Cahill v Kiversun Pty Ltd
[2017] VSC 628
•12 October 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2016 01231
BETWEEN
| PETER JOSEPH CAHILL | Plaintiff |
| v | |
| KIVERSUN PTY LTD | Defendant |
S ECI 2016 01256
AND BETWEEN
| MOLONGLO GROUP (AUSTRALIA) PTY LTD | Plaintiff |
| v | |
| PETER JOSEPH CAHILL AND OTHERS (according to the attached schedule) | Defendants |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 30 August 2017 and 12 September 2017 |
DATE OF JUDGMENT: | 12 October 2017 |
CASE MAY BE CITED AS: | Cahill v Kiversun Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2017] VSC 628 |
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PRACTICE AND PROCEDURE – Subpoena – Objection to inspection of documents by reason they are protected by client legal privilege – Whether inspection should be permitted by reason that subject documents ‘affect a right of a person’ within the meaning of s 121(3) of the Evidence Act 2008 (Vic).
PRACTICE AND PROCEDURE – Discovery – Documents – Application for further discovery of communications between solicitor and clients after contract is alleged to have been concluded – applicant contended post contractual conduct was relevant in determining whether contract existed and whether terms should be implied into contract – Application refused.
PRACTICE AND PROCEDURE – Discovery – Documents – party had pleaded that he ‘was ready willing and able to perform agreement’ – Application for discovery of all documents relevant to party’s ability to perform obligations under agreement – Party’s ability to perform obligations under the alleged sale agreement was a real issue in dispute and documents sought were discoverable.
In proceeding S ECI 2016 01231
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Rodbard-Bean | Aitken Partners |
| For the Defendant | Mr S T Pitt | Mills Oakley |
In proceeding S ECI 2016 01256
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms T Spencer Bruce | King & Wood Mallesons |
| For the Defendant | Mr A Rodbard-Bean | Aitken Partners |
HIS HONOUR:
The plaintiff in proceeding number S ECI 2016 01231, Peter Joseph Cahill (‘Mr Cahill’), seeks an order for specific performance of an alleged sale agreement dated 15 July 2016 by which he claims to have a proprietary interest in a property at Rokeby Street, Collingwood. That agreement is referred to in the pleadings as the ‘Cahill Sale Agreement’ and I shall adopt that term in these reasons. The defendant in that proceeding, Kiversun Pty Ltd (‘Kiversun’), the vendor of the Rokeby Street property, denies that any binding contract was made for the sale of the Rokeby Street property with Mr Cahill and maintains that an enforceable agreement was reached with Molonglo Pty Ltd (‘Molonglo’).
In essence Mr Cahill contends that Kiversun and Molonglo are attempting to ‘gazump’ the Cahill Sale Agreement which he contends was binding on the parties and entered into before the Molonglo contract.
In the proceeding in which Molonglo is plaintiff, number S ECI 2016 01256, Molonglo seeks removal of a caveat placed on the Rokeby Street property by Mr Cahill by reason that Mr Cahill has no caveatable interest. Mr Cahill resists the removal of his caveat and counterclaims for the removal of Molonglo’s caveat on the basis that he is entitled to specific performance of the Cahill Sale Agreement.
There are two interlocutory applications before the court.
Mr Cahill’s application
Mr Cahill makes application by summons dated 11 August 2017 as plaintiff in proceeding number S ECI 2016 01231, and as first defendant in proceeding number S ECI 2016 01256, for the following orders:
(1)The Defendant in S E CI 2016 001231 (Kiversun) and the Plaintiff in S ECI 2016 001256 (Molonglo) make discovery of the following categories of documents:
(a)All communications including letters and emails between Kiversun and Molonglo, their officers, agents, employees or solicitors between 4 August and 3 October 2016 concerning or pertaining to the property situate at 112-118 Rokeby Street, Collingwood; and
(b)File notes, memoranda and the like evidencing any telephone conversations or meetings between officers, agents, employees or solicitors of or acting for or on behalf of Kiversun on the one hand and Molonglo on the other hand between 4 August and 3 October 2016 concerning or pertaining to the property situate at 112-118 Rokeby Street, Collingwood.
In his application, Mr Cahill also seeks an order that he be entitled to inspect certain documents produced in response to a subpoena issued by him to Kiversun’s accountant, De Luca Partners, on 30 May 2017, which were the subject of an objection to inspection filed by Kiversun. Those documents are communications passing between Kiversun’s solicitors, Mills Oakley, and De Luca Partners.
Mr Cahill’s application is supported by an affidavit of Katherine Wangmann (‘Ms Wangmann’) sworn 24 August 2017.[1]
[1]Mr Pitt, Counsel for Kiversun, objected to the admissibility of certain paragraphs of Ms Wangmann’s affidavit. In order to expeditiously deal with the substance of the matter, the application was conducted by reference to the documentation exhibited to Ms Wangmann’s affidavit rather than descending to a consideration of the objections to her affidavit.
