person to whom it is addressed. (4) This rule applies, with any necessary modification, where the applicant, being a party to proceedings, wishes to decide whether or not to claim or cross-claim against a person who is not a party to the proceedings." 35In an application for preliminary discovery, there are jurisdictional questions and considerations of discretion. As can be observed, as a threshold for considering making an order under the rule, it must "appear to the Court that the applicant may be entitled to make a claim for relief". 36"Claim for relief" is defined in s 3 of the Civil Procedure Act 2005 to include, relevantly: "(c) a claim for the recovery of damages or other money, and ... (e) a claim for the determination of any question or matter that may be determined by the court, and (f) any other claim (whether legal, equitable or otherwise) that is justiciable in the court." 37That definition applies to UCPR rule 5.3 by virtue of s 11 of the Interpretation Act 1987 which provides: "Words and expressions that occur in an instrument have the same meanings as they have in the Act, or in the relevant provisions of the Act, under which the instrument is made". 38The evident purpose of the rule is to enable a prospective litigant (the applicant) to obtain documents, or things, that may assist in making a decision whether to commence proceedings. 39That purpose would be defeated if the applicant were required to demonstrate, at the time of the application, the existence of a claim for relief as a condition to the exercise of the Court's jurisdiction. The possible existence of a claim, not the probability of the claim being established at trial, is the relevant consideration. 40Thus, it will be sufficient if there is reasonable cause to believe that the applicant may have a right of action against the respondent resting on some recognised legal ground (Panasonic Australia Pty Ltd v Ngage Pty Ltd [2006] NSWSC 399; (2006) 69 IPR 595, per Young CJ in Eq (as his Honour then was), at 598 [20] and 599 [27]; Morton v Nylex Ltd [2007] NSWSC 562, per White J, at [25]. 41It is not the intention of the rule that the Court, at the stage of preliminary discovery, should reach any conclusion as to the likelihood of ultimate success at trial. The evidence, although falling short of establishing all the ingredients of a prima facie case, should point sufficiently to the existence of a case for relief as to make it proper, in the interests of justice, that preliminary discovery should be ordered so that proceedings for that relief could be brought. 42Adams J in Hornsby Shire Council v Valuer General of NSW [2008] NSWSC 1179 put the test in this way: "[33] The gateways specified by the Rule are quite easily opened. It is necessary only that the elements "appear", a much less stringent test than proving or establishing. I respectfully agree with Young CJ in Eq that it is not necessary for a plaintiff to show more than that "the contemplated proceedings are likely to rest on some recognised legal ground and does not necessarily have to show a prima facie or pleadable case, though mere assertion that there is such a case is insufficient": Panasonic Australia Pty Ltd v Ngage Pty Ltd [2006] NSWSC 399 at [20], [27]; [2006] NSWSC 399; 69 IPR 595; and see Morton v Nylex Ltd [2007] NSWSC 562, White J at [26]." 43However, as was written in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216; (2007) 164 FCR 450, by Middleton J, at [44], 471: "· It is necessary to examine the various elements of the potential cause of action that is sought to be relied upon to determine whether there is reasonable cause to believe that each of the necessary elements exist. That task requires the Court to conclude at least that there is a reasonable cause to believe that each of the elements of the relevant cause of action might be established. The test is an objective one, and it is not necessary to prove that each of the elements do in fact exist. The rule contemplates that there be reasonable cause to believe that the respondents may have a right to obtain relief: see Austrac Operations Pty Ltd v New South Wales [2003] ATPR 41-960 at [11] and Leighton Contractors Pty Ltd v Page Kirkland Management Pty Ltd [2006] FCA 288 at [5]. · If the cause of action on which an application for preliminary discovery is based could not succeed, is bound to fail, is ill-founded or is doomed to fail, then discovery ought not be ordered: Bradley v Eagle Star Insurance Co Ltd [1989] 1 All ER 961 at 963 to 964; Harris v Newcastle-upon-Tyne Health Authority [1989] 2 All ER 273 at 277. If the potential cause of action would not survive an application for summary judgment pursuant to s 31A of the Federal Court of Australia Act 1976 ('Federal Court Act'), then discovery ought not to be ordered. ... · The rule is one which should be construed beneficially. In Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 at 733 Burchett J said: It is no answer to the applicant's application under r 6 to say that the proceeding is in the nature of a fishing expedition: cf Meth v Norbert Steinhardt & Son Ltd (1959) 33 ALJR 78at 81. Rule 6 is designed to enable an applicant, in a situation where his proof can rise no higher than the level the rule describes, to ascertain whether he has a case against the prospective respondent - that is, to "fish" in the old sense ... It would