De Francesch Builders Pty Ltd v Infusion Capital Pty Ltd
[2020] WADC 64
•15 MAY 2020
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: DE FRANCESCH BUILDERS PTY LTD -v- INFUSION CAPITAL PTY LTD [2020] WADC 64
CORAM: BURROWS DCJ
HEARD: 8 APRIL 2020
DELIVERED : 12 MAY 2020
PUBLISHED : 15 MAY 2020
FILE NO/S: CIVO 152 of 2018
ROBERT DE FRANCESCH
First Applicant
NATALIE DE FRANCESCH
Second Applicant
JOEGILDA PTY LTD
Third Applicant
DE FRANCESCH BUILDERS PTY LTD
Fourth Applicant
AND
EX PARTE
INFUSION CAPITAL PTY LTD
First Respondent
ABBOTT CORPORATE PARTNERS PTY LTD
Second Respondent
SUSAN MARGARET ABBOTT
Third Respondent
GLEN JOHN WHEELER
Fourth Respondent
Catchwords:
Application for pre-action discovery - Appeal from decision of deputy registrar refusing application
Legislation:
Rules of the Supreme Court 1971 (WA), O 26A r 4
Result:
Appeal allowed
Representation:
Counsel:
| First Applicant | : | Mr A Metaxas |
| Second Applicant | : | Mr A Metaxas |
| Third Applicant | : | Mr A Metaxas |
| Fourth Applicant | : | Mr A Metaxas |
| First Respondent | : | Mr R A S Rowick |
| Second Respondent | : | Mr R A S Rowick |
| Third Respondent | : | Mr R A S Rowick |
| Fourth Respondent | : | No attendance |
Solicitors:
| First Applicant | : | Metaxas Legal |
| Second Applicant | : | Metaxas Legal |
| Third Applicant | : | Metaxas Legal |
| Fourth Applicant | : | Metaxas Legal |
| First Respondent | : | Rowick & Bucolo Lawyers |
| Second Respondent | : | Rowick & Bucolo Lawyers |
| Third Respondent | : | Rowick & Bucolo Lawyers |
| Fourth Respondent | : | Not applicable |
Case(s) referred to in decision(s):
Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458
GH v AB [2019] WASCA 47
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14
Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 (S)
Re McHenry [2014] WADC 92
White t/as Jewel Cave Café v Bromic Pty Ltd [2019] WADC 34
BURROWS DCJ:
This is an appeal from a decision of Deputy Registrar Harman made 25 July 2019 dismissing the application of the applicants for pre‑action discovery pursuant to O 26A r 4 of the Rules of the Supreme Court 1971 (WA) (RSC). The appeal is brought pursuant to r 15 of the District Court Rules 2005 (WA) (DCR). The appeal is by way of a hearing de novo. The applicants do not appeal the orders made by the deputy registrar in respect of the fourth respondent. The fourth respondent accordingly took no part in the appeal.
Background
The first and second applicants Robert and Natalie De Francesch are husband and wife. They are the trustees of the R & N De Francesch Superannuation Fund. Mr De Francesch's father, Joseph De Francesch, is the sole director of the third applicant (Joegilda). Mr De Francesch and his father are directors of the fourth applicant (De Francesch Builders).
The third respondent (Mrs Abbott) is an accountant and the sole director and shareholder of the first respondent (Infusion). The fourth respondent (Mr Wheeler) was a director of Infusion from 17 March 2015 to 27 May 2016.
Mrs Abbott is also the sole director and shareholder of the second respondent (ACP). ACP conducts an accounting practice.
Robert De Francesch has filed an affidavit in support of the application. He deposes that on 8 April 2015 Mr Wheeler, who was known to him through his golf club and with whom he had previous business dealings, provided him with a letter from ACP addressed to Mr Wheeler[1] (the ACP letter) and a document headed 'short term loan agreement'.[2] Mr Wheeler told Mr De Francesch that Infusion could obtain research and development (R & D) grants from the Australian government and invited Mr De Francesch to lend money to Infusion. Mr De Francesch consulted with his father and it was agreed $200,000 would be loaned to Infusion as follows:
(a)$100,000 advanced by the Superannuation Fund;
(b)$50,000 advanced by Joegilda; and
(c)$50,000 advanced by De Francesch Builders.
