Crowe Horwath Sydney Pty Ltd v Mark Purtill

[2012] NSWSC 1038

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Crowe Horwath Sydney Pty Ltd v Mark Purtill & Anor [2012] NSWSC 1038
Hearing dates:	14 August 2012
Decision date:	14 August 2012
Jurisdiction:	Equity Division
Before:	Lindsay J
Decision:	Orders for limited discovery granted. Costs of the motion be costs in the proceedings.
Catchwords:	PRACTICE AND PROCEDURE - Mediation, Voluntary Mediation, Discovery, Limited Discovery, Practice Note SC Eq 11, Legitimate Forensic Purpose, Delay in Making Application for Discovery, Oppression
Category:	Interlocutory applications
Parties:	Crowe Horwath Sydney Pty Ltd (Plaintiff) Mark Purtill (First Defendant) MPP Consulting Pty Ltd (Second Defendant)
Representation:	Y Shariff (Plaintiff) Minter Ellison (Plaintiff) Somerville Legal (Defendants)
File Number(s):	2011/306722

Judgment - Ex tempore

1. The Court has before it an amended notice of motion filed by the plaintiff today. It seeks, first of all, an order for discovery by categories and, secondly, an order for a compulsory private mediation.

1. The motion arises for consideration in circumstances in which, first, the plaintiff advises the Court that it has served, substantially, the whole of its affidavit evidence and, secondly, the defendants advise the Court that they have served the whole of their affidavit evidence.

1. The plaintiff's position on the state of the evidence should be recorded with greater particularity. The plaintiff advises the Court that it has served the whole of its lay affidavit evidence. It says, further, that there are only two categories of evidence which may be the subject of service of further evidence by it. The first category relates to expert accounting evidence going to an assessment of damages; the second relates to the tender of documents that might be discovered by the defendants.

1. The parties presently envisage that any trial of the proceedings will be a trial on all issues. Their preparations for trial have proceeded on that basis. No application has been made, and no application is anticipated, for an order that questions of liability and damage be separately tried.

1. At the heart of any trial will be questions as to the validity and reasonableness of three restraint of trade clauses. In a contract styled "Sale and Purchase of Business Agreement", dated 2 July 2007, there are two clauses; clause 19.2 is a non-competition restraint clause; clause 19.3 is a non-solicitation restraint clause.

1. In a contract styled, "Deed of Employee Obligations", dated 1 July 2007, there is one restraint clause, a non-solicitation clause, numbered 6.1.

1. The defendants have made admissions about the first defendant's activities, in particular, which suggest that, if those clauses are enforceable, the defendants may have a liability to the plaintiff. That is entirely consistent with the fact that questions about the validity and reasonableness of the three restraint clauses are at the heart of the trial.

1. Nevertheless, there are questions of fact in issue in addition to any assessment of damages. In that regard, my attention has been drawn to the pleadings: an amended statement of claim filed on 3 July 2012 and a defence filed on 27 February 2012. I infer that there has been a joinder of issue on those two pleadings, notwithstanding their respective dates of filing. My attention has been drawn, in particular, to paragraphs 11, 13 and 19 of the defence.

1. Questions about discovery arise in the context of the Court's Practice Note SC Equity 11. The defendants rely upon the Practice Note in support of their primary contention that no discovery orders should be made. They complain, first, that the Practice Note requires all evidence, not merely all lay evidence, to be served before a disclosure order can be made. Secondly, that discovery is not, in any sense, necessary because of the limited ambit of factual contests in the proceedings and, thirdly, that the plaintiff has been guilty of delay in making its application for discovery.

1. Having heard the parties on the motion, I am satisfied that the plaintiff has a legitimate forensic purpose in obtaining a limited form of discovery, notwithstanding criticisms of delay, provided, first of all, that the discovery process is not allowed unduly to delay preparations for trial and, secondly, the plaintiff acts reasonably in accommodation of the request for discovery which, as it happens, the defendants have made by reference to paragraphs 1 to 5, but, principally, paragraphs 2 and 3 of a letter dated 27 February 2012, addressed by the defendants' solicitors to solicitors then acting for the plaintiff, that letter having been marked in these proceedings as exhibit #P4.

1. The plaintiff is prepared to accommodate the defendants' request for discovery, at least, in principle. I have invited the parties to prepare documentation that defines the categories by reference to which the plaintiff is to give discovery. That invitation has not, in the time available, been availed of, save to the extent that there appears to be agreement that what the defendants particularly seek is some form of discovery on the categories defined by reference to paragraphs 2 and 3 of the letter dated 27 February 2012.

1. I am minded to make orders that will allow for there to be discovery by the plaintiffs on those two categories defined by reference to paragraphs 2 and 3, in respect of high level documentation, reserving a right to the defendants, if need be, to apply for further discovery.

1. I turn to the categories of documents sought by the plaintiff in its amended notice of motion. In doing so, I note that the parties are agreed that any discovery ordered to be given should be by way of a verified list of documents. To the extent that discovery is to be given, I have in mind that any list of documents should be verified.

1. In relation to some categories of documents sought in the amended notice of motion, the solicitor for the defendants has announced his instructions that there is no documentation to discover. That announcement related to the categories in the amended notice of motion defined by reference to paragraphs 1(a), 1(b) and (ii) and paragraph 1(e). The defendants should, nevertheless, verify their discovery of "no documentation" falling within these category descriptions, so as to ensure that there is a formal record of the defendants' position, which can be used at trial as may be required.

