E C Dawson Investments Pty Ltd v Crystal Finance Pty Ltd

[2009] WASC 395

E C DAWSON INVESTMENTS PTY LTD -v- CRYSTAL FINANCE PTY LTD [2009] WASC 395

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2009] WASC 395
Case No:	CIV:1176/2008	Heard:	ON THE PAPERS
Coram:	BEECH J	Delivered:	17/12/09
No of pages:	19	Judgment Part:	1 of 1
Result:	Orders for non-party discovery by one party, application otherwise dismissed
Category:	B
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Parties:	E C DAWSON INVESTMENTS PTY LTD (ACN 121 204 448) CRYSTAL FINANCE PTY LTD (ACN 104 866 631) ROBERT FREDERICK COOMBS
Catchwords:	Practice and procedure Discovery Non-party discovery Turns on own facts
Legislation:	Rules of the Supreme Court 1971 (WA) O 26 r 5
Case References:	Fairfax Media Publications Pty Ltd v Western Australian Rugby Union Inc [2008] WASCA 123 Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : E C DAWSON INVESTMENTS PTY LTD -v- CRYSTAL FINANCE PTY LTD [2009] WASC 395 CORAM : BEECH J HEARD : ON THE PAPERS DELIVERED : 17 DECEMBER 2009 FILE NO/S : CIV 1176 of 2008 BETWEEN : E C DAWSON INVESTMENTS PTY LTD (ACN 121 204 448)

Plaintiff

AND

CRYSTAL FINANCE PTY LTD (ACN 104 866 631)
First Defendant

ROBERT FREDERICK COOMBS
Second Defendant

Catchwords:

Practice and procedure - Discovery - Non-party discovery - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA) O 26 r 5

Result:

Orders for non-party discovery by one party, application otherwise dismissed

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Category: B

Representation:

Counsel:

Plaintiff : No appearance
First Defendant : No appearance
Second Defendant : No appearance

KPP Pty Ltd : No appearance

Solicitors:

Plaintiff : Redding & Associates
First Defendant : Carol Bahemia
Second Defendant : Carol Bahemia

KPP Pty Ltd : HHG Legal Group

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

Fairfax Media Publications Pty Ltd v Western Australian Rugby Union Inc [2008] WASCA 123
Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341


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BEECH J:

Introduction

1 The plaintiff (ECDI) applies for orders for non-party discovery by the Commissioner for Consumer Protection and by the defendants' accountants. I will begin by outlining the relevant legal principles and the pleadings and then turn to the two applications.

Non-party discovery - principles

2 Order 26A r 5 of the Rules of the Supreme Court 1971 (WA) provides:

5. Discovery from a non-party

(1) If there are reasonable grounds for believing that a person who is not party to an action (the non-party) had, has, or is likely to have had or to have, possession of documents that relate to any matter in question in the action, a party to the action may apply for an order under this Rule.

(2) The application shall be supported by an affidavit and a copy of both shall be served on the non-party and the other parties to the action.

(3) On the application the Court may order the non-party to give discovery of all documents that are or have been in the non-party’s possession and that relate to any matter in question in the action.

3 Thus, it is only if there are reasonable grounds for believing that the non-party had, has or is likely to have had or to have possession of documents relating to any matter in question that a party may apply for an order. The court's power is to make an order for discovery by the non-party of documents that are or have been in its possession and that relate to any matter in question.

4 An order under O 26A r 5 will be made only if the power is enlivened, the document or class of documents is described with sufficient specificity, and as a matter of discretion it is determined that an order should be made.

5 The principles were outlined by Newnes AJA (Buss JA agreeing) in Fairfax Media Publications Pty Ltd v Western Australian Rugby Union Inc [2008] WASCA 123.

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6 What matters are in question in an action is to be determined by reference to the pleadings in the action: Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341, 345; Fairfax [30]. It is sufficient if a document would, or may fairly lead to a train of inquiry which would, either advance a party's own case or damage that of the other party: Mulley v Manifold (345); Fairfax [30]. It is not enough that a document goes to the credit of a party to mean that it relates to a matter in question: Fairfax [30].

7 A class of documents must be described in a way that any document falling within the class is relevant to a matter in question in the action. The position was explained by Newnes AJA in Fairfax as follows:

The power of the court under O 26A r 5 is to require a non-party to give discovery of documents which 'relate to any matter in question in the action'. An order under the rule must be directed to that end, and to that end alone. Where an order is made for discovery of documents, not by reference to their content, but by reference to some other method of classification, such as the date of their creation or communication, it must appear that any document which falls within that classification is relevant to a matter in issue in the action [37].

