Falk v Finlay (No.2)

[2000] NSWSC 17

CITATION:	Falk v Finlay (No.2) [2000] NSWSC 17
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 4482/96
HEARING DATE(S):	2 February 2000
JUDGMENT DATE:	4 February 2000
PARTIES :	Michael Falk (P) Ronald Arthur Finlay, Edward Bertram Cowpe, Francis Reginald Lawson, John Gregory McCombe, Roderick Hamilton McGeoch, Allan John Macdonald, Frederick John Kehoe, Richard Kay Liebmann, Paul Richard McCann, Alexander John Munton, Geoffrey Hungerford Pike, Andrew Lee Price, Anthony John Sheehan, Peter William Damian Smith, Andrew Wentworth Stevenson, Stuart David Westgarth, Patrick Bill Williams, Jennifer Margaret Boland, Carmen Champion, Charles Macquarie Cowper, Graeme John Dennis, Michael John Ellis, Julian Maxwell Gregory, John Henry Herron, William John Koeck, Paul Harry Huges, Andrew John Lumsden, Peter Thomas Pether, Erica Jane Robinson, Stephen Price (Ds)
JUDGMENT OF:	Austin J

COUNSEL :	D L Williams (P) D Pritchard (D)
SOLICITORS:	Abbott Tout (P) Holman Webb (D)
CATCHWORDS:	PRACTICE AND PROCEDURE - discovery - application for orders that further discovery be given with respect to specific classes of documents - whether wider orders are appropriate when the Court finds that discovery has been given under a misapprehension as to the applicable legal principles
DECISION:	Orders for further discovery made - see paragraph 22

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

4 FEBRUARY 2000

4482/96 - MICHAEL FALK V RONALD ARTHUR FINLAY & ORS

JUDGMENT

1   HIS HONOUR: On 24 December 1989 I delivered written reasons for judgment on an application by the plaintiff, by notice of motion, for orders for further discovery of documents by the defendants. I found that the defendants’ discovery had been deficient and that orders for further discovery should be made. I stood the application over until 2 February 2000 to hear submissions on the appropriate form of the orders to give effect to my judgment, and on costs. At the further hearing on 2 February 2000, it emerged from submissions and discussion that there were three issues in contention which would require further rulings. They are:
· whether it would be too ambiguous to order Mr Finlay and Mr Westgarth to file affidavits describing ‘ in detail ’ the inquiries made and steps taken to comply with my orders;
· whether I should order Mr Westgarth to file an affidavit to the effect that he had by that time provided a copy of my earlier judgment and my orders to each individual defendant;
· most importantly, whether I should make an order to the effect that the entire discovery process be repeated, so far as it relates to the question of pension entitlement which remains in contention between the parties.
I shall consider each of these issues in turn.
Is ‘in detail’ too ambiguous?


2   In paragraph 78 of my earlier judgment, I expressed the opinion that my orders should require that one or more affidavits be filed on behalf of the defendants deposing to ‘ what is actually done by way of further communications to and from individual defendants and further reviews of the defendants' documents, for the purpose of complying with the orders which are to be made’. This observation flowed from the inferences which I had drawn in paragraph 76, to the effect that the review of the defendants' documents conducted by their solicitor in 1997 had failed to identify discoverable documents and there had been no subsequent general review of the documents. It also flowed from my conclusion, started in paragraph 77, that in the circumstances the Court could have no confidence that the defendants' discovery was complete.

3   I thought it necessary to require that the methodology and procedure which would be used by the defendants to comply with my further orders for discovery, and their implementation, be laid bare to the plaintiff and the Court, in specific terms. Counsel for the plaintiff proposed that I give effect to this intention by orders requiring Mr Finlay and Mr Westgarth to provide affidavits describing in detail the inquiries made and steps taken to comply with my orders.

4   Counsel for the defendants submits that the words ‘in detail’ are ambiguous and will create uncertainty as to the level of specificity to be provided in the affidavits. For example, he says, will it be necessary for the affidavits to set out particulars of every telephone call or discussion which each of the two deponents has with every one of the other 28 defendants, the time and duration of each conversation, and its complete contents? I reject this submission. While I accept the importance of making my orders as precise as practicable, language is not a precision instrument. It is unavoidable, whatever language I use, that judgment and commonsense will have to be exercised by those who must comply with my orders, as well as by the plaintiff in deciding whether to allege non-compliance, and by the Court in ruling on any such complaint.

