Arvind Pty Ltd v Lamers
[2020] WASCA 47
•3 APRIL 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: ARVIND PTY LTD -v-LAMERS [2020] WASCA 47
CORAM: MITCHELL JA
VAUGHAN JA
HEARD: 24 MARCH 2020
DELIVERED : 24 MARCH 2020
PUBLISHED : 3 APRIL 2020
FILE NO/S: CACV 24 of 2020
BETWEEN: ARVIND PTY LTD (ACN 052 292 145)
First Appellant
SARO VINZI CARBONE
Second Appellant
BRIGHT IMAGE DENTAL PTY LTD
Third Appellant
AND
BERNARD HENRICUS LAMERS as trustee for THE BEN AND DEBRA LAMERS FAMILY TRUST
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: STRK AJ
File Number : CIV 2404 of 2017
Catchwords:
Practice and procedure - Discovery - Appeal from an interlocutory procedural order requiring supplementary discovery - Whether leave to appeal should be granted - Whether the appellants would suffer any substantial injustice if the order were to stand - Whether the primary decision is attended by sufficient doubt to justify the grant of leave to appeal - Whether there were grounds for interfering with the primary judge's interlocutory procedural decision relating to supplementary discovery
Legislation:
Rules of the Supreme Court 1971 (WA), Order 26 r 6
Result:
Leave to appeal refused
Appeal dismissed
Category: B
Representation:
Counsel:
| First Appellant | : | A Metaxas |
| Second Appellant | : | A Metaxas |
| Third Appellant | : | A Metaxas |
| Respondent | : | T Darbyshire |
Solicitors:
| First Appellant | : | Metaxas Legal |
| Second Appellant | : | Metaxas Legal |
| Third Appellant | : | Metaxas Legal |
| Respondent | : | Kott Gunning |
Case(s) referred to in decision(s):
Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170
Dodds v Kennedy [2011] WASCA 32
Forrest & Forrest Pty Ltd v Minister for Mines and Petroleum [2017] WASCA 153; (2017) 51 WAR 425
Girgis v Poliwka [2016] WASCA 158
Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2019] WASCA 141
Hearne v Street [2008] HCA 36; (2008) 235 CLR 125
Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14; (2016) 49 WAR 374
Lamers v Arvind Pty Ltd [2020] WASC 52
Pearce v International Mining Technologies Ltd [2009] WASCA 239
Re the Will of FB Gilbert (Dec) (1946) 46 SR (NSW) 318
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2010] WASC 218
The State of Western Australia v Bond Corporation Holding Ltd (1991) 5 WAR 40
Waller v Waller [2009] WASCA 61
Wilson v Metaxas [1989] WAR 285
REASONS OF THE COURT:
At the conclusion of the hearing of the appellants' application for leave to appeal from an interlocutory decision, we made the following orders:
(1)The application for leave to appeal is refused.
(2)The appeal is dismissed.
(3)The appellants pay the respondent's costs of the application for leave to appeal, and the appeal, fixed in the sum of $840.
These are our reasons for making those orders.
Case management and further discovery
This appeal is against an order of the primary judge requiring the appellants to give supplementary discovery of documents. Because it is an appeal against an interlocutory order, leave to appeal is required. In submitting that leave should be given, the appellants submit, in effect, that allowing too broad a discovery (by what the appellants describe as a 'scattergun approach') is inconsistent with case management principles.
In our view, it is the appellants' approach to the question of discovery which is inconsistent with O 1 r 4A of the Rules of the Supreme Court 1971 (WA), which provides:
The practice, procedure and interlocutory processes of the Court shall have as their goal the elimination of any lapse of time from the date of initiation of proceedings to their final determination beyond that reasonably required for interlocutory activities essential to the fair and just determination of the issues bona fide in contention between the parties and the preparation of the case for trial.
