De Francesch v Infusion Capital Pty Ltd - [2019] WADC 47

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   DE FRANCESCH -v- INFUSION CAPITAL PTY LTD [2019] WADC 47
CORAM:   DEPUTY REGISTRAR HARMAN
HEARD:   14 FEBRUARY 2019
DELIVERED          :   4 APRIL 2019
FILE NO/S:   CIVO 152 of 2018
BETWEEN:   ROBERT DE FRANCESCH
NATALIE DE FRANCESCH
First Applicants
JOEGILDA PTY LTD
Second Applicant
DE FRANCESCH BUILDERS PTY LTD
Third Applicant
AND
INFUSION CAPITAL PTY LTD
First Respondent
ABBOTT CORPORATE PARTNERS PTY LTD
Second Respondent
SUSAN MARGARET ABBOTT
Third Respondent
GLEN JOHN WHEELER
Fourth Respondent

Catchwords:

Practice - Practice under the Rules of the Supreme Court1971 - Application for pre-action discovery O 26A r 4 - Turns on its own facts

Legislation:

Rules of the Supreme Court 1971

Result:

Application dismissed

Representation:

Counsel:

First Applicants	:	Mr A Metaxas
Second Applicant	:	Mr A Metaxas
Third 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	:	Mr P Van Der Zanden

Solicitors:

First Applicants	:	Metaxas Legal
Second Applicant	:	Metaxas Legal
Third Applicant	:	Metaxas Legal
First Respondent	:	Richard Rowick Barrister and Solicitor
Second Respondent	:	Richard Rowick Barrister and Solicitor
Third Respondent	:	Richard Rowick Barrister and Solicitor
Fourth Respondent	:	Hotchkin Hanly

Case(s) referred to in decision(s):

Nil

DEPUTY REGISTRAR HARMAN:

Order O 26A r 4 of the Rules of the Supreme Court 1971 (WA) provides:
(1)This rule applies if a person who may have a cause of action against a person whose description has been ascertained (the potential party) wants –
(a)to commence proceedings against the potential party; or
(b)to take proceedings against the potential party in the course of an action in which the person is a party,
but the person, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or to take the proceedings.
(2)If there are reasonable grounds for believing that the potential party had, has or is likely to have had or to have, possession of documents that may assist in making the decision the person may apply for an order under this rule.
(3)The application should be supported by an affidavit and a copy of both shall be served on the potential party.
(4)On the application the court may order the potential party to give discovery of all documents that are or have been in the potential party's possession and that may assist the applicant in making the decision.
It is for an applicant to justify its recourse to the rule. It would expect that careful consideration would be given to the sufficiency of the evidence for the purpose of establishing jurisdiction.
The applicants seek an order for discovery and inspection against four respondents. The documents of which discovery is sought are either specified or described as part of a category in a schedule to the application.
The evidence upon which the applicants rely is of the first named first applicant. As such he is a trustee of a superannuation fund. His father is the sole director of the second applicant and along with his father he is a director of the third.
The deponent states as follows:
9.On or about 8 April 2015 (the fourth respondent) provided to me a letter from (the second respondent) to him dated 8 April 2015 … and a document headed 'SHORT TERM CONVERTIBLE LOAN AGREEMENT' …
10.When (the fourth respondent) handed the documents to me he said words to the effect that (the first respondent) could obtain research and development grants from the Australian government and that I should consider taking up the opportunity to lend money to (the first respondent). In response I said to (the fourth respondent) that I would read the documents which he had provided to me and let him know if I was interested. I had previously been involved in 2 transactions with (the fourth respondent), one being a loan and the other being an investment. In both of those transactions (the fourth respondent) met his commitments.
11.I later discussed the proposal with my father who said he would trust my judgment. I later informed (the fourth respondent), on or about 9th or 10th April 2015 that:
11.1The first (applicants) would lend (the first respondent) $100,000;
11.2The second (applicant) would lend (the first respondent) $50,000;
11.3The third (applicant) would lend (the first respondent) $50,000.
I am satisfied that each amount proposed to be loaned was advanced by the respective applicant to the first respondent and that the first respondent is now in default under each loan agreement.
I am satisfied that each of the applicants may have a cause of action against the first respondent for breach of agreement however there is reason to doubt that any claim of the second and third applicants would be within the jurisdiction of the court.
There is no evidence that would suggest that the application was brought for the purpose of obtaining documentary evidence to inform a decision by each applicant whether to issue proceedings against the first respondent. The fact that the schedule does not include the agreement for the second applicant's loan which the deponent has been unable to locate would suggest the same conclusion.
At par 12 the deponent states that:
In deciding to make the loans I relied on the (second respondent's) letter which I understood to have been prepared by (the third respondent) for (the second respondent) as an independent consultant engaged by (the first respondent). I was not aware when I agreed to advance the loans and when I made the advances that (the third respondent) was the sole director and shareholder of (the first respondent).
At par 16 he deposes:
I understood from the Agreement that the R&D Grant Claim for 2015 and 2016 financial years would be retained by (the first respondent ) as security for repayment of the loans and that each loan would be repaid on the 'Rollover Repayment Date' with interest at 20% per annum. I understood from the (second respondent's) letter that the R&D Grant Claim would be for $258,887 which was sufficient to ensure repayment of the (applicants') loans totalling $200,000 with interest at 20% per annum.
At par 40 of the affidavit the deponent states his belief that the applicants may have a cause of action against each respondent for misleading and deceptive conduct. In the following paragraphs he specifies particular conduct of the third respondent. At par 41 he deposes that neither by her letter dated 8 April 2015 nor otherwise did the third respondent disclose to him her directorship of the first respondent. At par 42 he deposes that in the letter she wrote that she had reviewed 'the financials to 31 March 2015' and 'the projected financials to 30 June 2015' of the first respondent 'when as the sole director of (the first respondent) these were documents she had presumably approved'.
I am satisfied that as against the third respondent the statement of belief at par 40 is established. Each of the applicants may have a cause of action for misleading and deceptive conduct against the third respondent on the cases outlined at pars 41 and 42 of the affidavit.
I am satisfied that at the relevant time the third respondent was the director of the second respondent and a director of the first respondent.
I am satisfied that there is scope to consider that there is sufficient evidence to implicate the second respondent in the conduct of the third respondent specified at pars 41 and 42, alternatively that it may be responsible for its officer's conduct. It follows that each of the applicants may have a cause of action for misleading and deceptive conduct against the second respondent on the cases outlined at pars 41 and 42 of the affidavit.
There is no evidence that suggests that the deponent considers that the first respondent was implicated in the conduct of the third respondent specified at pars 41 and 42. There is no basis to consider that the conduct of the third respondent specified at pars 41 and 42 may be attributable to the first respondent.
As against the first respondent the statement of belief at par 40 is an unsubstantiated conclusion. The applicants have not established that they may have a cause of action against the first respondent for misleading and deceptive conduct.