[1] Affidavit of Robert De Francesch sworn 21 September 2018, Annexure RDF 5.
[2] Annexure RDF 6.
Loan agreements were signed in April 2015 and the funds advanced to Infusion.[3] The loan agreements provided that each loan would be repaid on 30 September 2015 with a rollover option for the lender to elect to redeem 50% of the loan amount or rollover the loan for a further 12 months to the rollover date of 30 September 2016. Interest was payable at 20%. It is not in dispute that the loans have not been repaid.
[3] Annexure RDF 9.
Robert De Francesch deposes[4] that based on the ACP letter and loan agreement he understood the R & D grant claims for the 2015, 2016 and 2017 financial years totalling $258,887 would be retained by ACP as security for repayment of the loans and would be sufficient to ensure payment of the loans and interest.
[4] Affidavit of Robert De Francesch sworn 21 September 2018, par 16.
The ACP letter is in the following terms:
Dear Glenn
R & D Tax Incentive Claims
Further to our recent discussions regarding the R & D Tax Incentive Claims for the 2014/15 to 2016/17 financial years, I now confirm the following:
1 I have reviewed the financials to 31 March 2015;
2 I have also reviewed the projected financials to 30 June 2015 based on current and planned activities;
3 I have prepared preliminary Budgeted Profit and Loss/Cashflow Statements for the following periods:
•1 April 2015 to 30 June 2015 (3 months)
•1 July 2015 to 30 June 2016 (12 months)
•1 July 2016 to 30 June 2017 (12 months)
4 Infusion Capital Pty Ltd will be eligible for the R & D Tax Incentives for 2015, 2016 and 2017 with regard to the development and testing of its unique specialized service delivery model for SME companies, with an initial focus on clients who are seeking to commercialise innovated technology;
5 My estimate of the likely net claim (after fees), based on the above, is as follows:
*2015 (receive Sept 2015) $109,199
*2016 (receive Sept 2016) $118,520
*2017 (receive Sept 2017) $ 31,168
Total Estimated Funds $258,887
6 Based on my experience over 13 years, current activities and the requirements of the legislation for Registration and calculation of claims, I can see no reason that the R & D Tax Incentive claims would not proceed in full;
7 Whilst I cannot provide a 100% guarantee, I have had all past claims for clients accepted in full, over the 13 year period advising in this area, and all claims Audited have been fully compliant and accepted by both AusIndustry and the ATO without adjustment;
8 The risk that this claim would not be accepted is therefore extremely low.
I would, therefore, be confident that Infusion Capital Pty Ltd will qualify for the claim in each of the 2015 to 2017 Financial Years, and receive an estimated $250,000 plus (net of fees) as a minimum. Please note that there is no legislated upper limit on claims, only a gross turnover limit of $20 million for the Cash Rebate option to apply.
The Application for Registration of the R & D Project occurs through AusIndustry and this would be lodged in July, taking up to 14 days to be processed. On receipt of the Registration Number, the Tax Return would then be lodged. The ATO refund takes a further 14 days to issue, so it is likely to be received by late August/early September each year.
Should you require any further details, please call me on (08) 9388 0041.
Kind regards
[Signature]
Sue Abbott B.Bus. (Acctg) Mapp Fin CPA SAFin MAICD
Director
Principles applicable to appeal
An appeal from a registrar to a judge is to be by way of a new hearing of the matter that was before the registrar: DCR 15(6). The judge hearing the appeal is to treat the application as if it is before the court for the first time save that the party appealing has the right as well as the obligation to open the appeal: Hazart Pty Ltd v Rademaker.[5] There is no requirement on the applicants to show that the registrar made an error in the decision under appeal: Hazart Pty Ltd v Rademaker.[6]
[5] Hazart Pty Ltd v Rademaker (1993) 11 WAR 26 [4].
