Cockatoo Gallery Pty Ltd v Powell
[2004] WADC 96
•19 May 2004
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: COCKATOO GALLERY PTY LTD -v- POWELL [2004] WADC 96
CORAM: COMMISSIONER GREAVES
HEARD: 19 APRIL 2004
DELIVERED : 19 MAY 2004
FILE NO/S: CIVO 188 of 2003
BETWEEN: COCKATOO GALLERY PTY LTD (ACN 088 800 686)
Plaintiff
AND
RONLYN POWELL
Defendant
Catchwords:
Practice and procedure - Pre-action discovery - Turns on its own facts
Legislation:
Supreme Court Rules, O 26A r 4
Result:
Application granted
Representation:
Counsel:
Plaintiff: Mr A Metaxas
Defendant: Mr J A Marquis
Solicitors:
Plaintiff: Arthur Metaxas & Co
Defendant: Bruce Havilah & Associates
Case(s) referred to in judgment(s):
Harman v Secretary of State for the Home Department [1983] 1 AC 280
McCarthy & Ors v Dolpag Pty Ltd [2000] WASCA 106
Case(s) also cited:
Dolpag Pty Ltd v McCarthy & Ors [2000] WASC 133
COMMISSIONER GREAVES: This is an application for an Order pursuant to Supreme Court Rules O 26A r 4 which provides:
"(1) This rule applies if a person who may have a cause of action against a person whose description has been ascertained ("the potential party") wants –
(a)to commence proceedings against the potential party; or
(b)to take proceedings against the potential party in the course of an action to which the person is a party.
but the person, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings.
(2) If there are reasonable grounds for believing that the potential party had, has or is likely to have had or to have, possession of documents that may assist in making the decision, the person may apply for an order under this Rule.
(3) The application shall be supported by an affidavit and a copy of both shall be served on the potential party.
(4) On the application the Court may order the potential party to give discovery of all documents that are or have been in the potential party's possession and that may assist the applicant in making the decision."
The application is made by originating summons in which the plaintiff seeks the following orders:
"1.within 14 days from the date of this order the defendant make file and serve an affidavit verifying a list of the following documents:
1.1BAS returns for the business trading under the name 'Wild Angels' for the financial years ended 30 June 1999, 2000, 2001, 2002 and 2003;
1.2income tax returns and assessments for the defendant for the financial years ended 30 June 1999, 2000, 2001, 2002 and 2003; and
1.3daily takings records for the business 'Wild Angels' for the financial years ended 30 June 1999, 2000, 2001, 2002 and 2003;
1.4BAS returns for the Wild Child Trust for the financial years ended 30 June 2001, 2002 and 2003;
1.5income tax returns and assessments for the Wild Child Trust for the financial years ended 30 June 1999, 2000, 2001, 2002 and 2003;
1.6daily takings records for the Wild Child Trust for the financial years ended 30 June 1999, 2000, 2001, 2002 and 2003.
2.the defendant permit the plaintiff's solicitor to inspect the documents so discovered within 28 days after the filing and service of the affidavit required by the preceding order".
The application is supported by the affidavit of Helen Joy Norton in which she deposes to the fact that she is a director of the plaintiff and authorised to swear the affidavit on its behalf. She annexes to the affidavit a copy of a contract by which the plaintiff agreed to purchase from the defendant a business which traded under the name "Wild Angels" at 54 Market Street, Fremantle. Settlement of the sale and purchase of the business under the contract was effected on 1 August 2003. The plaintiff paid $30,000 for the business name, including good will and a further $20,000 was paid for plant, equipment and stock. The defendant as vendor warranted as a special condition of the contract, the monthly sales figures for the business as attached to the contract, and the accounts for the business as attached to the contract. Ms Norton says in reliance on those warranties, she decided that the plaintiff would purchase the business and entered into the contract. Ms Norton then deposes to the fact that the plaintiff has concerns that the warranted sales results for the business were not accurate. She says the plaintiff can only ascertain the truth of the warranted sales figures by the defendant's producing the documents referred to in par 1 of the originating summons.
Ms Norton deposes to the fact that the defendant has offered to produce accounts prepared by her accountant for the business but not the source documents, taxation returns or BAS statements. She says she is contemplating an action against the defendant for misleading and deceptive conduct and/or breach of warranties, and will commence such an action dependant upon what is revealed by inspection of the documents sought to be discovered. She deposes to the fact that the BAS records and tax returns are documents required to be created by law, while those documents that relate to takings are records that the defendant's solicitors have advised are in existence.
The defendant opposes the application and relies upon her affidavit of 29 January 2004. At par 16 et seq of that affidavit, the defendant objects to providing the documents requested by the plaintiff on the grounds that such documents would be expensive and time consuming to collect, are very wide ranging in nature, and would be irrelevant to any subsequent litigation. Further, she states the documents sought by the plaintiff contain confidential personal income details. She states the expense, time and effort she would be forced to endure if the application is granted would be very severe.
Counsel for the plaintiff submitted the chain of correspondence attached to the affidavit of Ms Norton that preceded this application demonstrates clearly the defendant has been evasive and difficult in relation to providing documents to substantiate the warranted financial information. Counsel for the plaintiff supported that submission by detailed reference to the correspondence.
Counsel for the defendant submitted the defendant is seeking 28 separate sets of financial statements from three different entities.
As the Full Court observed in McCarthy & Ors v Dolpag Pty Ltd [2000] WASCA 106 at [13] et seq of the joint judgment, there is no doubt that caution must be exercised before making an order under O 26A r 4 and that such orders should not be made as a matter of course. They should only be made when reasonably necessary to achieve the proper administration of justice. It must be remembered that discovery "constitutes a very serious invasion of privacy and confidentiality (and) the process should not be allowed to place upon a litigant any harsher or more oppressive burden that is strictly required": Harman v Secretary of State for the Home Department [1983] 1 AC 280 at 308 per Lord Keith of Kinkel. The Full Court go on to observe this is a fortiori the position where the discovery is sought before action and is for the purpose of determining whether or not there is an issue to litigate.
In my opinion, the evidence for the plaintiff in this application establishes the plaintiff is a person which may have a cause of action against the defendant, and that the plaintiff is a person that, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made whether to commence proceedings against the defendant. The evidence for the plaintiff establishes there are reasonable grounds for believing that the defendant has possession of the documents set out in the originating summons that may assist in making the decision whether to commence proceedings against the defendant, and they relate to the matters likely to be in question in an action against the defendant for misleading and deceptive conduct and/or breach of warranties, contemplated by the plaintiff. In my opinion there is nothing oppressive about the scope of the orders sought. Nor does it reach beyond the documents relevant to the potential cause of action. Counsel for the plaintiff acknowledged the discovery sought is an intrusive process. He conceded the plaintiff should be entitled to the protection afforded under the rules in terms of the implied undertaking about the use that can be made of the discovered documents, the subject of the order. In my opinion, the plaintiff is entitled to the orders sought subject to the usual undertaking.
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