Ballymoss Pty Ltd v Kollaras & Co Pty Ltd (No 4)
[2023] VCC 1268
•26 July 2023
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
General List
Case No. CI- 20-02138
| BALLYMOSS PTY LTD (ABN 16 006 923 717) trading as Monacellars | Plaintiff |
| V | |
| KOLLARAS & CO PTY LTD (ABN 85 001 919 884) trading as Kollaras Trading Company and VP BRANDS INTERNATIONAL PTY LTD (ACN 614 813 384) trading as All Stars Liquor | Defendant Third party |
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JUDGE: | HER HONOUR JUDGE RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20 March 2023 | |
DATE OF RULING: | 26 July 2023 | |
CASE MAY BE CITED AS: | Ballymoss Pty Ltd v Kollaras & Co Pty Ltd (No 4) | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 1268 | |
RULING
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Subject: PRACTICE AND PROCEDURE
Catchwords: Particular discovery pursuant to r.29.08 of County Court Civil Procedure Rules 2018 – whether defendant waived legal professional privilege over discoverable documents either expressly or by implication due to alleged inconsistency with pleaded case – application for further security – consideration of threshold requirement – whether appropriate to order further security when substantial security already provided.
Legislation Cited: County Court Civil Procedure Rules 2018; Civil Procedure Act 2010; Evidence Act 2008; Customs Act 1901 (Cth); Corporations Act 2001 (Cth); Wrongs Act 1958
Cases Cited:Cargill Australia Ltd v Viterra Malt Pty Ltd (No.9) [2018] VSC 433; Wang v HMG Capital Pty Ltd (15 December 2022)(Elliott J); Opti-Pharm Pty Ltd v Nature One Dairy Pty Ltd (No 2) [2018] VSC 688; Braham v ACN 101 482 580 Pty Ltd (No 2); Muchnicki & Anor v Avalanche Management Pty Ltd & Anor [2020] VSC 710; UDP Holdings Pty Ltd v Esposito Holdings Pty Ltd (No 3) [2020] VSC 260; Austructures Pty Ltd v Makin [2016] VSC 289; Indtex Pty Ltd v Knight Homes Pty [2020] VSC 427; Viterra Malt Pty Ltd v Cargill Australia Ltd (2018) 58 VR 333; Terracom V ASIC [2022] FCA 208; Garratts Ltd [2002] NSWSC 39; Liquorland v Anghie (2003) 7 VR 27; DSE v Intertan (2003) 127 FCR 499; GR Capital [2020] NSWCA 266; Mann v Carnell [1999] HCA 66; Seketa v Gadens Lawyers [2021] VSC 245; New South Wales Bar Association v Archer (2008) 72 NSWLR 236; Macquarie Bank Limited v Arup Pty Ltd [2016] FCAFC 117; Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 371; Osland v the Secretary of the Department of Justice (2008) 234 CLR 275; The Queensland Local Government Superannuation Board v Allen [2016] QCA 325; Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd (Trailer Trash) [2017] VSCA 293; Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377; Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125; Amcor v Barnes [2015] VSC 90; Oswal v Australia and New Zealand Banking Group Ltd [2016] VSC 52; Bogan & Anor v The Estate of Peter John Smedley, deceased & Ors [2022] VSC 645; Indtex Pty Ltd v Knight Homes Pty Ltd [2020] VSC 427; US Realty Investments LLC #1 & Ors v Need [2013] VSC 590; Credit Clear Limited [2022] VSC 206; Madgwick v Kelly [2013] 212 FCR 1; Expense Reduction Analysts Group Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; Saint Gobain RF Pty Ltd v Maax SPA Corporation Pty Ltd [2004] VSC 335
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | G L Meehan with M D Dean | Hall & Wilcox |
| For the Defendant | B Barr | Holding Redlich |
| For the Third Party | M La Pirow | Davies Moloney |
HER HONOUR:
1This ruling deals with two summonses filed by the plaintiff and defendant by counterclaim (“Ballymoss”).
2First, by a second further amended summons dated 25 October 2022, Ballymoss seeks particular discovery from the defendant and plaintiff by counterclaim (“Kollaras”) under Rule 29.08 of the County Court Civil Procedure Rules 2018 (“the Rules”) (“discovery application”).
3Second, by summons dated 7 December 2022, Ballymoss seeks an order that Kollaras provide further security for Ballymoss’ costs of the proceeding (“security for costs application”).
4Both parties filed extensive materials and made comprehensive oral submissions at the hearing on 20 March 2023. The Court was assisted by the provision of court books relating to each application. The Court was also handed various aide memoires during the course of the hearing, including spreadsheets setting out the parties’ competing contentions.
5Ballymoss relied upon:
(a) five affidavits of Donald Craig MacDougall dated 20 December 2021, 14 February, 5 May, 27 July, and 24 October 2022;
(b) two affidavits of Andrew Murray Ross dated 29 July and 17 November 2022;
(c) an affidavit of Graydon Francis Dowd dated 16 March 2023;
(d) written submissions dated 16 March 2023 in support of the application for further discovery; and
(e) written submissions dated 20 March 2023 in relation to the security for costs application.
6Kollaras relied upon:
(a) two affidavits of Peter Rostirolla dated 23 February 2022 and 17 March 2023;
(b) an affidavit of John Kollaras dated 24 February 2022;
(c) an affidavit of Nathan Cecil dated 16 March 2023;
(d) written submissions responding to both applications dated 17 March 2023.
7Trading under the name of Monacellars, Ballymoss sells alcoholic goods through its retail stores and wholesale business. It does not import or export stock. By contrast, Kollaras exports stock as well as being a retailer and wholesaler. Kollaras previously purchased alcoholic goods from Ballymoss and on sold them to domestic and export customers. If Kollaras sells stock to export customers, such as the Australian Antarctic Division or cruise ships in Sydney Harbour, these customers are treated as foreign entities. In those circumstances, Kollaras can apply to the Commonwealth to recover the customs duty paid when the stock was originally imported into Australia under a duty drawback scheme administered by the Australian Border Force (“ABF”). Kollaras is unable to claim duty drawback on stock it sells to domestic customers.
8Ballymoss’ claim in this proceeding is for the recovery of a debt in the sum of $6,963,426.12. The debt relates to goods comprising alcoholic beverages sold and delivered by Ballymoss to Kollaras between 30 October 2019 and 12 March 2020.
9By its amended defence and second amended counterclaim dated 30 March 2022, Kollaras admits it has not paid Ballymoss for the goods sold and delivered but seeks to set off its counterclaim for damages against the debt payable to Ballymoss. The quantum of the damages claimed by Kollaras exceeds the debt. Kollaras alleges Ballymoss breached express and implied warranties of sale because customs duty had not been paid on the alcoholic goods sold to Kollaras when those goods were imported into Australia. The damages claimed under the breach of warranty claim is approximately $7,900,000. This sum represents the amount of the unpaid duties, being the amount required to render the warranty true. The damages are calculated by reference to export sales of stock that Kollaras bought from Ballymoss.
10In the alternative, Kollaras brings a misleading and deceptive conduct claim under s18 of the Australian Consumer Law. Kollaras alleges that contrary to various representations made in connection with the transactions, excise duty had not been paid on the goods upon their importation into Australia. The loss claimed is a loss of profit on export sales made by Kollaras of goods purchased from Ballymoss. The goods identified were sold duty free to export customers at a lower price than would be the case had Kollaras known the applicable duty had not been paid. The quantum of damages claimed under this head is $7,100,000. The goods referred to in the counterclaim extend beyond the goods the subject of Ballymoss’ debt claim, which explains why the quantum of the counterclaim exceeds the debt claim.
11Kollaras makes no claim for loss and damage relating to goods purchased from Ballymoss which it on sold to domestic customers.
12Additionally, Kollaras sues Ballymoss for a debt relating to unpaid supplies of alcoholic beverages between November 2019 to February 2020 in the sum of $886,722.03.
13Kollaras further pleads in its counterclaim that between October 2019 and December 2019, Kollaras applied to the ABF for a refund drawback of the customs duties relating to the goods supplied by Ballymoss to Kollaras in the sum of approximately $7.9million (collectively, “the drawback claims”). In a letter to Kollaras from the ABF dated 23 December 2019, the ABF declined to approve or alternatively, indicated it would refuse the drawback claims on certain bases. These included the fact that the ABF had not been able to identify any records sufficient to establish import duty was paid in respect of the relevant goods, including via the ABF’s own integrated cargo system.
14Ballymoss has joined VP Brands International trading as All Stars Liquor (“VP Brands”) as a third party to the counterclaim. The claim made against VP Brands mirrors to some extent, the claim made by Kollaras against Ballymoss. VP Brands imported stock, which was purchased by Ballymoss, some of which was then on sold to Kollaras. Ballymoss alleges that VP Brands did not pay the duties payable when the stock was imported. Ballymoss seeks an indemnity from VP Brands to the extent that it may be found liable to pay damages to Kollaras.
15In its amended defence to the counterclaim dated 7 November 2022, Ballymoss joined the ABF and VP Brands as concurrent wrongdoers under the proportionate liability scheme under the Wrongs Act 1958. The applications before the Court did not involve either of these parties.
(1) Discovery application
Legal principles
16Ballymoss seeks orders for particular discovery of documents under Rule 29.08.
17Rule 29.08(2) provides:
“(2) Where, at any stage of a proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any question in the proceeding may be or may have been in the possession of a party, the Court may order that party to make and serve on any other party an affidavit stating—
(a) whether that document or any, and if so what, document or documents of that class is or has been in that party's possession; and
(b) if it has been but is no longer in that party's possession, when the party parted with it and that party's belief as to what has become of it.”
18Orders made under Rule 29.08 are discretionary. In deciding whether to order particular discovery, the touchstone is that the documents sought must be relevant to the proceeding. Relevance is determined by reference to the pleadings with an eye to the overarching purpose and obligations under the Civil Procedure Act 2010 (“CPA”). It is accepted that orders made pursuant to Rule 29.08 are not to be made lightly.[1]
[1]Cargill Australia Ltd v Viterra Malt Pty Ltd (No.9) [2018] VSC 433; Wang v HMG Capital Pty Ltd (15 December 2022)(Elliott J); Opti-Pharm Pty Ltd v Nature One Dairy Pty Ltd (No 2) [2018] VSC 688 at [20]
19Elliott J referred to issues of relevance and confidentiality in Cargill Australia Ltd v Viterra Malt Pty Ltd:[2]
“The relevance of documents to the proceeding is a threshold factor to be considered. If documents sought to be discovered are not relevant to the proceeding then there is no basis for ordering their production. Further, even if the documents are relevant, issues may arise if the documents sought are commercially sensitive. It was not in dispute that, in relation to confidential documents, the factors to be considered are as follows:
(1) The degree of relevance of the document or documents.
(2) The extent to which the document or documents are confidential, including whether the information has already been disclosed in the proceeding.
(3) The use to which the information might be put once it is known, such as by an opposing party who is a trade rival or is also an opposing party in another proceeding (or an anticipated or pending proceeding).
(4) The utility or procedural fairness, or otherwise, of imposing restrictions or conditions, including limiting production to certain persons upon the provision of confidentiality undertakings.
(5) Any other matters relevant to the due administration of justice, including ensuring compliance with the overarching purpose in the Civil Procedure Act 2010 (Vic).”
