Gliddon Properties Pty Ltd v NP Properties Pty Ltd
[2006] WASC 64
GLIDDON PROPERTIES PTY LTD -v- NP PROPERTIES PTY LTD & ORS [2006] WASC 64
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 64 | |
| Case No: | CIV:2294/2005 | 3 APRIL 2006 | |
| Coram: | MASTER NEWNES | 13/04/06 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Order for preaction discovery | ||
| B | |||
| PDF Version |
| Parties: | GLIDDON PROPERTIES PTY LTD (ACN 073 690 552) NP PROPERTIES PTY LTD (ACN 115 078 995) NEVILLE JOHN CROKE N J CROKE PTY LTD (ACN 080 457 996) |
Catchwords: | Practice and procedure Application for pre-action discovery O 26A r 4 Whether plaintiff may have cause of action against the defendants Turns on own facts |
Legislation: | Corporations Act 2001 (Cth), s 436A Rules of the Supreme Court 1971 (WA), O 26A r 4 |
Case References: | McCarthy v Dolpag Pty Ltd [2000] WASCA 106 Cohen v Walthamstow Pty Ltd, unreported; SCt of WA; Library No 980148; 30 March 1998 Ronald Charles Davis v Sagar Pty Ltd, unreported; SCt of WA; Library No 980443; 10 August 1998 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
NP PROPERTIES PTY LTD (ACN 115 078 995)
First Defendant
NEVILLE JOHN CROKE
Second Defendant
N J CROKE PTY LTD (ACN 080 457 996)
Third Defendant
Catchwords:
Practice and procedure - Application for pre-action discovery - O 26A r 4 - Whether plaintiff may have cause of action against the defendants - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 436A
Rules of the Supreme Court 1971 (WA), O 26A r 4
(Page 2)
Result:
Order for preaction discovery
Category: B
Representation:
Counsel:
Plaintiff : Mr T H Brickhill
First Defendant : Mr M A Atkinson
Second Defendant : Mr M A Atkinson
Third Defendant : Mr M A Atkinson
Solicitors:
Plaintiff : Brickhills
First Defendant : Atkinson & Partners
Second Defendant : Atkinson & Partners
Third Defendant : Atkinson & Partners
Case(s) referred to in judgment(s):
McCarthy v Dolpag Pty Ltd [2000] WASCA 106
Case(s) also cited:
Cohen v Walthamstow Pty Ltd, unreported; SCt of WA; Library No 980148; 30 March 1998
Ronald Charles Davis v Sagar Pty Ltd, unreported; SCt of WA; Library No 980443; 10 August 1998
(Page 3)
1 MASTER NEWNES: This is an application by the plaintiff for pre-action discovery under O 26A r 4 to obtain information to enable the plaintiff to make a decision whether or not to commence proceedings against the defendants.
2 The plaintiff, in its capacity as trustee of the Gliddon Investment Trust, and NJ Croke Pty Ltd, in its capacity as trustee for the Croke Family Trust, previously carried on, in partnership, the business of "WA Road Projects". The partnership business involved the provision of traffic management services and traffic control, the supply and installation of various road signs, guard rails, traffic support equipment and the letting of such equipment, as well as the provision of various support services in relation to road maintenance projects, traffic control and public safety.
3 The partnership was dissolved by a deed of assignment and sale of partnership interest (the "deed") entered into by the parties on or about 30 December 2003. By the deed, the plaintiff in its own right acquired the interest of the Croke Family Trust for a total consideration of $1,000,000, of which $550,000 was paid by the third defendant ("NJ Croke") in cash and the balance of $450,000 was made up by the forgiveness of a debt.
4 The deed provides, so far as relevant, that:
"5.1 [NJ Croke, as trustee for the Croke Family Trust] and [the second defendant] covenant and agree with [the plaintiff] that neither of them will, without the consent of [the plaintiff] (which consent may not be unreasonably withheld):
(a) be directly or indirectly engaged, concerned or interested in any business of a nature similar to and which is in competition with the Business;
(b) either as shareholder (other than as shareholder holding less than 5% of the shares in a company listed on the Australian Stock Exchange), director, employee, consultant, agent, partner, or otherwise; and
(c) within the Restraint Area during the Restraint Period."
(Page 4)
- settlement. The date of settlement was 30 December 2003. The restraint period expired on 30 December 2005.
6 Themajor business competitor of the plaintiff was Advanced Traffic Management (WA) Pty Ltd ("ATM"). On 21 June 2005, administrators were appointed to ATM, pursuant to s 436A of the Corporations Act 2001 (Cth).
