Chaudhary v Bandicoot Group Pty Ltd (No 2)
[2018] FCA 420
•28 March 2018
FEDERAL COURT OF AUSTRALIA
Chaudhary v Bandicoot Group Pty Ltd (No 2) [2018] FCA 420
File number: SAD 211 of 2016 Judge: BESANKO J Date of judgment: 28 March 2018 Catchwords: PRACTICE AND PROCEDURE – interlocutory application – whether an order under r 20.15 of the Federal Court Rules 2011 (Cth) requiring the discovery of documents within identified categories ought to be made Legislation: Federal Court Rules 2011 (Cth) rr 20.14, 20.15 Cases cited: B v B [1978] 3 WLR 624
Chaudhary v Bandicoot Group Pty Ltd [2017] FCA 517
Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627
Date of hearing: 20 September 2017 Date of last submissions: 3 October 2017 Registry: South Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 79 Counsel for the Plaintiff: Mr M Douglas Solicitor for the Plaintiff: PGC Legal Pty Ltd Counsel for the Defendants: Mr N Swan Solicitor for the Defendants: Andersons Solicitors ORDERS
SAD 211 of 2016 BETWEEN: VISHAL CHAUDHARY
Plaintiff
AND: BANDICOOT GROUP PTY LTD ACN 134 424 034
First Defendant
ASHEESH GOYAL
Second Defendant
RUCHI GOYAL
Third Defendant
JUDGE:
BESANKO J
DATE OF ORDER:
28 MARCH 2018
THE COURT ORDERS THAT:
1.The plaintiff bring in draft minutes of order reflecting the conclusions in these reasons.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BESANKO J:
INTRODUCTION
The plaintiff, Mr Vishal Chaudhary, has brought a proceeding against Bandicoot Group Pty Ltd (Bandicoot), Mr Asheesh Goyal (second defendant) and Ms Ruchi Goyal (third defendant). He has issued an interlocutory application in this proceeding wherein he seeks an order under r 20.15 of the Federal Court Rules 2011 (Cth) requiring the defendants to make discovery of documents within the categories identified in an annexure to the application. The application is supported by two affidavits affirmed by the plaintiff and an affidavit sworn by the plaintiff’s solicitor. The defendants oppose the application. They rely on an affidavit sworn by the second defendant.
In his interlocutory application, the plaintiff sought an order for standard discovery under r 20.14 or an order for discovery by categories under r 20.15. By the time of the hearing, it was clear that he was seeking discovery by categories under r 20.15. The plaintiff has not identified any criteria in r 20.14(1) and (2) which should not apply.
There has been a previous interlocutory application in the proceeding. It was brought by the defendants and related to paragraphs in the Third Statement of Claim. Details of the nature of the plaintiff’s claim are set out in my reasons on that application (Chaudhary v Bandicoot Group Pty Ltd [2017] FCA 517).
The plaintiff is the registered shareholder of 49 paid ordinary shares in Bandicoot. The defendants allege that a Mr Dhyan Singh asserts that 50% of the plaintiff’s shares are held by the plaintiff on trust for Mr Singh’s benefit. The plaintiff was a director of Bandicoot from 28 January 2009 to 26 February 2016. The plaintiff alleges, and the defendants admit, that from about 1 July 2009 to 25 January 2016, he was employed by Bandicoot in a role titled “Director of Student Support Services” (DSSS). In further response to this allegation, the defendants allege that the plaintiff received management fees between July 2009 and June 2011, and then became a full time employee of Bandicoot from July 2011 to March 2012. The defendants allege that after March 2012 and until 25 January 2016, the plaintiff provided services to Bandicoot as a contractor and received fees payable to his family trust. The plaintiff alleges that he is a creditor of Bandicoot. This is denied by the defendants.
