Angel Place Bloodstock P/L & Ors v Pegasus Leasing Ltd & Anor Pegasus Leasing Ltd v Angel Place Bloodstock P/L
[1993] FCA 71
•24 Feb 1993
71 s s
JUDGMENT Fle. ........ ..,...... I ........ ....
IN THE FEDERAL COURT OF AUSTRALIA
) )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 258 of 1991
)
GENERAL DIVISION )
BETWEEN: ANGEL PLACE BLOODSTOCK PTY LIMITED AND THE PERSONS SPECIFIED IN THE SCHEDULE TO THE AMENDED STATEMENT OF CLAIM
Applicants
AND: PEGASUS LEASING LIMITED
ACN 008 078 162
First Respondent
JOHN WILLIAM DUKE
Second Respondent
PEGASUS LEASING LIMITED
ACN 008 078 162
First Cross-Claimant
ANGEL PLACE BLOODSTOCK PTY LIMITED AND THE PERSONS SPECIFIED IN THE SCHEDULE TO THE FIRST CROSS-CLAIM
First Cross-Respondents
PEGASUS LEASING LIMITED
ACN 008 078 162
Second Cross-Claimant
ANGEL PLACE BLOODSTOCK PTY LIMITED, FRANCIS ROBERT LAROSA, PETER GERRARD FALVEY and JOHN WILLIAM DUKE
Second Cross-Respondents
FRANCIS ROBERT LAROSA and PETER
GERRARD FALVEY
DATE : 24 FEBRUARY 1993 PLACE :
SYDNEY
Thlrd Cross-Claimants
PEGASUS LEASING LIMITED
ACN 008 078 162
Third Cross-Respondent
RECEIVED
2 5 FEB 1993 JOHN WILLIAM DUKE FEDERAL COURT OF Fourth Cross-Claimant AUSTRALIA
PRINCIPAL
REGISTRY
ANGEL PLACE BLOODSTOCK PTY LIMITED, FRANCIS ROBERT LAROSA and PETER GERRARD FALVEY
Fourth Cross-Respondents
JUDGE MAKING ORDERS: FOSTER J
MINUTE OF ORDERS
THE COURT ORDERS THAT:
1. Within twenty one days the first respondent give discovery of the documents described in the attached schedule;
2. Each party pay its own costs of this motion.
Note: Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
SCHEDULE
1. All documents in relation to debts owing to Pegasus Securities Limited and clalms made by Pegasus Securities Limited or the first respondent against John William Duke (the second respondent) including but not limited to:
(a)
Proceedings commenced in the Queensland Supreme Court on 17 October 1988 in respect of a debt in the sum of $116,054.00.
(b) South Australian Supreme Court proceedings no. 1870 of 1990.
(c) South Australian Supreme Court proceedings no. 811 of 1992.
(d) Any debt or loan guaranteed by the second respondent and In particular in relation to Malcolm Dixon or Derlck Dlxon and in particular Account Nos. 510426, 510453, 510464, 510465. 2. All documents in respect of Bloodstock acquired by the first respondent or Pegasus Securities Limited during
1988 from any of the follow~ng companies: (a) Trelawney Breeding Partnership
(b) Troy Corporation Limited
(c) Bloodstock Management Pty. Limited
(d) Bloodstock Management International Pty.
Limited(e) Australian Breedlng Stables Limited
(f) Thoroughbred Management Limited (g) Randwick Bloodstock Pty. Lunited.
All valuations in 1988 by David Coles ln relation to any Bloodstock acquired by the flrst respondent or Pegasus Securities Limited from the following companies:
(a) Trelawney Breeding Partnership
(b) Troy Corporation Limited
(c) Bloodstock Management Pty. Limlted
(d) Bloodstock Management International Pty.
Limited(e) Australian Breeding Stables Limited
(f) Thoroughbred Management Limited
(g) Randwlck Bloodstock Pty. Llmited.
All documents in relation to payments to M r David Coles in relation to valuatlons ln 1988 by Mr Coles of Bloodstock acquired by the first respondent or Pegasus Securities Limited referred to in paragraph 3 above.
5. The employment files for the following:
(a) Mr Greg France
(b) Mr Mark Simmons
(c) Mr John Gore
(d) Kirstie McGregor (Wood)
(e) Mr Howard Waplrngton.