Kiversun opposes the application for inspection of the documents produced by De Luca Partners and contends that they are the subject of legal advice privilege.[2] It relies on an affidavit of George Paraskevakis sworn 29 August 2017.
[2]See Evidence Act2008 (Vic), s 118.
A further affidavit was filed by Ms Wangmann on 29 August 2017 which sought to raise additional matters. At the hearing on 30 August 2017, it was agreed that such matters would be held over and dealt with on 12 September 2017 if agreement could not be reached in regard to them before that date. No agreement was reached and, on 12 September 2017, that part of the application returned to Court and was resolved in the course of the hearing.
Molonglo’s application
By a summons dated 17 August 2017, the plaintiff in proceeding S ECI 2016 01256, Molonglo, seeks discovery from Mr Cahill of all documents in his possession relevant to his ability to perform his obligations under the Cahill Sale Agreement including, but not limited to, bank statements, tax returns and financial statements.
Molonglo relies upon a paginated bundle of correspondence between the parties to support its application. Mr Cahill opposes this application, relying on an affidavit of Ms Wangmann of 28 August 2017.
On 3 October 2017, I made orders dismissing Mr Cahill’s application. On the application made by Molonglo, I ordered that Mr Cahill made discovery of the documents sought by Molonglo in its application. I ordered that Mr Cahill pay the costs of those applications. I now publish my reasons for making those orders.
I will consider each application in turn.
The objection by Kiversun to the inspection of documents produced pursuant to Mr Cahill’s subpoena
As it was the first matter dealt with by Mr Rodbard–Bean in his submissions, it is convenient to begin with the application by Mr Cahill for inspection of the documents produced by De Luca Partners in response to the subpoena of 30 May 2017.
The subpoena requires production of the following documents:
All files, correspondence including advice, letters and/or emails, documents, paper, writings, notes, memoranda, records and electronic records relating to the sale, listing for sale and/or proposed sale of the property situated at 112-118 Rokeby Street, Collingwood by Kiversun Pty Ltd during the period of 1 January 2016 to 31 December 2016 including but not limited to:
(a)advice, correspondence, letters or emails to or notes recording any meetings or telephone discussions with Vision Real Estate;
(b)advice, correspondence, letters or emails to or notes recording any meetings or telephone discussions with George Paraskevakis and/or Bruna Paraskevakis; and
(c)advice, correspondence, letters or emails to or notes recording any meetings or telephone discussions with Mills Oakley Lawyers.
Kiversun produced documents to the Prothonotary which meet the description of the documentation in the subpoena but resists inspection of those documents on the basis they are the subject of legal advice privilege under s 118 of the Evidence Act2008 (Vic) (‘Evidence Act’).
In his affidavit, Mr Paraskevakis states that he is a director and secretary of Kiversun. He says that on or about 15 July 2016 he signed a document which is the Cahill Sale Agreement. At about that time he spoke with his accountant, Mr Vlahopoulos, of De Luca Partners, who was in attendance at his office that day and who offered to seek advice on the Cahill Sale Agreement, more particularly the document headed ‘Agreement to Purchase’ and the taxation implications of that document, from Mills Oakley[3]. Mr Vlahopoulos said words to the effect that he would contact Mills Oakley to seek that legal advice. Mr Paraskevakis asked Mr Vlahopoulos to deal directly with Mills Oakley on behalf of Kiversun in relation to those issues. He believes that Mr Vlahopoulos dealt directly with Mills Oakley on the issues referred to and the basis for his belief is that he was copied into some of the correspondence between Mills Oakley and Mr Vlahopoulos and had opportunity to read further correspondence produced under the subpoena by De Luca Partners.
[3]Mills Oakley were also engaged to carry out the conveyancing work on behalf of Kiversun.
Mr Rodbard-Bean and Mr Pitt, counsel for Mr Cahill and Kiversun respectively, invited me to inspect the documents pursuant to the power expressly given in s 133 of the Evidence Act and I have done so as this will serve to expedite the matter.
As a result of that review, I am satisfied that the documents are the subject of legal advice privilege by reason that they are legal advice within the meaning of s 118 of the Evidence Act. More particularly they are communications passing between Mr Vlahopoulos of De Luca Partners and Mr Giannakidis of Mills Oakley and they are, by reference to their substance and context, dominantly for the purpose of providing legal advice to Kiversun, more specifically advice relating to the taxation implications to Kiversun of the sale of the Rokeby Street property. Further, De Luca Partners, on my review of the documents, is clearly acting as the agent of Kiversun in its communications with Mills Oakley and the documents are confidential communications generated between Mr Vlahopoulos of De Luca Partners, as agent of the client within the meaning of s 117 of the Evidence Act, [4] and Mr Giannakidis of Mills Oakley, as a lawyer.