The goal to which r 4A refers is best advanced by dealing promptly with any disputes about the scope of interlocutory orders concerning matters such as discovery and inspection of documents which arise in the course of pending proceedings. It is to be hoped that a case manager of the proceedings would be in a position to resolve contested questions as to the scope of discovery quickly, ordinarily by ex tempore reasons which need not be elaborate. This court's approach to the grant of leave to appeal and the assessment of a case manager's reasons should advance the important public policy which r 4A identifies. This court's approach should not encourage additional delays which are an inevitable product of an interlocutory appeal. It should not discourage the prompt disposition of issues by case managers by demanding overly elaborate reasons or scrutinising the reasons which are given in a narrow or pedantic manner.
In the present case, the respondent made an application for supplementary discovery on 11 April 2019. The application was subject to extensive submissions, and was not determined until 25 February 2020. The institution of an appeal to this court has resulted in an extension of time for the provision of discovery to allow the general division to hear a stay application on 9 April 2020. The result has been that it has taken almost a year to resolve a question of the extent of supplementary discovery which should be provided. The appellants' interlocutory appeal has contributed to that regrettable delay, and would extend the delay by many months if leave were to be granted.
The above unsatisfactory history illustrates the importance of this court actively discouraging interlocutory appeals from procedural directions on matters such as discovery in pending proceedings, and exercising restraint in interfering with a case manager's broad discretion on matters of practice and procedure. Consistently with that approach, leave to appeal in the present case should be refused.
The primary proceedings
The primary proceedings are an action brought by the respondent (Mr Lamers) as trustee for The Ben and Debra Lamers Family Trust (Family Trust). The Family Trust is one of two unit holders in the Arvind Property Trust (Unit Trust). The third appellant (Bright Image) is the other unit holder. The first appellant (Arvind) is the trustee of the Unit Trust. The second appellant (Mr Barbone) is a director of Arvind.
In broad terms, Mr Lamers relevantly claims that, in breach of trust, further or alternatively, in breach of fiduciary duty, Arvind granted a mortgage over property of the Unit Trust, namely land in Ranford Road, Canning Vale. The mortgage secured a loan, the proceeds of which were allegedly used for the appellants' benefit. He alleges that Mr Barbone and Bright Image knowingly participated in the breach. Mr Lamers relevantly seeks orders removing Arvind as trustee of the Unit Trust, equitable compensation and an account of profits against all of the appellants.
The primary judge was the case manager of the primary proceedings in the Commercial and Managed Cases List. On 25 February 2020, the primary judge ordered the appellants to provide supplementary discovery of documents in defined classes (Discovery Order). The contentious class of documents comprised certain of the appellants' financial statements, tax returns, land sale contracts, bank statements and correspondence giving accounting instructions for the financial statements of the Unit Trust.
Her Honour published written reasons for that decision.[1] In brief summary, the primary judge was satisfied that:
(1)Mr Lamers had demonstrated that there were reasonable grounds for being fairly certain that the relevant documents actually do or did exist in the possession, custody or power of the appellants.[2]
(2)The relevant documents were relevant to matters in issue in the primary proceedings, in particular the pleaded claim for an account of profits. The documents were relevant to the identification of the benefit or gain to the fiduciary or knowing participant, and the determination of whether the breach can be concluded to have played a material part in contributing to the benefit or gain of the fiduciary or knowing participant.[3]
(3)Further discovery was necessary to enable the just resolution of a real and essential issue in the proceedings, namely whether any benefits have been derived by any of the appellants in breach of fiduciary duty or through knowing participation in that breach, and if so, the nature and extent of those benefits. Further discovery would facilitate an inquiry to determine whether the court's jurisdiction to order an account of profits is enlivened.[4]
(4)It was appropriate to order further discovery in the exercise of the court's inherent jurisdiction, so it was unnecessary to resolve all issues which the appellants took with the affidavit grounding the application under O 26 r 6(1) of the Rules of the Supreme Court 1971 (WA).[5]
[1] Lamers v Arvind Pty Ltd [2020] WASC 52 (primary decision).
[2] Primary decision [55] - [61].
[3] Primary decision [62] - [69].
[4] Primary decision [70] - [77].
[5] Primary decision [80] - [91].
As can be seen from this summary, the primary judge expressly considered whether the Discovery Order was necessary for the fair determination of the issues in the action. In this regard, her Honour recorded that she weighed case management considerations in the balance.[6] The primary judge noted that there was no evidence of the likely costs and delay involved in the provision of the further discovery, the financial standing of any party or the extent of the likely burden on the defendants if the discovery order was made.[7] The grounds of appeal do not allege any error in these findings.