6. Entries in the first respondent's cash book for May, June and July 1988 relatlng to the acqulsltion of mares leased to the applicants.
IN THE FEDERAL COURT OF AUSTRALIA ) j NEW SOUTH WALES DISTRICT REGISTRY
) No. NG 2 5 8 of 1 9 9 1 1 GENERAL DIVISION 1
BETWEEN: ANGEL PLACE BLOODSTOCK PTY LIMITED AND THE PERSONS SPECIFIED IN THE SCHEDULE TO THE AMENDED STATEMENT OF CLAIM
Applicants
AND: PEGASUS LEASING LIMITED
ACN 0 0 8 0 7 8 1 6 2
First Respondent
JOHN WILLIAM DUKE
Second Respondent
PEGASUS LEASING LIMITED
ACN 0 0 8 0 7 8 1 6 2
First Cross-Claimant
ANGEL PLACE BLOODSTOCK PTY LIMITED AND THE PERSONS SPECIFIED IN THE SCHEDULE TO THE FIRST CROSS-CLAIM
Flrst Cross-Respondents
PEGASUS LEASING LIMITED
ACN 0 0 8 0 7 8 1 6 2 Second Cross-Claimant ANGEL PLACE BLOODSTOCK PTY LIMITED, FRANCIS ROBERT LAROSA, PETER GERRARD FALVEY and JOHN WILLIAM DUKE
Second Cross-Respondents
FRANCIS ROBERT LAROSA and PETER
GERRARD FALVEY Third Cross-Claimants
PEGASUS LEASING LIMITED
ACN 0 0 8 0 7 8 1 6 2 Thlrd Cross-Respondent
JOHN WILLIAM DUKE
Fourth Cross-Claimant
ANGEL PLACE BLOODSTOCK PTY LIMITED, FRANCIS ROBERT LAROSA and PETER GERRARD FALVEY
Fourth Cross-Respondents
CORAM: FOSTER J DATE :
24 FEBRUARY 1 9 9 3 PLACE : SYDNEY
REASONS FOR JUDGMENT
HIS HONOUR: Thls motion is brought by the applicants against the first respondent for orders that the first respondent make further discovery of documents or classes of documents said to be relevant to matters in question in these proceedings. The notice of motion seeks the following specific orders:-
"1. The First Respondent give discovery of the documents enumerated in the Schedule attached to the letter from the solicitors for the Applicants to the solicitors for the First Respondent and dated 15 September 1992 within fourteen (14) days.
2. The First Respondent discover all documents in relation to the contract between the First Respondent and ABCOS (Australian Breeders Co- operative Society Ltd).
3. The First Respondent dlscover all documents in relation to the agencies of the first Respondent in the bloodstock industry in New Zealand in the year ending 30 June 1988.
5. The First Respondent pay the Applicants' costs of and ~ncidental to this motion insofar as they relate to the First Respondent.
Other paragraphs in the notice of motion relate to orders sought against the second respondent. Questions arising under those paragraphs have been dealt with by agreement between the parties. However, considerations relating to the second respondent are, to an extent, involved in the determination of questions raised in the orders sought against the first respondent. I shall deal with these matters later in these reasons
The orders sought have been more precisely defined in a schedule whlch was handed to the Court in argument. Answers in respect of certaln items ln the schedule were provided and accepted in argument, wrth the result that no determination need be made In respect of those items. I shall refer to them later.