[6] Hazart Pty Ltd v Rademaker [28].
The notice of appeal was filed three days out of time. Pursuant to DCR 15(2) an appeal against the decision of a registrar must be commenced within 10 days after the date of the decision.
The respondents do not submit any prejudice is caused to them by the late filing of the appeal. The explanation provided by counsel is that he was instructed to appeal on the day the decision was delivered.[7] He erroneously thought the DCR provided for a period of 14 days in which to appeal as opposed to 10 days and proceeded under a misapprehension that the applicants had until 8 August to appeal from the orders. The court has a discretion to extend the time in which the appeal is brought by DCR 15(2). The object of that Rule is to ensure that the rules which fix time for doing of acts do not become instruments of injustice: Gallo v Dawson;[8] Re McHenry.[9]
[7] Affidavit of Arthur Metaxas sworn 7 August 2019.
[8] Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458, 459 (McHugh J).
[9] Re McHenry [2014] WADC 92 [24] (Herron DCJ).
The delay of three days in filing the notice of appeal is not significant. The delay was due to an error on the part of the legal advisors of the applicants. I am satisfied the delay was not intentional. There is no demonstrated prejudice suffered by the respondents. The time for filing and service of the notice of appeal is therefore extended to 8 August 2019.
Order 26A r 4 of the RSC
The applicable principles were recently summarised by Lemonis J in White t/as Jewel Cave Café v Bromic Pty Ltd.[10] I adopt what his Honour said at [4] - [11]:
[10] White t/as Jewel Cave Café v Bromic Pty Ltd [2019] WADC 34.
4Order 26A r 4 of the RSC provides to the court a discretion to order what is commonly known as pre‑action discovery where the prerequisites set out at O 26A r 4(1), r 4(2) and r 4(3) are met.
5In order to enliven that discretion, the applicant for the order must establish by evidence that:
1.The applicant may have a cause of action against the potential party;
2.The applicant wants to commence proceedings against the potential party or to take proceedings against the potential party in the course of an action to which the applicant is a party;
3.The applicant, 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;
4.There are reasonable grounds for believing that the potential party had or has, or is likely to have had or have, possession of documents that may assist in making the decision (the decision being whether to commence or take proceedings).2
6The order contains a mix of objective and subjective elements.3
7Whether an applicant may have a cause of action is an objective question.4 In GH v AB,5 Mitchell JA stated that an applicant:
'must demonstrate more than mere assertion, conjecture or suspicion, but does not have to positively establish the existence of a cause of action. What the applicant must produce is evidence showing that he, she or it may have a cause of action.'
8The court must form an opinion as to whether there is sufficient evidence before it that the applicant may have a cause of action against the potential party.6 The ambit of the evidence reasonably required to establish that the applicant 'may have a cause of action' will be assessed in the context of the character and ambit of the relief sought.7
9It is a natural corollary to the prerequisite that an applicant has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings, that at the time of making the application the applicant has not made such a decision.8
10At first glance, the separate requirements that an applicant wants to commence proceedings, yet has not made a decision to commence proceedings, may appear contradictory. However, each is a separate and distinct subjective matter. A person may want to carry out a particular act (here, commence proceedings), yet, the decision to do so remains dependent upon other factors. As McLure JA (with whom Miller JA agreed) explained in The New South Wales Solicitors Mutual Indemnity Fund:
'It is also necessary to consider the scope and relationship between the requirement that the applicant wants to commence or take proceedings against the potential party and the requirement that the applicant does not have sufficient information to enable a decision to be made as to whether to commence or take proceedings. The first of the two requirements (which has no equivalent in the Federal Court rule) places a limitation on the extent to which an applicant can fish for information. As the applicant must show that it wants to commence or take proceedings against the potential party, it follows that if the missing information supports its claim, proceedings would be commenced or taken. The conditions enlivening the discretion are not met if the applicant requires the information in order to determine whether or not it wants to take proceedings'.9
11The reasonableness of the inquiries and the sufficiency of the information available are objective standards.10 In The New South Wales Solicitors Mutual Indemnity Fund11 McLure JA stated that sufficient information means:
'… no more than that which is reasonably necessary to enable the person to decide whether to commence or take proceedings. … Ordinarily, what is reasonably necessary is unlikely to extend beyond documents constituting or contemporaneously recording the material facts or information necessary to determine the material facts. It should not extend, for example, to the potential parties' subjective evaluation of its potential liability.'