5   In my opinion the words ‘in detail’ are sufficiently clear, especially in the context of the purpose of my orders and the reasons for judgment from which they emerge, that the defendants will be able to use their commonsense to decide what needs to be done for compliance. Thus, while the Court will obviously be interested to know whether the deponent has in fact made contact with each other defendant, and what precisely the deponent has asked each defendant to do, and what precisely (by reference to identified documents or files) each defendant has told the deponent that he or she has done, and with what result, it is in my view inconceivable that any reasonable person would regard it as necessary or even appropriate to particularise (for example) the time of day of any of the conversations between the deponent and another defendant. However, such is the potential for controversy in the discovery process in this case that I propose to build into my orders a mechanism for resolving any real uncertainty that may unexpectedly arise, by granting either party liberty to apply to me on two days' notice during the further discovery process.

Should I require that my judgment and orders be provided to each defendant?


6   Counsel for the plaintiff proposes that I do so, in effect, by ordering Mr Westgarth to file and serve an affidavit stating that this has been done. He says that it is necessary to do so, in order to bring home to each defendant the importance of the discovery process and the necessity for each of them to contribute to it with meticulous care. Counsel for the defendants submits that is unnecessary to do so, given that my judgment is generally available and sufficiently long that the copying and distribution of it to 30 defendants would be a substantial task. He says that imposing this requirement would serve no useful purpose.

7 The order which the plaintiff seeks might appear in isolation to be heavy-handed and unnecessary. But I wish there to be no doubt in the mind of any defendant that after lengthy and careful consideration I have been led by the evidence to conclude that the defendants have fallen well short of their legal duty to give discovery in accordance with the Supreme Court Rules. This is a serious matter, made all the more troubling by the position of the defendants, at the relevant time, as partners in an eminent firm of solicitors. Were it not for the depth of antagonism between the parties I would be content to make an order to the effect that a succinct summary of my reasons for judgment be provided to each defendant, together with the orders. But in the present case, such is the bitterness of the dispute that an order of this kind would almost certainly lead to argument as to whether the summary was adequate or misleading. The safest way of giving effect to my purpose is to make orders having the effect that a hard copy of my reasons for judgment on the last occasion and on the present occasion is provided to each defendant, together with a copy of the orders, before the further discovery process has been completed.

Should I require the defendants to review the entire discovery process?


8   I outlined the history of the discovery process in this case in my reasons for judgment delivered on 24 December 1999. Discovery orders were made by the Court on 15 November 1996, 22 August 97 and 20 November 1997. The plaintiff says that in order to give effect to my reasons for judgment, I should order the defendants to file and serve a further list of documents, verified by affidavits of Mr Finlay and Mr Westgarth, giving discovery of ‘all documents falling within the categories of documents referred to in this Court's orders’ made on those three occasions.

9   The plaintiff relies on paragraph 78 of my reasons for judgment, in which I said that ‘orders of an appropriate kind should be made so that the defendants' documents are reassessed according to the correct legal principles of discovery, by a proper general review, and any additional discoverable documents are then brought forward.’ I reached this conclusion after I had found that 14 boxes of the defendants' documents, identified by Mr Finlay’s secretary, had been the subject of a general review only once, by the defendants’ solicitor, who had failed to identify certain discoverable documents, applying incorrect legal principles and reaching incorrect conclusions (as did Mr Westgarth, the defendant who was responsible for instructing the solicitor).

10   Counsel for the defendants strenuously objects to my making any such order. He points out that the plaintiff's notice of motion, which was the subject of my reasons for judgment, sought much narrower relief. It sought production of specified files or bundles of documents concerning pension entitlements of the former WM partners consequent upon the merger of the partnerships, handwritten notes identified by Mr Finlay in his evidence, the document to which ‘Schedule C’ was originally attached, and the schedule of retirement allowances shown to the former WM partners late in 1990 in hard copy or transparency form. He says that the defendants presented their case in opposition to the plaintiff's application for further discovery on the assumption that the application was limited to discovery in respect of those specific classes of documents; and that if application had been made for an order of the broad kind now sought his clients may very well have wished to tender further evidence, including evidence to show that such an order would be onerous and compliance with it would be costly and time-consuming. He says that procedural fairness requires that his clients be given the opportunity to adduce further evidence and make further submissions before any such order is made.

11   In my view the plaintiff is entitled to discovery orders along the lines of the orders sought in the notice of motion (modified in the fashion indicated in paragraph 80 of my reasons for judgment), and he is also entitled to a somewhat broader order to reflect paragraph 78 of the judgment. But the order which he seeks, in draft short minutes of orders handed up at the hearing on 2 February 2000, is too broad for three reasons.

