Brian Neville Mayfield & Marlene Theresa Mayfield (ATF B & M Mayfield Superannuation Fund) v P & B Corporation Pty Ltd (ATF North Cape Development Trust) [No 4]
[2016] WASC 292
•19 SEPTEMBER 2016
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BRIAN NEVILLE MAYFIELD & MARLENE THERESA MAYFIELD (ATF B & M Mayfield Superannuation Fund) -v- P & B CORPORATION PTY LTD (ATF North Cape Development Trust) [No 4] [2016] WASC 292
CORAM: ALLANSON J
HEARD: 31 AUGUST 2016
DELIVERED : 19 SEPTEMBER 2016
FILE NO/S: CIV 2796 of 2013
BETWEEN: BRIAN NEVILLE MAYFIELD & MARLENE THERESA MAYFIELD (ATF B & M Mayfield Superannuation Fund)
First Plaintiffs
RICHARD COBLEY & ROBYN COBLEY (ATF R & R Cobley Family Super Fund)
Second PlaintiffsKENNETH MAXWELL DOWNES & LYNETTE LORRAINE GRIEVES
Third PlaintiffsPETER DAVID HORWOOD AND JILL HORWOOD
Fourth PlaintiffsDISCOVERY III PTY LTD FORMERLY LATITUDE FISHERIES PTY LTD (ATF Boschetti Superannuation Fund)
Fifth PlaintiffMURRAY RONALD HORAK & ASTRID JEANETTE MARQUERITE HORAK
Sixth PlaintiffsMARTIN RYAN HORAK & URIEL GERALDINE DEKALBERMATTEN
Seventh PlaintiffsAND
P & B CORPORATION PTY LTD (ATF North Cape Development Trust)
First DefendantBARRY COLIN HUMFREY
Second DefendantPETER FRANCIS BELL
Third DefendantREGIONAL WA PTY LTD FORMERLY P & B SERVICES PTY LTD
Fourth DefendantKENESTA PTY LTD
Fifth DefendantJOHN SCOTT THOMSON
Seventh DefendantBIRDANCO NOMINEES PTY LTD (T/As RSM Bird Cameron)
Eighth Defendant
Catchwords:
Practice and procedure - Discovery - Application for further and better discovery - Relevance to matters in issue - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 26 r 4, O 26 r 12
Result:
Claim for privilege adjourned
Orders for further and better discovery made
Category: B
Representation:
Counsel:
First Plaintiffs : Mr M L Bennett
Second Plaintiffs : Mr M L Bennett
Third Plaintiffs : Mr M L Bennett
Fourth Plaintiffs : Mr M L Bennett
Fifth Plaintiff : Mr M L Bennett
Sixth Plaintiffs : Mr M L Bennett
Seventh Plaintiffs : Mr M L Bennett
First Defendant : Mr C S Williams
Second Defendant : Mr C S Williams
Third Defendant : No appearance
Fourth Defendant : Mr C S Williams
Fifth Defendant : Mr C S Williams
Seventh Defendant : No appearance
Eighth Defendant : No appearance
Solicitors:
First Plaintiffs : Bennett + Co
Second Plaintiffs : Bennett + Co
Third Plaintiffs : Bennett + Co
Fourth Plaintiffs : Bennett + Co
Fifth Plaintiff : Bennett + Co
Sixth Plaintiffs : Bennett + Co
Seventh Plaintiffs : Bennett + Co
First Defendant : Solomon Brothers
Second Defendant : Solomon Brothers
Third Defendant : No appearance
Fourth Defendant : Solomon Brothers
Fifth Defendant : Solomon Brothers
Seventh Defendant : No appearance
Eighth Defendant : No appearance
Case(s) referred to in judgment(s):
Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341
Schlam v WA Trustee Executor and Agency Co Ltd (1964) WAR 178
Southern Equities Corp Ltd v West Australian Government Holdings Ltd (1993) 10 WAR 1
ALLANSON J: The plaintiffs apply for orders:
1.for inspection of documents claimed to be privileged by the seventh and eighth defendants; and
2.for further and better discovery by the first, second and fourth defendants.