[2] (No 9) [2018] VSC 433 at [40]
20In similar vein, Elliott J made the following observations in Opti-Pharm v Nature One Diary Pty Ltd (No.2) [3]
“Orders made under r 29.08 are discretionary and are not to be made lightly. Orders under r 29.08 may be made in respect of documents relating to issues raised on the pleadings or connected to any question arising in the proceeding. Accordingly, subject to the overarching obligations, the kinds of documents that may be ordered to be discovered pursuant to r 29.08 are broader than those that may be required to be discovered at the commencement of the proceeding. Particular discovery may be ordered where the pleadings or prior discovery indicate inadequate discovery in the proceeding, or where the evidence discloses an admission as to the existence of the document or documents sought.”
(citations omitted)
[3] [2018] VSC 688 at [20]
21Macauley J referred to the ability of a party to go behind an affidavit of documents and seek particular discovery in Braham v ACN 101 482 580 Pty Ltd (No 2),[4] where His Honour said:
“Rule 29.08 is engaged when a party claims that the discovering party has failed to discover a document or class of documents which relate to a question in the proceeding (that is, is discoverable) in respect of which there is a reason to believe that it or they exist. It enables a party to ‘go behind’ the affidavit and move the Court to make a further order for particular discovery.”
(citations omitted)
[4] [2015] VSC 492 at [30]
22In Muchnicki & Anor v Avalanche Management Pty Ltd & Anor [2020] VSC 710, Matthews JR (as Her Honour then was) observed:
“As I noted in UDP Holdings Pty Ltd v Esposito Holdings Pty Ltd (No 3) [2020] VSC 260:
‘an order for particular discovery is in the discretion of the Court. In exercising that discretion, a threshold issue is whether the documents are relevant to the proceeding. The Court may make an order for particular discovery if the pleadings or prior discovery indicate inadequate discovery in the proceeding, or where the evidence discloses an admission as to the existence of the documents sought.’[5]
I accept the Defendants’ submission that an applicant pursuant to rule 29.08 must identify the relevant documents and explain how and in what way they are relevant. In Austructures Pty Ltd v Makin [2016] VSC 289 Mukhtar AsJ stated that:
‘It is not enough for there to be vehement assertions that ‘relevant documents exist which have not been discovered’ without an identification of those documents and an explanation of how and in what way they are relevant to an issue in the case.’”[6]
[5] At [78]
[6] At [79]
(citations omitted)
23In Indtex Pty Ltd v Knight Homes Pty Ltd,[7] Derham AsJ noted there was no utility in making an order under r29.08 where a party has sworn that it has no other documents in its possession. His Honour said:
“The power to require an affidavit to be made under the rule is discretionary. Where, as here, the defendants have sworn that there are no other documents of the particular class in the party’s possession, etc, other than those disclosed in the previous three affidavits of documents, then the making of an order under the rule is pointless. It is therefore not necessary to consider the submissions regarding whether the documents do or do not relate to any question in the proceeding.”[8]
[7] [2020] VSC 427 at [41]
[8] At [41]
24The Court also has an overriding discretion to give any direction in relation to discovery that it considers necessary or appropriate under s55(1) of the CPA. The application of s55 was considered by Steffensen AsJ in Bogan & Anor v The Estate of Peter John Smedley, deceased & Ors:[9]
"6.The principles with respect to discovery are clear. Discovery is to be made of documents which are directly relevant to matters in issue in the proceedings, and that is determined by reference to the pleadings.
7.Section 55(1) of the Civil Procedure Act 2010 (Vic) gives the court an overriding discretion to ‘make any order or give any directions in relation to discovery that it considers necessary or appropriate.’ As set out in Volunteer Fire Brigades Victoria Inc v Country Fire Authority:
… demands for discovery of documents which are peripheral to the central issues cannot be entertained. The Court is obliged to focus on the central issues as best it can be determined at this point in the litigation.
8.Discovery orders should be directed to finding the most efficient, effective and economical management of the discovery exercise, bearing in mind the nature and complexity of the trial.”
[9][2022] VSC 645 at [6]-[8]
25Similarly, in Intdex Pty Ltd v Knight Homes Pty Ltd,[10] Derham AsJ commented:
“50.… Furthermore, the court’s powers in relation to discovery under s 55 of the CPA, although broad, should be directed to finding the most efficient, effective and economical management of the discovery exercise, bearing in mind the nature and complexity of the case.
51.The making of the order sought would serve only to prolong the discovery process and unnecessarily burden the defendants. In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd the High Court commented upon the increasingly burdensome task of discovery, and the distracting interlocutory applications that often accompany it. The Court was critical of discovery disputes which frustrate the overriding purpose of Civil Procedure statutes. This is just such a dispute.”
[10][2020] VSC 427 at [50]-[51]
26I deal below with each of the categories of documents sought in paragraph 5 of the discovery application.
Paragraph 5(b) – documents listed in schedule marked ‘Kollaras Discovery sought 8 March 2022’.
27By way of background, Kollaras made discovery of 10 categories of documents in an affidavit of documents affirmed by Peter Rositrolla, who is the Chief Financial Officer of Kollaras. The eighth category of documents referred to in that affidavit have become known as the “Tab 8” documents or “Tab 8” spreadsheets. This category is listed as records from Kollaras’ enterprise resource planning (“ERP”) system. The records identify ledger entries for the goods purchased by Kollaras from Ballymoss and subsequently exported, as particularised in Annexure A to the counterclaim.
28Under this heading, Ballymoss seeks the documents listed in the schedule marked “Kollaras Discovery sought 8 March 2022”. Those documents were identified in a schedule attached to the discovery application. Attached to this ruling and marked Annexure 1 is a copy of the schedule listing the documents sought under paragraph 5(b). There are six categories of documents sought.
29As a general response to Ballymoss’ requests for particular discovery, Kollaras accepts it should discover some categories of documents listed and has made discovery to that extent. However, discovery of certain other categories should not be ordered because:
(a) They are not relevant. This case does not concern domestically sold goods. Both Kollaras’ warranty claim and misleading and deceptive conduct claim only concern goods that Kollaras subsequently exported.
(b) Discovery would impose an excessive burden on Kollaras. This would require Kollaras having to manually work through various special purpose generated reports and tracing the sale in some cases of individual bottles to its purchasers. This is excessive.
(c) Many of the requests are speculative. These other categories largely concern documents that are merely collateral to records that have already been discovered by Kollaras or relate to third parties who have no particular connection to this case. None of the issues to which those documents could reasonably relate are in issue. The orders sought would be a disproportionate course having regard to ss24 and 47(3)(g) of the CPA. These sections refer to the overarching obligation to ensure that costs are reasonable and proportionate.
Category 1
30Ballymoss seeks documents for each of the goods described in the column headed “Item Description in Annexure A to the SACC,[11]” namely:
(a) documents including purchase orders and invoices evidencing sales of those goods not exported (domestically sold goods);
(b) financial records or other documents evidencing the profit or loss on the domestically sold goods.
[11] “SACC” is a reference to Kollaras’ second amended counterclaim dated 30 March 2022
31Annexure A to the SACC sets out a table particularising[12]:
(a) Kollaras’ purchase of alcoholic products from Ballymoss, including details of Kollaras’ purchase orders and Ballymoss invoices for the products;
(b) Kollaras’ subsequent export of alcohol products purchased from Ballymoss with details of Kollaras’ invoices, export declarations and the identity of the Kollaras customer;
(c) losses suffered by Kollaras because of unpaid customs duty contrary to warranties and misrepresentations as to custom duty having been paid.
[12] Cecil affidavit dated 16 March 2023 at paragraph 31.
32In support of this category, Ballymoss contends that the loss and damage claim by Kollaras, whether it be under breach of warranty or misleading and deceptive conduct, is to be calculated by reference to the transaction which Kollaras entered into when purchasing the stock from Ballymoss. In that calculation, there must be taken into account profits made by Kollaras on the subsequent sale of those goods, whether domestic or export sales. It is contended that this issue is integral to the case brought by Kollaras, whether burdensome or not.
33Kollaras says that information regarding domestic sales is irrelevant as its claim for loss is confined to export sales only. It submits the tasks imposed would require the creation of a new document which would be unreasonable, disproportionate and oppressive.
34Kollaras relies upon paragraphs 5-13, 14 and 17 of the Rostirolla affidavit dated 17 March 2023. For the reasons he explains, Mr Rostirolla deposes that compliance with this category would place an enormous burden upon Kollaras as it would necessitate the creation of a customised purpose built report. It would require a full time employee 3-4 months after training to comply with this request. Significant managerial time would also be spent in supervision. Alternatively, if Kollaras engaged an ERP systems administrator to create such a report, the costs would be in the order of $20,000 for each sub-category sought.
35In response, Ballymoss asserts as it does for a number of other categories, that the answer is to provide Ballymoss with access to a read only version of the ERP system. Therefore, Kollaras would not need to make the effort itself to run the reports referred to in the Rostirolla affidavit. Ballymoss wishes to provide the ERP system to Mr Ross, a forensic accountant from Korda Mentha engaged by Ballymoss, so that he can analyse the system and extract information.
36As demonstrated by the authorities, the first question is whether the documents sought are relevant to an issue raised by the pleading. Kollaras argues that the category of documents sought regarding domestic sales is irrelevant, because it make no claim for loss in respect of these sales but confine its losses to only stock subsequently exported by Kollaras. Therefore, any of the sales information relating to domestic stock is not relevant.
37In paragraph 7B of the defence to the SACC, Ballymoss pleads that any loss suffered by Kollaras must take into account, inter alia, any profit made on sales to domestic customers. Ballymoss contends this goes to the question of whether Kollaras would have entered into the transaction or not and whether it is worse off as a result. It argues the profits made on the domestic sales are relevant to establishing that Kollaras would not necessarily be any worse off. The argument put is that Kollaras’ claim is a “no transaction” case.[13]
[13] Transcript (“T”) 38
38It is clearly not appropriate in an application of this sort to determine whether a claim raised in the pleadings is likely to succeed or not. Whilst Kollaras disputes the relevancy of the domestic sales, it is a matter that has been raised directly by Ballymoss. Kollaras admits in paragraph 7(c) of its reply that it made some profit on some but not all of the sales to domestic customers. I am therefore satisfied that the documents are arguably relevant having regard to the pleadings as presently formulated. The correctness or otherwise of Ballymoss’ plea that profits on domestic sales should be taken into account when assessing Kollaras’ claim for damages, which is presently confined to export sales, will ultimately be a matter for trial.
39However, in the exercise of my discretion, I am not satisfied that the Court should order Kollaras give particular discovery of this category. The reasons I am not persuaded it is appropriate to do is because of the hardship it would cause to Kollaras in terms of the time and cost spent by Kollaras in complying with this request, as deposed to by Mr Rostirolla. I consider the costs associated in providing discovery under this heading would be disproportionate and excessive.
40Nor am I satisfied that the answer is to give unlimited access to Ballymoss to Kollaras’ ERP system, as is sought, so that Korda Mentha can conduct various analyses relating to this category and others. It should be noted this is an application for particular discovery of documents. The issue is whether Kollaras should be ordered to provide additional documents in its possession or not, bearing in mind relevancy and proportionality of compliance with the requests made. In my view, that issue is not to be resolved by ordering Kollaras to produce its ERP software system so that Ballymoss’ forensic accountant can then extensively examine Kollaras’ records, some of which Kollaras says are commercially sensitive. Additionally, as will be seen in the second part of this ruling dealing with the security for costs application, the costs already incurred by Ballymoss for costs claimed for the forensic accountant’s work to date, for one limited aspect, is in the order of $75,000. I am mindful of the overarching obligations that costs must be reasonable and proportionate. This is yet a further reason why I am not prepared to order that Ballymoss’ expert be permitted to access and review Kollaras’ ERP system, given the likelihood that very significant costs would be incurred in doing so.
