Elsegood v Elsegood
[2018] WASC 241
•30 JULY 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: ELSEGOOD -v- ELSEGOOD [2018] WASC 241
CORAM: TOTTLE J
HEARD: 30 JULY 2018
DELIVERED : 30 JULY 2018
FILE NO/S: CIV 1594 of 2018
BETWEEN: TIMOTHY WILLIAM ELSEGOOD
Plaintiff
AND
TREVOR JOHN ELSEGOOD
JUDITH DELIA ELSEGOOD
First Defendants
ELSEGOOD NOMINEES PTY LTD as trustee for THE J E D & K G ELSEGOOD FAMILY TRUST
Second Defendant
EMITA PTY LTD as trustee for THE B M & C R FAMILY TRUST
Third Defendant
ELSEGOOD NOMINEES PTY LTD as trustee for THE TEEJAY FAMILY TRUST
Fourth Defendant
Catchwords:
Practice and procedure - Non-party discovery - Where defendants seek discovery of documents from non-party - Whether documents sought are relevant to the action
Legislation:
Rules of the Supreme Court 1971 (WA), O 26A r 5
Result:
Application successful
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr J C Yeldon |
| First Defendants | : | Mr P G Donovan |
| Second Defendant | : | Mr P G Donovan |
| Third Defendant | : | Mr P G Donovan |
| Fourth Defendant | : | Mr P G Donovan |
| Non-party | : | Mr I Viner QC |
Solicitors:
| Plaintiff | : | Cullen Macleod Lawyers |
| First Defendants | : | MDS Legal |
| Second Defendant | : | MDS Legal |
| Third Defendant | : | MDS Legal |
| Fourth Defendant | : | MDS Legal |
| Non-party | : | GV Lawyers |
Case(s) referred to in decision(s):
Compagnie Financiere et, Commerciale du Pacifique v Peruvian Guano Company (1882) 11 QBD 55
TOTTLE J:
(This judgment was delivered extemporaneously on 30 July 2018 and has been edited from the transcript.)
These reasons concern an application for discovery against non‑parties made pursuant to O 26A r 5 of the Rules of the Supreme Court1971 (WA). The non‑parties are Ms Rebecca Jane Elsegood and Rickey's Nominees Pty Ltd, a company of which Ms Elsegood is a director and shareholder. The plaintiff and Ms Elsegood are married.
Background
This application arises in the context of an unfortunate intergenerational dispute between members of a farming family. The plaintiff is the son of the first defendants. He claims an interest in the proceeds of sale of family farms based upon the principle of proprietary estoppel. The farms in question were sold following earlier proceedings to extend the operation of caveats lodged by the plaintiff against the titles to the farms, those proceedings having been compromised by mutual undertakings. The proceeds of sale of the farms are currently held on trust pending the outcome of these proceedings.
In his amended statement of claim, the plaintiff alleges that the farms were owned by the second and third defendants, and that a farming business was conducted on them by the fourth defendant. The first defendants are the directors and shareholders of the second, third and fourth defendants. The plaintiff alleges that the first defendants encouraged him to devote his life and future to the family farms in the expectation that he would take over the farms when the first defendants retired, and that he would be the owner of the farms when the first defendants died. The plaintiff alleges that after receiving that encouragement from the first defendants he did assume that he would take over the farms on the first defendants' retirement, and that he would become the owner of them when they passed away, and that he acted on that assumption to his detriment and with the knowledge and acquiescence of the first defendants.
The plaintiff pleads that in 2016 and 2017 he engaged in discussions with the first defendants to formalise the handover of the farms to him, but in November 2017 he alleges that the first defendants resiled from the position that he should take over the farms on their retirement, and that he would eventually become the owner of the farms, and that instead, the first defendants listed the farms for sale and conducted a clearing sale and then accepted an offer to purchase the farms.
In support of the plaintiff's case that in reliance on the encouragement given to him by the first defendants he acted to his detriment, the plaintiff alleges amongst other things that:
a)he devoted all of his time and energy to the management of the farms;
b)he accepted lower remuneration than he would otherwise have done on the basis that he was a part‑owner of the farms and that he would inherit them; and
c)he did not pursue other commercial opportunities which were open to him.
In their defence, the first defendants deny that they encouraged the expectation relied upon by the plaintiff. They join issue with the plaintiff's allegation that he devoted all of his time and energy to the family farms. The matters relied upon in support of their denial of that allegation include a positive allegation by the defendants that since 2011 the plaintiff has worked at a commercial farming operation near York known as Sunset Hill that is conducted by Rickey's Nominees as trustee of the B G Halbert Family Trust. Ms Elsegood and her father are the directors of Rickey's Nominees.
