Caruso v Miluc Pty Ltd as trustee for the MLG Trust
[2021] WASC 91
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CARUSO -v- MILUC PTY LTD as trustee for THE MLG TRUST [2021] WASC 91
CORAM: REGISTRAR WHITBY
HEARD: 8 MARCH 2021
DELIVERED : 8 MARCH 2021
PUBLISHED : 1 APRIL 2021
FILE NO/S: CIV 2042 of 2018
BETWEEN: VINCENZO CARUSO
First Plaintiff
ISOLETTA CARUSO
Second Plaintiff
AND
MILUC PTY LTD as trustee for THE MLG TRUST
First Defendant
MICHAEL ROLAND GOSATTI
Second Defendant
LUCY GOSATTI
Third Defendant
Catchwords:
Discovery - Application for further and better discovery - Relevance of documents - Whether discovery oppressive
Legislation:
Rules of the Supreme Court 1971 (WA), O 1 r 4A, O 1 r 4B, O 1 r 7
Result:
Further and better discovery of bank statements and loan applications ordered
Further and better discovery of documents relating to how secured funds used and benefit derived refused
Representation:
Counsel:
| First Plaintiff | : | Ms J Sacino |
| Second Plaintiff | : | Ms J Sacino |
| First Defendant | : | Mr W Spyker |
| Second Defendant | : | Mr W Spyker |
| Third Defendant | : | Mr W Spyker |
Solicitors:
| First Plaintiff | : | HFM Legal |
| Second Plaintiff | : | HFM Legal |
| First Defendant | : | Spyker Legal |
| Second Defendant | : | Spyker Legal |
| Third Defendant | : | Spyker Legal |
Case(s) referred to in decision(s):
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Cazaly Iron Pty Ltd v Minister for Resources [2007] WASCA 60
Mulley & Marney v Manifold [1959] HCA 23; (1959) 103 CLR 341
Perpetual Trustees Company Ltd v Burniston [2012] WASC 26
Westraint Resources Pty Ltd v BHP Iron Ore Pty Ltd [No 4] [2009] WASC 17
Youlden Enterprises Pty Ltd v Health Solutions WA Pty Ltd [2005] WASC 60
REGISTRAR WHITBY:
This is the plaintiffs' application made by chamber summons dated 18 September 2020 for orders for further and better discovery from the defendants pursuant to O 26 r 7(1) of the Rules of the Supreme Court 1971 (RSC).
The plaintiffs rely upon the affidavit of Josephine Sacino sworn 4 November 2020 in support of the application.
Introduction
On 7 February 2004, Vincenzo and Isoletta Caruso as sellers, and Miluc Pty Ltd as trustee for the MLG Trust, as buyer, entered into a contract for the sale of land in Kenwick (lots 97 and 98).
Miluc purchased lots 97 and 98 in order to sub‑divide and develop the land.
As part of the contract for sale, Miluc agreed to pay an amount of money to the Carusos and also to transfer to the Carusos two sub‑divided lots of the land.
Miluc has since sub‑divided and developed the land. Miluc has not transferred any sub‑divided lots to the Carusos.
Michael and Lucy Gosatti are directors of Miluc. On 25 October 2018, Mr Gosatti signed transfers of land in order to transfer two sub‑divided lots of the land to the Carusos. The transfers could not be registered because there is a mortgage and caveats on the titles of the land.
The Carusos say they need information about the amount that is secured against the two sub‑divided lots of land, whether Miluc and the Gosattis benefited from using the land as security and if they did, the amount of benefit they received.
The Carusos are seeking discovery of the following documents in order to obtain that information:
(a)bank statements;
(b)loan applications;
(c)documents showing how Miluc and the Gosattis used funds secured by the land; and
(d)documents which show the benefit derived by Miluc and the Gosattis from the use of the funds secured by the land.
The issues I am required to determine in this application are whether the documents are relevant to the matters in issue in the action and if they are relevant, whether discovery would be oppressive.
For the reasons that follow, I find that:
(a)bank statements and loan applications are relevant and discovery is not oppressive; and
(b)documents showing how the land was used as security and any benefit obtained from the use of funds secured against the land are relevant but discovery is oppressive.
Further and Better Discovery – Legal Principles
I must be satisfied of the following three requirements before I order further and better discovery:
(a)I must be fairly certain that the documents exist;
(b)the documents must be relevant; and
(c)the documents should have been disclosed:
Perpetual Trustees Company Ltd v Burniston [2012] WASC 26 [29].
The documents will be relevant if they:
(a)advance the Carusos' case or damage Miluc's and/or the Gosattis' case; or
(b)lead to a train of inquiry that would either advance the Carusos' case or damage Miluc's and/or the Gosattis' case:
Mulley & Marney v Manifold [1959] HCA 23; (1959) 103 CLR 341, 345 (Menzies J).