The first, second, fourth and fifth defendants are all represented by the same solicitors. Barry Colin Humfrey, the second defendant, is a director of each of the first, fourth and fifth defendants. In these reasons, when referring to these defendants as a group, I will refer to them as the Humfrey defendants.
The privilege claim
Although the application refers to the claim of privilege made by the seventh and eighth defendants, it is the Humfrey defendants who assert the claim. The affidavit of discovery on behalf of the eighth defendant, sworn by Kimberley John Hutchinson and dated 22 February 2016, lists 14 documents (three of which are described as email threads) for which privilege is claimed. Part 1B of the schedule of documents states:
The first, second, fourth and fifth defendants have informed the eighth defendant that they claim privilege over each of the documents … on the basis that they are documents which were created for the sole or dominant purpose of obtaining legal advice or for use in actual or contemplated litigation and accordingly legal professional privilege is claimed in respect of them by the first, second, fourth and fifth defendants.
The affidavit of discovery for the Humfrey defendants was made on 16 March 2016 by Mr Humfrey. It does not list documents for which privilege is claimed but simply, in item 129 of the schedule, lists:
Correspondence between the first defendant, the second defendant, the fourth defendant, and the fifth defendant and the agents and/or their solicitors, statements from witnesses and others, proofs of evidence, memoranda, opinions and drafts prepared and produced for the dominant purpose of providing or obtaining legal advice or for use in anticipated or existing litigation.
A claim of privilege in this form does not comply with O 26 r 4 of the Rules of the Supreme Court 1971 (WA). The list of documents 'must enumerate the documents in a convenient order and as shortly as possible, but describing each of them … sufficiently to enable it to be identified': O 26 r 4(1). Where a claim of privilege is made, it must be made 'with a sufficient statement of the grounds of the privilege': O 26 r 4(2). Where a claim of privilege is made it 'shall be sustained' in the absence of evidence that the claim is mistaken or unfounded: O 26 r 12, and see Southern Equities Corp Ltd v West Australian Government Holdings Ltd (1993) 10 WAR 1, 16. Where there is evidence that might displace a claim of privilege, the onus is on the person claiming privilege to prove that claim.
There are many cases where contested issues of privilege are unlikely to arise. A blanket claim of privilege, such as that made in item 129 of Mr Humfrey's affidavit, while inadequate, may often pass unchallenged. But in this action, questions of privilege between trustee and beneficiary were almost inevitable.
I was not prepared to determine the claim for privilege on the existing, inadequate, evidence but adjourned that part of the application to enable affidavits to be filed. Should the determination of that claim require inspection of disputed documents by the court, it will need to be determined by another judge.
Further discovery
The balance of the application had been narrowed in conferral to further and better discovery of four classes of documents (categories 3.4, 3.5, 3.8 and 3.9 in the application):
3.4.documents in relation to a loan from Cuzinc 2 Pty Ltd to the North Cape Development Trust in the sum of $150,000, recorded in the financial report for the year ended 30 June 2013;
3.5.documents evidencing or recording communications between the directors of the trustee of the North Cape Development Trust (the first defendant) with its solicitors and accountants;
3.8.correspondence between the directors, agents or employees of the first defendant and the eighth defendant (RSM Bird Cameron), its directors, agents or employees in relation to the 1 May letter, the default notices and the compulsory acquisition notices (all documents clearly identified in the pleadings); and
3.9.all correspondence between Mr Humfrey (the second defendant) and Mr Thomson (the seventh defendant) regarding the assistance provided by Mr Thomson to raise funds for the North Cape Development Trust.
Where a party applies for specific discovery, the application must be supported by an affidavit stating the belief of the deponent that the party from whom discovery is sought has, or at some time had, in his possession, custody or power the document or class of document specified or described in the application and that it relates to one or more of the matters in question in the cause or matter: O 26 r 6(3). The court must be able to draw the inference that there are further documents that should have been discovered. Where the party applying does not seek discovery of specific documents, but of documents falling within a described class of documents, it must satisfy the court that the class of documents, so described, exists and is relevant.