The defendants also join issue with the allegation that the plaintiff accepted lower remuneration than he would otherwise have done. The defendants allege that the plaintiff has received benefits over and above any remuneration paid directly to him. They say that these benefits include:
a)the ability to use machinery owned by the fourth defendant at the Sunset Hill farming operation every year since 2011;
b)the ability to obtain an income from the Sunset Hill property; and
c)benefits received by Ms Elsegood from her association with the defendants, including:
i)advances from the fourth defendant for the payment of accounts and invoices pertaining to the operation of Sunset Hill;
ii)advances for amounts due for the use of grain, fertiliser and chemicals at Sunset Hill;
iii)sheep transferred from the family farms to Sunset Hill, all of which were provided on terms which gave rise to an alleged debt of least $180,000 which remains payable to the fourth defendant;
iv)a payment of $20,000 in respect of a credit card debt, albeit that that amount was later repaid by Mr Bruce Halbert;
v)the use of machinery owned by the fourth defendant at Sunset Hill since 2011 and the provision of 300 sheep by the fourth defendant to Sunset Hill in 2011; and
vi)the provision by both the plaintiff and the first named first defendant of his labour.
The defendants plead that further particulars of the benefits obtained by the plaintiff will be provided following discovery and prior to the trial. The benefits obtained by the plaintiff include, as it was explained by counsel for the defendants in the course of this application, the benefits obtained by Ms Elsegood.
Mediation is scheduled to take place on 15 August 2018, and the defendants press for an order for speedy discovery of the documents of which they seek discovery to enable them to prepare for that mediation.
Legal principles
This application involved no question of principle and no argument about the scope of O 26A r 5. It suffices to say that O 26A r 5 provides for discovery to be given if there are reasonable grounds for believing that a person who is not a 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, in which event a party to the action may apply for order for non‑party discovery.[1]
[1] Rules of the Supreme Court1971 (WA) O 26A r 5.
Evidence and orders sought
The present application is supported by an affidavit sworn by Ms Helen Jennifer Burnside on 20 July 2018 in which she deposes to the issues to which the documents sought are relevant, and the grounds for believing that the documents are, or have been, or are likely to have been in the possession of Ms Elsegood or Rickey's Nominees. The categories of documents sought are set out in the defendant's amended minute of proposed orders filed on 27 July 2018 and are as follows:
1.Within 7 days Rebecca Jane Elsegood of 48 Halbert Road, Kauring, Western Australia (Rebecca Elsegood) give discovery on affidavit of all documents which are or have been in her possession, custody or power which fall within the following categories:
(a)Tax returns, business activity statements and annual financial statements (including, but not limited to, profit and loss statements, balance sheets and depreciation schedules), for Rickey's Nominees Pty Ltd as trustee of the BG Halbert Family Trust the entity that conducts, or has conducted at any time since 2008, the farming business on the property located near York and known as 'Sunset Hill' and/or 'Sunset Farm' (Sunset Hill Business) (for the financial years from 2009 to the present).
(b)The trust deed for the BG Halbert Family Trust and any variations.
(c)Any documents evidencing payments of money or goods (being gifts, salary, distributions, loans and/or any remuneration) made to Rebecca Elsegood by any of the Defendants in the period from 1 July 2008 to the present.
(d)Any documents evidencing payments of money or goods (being gifts, loans or any distributions) made to Rickey's Nominees Pty Ltd as trustee of the BG Halbert Family Trust the Sunset Hill Business by any of the Defendants in the financial years from 2009 to the present.
(e)Any documents evidencing payments of money or goods (being gifts, salary, distributions, loans and/or any remuneration for the benefit and/or maintenance of Timothy Elsegood) made to the plaintiff by Rickey's Nominees Pty Ltd as trustee of the BG Halbert Family Trust the Sunset Hill Business for the financial years from 2009 to the present.
(f)Budgets and statements of position prepared by Timothy Elsegood, Rebecca Elsegood and/or any accountant or agricultural advisor for the Sunset Hill farm operated by Rickey's Nominees Pty Ltd as trustee of the BG Halbert Family Trust the Sunset Hill Business, for the financial years from 2008 until the present.
The defendants seek discovery of the same categories of documents from Rickey's Nominees.
Submissions
The competing submissions advanced in the course of argument focused on whether the documents sought by the defendants could be said to be relevant on the pleadings which have been exchanged.
Senior counsel for Ms Elsegood and Rickey's Nominees, Mr Viner QC, focused on the need to have close regard to the pleaded issues. He submitted that when that is done, it was apparent that the documents do not relate to any matter in question in the proceedings and that the application for non-party discovery should be seen for what it is, namely, a 'fishing expedition'.
Counsel for the defendants submitted that the documents of which the defendants sought discovery do relate to matters in issue in the proceedings and referred and relied upon the test for relevance for discovery purposes, namely that a document is relevant for discovery purposes if either directly or indirectly enables the party either to advance his or her case or to damage the case of his or her adversary.[2]
[2] Compagnie Financiere et, Commerciale du Pacifique v Peruvian Guano Company (1882) 11 QBD 55.
Disposition
In my assessment, there are three related issues raised by the pleadings in this case to which the documents sought by the defendant, or at least some of those documents, may be said to relate.
The first issue is whether the plaintiff devoted all of his time to the management of the family farms or whether, as the defendants contend, since 2011, he has devoted time and energy to the Sunset Hill farming business.
The second and related issue is whether the plaintiff, in reliance on the assumption made by him as to what was to happen on the family farms, has not pursued commercial opportunities that were open to him.