be unfortunate if a rule designed to amplify the court's power to penetrate obscurities and uncertainties in the interests of justice were to be weakened by restrictive and unnecessary glosses. I think the rule is of a beneficial kind within the meaning of the well known principle of interpretation, and should be given the fullest scope its language will reasonably allow. The proper brake on any excesses in its use is the discretion of the court, which is required to be exercised in the particular circumstances of each case." 44UCPR 5.3(1)(b) and (c) require three elements: (i) that a prospective defendant 'may have, or have had, possession of a document or thing,' that (ii) can assist in determining whether or not the applicant is entitled to make a claim, and (iii) 'inspection of such a document would assist the applicant to make the decision concerned.' On their face, the rules do not require the documents to provide direct proof that the applicant is entitled to make a claim. However, they must assist in that decision-making process: Maser v Edmondson [2009] NSWSC 966, per Macready AsJ at [29]. 45In Hatfield v TCN Channel Nine Pty Ltd [2010] NSWCA 69; (2010) 77 NSWLR 506, McColl JA wrote, at [46] - [52]: "It is convenient to set out the key principles relevant to an application for preliminary discovery. To a large part these are taken from the primary judge's exposition of the jurisprudence in this area which was accepted by all parties. Some of the principles are drawn from case law developed in relation to Federal Court Rules O 15A r 6. There are textual differences between the two provisions. No party suggested anything turned on those differences for the purposes of this case. First, "[i]n order for it to 'appear' to the Court that the applicant 'may be entitled' to make a claim for relief, it is not necessary for the applicant to show a prima facie or pleadable case": Morton v Nylex (at [25]). Secondly, while "the mere assertion of a case is insufficient...[i]t will be sufficient if there is reasonable cause to believe that the applicant may have a right of action against the respondent resting on some recognised legal ground": Morton v Nylex (at [25]). Thirdly, "belief requires more than mere assertion and more than suspicion or conjecture. [It] is an inclination of the mind towards assenting to, rather than rejecting, a proposition. Thus it is not sufficient to point to a mere possibility. The evidence must incline the mind towards the matter or fact in question. If there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application insofar as it is based on that cause of action": St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147 (at 26) per Hely J, referring in turn to John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679 (at [13], [14], [17] and [73]) per Emmett J. The use of the word "may" indicates the court does not have to reach "a firm view that there is a right to relief": Telstra Corp Ltd v Minister for Broadband, Communications and the Digital Economy [2008] FCAFC 7; (2008) 166 FCR 64 (at [58]). Fourthly, the requirement that the matters set out in UCPR 5.3 "appear[s]" to the court to establish an entitlement to an order under the rule may be wider than the requirement in the Federal Court Order 15A r 6 that there "is reasonable cause to believe": see Panasonic Australia Pty Ltd v Ngage Pty Ltd [2006] NSWSC 399; (2006) 69 IPR 595 (at [22]) per Young CJ in Eq; Papaconstuntinos v Holmes à Court [2006] NSWSC 945 (at [17] per Simpson J; Hornsby Shire Council v Valuer General of NSW [2008] NSWSC 1179 (at [33]) per Adams J. Nevertheless Hely J's statement in St George Bank Ltd (at 26) remains apposite, namely that "whilst uncertainty as to only one element of a cause of action might be compatible with the 'reasonable cause to believe' required by subparagraph (a), uncertainty as to a number of such elements may be sufficient to undermine the reasonableness of the cause to believe". Fifthly, "the question posed by [UCPR 5.3(1)(a)] ... is not whether the applicant has sufficient information to decide if a cause of action is available against the prospective respondent [but]... whether the applicant has sufficient information to make a decision whether to commence proceedings in the Court. 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": St George Bank Ltd (at 26) (emphasis in original); see also Morton v Nylex (at [33]). Thus application of the rule will not be precluded by the fact that the applicant already has available evidence establishing a prima facie case for the granting of relief, as there might be matters of defence which could defeat a prima facie case: Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 1500 (at [41]) per Lindgren J; referred to with approval by the Full Federal Court (French, Weinberg and Greenwood JJ) in Telstra Corp Ltd (at [60]). Sixthly, as Hely J said in St George Bank Ltd (at 26), "the Rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with the proper brake on any excesses lying in the discretion of the Court, exercised in the particular circumstances of each case". 