41Accepting that orders for particular discovery should not be made lightly and for the reasons I have already outlined, I am not persuaded it is appropriate or necessary to make an order under this category.
Category 2
42Ballymoss seeks all financial records including bank statements, evidence recording the sale of stock to the parties named in the column headed “Kollaras Purchaser” in Annexure A to the SACC and the payment of invoices listed in the column headed “Kollaras Invoice Numbers” in Annexure A. This is dealt with by Kollaras in the affidavit of Rostirolla dated 17 March 2023 at paragraphs 18-22, as well as the Cecil affidavit at paragraph 7 dated 16 March 2023. This category of documents is also opposed on the basis that the request is unreasonable, disproportionate and oppressive. Kollaras also said the request has already been partially satisfied.
43Ballymoss’ contention in regard to this category is that the extraction of information by Kollaras is not sufficient or consistent with the claim and notes there is inconsistency in respect of prices listed. For example, in line 7 of Annexure C to the SACC, the product described as Blantons Original has a purchase price listed in the sum of $59.95. Kollaras purchased 30 bottles of this product from Ballymoss and exported one bottle to the Australian Antarctic Division. However, looking at a stock entry spreadsheet discovered by Kollaras a different figure of $60.25 is shown (being a difference of 30 cents). Ballymoss contends this inconsistency is just one example of the unreliability of the extraction of the information by Kollaras.
44Mr Dean of counsel made submissions at the hearing referring to various alleged inconsistencies which he said arose from an examination of Kollaras’ discovery and produced aide memoires directed to this topic. This analysis went to the issue of Kollaras being able to establish any loss, particularly when taking into account profits made on domestic sales. He argued this showed the need for the ERP system to be handed over to Ballymoss’ forensic accountant for review and checking. It may well be that there are inconsistencies between the documents discovered which Ballymoss will wish to cross examine about at trial when Kollaras seeks to prove its losses. In my view, the matters raised by Mr Dean where matters directed to the evidentiary burden which will be faced by Kollaras at trial, rather than the issue of Kollaras being required to discover further documents, being the application currently before the Court.
45In Mr Rostirolla’s affidavit at paragraphs 18‑22, he deposes to the significant burden that would be imposed on Kollaras were it to produce all documents sought in this category. He states that the information on the purchase sale price is already included in annexures to the SACC, which is information he extracted from the Kollaras system. The information is also included in the invoices and purchase orders already discovered. He says that in order to discover evidence of actual payment, Kollaras would need to perform a manual line by line review of product sales reports in order to identify the approximate timing of payment and conduct searches and extract relevant bank statements needed and evidence of payment, et cetera. Additionally, some of Kollaras’ customers also pay by credit card. Therefore, Kollaras would have to review records from both its bank and its credit card payment service provider in order to identify and compile all such records evidencing payment. This would require Kollaras to allocate a fulltime resource for a significant period of time.
46In paragraph 7 of Mr Cecil’s affidavit dated 16 March 2023, he deposes that Kollaras has discovered all purchase orders from and invoices to the parties named in the column headed “Kollaras Purchaser” in its affidavit to documents dated 9 October 2020. Mr Cecil is the solicitor acting on behalf of Kollaras.
47I am not persuaded that it is appropriate to order discovery of these classes of documents. Kollaras has provided information as to the purchase/sales of the products identified in Annexure “A.” The information is also included in invoices and purchase orders already discovered. Having discovered these documents, the request made for additional documents, in effect being all financial records proving payment, is in my view excessive and unnecessary. Essentially, what Ballymoss is seeking to do is to challenge the assertion made by Kollaras that these payments were made. There is nothing to suggest that there is anything false about the information that has already been provided. To the extent that there are any minor inconsistencies amongst the documents that have been discovered, then no doubt, this will provide fertile ground for cross-examination and submission at trial. But overall, I consider the burden imposed for compliance with this category would be disproportionate, unreasonable and is unnecessary. Accordingly, this category is disallowed.
Category 3
48Ballymoss seeks all documents and correspondence passing between Kollaras and the ABF since 1 July 2014.
49Ballymoss alleges that the history between Kollaras and ABF is relevant to the reliance alleged by Kollaras against Ballymoss.
50In its reply, Kollaras admitted having been audited by the ABF. Ballymoss notes it has not made discovery of any documents relating to any audit or correspondence between ABF and Kollaras regarding these orders. Ballymoss states that the reliance by Kollaras on the audits undertaken by ABF in its ongoing relationship, as alleged by Ballymoss, is relevant to the alleged reliance pleaded against Ballymoss. Ballymoss’ case is that Kollaras traded as it had always done and the alleged representations had no effect on the conduct of Kollaras. Therefore, the relationship with ABF and the trading history of Kollaras with its export customers is a relevant matter to that issue.
51Kollaras says that it has partially satisfied the request having already made discovery of the documents. It otherwise says the documents sought are irrelevant and it is unreasonable, disproportionate and oppressive.
52This aspect is dealt with in the Rostirolla affidavit dated 17 March 2023 at paragraphs 23 and 24. Mr Rostirolla deposes that Kollaras has already discovered all documents and correspondence passing between it and the AFB relevant to the goods the subject matter of the SACC. He deposes further that discovery of all documents in this category would require Kollaras to hand over sensitive commercial information contained in Kollaras’ duty drawback applications to the ABF. As to the latter, Ballymoss noted that in the event documents were sensitive, then arrangements could be put in place to deal with any issues regarding confidentiality.
53Mr Cecil deposes in his affidavit dated 16 March 2023 at paragraph 8 that Kollaras has discovered all documents and correspondence passing between Kollaras and the ABF which relate to the sale and export of goods that are the subject of Kollaras’ counterclaim.
54I am not satisfied that the discovery of these documents should be provided in circumstances where Kollaras has already discovered documents and correspondence with the ABF relating to the goods, the subject of the SACC. Further, documents are sought from 1 July 2014, which is well before the sales of the relevant goods in May 2018 commenced in the first period pleaded in the SACC, so that the date span sought is too wide in any event. It will ultimately be a matter for trial as to whether or not Kollaras’ dealings with the ABF can have any bearing on the issue of reliance by Kollaras on the misrepresentations said to have been made by Ballymoss. Overall, I am not persuaded that I should exercise my discretion and order further discovery of the documents identified in category 3.
Category 4
55Ballymoss seeks documents and correspondence passing between Kollaras and each of Worldwide Beverage Group Pty Ltd, Daniel Baronian, VP Brands International Pty Ltd, Joseph Saad or Remy Saad, between 3 February 2018 and 20 July 2020.
56At the hearing, counsel for Ballymoss informed the Court that his client was no longer pursuing the documents requested in category 4.
Category 5
57Ballymoss sought all documents and correspondence between Kollaras and various purchasers identified in Annexure A to the SACC between 1 July 2014 and 20 July 2020. Whilst Kollaras accepted the documents are arguably relevant on the pleadings, the application was said to be unreasonable, disproportionate and oppressive.
58This aspect was dealt with in paragraphs 27 and 28 of Mr Rostirolla’s affidavit dated 17 March 2023.
59Mr Rostirolla deposed that Kollaras has already discovered all the invoices relating to its sales to these entities. He says that discovery of all documents in this category would be enormous. These businesses represent some of Kollaras’ largest export customers. There would be thousands of sales to them during the six year period in question. For each such sale, there would often be 20 emails between Kollaras and its customer, usually covering “run of the mill” matters such as shipping details, payment of a deposit, loading shipping advices, photos of packed containers, and packing and logistics issues.
60I am not satisfied it is appropriate to order discovery of the class of documents sought in category 5. I am not persuaded that such documents are necessary or particularly relevant to any of the central issues in dispute. Furthermore, provision of such documents would be an onerous task and be a disproportionate burden upon Kollaras. Therefore, I will not allow this category of documents.
Category 6
61Ballymoss seeks all documents evidencing or constituting claims made for import duty drawback on the ABF by Kollaras since 1 July 2014 in respect of goods purchased from Ballymoss.
62Ballymoss argues the history between Kollaras and ABF is relevant to the reliance alleged by Kollaras against Ballymoss. Schedule 1 to the defence to the SACC pleads the relevant period running from 1 July 2015. It said that the reliance by Kollaras on audits undertaken by ABF and its ongoing relationship as alleged by Ballymoss in its defence, is relevant to the alleged reliance pleaded against Ballymoss.
63Item 26 of the Kollaras affidavit of documents dated 9 October 2020 provides a bundle of ABF claims for drawback and supporting schedules and invoices in respect to the export alcohol products. Invoices for non Ballymoss suppliers have been omitted. Ballymoss said that Kollaras has subsequently provided an unredacted copy of item 26.
64Kollaras’ defence to this category is that it has already been partially satisfied; otherwise, it is irrelevant, unreasonable, disproportionate and oppressive.
65Mr Rostirolla deposes at paragraphs 29 to 33 of his affidavit dated 17 March 2023 that Kollaras has already discovered all documents and correspondence passing between it and ABF relevant to the goods the subject of Kollaras’ counterclaim, including all drawback claims made in respect of those goods. During the relevant period, Kollaras typically lodged one to two drawback claims per week. Each such claim is comprised of the drawback claims form and a schedule of calculations of the drawback amounts, a copy of the purchase invoice, sales invoice, export declaration number documents for the goods. Mr Rostirolla says there is no way to limit the production of drawback claims only involving goods originally purchased from Ballymoss. Kollaras would have to review each and every drawback application during the period in order to identify those that included goods originally purchased from Ballymoss. The total of the volume of documents to be reviewed would be immense.
66He also objects to the discovery of documents in this category as it would require Kollaras to hand over sensitive commercial information contained in its drawback applications to ABF which are completely unrelated to the products the subject of this proceeding. As to the latter, Ballymoss says that the fact that matters may be commercially sensitive is not a ground for objection to discovery. In any event, Kollaras has already subsequently provided an unredacted copy of item 26. Therefore, there is no basis for the allegation of commercial sensitivity, as alleged by Kollaras.
67Mr Cecil in his affidavit dated 16 March 2023, deposed at paragraph 9 that all documents evidencing or constituting claims made for import duty on the ABF which relate to the sale an export of goods, the subject of the SACC have been discovered.
68These documents appear to be relevant in regard to the pleadings although the breadth of the request is too wide. But I am not persuaded however that I should exercise my discretion to order the discovery sought under this category, as the total volume of documents to be reviewed by Kollaras would be immense. In my view, the request is unreasonable and compliance would impose an oppressive and disproportionate burden on Kollaras.
Paragraph 5(c) - documents listed in the schedule marked ‘Kollaras Discovery sought 20 April 2022’
69Ballymoss seeks discovery of various categories of documents identified in a schedule to its discovery application identified as “Kollaras Discovery sought 20 April 2022. Attached to this ruling and marked Annexure 2 is a copy of this schedule.
Category 1
70The documents in category 1 are no longer sought.
Category 2
71Ballymoss seeks all the documents upon which Annexures A to D in the SACC rely which have not already been produced. This is not the subject of any opposition by Kollaras. In the Rostirolla affidavit dated 17 March 2023 at paragraph 34, it is agreed that these documents will be supplied.