Bandicoot is a company which was duly incorporated on or about 1 December 2008 pursuant to the Corporations Act 2001 (Cth). At all material times, it traded as a vocational training institution under the name “Salford College”. Bandicoot had two bank accounts at the Westpac Banking Corporation and these are referred to in the Fourth Statement of Claim (Statement of Claim) as Account 1 and Account 2. From about December 2008, Bandicoot leased commercial premises at Level 1, 255 Pulteney Street, Adelaide and from that time to about January 2014, traded from those premises. From about January 2014, Bandicoot relocated from the Pulteney Street premises and traded from premises on Level 11, 68 Grenfell Street, Adelaide.
The second defendant was registered as a director of Bandicoot on 1 December 2008 and remains a director of Bandicoot. The third defendant is the wife of the second defendant and she was registered as a director of Bandicoot on 25 May 2014. The defendants allege that the third defendant ceased to be a director of Bandicoot on 30 June 2016.
The plaintiff’s claims against the defendants relate to the operations of Bandicoot. Broadly speaking, the plaintiff alleges that the second and third defendants have operated Bandicoot for their own benefit and for the benefit of entities related to them and not in the best interests of Bandicoot.
THE PLAINTIFF’S CLAIMS
It is convenient at the outset to identify the related entities.
Ms Veena Goyal is the sister-in-law of the second defendant and is a resident of, and domiciled in, India. Mr Shivam Goyal is the son of Ms Veena Goyal and is a resident of, and domiciled in, India.
Kush Nominees Pty Ltd (Kush Nominees) was incorporated as a company pursuant to the Corporations Act on 6 July 2012 and is the registered shareholder of 102 ordinary shares in Bandicoot. The third defendant is the company’s sole director and secretary and its sole shareholder.
Beachhead Training and Recruitment Pty Ltd (BTR Group) was incorporated as a company pursuant to the Corporations Act on 6 July 2012. The third defendant is the company’s sole director and secretary. Kush Nominees is the sole shareholder of the company. The plaintiff alleges that the BTR Group employs the second defendant in a role titled “Manager” and trades as an employment recruitment agency. He alleges that from about July 2012, the BTR Group traded from the Pulteney Street premises and, subsequently, from the Grenfell Street premises. The defendants deny some of these allegations and make alternative allegations which are unnecessary to set out. The defendants admit that the second defendant manages the BTR Group, although they claim that he is not employed by the group.
Ruash International Pty Ltd (Ruash International) was incorporated as a company pursuant to the Corporations Act on 22 February 2005. The third defendant is the company’s sole director and secretary. The second and third defendants are the company’s sole shareholders. Ruash International is engaged in the business of providing 3D design and animation services, primarily for architects. It appeared first under the name “Idrawfast” and subsequently under the name “CVIZ”. The plaintiff alleges that from about June 2009, Ruash International traded from the Pulteney Street premises. The defendants deny this allegation and plead that Ruash International has not traded from the Pulteney Street premises since January 2014.
Zest International Pty Ltd (Zest International) was incorporated as a company pursuant to the Corporations Act on 16 December 2013. The second defendant is the company’s sole director and secretary and Kush Nominees is its sole shareholder. The plaintiff alleges that it now trades as the business referred to in relation to Ruash International as “CVIZ”. The plaintiff alleges that from about 16 December 2013, Zest International traded from the Pulteney Street premises and, subsequently, from the Grenfell Street premises. The defendants deny these allegations and make alternative allegations. They allege that Zest International is the registered owner of the name “CVIZ”, but contend that the company has never traded, whether from the Pulteney Street premises or at all.
Lake Beverages Private Limited (Lake Beverages) was incorporated in India on 24 June 2013. The plaintiff alleges that it engages the second defendant as a representative. The defendants deny this allegation and make alternative allegations. Mr Shivam Goyal is a director of Lake Beverages. The company conducts a business of distilling, packaging and selling water.
Istudy Abroad Pty Ltd (Istudy Abroad) was incorporated as a company pursuant to the Corporations Act on 13 March 2013. The company was deregistered on 22 May 2016. The third defendant was its director during the period from 13 March 2013 to 22 May 2016. The second defendant was a shareholder of the company. The company had an office in India which was managed by Ms Veena Goyal and it traded as a recruitment agency for overseas students. The defendants admit these allegations and plead additional facts.
