Lazvisax Ltd v Manders Terrace Ltd & Ors (Approved)

Factual and Procedural Background

The Applicant, Lazvisax Limited ("Lazvisax"), a minority shareholder holding 7% of shares in the first named Respondent, Manders Terrace Limited (the "Company"), brought proceedings alleging that the Respondents, including Manders Terrace Limited, Proto Roto Limited, and an individual referred to as Defendant, oppressed Lazvisax and disregarded its interests over several years. The case involves a discovery application by Lazvisax seeking seven categories of documentation related to a series of posts made by Defendant on his Twitter account, which was linked to the Company. These posts concerned the State of Israel and related terrorist attacks, leading to worldwide negative media publicity and the withdrawal of clients and partners from the Web Summit technology conference operated by the Company.

Defendant resigned as CEO and director of the Company shortly after the posts. The Company had funded a media entity, referred to as The Ditch, which also published statements about the Israel-Hamas conflict. Subsequently, the Company ceased funding The Ditch. Lazvisax and another minority shareholder requisitioned an Extraordinary General Meeting (EGM) in January 2024, where resolutions proposed by them were voted down by the Respondents.

The discovery application arises following amendments to the pleadings related to the posts and the conduct of Defendant and The Ditch. The court was asked to consider the relevance, necessity, and proportionality of the discovery sought in light of the pleadings and admissions made by the Respondents.

Legal Issues Presented

1. Whether the categories of documents sought by Lazvisax are relevant and necessary for the fair determination of the proceedings or for saving costs under the Rules of the Superior Courts.
2. Whether the discovery sought goes beyond what is necessary given admissions made by the Respondents concerning the posts and their effects.
3. Whether the discovery requests are proportionate in scope and burden, considering the complexity and value of the case.
4. Whether the discovery sought overlaps with or duplicates existing discovery obligations under a prior discovery order dated 29 July 2022.
5. The extent to which discovery should be ordered to clarify disputed facts about the impact of the posts and Defendant’s resignation on the Company and Lazvisax’s interests.

Arguments of the Parties

Applicant's Arguments

• Lazvisax contends that the posts and related conduct by Defendant and The Ditch constitute oppression and disregard of its interests as a minority shareholder.
• The discovery sought is relevant and necessary to understand the impact of the posts, including reputational damage, financial consequences, and the Respondents’ responses to third-party complaints and withdrawals of support.
• Discovery categories should be clear, specific, and separate to avoid ambiguity and ensure effective disclosure.
• The admissions by Respondents do not cover all disputed facts, such as the extent of damage, the identity and number of parties who withdrew support, and the reasons for Defendant’s resignation.
• Discovery is required to test the Respondents’ denials and special pleas, including whether Defendant’s resignation was truly voluntary or due to untenable circumstances caused by his conduct.
• The discovery sought is not overly burdensome given the limited time frame and the importance of the documents to the issues at trial.
• There is no material overlap sufficient to subsume the new discovery requests under the prior discovery order, and any overlap should not prevent separate discovery categories.

Respondents' Arguments

• The Respondents admit certain facts, such as the posts causing offence and some withdrawal of support, and argue this limits the necessity for broad discovery.
• They contend that many of the discovery requests are overly broad, disproportionate, and constitute fishing expeditions beyond what is necessary to resolve the issues.
• They propose narrower, limited categories of discovery, focusing on complaints specifically referencing The Ditch and engagement with minority shareholder proposals.
• The Respondents argue that financial information relevant to share value and damage is already covered under a prior comprehensive discovery order, and duplicative discovery should be avoided.
• They deny that Defendant’s resignation was due to untenable circumstances and assert it was a voluntary decision in the Company’s best interests, negating the need for extensive discovery on this issue.
• They maintain that internal communications and documents not directly tied to the posts or their consequences are irrelevant and unnecessary.
• The Respondents suggest that interrogatories or other targeted procedures would be more appropriate to clarify disputed facts than broad discovery requests.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by outlining the principles governing discovery, emphasizing that discovery must be relevant, necessary for fair disposal or cost-saving, and proportionate in scope and burden. The court acknowledged that while some admissions had been made by the Respondents regarding the posts and their effects, there remained significant factual disputes, particularly concerning the extent of damage, the identity and number of parties withdrawing support, and the circumstances of Defendant’s resignation.

The court analyzed each category of discovery requested, assessing whether the documents sought were relevant and necessary in light of the pleadings and existing admissions. It found that certain categories, such as Category 1A (communications relating to the posts), Category 3A (communications among directors and executives about the posts), Category 4A (steps taken to mitigate damage), Category 5A (documents concerning Defendant’s resignation), and Category 7A (documents evidencing financial impact), were relevant and necessary. The court modified some categories by clarifying terminology (e.g., replacing "referring to or touching upon" with "relating to") to reduce ambiguity and burden.

Conversely, the court refused discovery for Category 2A (documents evidencing complaints and withdrawals unrelated specifically to the posts) and Category 6A (documents about the decision to cease funding The Ditch), reasoning that these categories were overly broad or unnecessary given the admissions and overlap with other categories.

The court rejected the Respondents’ arguments that discovery should be limited to the prior discovery order's scope, finding that the new issues raised by the amended pleadings justified separate and clear discovery categories. It emphasized that discovery of documents need only occur once even if responsive to multiple categories, thereby mitigating concerns about duplication and burden.

Overall, the court balanced the Applicant’s need to test disputed facts and establish the extent of alleged oppression against the burden imposed on the Respondents, concluding that the directed discovery was appropriate, limited in time scope, and proportionate.

Holding and Implications

The court GRANTED discovery in the following categories with certain modifications for clarity and proportionality:

• Category 1A: Communications between various stakeholders and the Respondents relating to Defendant’s and The Ditch's statements about the State of Israel, from 7 October 2023 onwards.
• Category 3A: Communications among current or former directors or executive team members referring to the posts, from 7 October 2023 onwards.
• Category 4A: Documents referring to mitigation steps taken by the Respondents concerning the damage to Web Summit’s business and reputation, including engagement with minority shareholder proposals, from 7 October 2023 onwards, excluding personal or confidential information about CEO recruitment candidates.
• Category 5A: Documents concerning Defendant’s resignation as CEO and board member, including reasons, from 7 October 2023 onwards.
• Category 7A: Documents evidencing or referring to the financial impact on the Company’s business of the conduct and events described in the amended pleadings, from 7 October 2023 onwards.

The court REFUSED discovery for Categories 2A and 6A as unnecessary or duplicative.

The implications of this decision include clarifying the scope of discovery tailored to the specific contested issues arising from the amended pleadings, thereby facilitating a fair trial process. The court emphasized that discovery should be clear, proportionate, and avoid duplication, but did not establish new legal precedent beyond applying established discovery principles to the facts. The parties were directed to attend a mention to discuss timelines and further directions.