8 In my view, where discovery is to be ordered by reference to the content of the document, the defining description of the content must be such that all or substantially all of the documents within the described class relate to matters in question in the action.

9 Because a non-party cannot be expected to be familiar with the matters in issue in the action, an order for discovery in general terms will rarely, if ever, be appropriate. Rather, an applicant for an order under O 26A r 5 must describe the documents sought with a sufficient degree of specificity, whether individually or by reference to a description or class, so that the non-party can readily identify the documents from that description: Fairfax [31].

10 In exercising the discretion, once the power is enlivened, caution must be exercised before making an order. The privacy of a person should not be invaded, and the person put to inconvenience and possibly irrecoverable expense, for the purpose of litigation in which that person is not a party unless, and only to the extent, that the applicant establishes that it is reasonably necessary to do so in order to achieve the proper administration of justice: Fairfax [28] - [29].

11 Before making an order the court must be satisfied as to what the documents sought to be discovered contain or might reasonably be

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expected to contain and that they relate sufficiently to a matter or matters in question to justify making the order. It is not enough that the documents might, as a matter of speculation, provide some evidence: Fairfax [32].

12 It can be seen from these principles that it is necessary, but not sufficient, for an applicant to establish that a class of documents relates to a matter in question. In the exercise of the discretion, the question of the apparent relevance and potential cogency of the documents sought is a factor to be borne in mind.

The pleadings

13 I do not propose a comprehensive outline of the pleadings. Rather, I will outline and summarise those parts of the pleadings which seem to me to bear upon the two applications for non-party discovery.

14 ECDI's pleaded claim may be summarised as follows:

(1) ECDI sues as assignee of causes of action from Finance Relationship Consultants Pty Ltd (in liquidation) (FRC) (par 1.3);

(2) Mr Coombs, the second defendant, was a director and general manager of FRC (par 3);

(3) he is also said to have been 'the licensed finance broker for FRC' (par 3.5). I will say more about this shortly;

(4) FRC carried on business as a finance broker under a licence issued pursuant to the Finance Brokers Control Act 1975 (WA) (the FBC Act) until 31 December 2005 (par 4.4);

(5) from 31 December 2005 until about 23 January 2006 'there was no person licensed under the FBC Act, on behalf of FRC, to carry on finance broking and accordingly, FRC was not lawfully able to continue to operate in Western Australia as a finance broking business' (par 7.1);

(6) FRC went into provisional liquidation on 16 January 2006 (par 7.4);

(7) ECDI claims (among other things) damages suffered by FRC and an account of profits against the first defendant (Crystal) for breaches of duty by Mr Coombs as general manager and director, claiming that Crystal knowingly assisted in those breaches;

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(8) the substance of the breaches alleged include wrongfully diverting clients of FRC, and diverting persons said to have been referred by 'The Investors' Club', so as to become clients of Crystal;

(9) breaches of this kind are pleaded as having occurred during three periods - late 2005 to 31 December 2005 (pars 14 - 16); 1 January 2006 to 16 January 2006 (pars 17 - 20); and 16 January 2006 to 21 December 2006 (pars 21 - 24); and

(10) it is also pleaded that such conduct continued after 21 December 2006 and continues to date (par 25);

15 For the purposes of the application against the Commissioner, more detailed attention should be given to what is pleaded about licences under the FBC Act.

16 Paragraph 2.3 of the statement of claim pleads that Crystal 'began carrying on a finance broking business some time between September and December 2005'.

17 The defendants deny par 2.3 of the statement of claim and plead that Crystal began carrying on a finance broking business on 1 January 2006.

18 There is no express plea that Crystal applied for or obtained a licence under the FBC Act. However, given the prohibition in s 26 of the FBC Act on carrying on business as a finance broker without being licensed, it may be thought to be implicit in par 2.3 of the statement of claim that Crystal was licensed. In any event, the defendants rightly accept that whether Crystal was licensed in 2005 and 2006 relates to a matter in question.

19 The defendants have discovered a licence of Crystal. That licence is referred to in pars 9 and 11 of Mr Dawson's affidavit in support of this application. Mr Dawson says that the licence is dated 23 December 2005 and licensed Crystal to carry on business as a finance broker '[a]s of 1 January 2006'.