It will be necessary to refer to the pleadings in the proceedings, but it will be more convenient to do so in relatlon to the individual orders sought in the schedule. For present purposes it is sufficient to indicate that the first applicant, Angel Place Bloodstock Pty Limited, is the manager of a partnership syndicate comprlslng the other appllcants which was interested in the buslness of thoroughbred horse breeding and the leasing for that purpose of thoroughbred mares. The first respondent is a flnance company, carrying on, as part of its business, the leaslng of such mares. It,
business arrangements wlth the appllcants, entered into in fact, leased mares to the applicants and, as part of the written agreements referred to in the pleadings as Thoroughbred Bloodstock Leases, Loan Agreements and Mortgages of Partnership Shares, and, ln respect of certain of the applrcants, obtarned Guarantees and Indemnrties. It was part of the general arrangements that the second respondent, John William Duke ("Duke") was appointed by the first applicant to advise it and the syndicate members "in connection with and to
select, subject to approval by the first respondent, suitable thoroughbred mares and their progeny to be leased by the syndicate from the first respondent". The mares when so selected were to be acquired by the first respondent and then leased to the applicants. It appears that Duke negotiated the purchase prlce, subject to the approval of the first respondent. The first respondent, before giving approval, obtained independent valuations of the selected mares. These valuations were made, on its behalf, by a Mr Coles. For the most part, the mares the subject of these arrangements, were purchased from breeders in New Zealand to which reference will be made hereafter. The negotiations with these breeders were conducted by Duke.
An affidavit of discovery has been filed by the flrst respondent. As a result of documents discovered and also as a result of ~ndependent inquiries in New Zealand, it appears that the applicants' legal advisers formed the view that further discoverable documents existed or should exist.
Correspondence between the parties was entered into in relation to this contention. It is annexed to the affidavit of Robert John McCourt. It is unnecessary to set it out as the arguments on one side or the other contained in it have been put to the Court by way of submissions.
The most convenient course is to deal with the
matters raised in the order in which they are referred to in
the schedule, whlch is entitled "Schedule of Documents Not
Discovered by the First Respondent".
The first item related to credit policy, guidelines, manuals and the like. I was advised by counsel that, following discussions, this matter was no longer a problem. I shall, therefore, not refer to it further.
The second item reads as follows:-
"2. All documents in relation to debts owing to Pegasus Securities Llmlted and claims made by Pegasus Securities Limlted or the First Respondent against John Willlam Duke (the second respondent) lncludlng but not limited to:
(a) Proceedings commenced in the Queensland Supreme Court on 17 October 1988 in respect of a debt in the sum of $116,054.00. (b) South Australian Supreme Court proceedings no. 1870 of 1990 (c) South Australian Supreme Court proceedings no. 811 of 1992. (d) Any debt or loan guaranteed by the second respondent and in particular in relation to Malcolm Dixon or Derick Dixon and in
particular Account Nos. 510426, 510453, 510464, 510465."
Counsel for the first respondent, in the course of the hearing, stated that his client had no documents which could fall within sub-paragraphs (a), (c) and (d). He said that discovery could be given in relation to the proceedings referred to in sub-paragraph (b) "of the few pieces of paper which it has which relate to the fact of those proceedings coming to its knowledge and then having been discont~nued".
This was said in the context that the proceedings referred to In sub-paragraph (b) had been commenced in the name of the first respondent but that thls had been a mistake. The proceedings should have been commenced in the name of Pegasus Secur~ties Limited. When the mistake was discovered it had been corrected. The few documents in the possession of the first respondent related to this discovery and correction.
As to the proceedings in sub-paragraphs (a), (c) and
(d), the first respondent had never been a party to them and
had no documents. In any event, it was submitted that t h ~ s claim for discovery d ~ d no relate to any matter in issue in the present case.
The answers given during the hear~ng are not, in themselves, sufficient to d~spose of the claims made in this paragraph, if those claims are sustainable. The basis of the claim, as explained by counsel for the applicants, is as follows.
As set out in paragraphs 33 and following of the further amended statement of claim the e~ghth and ninth appl~cants entered into a guarantee and indemnity with the first respondent in respect of the financial accommodation provided by the first respondent to the breeding syndicate. Duke was a CO-guarantor of these obligations. Duke also had financial obligations to Pegasus Securities Limited wh~ch were
said to arise from "amongst other th~ngs, a guarantee of the
obligations of Malcolm T Dlxon". Duke was ln default in respect of these obligations and Pegasus Securities Limited was contemplating the brlnging of legal proceedings against him, which proceedings would involve a substantial sum of money. When obtaining the guarantee and indemnity from the eighth and ninth applicants, the first respondent did not disclose to them the problems that it was hav~ng with Duke who was to be a CO-guarantor. As I understand it, the short answer given by the first respondent is that it was in no way a party to the dealings between Pegasus Securities Limited and Duke, nor was it in any way lnvolved in litigation resulting from those dealings. There was, accordingly, no issue between the applicants and the first respondent to which the documents sought to be discovered could relate. It further said that, despite the allegation in the further amended statement of clam, it and Pegasus Securities Lmited were not associated companies.