1. A principal complaint by the defendants is that it would be oppressive to order them to discover telephone records described in paragraph 1(g) of the amended notice of motion. I am not prepared, at this stage of the proceedings, to order discovery referable to that category.

1. The defendants have submitted that the categories of document described in paragraphs 1(b), subparagraphs (iii) and (iv) should be limited to documentation relating to initial communications between the defendants, on the one hand, and identified third party clients on the other hand. The parties have, I believe, formulated a limitation that meets the defendants' concerns, and I will return to that to embrace it in the orders that are made at the end of this judgment.

1. The defendants have no objection to the category of documents described in paragraph 1(c) of the amended notice of motion.

1. The defendants object to the category of documents referred to in paragraph 1(f) in the amended notice of motion.

1. They assert that the plaintiff can have no legitimate forensic purpose in seeking documents within subparagraphs (i) and (ii) because the plaintiff's pleaded claim is for damages for breach of contract, not a claim in equity, for either compensation, or loss of profits. Nevertheless, it seems to me ,the documents sought as to the income earned by the defendants and their financial performance more generally might be material to quantification of damages claimed by the plaintiff and I propose to allow discovery on those categories.

1. The defendants submit that the category of document sought in paragraph 1(f)(iii) should be limited to clients identified in annexure A to the amended notice of motion. Although I have some sympathy with the plaintiff's position, I propose to limit that particular category, that is, paragraph 1(f)(iii), as suggested by the defendants, bearing in mind the Court's reluctance to allow discovery at large.

1. Without encouraging any further application for discovery, I do not intend by this limitation to preclude any future application on this topic by the plaintiff, should it be so advised.

1. I propose to make orders to give effect to these rulings. Before I do so I should, however, turn to paragraph 2 of the amended notice of motion.

1. Emerging from debate on the motion, there appears to be an acceptance that, in relation to mediation, there is a way forward. First of all, there is agreement, it seems to me, that the prospects of settlement would be best facilitated if there was not, at this stage, an order for compulsory mediation.

1. Secondly, the parties appear to be content that the Court note that they have agreed in principle upon the desirability of a private mediation to be conducted, by a mediator to be agreed, a mediator with expertise in the subject matter of the proceedings. The Court certainly encourages the parties to participate in a voluntary process of mediation. What is presently in mind is that any mediation process should be completed within five weeks of today, that is, on or before 25 September 2012.

1. I should note that these observations are not intended to preclude any future application for an order for compulsory mediation, should either side of the record be advised to make such an application. Hopefully, however, there will be no necessity for intervention of the Court and these matters relating to mediation can be sorted out without fuss.

1. I make orders to the following effect:

1. I dismiss paragraph 2 of the amended notice of motion, subject to a notation that the parties have in principle agreed to a private mediation to be conducted by a mediator to be agreed between them, such mediator to have expertise in the subject of the proceedings, and any process for mediation to be concluded on or before 25 September 2012.

2. In relation to paragraph 1 of the amended notice of motion, I make the following determinations:

(a) First of all, I refuse to make an order for discovery referable to paragraph 1(g) of the motion.

(b) Secondly, I order that the defendants give discovery by way of a verified list of documents directed to categories 1(a), (b), (c), (e) and (f)(i) and (f)(ii), together with discovery referable to category 1(f)(iii), limited to clients identified in annexure A to the motion.

3. I note that the plaintiff does not press for discovery referable to paragraph 1(d) of the amended notice of motion and I formally dismiss the application for discovery made in the motion by reference to that subparagraph.

4. I order that, insofar as discovery is to be given by reference to paragraph 1(b) of the motion, sub-subparagraphs (iii) and (iv) of the motion are to be replaced by a single sub-subparagraph (iii), which is to read:

"Communications between the defendants and the persons or entities listed in schedule A relating to those persons or entities becoming clients, or leading them to become clients, of the defendants (irrespective of who initiated the communication)".

5. As to discovery to be given by the plaintiff to the defendants referable to the defendants' solicitor's letter dated 27 February 2012, I order that the plaintiff give discovery by way of a verified list of documents directed to the categories described in paragraphs 2 and 3 of the letter, such discovery to be limited, in the first instance, to high level documentation, but reserving to the defendants liberty to apply to me via my Associate, should any further discovery be required by the defendants within the ambit of paragraphs 2 and 3 of the letter.

1. If either side of the record seeks confidentiality undertakings as to documents to be the subject of discovery, I encourage them to come to some private arrangement between themselves. At this stage, I make no order touching upon questions of confidentiality, but I draw to the attention of the parties and their respective legal advisers the implied undertaking that arises from any participation in discovery processes, not to use discovered documentation for any purpose other than as may be necessary for the conduct of the proceedings.

6. In terms of a timetable for discovery, I order that the parties' respective verified lists of documents be served on or before 11 September 2012.

7. I order that any inspection of discovered documents take place on or before 18 September 2012.

8. I order that the proceedings be listed before the Registrar for directions on 25 September 2012, the listing to take place at 9am on that date.

9. I reserve liberty to apply on three days' notice.

10. In these circumstances, I think the appropriate order is that the costs of the motion be costs in the proceedings and I make that order.

11. I order the exhibits to be returned.

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Amendments

05 September 2012 - Correction to counsel's initial.

Amended paragraphs: Coversheet

Decision last updated: 05 September 2012