46In Noble Earth Technologies Pty Ltd v Hampic Pty Ltd trading as Cyndan Chemicals [2012] NSWSC 935, after referring to the above passage, I noted, at [44] - [53]: "Importantly, to attract its operation, the rule requires that it must "appear" to the Court that the applicant "may be entitled to make a claim for relief". This does not mean, however, that the rule will apply in any case in which the applicant asserts a possible cause of action against some other person, no matter how speculative or remote. There needs to be an inclination of the mind towards assenting to, rather than rejecting, a proposition. It is not sufficient to point to a mere possibility: Clemett v New South Wales Lotteries Corporation Pty Ltd [2011] NSWSC 121 per Hoeben J (as his Honour then was) at [43]. In Morton v Nylex Ltd [2007] NSWSC 562, at [25], White J referred to this part of the rule saying: "It will be sufficient if there is reasonable cause to believe that the applicant may have a right of action against the respondent resting on some recognised legal ground (Panasonic Australia Pty Ltd v Ngage Pty Ltd (2006) 69 IPR 595 per Young CJ in Eq at 589 [20] and 599 [27])." At [26], his Honour described the test as "undemanding". What constitutes "reasonable inquiries" for the purpose of r 5.3(1)(a) is a question of fact, to be considered in all the circumstances of the particular case, which includes the relationship (if any) between the applicant and the prospective defendant (Steffen v ANZ Banking Group [2009] NSWSC 666, per McDougall J, at [15]). McColl JA added, Hatfield v TCN Channel 9, at [86], that the relationship (if any) between the prospective defendant and any source of information was also relevant. In Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33, at [83], Steytler JA, without being exhaustive, set out the factors that the Court would consider in exercising its discretion on an application for preliminary discovery: "[83] A Court, in considering whether or not to exercise the discretion afforded it by the section, or, to put it differently, in considering whether or not the order is reasonably necessary to achieve the proper administration of justice, will ordinarily take into account a range of factors. Without attempting to be exhaustive, these will usually include such things as the likelihood that a cause of action of the kind suggested will be found to exist, the nature and significance of that potential cause of action, the likely effect, on the person against whom discovery is sought, of the making of an order of the kind contended for, whether there is any other adequate means, available to the intending plaintiff, of obtaining the information which it seeks, the nature and confidentiality of the documents proposed to be obtained, the possible significance of the information contained within those documents to the decision whether or not to commence the contemplated proceedings, whether the applicant is able to compensate the potential party for its cost of complying with the order and whether there is any evidence of bad faith on the part of the applicant." Preliminary discovery is a matter of practice and procedure rather than a matter of substance. The distinction was adverted to in the High Court in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170, at 176-177, where their Honours (Gibbs CJ; Aickin, Wilson and Brennan JJ) said: "The essence of such a matter 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." Also see, Re Dernacourt Investments Pty Ltd (1990) 20 NSWLR 588; and Maser Technology Group Pty Ld v Edmondson [2010] NSWSC 458, per Hamilton AJ, at [15] - [16]. Orders for preliminary discovery should not be made as a matter of course but only when reasonably necessary to achieve the proper administration of justice: McCarthy v Dolpag Pty Ltd [2000] WASCA 106 at [13]. The measure of any preliminary discovery to be ordered is the extent of information that is necessary, but no more than that which is necessary, to overcome the insufficiency of information already possessed by the applicant after the making of all reasonable inquiries, to enable a decision to be made whether to commence a proceeding. The rule does not allow for third party discovery. Preliminary discovery may be ordered only against the "prospective defendant"." 47The onus is on the applicant to make it appear to the Court that, having made reasonable inquiries, the applicant is unable to obtain sufficient information to decide whether or not to commence proceedings against the respondents. As was written by White J in Morton v Nylex, at [33], this: "requires an objective assessment of the information already possessed by the plaintiffs to determine whether that information is sufficient for such a decision to be made. The question is whether the applicant has insufficient information to be able to decide whether to institute proceedings; not merely to establish a cause of action. Hence, an applicant may be entitled to preliminary discovery of documents relevant to available defences, or the extent of apprehended breaches, or the likely quantum of damages, as well as of documents which may establish whether there is a cause of action. However, unless the applicant is lacking something reasonably necessary to make a decision whether to institute proceedings, he or she is not entitled to preliminary discovery. An applicant must disclose what information he or she already has relevant to making such a decision, and identify what information is lacking. Preliminary discovery cannot be used to build up a case which an applicant has already decided, or could decide, to bring (Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd (Lindgren J, Federal Court of Australia, 24 May 1996, unreported); St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147 at 154 [26]; Glencore International AG v Selwyn Mines Ltd (recs and mgrs apptd) [2005] FCA 801; (2005) 223 ALR 238 at 241 [15]; Matrix Film Investment One Pty Ltd v Alameda Films LLC [2006] FCA 591 at [15]- [19], [25])." 