The plaintiff alleges that on 28 December 2008, the plaintiff, the second defendant and the third defendant entered into a written agreement titled “Memorandum of Understanding” regarding Bandicoot’s operations. The plaintiff refers to this as “the Contract”. The plaintiff pleads that the terms of the Contract included the following:
14.1.Asheesh and Ruchi would make an initial contribution towards the operational funds of the business of $40,800 (clause 2 of the Contract);
14.2.Asheesh would be paid an annual salary of $70,000 plus 5% of the business’ net income, which salary would be reviewed after six months and adjusted to an amount consistent with market rates for equivalent positions at other like businesses (clause 7 of the Contract);
14.2AVishal would be paid an annual salary of $40,000 plus 5% of the business’ net income, which salary would be reviewed after six months and adjusted to an amount consistent with market rates for equivalent positions at other like businesses (clause 7 of the Contact);
14.3.All decisions regarding the operations of the business would be approved by all of the parties to the Contract (clause 8 of the Contract);
14.4.No party to the Contract would draw any monies from the business’ bank accounts for personal use without specific approval from all of the parties (clause 10 of the Contract).
The defendants deny a number of these allegations and plead alternative and additional facts. The plaintiff alleges that the Contract constituted a valid and enforceable agreement between the parties. The defendants deny this allegation and plead that the Memorandum of Understanding was not intended by the parties to be an enforceable contract, but rather to record the then current intentions of the parties pending the establishment of Bandicoot and of the business of Salford College to be operated by Bandicoot.
The plaintiff alleges that the second and third defendants have misappropriated or misused Bandicoot’s funds for the benefit of them personally, their family and businesses associated with them in circumstances in which there has been no benefit to Bandicoot. Particulars are provided in support of this allegation. Schedule 1 to the Statement of Claim sets out payments made from Account 1, and Schedule 2 sets out payments made from Account 2.
The payments or benefits provided by Bandicoot to related entities without a benefit to Bandicoot are particularised in Schedule 3 (BTR Group), Schedule 4 (Ruash International), Schedule 5 (Zest International), Schedule 6 (Lake Beverages) and Schedule 7 (Istudy Abroad) to the Statement of Claim. The defendants deny a number of the allegations and plead additional and alternative facts. The defendants admit that payments were made from time to time to these entities, but deny that they were not for the benefit of Bandicoot, and further say that each such payment was a “proper payment in the ordinary course of the business of Bandicoot and was made with the plaintiff’s knowledge and approval” (para 13.3 of Second Defence).
The plaintiff alleges that the conduct of the second and third defendants was in breach of the Contract. The defendants deny this allegation.
The plaintiff alleges that the second defendant has been paid and is being paid unauthorised and excessive remuneration. The defendants deny this allegation and plead alternative and additional facts.
The plaintiff alleges that the second or third defendants, or both, have caused Bandicoot to act in breach of contracts the company had with various individuals or otherwise deal inappropriately with those individuals, such that those individuals resigned from their employment with, or engagement by, Bandicoot. Particulars of these allegations are provided in Schedule 8 to the Statement of Claim. The defendants deny the allegations.
The plaintiff alleges that in or about early 2015, he reviewed Bandicoot’s records and accounts and became aware of the unauthorised and excessive remuneration paid to the second defendant and the misappropriation and misuse of Bandicoot’s funds. In or about May and June 2015, he communicated his concerns to the second defendant and insisted that the monies be repaid. The defendants deny these allegations and plead alternative and additional facts.
The plaintiff alleges that after communicating his concerns to the second defendant, a meeting called a Shareholders and Board Meeting of the company took place on 19 December 2015 and that that was at a time when the second and third defendants knew that the plaintiff would be overseas. The second and third defendants approved a resolution for the issue of a further 51 shares in Bandicoot which shares are now registered in the name of Kush Nominees. That share issue has had the effect of diluting the plaintiff’s shareholding in Bandicoot. The plaintiff alleges that the share issue was made for an improper purpose. The defendants deny these allegations and plead alternative and additional facts, including an allegation that the purpose of the resolution for the issuing of further shares in Bandicoot was to raise capital for the company.