Category 3
72Ballymoss seeks an electronic copy of Kollaras stock records. Ballymoss notes that Mr Rostirolla confirms Kollaras can produce electronic reports for stock movements but only from 2015 onwards when the ERP system commenced. Kollaras has already provided the agreed discovery which are stock purchase, balance and movement documents as set out in the schedule – agreed Kollaras discovery in Kollaras’ affidavit of documents provided on 1 June 2022.
73However, Ballymoss seek the production of an electronic copy of Kollaras’ ERP system to enable its forensic accountant, Mr Ross of Korda Mentha, to conduct an analysis which is likely to provide sufficient discovery. Mr Ross addressed these matters in his affidavit of 17 November 2022 at paragraph 58.
74This category of documents is opposed, so far as it has been partially satisfied, but otherwise it would require creation of a new document which would be unreasonable, disproportionate and oppressive. The basis of the objection is dealt with by Mr Rostirolla in his affidavit dated 17 March 2023 at paragraphs 35-38. It is also dealt with by Mr Cecil in his affidavit dated 16 March 2023 at paragraph 10.
75Mr Rostirolla, in his affidavit, deposes at paragraph 35 that Kollaras can produce electronic reports for stock movements of the relevant product. Records are only available dating back to 2015 when Kollaras’ current ERP system records began. He says that discovery of this category of documents would require the production of a massive amount of material, effectively the stock movements for every relevant product since as early as 2015. It would also require the creation of a customised report by Kollaras’ external ERP consultants. He estimates that this cost would likely amount to a minimum total of $20,000 for discovery of just this category of documents.
76Mr Cecil, in his affidavit at paragraph 10, deposes that Kollaras has already discovered stock purchase, balance and movement documents, as set out in the schedule- agreed Kollaras’ discovery to Ballymoss in Kollaras’ affidavit of documents provided on 1 June 2022.
77It is not disputed that these documents are relevant but Kollaras says they have already been discovered. The documents discovered are the stock purchase balance and movement documents. The request made is for electronic reports for stock movements of the relevant products. Kollaras deposes this would involve the creation of a new report at considerable expense. I am not persuaded that this expense would be justified and proportionate. Furthermore, I am not satisfied that the solution, as put forward by Ballymoss, is to then provide Ballymoss with access to an electronic copy of Kollaras’ ERP system to enable the analysis to be conducted as foreshadowed by Mr Ross.
Category 4
78Ballymoss seeks documents which record the outcome of stocktakes performed in relation to Kollaras’ inventory between the earliest alleged supplies by Ballymoss to the first annual reporting date after the last alleged relevant export by Kollaras.
79Mr Rostirolla deposes at paragraphs 39-41 of his affidavit of 17 March 2023 that there are no documents to discover under this heading.
80Mr Rostirolla deposes that Kollaras conduct a stocktake at least once a year. However, during the relevant period, Kollaras trialled “cyclic accounting,” which is effectively a rolling stocktake method where a row or bay within Kollaras’ warehouse was subject to a stocktake each week or two weeks over a period of about six months. However, Kollaras does not keep the contemporaneous count sheets used when it performs a stocktake. The Kollaras system does record any stock adjustments that were made as a result of any stocktake which would be shown in stock movement reports and subject to the same position as he described in respect of the documents sought under paragraph 3. In essence, this would require the creation of a new document.
81In my view, it is futile to order Kollaras to produce documents that do not exist, nor should it be ordered to create a new document recording stocktakes.
82Again, Ballymoss seeks the production of the ERP system in electronic form. For the same reasons already given, I am not persuaded it is appropriate to order that the ERP system be provided in electronic form to Ballymoss. This category is refused.
Category 5
83Ballymoss seeks documents relating to the alleged supply of goods to export customers, including bills of lading, proof of delivery documents and remittance advices and other similar documents which record payments received by Kollaras from those customers.
84The application is opposed. It said that essentially the request is unreasonable, disproportionate and oppressive. These matters are dealt with by Mr Rostirolla in his affidavit dated 17 March 2023 at paragraphs 42-50.
85Similarly, Mr Cecil canvassed the matter in his affidavit dated 16 March 2023 at paragraph 11.
86Mr Cecil says in paragraph 11 that Kollaras discovered all purchase orders and invoices to the parties named in the column headed “Kollaras Purchaser.” Mr Rostirolla says in paragraphs 42‑50 that this category would require Kollaras to conduct a manual line-by-line review of product sales summaries and then manually review Kollaras’ emails to/from the relevant customers at or about the time of each sale in order to retrieve an electronic copy of the Bill of Lading for each overseas sale. In order to do so, it would take a Kollaras employee months and months and it would most likely be incomplete.
87Ballymoss says these documents are critical to prove sales and delivery to export customers. Kollaras must establish it sold the relevant goods to export. Two proofs are involved – one actual sale, and proof of export which is required for duty drawback. It said these are relevant to the quantification of Kollaras’ loss and damage and refers to Mr Ross’s affidavit of 29 July 2022 at paragraph 43. Ballymoss says Kollaras should discover all documents to support its case on sale of identified stock and export upon which Kollaras will rely. This should include the product sales summaries referred to by Mr Rostirolla in paragraph 42, which then can be analysed by Korda Mentha.
88Self-evidently, in order to prove its loss on export sales, Kollaras will need to establish that it on sold Ballymoss stock to export customers and that it did not receive duty drawback on those sales. The proof of its losses will be a matter for evidence at trial and will no doubt, be hotly contested. I am not persuaded it is necessary that all bills of lading sought must be discovered, nor proof of delivery documents signed by Kollaras’ customers and/or remittent advices which record payments. I am satisfied that the scope of the documents sought would impose an unnecessary burden upon Kollaras and be oppressive. Therefore, I decline to order this category of documents.
Category 6
89Ballymoss seeks financial statements of Kollaras for the four years ended 30 June 2021. This is opposed on the basis that the documents are publicly available. It was referred to by Mr Rostirolla in his affidavit of 17 March 2023 at paragraph 51. The relevance of these documents was referred to by Mr Ross in his affidavit of 29 July 2022 at paragraph 54. Ballymoss says that insofar as accounts are publicly available, this does not excuse discovery. It says that the statutory accounts are not the same as the financial statements and the full end of year accounts maintained by Kollaras.
90Whilst as a general proposition, a party is not obliged to discover a document which it knows to be in the possession of its opponent, Ballymoss says that the statutory accounts are not the same as financial statements and full end-of-year accounts maintained by Kollaras. Other than saying the documents are publicly available, no basis is otherwise put as an objection for the production of these documents. Therefore, I am satisfied that these are documents which can and should be discovered by Kollaras.
Category 7
91Ballymoss seeks, as at 30 June of each of the four years to 2021, a list of Kollaras’ trade receivables, including for each trade debtor, the amount owed and the composition (in terms of deliveries made, payments received and credits provided) of each debt. This is said to be relevant by Mr Ross at paragraph 45 of his affidavit dated 29 July 2022. Ballymoss says it does not want Kollaras to create reports, but rather it wants the ERP system for analysis and any documents not on the ERP system relevant to this issue.
92Mr Rostirolla deals with this category at paragraphs 52 to 54 of his affidavit of 17 March 2023. The basis of the opposition is that it would require creation of a new document which would be unreasonable, disproportionate and oppressive. He states that Kollaras can produce a trade receivables report for each year, which would include all trade debtors. He says there is no way in the Kollaras’ ERP system to limit this to trade debtors in respect of product that was originally purchased from Ballymoss or trade debtors only for the product of the kind purchased from Ballymoss or export or domestic sales trade debtors. The reports do not break down the composition of each debt. There is just one line showing the trade debt owed by each trade debtor. In order to comply and show the composition of debts outstanding at a particular time, Kollaras would have to prepare a reconstructed spreadsheet manually, after reviewing product sales reports for every product, in order to identify what such products were purchased but remain unpaid for each trade debtor at the point in time which would take months.
93Having regard to Mr Rostirolla’s evidence, I am not persuaded that this category should be ordered because it would impose a disproportionate and unreasonable burden on Kollaras. Again, Ballymoss simply says it does not want Kollaras to create reports but wants access to the ERP system to conduct its own analysis on any documents not on the ERP relevant to this issue. For reasons already given, I am not persuaded it is appropriate to give Ballymoss access to the ERP system.
Category 8
94Ballymoss seeks documents which record the total volume of each of the relevant products sold by Kollaras to domestic customers along with any documents which record purchase orders from domestic customers that were not fulfilled by Kollaras. Ballymoss says that it wishes to obtain access to the ERP system for analysis and for any documents not on the ERP system relevant to this issue. This category is referred to by Mr Ross in his affidavit at paragraph 46.
95This category is opposed by Kollaras and dealt with by Mr Rostirolla in his affidavit of 17 March 2023 at paragraphs 55-56. Essentially, the application is opposed because it would require the creation of a new document which would be unreasonable, disproportionate and oppressive. Further, there are no documents to discover in respect of unfulfilled purchase orders.
96Similarly, as with Category 7, I am not persuaded that Ballymoss be given access to Kollaras’ ERP system. Mr Rostirolla does depose that electronic sales customer reports would be subject to the same limitations identified in respect of Category 7. He says that Kollaras does not keep records of purchase orders that were not fulfilled by Kollaras. In the circumstances, it is not appropriate for Kollaras to have to prepare a new document. I consider this request is excessive and disproportionate and should not be allowed.
Category 9
97Under this heading, Ballymoss seeks various BAS statements or other records which record the last date which predates the earliest Kollaras’ purchase order on which Kollaras’ stock records record that Kollaras had no stock on hand and sales revenue and GST collected. Pausing here, the request as drafted is very unclear.
98This category is opposed by Kollaras. It said there are no documents to discover under this category and it would require the creation of a new document. This is dealt with by Mr Rostirolla in his affidavit of 17 March 2023 at paragraphs 57-61.
99Ballymoss relies on paragraph 47 of Mr Ross’ affidavit dated 29 July 2022 to say that the documents are relevant. Ballymoss says it does not want Kollaras to create reports but seeks the other “records” referred to in Mr Rostirolla’s affidavit at paragraphs 59 and 61.
100Mr Rostirolla deposes that Kollaras lodges monthly BAS statements which do not break down stock on hand level. Nor do they break down sales revenues to the degree described by this category. The BAS statements are generated automatically so Kollaras would need to manually reconstruct a document or spreadsheet from its other records to provide this information. I am not persuaded of the relevance of these documents. But even if I were, Kollaras should not be obliged to create a new document, which is not the purpose of an application under an order for particular discovery which requires a party to produce additional documents. Again, I consider the task that would be imposed upon Kollaras if this category were ordered is disproportionate and unreasonable.
Category 10
101Ballymoss seeks documents which record or evidence each supplier to supplier and original importer named in the unredacted Kollaras discovered document number 26 to the affidavit of Peter Rostirolla affirmed on 9 October 2020. Ballymoss says that it is entitled to know whether, in the relevant period of Annexure A, Kollaras was requesting and receiving from non-Ballymoss suppliers any documents evidencing or recording the original supplier or importer. This goes to the allegation that Kollaras assumed that duty was paid on the stock purchased from Ballymoss. This is referred to by Mr Ross in his affidavit at paragraph 48.