48In Contour Building and Construction Pty Ltd v Kerr [2008] NSWSC 883, Barrett J (as his Honour then was), at [10] - [14], wrote that a party who had already asserted an entitlement to commence substantive proceedings, could not sustain an application for preliminary discovery under the rule. In other words, preliminary discovery cannot be used to build up a case which an applicant has already decided to bring, or could decide to bring: St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147 at [27]; Murray v Wheeler [2013] NSWSC 137; Morton v Nylex Ltd at [33]. 49In Papaconstuntinos v Holmes A Court [2006] NSWSC 945, Simpson J, at [20], stated, in relation to the considerations: "These questions are also to be considered against the background of the nature of the relief made available by r 5.3. This is, before any substantive proceedings have been commenced, to require a prospective defendant to give discovery of documents that are or have been in the prospective defendant's possession and that relate to the question of whether or not the plaintiff is entitled to make a claim for relief. This is potentially an extremely demanding task and a considerable imposition upon a defendant. Depending upon the specificity with which the documents ordered to be discovered are identified, it may require the prospective defendant to make an assessment of the potential relevance of documents or other things to putative proceedings that have not yet been formulated. It may require a very lengthy and detailed examination of documents and records. It is not a power to be exercised lightly. It is, no doubt, for that reason that the power is not to be exercised unless and until the plaintiff has been shown to have made reasonable enquiries otherwise."

Determination 50The first question to be addressed is whether it "appears" that the Plaintiff "may be entitled to make a claim for relief from the court against a person". I have outlined the broad facts asserted by the Plaintiff. 51In Sons of Gwalia Ltd v Margaretic [2007] HCA 1; (2007) 231 CLR 160 Gleeson CJ observed, at [18], 180: "...modern legislation ... has extended greatly the scope for 'shareholder claims' against corporations ... . Corporate regulation has become more intensive, and legislatures have imposed on companies and their officers obligations, breach of which may sound in damages, for the protection of members of the public who deal in shares and other securities." 52It seems clear that what was required to be disseminated could not be made available simultaneously to all of PHC's shareholders or to the public generally. 53Thus, PHC and the Defendants appear to have adopted a sequential process for the taking up of the new shares, first by those identified as shareholders to whom either extended an offer to subscribe on the basis of PHC's, or the Defendants', as Underwriters', belief, that they were an Institutional Investor. Alternatively, the Defendants, as Underwriters, identified those shareholders as shareholders to whom an offer to subscribe was extended on the basis of the Defendants', as Underwriters, belief, that they were an institutional, or other professional or sophisticated investor. 54RinRim has not identified any precise obligation upon either PHC, or the Defendants, as Underwriters, to extend the offer to subscribe to every shareholder on the basis of the belief that it was an Eligible Institutional Shareholder or upon the basis of the Defendants', as Underwriters, belief that it was an institutional, or other professional or sophisticated investor. 55The Defendants point to the ASX letter dated 12 February 2008 which states that those investors believed by the Defendants, as Underwriters, to be exempt investors under Chapter 6D of the Corporations Act "may be invited" and that this permitted PHC or the Defendants, as Underwriters to not extend the Institutional Entitlement Offer to any shareholder, even if it were an ineligible investor. (It is arguable that these words do no more than identify the investors to whom, or which, the Institutional Entitlement Offer could be made.) 56However, the definition of Ineligible Institutional Shareholder was one which, "if they had a registered address in Australia, would in the reasonable opinion of [PHC] be an Institutional Investor, but who [PHC] and the Underwriters agree shall not receive an offer under the Institutional Entitlement Offer". 57From the documents available on the application, it is not possible to know whether the Defendants, as Underwriters, formed the belief that RinRim was, or was not, an institutional, or other professional, or sophisticated, investor, and how any such belief was formed. What information the Defendants had received, or had obtained, about RinRim, to enable any such belief to be formed is not known. If there were such information available to them, the Defendants, one might have thought, would be obliged to consider it since "belief is an inclination of mind towards assenting to, rather than rejecting, [a] proposition": Apache Northwest Pty Ltd v Newcrest Mining Ltd [2009] FCAFC 39, per Moore and Gilmour JJ, at [3]. 