David Mark Hodgson as joint and several liquidators of Diploma Construction (WA) Pty Ltd (in Liquidation) (Receivers & Managers Appointed) ACN 113 950 100 v Wield Holdings Pty Ltd [No 2]
[2022] WASC 263
•15 AUGUST 2022
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: DAVID MARK HODGSON as joint and several liquidators of DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100 -v- WIELD HOLDINGS PTY LTD [No 2] [2022] WASC 263
CORAM: HILL J
HEARD: 1 AUGUST 2022
DELIVERED : 10 AUGUST 2022
PUBLISHED : 15 AUGUST 2022
FILE NO/S: COR 218 of 2019
COR 113 of 2021
(Consolidated by orders of 1 September 2021)
BETWEEN: DAVID MARK HODGSON as joint and several liquidators of DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100
First named First Plaintiff
ANDREW STEWART REED HEWITT as joint and several liquidators of DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100
Second named First Plaintiff
DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100
Second Plaintiff
AND
WIELD HOLDINGS PTY LTD
Ninth Defendant
IV CORP (AUST) PTY LTD
Tenth Defendant
NICOLA DOMENICO DI LATTE
Eleventh Defendant
CARLA MARIA DI LATTE
Twelfth Defendant
ARB PROPERTIES PTY LTD
Thirteenth Defendant
NATALINA FILOMENA DE FELICE
Fourteenth Defendant
MARIO DE FELICE
Fifteenth Defendant
SWANHILL ENTERPRISES PTY LTD
Sixteenth Defendant
(BY ORIGINAL ACTION)
FILE NO/S: CIV 3166 of 2019
BETWEEN: DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100
First Plaintiff
DAVID MARK HODGSON as joint and several liquidators of DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100
ANDREW STEWART REED HEWITT as joint and several liquidators of DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100
Second Plaintiffs
DIPLOMA GROUP LIMITED (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 129 462 686
Third Plaintiff
DAVID MARK HODGSON as joint and several liquidators of DIPLOMA GROUP LIMITED (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 129 462 686
ANDREW STEWART REED HEWITT as joint and several liquidators of DIPLOMA GROUP LIMITED (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 129 462 686
Fourth Plaintiffs
AND
NICOLA DOMENICO DI LATTE
Defendant
FILE NO/S: COR 86 of 2020
BETWEEN: DAVID MARK HODGSON IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPO
First Plaintiff
ANDREW STEWART REED HEWITT IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS AND MANGE
Second Plaintiff
AND
NICOLA DOMENICO DI LATTE
Defendant
Catchwords:
Practice and procedure - Discovery - Whether discovery should be given by categories or by reference to Federal Court Rules - Whether categories relate to matters in issue - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 588FB, s 588FDA
Federal Court Rules 2011 (Cth) r 20.14
Rules of the Supreme Court 1971 (WA) O 26
Result:
Discovery ordered by categories
Application allowed in part
Category: B
Representation:
COR 218 of 2019
Original Action
COR 113 of 2021
(Consolidated by orders of 1 September 2021)
Counsel:
| First named First Plaintiff | : | N R White |
| Second named First Plaintiff | : | N R White |
| Second Plaintiff | : | N R White |
| Ninth Defendant | : | M A MacLennan |
| Tenth Defendant | : | M A MacLennan |
| Eleventh Defendant | : | M A MacLennan |
| Twelfth Defendant | : | M A MacLennan |
| Thirteenth Defendant | : | M A MacLennan |
| Fourteenth Defendant | : | M A MacLennan |
| Fifteenth Defendant | : | M A MacLennan |
| Sixteenth Defendant | : | M A MacLennan |
Solicitors:
| First named First Plaintiff | : | Norton Rose Fulbright Australia |
| Second named First Plaintiff | : | Norton Rose Fulbright Australia |
| Second Plaintiff | : | Norton Rose Fulbright Australia |
| Ninth Defendant | : | Bennett |
| Tenth Defendant | : | Bennett |
| Eleventh Defendant | : | Bennett |
| Twelfth Defendant | : | Bennett |
| Thirteenth Defendant | : | Bennett |
| Fourteenth Defendant | : | Bennett |
| Fifteenth Defendant | : | Bennett |
| Sixteenth Defendant | : | Bennett |
CIV 3166 of 2019
Counsel:
| First Plaintiff | : | N R White |
| Second Plaintiffs | : | N R White |
| Third Plaintiff | : | N R White |
| Fourth Plaintiffs | : | N R White |
| Defendant | : | M A MacLennan |
Solicitors:
| First Plaintiff | : | Norton Rose Fulbright Australia |
| Second Plaintiffs | : | Norton Rose Fulbright Australia |
| Third Plaintiff | : | Norton Rose Fulbright Australia |
| Fourth Plaintiffs | : | Norton Rose Fulbright Australia |
| Defendant | : | Bennett |
COR 86 of 2020
Counsel:
| First Plaintiff | : | N R White |
| Second Plaintiff | : | N R White |
| Defendant | : | M A MacLennan |
Solicitors:
| First Plaintiff | : | Norton Rose Fulbright Australia |
| Second Plaintiff | : | Norton Rose Fulbright Australia |
| Defendant | : | Bennett |
Cases referred to in decision:
Blakeley (as joint and several liquidators of Akron Roads Pty Ltd (in liq)) v Crewe (in liq) [No 3] [2016] VSC 657; (2016) 348 ALR 704
Capital Finance Australia Ltd v Tolcher [2017] FCAFC 185; (2007) 164 FCR 83
Cove House Illiquid Investments DAC v YA Global Investments LP [2018] WASC 349
Lanco Resources Australia Pty Ltd v Griffin Energy Group Pty Ltd [2016] WASC 322
Re Rococo Group Pty Ltd (in liq) [2022] VSC 167
Roe v Western Australia [2013] WASC 130
Singh v Friedman [2013] WASC 78
HILL J:
(This judgment was delivered orally and has been edited from the transcript.)