[6] Primary decision [72].
[7] Primary decision [72].
The appeal to this court
The appellants seek leave to appeal against the Discovery Orders on five grounds, which in essence contend that the primary judge erred in the following respects:
(1)Failing to accord procedural fairness by permitting Mr Lamers to amend his discovery application in closing submissions.
(2)Finding the documents were relevant to Mr Lamers' pleaded claim in the primary proceedings.
(3)Having regard to a submission as to whether the documents sought would enable Mr Lamers to determine whether the appellants benefited from the breach of fiduciary duty and, if so, to what extent.
(4)Finding, in effect, that the supporting affidavit complied with O 26 r 6 of the Rules.
(5)Finding that the criteria for the exercise of the inherent jurisdiction were satisfied.
Requirement for leave to appeal
The appellants require leave to appeal from the interlocutory Discovery Order under s 60(1)(f) of the Supreme Court Act 1935 (WA).
The principles governing the grant of leave to appeal from an interlocutory decision are well established. The object of the requirement for leave is to reduce appeals from interlocutory orders as much as possible. Generally, leave should not be granted unless the decision below is plainly wrong or is attended by sufficient doubt to justify the grant of leave and a substantial injustice would be done if it remains undisturbed.[8] That said, the discretion is broad and these considerations are not applied as if they were rigid or exhaustive criteria. The ultimate touchstone is whether leave to appeal is in the interests of justice.[9]
[8] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14; (2016) 49 WAR 374 [80] - [81]; Wilson v Metaxas [1989] WAR 285, 294.
[9] The State of Western Australia v Bond Corporation Holding Ltd (1991) 5 WAR 40, 57.
In Waller v Waller, Martin CJ observed:[10]
The requirement that interlocutory appeals be subject to the grant of leave of the Court of Appeal is no mere technicality or procedural nicety. It is a substantive restriction upon the pursuit of interlocutory appeals which is designed to enhance the interests of justice. Those interests will not be well served if the parties to litigation and the limited resources of the court are distracted from the determination of substantive rights and interests by an unnecessary and inappropriate focus upon interlocutory issues. The grant of leave to appeal from an interlocutory determination is therefore restricted to those exceptional cases in which the decision in question is not only plainly wrong or attended with sufficient doubt to justify the grant of leave, but also in which a substantial injustice would be done if the decision remains in place. It would defeat the purpose of the restriction upon interlocutory appeals if there were to be any departure from the strict satisfaction of these requirements.
In particular, the injustice that must be demonstrated must be properly characterised as 'substantial'. If every infraction of a party's procedural rights were to be regarded as a 'substantial injustice', this aspect of the requirements for the grant of leave would become meaningless, as virtually every erroneous interlocutory decision will involve an infraction of a party's procedural rights. Accordingly, the notion of 'substantial injustice' looks to the substantive rights of the party adversely affected by the order under review, and requires that party to demonstrate that the effect of the order will go beyond mere inconvenience and procedural disadvantage.
This court adopted those observations in Kelbush.[11]
[10] Waller v Waller [2009] WASCA 61 [9] - [10].
[11] Kelbush [81] (Mitchell J; Martin CJ and Buss JA agreeing).
Also relevant to the present application for leave to appeal is that the Discovery Order involved a question of practice and procedure. The reasons why there must be a tight rein on interlocutory appeals against the exercise of discretion on a point of practice and procedure are well-established. As was said by Jordan CJ in Re the Will of FB Gilbert (Dec):[12]
[T]here is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal.
[12] Re the Will of FB Gilbert (Dec) (1946) 46 SR (NSW) 318, 323 (as adopted in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 177).
Disposition of leave application
In the present case, we are not satisfied that any substantial injustice would be done if the Discovery Order remains in place.