58It was not suggested by RinRim that there was any statutory, or other, right of appeal from a decision of the Defendants, or of PHC. But this does not mean that the decisions of either may not be examinable. It is at least arguable that it may be open to a shareholder to seek to challenge an erroneous decision. 59There are no documents in its possession to enable RinRim to ascertain how the Defendants' belief, whatever it was, was formed. Nor are there any documents that enable RinRim to determine whether PHC or the Defendants, as Underwriters, considered, at all, RinRim to be an institutional, or other professional, or sophisticated, investor and then exercised a discretion not to make the Institutional Entitlement Offer to it. 60Also, there are no documents in RinRim's possession to enable it to determine whether PHC and the Defendants, as Underwriters, agreed that RinRim should not receive an offer under the Institutional Entitlement Offer, thereby making RinRim an Ineligible Institutional Shareholder. 61Furthermore, since the Prospectus was not sent to Retail Investors until after the Institutional Entitlement Offer had been sent and the time for its acceptance had expired, RinRim had no forewarning of it and it had no way to communicate with the Defendants as to the belief they were required to form. 62Yet, I repeat that the first question posed by UCPR 5.3(1)(a) is not whether the applicant has sufficient information to decide if a cause of action is available against the Defendants, but whether RinRim has sufficient information to make a decision whether to commence proceedings. It seems to me that it does not. It knows nothing, or virtually nothing, of the decision making process and whether it was flawed as a result of acts or omissions of the Defendants. 63Furthermore, RinRim may be entitled to documents by way of preliminary discovery in order to determine what defences are available to the Defendants and the possible strength of those defences. Whilst RinRim, by virtue of the Defendants' submissions, has been provided with the nature of the defences that might be raised if proceedings are commenced, it knows nothing about what might be raised, by way of defence, regarding the decision making process. 64I have carefully considered the submissions on the first gateway made by the Defendants. In my view, they place too high a burden on RinRim at that stage. As stated above, it is not necessary for RinRim to show a prima facie, or pleadable, case. 65I am satisfied that it appears to the Court that RinRim may be entitled to make a claim for relief against the Defendants, as raised in its submissions. (In stating this, I express no view of the likely success, or otherwise, of either asserted possible claim.) 66The next question is whether the Plaintiff has been "unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant". If that question is answered in the affirmative, it will be necessary to decide whether the inability exists after, and despite, the making of "reasonable inquiries". 67I am satisfied that RinRim has been unable to obtain such information and that "reasonable inquiries" have been made. In circumstances where RinRim has established that it made inquiries of each of the Defendants, and also of PHC, putting each on notice of the reasons for the inquiries, I consider that, given the liberal construction to be accorded to UCPR rule 5.3, that the second gateway is satisfied. 68It is clear that none of the Defendants, or PHC, have provided any documentation. It was not until almost the conclusion of his submissions, that counsel for the Defendants stated that if the Court were satisfied that RinRim were entitled to relief, they would make available "documents created between 1 February 2008 and 14 February 2008 in relation to the Institutional Entitlement Offer conducted by PHC in or about February or March 2008 which records information about RinRim". 69This satisfies me that the Defendants had not made such documents available previously. 70The next question is whether it appears that any of the Defendants may have, or have had possession of documents or things that can assist in determining whether or not RinRim is entitled to make such a claim for relief and would assist the Plaintiff in making such a decision. Clearly, the Defendants, or some of them, would have the documents to which their counsel made reference and also documents that reveal any agreement between them, or any of them, and PHC, as to which shareholders an offer should, and should not, be extended. 71The next question is whether there are discretionary reasons for refusing the application in respect of all, or some, of the documents sought. The delay in bringing the application and the failure to explain it has caused me some concern. However, other than raising it, the Defendants' solicitor, in his affidavit, did not identify any prejudice that would be suffered because of the delay. 72More important, it seems to me, is the scope of the categories of documents (whether in Annexure A to the Summons or in a reduced form). As a matter of discretion, and remembering the purpose of the discovery, I would not require the Defendants to produce such a vast array of documents. 