(FN2: The New South Wales Solicitors Mutual Indemnity Fund v The Hancock Family Memorial Foundation Limited [No 2] [2009] WASCA 146 [12] (McLure JA) (with whom Miller JA agreed).)
(FN3: The New South Wales Solicitors Mutual Indemnity Fund v The Hancock Family Memorial Foundation Limited [No 2] [14])
(FN4: Waller v Waller [2009] WASCA 61 [75])
(FN5: GH v AB [2019] WASCA 47 [34])
(FN6: Waller v Waller [75])
(FN7: Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 [3])
(FN8: The New South Wales Solicitors Mutual Indemnity Fund v The Hancock Family Memorial Foundation Limited [No 2] [17]; Horwood v Davenport [2014] WASC 436 [8(f)])
(FN9: The New South Wales Solicitors Mutual Indemnity Fund v The Hancock Family Memorial Foundation Limited [No 2] [16])
(FN10: The New South Wales Solicitors Mutual Indemnity Fund v The Hancock Family Memorial Foundation Limited [No 2] [14])
(FN11: The New South Wales Solicitors Mutual Indemnity Fund v The Hancock Family Memorial Foundation Limited [No 2] [15])
The factors relevant to the exercise of the discretion once it is enlivened were set out by Mitchell J (with whom Martin CJ and Buss JA agreed) in Kelbush[11] at (120) ‑ (124):
[11] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14.
120It is established that the discretion to order pre-action discovery will not be exercised in favour of the party seeking discovery as a matter of course. A court considering the exercise of the discretion will commonly consider whether or not the order is reasonably necessary to achieve the proper administration of justice.38 In Central Exchange, the court identified the following non‑exhaustive factors as relevant to the exercise of its discretion:
1.the likelihood that a cause of action of the kind suggested will be found to exist;
2.the nature and significance of that potential cause of action;
3.the likely effect, on the person against whom discovery is sought, of the making of an order of the kind contended for;
4.whether there is any other adequate means, available to the intending plaintiff, of obtaining the information which it seeks;
5.the nature and confidentiality of the documents proposed to be obtained;
6.the possible significance of the information contained within those documents to the decision whether or not to commence the contemplated proceedings;
7.whether the applicant is able to compensate the potential party for its cost of complying with the order; and
8.whether there is any evidence of bad faith on the part of the applicant.
121To that list of relevant matters, I would add the extent to which the cost and effort involved in undertaking discovery and inspection is proportionate to the likely value of the claim if successful.
122In Roe v The State of Western Australia,39 Martin CJ summarised the principles governing the exercise of discretion to order discovery within an existing action in the following terms, with which I respectfully agree:
'[I]t is now established that general discovery is no longer regarded as a right. Rather, the extent of the obligation to give discovery and the entitlement to discovery will be fashioned having regard to the general principles that are articulated in the Rules of the Supreme Court 1971 (WA) and in particular the principles enunciated in O 1 r 4A and r 4B. Those principles include and expressly embody the notion of proportionality, which requires a court, before ordering any interlocutory process, to assess whether the forensic benefit to be derived by that process is proportional to the cost and delay which will flow from the undertaking of the process, having regard to the value, importance and complexity of the subject matter in dispute and the financial position of the parties.
In the context of discovery, this means that when issues arise with respect to the breadth of the discovery to be ordered, the ambit of discovery will be determined taking into account the cost and delay associated with the provision of discovery over a broader ambit, as compared to the forensic benefit likely to be derived from the provision of discovery over that broader ambit. Unless the cost and delay involved in the provision of that discovery is proportionate to the forensic benefit likely to be derived from a broader ambit of discovery, and to the value and importance or complexity of the subject matter of the proceedings, a narrower ambit of discovery will be ordered.'