The plaintiff alleges that as DSSS, he was remunerated directly by Bandicoot up until May 2012. After this date, his remuneration was paid to the trustee of his family trust. The plaintiff alleges that it was agreed that from 1 July 2012 he would receive an annual remuneration in his role as DSSS of $110,000. He alleges that he did not receive that remuneration. The defendants deny these allegations and plead alternative and additional facts. The plaintiff alleges that on 25 January 2016, the second defendant, on behalf of Bandicoot, advised him that his contract of employment was terminated. He alleges that the decision to terminate his employment was wrongful and actuated by improper motives. The defendants deny these allegations and plead alternative and additional facts, including allegations that the plaintiff’s contract was terminated on the basis that he was not adequately performing the terms of the contract and was acting against the interests of Bandicoot.
The plaintiff alleges that he was improperly removed as a director of Bandicoot on or about 23 February 2016. The defendants deny this allegation.
The plaintiff alleges that the second and third defendants have both, since February 2012, conducted meetings or purported to conduct meetings of Bandicoot improperly. He provides detailed particulars of this allegation. The defendants deny this allegation.
The plaintiff alleges that the second and third defendants failed to contribute capital funds as agreed. The defendants deny this allegation.
The plaintiff alleges that Bandicoot paid a dividend to Kush Nominees on the instructions of the second and third defendants and yet no dividend was paid to the plaintiff and that this conduct was improper. The defendants deny this allegation.
The plaintiff alleges that the second and third defendants as directors of Bandicoot have acted in breach of their fiduciary and equitable duties to the company and in contravention of ss 180, 181, 182 and 183 of the Corporations Act. He also alleges that the conduct of the affairs of Bandicoot by the second and third defendants has been oppressive. The defendants deny this allegation.
The plaintiff alleges that the second and third defendants have breached various terms of the Contract and that, as a result, he has suffered and continued to suffer loss and damage. The defendants deny this allegation.
The plaintiff seeks declarations against the second and third defendants. He seeks an order that Bandicoot be wound up pursuant to s 233 of the Corporations Act, or in the alternative, s 461 of the Corporations Act. He seeks an order requiring the second and third defendants to repay funds that have been misappropriated and misused. In the alternative to an order that the company be wound up, he seeks various orders pursuant to s 233 of the Corporations Act. The defendants allege that the plaintiff is not entitled to any of the relief which he seeks.
THE APPLICATION FOR DISCOVERY
In accordance with orders of the Court, the plaintiff and the defendants each filed a table identifying with respect to each category of documents sought, the relevance of such category (in the case of the plaintiff) and the basis of objection (in the case of the defendants). There are 74 categories. Categories 20, 21, 39 and 40 are not pressed by the plaintiff and the defendants do not continue to oppose categories 24, 25, 62, 63 and 64.
In an effort to classify the categories in accordance with common themes or issues, counsel for the plaintiff identified five classes within which the categories were said to fall. Those classes are as follows:
(1)Documents with respect to the related entities where the plaintiff’s allegation is that Bandicoot provided funds or benefits to those entities with no benefit to Bandicoot: categories 32, 33, 36, 37, 42-46 inclusive, 51‑57 inclusive and 61;
(2)Financial documents of Bandicoot: categories 2, 3, 4, 22, 26 and 28;
(3)Personal financial documents of the second and third defendants: categories 13, 14, 15 and 23;
(4)Minutes of board meetings, resolutions and business plans of Bandicoot: categories 5 and 7;
(5)PAYG records and payslips of Bandicoot: categories 69 and 70.
Class 1 (categories 32, 33, 36, 37, 42-46 inclusive, 51‑57 inclusive and 61)
Category 32 consists of documents described as all financial records, statements and bank account statements of the BTR Group. The third defendant is the sole director of the BTR Group and the second defendant manages the company. The third defendant owns the company through Kush Nominees.