In each of these proceedings the parties seek orders for discovery, although they disagree on the specific orders that should be made.
The plaintiffs seek orders for the parties to give discovery by reference to specific categories.
The defendants oppose these orders and contend the plaintiffs' categories are so broad as to constitute an order for general discovery. Instead, the defendants submit that the categories provide a useful reference for the discovery process, but that discovery should be ordered in accordance with the practice in the Federal Court. That is, the defendants contend that discovery should be of documents of direct relevance within one of the following categories:
(a)documents on which the party intends to rely;
(b)documents which adversely affect the party's own case;
(c)documents which support another party's case; and
(d)documents which adversely affect another party's case.
The defendants submit that rather than giving discovery by reference to the plaintiffs' proposed categories, these categories will assist the parties in assessing what documents fall within the defendants' proposed categories and are required to be discovered.
Procedural history of application
The application initially came before me for hearing on 29 June 2022. At that time, the application was adjourned to enable further conferral between the parties to occur. This conferral significantly reduced the areas of dispute between the parties.
In support of its proposed orders, the defendants relied on an affidavit of Demi Ellen Swain, a solicitor employed by Bennett, filed 17 June 2022. Ms Swain's evidence was that:
(a)the defendants have a substantial volume of electronic and hard copy documents which will require review for the purposes of discovery; and
(b)if orders are made in terms of the plaintiffs' categories, the solicitors will need to interpret, understand and apply each of these categories to these documents. This will involve devising and applying search terms to each of these categories.
While I accept this evidence explains how the task of discovery will be approached, Ms Swain's evidence does not address how these tasks differ from those required if orders are made in terms of the defendants' proposed categories nor what, if any, time or cost will be saved if the defendants' proposal is adopted.
At the initial hearing of the application, I suggested that orders for discovery, at least initially, be limited to documents of direct relevance to the categories proposed by the plaintiffs, and that, in relation to financial documents, discovery be limited to high‑level documents. Counsel for the defendants expressed a concern about this on the basis that they required the plaintiffs to discover documents that were prejudicial to the plaintiffs' case and which support the defendants' case.
However, it was not clear from the defendants' submissions as to why, if discovery is ordered to be provided by categories, any documents that are prejudicial to the plaintiffs' case and/or support the defendants' case will not be required to be discovered. No evidence was adduced by the defendants in this regard.
The issues between the parties that require determination are, first, whether the defendants' approach to discovery should be preferred to the plaintiffs' proposed approach and, second, whether the categories in dispute between the parties should be ordered to be given.
Discovery by Category or Issues
It is not in dispute that orders for general discovery are not routinely made in major litigation. The rationale for limiting the scope of discovery is set out in Singh v Friedman,[1] Roe v Western Australia,[2] and Lanco Resources Australia Pty Ltd v Griffin Energy Group Pty Ltd.[3]
[1]Singh v Friedman [2013] WASC 78.
[2]Roe v Western Australia [2013] WASC 130.
[3]Lanco Resources Australia Pty Ltd v Griffin Energy Group Pty Ltd [2016] WASC 322.
Relevantly, these principles include:
(a)the power to order discovery is discretionary. The discretion is to be exercised having regard to the timely and cost‑effective disposal of litigation;
(b)discovery is an essential part of the administration of justice;
(c)in determining what classes of documents are relevant, the court must consider the pleadings together with the conduct and the nature of the action;
(d)in deciding what orders to make, the court must consider the cost to the parties and whether the discovery sought is proportionate to the value, importance and complexity of the subject matter in dispute and the financial position of each of the parties; and
(e)in the absence of evidence, it is difficult for the court to make a proper assessment of proportionality.
An additional observation, as was noted by Smith J in Cove House Illiquid Investments DAC v YA Global Investments LP,[4] is that orders for discovery in the commercial and managed cases list of this court are usually restricted to discovery of documents that are directly relevant to an issue.