The Discovery Order does not affect the substantive rights of any of the appellants. It merely imposes a procedural requirement for the appellants to prepare a supplementary list of documents of a defined class which are or have been in their possession, custody or power. The list, and inspection of documents on the supplementary list, will be subject to the implied obligation of Mr Lamers not to use the information other than for the purposes of the primary proceedings unless the documents are tendered in evidence or the court grants leave to do so.[13] There is, consistent with the unchallenged findings of the primary judge mentioned at [12] above, no evidence of any oppression or unusual prejudice that would be involved in the exercise from the appellants' perspective. The contentious class of documents which are the subject of the Discovery Order are financial documents of a kind which would ordinarily be readily available to the appellants and able to be produced. There is no evidence of any particular reason why the documents, if relevant, ought not to be disclosed.
[13] Hearne v Street [2008] HCA 36; (2008) 235 CLR 125 [105] - [108].
Further, many of the objections sought to be raised in the grounds of appeal are technical in nature and allege deficiencies which, if made out, could be remedied in a way that is not likely to result in the making of substantively different orders. For example, an application supported by a further affidavit under O 26 could be filed.
The only injustice which the appellants point to in their written submissions is that they have been ordered to give discovery of documents which are not relevant. The appellants submit that the primary judge's decision changed the law, which resulted in the success of an application for discovery which should have failed. Adopting the observations of Martin CJ in Waller, that alleged infringement of the appellants' procedural rights is not a substantive injustice justifying the grant of leave to appeal.
At the oral hearing, counsel for the appellants also suggested that leave to appeal was in the interests of justice insofar as, if followed, the decision of the primary judge might affect other litigants. That assumes the correctness of the appellants' submission that the primary judge's decision changed the law. As will be seen, the appellants' assumption is incorrect: her Honour was not stating any new principle of law of general application. Insofar as the impugned part of the primary judge's reasons do no more than address the particular documents which were the subject of the application before her Honour, there is no cause to believe that the decision will result in any wider flow-on effect contrary to the due administration of justice which might mean that it is in the interests of justice that leave to appeal be granted.
Further, we are far from satisfied that the Discovery Order is plainly wrong or attended by sufficient doubt so as to justify the grant of leave to appeal. It was well within the primary judge's discretionary power to make case management orders for supplementary discovery in terms of the Discovery Order. In assessing that question, it is important to bear in mind the principles summarised by Martin CJ, with whom Newnes and Murphy JJA agreed, in Girgis v Poliwka:[14]
[A] tight rein must be kept upon interference with the orders of judges at first instance, exercising discretions with respect to points of practice or procedure.[15] In this court it is also established that there is a particular need to refrain from interfering with interlocutory procedural decisions made by judges managing cases in the commercial and managed cases list. The reasons for that restraint are explained by the court in Pearce v International Mining Technologies Ltd in these terms:[16]
A judge who has a continuing involvement in the management of a case in the CMC List is likely to have a much better overall perspective of the litigation, and to be in a much better position to determine what particular procedural steps are appropriate, than this court. The advantage that such a judge will generally have from his or her familiarity with the case is not lightly to be put aside. While this court must be prepared to intervene where questions of legal principle arise or the interests of justice otherwise require it, restraint is necessary to avoid the appellate process becoming an obstacle to the proper and effective management of cases in the CMC List.
[14] Girgis v Poliwka [2016] WASCA 158 [1]. Approved and followed in Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2019] WASCA 141 [49].
[15] Dodds v Kennedy [2011] WASCA 32 [5] (Murphy JA & Mazza J).
[16] Pearce v International Mining Technologies Ltd [2009] WASCA 239 [26] (Pullin & Newnes JJA).
None of the grounds of appeal in this case raise a proper basis for interfering with the primary judge's interlocutory procedural decision relating to supplementary discovery.
There is no merit to ground 1, which asserts a failure to accord procedural fairness. The order eventually made was proposed in post-hearing written submissions filed by Mr Lamers on 19 June 2019, responding to supplementary submissions filed by the appellants. However, there was a strong relationship between the orders as so proposed and the form of the orders agitated at the earlier oral hearing before the primary judge. In any event, the Discovery Order was made on 25 February 2020, some 7 months later. If the appellants took issue with the modified form of the orders proposed by Mr Lamers, and felt that they had not been given an opportunity to be heard, then the appropriate course was for them to seek leave to file a supplementary submission addressing any new issues. The appellants did not choose to do so.