[4]In s 117(1) of the Evidence Act 2008 (Vic), ’client’ is defined as including an employee or agent of the client.
Mr Rodbard-Bean contends however that even if the claim for privilege is established, that an exception arises under s 121(3) of the Evidence Act which provides:
This division does not prevent the adducing of evidence of a communication or document that affects a right of a person.
He contended that Mr Cahill is entitled to inspect the documents because they ‘affect a right’ of Mr Cahill, within the meaning of that expression in s 121 of the Evidence Act, in relation to the Cahill Sale Agreement and the allegations of misleading and deceptive conduct. Mr Rodbard‑Bean contends that his client was informed by the real estate agent for Kiversun that there were only monthly tenancies in place on the properties. However, when Mr Cahill received a contract of sale, it stated that the lease to be granted under the terms of the contract was for a five year lease. Because of this, he contended something occurred between the accountants and the lawyers in dealing with this aspect of drafting the contract of sale, so as to provide for a going concern with the lease in order to trigger the application of certain GST exceptions. If the Rokeby Street property was the subject of a lease at the time of settlement, then it is regarded as a going concern and no GST is payable on the purchase. It is Mr Cahill’s case that what occurred between the accountants and the solicitors was that Mr Cahill was provided with a contract by Mills Oakley which was ‘designed to fail’. When there was resistance to the five year lease, the immediate response from Mills Oakley was to indicate that the matter would not be proceeding and there would be a sale to the other party (Molonglo).
Mr Rodbard‑Bean indicated that there are few authorities as such on the interpretation of s 121(3), but that the authorities dealing with s 131(2)(i) of the Evidence Act, which contains provisions in very similar terms, are apt for application. In Talbot v NRMA Ltd,[5] Hodgson CJ in equity said:
Mr Shand has referred me to s 121(3) of the Evidence Act, which states that privilege would not prevent the producing of evidence of a communication or document which affects the rights of a person. In my opinion, that cannot mean a communication or document that is relevant to a right of a person because that would virtually eliminate the legal professional privilege as a ground for non-admission of evidence. In my opinion, that must mean a communication or document that affects in some fairly direct way what are the actual rights and perhaps also duties of a person.[6]
[5][2000] NSWSC 602 (29 June 2000) [3].
[6]Talbot v NRMA Limited [2000] NSWSC 602, [3].
In both his oral and written submissions, Mr Rodbard-Bean made reference to a number of other authorities dealing with the meaning of affecting ’rights’ in the context of s 131(2) of the Evidence Act.[7] Section 131(2)(1) allows evidence of settlement negotiations to be adduced if the making of the communication or preparing the documents ‘affects the rights of a person’.
[7]Transcript of Proceedings, Peter Cahill v Kiversun Pty Ltd (Supreme Court of Victoria (S ECI 2016 01231, Gardiner AsJ, 30 August 2017) and Molonglo Group (Australia) Pty Ltd v Peter Joseph Cahill & Anor (S ECI 2016 01256, Gardiner AsJ, 30 August 2017) 39-44 (‘Transcript of Proceedings (30 August 2017)’); Mr Cahill’s Outline of Submissions, [5]-[13].
In my opinion, on my review of the documents and on a consideration of the authorities to which he has referred me, it could not be said that the documents affect any existing right of Mr Cahill within the meaning of that expression in s 121(3). Mr Rodbard‑Bean, of course, has not had the opportunity to inspect the documents but I agree with the submissions of Mr Pitt that following my review of them they do not come within the exception described in s 121(3), or are of the type described in the authorities referred to by Mr Rodbard-Bean, as ’affecting a right’ of Mr Cahill. They are therefore protected by legal advice privilege and I uphold the objection to their inspection.
Mr Cahill’s application for further discovery
I now turn to the other part of Mr Cahill’s application, which seeks discovery from Kiversun and Molonglo of the documents described in paragraph 5 above, consisting of all communications between them (including between their solicitors) in the period 4 August to 3 October 2016. In her affidavit, Ms Wangmann contends (by way of submission) that such documents are relevant to several issues, namely the existence and terms of a binding sale agreement between Mr Cahill and Kiversun, the breach by Kiversun of an alleged obligation of good faith, and the alleged misleading and deceptive conduct on its part. [8]
[8]Affidavit of Katherine Wangmann sworn 11 August 2017, [37]-[39].
Mr Rodbard-Bean submitted that post-contractual conduct is admissible for the purpose of determining whether a contract existed and whether terms should be implied into a contract. He referred to a number of authorities which he contended supported his submission in that regard. He cited a passage from the recent decision of In the Matter of Centura Global Holdings Pty Ltd.[9]At [64]-[67] Black J stated:
[9][2016] NSWSC 62 (12 February 2016).