20 ECDI pleads that in the period from April 1998 to 31 December 2005, Mr Coombs 'was the licensed finance broker for FRC', having been licensed under the FBC Act (par 3.5).

21 The defendants plead a more detailed relationship between Mr Coombs' licence and FRC's licence under the FBC Act. It is

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convenient to set out s 29 of the FBC Act in order to provide the context for the defendants' plea. Section 29 of the FBC Act provides as follows:

29. Grant of licence to body corporate

(1) Subject to this Act, a body corporate which applies to the Commissioner for a licence and pays to the chief executive officer the prescribed fee for the licence shall be granted and may hold a licence if the Commissioner is satisfied that -


(a) all of the directors of the body corporate, and all of the persons concerned in the management or conduct of the body corporate, are persons of good character and repute;

(aa) all of the directors of the body corporate, and all of the persons concerned in the management or conduct of the body corporate, are persons fit to be concerned as directors of, or in the management and control of a finance broker’s business;

(b) that it has sufficient material and financial resources available to it to comply with the requirements of this Act;

(c) where there are not more than 3 directors of the body corporate at least one of them is licensed or where there are more than 3 directors of the body corporate at least 2 of them are licensed, and in either case the person in bona fide control of the business operated under the licence is licensed, or, where a declaration has been made pursuant to subsection (2) and is in force in respect of the body corporate, the officer in bona fide control of the finance broker’s part of the business of the body corporate is licensed; and

(d) that the person in bona fide control of the business, or the officer in bona fide control of the finance broker’s part of the business (as the case requires), has such other qualifications and satisfies such other requirements (if any) as may be prescribed by the regulations.


(2) Where the Commissioner is satisfied that finance broker’s business is a minor part of the business of any body corporate the Commissioner may recommend to the Minister that a declaration be made to that effect and the Minister may by notice published in the Government Gazette make a declaration accordingly and the Minister may upon the recommendation of the Commissioner by notice so published revoke any such declaration.

22 The defendants plead that Mr Coombs was the licence holder under the provisions of the FBC Act (for the purposes of s 29(1)(c)) and was the
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person in bona fide control of FRC for the purposes of its finance broking business activities (for the purposes of the same section).

23 I will return, later in these reasons, to the significance of the way in which the parties characterise the relationship between the licence held by Mr Coombs and the licence held by FRC.

24 Thus, the issues arising on the pleadings relating to the licensing of FRC, Crystal and Coombs are, relevantly to this application,:

(1) Did Crystal begin to carry on a finance broking business on 1 January 2006 or some time between September and December 2005?

(2) Was Mr Coombs the 'licensed finance broker for FRC' or did Mr Coombs' licence have the relationship pleaded by the defendant and summarised above?

25 It is important to notice, for the purposes of the application for discovery by the Commissioner for Consumer Protection (the Commissioner), that there is no allegation in the statement of claim relating to the obtaining of Crystal's licence or Mr Coombs' licence. Nor is there any allegation relating to FRC's licence or its expiry as at 31 December 2005.

26 I turn to ECDI's application for non-party discovery by the Commissioner.

Application for discovery by the Commissioner for Consumer Protection

The documents sought

27 ECDI applies for discovery by the Commissioner of the following categories of documents:

(1) all applications and forms presented, lodged or otherwise submitted by Crystal for a licence to operate a finance broking business in the State of Western Australia for the period from 1 September 2005 to the present date;

(2) all documents to and from Crystal relating to or concerning the applications and forms presented, lodged or otherwise submitted by Crystal for a licence to operate a finance broking business in the State of Western Australia in the period from 1 September 2005 to the present date.

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28 As I will explain, I accept the defendants' submission that ECDI's evidence and submissions in support of the application for discovery by the Commissioner are based on a view or assumption about ECDI's claim in the action that is broader than ECDI's pleaded claims in the statement of claim. However, I am satisfied that these categories of documents for the more limited period from 1 September 2005 to 31 January 2006 relate to matters in question in the action and I would order discovery to that extent. I proceed to explain those conclusions.