[4]Cove House Illiquid Investments DAC v YA Global Investments LP [2018] WASC 349 [27].
In exercising my discretion, I have taken into account the significant quantum in dispute between the parties (which is in the order of $48 million), the nature of the issues in each of the proceedings, and the complexity of the matters raised. There is no evidence before the court as to the financial position of the parties, that either party is going to be prejudiced by orders for discovery being made, or that the discovery sought is disproportionate to these matters.
For the following reasons, I consider that discovery should be ordered by reference to categories as proposed by the plaintiffs and not in the manner proposed by the defendants.
First, this is consistent with the approach taken in this court to matters in the commercial and managed cases list and provides greater clarity and certainty as to what is required to be discovered by the parties.
Second, while I accept that the approach of this court to discovery is broader than the more limited approach in the Federal Court,[5] the task of discovery in these matters adopting either approach is likely to be extensive because of the significant number of issues raised in the proceedings. Given the quantum of the amount in issue, I do not consider that the provision of discovery by way of categories is likely to be disproportionate or oppressive.
[5]Cove House Illiquid Investments DAC v YA Global Investments LP [37].
Third, as is acknowledged by counsel for the defendants, the categories proposed by the plaintiffs set out the matters in issue in the proceedings and would need to be referred to by those undertaking the task of discovery to consider whether documents need to be discovered, whichever approach is adopted. In these circumstances, in my view, it is more appropriate to require the parties to give discovery by reference to these categories rather than for these categories to be used simply as a guide.
Fourth, almost all of the concerns that have been expressed by the defendants can be addressed by limiting discovery to direct relevance and by removing some of the broader descriptions of the categories, including by the use of terms such as 'All documents constituting, recording or evidencing'.
I turn then to consider the specific categories of documents in relation to which the parties are still in dispute.
Disposition
Employment and directorship (proposed category 2)
In relation to the employment of Nick Di Latte and Carla Di Latte by the Diploma group, there are three categories of documents that remain in dispute namely:
(a)agreements entered into between April 2016 and December 2016 between Mr Di Latte and any of the Diploma Group companies concerning his engagement as a director of any of these companies or his engagement in any other capacity;
(b)taxation records, bank statements or other documents that record any salary, wages or other amounts paid by Diploma to Ms Di Latte (between February 2006 and 18 January 2016) and Mr Di Latte (between 28 April 2016 and 22 December 2016); and
(c)communications from Mr Di Latte between 1 January 2016 and 29 April 2016 concerning the termination of his appointment as a director.
In respect of Mr Di Latte, the plaintiffs contend these documents are relevant to the issue of whether Mr Di Latte was a de facto or shadow director after April 2016. In relation to Ms Di Latte, counsel for the plaintiffs drew my attention to the dispute between the parties as to the period when she was employed as in-house counsel.
The defendants do not accept these documents are relevant. In their submission, there is no allegation that concerns any agreement or the circumstances in which Mr Di Latte ceased to be a director in 2016. In this regard, counsel for the defendants emphasised that the question as to whether Mr Di Latte was a de facto or shadow director was an objective test focused on the actual conduct or capacity of the alleged director. On this basis, it was contended that any underlying agreements are not relevant to this issue.
In Blakeley (as joint and several liquidators of Akron Roads Pty Ltd (in liq)) v Crewe (in liq) [No 3],[6] Robson J summarised the principles that govern whether a person is a shadow director. These principles relevantly include the following:
[6] Blakeley (as joint and several liquidators of Akron Roads Pty Ltd (in liq)) v Crewe (in liq) [No 3] [2016] VSC 657; (2016) 348 ALR 704 [271].
(a)To establish that a defendant is a shadow director of a company it is necessary to prove:
(1)who are the directors of the company, whether de facto or de jure;
(2)that the defendant gave instructions or expressed wishes to those directors on how to act in relation to the company or that he was one of the persons who did so;
(3)that those directors acted in accordance with such instructions of wishes; and
(4)that there were accustomed so to act.
(b)What is needed is first a board of directors claiming and purporting to act as such; and secondly a pattern of behaviour in which the board did not exercise any discretion or judgment of its own, but acted in accordance with the instructions or wishes of others.
…
(h)The fact that a person has a genuine interest of his or her or its own in giving advice to the board, such as a bank or mortgagee, the mere fact that the board will tend to take that advice to preserve it from the mortgagee's wrath will not make the mortgagee, etcetera a shadow director.
…
(j)Similarly, not every person whose advice is in fact heeded as a general rule by the board is to be classed as a de facto or shadow director.
While I accept the defendants' submission that the question of whether Mr Di Latte was a shadow director is an objective test, in my view, the documents sought by the plaintiffs are relevant to the determination of this issue. That is, any agreement with and payments made to Mr Di Latte over these periods are, in my view, relevant to the assessment as to whether he had a relationship with the group and if so, the proper characterisation of that relationship.