In answer to these assertions, it was said on behalf of the applicants that whether or not the two companies were
strictly associated, there appeared, on the basis of material
already discovered, to be a significant link between them insofar as there appeared to be some commonalty of employees and a lack of discrimination in the use of the letterhead of each company in relation to transactions with the applicants and others. It was submitted that, at this stage there appeared to be sufficient grounds for conslderlng that employees of the first respondent deallng wlth the applicants
directly or indirectly would have been aware of the potential unsuitability of Duke as a CO-guarantor with the applicants of obligations to the first respondent. It was, therefore, submitted that there was a sufficient indication of relevance to pleaded issues to require discovery as sought in this paragraph.
With some hesitation, I have come to the view that I should uphold this claim. I am satisfied that the first respondent should be ordered to give discovery in the usual way of the documents sought in this paragraph and its sub- paragraphs.
Paragraph 3 of the schedule seeks discovery of the
following documents:-
"3. All documents in respect of Bloodstock acquired by the First Respondent or Pegasus Securities Limited during 1988 from any of the following companies:
(a) Trelawney Breeding Partnership
(b) Troy Corporation Limited (c) Bloodstock Management Pty. Llmited
(d) Bloodstock Management International Pty.
Limited(e) Australian Breeding Stables Limited
(f) Thoroughbred Management Limited
(g) Randwick Bloodstock Pty. Limited"
It is conceded that some, if not all, of the
organisations referred to in the sub-paragraphs were vendors
of bloodstock to the first respondent for the purpose of their
being leased to the applicants. For the most part they were
vendor organisations in New Zealand. It is put on behalf of
the first respondent that all documentation relating to the
sale of the bloodstock in question in these proceedings by the
relevant vendor organisations to the first respondent has been
discovered. It is submitted that any further documents would
not be discoverable as they would not have any relevance to
any matter in issue presently arising on the pleadings.
Counsel for the applicants disputes this proposition. He puts
the basis of alleged relevance as follows.
The bloodstock which was leased by the applicants from the first respondent and which was purchased by the first respondent from the vendor organisations was allegedly valued by the first respondent in the sum of $1.4 million. It was purchased at a price of $1.1 million. It was poor stock and was worth considerably less than $1.1 million. This fact has led to loss on the part of the applicants in respect of which
they claim in these proceedings.
The claim made by the applicants against the first respondent in respect of these losses is, in the further amended statement of claim, based upon alleged breaches of s 52 of the Trade Practices Act (Cth) 1974 and in negligence for breaches of the common law duty of care. It is convenient to set out in full those portions of the further amended statement of claim which relate to these matters. They are as
follows : -
"9. On or about 18 May 1988, the first respondent represented to the first applicant and the applicants referred to in Parts 1 and 2 of Schedule 1, in trade or commerce, that:
(a) The first respondent's valuer had valued the bloodstock proposed to be leased by the first respondent to the No. 1 Syndicate at $1.4 million; and (b) The first respondent:
(i) Held the opinion that the current market value of the bloodstock was $1.4 million; (ii) Had reasonable grounds for holding such opinion;
(iii) Was satisfied with and had approved the proposed finance package in respect of the Thoroughbred Bloodstock Lease and the Loan Agreement on the basis of the said valuation of $1.4 million;
(iv) Held the opinion that the second respondent had bought well in relation to the bloodstock proposed to be leased to the No. 1 Syndicate; and
(v) Had reasonable grounds for holding such opinlon.
PARTICULARS
The representation pleaded in (a) above was express and was made by Mr John Gore on behalf of the first respondent to Larosa on behalf of the said applicants in a telephone conversation on or about 18 May 1988.
The representations pleaded in paragraph (b)(i) to (iii) above were implied from the first respondent's representation pleaded in paragraph (a) above and its conduct in forwarding the transaction documents to the said applicant's for execution, notwithstanding that it had not received an independent valuation of the bloodstock to be provided by the said applicants.
