Armstrong Strategic Management and Marketing v Expense Reduction Analysis Group
[2013] NSWSC 1702
•15 November 2013
Supreme Court
New South Wales
Medium Neutral Citation: Armstrong Strategic Management and Marketing v Expense Reduction Analysis Group [2013] NSWSC 1702 Hearing dates: 15/11/2013 Decision date: 15 November 2013 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Order for further informal discovery; directions for evidence.
Catchwords: PRACTICE & PROCEDURE - Practice Note SC Eq 11 - discovery - where discovery ordered prior to commencement of Practice Note SC Eq 11 - where numerous additional potentially relevant documents located after commencement of Practice Note - whether party obliged to provide discoverable documents Legislation Cited: Civil Procedure Act 2005 (NSW) Category: Procedural and other rulings Parties: Armstrong Strategic Management and Marketing Pty Ltd (First plaintiff)
Armstrong Consulting Pty Ltd (Second plaintiff)
Ken Armstrong (Third plaintiff)
Expense Reduction Analysts Group Pty Ltd (First defendant)
ERA Insurance Services Pty Ltd (Second defendant)
Expense Reduction Analysts Australasia Pty Ltd (Third defendant)
Stuart Roy Michael (Fourth defendant)
Ronald Clucas (Fifth defendant)
Charles Frederick Marfleet (Sixth defendant)
Eragics Limited (Seventh defendant)
Expenses Reduction Analysts International Ltd (Eighth defendant)
Keith John Chapman (Ninth defendant)
Anthony Frederick Dormer (Tenth defendant)Representation: Counsel:
CN Bova (Plaintiffs)
EAJ Hyde (Fourth, fifth, sixth, ninth and tenth defendants)
JK Dormer (Solicitor)(First and third defendants)
Solicitors:
Marque Lawyers (Plaintiffs)
Norton Rose Australia (Fourth, fifth, sixth, ninth and tenth defendants)
Kresdon Dormers (First and third defendants)
File Number(s): 2011/76919
Judgment (ex tempore - revised 15 NOvember 2013)
HIS HONOUR: The procedural history of this matter could be taken to suggest that the parties have paid less attention to the provisions of s 56 of the Civil Procedure Act 2005 (NSW) than they have to the process of seeking to grind each other into the dust. Whether or not that is a correct summary of what has happened would depend upon a further investigation of the procedural history, which is a course that is not necessary to take for present purposes. Nonetheless, although I cannot express a concluded view on that point, I have a very uncomfortable impression that I am not far from the truth.
Be all that as it may, the matter is before me today because the parties, it might be thought unsurprisingly, are in dispute as to how the matter is to be moved forward towards a hearing.
Relevantly, an order for, in effect, general discovery was made on 22 July 2011. Rather than being for general discovery in the old sense, it was for discovery of documents limited to documents relevant to a fact in issue. The parties gave, or purported to give, discovery accordingly and that was completed some time in October 2011, by a process that included the exchange of verified lists of documents.
Unfortunately, the process of preparation has been derailed because a subsidiary but time-consuming and no doubt expensive dispute broke out over what the "individual defendants" say was the inadvertent discovery by them of privileged documents. For reasons that I find hard to follow, that apparently simple issue required the consideration of a Judge of this division, the Court of Appeal of this State and the High Court of Australia. The parties are now turning their attention once more to how the matter might be moved forward to hearing.
Having regard to the form of the order that was made - I interpolate, made well before the commencement of Practice Note SC Eq 11 on 26 March 2012 - the individual defendants are under a continuing obligation to discover documents. That obligation has been enlivened because, in the course of meeting with witnesses (that is to say, in the course of preparing evidence for hearing), the solicitor for the individual defendants "became aware of... a number of additional documents that were potentially relevant to issues in dispute in the proceedings and that had not previously been reviewed by" the firm of which he is a member.
The affidavit does not suggest that the documents were not available to be reviewed, and to the extent necessary discovered, back in the period from July to October 2011. On the face of things, therefore, there has been a failure on the part of the individual defendants to comply with the Court's order made on 22 July 2011. It may be that the failure was inadvertent; it is unnecessary to express a view either way.