123That question of proportionality will also be relevant at the stage of pre‑action discovery.
124In Central Exchange Steytler J, with whom other members of the court agreed, observed [82]:
'While it is true that the rule, in this State, uses the word 'may', that does not mean that, in any case in which the applicant asserts a possible cause of action against some other person, no matter how speculative or remote, discovery will be ordered.'
(FN38: Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26WAR 33 [82] ‑ [83])
(FN39: Roe v The State of Western Australia [2013] WASC 130 [10] ‑ [11])
Mr De Francesch deposes that the applicants may have a cause of action against each of the respondents for misleading and deceptive conduct. He states:[12]
41Ms Abbott did not disclose her position as directed to me in her letter dated 8 April 2015 or during any period before the plaintiffs advanced any loans to Infusion.
42In the ACP letter Ms Abbott wrote that she had reviewed 'the financials to 31 March 2015' for Infusion and that she had also reviewed 'the projected financials to 30 June 2015, based on current and planned activities' when as the sole director of Infusion these were documents she had presumably approved. She proceeded to write 'Infusion Capital Pty Ltd will be eligible for the R&D Tax Incentive for 2015, 2016 and 2017 with regard to the development and testing of its unique specialised service delivery model for SME companies …'
43I wish to inspect the documents requested in the plaintiff's application to assist the plaintiffs in making a decision as to whether to commence an action against the defendants or some of the defendants.
[12] Affidavit of Robert De Francesch sworn 21 September 2018, pars 41 - 43.
At the hearing of the appeal no additional evidence was sought to be led, the applicants being content to rely upon Mr De Francesch's affidavit sworn in support of the application before the deputy registrar.
In assessing whether the applicants may have a cause of action they need not establish the existence of a cause of action, but that they may have a course of action beyond 'mere assertion, conjecture or suspicion'.[13]
[13] GH v AB [2019] WASCA 47 [34].
Documents sought
The applicants seek discovery of the following documents for the reasons that follow:[14]
[14] Schedule to Notice of Appeal filed 7 August 2019.
(a)Application registration number IR1502540 by the first respondent with Innovation Australia.
The document is sought on the basis that it would be expected to include information which would demonstrate that the Applicant for the R & D tax incentive grant falls within the relevant legislation thereby going to the representation at par 4 of the ACP letter. Further the applicants seek the application in order to ascertain what the 'innovative unique specialised service delivery model' which will be eligible for the R & D tax incentive is referred to therein. This is also relevant to the representation at par 4 of the ACP letter. Previous requests by Mr De Francesch for a copy of the Application were unsuccessful.[15]
[15] Annexure RDF 17, Annexure RDF 19 and Annexure RDF 27.
(b)Written communications between AusIndustry and the first respondent regarding the application registration number IR1502540.
Mrs Abbott provided to Mr De Francesch a copy of the Department of Industry and Science Notice of Registration by email on 16 February 2018.[16] In that email she stated the 2015 tax return for Infusion had been lodged on 2 October 2015 and a three week turnaround on the R & D refund had been anticipated. She stated the registration disclosed all details of the project and core activities. She went on to state she had had no previous applications and registrations queried over a 13 year period. The email refers to requests for further details being made by the ATO in respect of the R & D claims by Infusion and a review of the core activities taking place by AusIndustry in September and December 2016 and April and late June 2017. Following this review she stated the final position was that the core activities, on a technicality, may have fallen into an excluded category.
[16] RDF 18, email 16 February, page 52.
The communications are asserted to be relevant to the representations in pars 4 - 6 of the ACP letter. That such communications exist and may be in the respondents is evident from RDF 18.
(c)Income tax returns lodged by the first respondent for the 2014/15 and 2015/16 financial years.
The applicants submit the tax returns should detail expenditure of Infusion and thereby demonstrate whether Infusion was expending money that was capable of attracting the estimated tax refund at par 5 of the ACP letter.
