ANZ Banking Group v Arapali

[2014] NSWSC 881

Supreme Court

New South Wales

Medium Neutral Citation:	ANZ Banking Group v Arapali [2014] NSWSC 881
Hearing dates:	27/06/2014
Decision date:	27 June 2014
Jurisdiction:	Equity Division - Commercial List
Before:	McDougall J
Decision:	Order discovery of limited categories of documents. Parties to bring in draft orders.
Catchwords:	PROCEDURE - discovery and interrogatories - discovery and inspection of documents - whether to order discovery of documents which are not relevant to the issues as they appear from the pleadings - whether to order discovery of documents where property the subject of the order was not disclosed in the particulars COSTS - general rule that costs follow the event - where requests made by motion were overly ambitious - where argument justified - whether to order costs in favour of party who had substantial success on the application
Legislation Cited:	Civil Procedure Act 2005 (NSW) Contracts Review Act 1980 (NSW) Corporations Act 2001 (Cth) Uniform Civil Procedure Rules 2005 (NSW)
Category:	Procedural and other rulings
Parties:	Australia and New Zealand Banking Group Limited (Plaintiff) David Arapali (Defendant)
Representation:	Counsel: J Hynes (Plaintiff) N Kirby (Defendant) Solicitors: Minter Ellison (Plaintiff) Clamenz Evans Ellis (Defendant)
File Number(s):	2013/328799

Judgment (ex tempore - revised 27 june 2014)

1. HIS HONOUR: The plaintiff (ANZ) sues the defendant (Mr Arapali) on guarantees said to have been given by him of companies under his control. The amount claimed is substantial.

1. Mr Arapali defends the claims on various grounds, including that he is entitled to relief under the Contracts Review Act 1980 (NSW).

1. ANZ as mortgagee in possession sold two properties owned by a company or companies controlled by Mr Arapali. Receivers appointed by ANZ sold another property, or group of properties, owned by a company or companies under the control of Mr Arapali.

1. Mr Arapali wishes to say that the sales were at an undervalue and in breach of various general law and statutory duties owed (it would seem that the statutory duties claim, under s 420A of the Corporations Act 2001 (Cth), could only relate to the sale by the receivers, but it is not necessary to express a view on that).

1. I am concerned today with a notice of motion filed by Mr Arapali in which he seeks discovery of documents in various categories, leave to issue a subpoena to the receivers and, in the alternative to that latter order, discovery under UCPR Part 5.3. This last, alternative, claim was not pressed.

1. The first category of documents concerns documents relating to the listing, marketing, negotiations for and sale of four identified properties or groups of properties. The first two properties are known as 43 Burelli Street and 34 Stewart Street, Wollongong. They were properties which were sold by the bank as mortgagee in possession, apparently as it were in one line.

1. The third property (or group of properties) is described as 93-97 Burelli Street. It was sold by the receivers. The fourth property is described as 144 Shellharbour Road, Warilla.

1. The opposition to discovery in respect of this category of documents has three bases. One is that two of the properties, 34 Stewart Street and 144 Shellharbour Road, were not referred to in further and better particulars given by Mr Arapali of his claim of breach of duty. That is undoubtedly correct. However, given that 34 Stewart Street was sold in conjunction with 43 Burelli Street (the sale of the latter property having been particularised), it seems to me that this requires no more than an amendment of the further and better particulars, or a supplementation of those already given. On that basis, cutting through the formalities and obeying what I perceive to be the fundamental requirement, namely the command of ss 56 and following of the Civil Procedure Act, 2005 (NSW), I do not regard that objection as of itself being sufficient to deflect the claim for discovery.

1. The next objection is that although the discovery is sought from ANZ, the property 93-97 Burelli Street was not sold by ANZ but by the receivers. That is undoubtedly a substantial objection.

1. The third objection (which was the first stated) is that the complaint is one of sale at an undervalue, and hence documents in the classes that I have described cannot be relevant. However, although the further and better particulars are drafted with a degree of width which is not entirely appropriate, they seem to make it clear that the underlying complaint is one of failure to obtain the market price or the best price reasonably obtainable. It seems to me that documents of the kind of which discovery is sought could go to the claim of breach of duty thus understood.

1. In the result, I would order ANZ to give discovery in category A, limited to the properties 43 Burelli Street and 34 Stewart Street.

1. The next category of documents is described as all documents for a described period relating to and including a valuation being prepared by Colliers International for Mr Arapali. Mr Arapali says, in an affidavit affirmed in support of the notice of motion, that he had instructed Colliers to prepare such a valuation, that he was told by Colliers that it was nearly complete, and that he was then told, to his surprise, that a director of the company from Singapore had instructed the person preparing the valuation not to proceed to finalise it and give it to Mr Arapali. That is no doubt all very strange. But it is entirely irrelevant to the issues as they appear from the "pleadings" and particulars. Mr Kirby of counsel, who appeared for Mr Arapali, submitted that there were circumstances of suspicion arising from that. This may well be so. But the issues in the case do not, as I understand it, include the suspicious suppression of documents requested to be prepared.