In relation to categories of documents sought in relation to Ms Di Latte, I accept that these documents are relevant to establishing the period in which she was employed. This is disputed by the defendants. However, as noted by counsel for the defendants, the allegation that Ms Di Latte was employed by the group is not relied upon by the plaintiffs to support any claim against Ms Di Latte or any of the defendants. Instead, the plaintiffs rely on the marital relationship between Mr and Ms Di Latte. Given this, it is my view that discovery of the documents in category 2.2(1) would be disproportionate to the issues in the proceedings.
Further, while I accept that category 2.2(2) is relevant to the issues in the proceedings, I consider the wording of this category is too broad. In my view, this category should be limited to taxation records, bank statements or financial documents or records. Similarly, in relation to the time period in category 2.3, I consider this is too broad. There is no evidence before the court as to why a period of four months has been chosen or whether Mr Di Latte was discussing his resignation as a director as early as 1 January 2016. In my view, this should be limited to the period from 1 March 2016 - 29 April 2016 at this stage.
Value of properties (proposed categories 8.4(8), 9.1(7), 10.5(1), 11.3(1))
The plaintiffs seek discovery of documents relevant to the value of a number of properties referred to in the statement of claim. The plaintiffs contend these documents are relevant to the issue of the benefit to the relevant company in entering into these transactions.
Each of these transactions are pleaded to be uncommercial transactions pursuant to s 588FB of the Corporations Act 2001 (Cth) (Act) as well as unreasonable director-related transactions pursuant to s 588FDA of the Act.
The relevant principles relating to uncommercial transactions were summarised by Gordon J (as her Honour then was) in the Full Court of the Federal Court decision of Capital Finance Australia Ltd v Tolcher as follows:[7]
…
(1)as the express words of s 588FB make clear, it is an objective standard to determine if a transaction is uncommercial;
(2)four criteria are to be considered - the benefits enjoyed by the company (s 588FB(1)(a)), the detriment to the company (s 588FB(1)(b)), the respective benefits others received (s 588FB(1)(c)) and any other relevant matters (s 588FB(1)(d));
(3)the objective criteria are not considered in some vacuum but by reference to "the company's circumstances" which must include the state of knowledge of those who were the directing mind of the company, such as its controlling director or directors; and
(4)for a transaction to be 'uncommercial' it must result in 'the recipient receiving a gift or obtaining a bargain of such magnitude that it [cannot] be explained by normal commercial practice' or where 'the consideration … lacks a "commercial quality"'.
[7]Capital Finance Australia Ltd v Tolcher [2017] FCAFC 185; (2007) 164 FCR 83 [129].
In addition to these matters, the following principles are also relevant:[8]
(a)the 'value' of a transaction will often be an important consideration in assessing whether it is 'uncommercial' for the purposes of the provision, although it will not always prove decisive. Rather, the court must consider all benefits and detriments which bear upon a party's decision to enter into a transaction, including those that cannot be measured in monetary terms;
(b)in determining whether a transaction is for the benefit or detriment of a company, the interests of the company's unsecured creditors are necessarily relevant;
(c)in comparing the value given by the company against the value received, the court does not require exact equivalence but only a fair equivalence;
(d)a transaction which involves family members or related entities will attract a greater level of scrutiny by the court; and
(e)in assessing whether a reasonable person in the company's circumstances would not have entered into the transaction, it is not necessary for a liquidator to demonstrate that the transaction was so unreasonable that no reasonable person would enter into it. Normal commercial practice will be a relevant consideration.
[8]Re Rococo Group Pty Ltd (in liq) [2022] VSC 167 [37].
As was noted by counsel for the plaintiffs at the hearing of the application, for the purposes of s 588FB, it is not just the overall disposition or transaction that must be considered. Under the express terms of the Act, each payment made by the company has to be considered to determine whether it is an uncommercial transaction.
The assessment of whether a transaction is an uncommercial transaction or unreasonable director-related transaction occurs at the time of entry into each transaction. This assessment requires consideration of any benefit or detriment of the transaction. In my view, in assessing the benefit of any transaction, a relevant consideration is likely to be the value of the property in question. For this reason, I accept that any documents which consider the value of these properties (either at that time or its future value) which were in existence at the time of entry into the relevant transaction (namely the date of each payment) are relevant.
I turn then to consider the specific transactions that are the subject of the application.
The first is Unit 73, 155 Adelaide Terrace, Perth which is pleaded at [106] - [119G] of the Consolidated Substituted Statement of Claim (Statement of Claim). The payments which are the subject of the pleading commence on 22 July 2015 and conclude on 23 June 2016. However, the proposed category seeks discovery of documents between 1 June 2010 (when the contract was entered into) and 22 December 2016. In submissions, counsel for the plaintiff explained that the transactions pleaded in the Statement of Claim were those that were within the limitation period, but pressed for orders to be made in relation to the proposed category on the basis that these documents 'may relate to the questions in issue'. I do not accept this submission. The purpose of pleadings is to define and limit the issues in dispute. In circumstances where the pleaded transactions commence on 22 July 2015, the obligations of discovery concern documents relevant to the question as to why this payment and subsequent payments were made and whether each of these payments are voidable transactions on any of the grounds pleaded by the plaintiff. While I am prepared to order discovery in terms of 8.4(8), I consider the time period in the category should be limited to 1 June 2015 to 31 August 2016.