102The topic is dealt with by Mr Rostirolla in his affidavit of 17 March 2023 at paragraphs 62-64. He says that Kollaras does not know the supplier to its supplier or the original importer of any exported goods. It only obtains this information by asking its supplier to identify the same. In respect of the documents evidencing each supplier to supply original importer of the goods the subject of these proceedings, he refers to his affidavit affirmed on 26 April 2022. Mr Rostirolla says this information was provided by Mario Monacellar of Ballymoss. He goes on to say these documents are common to both parties.
103Mr Rostirolla further deposes that if Kollaras is ordered to provide discovery of documents recording evidence of the identity of the supplier to supplier and original importer for the other goods that are not the subject of these proceedings, Kollaras would have to manually review its email records with its relevant suppliers. This would include all such goods at or about the time of purchasing these goods and exporting them in order to identify records of when it asked for and received such information from its suppliers over many such communications would have been made by phone and there may be no written record.
104I am not persuaded that these documents should be provided because the documents relate to goods from non-Ballymoss suppliers, which are not the subject of this proceeding. Their relevance, at best, is peripheral to the central issues in dispute. Details in respect of the goods that are the subject of this proceeding have already been given to Ballymoss by Kollaras and are documents common to both parties. I consider the request made under category 10 should not be allowed given the lack of relevance. It would also be disproportionate to require Kollaras to conduct a manual review and noting further, that many communications may not have been reduced to writing.
Paragraph 5(c)(c) - documents listed in the schedule marked ‘Kollaras Discovery sought 5 October 2022’
105Ballymoss seeks the documents listed in the schedule marked “Kollaras Discovery sought 5 October 2022”. The documents identified in this heading are listed in the schedule attached to the discovery application. A copy of the schedule is attached to this Ruling and marked Annexure 3.
106There are two categories of documents sought under this heading. The categories relate to documents referred to at Tab 8, Product Spreadsheet, in “Annexure A-Lots.’
107Ballymoss says that the Tab 8 documents are extracts from the ERP system, which is not proper discovery. It said the veracity of the documents cannot be tested, which is why it wants access to the ERP system so that Korda Mentha can run relevant analysis. As to commercial sensitivity, it said Ballymoss is not a competitor with Kollaras in the export market, as Ballymoss has never been an importer or exporter. Although as noted above, Kollaras also operates in the domestic market as a retailer and wholesaler.
108In response to paragraph 5(c)(c), Kollaras opposes the application for particular discovery of the specified categories of documents referred to in or “relevant to” the contents of the Tab 8 Documents on the following bases:
(a) there are no documents to discover in respect of many of the categories because either the Tab 8 Spreadsheet has been misunderstood by Ballymoss and does not actually refer to other documents. The explanations sought by Ballymoss have been provided in correspondence by Holding Redlich to Rennick & Gaynor on 12 October 2022, or discovery has already been made by Kollaras; and
(b) part of the request requires the creation of new documents.
109Kollaras opposes the application for access to its ERP database and its SQL database claiming there is no legitimate reason for access to be granted to the entire database in circumstances where the relevant documents (being the Tab 8 documents) have already been extracted from the database. The Table 8 documents evidence the stock movements of products during the relevant period whether purchased from Ballymoss or other suppliers until exported.
110The documents sought are dealt with by Mr Rostirolla in his affidavit of 17 March 2023 at paragraphs 65-70. The reference to paragraph 1(a) in the request is a reference to a system auto generated reference. It is not a document that Kollaras produces or uses. He deposes that Kolloras has provided a response to the plaintiff’s lawyers in answer to sub paragraphs 1(b) and (c). Purchase orders have been discovered under 1(d) as have drawback claims under 1(2). As to 1(f), he deposes that the Tab 8 documents are direct extracts from the ERP system. Whilst Kollaras could run reports structured in any number of different ways, such documents would be generated documents and not extracts from Kollaras’ system.
111In paragraph 2, Ballymoss seeks the ERP accounting system operated by Kollaras on a read only access basis or, alternatively, a copy of the SQL database. This is opposed as it is said it is not a proper request for discovery, it is substantially irrelevant and also includes commercially sensitive material. Mr Rostirolla deals with this at paragraph 71 of his affidavit of 17 March 2023. He says that the ERP system is the interface used to access and display records from Kollaras SQL database. Kollaras has extracted the Tab 8 documents form its ERP system. The SQL database holds almost every piece of commercially sensitive information relevant to Kollaras’ epurations. It goes back seven years and is likely to be incredibly large. Kollaras objects to Ballymoss accessing its ERP system on the basis that Ballymoss is a competitor in the market for the trading and sale of alcohol products.
112For the reasons already stated, I will not order Kollaras to produce its ERP system to Ballymoss. It is futile to order discovery where there are no documents to discover nor it is appropriate to require Kollaras to create a new document. The task of compliance with this category would be disproportionate and unnecessary in my view. Consequently, I will not order discovery of this category.
Paragraph 5(d) - documents listed in schedule marked ‘Kollaras Drawback Advices’
113The documents sought under paragraph 5(d) are listed in the schedule attached to the discovery application referred to as “Kollaras drawback advices”. A copy of the schedule is attached to this ruling and marked Annexure 4. Four categories of documents are sought. Kollaras objects to providing these documents on the basis that they are the subject of legal professional privilege.
114The first category sought are the emails referred to in paragraphs 16 to 21 of Mr Rostirolla’s affidavit of 22 February 2022. The second category are the emails referred to in paragraphs 6, 7 and 8 of Mr Kollaras’ affidavit of 24 February 2022. The third category seeks all legal advices provided to Kollaras about or concerning its entitlement to import duty drawback at any time from the date of its first purchase from Ballymoss and about or concerning any drawback application to ABF. Finally, the fourth category seeks all legal advices provided to Kollaras concerning the term of each sale included in each Kollaras purchase order referred to in paragraph 4 of the SACC.
115At the hearing, counsel for Kollaras noted that the third and fourth categories were not restricted in any way. There was no confinement to a particular date range or any other matter that might be relevant on the pleadings. As currently drafted, the request made would include any legal advice which Kollaras was currently receiving which should not be permitted. In reply, counsel for Ballymoss submitted his client was not seeking ongoing advices. The advices sought in paragraph 3 could be confined to advices from the start of the trading relationship between Ballymoss and Kollaras to the date of the last export sale shown in Annexure A which appeared to be 19 December 2019.[14]
[14] T137
Plaintiff’s submissions
116Ballymoss contends Kollaras has waived legal professional privilege, either expressly or impliedly, over the documents sought.
117Annexure A to the SACC discloses that Kollaras was buying stock from Ballymoss up to about 23 November 2019 and selling some stock allegedly to export until 19 December 2019. Ballymoss argues that the disclosure of the timing of legal advice received by Kollaras shows that Kollaras was receiving legal advice about its entitlement to obtain drawback of import duty and rights against the ABF over the same period and up to 20 December 2019.
118Ballymoss contends the disclosure of an email from Kollaras to the ABF dated 20 December 2019 referring to legal advice amounts to an express waiver of privilege. The substance of the advice has been disclosed, namely, that Kollaras has received advice that it could bring proceedings in the Federal Court against the ABF for orders directing the ABF to pay drawback to Kollaras.
119Ballymoss further argues that there is implied waiver of privilege by Kollaras because of its pleaded case. Kollaras pleads it relied upon the alleged conduct of Ballymoss and that this caused Kollaras to believe that ABF would pay drawback. But it is clear that Kollaras was obtaining legal advice from Holding Redlich in a relevant period, that Kollaras has now admitted in its reply that it relied upon the past practice of the ABF in paying drawback, the ABF audit process over many years and its experience in making drawback applications since 2015.
120Ballymoss notes that Kollaras does not deny in its reply that it relied upon legal advice it received from Holding Redlich as alleged in paragraph 20(b)(iv) of the defence to the SACC.
121Ballymoss submits that the test for waiver of privilege, if implied, is whether the particular conduct of Kollaras is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect.[15] It would be unfair and misleading to allow Kollaras to maintain privilege, despite the inconsistent action of pleading a counterclaim against Ballymoss relying on allegations of reliance and belief, putting the state of mind of the Kollaras' officers in issue. In its reply, Kollaras went further and itself relied upon the 20 December 2019 email to the ABF for its full terms and effect. Ballymoss submitted that the wording of the pleadings needed to be read closely to see the extent to which Kollaras had put its state of mind in issue that is inconsistent with maintaining the claim for privilege.
[15] Evidence Act 2008, s122
122Ballymoss then referred to a number of authorities on pages 10 and 11 of its written submissions dealing with implied waiver due to inconsistency. One of the cases relied upon by Ballymoss namely, GR Capital Group Pty Ltd v Xinfeng Australia International Investment Pty Ltd[16] contains a helpful summary of the relevant principles. Macfarlan JA gave the lead judgment with which the other NSW Court of Appeal judges agreed. After conducting an extensive review of the authorities His Honour set out the following five propositions:
“(1) The test is one of inconsistency between the privilege holder’s conduct and its maintenance of the privilege, not one of general fairness or of relevance to an issue in the proceedings.
(2) Enquiring whether the privilege holder has made express or implied assertions about the contents of the confidential communications, and whether its conduct has therefore “laid open the communications to scrutiny,” assists in ensuring that the court’s focus is on inconsistency rather than simply relevance. If the privilege holder is understood to be asserting something about the contents of the communications, it is but a short step to conclude that it would be inconsistent for it to prevent those contents being scrutinised.
(3) On the other hand, mere relevance of the content of the privileged communications to an issue raised in the proceedings by the privilege holder does not equate to inconsistency – something more is needed. It is of the essence of legal professional privilege that, if maintainable, it entitles a party to withhold potentially relevant documents from inspection by the other party.
(4) The determination of whether there has been an express or implied assertion about the contents of privileged communications giving rise to a relevant inconsistency is an evaluative decision to be made after consideration of the whole of the circumstances of the case. No hard and fast rules can be formulated. Those circumstances will include the degree of relevance of any advice to the issues in the proceedings, the centrality of the relevant issues in the proceedings and the likelihood of advice having been given, informed as the High Court said in Mann v Carnell, by considerations of fairness.
(5) Having considered all those circumstances, the court must decide whether it would be inconsistent with the privilege holder’s conduct for it to maintain privilege. The line between relevance to an issue and inconsistency in this context may be very fine and therefore one on which views might well differ.”[17]
[16] [2020] NSWCA 266 at [57]
[17] GR Capital [2020] NSWCA 266 [57]
123In Viterra,[18] the Victorian Court of Appeal made it clear that there is no settled list of actions which gives rise to implied waiver. Each case must be assessed on its own set of facts and circumstances.
[18] Viterra Malt Pty Ltd v Cargill Australia Ltd (2018) 58 VR 333
124In summary, Ballymoss says that Kollaras has explicitly pleaded reliance and belief and put in issue its legal rights against the ABF so as to constitute “something more” than mere relevance. The legal advice puts in issue Kollaras’ understanding of the requirements for obtaining duty drawback. The pleaded matters are entirely inconsistent with the maintenance of the privilege claimed and therefore the privilege has been waived. Further, it would be manifestly unjust and misleading to permit Kollaras to maintain privilege over the very documents which go to whether or not it actually relied upon Ballymoss as alleged or knew differently because it was advised what its obligations were with respect to the ABF and the drawback claim process.
Defendant’s submissions
125Kollaras opposes the application and maintains that the documents sought in Annexure 4 are and remain privileged.