The evidence in support of the application is in an affidavit of Taleesha Jayne Conlan Elder, sworn 4 July 2016. Ms Elder deposes, having inspected the documents produced by each defendant on discovery, that:
(1) The eighth defendant gave discovery of financial reports for the North Cape Development Trust for the years ended 30 June 2012 and 30 June 2013. The Humfrey defendants have not discovered any documents relating to a loan from Cuzinc 2 Pty Ltd, recorded in the 2013 financial report as having been received in the 2012 reporting period.
(2)The Humfrey defendants have discovered only one document as correspondence between the Humfrey defendants and RSM Bird Cameron.
(3)Other parties have discovered correspondence including:
(a)a letter dated 13 November 2009, from the first defendant to Trust Unit Holders, which refers to a presentation to be given to a potential investor by Barry Humfrey and RSM Bird Cameron;
(b)an email from a valuer, dated 28 January 2010, to Travis Bate, with an email address at RSM Bird Cameron, copied to Mr Humfrey and Mr Thomson;
(c)an email thread in relation to a statutory demand, and including an email from Mr Humfrey dated 23 June 2010, copied to Mr Thomson;
(d)a letter from RSM Bird Cameron to potential purchasers of a share in the North Cape Development Trust, dated 23 June 2010, signed by Mr Thomson;
(e)an email thread dated October 2010, again regarding potential investment, and including Mr Thomson;
(f)an email to Mr Thomson dated 21 February 2011, apparently with regard to the possible appointment of Colliers as selling agent for assets including the Norcape Lodge site, and referring to a meeting earlier that month;
(g)an email dated 12 May 2011 regarding 'the Exmouth build' and addressed to Mr Thomson;
(h)minutes of a shareholder meeting of Regional WA Pty Ltd (the fourth defendant) in May 2011, attended by Mr Thomson;
(i)an email from the project manager, Humfrey Land Developments, dated 31 August 2011, with the subject Nor Capelodge Project, copied to Mr Thomson;
(j)an email dated 29 September 2011 from Mr Humfrey to [email protected], copied to Mr Thomson, in which Mr Thomson is described as 'John Thompson from RSM Bird Cameron (my strategic adviser)';
(k)an email from Ledge Equipment Finance to Mr Humfrey, dated 3 November 2011, regarding preparation of a finance proposal, and copied to Mr Thomson;
(l)an email from Trevor Lake of RSM Bird Cameron to Mr Humfrey, regarding the 'net asset backing valuation' letter, referring to amendments, and asking Mr Humfrey to review it before printing on RSM Bird Cameron letterhead.
(4) In October 2013, before proceedings were commenced, KordaMentha inspected books and records of the first defendant, on behalf of the plaintiffs. KordaMentha produced a list of the documents provided to them. Documents on the list, not discovered by the Humfrey defendants, include 'RSM working papers' for 2008 and 2009.
The plaintiffs also refer to an affidavit of Mr Humfrey, dated 15 July 2015, filed in support of an application to set aside a subpoena. Mr Humfrey there deposes, in effect, that in the period 1 July 2009 to 3 February 2014, he communicated with Mr Thomson and other representatives of RSM Bird Cameron in relation to a variety of matters, including the North Cape Development Trust. Those communications were conducted, in part, by email.
On the basis of the documents attached to Ms Elder's affidavit, I am satisfied the Humfrey defendants have, or have had, in their possession, custody or power documents that fall within the four classes described in the application and which have not been discovered.
The parties agreed to general discovery in this case. The next question is whether the documents in those classes relate to a matter in question.
The Cuzinc loan
Ms Elder attaches the financial statements of the North Cape Development Trust for the years ended 30 June 2012 and 30 June 2013. In the balance sheet for 2012, the current liabilities include, in Trade and Other Payables, a loan of $150,000 from the unrelated entity Cuzinc 2 Pty Ltd. The column for 2012 records that loan in the same amount. The loan is not, however, recorded in the 2012 balance sheet.
In written submissions, the plaintiffs took a very expansive view of the issues in the action, submitting that the circumstances in which decisions were made by the Trustee in spending money or incurring liabilities on behalf of the trust is a central issue in the litigation. On that basis, the plaintiffs asserted that documents surrounding any transaction in relation to the management of the affairs of the trust are relevant and must be discovered. The conclusion was that the documents surrounding the Cuzinc loan must be discovered.