The second is 8 Riverview Court, Dalkeith which is pleaded at [124] ‑ [136G] of the Statement of Claim. In respect of this property, the plaintiffs plead that payments were made between 9 August 2012 and 13 May 2016 for the construction of a residence on this property. The plaintiffs' proposed category of documents seeks discovery of documents between December 2007 and 22 December 2016. For the same reasons as set out above, I consider this time period should be limited by reference to the dates pleaded in the Statement of Claim. In my view, this time period should be limited to 1 July 2012 to 30 June 2016.
The third property is 13 Mews Road Fremantle which is pleaded at [137] ‑ [152H] of the Statement of Claim. In respect of this property, the plaintiffs plead that payments were made between 18 April 2011 and 12 October 2016 for the construction of a building on the property. The plaintiffs' proposed category of documents seeks discovery of documents between May 2015 and 22 December 2016. I accept that this time period is relevant on the pleadings and will order discovery to be provided in the terms proposed.
The fourth property is 98 Circe Circle South, Dalkeith which is pleaded at [153] ‑ [166G] of the Statement of Claim. In respect of this property, the plaintiffs plead that payments were made between 4 March 2011 and 23 March 2016 to construct a residence on this property. The plaintiffs' proposed category of documents seeks discovery of documents between December 2007 and 22 December 2016. For the same reasons as set out above, I consider this time period should be limited by reference to the dates pleaded in the Statement of Claim. In my view, this time period should be limited to 1 February 2011 to 30 April 2016.
Application of proceeds of sale (proposed categories 9.1(6) and 12.3(5))
The plaintiffs seek discovery of documents relevant to the application of the proceeds of sale of 27 Kenmore Crescent Floreat in April 2013 and Lot 100, Mounts Bay Road, Perth. The defendants say the application of the proceeds is not relevant to the pleaded issues although they concede the quantum is.
These transactions are pleaded to be uncommercial transactions pursuant to s 588FB of the Act as well as unreasonable director-related transactions pursuant to s 588FDA of the Act.
The plaintiffs contend this category is relevant to three matters: first, the benefit to the defendants in entering into the transactions; second, whether the transactions are uncommercial or unreasonable director-related transactions; and third, whether the entry into these transactions was a breach of director's duties. I do not accept these submissions. In relation to the first and third of these matters, the question as to what was ultimately done with the proceeds of sale cannot be relevant to an assessment of the circumstances in which each of these transactions were entered into.
In respect of the second issue, while I accept the question of the application of these funds could in certain circumstances be relevant to the assessment as to whether a transaction was a director-related transaction, this is not what is pleaded by the plaintiffs.
In respect of the property in Floreat, the plaintiffs plead that this property was owned by Ms Di Latte, Mr Di Latte's wife. It is on the basis of this relationship that it is contended the relevant transaction is a director-related transaction.
In respect of the Mounts Bay Road property, the plaintiffs plead this property is owned by Swanhill Enterprises Pty Ltd and that one of the directors of this company is Mr Di Latte's brother. It is on this basis that it is contended the relevant transaction is a director-related transactions.
On the current pleadings, no reliance is placed by the plaintiffs on the proceeds of any sale as supporting the allegation that these transactions are director-related transactions.
For these reasons, I consider these categories should be limited to the quantum of the proceeds of sale as proposed by the defendants.
Communications concerning entry into particular contracts (proposed categories 12.3(1) and (2), 13.1(4) and (5), 14.1(3) and (4))
The first of these categories concerns the property at Lot 100 Mounts Bay Road. The contract to construct this property was entered into in or around 21 April 2014.
The plaintiffs seek discovery of communications between January and April 2014 in relation to the estimated profit that might be derived from the contract, the estimated time to complete the contract as well as communications relating to the terms of the contract.
The plaintiffs say that these documents are relevant to the issue as to whether the payments made in connection with the contract are uncommercial transactions or unreasonable director‑related transactions. The plaintiffs plead that certain standard terms were deleted from the Australian standard general conditions of contract.
In my view, given this pleading, documents in the three‑month period prior to the date of entry into the contract are relevant to the question as to whether, at the time of entry into the contract, there was any benefit to Diploma Construction (WA) Pty Ltd in entering into the contract on the terms proposed and deleting certain terms.
The second of these categories concerns the property at 176 Adelaide Terrace Perth. The contract to construct this property was entered into on or around 5 September 2014.
The plaintiffs seek discovery of communications between January and September 2014 in relation to the estimated profit that might be derived from the contract, the estimated time to complete the contract, as well as communications relating to the terms of the contract and the liquidated damages payable if practical completion was delayed.