It is clear from RDF 18 and the affidavit of Mrs Abbott sworn 21 February 2019 that a tax return for Infusion for the 2015 financial year was prepared and filed in October 2015. Mrs Abbott deposes that no further returns were filed thereafter. Despite this, the applicants press for a further affidavit with a list of documents not in existence to be prepared.
(d)All written communications between each of the first respondent, the second respondent and/or the third respondent and the fourth respondent relating to the application registration number IR1502540.
The specific basis upon which these documents are sought is not clear from the submissions. The respondents have stated that no such communications exist at par 4 of its submissions dated 6 April 2020.
(e)All written communications between each of the first respondent, the second respondent and/or the third respondent and the fourth respondent relating to the letter from the second respondent to the first respondent dated 8 April 2015.
The applicants assert it would be reasonable to expect a chain of communication between the respondents in respect of the ACP letter.
The respondents' position in respect of (e) is that no such communications exist.
(f)All written communications between any of the first respondent, the second respondent, the third respondent and the fourth respondent and any other prospective lender to the first respondent written between 1 March and 30 April 2015.
The applicants did not pursue discovery of these documents at the hearing of the appeal.
(g)All written communications between each of the first respondent, the second respondent, the third respondent and the fourth respondent and any other lenders to the first respondent relating to the application registration number IR1502540.
The applicants did not pursue discovery of these documents at the hearing of the appeal.
(h)Financial statements of the first respondent for the years ended 30 June 2015, 2016 and 2017.
At par 3 of the ACP letter Mrs Abbott stated that she had prepared the preliminary budgeted profit and loss and cash flow statements for various periods to 30 June 2015, 2016 and 2017. The applicants seek those documents in order to ascertain whether Infusion had generated income necessary for the tax incentive to apply.
The respondents argue that the prerequisites to enliven the discretion under the rule have not been satisfied. They submit if the court is of the view that they have, then the court should not exercise the discretion in favour of the applicants. The respondents' argument can be summarised as follows:
(a)Firstly the applicants have failed to depose that they want to commence proceedings against the respondents. They say the affidavit of Mr De Francesch and the letter RDF 27 are insufficient to satisfy the requirement of O 26A r 4(1).
(b)Secondly the applicants already have sufficient information upon which to base a decision to issue proceedings in this matter based on the ACP letter.
(c)Thirdly the applicants have failed to sufficiently particularise the misleading or deceptive conduct as against each of the respondents.
(d)Fourthly the applicants have failed to identify the relevance of the documents to the decision as to whether to commence a cause of action.
(e)Fifthly the cost and time of providing the documents sought would be significant.
It is important to observe in this case that the submissions made by the parties both written and orally at the appeal were more extensive than those made before the learned deputy registrar. Further, the scope of the documents sought was reduced at the hearing of the appeal. It has only been with benefit of the applicants' oral submissions, particularly those in reply at the hearing of the appeal that the relevance of the documents sought has been able to be fully appreciated by the court. It is regrettable that the relevance of the documents sought had not been more fully expressed at an earlier time in the proceedings by way of affidavit and written submissions.
The applicants want to commence proceedings
The applicants argue that the affidavit of Mr De Francesch and RDF 27 are sufficient evidence of the applicants' desire to commence proceedings.
I am satisfied based on Mr De Francesch's affidavit when read with RDF 27 that the applicants want to commence proceedings against one or more of the respondents and that the criteria set out in O 26A r 4(1) has been met. Whilst Mr De Francesch has not specifically deposed to that desire by using the word 'want', it can be readily inferred from the affidavit at pars 40 ‑ 43 and RDF 27. It would have been preferable to adopt the precise wording used in the rule, however the failure to do so does not in my view, result in failure to meet the prerequisite to enliven the discretion in this case.
Have the applicants established that they may have a cause of action against the respondents?