I do not accept the breadth of the premise that any transaction in relation to the management of the affairs of the trust is relevant. The matters in issue, by which to judge relevance, are generally to be determined by reference to the pleadings, with regard also to the conduct and admissions of the parties and the nature of the action: Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341, 345; Schlam v WA Trustee Executor and Agency Co Ltd (1964) WAR 178, 186.
The pleadings do not put in issue all transactions in relation to the management of the affairs of the trust. The plaintiffs' pleaded case against the first to fifth defendants alleges specific instances where the first defendant, as trustee, incurred liabilities on behalf of the North Cape Development Trust in breach of its obligations under the Trust Deed. All are before 2009. The loan from Cuzinc in 2012 is not one of the liabilities specified, and the plaintiffs plead nothing in regard to it.
In oral submissions, counsel for the plaintiffs relied on the case pleaded against the seventh and eighth defendants, and in particular the plea in par 89 regarding advice provided by Mr Thomson at a meeting of unit holders on 3 November 2012. That plea does not, however, refer to the Cuzinc loan, or to liabilities incurred by the Trust more generally. Neither in the plea relating to that meeting, nor in any plea as to the legal consequences of advice given by Mr Thomson or RSM Bird Cameron, do the plaintiffs raise the Cuzinc loan as a material fact.
I can see no basis to regard to documents relating to that loan as relating either directly or indirectly to the matters in issue. There should be no order for further discovery of the documents in category 3.4 of the plaintiffs' application.
The communications with RSM Bird Cameron
The defendants, in their written submissions, said that the issue for these categories is whether there are documents that have not been discovered, and did not contest that such documents would relate to a matter in issue. In oral submissions, however, counsel for the Humfrey defendants did question relevance.
The plaintiffs again rely on a wide premise: that all communications between the trustee and its directors and their solicitors and accountants in relation to the affairs of the trust are relevant to the matters in issue.
The relationship between the Humfrey defendants and RSM Bird Cameron (including Mr Thomson) is directly in issue on the pleadings. The plaintiffs plead, in par 81 of the statement of claim, that since about October 2009, Mr Thomson and RSM Bird Cameron provided financial, commercial and business advice to P&B Corporation in its capacity as trustee for the benefit of the Trust. Paragraph 81.3 pleads that full particulars will be given after discovery. Consequent on that plea, the plaintiffs allege that RSM Bird Cameron and Mr Thomson entered into a fiduciary relationship with the first defendant, and, since about October 2009, alternatively about 3 November 2012, knew that the first defendant was the trustee of the Trust and had duties to the unit holders, including the plaintiffs, under the trust Deed and by law: par 82, par 83.
The Humfrey defendants do not admit those allegations: defence par 49.
RSM Bird Cameron and Mr Thomson plead in greater detail. They deny the allegations in par 81 of the statement of claim, and plead limited engagements for particular tasks between November 2009 and March 2013. It is sufficient, for present purposes, to find that the documents attached to the affidavit of Ms Elder, and listed above, include matters not apparently within those tasks.
In earlier proceedings, on an application to strike out parts of the statement of claim, the extent and nature of the relationship between Mr Thomson, RSM Bird Cameron and the plaintiffs was directly in issue. I held that it was premature, at that stage, to determine whether certain breaches alleged by the plaintiffs could not conceivably give rise to the relief claimed, and that the question of the scope of the defendants' engagement to provide advice to the first defendant (as Trustee) might await the completion of discovery.
On the pleadings and the way in which the case has been conducted, the extent and nature of the relationship between the Humfrey defendants, in particular the first defendant, and RSM Bird Cameron and Mr Thomson is in issue. The documents sought in categories 3.5, 3.8 and 3.9 therefore relate to matters in issue.
Finally, it is necessary to consider the application by reference to the requirement in O 1 r 4B. I am satisfied that the orders I propose to make are consistent with that rule, and will promote the just determination of the litigation.
There will be an order for the Humfrey defendants to provide further and better discovery of the documents sought in categories 3.5, 3.8 and 3.9 of the plaintiffs' application.
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