In my view, documents which were created in the lead up to entry into the contract are relevant to the question as to whether at the time of entry into the contract, there was any benefit in entering into the contract. However, I do not accept this period should extend to nine months prior to entry into the contract. In my view, this period should only extend back to 1 July 2014.
The final category concerns the property at Flinders Lane, Rockingham which is referred to in the pleadings as the Quest Rockingham. The contract to construct this property was entered into on or about 26 June 2014.
The plaintiffs seek discovery of communications between January and June 2014 in relation to the estimated profit that might be derived from the contract, the estimated time to complete the contract, as well as communications relating to the terms of the contract and the liquidated damages payable if practical completion was delayed.
In my view, documents which were created in the lead up to entry into the contract are relevant to the question as to whether at the time of entry into the contract, there was any benefit in entering into the contract. However, it is not clear why this time period should extend to five months prior to entry into the contract. In my view, this period should only extend back to 1 April 2014.
Proposed additions to category 16
The defendants seek orders for two additional categories to be added to the list being:
(a)documents which a party wishes to rely on at trial; and
(b)documents adverse to a party's case.
The defendants say that it is possible documents will fall within these categories that are not captured by the proposed categories and that these proposed categories will not result in a significant number of additional documents being produced.
I do not consider that these categories should be ordered. Any document on which a party wishes to rely at trial will need to be relevant to the issues in the proceeding. As noted by the defendants at the hearing of the application, the categories proposed by the plaintiffs are relatively extensive and, on that basis, any document that is relevant and is to be relied on by either party will almost certainly fall within the categories. The defendants could not point to any documents or categories of documents which may fall within this category. Similarly, documents which a party is required to discover, even where categories are ordered, include not only documents which are favourable to that party's case, but also documents which are adverse to it.
For these reasons, I do not consider these categories are required.
Other matters
In relation to the remaining categories of documents, the defendants submit that discovery should not be given in respect of 'all documents constituting, recording or evidencing' the respective categories. I accept this submission. In my view, the description of categories of discovery in these terms is too broad and not sufficiently focussed - particularly in relation to a matter in the commercial and managed cases list of the court.
My preliminary view is that these words at the commencement of categories 1.2, 3.1, 5.1, 6.1, 7.1, 8.1, 8.4, 9.1, 10.1, 10.3, 10.5, 11.1, 11.3, 12.1, 12.3, 13.1, 14.1, 15.1 and 15.3 should be deleted. However, because this matter was not addressed at the hearing before me, I will hear from the parties prior to making any orders in this regard.
Conclusion
For these reasons, I consider that orders should be made in terms of the plaintiffs' minute of orders but excluding category 2.2(1) and subject to the specific amendments in relation to the categories that I have set out above.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
FD
Associate to the Honourable Justice Hill
15 AUGUST 2022
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: DAVID MARK HODGSON as joint and several liquidators of DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100 -v- WIELD HOLDINGS PTY LTD [No 2] [2022] WASC 263 (S)
CORAM: HILL J
HEARD: ON THE PAPERS
DELIVERED : 31 MARCH 2023
PUBLISHED : 31 MARCH 2023
FILE NO/S: COR 218 of 2019
COR 113 of 2021
(Consolidated by orders of 1 September 2021)
BETWEEN: DAVID MARK HODGSON as joint and several liquidators of DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100
First named First Plaintiff
ANDREW STEWART REED HEWITT as joint and several liquidators of DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100
Second named First Plaintiff
DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100
Second Plaintiff
AND
WIELD HOLDINGS PTY LTD
Ninth Defendant
IV CORP (AUST) PTY LTD
Tenth Defendant
NICOLA DOMENICO DI LATTE
Eleventh Defendant
CARLA MARIA DI LATTE
Twelfth Defendant
ARB PROPERTIES PTY LTD
Thirteenth Defendant
NATALINA FILOMENA DE FELICE
Fourteenth Defendant
MARIO DE FELICE
Fifteenth Defendant
SWANHILL ENTERPRISES PTY LTD
Sixteenth Defendant
FILE NO/S: COR 86 of 2020
BETWEEN: DAVID MARK HODGSON IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPO
First Plaintiff
ANDREW STEWART REED HEWITT IN HIS CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS AND MANGE
Second Plaintiff
AND
NICOLA DOMENICO DI LATTE
Defendant
FILE NO/S: COR 113 of 2021
(Consolidated by orders of 1 September 2021)
BETWEEN: DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)
Plaintiff
AND
NICOLA DOMENICO DI LATTE