12   First, the discovery orders previously made by the Court extended to matters then in dispute which have subsequently been resolved, such as, documents relating to the costs of Mr Stevenson in the Budget litigation. Further discovery of such documents would obviously be pointless. It may also be true that some of the specific discovery orders previously made have been complied with and need not be repeated - such as the order for production of documents relating to pension or retirement allowances paid to specified individuals (see Order 2 of the orders made on 20 November 1997), though the evidence before me does not indicate whether this is so.

13   Secondly, I believe there is some force in the defendants' submission about procedural fairness. The point should not be pushed too far. An unsuccessful party cannot resist an order purely on the ground that it is different from or even wider than the orders sought against that party in the application. One must look beyond the form of the orders sought and proposed, to the substance of the issues in contention in the application and the Court's decision on those issues. If the hearing of the application canvasses wider issues than the application itself raises, and the respondent to the application is given the opportunity to meet and deal with the applicant's case, it may well be appropriate to make an order which reflects the Court's determination of the wider issue.

14   In the present case the plaintiff contended at the hearing of the application that the entire discovery process had been tainted by the defendants taking too narrow a view of the range of documents which were required to be discovered. But in my opinion this did not put the defendants on notice that the plaintiff would seek the kind of order which he now seeks. I accept the defendants' submission that if the plaintiff indicated that he would seek an order having the effect of re-committing their entire discovery, it is likely that they would have wished to adduce further evidence, both as to their implementation of discovery in the past and as to the cost and difficulty of carrying out the process again. I do not believe that they have been given adequate opportunity to do so in the context of the present application.

15   It is no answer to the procedural fairness point that the notice of motion expressly sought such further or other orders as the Court may deem fit. Such a general prayer for relief does not warn the respondent that the applicant will seek an order categorically different from the orders which the notice of motion sets out in specific terms, especially where different evidence may become relevant when the new order is sought.

16   However, it must be remembered that the application was triggered by Mr Finlay's evidence that handwritten notes and a transparency showing entitlements had been prepared, though these documents had not been produced on discovery. Shortly after the application was made, affidavits were filed on behalf of the defendants annexing some handwritten notes and schedules. The sources of those documents were identified as the 14 boxes made available to the defendants' solicitor by Mr Finlay's secretary, and the files of Mr Westgarth. The production of these documents from those sources raised an obvious question for the defendants to answer: might those sources yield further discoverable documents if they were fully and systematically reviewed? In my view the defendants should have realised (and probably did) that their own evidence suggested that they had not conducted an adequate systematic review of the 14 boxes and Mr Westgarth's files, and by giving that evidence they exposed themselves to an order for further discovery by reference to those sources.

17   I take the view that procedural fairness prevents me from requiring that the defendants' entire discovery be repeated, but that it does not prevent me from requiring a proper general review, upon the correct legal principles, of the 14 boxes and the files which the defendants' own evidence has identified as sources of discoverable documents which had not been discovered during the original discovery process.

18 My third reason relates to the meaning of paragraph 78 of my earlier reasons for judgment. Messrs Allsop, Finlay and Westgarth gave evidence on the application which led me to conclude that they had misunderstood and therefore misapplied the legal principles concerning discovery in two ways. First, they had incorrectly superimposed the test of relevance contained in Part 23 Rule 1(d) upon the Court's orders for discovery, because their evidence implied that they would regard a document as not discoverable if it did not (in their view) meet the test of relevance, even if it fell within one of the categories set out in the Court's orders for discovery. Secondly, though I did not expressly say so in my earlier judgment, I not only disagreed with their application of the test of relevance to the handwritten notes and schedules which had been brought forward, but I took the view that their conclusion that that those documents were not discoverable could not be sustained by any reasonable application of the test of relevance.

19   These are serious mistakes about the applicable law. Since Messrs Allsop, Finlay and Westgarth were together the persons with the principal responsibility for the entire process of discovery on behalf of the defendants, these conclusions suggest that the entire discovery process may have been tainted by their misunderstanding of the law. Procedural fairness would prevent me from making an order reflecting such a view, as I have explained. Additionally, my earlier reasons for judgment did not contemplate that I should do so. In paragraph 78 I said that an appropriate order should be made that the defendants' documents be re-assessed according to the correct legal principles of discovery, by a proper general review. The ‘defendants' documents’ to which I was referring were the 14 boxes of Mr Finlay's documents and the files of Mr Westgarth about which evidence had been given (see paragraphs 74 to 76). Therefore an order requiring a general review of all of the defendants' documents would go beyond what was contemplated by paragraph 78 of my earlier reasons for judgment, but an order requiring a general review of the 14 boxes and Mr Westgarth's files would be in accordance with what I had in mind.