126In response to the categories sought under paragraph 5(d), Kollaras’ evidence is that there are potentially five emails falling within categories one and two or are otherwise related to documents within that form:[19]
(a) an email from Kollaras to Holding Redlich dated 7 November 2019 “seeking advice in relation to delays by the ABF in approving and paying Kollaras’ duty drawback applications”;
(b) an email from Holding Redlich to Kollaras dated 8 November 2019 “regarding the availability of legal grounds to urge the Collector (within the meaning of the Customs Act 1901 (Cth) to determine Kollaras’ duty drawback applications. That advice contained a summary of Holding Redlich’s advice and recommendations along with a more detailed discussion of its advice and the reasons for it;”
(c) an email from Holding Redlich to Kollaras dated 11 November 2019 “regarding the same matters, discussing a further matter that had arisen from my further consideration of the matter”;
(d) an email from Kollaras to Holding Redlich dated 19 December 2019 forwarding an email between Kollaras and the ABF; and
(e) an email from Holding Redlich to Kollaras dated 20 December 2019 providing “advice in relation to Kollaras’ correspondence with the ABF.”
[19] Paragraph 29 of Defendant Submissions 17 March 2023
127Kollaras claims the relevant documents constitute a confidential communication made between them and Holding Redlich for the dominant purpose of Holding Redlich providing legal advice to the client and/or[20] a confidential communication between Kollaras and Holding Redlich made for the dominant purpose of Kollaras being provided with professional legal services relating to an anticipated Australian proceeding in which Kollaras might have been a party.[21]
[20] Evidence Act 2008 (Vic) s118
[21] Evidence Act s119
128The affidavits affirmed by Peter Rostirolla on 23 February 2022 and John Kollaras on 24 February 2022 were expressly prepared in support of Kollaras’ privilege claim. Each witness deposed that he did not intend to waive any privilege.
129The email dated 19 December 2019 referred to in paragraph 5(h) of the reply is not a communication for which Kollaras claims privilege. The email is merely informing the ABF that Kollaras was aware of options to achieve its objectives beyond the administrative application process of which it and the ABF were presently seized. One of those options is “proceedings in the Federal Court for orders directing ABF to pay our drawback claims.” There is no mention of what the other options may be. Nothing is said about the prospects of legal proceedings nor any advice about such legal proceedings. The reader is left unaware as to the substance of the advice such that there can be no relevant inconsistency. The email makes no reference, directly or indirectly, to the strengths of the potential Federal Court claim or any other “option.” Nor does it assert a legal entitlement to any particular relief. It merely states that such relief might be sought. Kollaras’ awareness of its options was based on information from lawyers, not its own search or enquiries.
130To amount to waiver, the substance of the advice needs to be disclosed and further, the substance of the advice must be used in some way, neither of which applied in this case. Kollaras maintains there is no relevant inconsistency sufficient to waive privilege arising from this email.
131The first part of the misrepresentation claim relates to the period of orders between May 2018 and November 2018. This was before the email of 20 December 2019.
132The relevant representation that Kollaras pleads for the first and second period is that Ballymoss represented that customs duty had been paid or to its knowledge, customs duty had been paid and failed at any time to communicate otherwise. Reliance on the representation is dealt with in paragraph 6(f) of the SACC. Kollaras believed that customs duty had been paid and that were it to do certain things, it would receive a refund drawback from the ABF. Kollaras submits that Ballymoss then incorrectly argues that Kollaras has therefore put its state of mind in issue because Kollaras pleads it relied upon Ballymoss “conduct in believing that customs duty had been paid and it would receive a drawback.” Kollaras contends its plea of reliance upon Ballymoss’ conduct does not therefore lay open to scrutiny any evidence going to whether Kollaras relied upon other matters, including privileged communications so as to disprove the pleaded allegation of reliance on their conduct.
133Kollaras submits that it has not attempted to boost its case by reliance upon the advice in any way. It makes no assertion nor brings a case about the contents of a privileged communication.
134In support of the argument that privilege has not been waived, Kollaras relies on Seketa v Gadens Lawyers,[22] in that “merely putting state of mind in issue is not enough for privilege to be waived in respect of communications relevant to that state of mind, and something more than these matters is required.” Privilege in a communication will only be waived where the privilege holder makes an assertion (express or implied) or brings a case, which is either about the contents of an otherwise privileged communication or which necessarily lays open the confidential communication to scrutiny.[23] Kollaras says that Ballymoss has not provided the “something more.”
[22][2021] VSC 245
[23] Ibid at [56]
135Similarly, the New South Wales Court of Appeal has held, in dicta approved by the Full Federal Court,[24] and referred to with approval in Macquarie Bank Limited v Arup Pty Ltd:[25]
“It is not enough to bring about a waiver of client legal privilege that the client is bringing proceedings in which the content of the privileged communications could, as a reasonable possibility, be relevant and of assistance to the other party. For the client to do this is not inconsistent with the maintenance of the privilege, and does not give rise to unfairness of the type in question. What would involve inconsistency and relevant unfairness is the making of express or implied assertions about the content of the privileged communications, while at the same time seeking to maintain the privilege.”
[24] Council of the New South Wales Bar Association v Archer (2008) 72 NSWLR 236, [48]
[25][2016] FCAFC 117 at [32]
136The Queensland Court of Appeal has held:[26]
“… where the privilege holder’s state of mind is an issue in a proceeding, the taking of advice and the content of that advice will be facts beyond reach of the other party unless the privilege holder has attempted to boost its case by reliance on the advice in some way. … justify its position (or state of mind) by reference to the substance or effect of legal advice it has received, …”
[26]See The Queensland Local Government Superannuation Board v Allen [2016] QCA 325 [70]-[73]
137During the hearing on 20 March 2023, Kollaras also relied on Australian Agricultural Company Limited v AMP Life Limited.[27] The central issue in this case concerned the defendant pleading reliance on certain legal advices in accepting a tender offer and in pleading its corporate state of mind in its defence, it had waived privilege over that legal advice.[28]
[27][2006] FCA 371
[28] Ibid
138Cowdroy J held at [34] that:
“… in order to waive privilege a party must assert a belief which is likely to have been, or is explicitly said to have been, materially dependent upon legal advice given to that party. In that case the proof or otherwise of the belief is dependent upon the legal advice and accordingly privilege is waived.”
139And further at [35]:
“In the present case, the belief pleaded by AMP is not intimately connected with the legal advice given to it at the time … AMP’s defence does not make assertions as to the content of legal advice given to it; nor does AMP’s defence state that its decision to accept the tender … was based upon legal advice …”
140Consequently, his Honour held that he did not consider AMP’s pleadings were inconsistent with the maintenance of its legal professional privilege.
141Kollaras also referred to Viterra Malt Pty Ltd v Cargill Australia Ltd [29] and Osland v the Secretary of the Department of Justice[30] in its written submissions, as did Ballymoss.
[29](2018) 58 VR 333
[30](2008) 234 CLR 275
Analysis
142There was no dispute between the parties about the relevant legal principles to be applied. Ballymoss agreed the legal test relating to waiver of legal professional privilege was correctly identified in Kollaras’ written submissions.[31]
[31] T18
143The legal advice sought concerns Kollaras’ rights it might have against the ABF relating to claims for drawback duty. Ballymoss’ claim is that the advice Kollaras received about its rights against the ABF is directly relevant to the question of whether Kollaras relied upon any alleged misrepresentation made by Ballymoss. It is not suggested that Kollaras sought and relied upon legal advice as to whether it should buy stock from Ballymoss before doing so.
144No argument was raised that the documents sought in Annexure 4 were not privileged communications – the focus of the debate revolved around the issue of waiver.
145The first issue is whether Kollaras has expressly waived privilege. I am not persuaded that the email of 19 December 2019 from Kollaras to the ABF amounts to an express waiver of legal professional privilege. I agree with the stance put forward by Kollaras, namely, that the email does not inform the reader of the substance or the gist of the legal advice provided. The mere reference to one potential option being to issue proceedings in the Federal Court is not enough, in my view, to waive privilege about the contents of the advice received. Consequently, I am not satisfied that Kollaras has expressly waived its right to claim legal professional privilege as result of this email.
146In the course of oral argument, counsel for Ballymoss referred to paragraph 23 of the affidavit of Mr Cecil, Kollaras’ solicitor dated 16 March 2023.[32] He submitted this paragraph constituted a waiver of the substance of legal advice given. This paragraph reads as follows:
[39]Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377 at [15]-[16]
[40]Saint Gobain RF Pty Ltd v Maax SPA Corporation Pty Ltd [2004] VSC 335 at [8]
187Once the threshold requirement is met, the discretionary power to award security is enlivened. The court will then have regard to various well known discretionary factors when exercising its discretion but accepting the court has an unfettered discretion whether to order security.[41]
[41]See for example US Realty Investments LLC #1 & Ors v Need [2013] VSC 590 per Derham AsJ at [21]
188In the recent decision of Credit Clear Limited,[42] Riordan J outlined the various discretionary factors as follows:
[42][2022] VSC 206 at [10] – [13]
“10.If the defendant satisfies the threshold condition, the Court has an unfettered discretion to award security for costs, which must be exercised judicially, having regard to all of the circumstances.
11.The factors commonly considered to be relevant in the exercise of the discretion have included the following:
(a)the merits of the claim;
(b)whether the orders being sought would stultify the claim;
(c)whether the defendant was the cause of the company’s impecuniosity;
(d)whether there was delay in making the application;
(e)whether there are any persons standing behind the company who are likely to benefit from the litigation and who are willing to provide the necessary security;
(f)whether the persons standing behind the company have offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking; and
(g)whether the company is in substance a defendant, as an order ought not be made against parties who are defending themselves and thus forced to litigate.
12.The burden of satisfying the Court that the threshold condition has been met and that the Court should exercise its discretion to order security for costs rests on the defendant ‘from first to last.’ However, matters that are peculiarly within the knowledge of the plaintiff, such as:
(a)whether an order for security would stultify its capacity to conduct the litigation or be oppressive; and
(b)whether the plaintiff’s impecuniosity was caused by the defendant,
must be established by the plaintiff.
13.In exercising its discretion, the Court is called upon to balance the risk of a successful defendant being unable to enforce a costs order against the prospect of an impecunious corporation being prevented from pursuing a bona fide claim.”
189It is not necessary that each of the discretionary factors be examined – much depends upon the individual facts of each case.[43]
[43]Madgwick v Kelly [2013] 212 FCR 1 at [8]
Plaintiff’s submissions
190Ballymoss had sought security in the total amount of $216,446.80. This comprised $137,096.80 pursuant to the second MacDougall affidavit dated 7 December 2022 and $79,350 pursuant to the Dowd affidavit dated 16 March 2023. A detailed breakup of the costs sought relating to the first sum was set out in a letter to Kollaras’ solicitors from Ballymoss’ solicitors dated 2 November 2022. The security sought related to costs incurred after 15 July 2022 and included costs relating to the further discovery provided by Kollaras in September 2022 of the Tab 8 documents which compromised nine lever arch files, two of which contained some 126 Excel spreadsheets. This was reviewed by a forensic accountant engaged by Ballymoss, namely Korda Mentha. Costs were also claimed for Counsel’s fees associated with reviewing the discovery and amending the defence dated 7 November 2022.
191At the hearing, Ballymoss withdrew its claim for security for costs associated with the third-party notice of $17,600, referred to in the MacDougall affidavit. As for the costs claimed in the Dowd affidavit, the only remaining costs pressed were the first two items, namely, $2,000 for costs of compliance with an earlier order and $500 for the reply.