The potential cause of action is identified in the affidavit of Mr De Francesch at par 43 as misleading and deceptive conduct in respect of each of the respondents. It is not in issue that the applicants each have a cause of action against Infusion on the loan agreements however Infusion is a proprietary company with a single $1 share held by Mrs Abbott.
The potential cause of action being considered by the applicants is one of misleading and deceptive conduct based on the provision and the contents of the ACP letter in circumstances where it was not disclosed to Mr De Francesch that Mrs Abbott was a director and sole shareholder of Infusion. In respect of Mrs Abbott I am satisfied that the applicants may have a cause of action against Mrs Abbott and ACP for misleading and deceptive conduct. I am also satisfied that they may have a cause of action against Infusion for misleading and deceptive conduct on the basis that at the time Mrs Abbott and Mr Wheeler were directors of Infusion and the representations were made to secure loans on behalf of Infusion.
I agree with the respondents that misleading or deceptive conduct based on the failure by Mrs Abbott to disclose a common directorship of ACP and Infusion can be established by a company search of Infusion and on the ACP letter itself. This requires no further documents
The respondents assert that a number of the representations contained in the ACP letter are representations in respect of future matters, specifically those contained in pars 4, 5 and 6.
The respondents also argue the applicants can rely on s 4(1) of the Australian Consumer Law (sch 2) Competition Consumer Act 2010 (Cth) to support any claim under s 18.If the allegation is of misleading and deceptive conduct on behalf of a future matter then the evidential onus shifts to the person making a representation to establish that they had reasonable grounds for so making the representation.
The question as to whether the representations contained in the ACP letter were misleading and deceptive and the opinions expressed by Mrs Abbott were made on reasonable grounds are likely to be impacted by some of the documents sought by the applicants, specifically the documents referred to in the letter itself and correspondence with AusIndustry in respect of the application.
The fact that the evidentiary onus lies on the respondents who rely on reasonableness is not to the point. If there are documents which impact on the issue of reasonableness this in turn is likely to impact on the decision of the applicants as to whether to issue proceedings at all. If proceedings are issued and the documents then produced, the applicants are put at risk of having adverse costs orders made against them. It is desirable in this case that a reasoned decision be made before proceedings are issued.
Has the applicant after reasonable inquiries not been able to obtain sufficient information to enable a decision to be made as to whether to commence proceedings?
I am satisfied from the email exchanges between Mr De Francesch and Ms Abbott and Mr Wheeler that the applicants have made repeated requests over a significant period of time to obtain the documents sought, particularly the application, correspondence with the ATO and AusIndustry and the financial statements of Infusion for the 2015 ‑ 2017 financial years. I am also satisfied that those enquiries were reasonable. I am satisfied that the applicants have not been able to obtain sufficient information to enable a decision to commence proceedings against any of the respondents.
I am satisfied that some of the documents may relate sufficiently to a matter or matters in question for the reasons outlined by the applicants. I am also satisfied that there are reasonable grounds for believing that the respondents have possession of the documents based on the affidavits of Mrs Abbott and the respondents' submissions.
The prerequisites to enliven the discretion have been met in this case.
I turn now to the exercise of the discretion.
I consider it both reasonable and appropriate for the applicants to obtain copies of some of the documents sought as part of their decision making process. There are no other obvious means of obtaining the documents they require to make their decision as to whether to commence the contemplated proceedings. Previous requests for the documents have been unsuccessful. There is no suggestion that the applicants have acted in bad faith.
A claim for misleading and deceptive conduct will need to be particularised at an early stage of any proceedings commenced. If it is to be limited to non‑disclosure of Mrs Abbott's directorship of Infusion, then it is important that it be so limited at the outset to avoid any unnecessary issues being litigated. The source documents referred to in the ACP letter which directly relate to the representations made and opinions expressed by Mrs Abbott are appropriately sought and should in my view be disclosed.
The respondents have indicated the application and correspondence with AusIndustry are contained in six lever arch files. The costs of providing inspection of these files will not in my view be burdensome. The order that I propose to make will be on the terms that the applicants pay the reasonable cost of complying with the orders made for inspection and copying of documents. The intrusion into the privacy of the respondents' business affairs will be limited by the implied undertaking or obligation of the applicants not to use the discovered documents for purposes collateral to the contemplated proceedings and deciding whether they should be commenced.