Miluc and the Gosattis do not dispute that the documents exist. The issue is whether they are relevant.
Facts
Miluc remains the registered owner of the land. The Carusos say that, pursuant to the contract for sale of the land, Miluc agreed to transfer two sub‑divided lots to the Carusos. The Carusos say therefore, that they are the beneficial owners of two sub‑divided lots of the land, one on Summershill Gate in Kenwick and one on Austin Avenue in Kenwick. The Caruso refer to these lots as lot 2 and lot 125 respectively. I will refer to these two lots as the Kenwick properties.
The Carusos also say that, on 5 March 2015, the parties entered into a settlement agreement. The settlement agreement required Miluc to transfer lot 2 to the Carusos by 31 July 2015 and lot 125 to the Carusos by 31 October 2015.
The Carusos say that:
(a)Miluc has breached the contract for sale of the land because it has not transferred the Kenwick properties to the Carusos;
(b)Miluc has breached the settlement agreement because it has not transferred the Kenwick properties to the Carusos; and
(c)Miluc has enjoyed the benefit of legally owning the Kenwick properties, a benefit that the Carusos should have had instead.
On 25 October 2018, Michael Gosatti, on behalf of Miluc, signed transfers of land to transfer the Kenwick properties to the Carusos.
The transfers have not been registered because the following encumbrances are registered against the titles of the Kenwick properties:
(a)a mortgage in favour of the NAB registered on 20 September 2005;
(b)a Memorial pursuant to the Taxation Administration Act 2003 lodged on 7 February 2018;
(c)four caveats in favour of Batalin Nominees Pty Ltd:
(i)one registered on 24 March 2014
(ii)one registered on 22 May 2019
(iii)two registered on 8 July 2019.
The Carusos are asking the court to grant the following relief:
(a)specific performance of the contract for sale;
(b)specific performance of the settlement agreement; or
(c)damages for breach of either the contract for sale or the settlement agreement.
The Carusos' application for further and better discovery
The Carusos are applying for orders to require Miluc and the Gosattis to provide discovery of the following documents:
(a)account statements issued by the NAB Bank to Miluc in respect of any loan facility that has previously been or is currently secured by mortgages registered over the Kenwick Properties (NAB statements);
(b)all applications to NAB with respect to any funds secured by the Kenwick properties, now or at any time since 20/09/2005, including correspondence between any of Miluc and/or the Carusos and NAB with respect to the applications for such land and all documents provided by Miluc and the Carusos (or any one or more of them) to NAB in support of such applications (NAB applications);
(c)documents evidencing the use of funds advanced by NAB to Miluc which are now, or were at any time since 20/09/2005 secured against the Kenwick properties (use of funds documents);
(d)any benefit wholly or partially derived by Miluc and/or Michael Gosatti and/or Lucy Gosatti, or any related entities from the use of the funds advanced by NAB that are now or were at any time since 20/09/2005 secured by the Kenwick properties with such documents to include but not be limited to:
(i)Financial Statements of Miluc;
(ii)Tax returns of Miluc and the Gosattis;
(iii)sale of land contracts for the sale of any land the purchase and/or development of which was funded by loans and/or advances from NAB that are now, or were at any time since 20/09/2005, secured by the Kenwick Properties;
(iv)settlement statements; and
(v)bank statements and investment statements
(benefit documents).
The Carusos submit that all of the documents exist and are relevant to the matters in issue in the proceedings, specifically that:
(a)the NAB statements and NAB applications will enable them to determine whether or not Miluc is able to perform the contract for sale or the settlement agreement by transferring the Kenwick properties to the Carusos; and
(b)the fund documents and the benefit documents will enable the Carusos to determine the benefit that Miluc obtained from using the Kenwick properties as security to borrow funds.
Miluc and the Gosattis submit that none of the documents are relevant to any matters in issue. They say they are only relevant to any enforcement proceedings, such as a means inquiry, to determine Miluc's ability to satisfy any judgment.
In any event, Miluc and the Gosattis say that the discovery of the documents would be oppressive because the description of the documents is so broad and dates back to 2005. The application should be dismissed on the grounds that it disproportionate to the value, importance and complexity of the matters in dispute.
What are the issues?
The issues in this application are:
(a)Are the documents relevant to the matters in issue?
(b)If so, is discovery of the documents oppressive?
Are the documents relevant?
In order to assess whether documents are relevant, the court must have regard to the pleadings and the conduct and admissions of the parties: Youlden Enterprises Pty Ltd v Health Solutions WA Pty Ltd [2005] WASC 60 [5].
Are the NAB statements and NAB applications relevant to the matters in issue?
The parties agreed, by consent order on 18 February 2020, that discovery would include:
'all documents relating to the security that [Miluc has] given to other parties over [the Kenwick properties].'