It is also common ground that the Court may have regard to the subsequent conduct of the parties in reaching findings as to whether such an agreement existed (which is here not in dispute) and as to its terms, as distinct from questions of construction in respect of such an agreement. In Mears v Safecar Security Ltd [1983] QB 54 at 77, Stephenson LJ (with whom O’Connor LJ and Sir Stanley Rees agreed) observed that:
I have already expressed my view that this agreement was oral, but even if it was partly in writing, we are concerned with the search for a term that was not written down, and there is nothing in those authorities which prevents the court from looking at the way the parties acted for the purpose of ascertaining what that term was. Common sense suggests that their subsequent conduct is the best evidence of what they had agreed orally but not reduced to writing, though it is not evidence of what any written terms mean… .
This observation was approved by Owen J in The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239 at [2668] and by Murphy JA (Pullin & Newnes JJA agreeing) in Fazio v Fazio [2012] WASCA 72 at [192]-[195].
In County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193, to which Mr Allen referred, Spigelman CJ (at [24]) described post-contractual conduct as a matter of “significant weight” in identifying the subject matter of an alleged oral contract. McColl JA also there noted (at [161]–[162]) that, although subsequent communications cannot be looked to as an aid to construction of a contract, they can be looked to “as an aid to deciding whether a contract has been entered into” and subsequent conduct can also constitute an admission of the state of the parties’ rights, although care must be taken in identifying the fact said to have been admitted.
In Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 at [143], Campbell JA observed that:
… the task in ascertaining what are the terms of a contract that is not wholly in writing … is finding as a fact what the parties have agreed. A range of post-contractual conduct could be relevant to ascertaining what the parties have agreed. For example, their conduct in carrying out the contract could itself be objective evidence of what they had agreed, an admission of one of the parties could assist in ascertaining what they have agreed, and business records created to record or report on the contract rather than carry it out could also assist in that task.
In Hightime Investments Pty Ltd v Adamus Resources Ltd [2012] WASC 295 at [98]–[99], Edelman J similarly observed that:
… subsequent conduct is a relevant matter to consider in finding whether, as a fact, the alleged oral promises were made. … This approach also accords with principle. It would be peculiar if courts were to be constrained in the exercise of finding facts from considering any relevant matter subsequent to the alleged occurrence of the fact in issue.
Mr Rodbard-Bean contended that evidence of post-contractual conduct can also be used as an aid to the construction of a written contract, if it provides retrospectant evidence of the surrounding circumstances known to the parties at the time of contracting.[10] Mr Rodbard-Bean submitted that questions of construction arise in these circumstances about the terms of the Cahill sale Agreement as pleaded in paragraph [5] of the ASOC.
[10]See Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570, 582 [35] (Gummow, Hayne and Kiefel JJ), citing James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583, 603 (Lord Reid).
In his submissions Mr Rodbard–Bean contended that the documents sought, which relate to post contractual conduct, are discoverable because they are relevant to determining whether a binding contract came into place, whether terms should be implied into the contract and whether admissions have been made which are contrary to Kiversun’s case.
Kiversun and Molonglo contend that the documents sought are not relevant to the issues in dispute on the pleadings in either proceeding, and therefore discovery of them is neither necessary nor appropriate.
Part 4.3 of the Civil Procedure Act 2010 (Vic) (‘CPA’) deals with disclosure and discovery of documents. Section 54 of the CPA provides:
54 Discovery of documents to be in accordance with rules of court
Unless a court otherwise orders, discovery of documents in a civil proceeding is to be in accordance with the rules of court.
Section 55(1) provides:
55 Court orders for discovery
(1)A court may make any order or give any directions in relation to discovery that it considers necessary or appropriate.
(2)Without limiting subsection (1), a court may make any order or give any directions—
(a) requiring a party to make discovery to another party of—
(i)any documents within a class or classes specified in the order; or
(ii)one or more samples of documents within a class or classes, selected in any manner which the court specifies in the order;
(b) relieving a party from the obligation to provide discovery;
(c) limiting the obligation of discovery to—
(i) a class or classes of documents specified in the order; or
(ii)documents relating to one or more specified facts or issues in dispute; or
(iii)some or all of the issues set out in a statement of issues filed in the proceeding;
(d) that discovery occur in separate stages;
(e)requiring discovery of specified classes of documents prior to the close of pleadings;
(f) expanding a party's obligation to provide discovery;
(g)requiring a list of documents be indexed or arranged in a particular way;
(h)requiring discovery or inspection of documents to be provided by a specific time;
(i)as to which parties are to be provided with inspection of documents by another party;
(j)relieving a party of the obligation to provide an affidavit of documents;
(k)modifying or regulating discovery of documents in any other way the court thinks fit.