The evidence in support of the application

29 ECDI relies on an affidavit of its sole director and shareholder Mr Emile Dawson. He says (par 4) by way of summary, that ECDI seeks discovery from the Commissioner on the basis that:

(a) 'it is likely to be in possession of documents which would assist [ECDI] in establishing before this court when, how and to what extent the defendants applied to and did become licensed to operate a finance broking business in late 2005, early 2006 and thereafter­ - the causes of action which [ECDI] has against the defendants include breaches of fiduciary duty and breach of contract'; and

(b) 'it is likely to be in possession of documents which would assist [ECDI] in its ascertaining the precise manner in which and date on which the defendants sought and obtained a licence to operate a finance broking business in competition with and to the exclusion of FRC'.

30 He also says that he is presently unable to ascertain that information because insufficient documentation has been discovered by the defendants.

31 The point to be emphasised (at the risk of repetition) is that ECDI's claims for breach of fiduciary duty and breach of contract do not complain of conduct by the defendants in seeking and obtaining a licence to operate a finance broking business.

32 For the same reason, Mr Dawson's statement in par 5 that ECDI does not have sufficient documentation or evidence to establish 'the breaches referred to' does not assist the present application.

33 Mr Dawson's affidavit also refers to the condition of FRC's licence that 'if FRC had not been wound up or had not ceased to trade by

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31 December 2005, the certificate would become invalid and must be surrendered' (par 7). He says he does not know why the business certificate contained that condition. Again, there is nothing pleaded to make that relevant to a matter in question in the action. Moreover, the application for discovery by the Commissioner relates to Crystal's licence application, not the licence application for FRC.

34 In par 9 of his affidavit, Mr Dawson says that 'it is apparent that [Crystal] preferred to obtain a licence to conduct a finance broking business… for [Crystal] rather than FRC'. That conclusionary statement is inadmissible. In any event, it asserts a matter that is not pleaded in the statement of claim.

35 I turn to ECDI's submissions in support of the application.

ECDI's submissions

36 In its written submissions dated 20 November 2009 ECDI submits that the following is 'beyond contention':

3.1 Coombs was a Director of FRC from about 1999: Defence at para 3(2)(b) to (g). The Defendants plead that Coombs held the finance broking license from April 1999 and supported FRC's business certificate to operate as a licensed finance broker in Western Australia to 31 December 2005;

3.2 in late 2005, Coombs was granted a licence by the Department of Consumer and Employment protection (now CCP) to operate a finance broking business through FRC to August 2008: Affidavit of Dawson at [pages] 20 - 21. As such, FRC was entitled to continue to operate as a finance broking business to FRC to August 2008 subject to conditions. FRC was entitled to continue to operate as a finance broking business beyond 31 December 2005 as long as Coombs utilised the licence granted to him for the benefit of FRC. Coombs elected not to do so;

3.3 in the events that transpired, Coombs utilised the licence granted to him for the benefit of Crystal Finance and himself and not for the benefit of FRC. The circumstances behind this are not known to [ECDI];

3.4 the only documents discovered by the Defendants relevant to this issue are the licence granted to Coombs on 18 February 2002 (for FRC), the Finance Broker's Control Business Certificate granted to FRC on 27 August 2002 (to FRC), the Statutory Declarations in support of an Application by Coombs dated 3 August 2005, the Finance Brokers Control Act 1975 Business Certificate granted to FRC on 30 September 2005 and the Finance Brokers Control Act

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licence granted to Crystal Finance on 23 December 2005 (documents numbered 7, 9 ,12, 14 and 17 from list of 20 August 2008). The types of documents ordinarily required are set out in the Affidavit of Dawson at para 12;

3.5 the relevant pleas are in the Statement of Claim at para 3.5 (Defence does not plead to this), and the alleged breach of duties at paras 14, 14A, 17, 17A, 18, 21 - 22, 22A, etc;

3.6 by Section 29 of the Finance Brokers Control Act (WA) 1975, FRC (and [Crystal]) could only be certified to operate a finance broking business once a director was licensed. [Crystal] cannot, of its own, obtain certifications without a licence being granted to a director. Hence the licence was sought by and granted to Coombs.

37 Many of the assertions and conclusions in pars 3.1 - 3.6 are, in my opinion, by no means 'beyond contention'. Paragraphs 3.2 and 3.3 illustrate this. For example, there seems to me to be room for doubt as to whether FRC was entitled to continue to operate as a finance broking business after 31 December 2005 regardless of anything Mr Coombs did. That doubt arises from the condition of FRC's licence already referred to. Further, ECDI's submissions are based on a view of the relationship between FRC's licence and Mr Coombs' licence that is, as I have explained, in issue on the pleadings.