73It seems to me that in addition to the documents that the Defendants have identified, the only other documents that should be produced are documents going to any agreement between the Defendants, or any of them and PHC, relating to which shareholders the Institutional Entitlement Offer should, or should not, be extended. 74I respectfully agree that the documents should be limited to existing hard copy documents. 75I shall allow the parties 7 days to agree upon the scope of documents that fall into these limited categories. If they are unable to do so, competing schedules of documents should be provided, and I shall determine the issue although, obviously, this may not be able to be done with the speed that RinRim requires. 76In order to ensure that the process is given within a reasonable period, and whilst not putting undue pressure to complete the whole task within the unreasonable period (28 days) suggested by RinRim, perhaps, documents could be made available after say each 5 working days of the 42 day period that was suggested by the Defendants' counsel, which, in all the circumstances, and bearing in mind the time of year, is reasonable. 77Again, the parties may wish to consider reaching agreement on a workable approach. 78(In this regard, I respectfully agree with the Defendants' submission that the difficulties that may be experienced in this regard have been caused by RinRim's approach to bringing this application.) 79I then turn to the costs of compliance by the Defendants. UCPR rule 5.8 provides that "the court may make orders for the costs of the applicant, of the person against whom the order is made or sought and of any other party to the proceedings". Those costs may include the costs of preparing the affidavit of discovery and the costs of production: UCPR rule 5.8(2). The costs of production are recoverable in the same way as those incurred by a person who has responded to a subpoena: Airways Corp of New Zealand v Present Partners of Price Waterhouse Coopers Legal [2002] NSWSC 521 at [12] per Simpson J. 80The competing considerations were discussed by Ball J in Andrews Advertising Pty Ltd v Andrews [2011] NSWSC 244. Taking into account the facts of this case, and the matters referred to by Ball J, in my view, the most appropriate order is that RinRim should pay the Defendants' costs, calculated on the indemnity basis, of production and preparation of their affidavits of discovery. 81In Panasonic Australia Pty Ltd v Ngage Pty Ltd, Young CJ in Eq, at [40], wrote: "Ideally what should happen is that the defendant should indicate a sum of money which it reasonably requires for preparing the list of documents and for supervising inspection and if there is any dispute, that could be settled by a Registrar." 82Because of the urgency of the requirement for production, which has been caused solely by RinRim, if there is any disagreement about the costs of production and the preparation of the affidavits of discovery, the amount sought by the Defendants, unless demonstrably unreasonable, should be paid by RinRim, into a controlled moneys account held in the names of the parties' solicitors, pending the determination of the issue of quantum. Alternatively, RinRim should provide security, satisfactory to the Defendants, for those costs. 83In relation to the costs of the actual application, whilst it is true that RinRim has had a measure of success, that success has been extremely limited. The application by RinRim, as initially conceived and even as pressed at the hearing, was simply too broad. The considerable burden that would have been imposed upon the Defendants in trying to amass the documents should have been obvious. To require production within 28 days, bearing in mind that the events took place over 5 years ago, further demonstrates the unreasonableness of RinRim's demands. In my view, the Defendants did not act unreasonably in taking the stance that they did. 84I have considered whether the disposition of costs should depend on the initiation and outcome of any litigation following preliminary discovery. I do not think it should bearing in mind the delay in bringing the application, which as stated, was not explained. 85Further, as has often been stated, the jurisdiction to order preliminary discovery is an extraordinary one "since an order for preliminary discovery involves an invasion of the prospective respondent's private affairs in order to determine whether or not a case can properly be brought against the prospective respondent": J & A Vaughan Super Pty Ltd v Becton Property Group Limited [2013] FCA 340 at [17]. 86However, I note that it was not until almost the conclusion of counsel's submissions that the Defendants stated that in the event that the Court concluded that RinRim was entitled to some relief (which even then was opposed), some documents could be produced. 87In my view, RinRim should pay 80 per cent of the Defendants' costs, calculated on the ordinary basis, of the application, and that RinRim should bear its own costs of the application. 88I direct the parties, within 7 days, to bring in Short Minutes of Order reflecting these reasons. The parties should agree upon the precise categories of documents within the parameters that I have indicated and a regime for production.

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: 28 November 2013