The Trial Judge in this matter, Kennedy J, made specific orders for discovery on 28 November 2016 (in orders 11 and 16) and on 10 March 2017 (order 3). The 28 November 2016 orders provided that the parties each discover their conveyancing files in respect of the Cahill sale Agreement and the sale to Molonglo and this has apparently been done. On 10 March 2017 her Honour ordered that the parties file and serve their list of documents that are relevant to the issues in dispute in the Cahill proceeding and the proceeding commenced by Molonglo.
Thus discovery in these proceedings is not ‘at large’ and is quite specific. As such, they are ‘otherwise orders’ as contemplated by s 54 of the CPA and rule 29.01.1 of the Supreme Court (General Civil Procedure) Rules2015 (Vic) (the ‘Rules’). At its widest the scope of discovery has been limited to documents which are relevant to the issues in dispute, i.e. the issues as defined by the pleadings which are now closed.
The task for the Court is to ensure discovery remains proportionate and limited to documents which are directly relevant to the issues in dispute.[11] The obligation on the Court is to ’focus‘ on the real issues in dispute and, in particular, to discard any broad based discovery notions based upon the Peruvian Guano[12] ‘train of inquiry’ test.[13]
[11]Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303 at 323 [56]-[57]; Mullet v Nixon & Ors [2015] VSC 727 (16 December 2015) [10]-[12] (J Forrest J). See also Matthews v SPI Electricity Pty Ltd & Ors [2011] VSC 401 (30 August 2011) [16]-[29] (Zammit AsJ); Volunteer Fire Brigade Victoria v CFA (Discovery ruling) [2016] VSC 573 (29 September 2016) [28]-[36] (J Forrest J). See also generally Yara Australia Pty Ltd v Oswal (2013) 41 VR 302, 307-8 [12]-[15] (Macaulay AJA, Redlich and Priest JJA) (Court of Appeal).
[12]Compagnie Financiere et Commerciale du Pacifique v The Peruvian Guano Company (1882) 11 QBD 55, 63.
[13]Mullet v Nixon & Ors [2015] VSC 727 (16 December 2015) [10]-[12] (J Forrest J). See also Liesfield v SPI Electricity (2013) 43 VR 493 at 501 [29] where J Forrest J states that his Honour is ‘keenly aware of this court’s concern over a growing culture of discovery which aims to leave ”no stone unturned” or to ”search for the smoking gun”’ and observes that the ‘shift away from the Peruvian Guano test and amendments to both Federal and State court practice demonstrate the determination of the legislature and the court to reverse this trend.’
The central issue in dispute in the two proceedings is the priority dispute between Mr Cahill and Molonglo in relation to the Rokeby street property. Mr Cahill claims to be first in time by reason of the Cahill Sale Agreement becoming binding and enforceable on 15 July 2016. The sale agreement to Molonglo was entered into on 4 August 2016 and in order for Mr Cahill to succeed and obtain an order for specific performance he must prove that the Cahill Sale Agreement was binding and enforceable prior to that date. Mr Cahill also alleges that Kiversun has breached an obligation of good faith to Mr Cahill, or engaged in misleading and deceptive conduct by conducting negotiations with Molonglo for the sale of the Rokeby street property. In this regard, the amended statement of claim of Mr Cahill relies on conduct on Kiversun’s part in the period 15 July to 4 August 2016.
Mr Cahill pleads that the Cahill sale Agreement was entered into on 15 July 2016, and is partly written, partly oral, and partly to be implied.[14] To the extent that it is written, Cahill pleads that it is constituted by the document titled ’Agreement to Purchase’ (i.e. the Cahill sale agreement). To the extent it is oral, Cahill pleads that it is constituted by conversations between Mr Cahill and Mr Simpson (the vendor’s agent) and to the extent it is implied, Mr Cahill pleads that it is implied by law.
[14]Paragraph [4] of the Further Amended Statement of Claim filed on 18 August 2017 on behalf of the Plaintiff in Peter Cahill v Kiversun Pty Ltd, Supreme Court of Victoria, S ECI 2016 01231 (‘Further Amended Statement of Claim (Cahill Proceeding)’); Paragraph [8] of the Amended Defence and Counterclaim filed on 18 August 2017 on behalf of the First Defendant in Molonglo Group (Australia) Pty Ltd v Peter Joseph Cahill & Anor, Supreme Court of Victoria, S ECI 2016 01256 (‘Amended Defence and Counterclaim (Molonglo Proceeding)’) .
Mr Pitt, counsel for Kiversun and Ms Spencer-Bruce, Counsel for Molonglo, made similar submissions in resistance to Mr Cahill’s application.
Mr Pitt, Counsel for Kiversun, submitted that the first cause of action pleaded by Mr Cahill is at paragraph [15] of the Further Amended Statement of Claim filed on 18 August 2017 on behalf of Mr Cahill in the Cahill Proceeding (‘ASOC’). In that paragraph, it is pleaded by Mr Cahill that, by reason of the matters set out in paragraph [7] to [13] of the ASOC, Kiversun has refused to abide by its obligations under the Cahill Sale Agreement and Mr Cahill is entitled to relief by way of specific performance. The date range of material facts pleaded in support of Cahill’s specific performance claim is from 15 July 2016 to 4 August 2016, when Kiversun is alleged to have wrongfully purported to reject the contract of sale documentation executed and delivered by Mr Cahill and terminate the Cahill Sale Agreement.