Further, the appellants were given an advance copy of the primary decision before judgment delivery. The primary decision indicated the terms in which her Honour proposed making orders 'subject to hearing from the parties as to the final form of the orders'.[17] The appellants were therefore given the opportunity to make submissions as to the precise form of the orders before they were pronounced. The claim of lack of procedural fairness is hollow given the opportunity specifically afforded by the terms of the primary judge's reasons.
[17] Primary decision [92].
In any event, the judge was not bound by the form of order sought in the application, and there was no significant substantive difference, prejudicial to the appellants, between the orders previously sought and the order that was ultimately made.
Ground 2, and the submissions advanced in support of that ground, read part of the primary judge's reasons out of context.
The submissions before the primary judge focused on par 42 of the Re-Amended Substituted Statement of Claim, which pleads that, to the extent the appellants made unauthorised profits, the profits are held on constructive trust. The appellants contended that the respondent did not plead that the appellants had actually made an unauthorised profit. However, par 61 did expressly plead that Mr Carbone and Bright Image had gained a profit by reason of the relevant breach. It was well open to the primary judge to construe the pleadings as asserting a cause of action for an account of profits which the appellants derived from the alleged breach of fiduciary duty or participation therein. The financial documents sought by the respondent are, on the face of it, relevant to the existence and extent of that profit.
On appeal, the appellants focus on the following passage of the primary decision:[18]
I am satisfied that the documents sought (which include bank statements and financial statements) are relevant to these matters in issue, and would also, or would lead to a train of inquiry which would, either advance the plaintiff’s own case or damage that of the defendants. Further, given the nature of the pleaded claim and that the plaintiff seeks an account of profits, the mere fact that a document falls within the scope of the classes pressed is in this case sufficient to establish relevance. (emphasis added) (citation omitted)
[18] Primary decision [69].
The appellants submit that the italicised part of this passage effects a change in the law, so that where an account of profits is claimed any document relating to the financial affairs of the other party is discoverable. In our view, that reading of the passage takes the statement out of context. The primary judge's statement was directed to the particular documents which were the subject of the order ultimately made. Her Honour was not stating any new general principle of law.
The particular identified documents related to the use of funds drawn from the account secured by the mortgage, and were relevant to establishing the existence and extent of profits, if any, made by the defendants from the alleged breach of fiduciary duty. Some of the documents (such as profit and loss statements and tax returns) are likely to contain some irrelevant material, but will still be discoverable if they include relevant material.
The appellants also make the point that they agreed to discover account statements, which would show the extent of any withdrawal. However, while the bank account statements would show withdrawals from the account, they would not show the extent of profits made using the withdrawn funds.
We are not satisfied that ground 2 identifies any material error of law made by the primary judge.
Ground 3 is without substance, as there was no error in the primary judge having regard to a submission which Mr Lamers advanced in support of his discovery application. Procedural fairness required the judge to actually consider relevant submissions which a party has an opportunity to make.[19] In all the circumstances, the judge was entitled to have regard to and accept the submission.
[19] Forrest & Forrest Pty Ltd v Minister for Mines and Petroleum [2017] WASCA 153; (2017) 51 WAR 425 [103].
Ground 4 cannot lead to the appeal being allowed, as the judge was correct to hold that the Discovery Order was properly made in the inherent jurisdiction of the court. The appellants' affidavits of discovery were not conclusive as to the documents in their possession, custody and control when it was evident that they had excluded financial documents under a misconception of Mr Lamers' case.[20] Therefore, ground 5 is not established.
[20] Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2010] WASC 218 [4].
The present case is one in which an interlocutory appeal has the potential to divert and delay the primary proceedings and increase the parties' cost of resolving the dispute. No substantial injustice will be occasioned to the appellants by allowing the orders to stand. There is no proper ground for interfering with the primary judge's interlocutory procedural decision relating to supplementary discovery. For these reasons, we refused leave to appeal and dismissed the appeal.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ZMM
Associate to the Honourable Justice Mitchell3 APRIL 2020
12
13
1