192The total amount of further security was revised and reduced to $121,996.80. Ballymoss said this was the full amount it now sought but accepted it was usual practice to apply some discount.[44]
[44] T74
193Ballymoss contends there is reason to believe that Kollaras has insufficient assets in Victoria to pay Ballymoss’ costs of the proceeding if ordered to do so by reason of the following:
(a) Kollaras has failed to refute the assertion made by Ballymoss in October 2021 that for the year ended 30 June 2020, Kollaras had:
(i)negative equity of $3,852,681;
(ii)had current liabilities exceeding its current assets;
(iii)was prima facie insolvent;
(iv)had received a qualified opinion from an independent auditor because of events or conditions “which give rise to the existence of a material uncertainty that may cast doubt about the company’s ability to continue as a going concern and therefore the group may be unable to realise its assets and discharge its liabilities in the normal course of business;”[45]
[45] Affidavit of Craig Donald MacDougall sworn 20 December 2021 [DCM-7]
(b) Kollaras has a full paid share capital of only $10,006;
(c) Kollaras has not lodged financial statements with ASIC since 30 June 2020;
(d) financial statements for the year ending 30 June 2020 disclosed a loss of $10,440,525 for that financial year and a net asset deficiency of $3,852,681; and
(e) Kollaras’ failure, by its proper officer, to swear any affidavit as to its assets, liabilities or profit/loss and its capacity to satisfy any order for costs made against it in the proceeding.
194Ballymoss relies on Trailer Trash Franchise Systems Pty Ltd v GM Fascia & Gutter Pty Ltd (Trailer Trash),[46] where the Victorian Court Appeal provided guidance on a Court’s function in assessing an appropriate amount for security of costs.
“[T]he Court does not seek to provide full protection for the estimated costs of the party seeking security. Rather, having regard to the fact that the order for security is usually made at an early stage of a proceeding and there are many contingencies that will affect the actual costs incurred by that party, the Court fixes an amount that it considers adequate in all the circumstances of the case. Those circumstances include the nature of the proceeding, the nature and complexity of the steps that need to be undertaken by the party seeking security, the likely costs in undertaking those steps, the length of the trial, any security already provided, and the possibility that the proceeding may settle.
In determining a sufficient amount for security for costs the Court does not undertake precise mathematical calculations. Rather, it adopts a ‘broad brush’ approach involving ‘guesstimates as much as estimates.’ However, the broad brush approach does not involve an abstract process. It must have an evidentiary basis. The Court must have regard to the evidence adduced by the parties as to quantum — whether in the form of an affidavit by an experienced litigation lawyer or an expert report by a costs consultant — although it is not bound by the parties’ estimates. The Court may scrutinise the individual items in the parties’ estimates, but not to the extent of minute examination akin to a taxation.
The amount ultimately fixed by the Court must not be so low that it fails to provide any real protection to the party seeking security or so high that it is oppressive to the party required to provide the security. The amount must be ‘just and reasonable’ in all the circumstances of the particular case.”
[46][2017] VSCA 293 at [63]-[65]
195On 20 May 2022, Judge Cosgrave ordered that additional discovery by Kollaras be served by 1 June 2022. The additional discovery comprising the Tab 8 documents were not provided in electronic form by Kollaras until 5 September 2022. The Tab 8 Documents comprised spreadsheets of data records, product items, sales of stock, customers, quantities, prices, import duty recovered from the ABF and unpaid import duty. The documents relate to alcoholic products in respect of every transaction listed in Annexure A to the SACC and are extracts from the ERP system operated by Kollaras. When printed the documents comprise some nine arch lever folders and include 126 Excel spreadsheets.
196On 15 July 2022, when Ballymoss and Kollaras consented to an order that the Kollaras provide security of $53,818, discovery of the Tab 8 Documents had not been made. The extent of the documents was unknown. The amount of $15,000 allocated for the forensic accountant’s fees had been sought solely in respect of Ballymoss’ costs of compliance with Order 5 of orders made by Judge Macnamara on 26 April 2022.
197Ballymoss now seeks $75,000 for forensic accountant’s costs incurred in reviewing the Tab 8 documents. Ballymoss submits the $75,000 sought for forensic accountant’s costs incurred after 5 September 2022 to analyse the Tab 8 documents it not a duplication of security previously paid by Kollaras as it relates to different tasks undertaken. The nature of the work undertaken comprising the sum of $75,000 is deposed to by Mr Ross of Korda Mentha in his affidavit of 7 November 2022.
198As part of the additional security sought by Ballymoss, $17,600 is claimed for costs of counsel in considering the Tab 8 Discovery in settling the Defence to the SACC.
Defendant’s submissions
199Kollaras argues Ballymoss has not met the threshold test which must be satisfied before the discretionary power to order security for costs is enlivened.[47]
[47] Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377, [11]
200It submits the well-established principles regarding the exercise of the Court’s discretion may be summarised as follows:[48]
(a) The applicant for security bears the onus of establishing that the discretion should be exercised in its favour.
(b) The Court does not seek to provide full protection for the estimated costs of the party seeking security. Rather, having regard to the fact that the order for security is usually made at an early stage of a proceeding, the Court fixes an amount that it considers adequate in all the circumstances of the case. Those circumstances include, among other things, any security already provided and the possibility that the proceeding may settle.
(c) In determining a sufficient amount for security for costs, the Court does not undertake precise mathematical calculations. Rather, it adopts a “broad brush” approach involving “guesstimates as much as estimates.” However, the broad-brush approach does not involve an abstract process. It must have an evidentiary basis.
(d) The amount of security ordered must be “just and reasonable” in all the circumstances of the particular case.
(e) The grant of security for past costs is a matter entirely within the Court’s discretion; the longer the delay and the greater the costs the plaintiff has been allowed to incur, the less likely it is that an order will be made.
(f) Prejudice to a plaintiff is assumed and presumed because of a delay in making an application for security.
(g) Absent exceptional circumstances, the costs of third-party proceedings are not normally properly the subject of an order for security costs because it is a separate proceeding made by the defendant as plaintiff against the third party as defendant. The same principle applies to contribution claims between defendants.
(h) A significant discount may be warranted if the costs are considered to be at the “high end” or reflecting a “deluxe approach.”
[48] See paragraph 8 of Kollaras’ submissions dated 17 March 2023 and the cases referred to therein
201Kollaras argued the totality of the evidence advanced by Ballymoss on its financial position is insufficient to make good the proposition that it will be unable to meet an adverse costs order. The evidence relied upon by Ballymoss is no different to countless other companies trading successfully and responsibly. The application is based on conjecture and speculation and the Court would be unable to draw a “reasonable and definite inference” from such evidence.[49]
[49] Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125, 141
202Kollaras argued there was a lack of credible testimony from Ballymoss. The contents of paragraph 11 of the Dowd affidavit were insufficient to satisfy the onus placed upon Ballymoss to adduce credible evidence of Kollaras’ alleged financial inability to pay costs. The information contained in the ASIC search exhibited to the Dowd affidavit was inadequate. The fact that there was $10,006 paid up share capital went nowhere. There was indeed a reference to a low risk credit score in the search. The change of place of business did not affect the issue. Mere speculation is insufficient to satisfy the requirement for credible testimony.[50]
[50] cf Amcor v Barnes [2015] VSC 90 at [36] to [40] and the cases referred to therein
203Contrary to Ballymoss’ submissions, there was no obligation upon Kollaras to refute various allegations. The onus remained upon Ballymoss at all times. Further, it is not conceded that merely because Kollaras provided security in the past by consent, that this meant the threshold requirement had been satisfied.
204Kollaras submits that if the Court disagrees and finds the discretion is enlivened, satisfaction of the threshold test alone does not dictate the making of an order for security for costs. The factors weighing against the making of an order for further security were:
(a)substantial security had already been provided to cover up to the handing down of judgment after trial;
(b) Ballymoss has had several opportunities to estimate its likely costs when requesting earlier amounts of security – this was now the fourth application; and
(c) many of the costs now claimed appeared to be for costs already incurred before the filing of the discovery application on 8 December 2022 – these are past costs which should not be allowed.
205Ballymoss already has three orders for security made by consent totalling $314,518. These orders are:
(i) 26 November 2021 - $60,700;
(ii) 2 March 2022 - $200,000; and
(iii) 15 July 2022 - $53,818.
206Consequently, Ballymoss is not unprotected given a substantial sum of security has been ordered already.
207Further, the orders made on 2 March 2022 and 15 July 2022 were expressly for costs “up to and including handing down of judgment after the final hearing in the proceeding.” Kollaras argues there is no acceptable reason that the security now sought was not contemplated and could not have been sought on a previous occasion when security was considered. This is now the fourth application and there should be an end to it.
208Ballymoss has already received security for much of the costs that it now seeks. As an example, Kollaras notes that Ballymoss sought security of $42,750 to cover counsel’s fees of settling its defence to counterclaim. The orders made on 15 July 2022 encompassed fees for counsel for settling the defence. However, Ballymoss now seeks a further $17,600 for counsel’s fees for settling its defence.
209Weighing against the Court ordering the payment of any further security is that the sum of $137,096.80 referred to in the MacDougall affidavit relates entirely to costs already incurred by Ballymoss prior to the filing of its summons on 8 December 2022. The same is true in respect of aspects of the sum of $79,350 referred to in the Dowd affidavit although at the hearing, most of these costs were abandoned. Ballymoss should not awarded security for costs which have already been incurred being past costs.
210Additionally, Kollaras notes Ballymoss does not allege the counterclaim is not made bona fide or does not have reasonable prospects of success.
211If contrary to Kollaras’ submissions, the Court does grant security, Kollaras disputes the quantum sought. It argues it would not be just and reasonable to make an order in the amount sought by Ballymoss. This is due to:
(a) the quantum sought by Ballymoss appears to be a full indemnity for its costs with no discount applied;
(b) the quantum sought does not appear to make any provision for the security already provided or the prospect that the proceeding may settle;
(c) Ballymoss seeks approximately $24,000 in respect of its claims against VP Brands and the Commonwealth of Australia. Those claims are not recoverable against Kollaras. This part of the claim was abandoned by Ballymoss at the hearing; and
(d) the costs in respect of which security are sought are extremely “high end” and reflect a deluxe approach.
212Consequently, the quantum of the security is severely inflated and should be substantially discounted. The figures for counsel’s fees should be discounted by 20 percent. The costs claimed of 20 days for the forensic accountant were excessive and plainly unreasonable A “Rolls Royce’ approach should not be permitted. An appropriate figure would be $40,000 before a discount was applied with the result that at most, Ballymoss should receive a figure in the order of $20,000 to $30,000.
213In reply, Ballymoss noted it relied on all the affidavits referred to and not just the Dowd affidavit. This included the extract of the independent auditor’s report exhibited as Exhibit “DCM-8” to the first MacDougall affidavit. As noted in Amcor, the threshold requirement imposes a low burden. Unlike Amcor, in this case there are financial reports in evidence which disclose a deficiency in net assets and a loss of $10.4m. Ballymoss further argued there was no substantial delay in making the additional request as after receiving the Tab 8 documents in September, its solicitors made a request in November 2022. Ballymoss accepted that a discount should be given on its claimed sum. It also said that the mere fact that the costs claimed were past costs was not an impediment to an award of security in the exercise of the Court’s discretion.[51]
[51]Per Sifris J in The Oswal matters – application for security for costsOswal v Australia and New Zealand Banking Group Ltd [2016] VSC 52 at [55] and ff and the cases referred to therein
Analysis
214Dealing first with the threshold requirement, I am persuaded that Ballymoss has satisfied the threshold test although the matter was not free from doubt. The issue of the paid up share capital is not enough.[52] Nor do I consider the change in address advances the matter at all. The assertion made in the submissions that Kollaras is prima facie insolvent is not borne out by any hard evidence that Kollaras is unable to pay its debts as and well they fall due – it is merely an assertion or speculation. I also accept that it was not incumbent upon Kollaras to enter the fray and provide opposing material given the onus always rested upon Ballymoss to adduce credible testimony, which Kollaras alleged it had failed to do so.