Schedule 3 to the Statement of Claim contains details of monies of Bandicoot used for the benefit of the BTR Group between September 2012 and March 2015. There are 80 items, including six unparticularised items relating to payments by Bandicoot or goods or services provided by Bandicoot by way of business accommodation, stationery, information technology, telephone and employee services for the benefit of the BTR Group.
I have considered the evidence adduced to this point, but clearly, I am not making findings of fact at this stage. There is evidence of a number of payments being made by Bandicoot to the BTR Group and of employees of the BTR Group using the Pulteney Street premises and the Grenfell Street premises. Perhaps these matters will be explained at trial as part of a labour hire arrangement as the defendants allege, but as I have said, I am not making findings of fact at this stage. It seems to me that the documents are relevant in terms of identifying the precise nature of the payments and whether there was, in reality, any resulting benefit to Bandicoot.
I am satisfied that I should make an order with respect to this category. I was concerned at the hearing as to whether documents in this category (i.e., documents of the BTR Group) were and are in the defendants’ control which is defined to mean possession, custody or power. After reviewing the authorities, I am satisfied that they are at least in the control of the third defendant (see, for example, B v B [1978] 3 WLR 624; Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627).
Category 33 consists of documents described as any agreements entered into between Bandicoot and the BTR Group regarding the purchase of IT services and software by Bandicoot on behalf of the BTR Group. It is convenient to deal with categories 36 and 37 in conjunction with this category. Category 36 consists of documents described as any agreements entered into between Bandicoot and the BTR Group regarding the purchase of stationery and use of other services by the BTR Group. Category 37 consists of documents described as all records documenting total amounts paid by Bandicoot for rent, other office supplies and services used by the BTR Group. The defendants’ evidence is that there were no agreements between Bandicoot and the BTR Group regarding the payment of rent and that there is no evidence of agreements for the provision of IT or stationery. I am satisfied that an order should be made with respect to these categories for the same reasons I consider I should make an order with respect to category 32.
Category 42 consists of documents described as all financial records, statements and bank account statements of Ruash International. The third defendant is the sole director and secretary of the company and she and the second defendant are the company’s sole shareholders.
The plaintiff’s evidence is that the second and third defendants conduct a business called CVIZ. His evidence is that the business involves the provision of 3D design and animation services and is unrelated to Bandicoot’s business. His understanding is that the business is conducted by Zest International and was previously conducted by Ruash International under the name, “Idrawfast”. The plaintiff’s evidence is that from about June 2009, CVIZ traded from the Pulteney Street premises without making any contribution for rent, stationery, IT services, telephone services and other services. The plaintiff believes monies and services of Bandicoot have been provided to the CVIZ business without any gain to Bandicoot. Schedule 4 to the Statement of Claim sets out 107 transactions between 2010 and 2015, including seven unparticularised allegations. Schedule 5 sets out 12 transactions in relation to Zest International, including five unparticularised allegations.
The defendants’ evidence is that an employee of CVIZ provided services to Bandicoot for which Bandicoot paid. Zest International, according to the defendants, did not trade and it did not receive any money from Bandicoot.
I will make an order with respect to category 42 essentially for the same reasons I will make an order with respect to category 32. There is evidence of payments by Bandicoot to Ruash International.
Categories 43, 44, 45 and 46 consist of documents described as follows:
43Any agreements entered into between Bandicoot and Ruash International regarding the lease of the Grenfell Street and Pulteney Street premises;
44Any agreements entered into between Bandicoot and Ruash International regarding the purchase of stationery and use of other services by the BTR Group;
45All documents documenting total amounts paid by Bandicoot for rent, other office supplies and services by Ruash International;
46Records of use of Bandicoot’s premises (Grenfell and/or Pulteney Street), supplies and services by Ruash International.
In my opinion, orders should be made with respect to these categories for the same reasons I will make orders with respect to categories 33, 36 and 37.