7 On 18 July 2005 the creditors of ATM resolved that the company execute a deed of company arrangement ("DOCA"). Under the DOCA, in essence, the first defendant as trustee for the NP Properties Unit Trust ("NP Properties"), was to pay the sum of $640,023 to the administrators of ATM in exchange for 100 issued shares and one special redeemable share in ATM. The DOCA also provided that Paul Desmond Sampson ("Mr Sampson") and Robbe Bryce were to be appointed directors of ATM and the existing director was to resign. The effect of the DOCA was that ATM continued to trade in competition with the plaintiff and that NP Properties had a controlling interest in it.
8 NP Properties had been incorporated on 1 July 2005 and its sole director and shareholder was, and is, Mr Sampson. The registered office of NP Properties is the offices of a firm of accountants, Banks & Co, in Albany Highway, Gosnells.
9 NJ Croke is a company controlled by the second defendant ("Mr Croke") who is the sole director and shareholder.
10 There was uncontroverted evidence from Mr Stephen O'Dwyer ("Mr O'Dwyer"), the general manager of the plaintiff, that Mr Sampson and Mr Croke are very close friends. Mr Sampson is a policeman by occupation and prior to the DOCA did not have any experience in the sort of business conducted by ATM. Mr O'Dwyer says that Banks & Co are also the accountants for the Croke Family Trust and their offices are also the registered office of NJ Croke. The solicitor who acted for NJ Croke in relation to the deed is also NP Properties' solicitor.
11 There was also evidence from Mr O'Dwyer that, at about the beginning of May 2004, he informed Mr Croke that he (Mr Croke) had been observed "working a guard rail" for ATM at Gosnells, in breach of the restraint clause. Mr O'Dwyer has exhibited to his affidavit an email dated 6 May 2004 from Mr Croke in which Mr Croke confirmed that the plaintiff would object to him working for, among others, ATM, and undertook not to work for that company.
(Page 5)
12 Mr O'Dwyer says that he received an email from Mr Croke, dated 26 July 2005, advising him of Mr Croke's address in the Northern Territory. The address is the same address as that of ATM in the Northern Territory.
13 According to Mr O'Dwyer, he has been informed by employees of the plaintiff that, in or about late November 2005, they observed the truck which is pictured in a photograph on Mr Croke's business card "doing guard rail" on the Roe Highway in Western Australia.
14 Mr O'Dwyer says further that he has been informed by a representative of SJ Roadworks that Mr Croke has been in the Pilbara claiming that he has a 51 per cent interest in ATM and seeking to canvass work for ATM. Mr O'Dwyer does not, however, indicate when that is alleged to have occurred.
15 On 24 October 2005, the plaintiff's solicitors wrote to each of the defendants informing them that the plaintiff had a reasonable apprehension that Mr Croke and NJ Croke were associated directly or indirectly with NP Properties in the conduct of the business of ATM. The solicitors asked that the defendants respond to that and outline what interests Mr Croke or NJ Croke, or any related parties, have in NP Properties or the NP Properties Unit Trust. A reply was requested by 28 October 2005. No reply was received.
16 This application was made on 1 November 2005. The defendants have not filed any affidavit evidence in opposition to the application but appeared by counsel to argue that the grounds of the application had not been made out because the plaintiff had not established that it may have a cause of action against any of the defendants or, in the alternative, that the category of documents sought by the plaintiff was too wide.
17 On this application, the plaintiff seeks discovery on affidavit by NP Properties of:
"(a) The NP Properties Unit Trust Deed and Unitholders Register.
(b) All financial statements or interim financial statements of the First Defendant since 1 July 2005.
(c) Documents recording or relating to any investment or loan or any other financial accommodation or arrangement passing between the First Defendant and the
- Second Defendant, the Third Defendant or the Croke Family Trust or any party associated with any of these parties.
- (d) All correspondence, agreements or memoranda with the Second Defendant, the Third Defendant or the Croke Family Trust or any party associated with any of these parties that touches or concerns the business of the First Defendant and its involvement in Advanced Traffic Management (WA) Pty Ltd ACN 107 481 756."
18 The plaintiff seeks against Mr Croke and NJ Croke respectively the documents referred to in par (c) and par (d), mutatis mutandis.
19 It was submitted on behalf of the plaintiff that the plaintiff had made reasonable enquiries of the defendants by the letter of 24 October 2005, but was still in the position where it had not been able to obtain sufficient information to enable a decision to be made as to whether or not to commence proceedings.
20 It was submitted that there was reasonable cause to believe that Mr Croke and NJ Croke had breached cl 5.1 of the deed and that NP Properties had been knowingly concerned in that breach. Counsel for the plaintiff acknowledged that the application should have been brought against NP Properties and NJ Croke in their respective capacities as trustees and foreshadowed an amendment to that end.
21 It was submitted on behalf of NP Properties that there were no reasonable grounds to believe that the plaintiff may have a cause of action against it. Counsel for the defendants accepted that such a cause of action would arise if NP Properties was knowingly involved in a breach of the deed by Mr Croke or NJ Croke, but said there was no evidence of that. The application was effectively based upon no more than a friendship between Mr Sampson and Mr Croke, use of the same professional advisers and speculation. The evidence of what occurred in relation to Mr Croke in May 2004 was irrelevant because at that stage NP Properties had no interest in ATM.