38 Further, and perhaps more importantly for the purpose of the present application, much of what is said in par 3 of ECDI's submissions does not represent ECDI's pleaded case in the statement of claim.

39 The classes of documents sought from the Commissioner are said, in ECDI's submissions to 'relate solely to the issue as to when and on what basis the Defendants sought and obtained a licence to operate a finance broking business in Western Australia for their own benefit and to the detriment of FRC' (par 6). In my opinion, the pleadings in the action do not give rise to this 'issue'.

The disposition of the application

40 The critical question is whether the categories of documents sought, or any distinct subset of those categories, relate to matters in question in the action.

41 As I have said, a document or class of documents relates to a matter in question if it may fairly lead to a train of inquiry which would advance a party's case or damage that of the other party.

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42 The issues in the case include:

(1) whether Crystal commenced carrying on finance broking business only on 1 January 2006 or did so at an earlier time, namely some time between September and December 2005; and

(2) whether at any time before 1 January 2006 Mr Coombs wrongly diverted any clients of FRC, or persons referred by The Investors' Club, toward Crystal.

43 I am satisfied that documents of the class sought by ECDI in the period 1 September 2005 to 31 January 2006 relate to those questions in issue. I consider they might fairly lead to a train of inquiry that might advance ECDI's case or damage the case of the defendants on these issues. I have included January 2006 on the basis that it may shed light on the period September to December 2005. However, I am not satisfied that documents of the kind sought after January 2006 relate to any matter in issue.

44 That leads to the question of the discretion to order discovery by a non-party. In this respect, I note that the Commissioner has, by his solicitor, been apprised of this application. In correspondence the Commissioner's solicitor has indicated that the relevant documents are available to be produced upon the making of any court order. The Commissioner has not raised any objection to the making of such an order, or suggested that there is any undue inconvenience or expense in the provision of the documents.

45 In the circumstances, I would exercise the discretion to order discovery in respect of the classes sought for the period from 1 September 2005 to 31 January 2006.

46 That brings me to the application for orders for discovery against the defendants' accountant.

The application for discovery by KPP Pty Ltd

47 KPP Pty Ltd trades as Link Accounting. It has provided accounting services to the defendants. I will refer to it as Link.

48 ECDI's chambers summons dated 1 October 2009 sought the following documents:

11.1 the trial balances of [Crystal] for the financial years ended 30 June 2006, 30 June 2007, 30 June 2008 and 30 June 2009;

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11.2 the general ledgers of [Crystal] for the financial years ended 30 June 2006, 30 June 2007, 30 June 2008 and 30 June 2009;

11.3 the general working papers, files and Documents generally held by Link Accounting relating to and concerning [Crystal] and in particular:


11.3.1 the end of year financial statements for the financial years ended 30 June 2006, 30 June 2007, 30 June 2008 and 30 June 2009;

11.3.2 the tax returns for the years ended 30 June 2006, 30 June 2007, 30 June 2008 and 30 June 2009;

11.3.3 accounting services generally provided for the period from 1 September 2005 to the present date;

11.3.4 all Documents generally provided by [Crystal] containing instructions and information for the services sought and provided by Link Accounting for the period from 1 September 2005 to the present date.

49 It appears from ECDI's submissions and from its solicitor's letters that ECDI does not pursue the application in relation to pars 11.1, 11.2, 11.3.1 and 11.3.2. See submissions [26]. That is unsurprising in circumstances that the financial statements, trial balances and general ledgers for the years up to 2008, have been discovered by Crystal - see Mr Dawson's affidavit par 18.

50 ECDI's submissions [26] seek two classes of documents, described as follows:

(1) 'the general working papers, files and documents generally held by Link Accounting relating to and concerning [Crystal]';

(2) documents 'generally provided by [Crystal] containing instructions and information for the services sought and provided by Link Accounting for the period from 1 September 2005 to the present date'.

51 These are both part of par 11.3 of the chamber summons.

Background

52 The application for non-party discovery by Link should be viewed against the background of the progress of discovery by the defendants in the action. There is a long history to the discovery in this action. I will not attempt to summarise all of it.

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53 Most recently, on 21 May 2009, an application by ECDI for further and better discovery from the defendants came before me in the CMC list. The minute of orders sought by ECDI set out some 19 wide-ranging categories of financial and other documents sought from Crystal and a further eight wide-ranging categories sought from Mr Coombs.