First Defendant
WIELD HOLDINGS PTY LTD
Second Defendant
IV CORP (AUST) PTY LTD
Third Defendant
CARLA MARIA DI LATTE
Fourth Defendant
ARB PROPERTIES PTY LTD
Fifth Defendant
NATALINA FILOMENA DE FELICE
Sixth Defendant
MARIO DE FELICE
Seventh Defendant
SWANHILL ENTERPRISES PTY LTD
Eighth Defendant
FILE NO/S: CIV 3166 of 2019
BETWEEN: DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100
First Plaintiff
DAVID MARK HODGSON as joint and several liquidators of DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100
ANDREW STEWART REED HEWITT as joint and several liquidators of DIPLOMA CONSTRUCTION (WA) PTY LTD (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 113 950 100
Second Plaintiffs
DIPLOMA GROUP LIMITED (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 129 462 686
Third Plaintiff
DAVID MARK HODGSON as joint and several liquidators of DIPLOMA GROUP LIMITED (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 129 462 686
ANDREW STEWART REED HEWITT as joint and several liquidators of DIPLOMA GROUP LIMITED (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) ACN 129 462 686
Fourth Plaintiffs
AND
NICOLA DOMENICO DI LATTE
Defendant
Catchwords:
Costs - Application for costs - Appropriate costs order of interlocutory application - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA) O 66 r 1(1)
Supreme Court Act 1935 (WA) s 37
Result:
The defendants pay 70% of the plaintiffs' costs of the application (including reserved costs) to be assessed if not agreed
Category: B
Representation:
COR 218 of 2019
Counsel:
| First named First Plaintiff | : | No appearance |
| Second named First Plaintiff | : | No appearance |
| Second Plaintiff | : | No appearance |
| Ninth Defendant | : | No appearance |
| Tenth Defendant | : | No appearance |
| Eleventh Defendant | : | No appearance |
| Twelfth Defendant | : | No appearance |
| Thirteenth Defendant | : | No appearance |
| Fourteenth Defendant | : | No appearance |
| Fifteenth Defendant | : | No appearance |
| Sixteenth Defendant | : | No appearance |
Solicitors:
| First named First Plaintiff | : | Norton Rose Fulbright Australia |
| Second named First Plaintiff | : | Norton Rose Fulbright Australia |
| Second Plaintiff | : | Norton Rose Fulbright Australia |
| Ninth Defendant | : | Bennett |
| Tenth Defendant | : | Bennett |
| Eleventh Defendant | : | Bennett |
| Twelfth Defendant | : | Bennett |
| Thirteenth Defendant | : | Bennett |
| Fourteenth Defendant | : | Bennett |
| Fifteenth Defendant | : | Bennett |
| Sixteenth Defendant | : | Bennett |
COR 86 of 2020
Counsel:
| First Plaintiff | : | No appearance |
| Second Plaintiff | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| First Plaintiff | : | Norton Rose Fulbright Australia |
| Second Plaintiff | : | Norton Rose Fulbright Australia |
| Defendant | : | Bennett |
COR 113 of 2021
(Consolidated by orders of 1 September 2021)
Counsel:
| Plaintiff | : |
| First Defendant | : |
| Second Defendant | : |
| Third Defendant | : |
| Fourth Defendant | : |
| Fifth Defendant | : |
| Sixth Defendant | : |
| Seventh Defendant | : |
| Eighth Defendant | : |
Solicitors:
| Plaintiff | : | Norton Rose Fulbright Australia |
| First Defendant | : | Bennett + Co |
| Second Defendant | : | Bennett + Co |
| Third Defendant | : | Bennett + Co |
| Fourth Defendant | : | Bennett + Co |
| Fifth Defendant | : | Bennett + Co |
| Sixth Defendant | : | Bennett + Co |
| Seventh Defendant | : | Bennett + Co |
| Eighth Defendant | : | Bennett + Co |
CIV 3166 of 2019
Counsel:
| First Plaintiff | : | No appearance |
| Second Plaintiffs | : | No appearance |
| Third Plaintiff | : | No appearance |
| Fourth Plaintiffs | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| First Plaintiff | : | Norton Rose Fulbright Australia |
| Second Plaintiffs | : | Norton Rose Fulbright Australia |
| Third Plaintiff | : | Norton Rose Fulbright Australia |
| Fourth Plaintiffs | : | Norton Rose Fulbright Australia |
| Defendant | : | Bennett |
Cases referred to in decision:
Amaca Pty Ltd v Hannell [2007] WASCA 158 (S)
Frigger v Lean [2012] WASCA 66
KSG Investments Pty Ltd v Open Markets Group Ltd (No 2) [2021] VSC 359
May v Thomas [2014] WASCA 176 (S)
State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174
Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388
HILL J:
On 10 August 2022, I delivered reasons for decision in relation to the parties competing proposals in relation to discovery. On 18 August 2023, the parties filed minutes of consent orders to give effect to my reasons for decision and proposed that the parties file submissions in relation to costs, and that the question of costs be determined on the papers. Orders were made to that effect on 23 August 2022.
The plaintiffs say that they were substantially successful on the application and that, as a result, the defendants should pay their costs of and incidental to the application, including any reserved costs. The defendants do not agree that the plaintiffs were the substantially successful party and say that each party was partially successful. On this basis, the defendants contend that the appropriate costs order is that costs be in the cause, alternatively that each party bear their own costs, alternatively that the court should apportion the costs between the parties 60/40 in favour of the plaintiff.