The representation pleaded in paragraph (b)(iv) and (v) above were implied from the representation by John Gore on behalf of the first respondent to Larosa on behalf of the applicants during the said telephone conversation that the second respondent had done well in the purchase of the bloodstock.
10. Acting on the faith of the representations and induced thereby the first applicant as Manager of the No. 1 Syndicate entered into the Thoroughbred Bloodstock Lease dated 23 May
1988, the applicants referred to in Part 1 of
Schedule 1 each entered into a Loan Agreement, a Thoroughbred Bloodstock Lease, and a Mortgage of Partnership Share with the first respondent each dated 23 May 1988 and the applicants referred to in Part 2 of Schedule 1 each entered into a Guarantee and Indemnity with the first respondent dated 23 May 1988.
11. In fact, the representations referred to in paragraph 9 above were untrue and the making of them constituted misleading or deceptive conduct in contravention of Sectlon 52 of the Trade Practices Act, 1974 (the "Act").
PARTICULARS
At all material times, in or about May 1988, the current market value of the bloodstock the subject of the Thoroughbred Bloodstock Lease was less than both the first respondent's valuation of $1.4 million and thelr purchase prlce of $1.1 million.
The flrst respondent did not either hold the opinions or have reasonable grounds for holding the
The first respondent's practlce in relation to
opinions pleaded Ln paragraph 9(b)(i), (ii), -(iv) and (v) above.
approval of lease flnance agreements was that approval was generally granted provided the value of the bloodstock was ln the range of their purchase prlce less the first lease payment (such payment belng made yearly in advance).
12.
By reason of the sald misleading or deceptive conduct the sald applicants have suffered loss and damage.
PARTICULARS
The loss suffered by the said applicants in entering into the obligations contained in the Thoroughbred
Bloodstock Lease, Loan Agreement, Mortgage of Partnership Share and Guarantee and Indemnity insofar as the value of the bloodstock was less than their purchase price of $1.1 million.
NEGLIGENCE CLAIM
13. Prior to 23 May 1988, the first respondent at all material times knew that the first applicant and the applicants referred to in Parts 1 and 2 of Schedule 1 were each proposing to enter into certain transactions with the first respondent in respect of the leasing of bloodstock and for this purpose the first respondent obtained its own valuation of the bloodstock and required the said applicants to provide a current valuation of the bloodstock to the first respondent.
14. On or about 18 May 1988, the first respondent represented to the first applicant and the applicants referred to in Part 1 and 2 of Schedule 1 that;
(a) It's valuer had valued the bloodstock at $1.4 million.
(b) The second respondent had purchased well on behalf of the said applicants in relation to bloodstock proposed to be leased by the first respondent to the said applicants. (c) It was satisfied wlth and had approved the proposed finance package in respect of the - Thoroughbred Lease agreement and the Loan
- Agreement on the basis of the said valuation of $1.4 million. (d) The first respondent's valuation was appropriate, sufficient and suitable material upon which to base a decision to enter Into the proposed lease and other transaction documents. PARTICULARS
The representations pleaded in (a) and (b) above were express and made in a telephone conversation by
Mr John Gore on behalf of the first respondent to
Larosa on behalf of the applicants.
The representations pleaded in (c) and (d) above were implied from the representation pleaded in (a) and (b) above and the conduct of the f~rst applicant
in forwarding the transaction documents to the said applicants for execution, notwithstanding that it had not received an independent valuation of the bloodstock to be provided by the said applicants.
15. At the time of making the representations the first respondent intended and well knew, or ought to have known that the said applicants would rely thereon and would be induced thereby to enter into, amongst other things, the Thoroughbred Bloodstock Lease, the Loan Agreement and the other transaction documents relating thereto.
16. In the circumstances the first respondent owed the said applicants a duty of care in making the representations to the said applicants.
17. Acting on the falth of the representations and induced thereby, the first applicant entered into a Thoroughbred Bloodstock Lease dated 2 3 May 1988, the applicants referred to in Part 1 of Schedule 1 each entered into a Loan Agreement, a Thoroughbred Bloodstock Lease and a Mortgage of Partnership Share with the first respondent each dated 23 May 1988 and the applicants referred to in Part 2 of Schedule 1 each entered into a Guarantee and Indemnity with the first respondent dated 2 3 May 1988.