The evidence at pars 9 and 10 establishes how the letter came into the deponent's hands. Apart from the reference to benign past dealings between the deponent and the fourth respondent there is no other evidence of the fourth respondent's conduct. There is no evidence that suggests that the deponent considers that the fourth respondent was implicated in the misleading or deceptive conduct of the third respondent revealed at pars 41 and 42. There is no basis to consider that the specified conduct of the third respondent may be attributed to the fourth respondent.
As against the fourth respondent the statement of belief at par 40 is an unsubstantiated conclusion. The applicants have not established that they may have a cause of action against the fourth respondent for misleading and deceptive conduct.
At par 43 the deponent states that the applicants want to make a decision whether to commence an action against the respondents or some of them. That statement reflects the justification for an exercise of discretion in favour of an applicant. To construct the context necessary to establish jurisdiction requires evidence that an applicant wants to commence proceedings against a respondent on a cause.
There is no evidence that any applicant wants to commence proceedings against any of the respondents on a cause of action for misleading and deceptive conduct.
There is no evidence that discovery and inspection of any document that is within the scope of the schedule is likely to assist in any of them in making a decision whether to commence proceedings on the cases outlined at pars 41 and 42. It is left for the court to infer that the content of the schedule would somehow inform the cases proposed to the extent that the applicants may be persuaded to a result in their consideration whether to commence an action. The schedule is as follows:
(a)Application registration number IR1502540 by the first respondent with Innovation Australia;
(b)Written communications between AusIndustry and the first respondent regarding the application registration number IR1502540.
(c)Income tax returns lodged by the first respondent for the 2014/15 and 2015/16 financial years.
(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.
(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.
(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.
(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 IR 1502540.
(h)Each application and the document advising that the application has been approved made by the second respondent and/or the third respondent on behalf of other persons /entities after 1 January 2002
(i)Financial statements of the first respondent for the years ended 30 June 2015, 2016 and 2017.
On an overview of the schedule it is probably more significant that there is no evidence to establish any useful connection between its content and the evidence at pars 41 and 42. It follows that there is no reason to consider that exercising discretion as the applicants propose would overcome any difficulty in the decision making process before them.
The key to understanding the significance of some parts of the schedule is that in their written submissions the applicants put the proposition that in the relevant letter the third respondent had made 11 representations; that the applicants relied on the letter and that if any of the representations made in the letter were misleading or deceptive then the applicants may have a cause of action against the respondents.
Thereby the applicants put the proposition that an exercise of discretion in their favour may provide them with a cause of action. According to the rule, jurisdiction to exercise discretion is established where an applicant satisfies the court that it may have a cause of action.
The submissions accurately summarise the position adopted by the applicants. There is no evidence to establish the prospect that any of the representations may establish a case of misleading and deceptive conduct.
Of itself the prospect that the applicants may not be in a position to put a case founded upon the representations is of no particular concern. The result that the application be dismissed would be justified by the fact that the rule does not apply.
It is difficult to avoid the conclusion that the applicants have sufficient material to justify putting the substantive cases that they present at pars 41 and 42. On the evidence presented in the application I struggle with the proposition that the applicants would require assistance in the form of an exercise of discretion.
The desirability of drawing inferences in order to assist an applicant always calls for careful reflection. In the context established by an application under the rule the court ought to be reticent to draw inferences. To do so in favour of the applicants would not conclude the application, it would only establish jurisdiction to consider whether to exercise discretion. Whether to do so and if so, for the benefit of the applicants would call for reflection on the case by which jurisdiction had been established.
The role established for the court by the applicants is to determine the application on its merits. The applicants clearly carry the onus to establish the context by which jurisdiction would be established. The facets of the context are clearly expressed in the rule. There is no evidence that there has been any impediment to discharging the onus.
The deficiency in the application is the failure to establish jurisdiction; in particular that any of the applicants wants to issue proceedings against any of the respondents. According to the rule the declaration that an applicant wants to issue proceedings would be made by deposition.
Ultimately, I am not persuaded that the failure to make the required commitment was due to oversight. Taking into account my findings I would not be persuaded to draw inferences to the end of establishing jurisdiction.
In the case of the second applicant, the process of drawing the necessary inference would be complicated by the absence of evidence of any relevant communication with the deponent. The fact that the deponent has been authorised to depose on behalf of the second applicant is not sufficient.
To the extent that a cause of action of the second applicant against any respondent would depend upon the prospect that at some point prior to lending money to the first respondent, it had relied on the letter, exposes a complication. The evidence at par 12 is not of the second applicant. It could not be constituted as the reliance of the second applicant absent a sufficient relationship between the deponent and the second applicant. In my opinion to infer that the second applicant had a relationship with the deponent sufficient to constitute his reliance on the letter as that of the second applicant would patently be a step too far.
A further complication in the process of considering inferences open on the evidence is that according to the deponent the second applicant relied upon the deponent.
The case presented in the application is insufficient.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
ET
Court Officer
2 APRIL 2019