Category 51 consists of documents described as all financial records, statements and bank statements of Zest International. The second defendant is the sole director of the company and the company is owned by the third defendant through Kush Nominees. I note that there is sworn evidence of the second defendant to the effect that Zest International did not trade and did not receive any money from Bandicoot. Findings of fact, unless clear beyond argument, should not be made at this stage. I consider that an order for this category should be made. There were undoubtedly payments by Bandicoot concerning the CVIZ business and the plaintiff should have a full opportunity to investigate the matters.
Categories 52, 53 and 54 consist of documents described as follows:
52Any agreements entered into between Bandicoot and Zest International regarding the lease of the Grenfell and Pulteney Street premises;
53Any agreements entered into between Bandicoot and Zest International regarding the purchase of stationery and the use of other services by Zest International;
54All records documenting total amounts paid by Bandicoot for rent, other office supplies and services used by Zest International.
Orders should be made with respect to these categories for reasons previously given in relation to categories 33, 36, 37, 43, 44, 45 and 46.
Category 55 consists of documents described as all financial records and bank account statements of Lake Beverages. Lake Beverages was, as I have said, incorporated in India and a document from the Ministry of Corporate Affairs in India shows the second defendant at Salford College as “Email id”. Mr Shivam Goyal, the son of the second defendant’s sister‑in‑law, is a director of the company. The allegation that the second defendant is engaged by Lake Beverages as a representative is denied. The plaintiff’s evidence is that Bandicoot has transferred monies to Ms Veena Goyal on behalf of Lake Beverages. Schedule 6 to the Statement of Claim contains details of Bandicoot’s funds being used for the benefit of Lake Beverages. There are 21 items, including one unparticularised allegation. I will not make an order with respect to this category because I am not satisfied that any such documents are within the control of the second or third defendants.
Categories 56 and 57 consist of documents described as correspondence between the defendants regarding payments made to Ms Veena Goyal and all agreements between Bandicoot on the one hand, and Lake Beverages or Ms Veena Goyal on the other hand, regarding the transfer of monies set out in Schedule 6 to the Statement of Claim. The defendants rely on a sworn statement by the second defendant to the effect that Bandicoot did transfer money to Ms Veena Goyal, but those transfers were in respect of the business of Istudy Abroad dealt with below. Again, I am not making findings of fact at this stage and I consider that there is sufficient substance in these allegations to justify orders with respect to these categories.
Category 61 consists of documents described as all financial records, statements and bank account statements of Istudy Abroad. The third defendant was the director of the company from 13 March 2013 to 22 May 2016 and the second defendant was a shareholder. Payments were made by Bandicoot to Istudy Abroad. An order should be made with respect to this category.
The conclusions set out above need to be qualified having regard to the following.
At the time oral submissions were made on the application, the defendants had served a notice to admit on the plaintiff seeking the plaintiff’s response to 104 “facts” and the authenticity of 43 documents. The plaintiff had not responded to the notice at the time of the hearing. I gave the parties leave to make any further relevant submissions in light of the plaintiff’s response.
With respect to category 32, the plaintiff admits that he has accessed the BTR Group bank account and the BTR Group payroll. In light of those admissions, he does not press for discovery of VC14 and VC15 to his first affidavit.
With respect to category 42, the plaintiff admits that he has accessed the bank statements of Ruash International, has in his possession or control bank statements of Ruash International, has accessed financial statements of Ruash International and has in his possession or control financial statements of Ruash International. In light of these admissions, he does not press for discovery of VC17 to his first affidavit.
With respect to category 61, the plaintiff admits that if a certain HDFC Bank Limited bank statement which is part of VC19 to his first affidavit is for the Australian company, Istudy Abroad, then he does not press for discovery of this document. With respect to category 64, the plaintiff does not press for American Express confirmation of payment initiations relating to transfers of money to “Istudy Abroad” insofar as they are part of VC20 to his first affidavit.
These qualifications should be reflected in the orders.
I note that the plaintiff admits that he was a co-signatory of the Bandicoot Group expense account between 1 February 2009 and 25 January 2016, but denies that he authorised the transactions of which he complains.