The plaintiffs say that the new documents, as I shall call them, should be reviewed and to the extent necessary discovered before the case goes too much further. The individual defendants say that the provisions of the Practice Note should effectively be picked up, and that all parties should be required to serve their evidence before the question of any further disclosure is considered.
The affidavit of the individual defendants' solicitor, Mr Klotz, makes it clear that the new documents are going to be reviewed either by him, or by people in the employ of his firm, or by junior counsel retained in the proceedings. He describes the process as one involving a number of steps.
First, the new documents will be reviewed by an electronic key word search for the purpose of identifying a subset of potentially relevant documents.
Secondly, that subset of the documents will be reviewed to determine their actual relevance.
Thirdly, there will be what he calls a "secondary review": as I understand it, being undertaken to confirm that conclusion of relevance.
Fourthly, there will be a final review to determine what documents can be put to witnesses for the purpose of preparing their statements.
The various stages of review identified by Mr Klotz in his latest affidavit are said to be steps to be undertaken for the purpose of preparation of the individual defendants' lay and expert evidence. However, in an affidavit affirmed earlier this year, in connection with an application for security for costs, Mr Klotz identified that the same steps would be taken, but targeted at finding documents relevant to issues in dispute in the proceedings rather than issues that would simply be the subject of the individual defendants' lay and expert evidence. The process is the same. The object of the processes appears to be somewhat different.
On the face of things, one might have thought that the process of review identified by Mr Klotz in his later affidavit would have turned up, among other things, documents relevant to facts in issue. Thus, on the face of things, one might have thought that it would enable the individual defendants to give either formal or informal discovery of documents identified by the review as being relevant to a fact in issue. On that hypothetical chain of reasoning, one might conclude that the process of giving at least informal further discovery would not be unduly onerous or expensive, because it would utilise work that is going to be performed in any event.
However, Mr Hyde of counsel, for the individual defendants, submits that this apparently simple chain of reasoning is based on a false premise. That false premise, he submits, is that the review identified in the later affidavit is essentially the same as the review identified in the former affidavit. He submitted that this is not so, because the reviews are targeted at different purposes.
In support of that submission, Mr Hyde put, and I understand, that tactical decisions may be made in the course of preparing a party's evidence that certain facts theoretically in issue on the pleadings will not be targeted because, for whatever reason (including, in this case, that the plaintiff's evidence is complete), the party thinks that it has no case to answer.
As I have said, I understand the theoretical difference. Nonetheless, it seems to me, given that the documents are going to be reviewed by the series of searches that I have identified, it is almost inevitable that the process will involve, perhaps as a subset of them that is greater than the ultimate subset that the individual defendants propose to use for evidentiary purposes, a category of documents that are relevant to a fact in issue. Accordingly, in my view, there is much to be said for the case put for the plaintiffs by Mr Bova of counsel that in fact the review process could be adapted to enable his clients to have the full benefit of the Court's orders already made, not the incomplete performance thereof that the individual defendants have so far tendered.
Although it is not a matter addressed in submissions, I do regard it as of some importance that the reasons why the new documents were not the subject of earlier discovery has not been elaborated except to the extent that I have described. That is to say, it does not appear that, for example, the individual defendants made proper searches for potentially discoverable documents, but that for good and understandable reasons, the new documents did not come to light in the course of that search. Thus, and somewhat contrary to the able way in which Mr Hyde put his client's case, this does seem to me to be as much a case of a party in default seeking some degree of ex post facto dispensation from further compliance, rather than a case of a party in the position of an applicant under the Practice Note seeking to justify what is now regarded as an exceptional case.
It is to be noted that so far as I can see the plaintiffs have complied with their obligations under the order of 22 July 2011. Thus, the individual (and other) defendants have the advantage of all discoverable documents coming from the plaintiffs, for the purpose of preparing their cases. However, as we now know, the plaintiffs have not had the like advantage, in relation to discoverable documents in the possession et cetera of the individual defendants.