Further, he says an alternative cause of action is pleaded in respect of breach of duty of good faith at paragraphs [16] to [18] of the ASOC. The date range which is relevant to this cause of action is said, in paragraph [17], to be 15 July 2016 to 4 August 2016. A cause of action is pleaded under the Australian Consumer Law at paragraphs [19] to [24] of the ASOC. The date range in respect of that cause of action is also from 15 July 2016 to 4 August 2016.
There is also an allegation that Kiversun made false or misleading statements or representations in connection with the sale of the Rokeby Street property at paragraphs [25]-[26]. Again the date range is the same, from 15 July 2016 to 4 August 2016. Kiversun’s defence does not plead any matters which take the issues in dispute between the parties outside the date range pleaded by Mr Cahill.
Mr Pitt, Counsel for Kiversun, submitted that none of the documents sought by Mr Cahill in the application for further discovery are relevant to his pleaded case or the defence of Kiversun, as all of Mr Cahill’s causes of action have been pleaded by reference to matters arising between 15 July and 4 August 2016. Further, Mr Cahill, he submits, appears to be ‘conflating the issue of identification of terms of the “Cahill sale Agreement” with the construction of those terms’.[15] He contended it is not permissible to have regard to the evidence of the conduct of parties subsequent to the formation of the agreement to ascertain what the terms are or how they are to be construed. Regard may be had to the surrounding circumstances at the time the contract was entered into as an aid to construction of the terms only if the terms are ambiguous.[16]
[15]Outline of Kiversun’s Submissions’, paragraph [33(c)].
[16]Ibid [33(d)], citing Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 117 [50] (French CJ, Nettle and Gordon JJ).
Mr Pitt submitted that there is no suggestion by Mr Cahill in the ASOC or elsewhere that the terms which have been identified are unable to be construed or are ambiguous. Indeed, Mr Cahill pleads the terms of the agreement clearly in paragraph [5] of the ASOC and it is not pleaded that any terms of the Cahill sale Agreement arise by reference to post-contractual statements.
In addition to these matters, Mr Pitt complains of the delay in the making of the application with the pleadings having closed in January and the first request for further documents following several months later. There is no explanation for that delay which he submits has the possible consequence of threatening to imperil the trial date. Finally, he complains that the application has all the appearances of a ‘fishing’ expedition to find documents for cross-examination of Kiversun’s witnesses.
Ms Spencer-Bruce contended that the documents sought, namely communications between 4 August and 3 October 2016, are not relevant to either the existence of a binding contract of sale between Mr Cahill and Kiversun concluded before 4 August 2016, nor to any alleged breach of good faith during the period 15 July to 4 August 2016. In this regard, Ms Spencer-Bruce made reference to the ASOC as well as the defence and counterclaim filed on behalf of Mr Cahill in the Molonglo proceeding. Ms Spencer-Bruce contended that the documents sought, namely communications between 4 August and 3 October 2016, are not relevant to either the existence of a binding contract of sale between Mr Cahill and Kiversun concluded before 4 August 2016, nor to any alleged breach of good faith during the period 15 July to 4 August 2016
As such, she submitted communications between Kiversun and Molonglo after 4 August 2016 were not admissible, let alone relevant, in construing the meaning of the terms of the Cahill Sale Agreement.
In this regard, Ms Spencer-Bruce submitted that the proper construction of a contract is to be determined objectively by reference to its text, context and purpose.[17] Ordinarily, the process of construction is possible by reference to the contract alone. It is only where a term is ambiguous that evidence of surrounding circumstances is admissible.[18] Further, if the Court is receiving evidence of surrounding circumstances, it is events, circumstances and things external to the contract which are known to the parties at the time the contract was entered into which may be considered.[19] Evidence of the parties’ statements and actions reflecting their actual intentions and expectations is inadmissible.[20]
[17]Citing Simic v New South Wales Land and Housing Corporation [2016] HCA 47 (7 December 2016) [18] (French CJ); [78] (Gageler, Nettle and Gordon JJ), citing Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640, 656 [35] (French CJ, Hayne, Crennan and Kiefel JJ); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116-7 [46]-[52] (French CJ, Nettle and Gordon JJ).
[18]Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116 [48] (French CJ, Nettle and Gordon JJ).
[19]Melbourne Linh Son Buddhist Society Inc v Gippsreal Ltd [2017] VSCA 161 (23 June 2017) [140] (Kyrou JA and Cameron AJA).
[20]Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 117 [50] (French CJ, Nettle and Gordon JJ).