18. In breach of its duty the first respondent was guilty of negligence in making the said representations.
PARTICULARS
In expressing the opinlon as to the value of the
bloodstock as referred to ln paragraph 14 above, the first respondent, amongst other things:
(a)
Failed to take Into account or glve proper regard to the origln of certain of the bloodstock.
(b)
Failed to take into account or give proper regard to the age, quallty and history of certain of the bloodstock.
(c)
Failed to lnform the applicants of the first respondent's practlce ln relation to approval of lease finance agreements, namely that approval was generally granted provlded the value of the bloodstock was in the range of the purchase price less the first lease payment (such payment being made yearly ln advance).
(d)
Failed to lnform the applicants that it did not hold or have reasonable grounds for holding the opinion as to value, pleaded in paragraph 14 above.
(e)
Failed to advise or warn the applicants that the first respondent's valuation was not of itself appropriate, sultable or sufficient material upon which to base a declsion to enter into, amongst other things, the Thoroughbred Bloodstock Lease.
(f)
Failed to advise or warn the applicant's that the first respondent's valuation was not based on an inspection of the bloodstock.
19. In truth and in fact the said representations were false and untrue and inaccurate and misleading.
PARTICULARS
(a) At all material times in or about May 1988 the current market value of the bloodstock was less than the first respondent's valuation of $1.4 m~lllon and their
purchase price of $1.1 million.
(b) The first respondent dld not either hold or have reasonable grounds for holding the opinion as to value pleaded in paragraph 14 above. (c) The first respondent's practice in
relatlon to approval of lease financing agreements was that approval was generally granted provided the value of the bloodstock was in the range of their purchase prlce less the first lease payment (such payment being made yearly in
advance) . (d) The first respondent's valuation was not of itself appropriate, suitable or sufficient material upon which to base a decision to enter into the Thoroughbred Lease Agreement and the other transaction
documents . 20. By reason of the matters pleaded above the said applicants have suffered loss and damage.
PARTICULARS
See particulars to paragraph 12 above."
It is alleged by the applicants that the bloodstock purchased in New Zealand had been placed on the market by the vendor organisations in circumstances where those organisations were in or about to be in receivership or liquidation and that the stock was known or at least suspected to be of poor quality and that the prices being paid were, in the circumstances, far too high. It is also put on behalf of the applicants that the first respondent had an extensive business in the leasing of equlne breeding stock and presumably would have had dealings with these vendors on occasions, probably numerous, other than those in which the purchase was made of the bloodstock in question in this case. It is submitted that the knowledge of relevant officers of the first respondent as to the financial position of the vendors and of the quality of their products would be a material matter going to the determination of the issues raised in
documentation in the possession, present or past, of the first these pleadings. Consequently, it is submitted that all respondent which could indicate the course of its dealing with these vendor organisations in 1988 could throw light on its knowledge of these matters. In these circumstances, it was put that discovery should not be limited merely to documents relating to the actual transactions relatlng to the purchase of the horses in question in these proceedings.
The first question, therefore, is whether there is a sufficient indication of potential relevance to warrant the making of the order sought.
Both the claim under the Trade Practices Act and the claim in negligence rely upon alleged oral representations made by a Mr Gore on behalf of the first respondent to one of the applicants. The representations were to the effect that the first respondent's valuer had valued the bloodstock at
$1.4 million and that Duke had done well in purchasing at the price of $1.1 million.
The first representation is one of fact. The second representation is one of opinion. It is the latter wh~ch
is
important for present purposes. If at the time when Mr Gore expressed this opinion,
he did not have a reasonable bas~s for holding it or did not
in fact hold rt then, in either case, that would be a relevant
matter in the establishment of the claim under s 52 of the Trade Practices Act or the claim in negligence. In these circumstances, documents in the possession, present or past, of the first respondent wh~ch could tend to lndicate the state of knowledge of W Gore or any other relevant officer of the financial situation of the New Zealand vendors in 1988 and of the prices being obtalned for stock of which they were disposing through the market and of the market's appreciation of the worth of the stock could be of significance. The
seeklng of the documents, having regard to the pleadings, would not, in my opinion, be an example of "fishing". It would be an example of the legitimate following of a chain or trail of inquiry.