1. I see no reason for ordering discovery of those documents.

1. The next category of documents seeks "sufficient documents to demonstrate" how it was that Mr Arapali's companies were in default, and how and when this occurred by reference to a letter of 12 March 2012.

1. The significance of this is that, as it appears from the pleadings, ANZ's case is that the relevant facilities were granted in August 2008. Thereafter, ANZ says, the debtor companies fell into default, as a result of which those companies, ANZ and Mr Arapali entered into an "Asset Management Deed". That deed, among other things, contained an acknowledgment of default, an agreement to repay the facilities by a specified date, and an acknowledgement that if any obligation under the deed were not met, that would be default under the facilities, and the full amount outstanding would become due and payable.

1. The execution, or making, of the deed is admitted. The effect of its terms is not. That is not something with which I am presently concerned.

1. The case for ANZ is that the companies and Mr Arapali made default under the deed and that, as a result, it was entitled to take the steps that it did take and is entitled to be paid the balance owing after the sale of the various security properties.

1. Mr Arapali's pleadings do not attack the deed or seek any relief in respect of it.

1. The submission that was put was that Mr Arapali was entitled to understand the nature of the underlying default. He may well wish now to know what that was. But since there is no pleaded issue going to that underlying or antecedent default, and since he is estopped by the deed from disputing whatever it acknowledges as to that default, I see no justification for requiring discovery of documents in this category.

1. The final category seeks discovery of documents for a defined period, which are not already in evidence, being letters of offer, variations, loan or security documents, agreements and notices as to interest rates, amendments and extension of such documents and correspondence relating to them.

1. That was said to be required for purposes such as to "to complete the otherwise incomplete factual picture which the defendant has". Quite why that is necessary, in relation to any pleaded issue, remains completely obscure.

1. I see no reason for ordering discovery of documents in that category.

1. An application was also made, although not by the notice of motion, for disclosure of documents said to be necessary for the expert retained by Mr Arapali to complete his report. The evidence of that necessity comes from an affidavit affirmed by Mr Arapali's solicitor. The documents are defined in para 11.

1. The documents are said to be "tenancy schedules, floor plans, lease agreements, rental figures and outgoings figures".

1. Some of those documents may be held by ANZ (because it sold two of the properties as mortgagee in possession). Others may be held by the receivers (because they sold 93-97 Burelli Street).

1. To my mind, the request is justified and compliance with it is unlikely to be burdensome. Mr Hynes of counsel accepted that, if I were to come to that conclusion, it would be appropriate to include those documents among the documents to be discovered by his client in respect of the two properties that it sold. He accepted, further, that it would be appropriate to give Mr Arapali leave to issue a subpoena directed to the receivers requiring production of those documents in respect of the property that they sold.

1. As I have said, I think that the request is justified.

1. The way in which the various requests were framed was far wider, not just as to categories of documents but also as to the ranges of properties, than the very limited extent to which I have indicated discovery or disclosure should be given. Rather than attempt to formulate the conclusions in orders that I might make which would be susceptible of errors in particularity, the better course is to direct the parties, having heard what I have said, to bring in short minutes of order to give effect to the limited success that Mr Arapali has had.

1. I will hear counsel on when that can be done and what should happen in relation to costs.

[Counsel addressed.]

1. ANZ seeks its costs of the notice of motion. It does so on the basis that the success that Mr Arapali had enjoyed has been very limited, and that (in respect of changes and additions introduced on the run), it took the appropriate course of agreeing.

1. To my mind, that position is correct. The starting point is that Mr Arapali failed entirely in respect of three of the four categories of documents that he sought.

1. The next point is that in respect of the first category, Mr Arapali succeeded only in part; and as to that partial success, he succeeded only because of the practical line that I took based on s 56 of the Civil Procedure Act.

1. In relation to the subpoena, Mr Arapali succeeded only in respect of one of the five properties listed. It should also be noted that the subpoena sought all documents relating to the company DAA Holdings Pty Limited. There was absolutely no justification given, or to my mind conceivable, for that aspect of the request.

1. Although it is very difficult to predict what might have happened had the application been limited appropriately, it seems to me that the overarchingly ambitious nature of the requests (in relation both to discovery and to subpoenas) and the unrealistic failure to limit the requests, coupled with the apparent failure to pay any real regard to the particularised case, means that, as Mr Hynes has submitted, ANZ has indeed been the party that has had substantial success on the application.

1. It may be - I do not know - that if a less ambitious and properly justifiable request had been made, ANZ would have opposed that also. In that hypothetical circumstance, the likely success, following from what I have said, would have been reflected in an order for costs in favour of the moving party. But in circumstances where the argument was really justified because the request was overly ambitious, and where the overly ambitious aspects of it took up 99 per cent of the time required, I think that the appropriate order is as Mr Hynes submitted it should be.

1. I direct counsel to submit to my Associate by 5 pm today an agreed minute of the orders sought to give effect to my reasons as to discovery, disclosure and subpoenas. Those orders should include a timetable for the defendant to furnish further and better particulars as discussed in the course of argument.

1. I order the defendant to pay the plaintiff's costs of the defendant's notice of motion filed 20 June 2014. I direct that the exhibits on the application be handed out.

**********

Decision last updated: 03 July 2014