Class 2 (categories 2, 3, 4, 22, 26 and 28)
Category 2 consists of documents described as all taxation records of Bandicoot from 2015 onwards. Two of the plaintiff’s claims are first, that the second and third defendants received monies owing to Bandicoot by students and did not account to Bandicoot for those monies and, in some cases, Bandicoot treated those monies as bad debts and secondly, that the second and third defendants have borrowed monies from Bandicoot and have not, or may not have, repaid the loans.
The plaintiff has produced, among other financial records, the taxation returns of Bandicoot for the financial years ended 2010 to 2014 inclusive. These returns show the following:
(1)Bandicoot has had bad debts and in some years in substantial amounts (2011-2012 financial year $425,613);
(2)directors loans; and
(3)rent paid by Bandicoot, for example, $129,414 in the financial year ended 2013 and $157,428 in the financial year ended 2014.
The defendants’ response to this request is that such documents are not relevant and, in any event, they have agreed to make discovery of all financial reports of the first defendant from 2015 onwards. More particularly, they have agreed to provide general ledger prints of MYOB files which are relevant to the transactions identified in the schedules to the Statement of Claim.
The plaintiff’s case is that his employment with Bandicoot was wrongfully terminated on or about 25 January 2016 and his position as director was wrongfully terminated on or about 26 February 2016. Whether those allegations are made out can only be determined at trial.
There are two reasons which, when combined, lead me to the conclusion that an order in respect to this category should be made. First, the plaintiff has been excluded from the operations of the company since early in 2016, whether rightly or wrongly, as I have said. Secondly, the plaintiff claims the affairs of Bandicoot have been conducted oppressively. Whether that has continued to be the case is likely to be relevant to a determination of the issue of oppression or, at least, to the relief granted if oppression is made out. I will make an order with respect to category 2.
Category 3 consists of documents described as all statements of Bandicoot’s bank accounts from 2015 onwards. The defendants’ response in the table does not match the request. It is that the personal bank statements of the second and third defendants cannot add to what is disclosed by the accounts of the company. The second part of the defendants’ response is that, in any event, the accounts of the company from 2015 onwards do not go to any fact directly in issue. For the same reasons I have given in relation to category 2, I consider that an order with respect to this category should be made.
Category 4 consists of documents described as all MYOB files held by Bandicoot. The defendants’ response is that general ledger prints of MYOB files which are relevant to the transactions set out in the schedules to the Statement of Claim will be provided and further documents will not be directly relevant to any matter in issue. For the same reasons I have given in relation to category 2, I consider that an order with respect to this category in the terms sought by the plaintiff should be made.
Category 22 consists of documents described as all correspondence between Bandicoot’s directors and any third parties regarding the purpose of overseas travel by the second defendant and the third defendant.
The plaintiff alleges that the second and third defendants used funds of Bandicoot for personal travel expenses. An example is the payments to Singapore Airlines for “personal” travel tickets on 7 December 2012. Another example is a payment to The Leela Palace, Kempi, New Delhi, India on 11 January 2013. The defendants’ response is that they will produce all accounting and other records held by Bandicoot in respect of such payments.
In my opinion, the plaintiff is entitled to all the documents which are available and which might assist in fully explaining these and other transactions which involve overseas travel by the second and third defendants. I will make an order in terms of category 22.
Category 26 consists of documents described as tax invoices and receipts of purchases made at restaurants and cafes as set out in Schedule 2 to the Statement of Claim and any documents evidencing the legitimacy of such purchases for Bandicoot’s benefit. The defendants’ response is that there is no allegation that the accounting records of Bandicoot do not correctly record expenses and additional documentation will not assist in the resolution of the proceeding. These purchases may be legitimate company expenses, but are not obviously so. These documents, to the extent they exist, should be disclosed and I will make an order in terms of category 26.
Category 28 consists of documents described as tax invoices and receipts of purchases relating to overseas travel as set out in Schedule 2 to the Statement of Claim and any documents evidencing the legitimacy of such purposes for Bandicoot’s benefit. The defendants’ response is that the defendants will produce all the accounting and other records held by Bandicoot in respect of such payments, “despite there being no basis for this claim”. To avoid any argument about the defendants’ obligation, I will make an order in terms of this category for the same reasons I will make an order in relation to category 22.