Taking all of these matters into consideration I have come to the view that the court should exercise its discretion to require more confined pre‑action discovery than that which is sought by the applicants. I am satisfied that an order for pre‑action discovery on a confined basis is necessary to achieve the proper administration of justice.
The provision pre‑action discovery shall be in respect of the following documents:
1.Application registration number IR1502540.
2.Written communications between AusIndustry and the first respondent regarding the application registration number IR1502540.
3.The income tax return lodged by the first respondent for the 2014/2015 financial year.
4.Financial statements of the first respondent for the years ended 30 June 2015, 2016 and 2017.
All of these documents are relevant to the representations made in the ACP letter. I am not prepared to order discovery of those documents that the respondents have indicated do not exist as I am not satisfied that there are reasonable grounds for believing that the potential party has or is likely to have had possession of such documents. I am also not prepared to order an affidavit of documents in existence in the usual terms at this point. The documents sought have been identified, that they exist has been confirmed. Inspection and copying should proceed without further delay.
Any costs associated are with the provision of the documents referred are ameliorated by an award of costs in favour of the respondents.
Costs
The parties were advised orally of my decision on this matter on 12 May 2020 with written reasons to be published on 15 May 2020. My preliminary views on costs were conveyed to the parties and submissions made. The usual course in relation to these applications is that in the absence of any reason to the contrary, the applicant pays for the respondents' costs of the application and the respondents' reasonable costs of complying with any order for discovery made.[17]
[17] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 (S) [2].
In respect of the costs of the application before the deputy registrar, the costs order in favour of the respondents should not be disturbed. This appeal has been conducted on a reduced scope of documents sought as before the deputy registrar. Furthermore, the usual order would be the applicants pay the costs of the hearing before the deputy registrar even if they had been successful.
In respect of the costs of this appeal, in Kelbush (S)[18] Martin CJ (with whom the other members of the court agreed) held that the principle that an applicant for an order of pre-trial discovery should ordinarily pay the respondents' costs, had no application beyond the proceedings at first instance. However, Kelbush was an appeal where it was necessary to demonstrate error by the decision maker.[19] The applicant argues for an apportionment of costs on the basis that it was partially successful on appeal. This appeal is a hearing de novo. The applicants have been only partially successful on the appeal in relation to the documents sought. Further there are the matters at [20] hereof. In all of the circumstances of this case, I consider it appropriate that the applicants should pay the respondents' costs of the appeal. Consistently with the principles set out at [3] and [4] of the decision of Martin CJ in Kelbush (S),[20] I would make an order empowering the applicants to make an application in the course of any subsequent proceedings for orders with respect to the costs that they are ordered to pay the respondents and also with respect to the applicants costs of the appeal before me.[21]
[18] Kelbush (S) [5].
[19] Kelbush [24] – [26].
[20] Kelbush (S) [3] - [4].
[21] Kelbush (S) [4].
The following orders are made:
1.The time within which the applicants may file and serve the notice of appeal be extended to 8 August 2019.
2.The appeal be allowed.
3.Order 1 of the order made by the deputy registrar on 25 July 2019 be set aside.
4.Subject to any claims of legal professional privilege by the respondents, within 21 days the respondents make available for inspection and photocopying by the applicants the following documents:
4.1.Application registration number IR1502540.
4.2.Written communications between AusIndustry and the first respondent regarding the application registration number IR1502540.
4.3.The income tax return lodged by the first respondent for the 2014/2015 financial year.
4.4. Financial statements of the first respondent for the years ended 30 June 2015, 2016 and 2017.
5.The applicants pay the respondents reasonable costs of compliance with order 3 to be taxed if not agreed.
6.The applicants pay the respondents costs of the appeal to be taxed if not agreed.
7.There be liberty to apply.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
JG
Associate to Judge Burrows15 MAY 2020
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