I consider, therefore, that the applicants are entitled to discovery in the ordinary way of any documents that fall within the description set out in paragraph 3 of the schedule.
As to paragraph 4 of the schedule, it sufficiently appeared in argument that the first respondent had none of the registration papers nor any coples of them. They had passed wlth the bloodstock after its repossession and resale. There IS, accordingly, no basls for the maklng of the orders sought.
Paragraph 5 of the schedule was not pressed.
Paragraph 6 and 7 may be considered together. They
read as follows:-
"6. All valuations in 1988 by Davld Coles in relatlon to any Bloodstock acquired by Pegasus Securities Llmited from the following companies:
(a) Trelawney Breeding Partnership
(b) Troy Corporation Limlted(c) Bloodstock Management Pty. Limlted
(d) Bloodstock Management Internat~onal Pty.
Llmited(e) Australian Breeding Stables Limlted
(f) Thoroughbred Management Limited
(g) Randwick Bloodstock Pty. Limited7. All documents rn relation to payments to Mr David Coles in relation to valuations in 1988 by Mr Coles of Bloodstock acquired by Pegasus referred to in paragraph 6 above."
I am prepared to assume that the words "the first respondent or" have been inadvertently omitted before the words "Pegasus Securities Limited" in paragraph 6 and that what is sought is documents answering this description in the possession of the first respondent, being documents supplied by Mr Coles to it or to Pegasus Securities Limlted which it had in its possession. Similarly, I am prepared to assume that the word "Pegasus" in paragraph 7 should be deleted and substituted with the words "the flrst respondent or Pegasus Securities Limited". Objection is made to this claim, with some force, on the basis that the documents lack relevance to any matter arising from the pleadings and that the applicants are merely fishing rather than seeklng to follow an indicated
trail. As to relevance, it must be noted that the pleadings do not assert that the valuer, Mr Coles, did not provide to the first respondent the valuation of $1.4 mllllon. However, it must be noted that this valuation exceeded the actual purchase price of $1.1 million by a not inconsiderable amount and that it is alleged that, in the context of passing on the information as to Mr Coles' valuation to the applicants, Mr
Gore expressed the oplnion that, ln effect, the purchase price was a good one and that Duke had done well in achieving it.
It must also be taken into account that the actual value of the stock, in accordance with the applicants' assertion, was considerably less than the purchase price. The question would, therefore, seem to arise both in relation to the count under the Trade Practices Act and also in negligence whether the oplnion expressed by Mr Gore was one that he could reasonably have held. Arguably he could reasonably have held it if he relied upon the opinion of Mr Coles as to the value of the stock. There is therefore a factual issue in the case as to whether he could reasonably have relied upon that opinion. There is a factual allegation to the effect that Mr Coles valued the stock without seeing it. There is, therefore, a suggestion made in the pleadings that the valuations glven by Mr Coles were merely perfunctory and consequently not of significant rellabllity. I consider that the pleadings raise suffrclently the question as to whether the first respondent acted reasonably or unreasonably in accepting and passing on Mr Coles' opinron as to value of the subject bloodstock to the applicants, to warrant inquiry as to
the first respondent's appreciation of the reliability of Mr Coles' valuations. The pattern of those valuations in relation to bloodstock purchased from the vendor organisations could cast light upon the werght that could reasonably be given to them. The standard of fee paid for the opinions could also cast some light upon t h ~ s matter. I thlnk the inqulry goes beyond mere fishlng. I therefore propose to order discovery of the documents as sought in these paragraphs with the amendments I have lnd~cated.