General principles as to costs
Under s 37 of the Supreme Court Act 1935 (WA), the court has a wide discretion to award costs. However, the discretion is not unfettered and must be exercised judicially.[9]
[9]Frigger v Lean [2012] WASCA 66 [53].
The general rule is that costs should follow the event; that is, the successful party should recover their costs from the opposing party. It is incumbent on an unsuccessful party to satisfy the court that there are good reasons it should not pay the successful party's costs.[10]
[10]Rules of the Supreme Court1971 (WA) O 66 r 1(1).
As was noted by the Court of Appeal in Strzelecki Holdings Pty Ltd v Jorgensen:[11]
What constitutes 'success' in proceedings is to be determined by the reality of the circumstances involved in the case. The Court may depart from the general rule that costs follow the event and modify a costs order to take into account matters such as any unreasonable conduct of a generally successful party, or to the failure of that party on one or more specific issues. The exercise of the discretion in that way is recognised by a number of rules in the [Rules of the Supreme Court], together with the practice of the Court, and authority. So, for example, if the Court is of the opinion that the conduct of a successful party - either before or after the commencement of the litigation - has resulted in costs being unnecessarily or unreasonably incurred, the Court may deprive that party of costs, either wholly or in part, and it may further order that party to pay the costs of an unsuccessful party, either wholly or in part …
Under O 66 r 1(3) RSC, where a party, though generally successful in an action, has, by the introduction of some issue or issues on which it has failed, increased the costs, the Court may order such party to pay the costs of such issue or issues. It is well-recognised that an order that a successful party recover only a portion of its costs, where it has not been wholly successful, should not be made as a matter of course, for at least two reasons. First, it is often the case that a successful party will not succeed on every issue raised. Secondly, to attempt, in every case, an analysis of which party was successful on which issue would add uncertainty and complexity to the outcome of litigation, and add to the time and cost of costs arguments. Consequently, the power to apportion costs in this way should only be exercised where there are discrete and severable issues on which the generally successful party failed, and which added to the cost of the proceedings in a significant and readily discernible way. Furthermore, while parties should be encouraged to consider carefully what matters they put in issue, justice may not be served if, by too ready a resort to deciding questions of costs according to success on particular issues, parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case.
Where the Court decides, in the exercise of its discretion, to modify the usual costs orders to reflect the limited success of the successful party, that power will be exercised broadly, and as a matter of impression, and without any attempt at mathematical precision (which is likely to prove illusory in any event). That approach reflects the fact that it may be difficult to separate the factual and evidentiary substratum of different issues, the fact that some issues are more important than others, and the fact that some issues are subsidiary to others. (footnotes omitted)
[11]Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 [50] ‑ [52].
However, even if a court does not accept all of a successful party's arguments at a trial, this does not, of itself, mean that it is appropriate to deal with costs orders on an issue by issue basis.[12] The court's discretion to render an award of costs by undertaking an assessment conducted by reference to issues at trial that have been won or lost, should only to be exercised in the clearest of cases.[13] The court's discretion to reduce costs for a successful party is approached as a matter of overall impression, without requiring any higher degree of mathematical precision.[14]
[12]State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174.
[13]KSG Investments Pty Ltd v Open Markets Group Ltd (No 2) [2021] VSC 359 [8] (Nichols J).
[14]Amaca Pty Ltd v Hannell [2007] WASCA 158 (S) [6]; May v Thomas [2014] WASCA 176 (S) [5].
Disposition
On the application, there were two main issues between the parties. The first was whether discovery should be ordered by categories or in line with the rules of the Federal Court of Australia. Second, there were a number of disputes between the parties in relation to the categories proposed.
In relation to the first issue, orders were made for discovery to be given by way of categories, as contended by the plaintiffs. In this respect, I accept that the plaintiffs were the successful party on this issue.
In relation to the remaining issues, including the categories proposed by the plaintiffs and the two categories proposed by the defendants, both parties had some success. The defendants were successful in removing one proposed category (category 2.2(1)) and in narrowing the other categories proposed by the plaintiffs. However, the defendants did not obtain orders for discovery of either of the categories of documents proposed by them.
In my view, while the plaintiffs were substantially successful in their application for discovery, a not insubstantial amount of time was taken during the hearings addressing the breadth of the categories and date range sought by the plaintiffs. In these circumstances, I consider it is appropriate for the plaintiffs' costs to be discounted to reflect this. Taking into account these matters, and as a matter of overall impression, I consider it would be appropriate to reduce the plaintiffs' costs of the application by 30%.
For these reasons, it is my view that the appropriate costs order is that the defendants pay 70% of the plaintiffs' costs of and incidental to the application, including the hearings on 29 June 2022 and 1 August 2022, including any reserved costs, to be assessed if not agreed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JN
Associate to the Honourable Justice Hill
31 MARCH 2023
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