Challenger Limited and Challenger Managed Investments Ltd (Challenger) have succeeded in blocking Macquarie and the legal teams behind two Storm Financial (Storm) class actions from accessing a series of company documents.
Last month, legal representatives for Challenger objected to a ruling in the Brisbane registry of the Federal Court that would give Macquarie Bank and members of two class actions, one involving the Commonwealth Bank of Australia, the other Macquarie, the chance to view company documents regarding Storm, court papers said.
The initial ruling was made as part of a Discovery Plan agreed between all parties involved in the case, including ASIC, the papers, released on 5 April, said.
As part of the agreement, parties were given the go ahead to request documents from the corporate regulator, a situation that was deemed unusual.
In this particular case, ASIC was the key regulator that investigated the 2009 collapse of the financial advisory group and was also the party responsible for commencing the court proceedings.
"That Discovery Plan accommodated an unusual situation. It was that ASIC held the vast majority of the documents relating to all three proceedings. It obtained most of those documents by use of its investigatory powers under the Australian Securities and Investments Commission Act 2001," the papers said.
"Included in those documents were documents ASIC had obtained from third parties to these three proceedings. Challenger was one of those third parties."
During the course of its 2009 and 2010 Storm investigations, ASIC obtained 27,700 documents from Challenger, the papers said.
"Because of this unusual situation, the Discovery Plan included a provision whereby a third party, such as Challenger, could object to ASIC giving any of the other parties to these proceedings access to that person's documents," it said.
Under one specific part of the agreement, ASIC was ordered to provide parties and non-parties who produced documents, as well as those who were examined under section 19 of the ASIC act and those examined by external administrations access to documents contained in "the Ringtail Database and the NUIX Database".
ASIC and parties were allowed to refuse access to the documents to third parties by writing, the court papers said.
Challenger's objections were raised following a request by Macquarie and the legal team behind the two class actions for access to two categories of documents. Challenger questioned the relevance of the third party requests.
The first category of documents involves correspondence and notes of meetings between representatives of Challenger and representatives of Storm regarding the negotiation of the Storm product maintenance and development deed term sheet dated on or about 11 January 2007, court papers said.
The second category involves documents recording communications among representatives of Challenger which refer to or comment on correspondence to or from Storm or meetings with representatives of Storm regarding the establishment and structure of the Challenger funds.
Representatives for Macquarie said the documents "are adjectivally or apparently relevant", with the financial services firm relying on elements of ASIC's statement of claim that "Storm and Challenger acted 'in concert' to develop and structure the Challenger Funds.
"Insofar as they relate to the Challenger Funds, the particulars in para 20 [of ASIC's statement of claim] describe three events: an email sent on 16 October 2003, a meeting held on 13 November 2003 and entering into the term deed on 11 January 2007," Reeves said in the court papers.
"Since the Challenger Funds were established on or about 30 April 2004, it is self-evident that the last of these three events could not have been a part of the development and structuring of those funds. It is, therefore, not possible for the acting "in concert" allegations in para 20 to be relevantly connected with the entry into the term deed some two years and nine months later."
He said as the allegations in the class action parties' statements of claim are essentially the same as those in ASIC's statement of claim, Reeves determined "the same reasoning applies" to the apparent relevance of the Challenger documents.
Reeves said since the central allegations in the proceedings are directed to Storm's use of investor funds borrowed from Macquarie to purchase units in, among others, the Challenger Funds, he found it difficult to find a link to Challenger's role.
"I fail to see how Challenger's role in the development and structuring of those funds . could have any apparent relevance to the dealings between Storm and Macquarie after those funds were established, which dealings are said to give rise to Macquarie's being knowingly concerned in the operation of an unregistered managed investment scheme by Storm," he said.
"It may be different if Challenger were alleged to have been knowingly concerned in that conduct, along with Macquarie, but that allegation is not made in the pleadings.
"For these reasons, I rule that neither Macquarie nor the class action parties may have access to the Challenger [category] documents."