[52] Dal Pont, Law of Costs, LexisNexis 5th ed at [28.25]
215But there is evidence being information taken from financial statements that Kollaras had a substantial loss of $10.4m in the year ended 30 June 2020 and had a net asset deficiency. It has not lodged any further statements with ASIC since 2020 so there is no information before the Court to show whether the position has changed from 2020. There is also the extract of the independent auditor’s report from 2020 in evidence. It states there are events or conditions which give rise to the existence of a material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern and Kollaras may therefore be unable to realise its assets and discharge its liabilities in the normal course of business.[53] Given these matters, I am satisfied that Ballymoss has done enough to meet the threshold test which has been described variously as a low one or undemanding or fairly modest.[54] Ballymoss has provided sufficient and credible evidence in my view, to show that Kollaras may not be able to pay Ballymoss’ costs, should it successfully defend the counterclaim.
[53] Exhibit “DCM-8” to the first MacDougall affidavit
[54] Dal Pont, Law of Costs at [28.23]
216The next issue is whether there are relevant discretionary factors which militate against an order being made. Kollaras argues that security should not be ordered because Ballymoss already has adequate protection by reason of the earlier security given by consent. It should not be allowed, by way of a fourth application, to top up the security sought when the last two orders expressly covered costs up to and including the delivery of judgment after trial. It should have foreseen the costs it now seeks. The costs now sought represent mostly past costs and were incurred prior the discovery application being made in December last year. As to that, Ballymoss says there was no real delay as the request for additional security was made promptly after Kollaras gave discovery in September 2022 of documents, including the Tab 8 documents.
217Whilst there should be an end to requests for security, the circumstances relating to the additional security relate to the Tab 8 documents primarily. Ballymoss says it has incurred significant costs in reviewing the documents and retaining Mr Ross of Korda Mentha to analyse the documents. Whilst it was incumbent on Ballymoss to assess its future costs with some degree of accuracy when seeking security, the reasons for the top up now sought have been explained.
218There would be a risk, in my view, that Ballymoss may not recoup these further costs if it were successful unless security was ordered. The mere fact that most of these costs were incurred before the application was filed and therefore are “past” costs, is not of itself a basis for rejecting the application. Past costs are not automatically excluded in applications of this sort.[55] I am also satisfied that there is no real delay on the part of Ballymoss given the sequence of events regarding the production of the Tab 8 documents which would prevent an order now being made.
[55] Dal Pont, Law of Costs, Lexis Nexis, 5th ed at [28.37]
219Although Ballymoss suggested in reply oral submissions that that there could be some doubts about Kollaras’ prospects of success given the discovery issues raised, I am not persuaded the counterclaim is not made bona fide or lacks reasonable prospects of success. I am satisfied that Kollaras has an arguable cause of action.
220Overall, I was not persuaded by the various arguments raised by Kollaras that I should not order security in the exercise of my discretion, in circumstances where the jurisdiction was enlivened.
221The final aspect relates to quantum. I consider that there is some force in the submission made by Kollaras that the costs claimed are “deluxe” and represent a full indemnity. Whilst self-evidently Ballymoss can chose to incur costs as it sees fit, including the costs of a forensic accountant, regard must be had to proportionality of those costs in assessing whether they would be recoverable upon a party/party taxation of costs. I accept that the costs are at the high end and would not be allowed in full upon a taxation.
222The costs claimed are now in the order of $121,000. $75,000 of this represents the fees of the forensic accountant for 20 days work. Doing the best I can and not sitting as a taxing officer, I consider the costs should be reduced to a reflect a figure more in keeping with party/party costs rather than a full indemnity amount. Allowing for the costs to be assessed on a party/party basis, I would reduce the sum claimed by 50 percent to arrive at $60,000. Accepting the likelihood that not all the costs claimed may be allowed upon a taxation as being reasonable and necessary, for example, 20 days claimed for the forensic accountant, I would further discount the sum sought by 20 percent. I will therefore order that Kollaras provide the sum of $48,000 as additional security.
Conclusion
223The parties are directed to confer and provide minutes of proposed orders to give effect to these reasons, including the costs of each application.
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Certificate
I certify that these 63 pages are a true copy of the Reasons for Ruling of Her Honour Judge A Ryan delivered on 26 July 2023.
Dated: 26 July 2023
Associate to Her Honour Judge A Ryan
ANNEXURE 1
SCHEDULE – ‘KOLLARAS DISCOVERY SOUGHT 8 MARCH 2022’
1. The following documents for each of the goods described in the column headed ‘Item Description’ in Annexure A to the Second Amended Counterclaim filed 4 April 2022 and served on 11 April 2022 (SACC):
a)documents including purchase orders and invoices evidencing sales of those goods not exported; (Domestically Sold Goods)
b)financial records or other documents evidencing the profit or loss on the Domestically Sold Goods;
2. all financial records, including bank statements, evidencing or recording the sale of stock to the parties named in the column headed ‘Kollaras Purchaser’ in Annexure A to the SACC and the payment of invoices listed in the column headed ‘Kollaras Invoice Numbers’ in Annexure A to the SACC;
3. all documents and correspondence passing between Kollaras and the Australian Border Force since 1 July 2014;
4. all documents and correspondence passing between Kollaras, on the one hand, and each of Worldwide Beverage Group Pty Ltd, Daniel Baronian, VP Brands International Pty Ltd, Joseph Saad or Ramy Saad, between 3 February 2018 and 20 July 2020;
5. all documents and correspondence passing between Kollaras on the one hand and each of the purchasers named Eminence International, SPX Traders Pty Ltd, Global Brand, MTR Bega International PTEW LTD, Ariki PTE LTD, P.G.A. Holdings Ltd, New World Distribution, Quality International Purchase B.V, World Export Service Trading BV, World Class Purchase Group N.V (WCPG) in the column headed ‘Kollaras Purchaser’ in Annexure A to the SACC between 1 July 2014 and 20 July 2020;
6. all documents evidencing or constituting claims made for import duty drawback on the Australian Border Force by Kollaras since 1 July 2014 in respect of goods purchased from Ballymoss.
ANNEXURE 2
SCHEDULE- ‘KOLLARAS DISCOVERY SOUGHT 20 APRIL 2022’
1.Electronic copy of (in original ‘native’ form) each of Annexures A-D to the Second Amended Counterclaim filed 4 April 2022 and served on 11 April 2022 (SACC).2.To the extent (if at all) that the documents upon which Annexures A-D to the SACC rely have not been produced, those documents;
3.An electronic copy of Kollaras stock records that relate to the records of all stock movements (purchases, sales, returns and other disposals) in every product which is the subject of any claim by Kollaras (for either unpaid duty, loss and damage due to misrepresentation or unpaid debt) where the period of time to which this request relates is the entire period (for each product) between:
a)the last date which pre-dates the earliest Kollaras purchase order date (for purchase orders included in Annexure A) on which Kollaras’ stock records record that Kollaras had no stock on hand of the relevant product; and
b)the day after the last dispatch of a relevant product as part of an alleged export shipment which is the subject of Kollaras’ claim or, in the case of export goods that have been subsequently returned to Kollaras, to the date of the return of such goods.
4.Documents which record the outcomes of stocktakes performed in relation to Kollaras inventory between the earliest alleged supply by Ballymoss to the first annual reporting date after the last alleged relevant export by Kollaras.
5.Documents relating to the alleged supplies of goods to export customers:
a)bills of lading or other documents which identify the volume of goods delivered to the relevant customers by Kollaras; and
b)proof of delivery documents signed by Kollaras’ customers evidencing the receipt of goods by those customers; and
c)remittance advices and other similar documents which record payments received by Kollaras from those customers.
6.Financial statements of Kollaras for the four years ended 30 June 2021.
7.As at 30 June of each of the four years to 2021, a list of Kollaras’ trade receivables, including, for each trade debtor, the amount owed and the composition (in terms of deliveries made, payments received and credits provided) of each debt.
8.Documents which record the total volume of each of the (relevant) products sold by Kollaras to domestic customers, along with any documents which record purchase orders from domestic customers that were not fulfilled by Kollaras.
9.Business Activity Statements (‘BAS’) or other records which record:
a)the last date which pre-dates the earliest Kollaras purchase order date (for purchase orders included in Annexure A) on which Kollaras’ stock records record that Kollaras had no stock on hand of the relevant product; and
b)sales revenue generated by Kollaras from the sale of those products (including sales revenue generated from domestic sales on that component of Kollaras’ alleged purchases from Monacellars which was not exported by Kollaras; and
c)GST collected on those sales.
10.Documents which record or evidence each:
a)supplier to supplier; and
b)original importer;
named in the unredacted Kollaras Discovered Document number 26 to the affidavit of Peter Rostirolla affirmed 9 October 2020.
ANNEXURE 3
SCHEDULE- ‘KOLLARAS DISCOVERY SOUGHT 5 OCTOBER 2022’
1. In respect of each Tab 8 Product Spreadsheet in ‘Annexure A- Lots’ discovery of the following documents:
a)documents referred to in the column headed ‘Document No.;’
b)documents relevant to the meaning of the descriptors in the column headed ‘Dept Code;’
c)documents relevant to the meaning of the descriptors in the column headed ‘Channel Code;’
d)documents referred to in the column headed ‘Description’ to the extent that they do not refer to purchase orders of Monacellars;
e)documents relevant to any drawback claims made in respect of the amounts (other than 0.00 and any such amount claimed for drawback the subject of Annexure A to the SACC) stated in the column headed ‘Duty Amount;’
f)spreadsheet documents for:
(i) JWalker Blk 700 ml (1094953);
(ii) Absolut 750 ml (1094892);
(iii) Glenfiddich 750 ml (1095846);
(iv) Hennessy VSOP (1094863);
(vi) Absolut 1 Lt (1094894);
(vii) Chivas Regal 12 YO 750 ml (1094952);
(viii) Ballantines 750 ml (1095355);
(ix) Jack Daniels 700 ml (1094973)
in a format recording Monacellars as the ‘Vend Name’ and no other vendor.
2. If the ERP/ accounting system operated by Kollaras is Microsoft Dynamics Navision, read-only access to the database, or alternatively, a copy of the SQL database
ANNEXURE 4
SCHEDULE- ‘KOLLARAS DRAWBACK ADVICES’
1. The emails referred to in paragraphs 16-21 (inclusive) of the Affidavit of Peter Rostirolla affirmed 23 February 2022;
2. The emails referred to in paragraphs 6,7 and 8 of the Affidavit of John Kollaras affirmed 24 February 2022;
3. All legal advices provided to Kollaras about or concerning its entitlement to import duty drawback at any time from the date of its first purchase from Ballymoss, and about or concerning any drawback application to ABF.
4. All legal advices provided to Kollaras concerning the term of each sale included in each Kollaras Purchase Order referred to in paragraph 4 of the SACC.
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