54 The defendants expressed a willingness to provide the financial statements and income tax returns for the financial years ending June 2006, 2007 and 2008. I indicated that my tentative view was that those documents should be received and reviewed before ECDI decided whether and to what extent to pursue the numerous other wide classes of documents referred to in the minute of orders. Counsel for ECDI stated that, bearing my observation in mind, ECDI proposed that the application be adjourned, with liberty to renew it following conferral after receipt of the financial statements and tax returns. ECDI has not invoked that liberty to apply.

Evidence in support of application

55 ECDI relies upon an affidavit by its sole director and shareholder Mr Dawson. He says, by way of summary, that ECDI seeks discovery from Link on the basis that it is likely to be in possession of documents that would assist ECDI to establish the true net profit derived by Crystal and the precise amount of commissions earned and paid by Crystal, which ECDI presently does not have sufficient information to calculate (pars 25 - 27).

56 In par 18 Mr Dawson deposes to having inspected the financial statements for Crystal for the financial years ended June 2006, 2007 and 2008 and the general ledgers and trial balances for those years. He says that the financial statements do not set out details about how the sales commissions are derived or from what source. He has compared the sales commission figure for each year with the total sales commissions based on documents discovered by Plan Australia. For each year, the difference is something less than about 1.5% of the total sales commissions for the year. In this paragraph, nothing is said about what is revealed by Crystal's general ledgers, as distinct from the financial statements.

57 In par 30 Mr Dawson says that there are no details setting out how various entries in the financial statements are derived and from what sources (see pars 30.1 - 30.35).

58 Mr Dawson has been informed by the expert accountant that ECDI proposes to brief, that in order for the accountant to ascertain the true net

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profit of Crystal he would require, in substance, the information set out in par 11.3 of the chamber summons (par 32).

The matters in question

59 I refer to my outline of the pleadings earlier in these reasons.

60 ECDI submits, and I accept, that the net profit of Crystal in the financial year ending 30 June 2006 and thereafter relates to a matter in question in the action. That arises from the claim for an account of profits against Crystal.

61 In its submissions of 8 December 2009 Link submits that:

(1) ECDI's claim as pleaded is unjustifiably wide in its temporal scope; and

(2) in determining whether to order non-party discovery it is permissible and appropriate for the court to 'critically assess the ambit of the plaintiff's claim'.

62 Link submits that, for at least two reasons, ECDI's claim cannot extend beyond losses and profits to the end of 2006. One argument in support of that submission is that, after 2006, FRC did not have a licence and so could not continue lawfully to conduct a finance broking business. In those circumstances, the submission continues, ECDI (as assignee from FRC) cannot obtain an account of profits for the period after 2006. Link's second argument focuses attention on the assignment by FRC (by its liquidator) to ECDI as the foundation of ECDI's claims. The claims made by ECDI are said by Link to extend considerably beyond what can be supported by that foundation. Similar arguments, and other related arguments, are developed in some detail in submissions dated 15 December 2009 filed by the defendants. It seems to me to be neither necessary nor appropriate to express any firm views in respect of these matters. It is not necessary because, for other reasons which I will explain, I have come to the view that the orders for discovery sought against Link should not be made. It is not appropriate because the statement of claim reflects ECDI's pleaded case and has not been the subject of any strike-out application by the defendants. An application for non-party discovery does not seem to me to be an appropriate occasion to determine the merits of the claim pleaded in the statement of claim.

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ECDI's submissions

63 In substance, ECDI's submissions in support of the application against Link may be summarised as follows:

(1) Link was Crystal's accountant for the relevant period and prepared its financial statements and tax returns for the financial years from 1 July 2005 onwards;

(2) ECDI has made numerous efforts over a long time to obtain financial documentation from the defendants;

(3) ECDI is entitled to have access to sufficient financial information regarding the operation of Crystal's business to enable the true net profit to be determined;

(4) ECDI's proposed expert accountant has identified the types of documentation required in order to provide an opinion on the true net profit (referring to Mr Dawson's affidavit par 32).

64 Broadly speaking, I accept these propositions, although there is no absolute entitlement in terms of the third proposition. The discretion attendant on discovery is inconsistent with the notion of entitlement. Any 'entitlement' is qualified by case management considerations, proportionality and other factors relating to the discretion respecting discovery generally and non-party discovery in particular.