The third issue is whether the plaintiff has received indirect benefits of the nature alleged by the defendants in their defence and to which I have referred.
For the purposes of determining this application, I accept two propositions. First, that documents evidencing benefits received by the plaintiff or documents evidencing a contingent entitlement to benefits by reason of the plaintiff's involvement in the Sunset Hill farming operation are relevant to each of the issues that I have identified. Secondly, a benefit conferred by the defendants on the Sunset Hill business may potentially - and I emphasise the word 'potentially' - be considered as a benefit to the plaintiff. Whether a benefit received by Ms Elsegood is or is not a benefit to the plaintiff is a matter which must await the trial. Against that background, I turn to the categories of documents of which discovery is sought.
In my view, the annual financial statements from 1 July 2011 to the present - and I include in that phrase the depreciation schedules - for the entity that conducts or has conducted at any time since 1 July 2011 the farming business on the property located near York and known as Sunset Hill and/or Sunset Farm (Sunset Hill business) are relevant. This is because such documents may disclose benefits received by the plaintiff by reason of his involvement in the Sunset Hill business or benefits received by the Sunset Hill business from the defendants by reason of the plaintiff's involvement with the Sunset Hill business. I have included in the discovery to be provided the depreciation schedules. Those documents are specifically included on the basis of my acceptance of the submissions advanced on behalf of the defendants that they may be relevant to the requirements of the Sunset Hill business for machinery on the basis that, if machinery was being provided by the plaintiff's family farms to the Sunset Hill business, the Sunset Hill business might not have the same requirements for machinery that it formerly did, and the depreciation schedules might shed some light on that issue.
I accept that the trust deed for the B G Halbert Family Trust and any variations to that trust deed may relate to the issues which I have identified because they may disclose whether the plaintiff is a beneficiary of that trust and whether he has an actual or contingent entitlement to share in the income or assets of that trust. For the reasons given in relation to the financial statements, the trust deed or any variations to the trust deed may be relevant.
Paragraph 8.5.2(c) of the defence pleads that the Sunset Hill business is conducted by Rickey's Nominees as trustee for the B G Halbert Family Trust, and it is against the background of that allegation that I consider that the trust deed or variations to the trust deed may be relevant.
I consider that the documents sought in pars 1(c) and 1(d) and in the corresponding pars 2(c) and 2(d) of the minute of orders are too wide in their scope. Read literally, subpar (c), which seeks:
... discovery of any documents evidencing payments of money or goods being gifts and other payments made to Ms Elsegood from 1 July 2008…
could encompass anything from birthday gifts as well as commercially significant benefits.
What is sought by the defendants by way of non-party discovery must be related much more closely to the pleaded allegations. I would propose that subpars (c) and (d) in their present form be struck out and that, in their place, a new category in the following terms be substituted:
Any documents evidencing:
(a)the payment by the fourth defendant of accounts and invoices of the entity that conducts the farming business on the property located near York and known as Sunset Hill or Sunset Farm from 1 July 2011 to the present;
(b)the provision by the fourth defendant of grain, fertiliser, chemicals, diesel fuel, machinery or livestock for the Sunset Hill business from 1 July 2011 to the present; or
(c)the provision by the plaintiff of his labour for the purposes of the Sunset Hill business from 1 July 2011 to the present.
I accept that the documents identified in pars 1(e) and 2(e) are relevant subject only to changing the date in the final line to 1 July 2011.
I have reflected carefully and closely on whether the documents identified in par 1(f) of the minute of orders - budgets and statements of position prepared by the plaintiff, Ms Elsegood, or any accountant or agricultural advisor for the Sunset Hill farm operated by the Sunset Hill business from the financial years 2008 until the present - are relevant and should be discovered.
In my assessment, the connection between the pleaded issues in this case and that category of documents is too tenuous to justify an order for non‑party discovery, and I will not make an order in the terms sought by the defendants.
I should make by way of an explanation these additional observations:
(a)First, I do not accept that documents that precede the marriage of the plaintiff and Ms Elsegood are sufficiently relevant to warrant discovery, and it is for that reason that I have set the commencement date of the period for relevant documents as 1 July 2011.
(b)Second, the discovery sought in par 1(a) extends beyond merely the financial statements to tax returns, business activity statements and annual financial statements. In my view, that is too onerous and potentially oppressive a scope of discovery. It is and should be sufficient for the defendant's purposes to have discovery of the annual financial statements.
(c) I will give the defendants liberty to apply on the basis of the explanation given by Mr Donovan that there was a concern that annual financial statements might not have been produced, and that was the reason why tax returns and business activity statements had been sought. It seems to me that I should approach this application on the basis that Ms Elsegood and Ricky Nominees Pty Ltd have complied with their obligations to prepare annual financial statements. But, should those statements not be available, then the defendants will have liberty to apply for further discovery in relation to those kinds of documents.
Whilst I have focused on the discovery to be given by Ms Elsegood, orders in identical terms will be made in relation to Rickey's Nominees. The reasoning for making those orders is identical to the reasoning for making the orders in relation to Ms Elsegood.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JB
ASSOCIATE TO THE HONOURABLE JUSTICE TOTTLE13 AUGUST 2018
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