Conclusions and Orders


20   As I have mentioned, the plaintiff's counsel handed up draft short minutes of orders, upon which counsel for both sides made further submissions. Counsel for the defendants did not, of course, consent to the form of orders to be made, but he helpfully assisted the Court to settle the text of orders which would reflect the earlier reasons for judgment, and he did not make submissions opposing the draft, after I had settled the wording in consultation with both counsel, except in the three respects which I have identified. Having dealt with those three issues, I shall set out below the text of the orders which I intend to make. In substance, the text is as settled with counsel, except for paragraphs 1(a) and 3(a), the liberty to apply in paragraph 8, and some changes of drafting.

21   Since the plaintiffs’ submissions on the form of the orders have been substantially successful, my order for costs will extend to the costs of the hearing on 2 February 2000. The plaintiff will not obtain an order for general discovery as wide as the one he sought, but he has established an entitlement to an order wider than the ones sought in the notice of motion, notwithstanding that the defendants initially opposed any wider form of relief.

22   My orders will be as follows:

1. Order that within 28 days the defendants file and serve a further list of documents, duly verified and complying with Part 23 Rule 3 of the Supreme Court Rules, giving discovery of:
(a) all documents recording or relating to any discussions, negotiations, agreements or calculations concerning the pension entitlements or proposed pension entitlements of partners of Corrs Chambers Westgarth of the types alleged in paragraphs 22 and 27 of the plaintiff's contentions contained in the Summons (but excluding documents relating solely to equity in WIP) and all documents recording or relating to payments or proposed payments in respect of those entitlements, but only to the extent that any such documents are contained in the 14 boxes of documents referred to in the affidavit of Richard Allsop of 9 December 1998 or in the files referred to in the affidavit of Stuart Westgarth of 11 December 1998;
(b) the files or documents of Mr Finlay, the Steering Committee of Westgarth Middletons and the Sydney Office Policy Committee of Corrs Chambers Westgarth concerning the respective pension entitlements of the former Westgarth Middletons partners consequent upon the merger;
(c) the handwritten notes of Mr Finlay identified by him in his evidence given on 8 December 1998, which comprised part of his files and concern the negotiation of the merger of Corrs Chambers Westgarth, insofar as such notes relate to pension entitlements of WM Sydney partners, whether by specific reference or as part of a wider category;
(d) the document or documents to which ‘Schedule C’ as attached to the memorandum to the Policy Committee Members by Mr Finlay dated 5 July 1991 was originally annexed;
(e) the schedule of retirement entitlements of the former Westgarth Middletons partners shown to the former Westgarth Middletons partners in or about November/December 1990 whether in hard copy or transparency form.
2. Order that the defendants file and serve, with the further list of documents referred to in Order 1, affidavits of Mr Finlay and Mr Westgarth:
(a) verifying the further list of documents in accordance with Part 23;
(b) identifying the documents in the further list of documents which are additional to those previously discovered by the defendants;
(c) to the extent that any of the documents referred to in subparagraphs (b) to (e) of Order 1 were not in the possession, custody or power of the defendants, or any them, later than six months prior to the commencement of the proceedings, stating when the defendants or any of them parted with the document and what has become of it.
3. Order that within 28 days the defendants file and serve an affidavit of Mr Westgarth to the effect that:
(a) a hard copy of the reasons for judgment of Austin J. dated 24 December 1999 and of his further reasons for judgment dated 4 February 2000, together with a hard copy of these orders, has been given to each individual defendant;
(b) based upon all proper inquiries and to the best of his knowledge, information and belief, all individual defendants have produced for discovery all documents within the categories set out in Order 1;
(c) describing in detail the inquiries made and steps taken by the defendants to comply with these orders.
4. Order that within 28 days the defendants file and serve an affidavit by Mr Finlay describing in detail the inquiries made and steps taken by him or on his personal behalf to comply with these orders.
5. Order that any documents additional to those previously discovered be made available for inspection by the plaintiff, no later than on the day on which the further list of documents is served on the plaintiff.
6. Order that the defendants' solicitor provide a certificate as referred to in Part 23 Rule 3(c) and to the effect that the solicitor is not aware of any documents within any of the classes specified in Order 1(b) to (e) which are or were in the possession, custody or power of the defendants or any of them other than those referred to in the further list of documents.
7. Order that the defendants pay the plaintiff's costs of the application for further discovery originally made orally and subsequently made the subject of a notice of motion filed on 9 December 1998, including the costs of the hearing on 2 February 2000.

8. Grant liberty to either party to apply to Austin J. on 48 hours' notice.

9. Stand the proceedings over for further mention before Austin J at 9.30am on Wednesday 8 March 2000.

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Last Modified: 09/25/2000