65 The question is whether the matters relied on by ECDI justify the making of an order for non-party discovery in the terms sought by ECDI.

The disposition of the application

66 The first question is whether each of the two classes of document now sought describes documents that are relevant to a matter in issue. While some of the documents in the classes sought may relate to matters in question, there is room for doubt whether the class as a whole relates to matters in question.

67 The first class of documents is described as working papers, files and documents 'relating to and concerning [Crystal]'. That class of documents is not necessarily limited to documents relating to a matter in question, because it extends beyond those documents which might bear on the true net profit of Crystal in any of the relevant periods. The services provided by Link were not necessarily limited to services directed to the financial

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statements and records of Crystal in relation to net profit. Services provided by an accountant are not inevitably so confined.

68 For corresponding reasons, there is room for doubt whether the second class of documents sought ('documents generally provided by [Crystal] containing instructions and information for the services sought and provided by Link Accounting for the period from 1 September 2005 to the present') is limited to documents relating to matters in question.

69 Moreover, the room for doubt in those respects is affected by the imprecise statement of the categories, to which I will return shortly.

70 In any event, insofar as these classes of documents relate to matters in question, I would not, as a matter of discretion, order non-party discovery by Link in respect of these two classes. That is so taking into account the following.

71 First, the classes of documents are described and defined in a way which, to my mind, lacks clarity and specificity. I note that Mr King, Link's principal, wrote to ECDI's solicitors on 2 October 2009 stating that he did 'not know what documents [were] meant to be referred to' by categories set out in a letter from ECDI's solicitors, including the second of the categories now sought. Whether a category is sufficiently clear and specific is to be determined objectively, not subjectively. However, to my mind, Mr King's response in this respect was reasonable. Moreover, ECDI's solicitor's subsequent correspondence did not respond to this point, or attempt to clarify the documents intended to be captured by the categories.

72 Secondly, to the extent that each class contains or may contain documents that relate to matters in question, taking into account what the documents might reasonably be expected to contain, I do not consider that the documents go to the heart of the issues in the action. If relevant at all, they would, it may reasonably be supposed, be of relatively limited utility. The gravamen of what is said by Mr Dawson in par 30 of his affidavit is that there were no details in Crystal's financial statements as to how the various figures were derived and there were no sources for those figures. I accept, as suggested in Mr King's affidavit of 19 November 2009 (pars 15 and 16), that source documents underlying the accounts are documents which are to be expected to be in the possession, custody and power of Crystal. There is no reason to suppose that Link, as Crystal's accountant, would have in its working papers or files those source documents. I also take into account what Mr King says in par 8 of his

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affidavit about the nature of the documents likely to have been retained and not retained by Link.

73 Thirdly, ECDI has an application for further discovery against the defendants adjourned with liberty to apply. It is open for ECDI to confer with the defendants in respect of discovery of documents underlying Crystal's financial statements and, if necessary, renew its discovery application against the defendants. In my opinion, as Link submits, that is an avenue which ECDI should pursue before seeking the documents sought from Link. Depending on the results of conferral with the defendants, and of any application for further discovery against the defendants, I would not foreclose subsequent discovery by Link in respect of one or more properly specified classes of documents.

74 Fourthly, discovery of the documents sought will cause not insubstantial inconvenience and expense for Link: see Mr King's affidavit pars 9 and 10.

75 I am not satisfied that ECDI has established that it is reasonably necessary, in order to achieve the proper administration of justice, that the orders sought against Link be made.

Conclusion

76 For these reasons, I would dismiss ECDI's application against Link and I would order discovery by the Commissioner to the extent set out in [45] of these reasons.

77 My tentative views on costs are as follows:

(1) The costs of the application for discovery by the Commissioner be costs in the cause;

(2) ECDI pay Link's costs of the application for discovery by Link;

(3) There be no order in relation to the defendants' costs of the application for discovery by Link.

78 As to (1), neither party was wholly successful, and ECDI advanced a wider basis for its claim of relevance than the view I have adopted.

79 The second contemplated costs order reflects Link's success on the application. The application was determined on bases not dealt with in the defendants' submissions, hence proposed costs order (3).

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80 Any party who seeks costs orders different from those I have set out has liberty to file and serve submissions by 12 January 2010, in which event other parties may file and serve responsive submissions by 27 January 2010. The question of costs will be determined on the papers.