22 Counsel for the defendants argued that the documents sought by the plaintiff involved confidential information of ATM, which was a major competitor of the plaintiff, and the provision of that information was likely substantially to prejudice the legitimate business interests of NP Properties and ATM.
(Page 7)
23 It was submitted on behalf of Mr Croke and NJ Croke that, again, there were no reasonable grounds to believe that the plaintiff may have a cause of action against them for breach of the restraint clause. The plaintiff's case went no further than simply alleging they were "associated" in some way with NP Properties. The evidence of what occurred in May 2004 was irrelevant and the evidence as to the address of Mr Croke in the Northern Territory was irrelevant because the restraint clause did not extend to the Northern Territory. Moreover, the documents sought by the plaintiff are not sufficiently related to any cause of action that the plaintiff may have and are not related to the matters alleged against these defendants in the affidavits filed on behalf of the plaintiff.
24 The relevant provisions of O 26A are as follows:
"4. Discovery from a potential party
(1) This Rule applies if a person who may have a cause of action against a person … ('the potential party') wants -
(a) to commence proceedings against the potential party;
(b) …
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 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."
(Page 8)
- confidentiality and should not be allowed to place upon a litigant any harsher or more oppressive burden than is strictly required: McCarthy v Dolpag Pty Ltd [2000] WASCA 106 at [13]. Orders for discovery of business records, especially of competitors, should be no wider than necessary: McCarthy v Dolpag Pty Ltd (supra) at [15].
26 The first question on this application is whether the plaintiff has established that it may have a cause of action against any of the defendants.
27 In considering what is necessary to establish that a party may have a cause of action it is, in my view, relevant to have regard to all of the circumstances of the case, including the nature of the cause of action concerned. In a potential claim of this type it is not surprising that for that purpose the plaintiff may rely on inferences from quite limited facts known to it. It is in the nature of such claims that it will often be the case that even where a breach of the sort alleged has in fact occurred most of the information which discloses the existence of such a claim will not be readily ascertainable by the prospective plaintiff.
28 In the present case, the uncontroverted evidence is that, in about May 2004, Mr Croke had been found to have been involved in some way in the business of ATM, although he had then undertaken that he would not be involved in the future. After an administrator was appointed to ATM in June 2005, a DOCA proposal was put to creditors in July 2005 by NP Properties, a company incorporated only a matter of two or three weeks previously. Mr Sampson, the sole director and shareholder of NP Properties, is a policeman who is a very close friend of Mr Croke. At the time NP Properties acquired its interest in ATM, Mr Sampson had no apparent experience in the sort of business conducted by ATM. NP Properties paid a substantial sum, an amount of $640,000, to acquire the business of ATM under the DOCA. NP Properties has the same registered office, the same accountant and the same solicitor as NJ Croke, of which Mr Croke is the sole director and shareholder.
29 There is also evidence that a truck which is pictured on Mr Croke's business card has been seen conducting work of the nature conducted by ATM and it also appears that in July 2005 Mr Croke had some connection with ATM in the Northern Territory. The Northern Territory is outside the restraint area specified in the deed but the fact of the apparent connection was relied upon by the plaintiff to indicate the existence of links between ATM and Mr Croke and NJ Croke.
(Page 9)
30 The defendants did not put on any evidence in opposition to this application and chose not to reply to the letter from the plaintiff's solicitors of 24 October 2005.
31 On balance, I am satisfied that sufficient has been shown to establish that the plaintiff may have a cause of action against Mr Croke and NJ Croke for breach of the restraint covenant. I consider that sufficient has also been shown to establish that it may have a cause of action against NP Properties.
32 In the event of such a finding, the issue then between the parties was whether the categories of documents sought by the plaintiff were too wide. In my view, in some respects, they are. In the first place, as conceded by counsel for the plaintiff, the documents sought from NP Properties and NJ Croke should be limited to those in their possession, custody or power as trustees of their respective trusts.
33 In addition, I consider that the claim for discovery of the unit holders register of the NP Properties Unit Trust Deed goes further than is reasonably necessary and I would limit that to discovery of any portion of the register which refers to Mr Croke and NJ Croke or any entity in which they have an interest.
34 In relation to the financial statements of NP Properties since 1 July 2005, I would again limit that to any entries in the financial statements which relate to Mr Croke and NJ Croke or any entity in which they have an interest.
35 I would limit the category of documents referred to in category (c) to such documents in connection with the business of ATM.
36 Subject to those limitations, I would make orders for discovery to the effect sought by the plaintiff.
37 I will hear the parties on the precise form of orders and on costs.