The Carusos say that Miluc and the Gosattis have already agreed that the NAB statements and the NAB applications are relevant because these documents fall within this agreed category of discovery.
By affidavit of Mr Gosatti sworn 5 May 2020, documents were discovered under the category described as 'Documents relating to the security given by the Defendants'. These documents did not include the NAB statements or the NAB applications.
I find that the NAB statements and the NAB applications are documents which fall within this agreed category of discovery because they relate to the loan facility which is secured by the Kenwick properties. They are ‘documents which relate to the security given to NAB over the [Kenwick properties]’. They should be discovered pursuant to the consent order.
In any event, the NAB statements and the NAB applications are documents which are relevant to the relief sought by the Carusos. These documents may lead to a train of enquiry which either advances or damages the Carusos' claim for specific performance of the contract for sale and/or the settlement agreement.
Are the fund documents relevant to the matters in issue?
The Carusos say that the fund documents are relevant to their plea of unjustment enrichment because the documents will enable them to determine whether Miluc benefited from using the Kenwick properties as security and the amount of any benefit.
The Carusos’ claim for unjustment enrichment is contained in paragraph 54.3 of the Amended Statement of Claim dated 21 November 2019:
Miluc has had the benefit of being the registered proprietor of [the Kenwick properties], and the benefit of subdividing and retaining the profit from the sale of Lot 97 and Lot 98 and has been unjustly enriched at the expense of the plaintiffs;
The unjust enrichment claim is a very broad one. It is not difficult to find that the fund documents may lead to a train of enquiry which advances the Carusos' claim that Miluc has benefited from using the Kenwick properties as security. It follows that the fund documents are relevant to a matter in issue.
Are the benefit documents relevant to the matters in issue?
For the same reasons the fund documents are relevant to the issue of unjust enrichment, I find that the benefit documents are also relevant.
Is discovery of the documents oppressive?
Any order for further and better discovery is discretionary and the discretion must be exercised having regard to the objectives of case management and the just resolution and determination of litigation: O 1 r 4B RSC; Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175.
Even if documents are relevant, one of the matters to be considered in exercising discretion to order discovery is whether the production of those documents would be oppressive or the utility of those documents would not justify the burden placed upon the discovering party in providing that discovery: Cazaly Iron Pty Ltd v Minister for Resources [2007] WASCA 60 [7].
In determining whether discovery is oppressive, relevant factors include the value of the discovery to the party seeking it and the burden imposed on the party giving it. Further, the court should restrict the volume of documents and the labour and expense involved to that which is needed for fairly disposing of the issues in the proceeding: Westraint Resources Pty Ltd v BHP Iron Ore Pty Ltd [No 4] [2009] WASC 17 [13].
The Carusos seek discovery of documents which date back to 2005. Miluc and the Gosattis say that the burden it will place on them to discover those documents is oppressive and outweighs any utility of discovery.
I accept that there is a significant burden on Miluc and the Gosattis to discover documents dating back 16 years. It is important to consider the utility of those documents if I am to make an order for their discovery.
The NAB statements and the NAB applications are directly relevant to Miluc's ability to perform the contract of sale and/or the settlement agreement. These categories of documents are clearly defined and able to be readily identified by Miluc. I find that the utility of these documents outweighs the burden of discovery.
The description and potential scope of the fund documents and the benefit documents is very broad. Discovery of these documents is burdensome – it would require tracing the use of all funds secured against the Kenwick properties since 2005.
In my view, the utility of the fund documents and the benefit documents is limited as the Carusos are seeking relief in the form of specific performance and damages, not restitution. It is difficult to see how the fund documents and the benefit documents are required by the Carusos to fairly dispose of the issues in the action.
In weighing the utility of the documents against the burden discovery will place upon Miluc and the Gosattis, I exercise my discretion against ordering discovery of the fund documents and the benefit documents.
Conclusion
The NAB statements and the NAB applications are relevant to matters in issue and discovery of those documents is not oppressive.
While the fund documents and the benefit documents are relevant to matters in issue, an order for discovery is oppressive.
Each party has been equally successful on this application. It is appropriate that each party pay their own costs.
Orders
I make the following orders:
1.By 15 April 2021 (or such later time as agreed by the parties), the defendants file and serve a supplementary list of documents verified by affidavit in respect of the following documents:
(a)Account statements issued by NAB to the first defendant in respect of any loan facility that has previously been or is currently secured by mortgages registered over 17A Summershill Gate Kenwick and 68 Austin Avenue Kenwick (the Kenwick properties); and
(b)All documents comprising application to NAB with respect to any funds secured by the Kenwick properties now or at any time since 20/09/2005, including correspondence between any of the defendants and NAB with respect to the applications for such land and all documents provided by the defendants (or any one or more of them) to NAB in support of such applications.
2.Each party pay their own costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TG
Court Officer
1 APRIL 2021
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