I agree with the submissions put on all sides that the objective of the Court now should be to get the matter ready for a fair trial as quickly and as cheaply as possible. I should perhaps refrain from making any further observation on the topic of s 56. But in looking at what is involved in procuring a fair trial, I do not think that I can put to one side that, as the evidence now shows, the individual defendants appear to have about 100,000 potentially discoverable new documents, in addition to the 60,000 potentially discoverable documents that were formerly reviewed and, to the extent that they were discoverable, discovered. In other words, this is not a case where the potential further discovery is of some relatively minor number or percentage of documents. It is a case where about 165 or 166 per cent documents more than were initially reviewed are now found to be reviewable. That suggests what might be described as wholesale non-compliance with the order earlier made by the Court. I repeat that, however the non-compliance might be characterised, it has not been explained in any way apart from what might be inferred as oversight.
In the circumstances, bearing in mind that the new documents are to be reviewed in any event, and bearing in mind the magnitude of the non-compliance with the Court's existing orders, I do not regard this as a case now to bring in, potentially to the significant disadvantage of the plaintiffs, the principles underlying the Practice Note. On the contrary, bearing those matters in mind, I regard this as a case where it is appropriate that the individual defendants should be required to comply with their obligations under the Court's existing orders. To the extent that this will impose further expense on them, because the processes of search that I have described will have to be doubly targeted, that may be a consequence that they have to bear given their unexplained failure to carry out the process of discovery fully and completely when it was appropriate to do so.
The result is that the individual defendants should be required to give verified discovery. I will make orders for that in a moment.
There is a question as to the way in which the discovery should be given. I do not know if it is suggested for the individual defendants that the process of formal discovery and verification would involve any additional and significant burden of cost. If that were the case, I would be prepared to entertain a proposal that, in the first instance, once the discoverable documents have been identified, they be provided informally on the basis that verification could be the subject of argument at a later date if it appeared that there might be some difficulty or inadequacy in that informal further discovery.
The next question to be considered is the timetabling of evidence. I accept in principle the evidence for the individual defendants that completion of their review and discovery obligations will take them through to the first week of new term, starting 3 February 2014. I accept in principle that they should be allowed approximately two months thereafter to serve their lay evidence.
The individual defendants seek a further six weeks, through to late May, to search their expert evidence. The justification put forward for that, based on Mr Klotz's affidavit, is that the expert evidence will depend on the substance of the lay evidence and hence that it cannot be completed until the lay evidence is finalised.
That may be accepted in principle. Further, and as Mr Hyde submitted, it may be accepted that the assumptions to be put to the experts will have to be fine-tuned by reference to the evidence that is actually put on. However, in my view, bearing in mind other matters that have happened in the course of this unfortunate litigation, the individual defendants should have a very clear idea now of what their attitude is to the various questions of fact raised by the plaintiffs. Thus, in my view, there should be little difficulty in finalising the assumptions to be put to the experts now rather than in early April, when the lay evidence for the individual defendants is to be served. Accordingly, I do not think that a delay of anything like the time contemplated is acceptable.
The result, in my view, is that the individual defendants should be ordered to serve their lay evidence by 11 April 2014 as they propose, and that their expert evidence should be available, extending time beyond what I would normally allow to take account of the Easter break, to 2 May 2014. If the apparent simplicity that I see at present in finalising the instructions to be given to the experts does not eventuate then an application for extension of that time can be made supported by appropriate evidence.
So far I have referred only to the individual defendants. However, it appears to be the case that the first and third defendants are also to be the subject of orders in similar terms. That will need to be encompassed in the orders to be made.
I will hear counsel as to the form in which further discoverable documents should be provided to the plaintiffs.
[Discussion with Counsel.]
I order the first, third, fourth, fifth, sixth, seventh, eighth, ninth and tenth defendants to give further informal discovery of documents by 3 February 2014;
I reserve the question of whether those defendants should be required to verify that further discovery;
I order those defendants to serve their lay evidence by 11 April 2014 and their expert evidence by 2 May 2014;
I list the matter for directions on 14 February 2014;
The costs of today are to be costs in the proceedings.
[Discussion with counsel as to costs whereupon above cost order revoked and amended to costs reserved.]
Costs reserved.
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Decision last updated: 20 November 2013
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