Moreover Ms Spencer-Bruce submitted, as the High Court has clearly stated, ’[‘[i]t is not legitimate to use as an aid to construction of [a] contract anything which the parties said or did after it was made’.[21]
[21]Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570, 582 [35] (Gummow, Hayne and Kiefel JJ), citing James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583, 603 (Lord Reid). See also Franklins Pty Ltd v Metcash Trading (2009) 76 NSWLR 603, 683 [327] where Campbell JA stated that what his Honour takes to be established by Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 is ’the use of subsequent conduct is forbidden to prove any matter that cannot legitimately enter into the construction of a written contract in accordance with the objective theory of contract’ and ‘[i]n particular, it cannot be used to prove what the parties meant by particular terms that they used in their contract.’
In my opinion, the application for further discovery against Kiversun and Molonglo by Mr Cahill should be refused. Kennedy J made quite specific orders for discovery in November 2016 and 10 March 2017 and those orders have apparently been complied with. The November 2016 orders were in respect of the conveyancing files of the parties and the second required the parties to make lists of documents relevant to the proceedings. The pleadings in the matter have closed. To my mind, the application is one which seeks to expand the orders made by Kennedy J for discovery under the guise of an application for further and better discovery. At the end of the day, Mr Cahill’s case depends upon him establishing that he had an effective and binding contract by reason of the Cahill Sale Agreement which was concluded on his case on 15 July 2016. There is no ambiguity about the terms of the Cahill Sale Agreement so as to render admissible evidence of the surrounding circumstances to resolve the ambiguity. As Black J observes in Centura Global Holdings Pty Ltd while a Court may have regard to the subsequent conduct of parties in reaching findings as to whether such an agreement existed, it cannot do so in circumstances of resolving questions of construction in respect of an agreement.
As the documents sought cannot be relevant to either the identification of the terms of the alleged Cahill Sale Agreement as pleaded, or to its construction, it appears they are sought for cross-examination on credit only[22] or as part of a ‘fishing’ expedition. Neither purposes are consistent with the requirements of the CPA or the Rules.
[22]Discovery is not ordered to provide documents for cross-examination on credit only: see, eg, North West Supermarkets Pty Ltd v The Leasing Centre (Aust) Pty Ltd [2015] VSC 212 (21 May 2015) [50]-[54] (Riordan J), referring to Beecham Group Ltd v Bristol Myers Co [1979] VR 273, 277.
Similarly, the second purported basis for the relevance of the documents sought does not accord with Mr Cahill’s pleaded case. Mr Cahill expressly relies for his bad faith allegations upon conduct during the period 15 July to 4 August 2016.[23] Documents evidencing communications after this period, which is what Cahill seeks in this application, have no relevance to this issue. The application for further discovery is refused.
[23]Paragraph [17] of the Further Amended Statement of Claim (Cahill Proceeding).
Molonglo’s application
I now turn to Molonglo’s application that Mr Cahill discover all documents in his possession relevant to his ability to perform his obligation under the Cahill Sale Agreement, including but not limited to bank statements, tax returns and financial statements. As I have noted, Molonglo relies on a bundle of documents consisting of correspondence passing between its solicitors, King & Wood Mallesons, and Mr Cahill’s solicitors, Aitken Partners.
In the pleadings delivered on his behalf, Mr Cahill has contended that he is ready, willing and able to perform the Cahill Sale Agreement.[24] Molonglo contends that this requires Mr Cahill to demonstrate, as he has pleaded, that he has the financial capacity to pay the purchase price upon settlement, whether in full or via finance, and that it is an essential element of Mr Cahill’s claim in the proceeding commenced by him (and in his defence and counterclaim in the proceedings commenced by Molonglo to remove Mr Cahill’s caveat).[25] Further, on 13 June 2017, Mr Cahill served a notice to admit, seeking an admission from Molonglo of his ability to pay the purchase price upon settlement. This was disputed by Molonglo’s notice of dispute of 27 June 2017. Mr Cahill has refused a number of requests to discover documents related to this issue.
[24]Paragraph [13] of the Further Amended Statement of Claim (Cahill Proceeding); Paragraph [10H] of the Amended Defence and Counterclaim (Molonglo Proceeding).
[25]See Paragraph [14] of the Reply and Defence to Counterclaim filed on behalf of the Plaintiff and Defendant by Counterclaim in Molonglo Group (Australia) Pty Ltd v Peter Joseph Cahill & Anor of Titles, Supreme Court of Victoria, S ECI 2016 01256.
In correspondence, Mr Cahill’s solicitors[26] assert that although his ability to perform is a ‘necessary element of his claim,’ it is not a ‘real issue in dispute’ and is not relevant, or if it is relevant, discovery of such documents is disproportionate. In their letter of 18 July 2017, Mr Cahill’s solicitors contend that his refusal to engage further on the issue of discovery of this category of documents is consistent with their overarching obligations under the CPA and that Mr Cahill intended to prove his ability to perform the contract for which he seeks specific performance at trial by adducing evidence ‘without the need to incur unnecessary legal costs arising from discovery’.