Class 3 (categories 13, 14, 15 and 23)
Category 13 consists of documents described as personal credit card statements of the second and third defendants from 2008 onwards. The defendants’ response is that personal credit card statements of the second and third defendants relevant to the transactions identified in Schedule 1 to the Statement of Claim have been provided and that additional personal credit card statements are not relevant. I think this is correct and that, subject to one qualification, this request represents a fishing expedition by the plaintiff. The one qualification is that should other transactions become relevant as a result of the orders I will make on this application or in some other way, then that would provide a proper basis for an order that personal credit card statements relevant to those transactions be discovered.
Category 14 consists of documents described as personal bank account statements of the second and third defendants from 2008 onwards. The defendants’ response is that such documents would add nothing to the accounting information of Bandicoot which is not alleged to be inaccurate. Such statements should be discovered insofar as they relate to transactions identified by the plaintiff in the Statement of Claim. Otherwise, I make the same comments as I have in relation to category 13.
Category 15 consists of documents described as individual taxation returns of the second defendant from the 2016 financial year onwards. The defendants’ response is that individual taxation returns of the second defendant from the 2016 financial year will add nothing to the records of Bandicoot and are, in any event, irrelevant. In view of the allegation that the second defendant was paid excessive remuneration by Bandicoot, these documents should be discovered, and I will make an order in terms of category 15.
Category 23 consists of documents described as receipts for purchases made by the second and third defendants for groceries. The defendants’ response is that these documents are unnecessary because it is not alleged that Bandicoot’s records are inaccurate, apart from one transaction which the second defendant explains, and the relatively small amount ($1,613.86) involved means that it would be difficult, if not impossible, to recover individual receipts. I accept this submission and I will not make an order in terms of category 23.
Class 4 (categories 5 and 7)
Category 5 consists of documents described as copies of all minute books and resolutions of Bandicoot. The minute books are said to be relevant to the reporting of bad debts, the payment of superannuation, the remuneration paid to the parties, including excessive remuneration allegedly paid to the second defendant, the declaration of dividends and the manner in which meetings of the company were conducted. The defendants’ response is that it has made a proposal to the plaintiff to produce these documents.
Category 7 consists of documents described as any business plans prepared for and on behalf of Bandicoot. The defendants’ response is that any “purported justification” for this request is no more than speculation as to “prospective documents”.
I will make an order in terms of both categories. These are key company documents and the challenges to the company’s operations are so pervasive that these documents should be disclosed without restriction to particular transactions.
Class 5 (categories 69 and 70)
Category 69 consists of documents described as all payslips of the second and third defendants and the parties set out at Schedule 8 to the Statement of Claim. The payslips of the second and third defendants are not in issue. The parties identified in Schedule 8 are employees of Bandicoot in respect of whom the plaintiff alleges that the second and third defendants caused Bandicoot to breach its contracts with those employees, or to deal inappropriately with them such that they resigned from their employment with Bandicoot. The defendants’ response is that the payslips of these persons will not add anything in terms of the resolution of any issue in the case. Presumably there are many documents of this nature. I am not satisfied that they are sufficiently relevant to add to the information to be gleaned from the books and records of the company.
Category 70 consists of documents described as all PAYG records of the second and third defendants and the parties set out at Schedule 8 to the Statement of Claim. The PAYG records of the second and third defendants are not in issue. The defendants’ response is that these documents will be of no potential relevance. In my opinion, the PAYG records of the other parties of which presumably there are not a great number, are relevant and should be disclosed.
CONCLUSION
The defendants should make discovery of documents within categories 2, 3, 4, 5, 7, 14 (to the extent the documents relate to transactions identified in the Statement of Claim), 15, 22, 26, 28, 32, 33, 36, 37, 42-46, 51-54, 56, 57, 61 and 70.
I refuse to make an order in relation to categories 13, 23, 55 and 69.
I certify that the preceding seventy-nine (79) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.
Associate:
Dated: 28 March 2018
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