As to paragraph 8 in the schedule, I am of the
opinion that it is too wide and is largely covered by earlier
paragraphs. I decline to make the order therein sought. Paragraph 9 was not pressed. Paragraph 10 has been resolved between the parties and no order is sought. Paragraph 11 is in the following terms:-
"11. The employment files for the following:
(a) Mr Greg France
(b) Mr Mark Slmrnons
(c) Mr John Gore
(d) Kirstle McGregor (Wood)
(e) Mr Howard Waplington"
The employees in question are, I am prepared to accept, on the basis of what has been put to me, persons whose names appear in relevant correspondence and who would appear to have some connection both with the first respondent and the
persons whose knowledge of Duke's financ~al situation, gained company Pegasus Securities Limited. Apparently, they are through his dealings with Pegasus Securities Limited, could have been brought to bear in relation to his dealings with the first respondent. That knowledge could bear upon the question of whether the first respondent should have made some disclosure as to the elghth and ninth applicants in relatlon to their becoming CO-guarantors w ~ t h Duke of obligations to the first respondent. Although I have had considerable hesitation about this matter, I have come to the conclusion
L l .
that once the relevance of their holding positions in both companies becomes apparent, then lt is reasonable that their employment files should be discovered on the basis that they might reasonably lead to a relevant train of inquiry. I therefore propose to order discovery in accordance with paragraph 11.
During the hearing some alteration was made to paragraph 12 in the schedule so that it now reads:-
"12. Entries ln Pegasus Securities Limited and Pegasus Leasing Limited cash books for May, June and July 1 9 8 8 relating to the acquisition of mares leased to the applicants."
I have been advised by counsel that Pegasus Securities Limited is now in liquidation and that, consequently, its cash book is not, if it ever was, in the possession of the first respondent. I decline to make any order in relation to the cash book of that company. As to the entries in the first respondent's cash book, I am satisfied
that, although the documents of original entry have already been discovered, it could be relevant to see how the transactions had been dealt with in the cash book. This could go to the question of the first respondent's knowledge of the position of the vendor organisations. There is no difficulty in the entries being made ava~lable. I therefore order discovery of all entrles in the cash book of the first respondent for May, June and July 1 9 8 8 relating to the purchase of the bloodstock leased to the applicants.
Paragraph 13 of the schedule was not pressed.
Paragraph 14 relates to insurance documents. In the circumstances, as I have been informed, the current insurance certificates have been discovered and I decline to make the order sought. A very wrde range of documents is sought and it has not been demonstrated to my satisfaction that discovery is necessary.
As to paragraph 15, it is in very wide terms. An attempt was made to limit its operation in argument. However, I am not prepared to make an order for discovery in its present terms and I am not able, on the basis of what has been put to me, to make any other order.
The material sought in paragraph 16 has already been discovered and I am told by counsel that no further material of this category exists. I therefore decline to make the order sought.
As to paragraph 17 of the schedule I am not
satisfied that the material sought is relevant to any issue
raised in the proceedings. I decline to make the order.
As to paragraph 18 it rs not established to my satisfaction that the documents sought go to any issue reasonably raised in the pleadings. I decline to make the order.
As to paragraph 19, there is no dispute that the
documents sought wrll be drscovered once they have been
assembled. On the basis that discovery will be given, I make
no order.
As to paragraph 20, I have not been persuaded that the documents sought therein are relevant to any issue between the applicants and the first respondent. I decline to make the order.
As to paragraph 21 of the schedule, I am told that the documents sought relate to the same matter considered in relatlon to paragraph 2. I am not persuaded that any wider order for discovery should be made ln relation to this matter than has already been made under paragraph 2. I decline to make the order sought.
I have not heard any specific argument as to costs
in thrs matter. However, I have come to the conclusion that
having regard to the orders whrch have been made for and agalnst each party that the appropriate order that I should make is that each party should pay rts own costs of this
motion. I so order.
I certify that thls and the preceding twenty two (22) pages are a true copy of the reasons for judgment herem of the Honourable 1Nr Justlce N. L. Foster.
I '
Associate: K, ~ 7 7 d
Date : 24 FEBRUARY 1993 A P P E A R A N C E S
COUNSEL FOR THE APPLICANTS: MR F. GLEESON INSTRUCTED BY: GARLAND HAWTHORN BRAHE
COUNSEL FOR THE FIRST RESPONDENT: MR M.A. PEMBROKE
INSTRUCTED BY: MALLESON STEPHEN JAQUES
COUNSEL FOR THE SECOND RESPONDENT: MR P.J. GARDE (Solicitor)
INSTRUCTED BY: GORDON & JOHNSTONE
DATE OF HEARING: 23 OCTOBER 1992 DATE OF JUDGMENT: 24 FEBRUARY 1993
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