[26]Letters Aitkin Partners Lawyers & Advisors to King & Wood Mallesons, 4 April 2017, 28 April 2017, 18 July 2017, 27 July 2017.
Ms Spencer Bruce contends that Mr Cahill’s readiness and ability to perform and therefore his financial position is an issue squarely raised on the pleadings. His solicitors’ correspondence, which signals that he intends to lead evidence of his ability to perform at trial, only serves to further highlight the need for adequate discovery to enable Molonglo to test any such evidence.
In her affidavit of 28 August 2017, Ms Wangmann exhibits a report of Dr Pasquale Franzese. The report states that Dr Franzese is a business and banking advisor who is said to be knowledgeable about the practices of Australian banks and regulated managed investment schemes and lending for property finance and related purposes. He makes certain conclusions as to Mr Cahill’s prospects of applying for and obtaining finance in respect of the purchase of the Rokeby Street property. Kiversun and Molonglo contend that communications between Kiversun and Molonglo after 4 August 2016 cannot have any relevance to the identification of the terms written in that document, the conversations between Cahill and Simpson, or terms implied by law.
Ms Spencer Bruce contended that it would be expected that there would be either financial statements, bank statements or other financial documents that evidence Mr Cahill’s ability to perform. There has been no suggestion that they do not exist. Ms Spencer Bruce observed that in Dr Franzese’s report he states, at p 13:
I have not been asked to review the financial records or asset liability statement of Cahill or any of his associated entities. … Cahill’s financial standing and other related financial information would be more relevant to a lender at the time of formal application. It is at this time that the lender would formally review capacity and other lending criteria. …
Dr Franzese goes on to say:
I have no evidence to say that Cahill could not meet the capacity requirements.
Ms Spencer Bruce observes that that is because Dr Franzese has been provided with no financial information at all about Mr Cahill. She submits that her clients are entitled to test the relevant documents to support Mr Cahill’s position in cross‑examination. As to the proposition that Mr Cahill himself may not be the ultimate borrower and that he would nominate an associated entity, Ms Spencer Bruce contended that both Mr Cahill’s personal financial data and that of the associated entity would then be both discoverable.
In response, Mr Rodbard‑Bean contended that reliance will be placed on Dr Franzese’s report and that Mr Cahill would ‘rise and fall on that’. Dr Franzese contends it is going to be the ability of Mr Cahill to perform in two years’ time and that is the way that Mr Cahill will prove his case.
In my view, the classes of documents for which Molonglo seeks discovery in its summons are discoverable and Mr Cahill will be ordered to discover them. At trial, Mr Cahill has the onus of establishing on the balance of probabilities that he (together with his nominee if there is one) is ready willing and able to perform the Cahill Sale Agreement as this element of Mr Cahill’s case has not been admitted by Molonglo. Mr Cahill’s lawyers have indicated that they intend to lead evidence at trial to establish this element. That will presumably involve production of documentation which goes to his creditworthiness in the eyes of financial intermediaries including his and his associated entities’ history of compliance in the past with their financial obligations. It seems[27] Dr Franseze was not provided with any independent documentation going to Mr Cahill’s history in that regard and he does not purport to assess Mr Cahill’s particular prospects of obtaining finance based on such material.[28] Dr Franzese speaks in his report[29] of ‘the 5 C’s of lending’, matters which a prudent and diligent bank is going to have regard to in assessing creditworthiness which include capacity to meet commitments, what capital the borrower has and what collateral security is available. These are matters for which Mr Cahill is likely to have documents in his possession and they are relevant to a matter in issue in the proceeding. I do not accept that requirement to make such discovery would run counter to the spirit of the CPA by involving the disproportionate application of resources or the incurring of unnecessary costs. I accept that there should be some time frame in the orders limiting how far back in time such documentation should extend to and I will hear the parties to the Molonglo application on this issue.
[27]Expert Witness Report of Dr Pasquale Franzese, 21 August 2017, 13.
[28]Ibid 3.
[29]Ibid 5.
SCHEDULE OF PARTIES
S ECI 2016 01231
PETER JOSEPH CAHILL Plaintiff -v- KIVERSUN PTY LTD Defendant
S ECI 2016 01256
BETWEEN:
MOLONGLO GROUP (AUSTRALIA) PTY LTD (ACN 109 342 547) Plaintiff -v- PETER JOSEPH CAHILL First Defendant REGISTRAR OF TITLES Second Defendant AND BETWEEN: PETER JOSEPH CAHILL Plaintiff by Counterclaim -v- MOLONGLO GROUP (AUSTRALIA) PTY LTD (ACN 109 342 547) Defendant by Counterclaim
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