Harris Scarfe Australia Pty Ltd v Shoe Source Group Importing Pty Ltd
[2008] SASC 187
•10 July 2008
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
HARRIS SCARFE AUSTRALIA PTY LTD v SHOE SOURCE GROUP IMPORTING PTY LTD & ORS
[2008] SASC 187
Reasons of Judge Lunn a Master of the Supreme Court
10 July 2008
PROCEDURE - DISCOVERY AND INTERROGATORIES
Application under 87R 60 for non party discovery - held no discovery to be ordered against non party banks for bank statements as they could be obtained from the parties - held where discovery sought of directly relevant documents which were part of a circumstantial case to prove anissue on the pleading the party applying had to show discernible pieces of other evidence to complete the circumstantial case or the diocuments sought were not directly relevant - held where documents sought under 87R 60 may be held by several non parties the application should be directed initially to the one with whom the contents of the documents were most closely connected.
HARRIS SCARFE AUSTRALIA PTY LTD v SHOE SOURCE GROUP IMPORTING PTY LTD & ORS
[2008] SASC 187Reasons on non-party discovery application.
JUDGE LUNN:
The parties and their associates.
The plaintiff conducts a number of large department stores.
Speed Shoes Group Pty Ltd (“Speeds”) was a shoe importer and wholesaler. It went into liquidation on 31 March 2004.
The first defendant, Shoe Source Group Importing Pty Ltd (“Shoe Source”), was incorporated on 23 March 2004. It was also an importer and wholesaler of shoes.
The second defendant, Strategy and Business Pty Ltd (“Strategy”), was a shareholder in Speeds and is a shareholder in Shoe Source.
The third defendant, Terrence Jongebloed (“Mr Jongebloed), is the sole director and shareholder of Strategy. He was also the sole director of Speeds before its liquidation. It is alleged he was a director of Shoe Source by virtue of the fifth defendant acting in accordance with his directions about its affairs.
The fourth defendant, Susan Dixon (“Ms Dixon”), is the wife of Mr Jongebloed. She is the sole director and shareholder of the sixth defendant.
The fifth defendant, Sandy Aras (“Ms Aras”), is a director of Shoe Source.
The sixth defendant, Retail Enterprise Developments Pty Ltd (“RED”), is a company of which Ms Dixon is the sole director and shareholder.
Gilberton Pty Ltd (“Gilberton”) is a company of which Ms Dixon is the sole director and shareholder.
Urban Sand Investments Pty Ltd (“Urban Sand”) is a company of which Ms Aras is the sole director and shareholder.
The Claim.
The plaintiff alleges that each of Strategy, Mr Jongebloed, Ms Dixon and RED, were employed by, or contracted to, it in various capacities, so that they all owed duties to it which it alleges they have breached. In the course of their engagements by the plaintiff Mr Jongebloed and Strategy had to implement a direct importation programme for shoes whereby the plaintiff made large wholesale purchases of shoes in Asia which would then be imported into Australia and sold in its stores. The plaintiff alleges that commercial importers used to bring shoes into Australia under such arrangements would have charged about 6% of the wholesale price for their services. The plaintiff purchased large quantities of shoes in Asia, initially through Speeds, and after its liquidation through Shoe Source, which was arranged by Strategy and Mr Jongebloed with an alleged involvement of some of the other defendants. The plaintiff paid substantially more than the Asian wholesale price plus 6% to Speeds and to Shoe Source for these shoes. The plaintiff alleges, but it is disputed, that it did not know of the interests which Strategy and Mr Jongebloed had in Speeds and Shoe Source which it asserts enabled them to benefit substantially from these purchases. That is a sufficient background for the present application, but the pleadings go into a number of other matters.
The non-party discovery application.
I have before me an application issued by the plaintiff on 16 May 2008 for orders under 87R 60 for non party discovery against the Australia and New Zealand Banking Group Limited (“ANZ”), Webb Group Australia Pty Ltd (“Webb & Co”) and the National Australia Bank Limited (“NAB”). ANZ and NAB were bankers to various of the defendants. Webb & Co were the accountants for Speeds, Mr Jongebloed, Ms Dixon and their companies. None of them have responded to the Court in answer to the application and are apparently prepared to abide by whatever orders the Court makes. The defendants have opposed the making of any order on the application. In the course of argument the plaintiff’s counsel sought to amend the precise terms of the orders sought for non-party discovery. In their final form the orders sought were as follows:
SCHEDULE 1 (ANZ)
For the period from 1 January 2004 to 30 April 2005:
1All bank statements in respect of all accounts held by the first defendant, Shoe Source Group Importing Ltd (including as trustees) including but not limited to the following:
Account Name: Shoe Source Group Importing Ltd …..
Account Name: Shoe Source Group Importing Ltd …..
Account Name: Shoe Source Group Importing Pty Ltd – GST Account …..
2All working files and documents in respect of the opening or establishment of accounts, applications for finance, finance arrangements, security arrangements in respect of Shoe Source ….. ( …..
Account Name: Shoe Source Group Importing Pty Ltd – GST Account …..
2All working files and documents in respect of the opening or establishment of accounts, applications for finance, finance arrangements, security arrangements in respect of Shoe Source ….. (including as trustee) (including but not limited to correspondence, file notes, and credit memoranda) which disclose and/or record:
(a)any benefits and/or loans paid by Shoe Source ….. (including as trustee) to Strategy ….., Ms Dixon, Mr Jongebloed, RED or Gilberton;
(b)the legal or beneficial ownership of Shoe Source ….. including any documents disclosing its shareholders.
SCHEDULE 2 (Webb & Co)
For the period from 1 January 2004 to 30 April 2005 all documents (including but not limited to correspondence, file notes, credit memoranda, schedules, spreadsheets, financial agreements, applications for finance, general ledgers and bank statements, cheque butts, pay records and trust deeds) which disclose and/or record:
(a)any benefits and/or loans paid by Shoe Source ….. (including as trustee) to Strategy ….., Ms Dixon, Mr Jongebloed, Ms Aras, ….. Urban Sand Investments, Gilberton and/or The Shoe Source Unit Trust;
(b)the legal or beneficial ownership of Shoe Source ….. including documents disclosing its shareholders.
SCHEDULE 3 (NAB)
For the period from 1 January 2004 to 30 April 2005:
1All bank statements in respect of all accounts held by:
1.1(a) Strategy;
1.2(b) Mr Jongebloed;
1.3(c) Ms Dixon;
1.4(d) RED;
1.5(e) Gilberton.
2All working files and documents in respect of the opening of accounts, applications for finance, finance arrangements, security arrangements in respect of the parties described above (including but not limited to correspondence, file notes and credit memoranda) which disclose and/or record:
(a)benefits and/or loans paid to any of the parties described above by Shoe Source (including as trustee) and/or Urban Sands (including as trustee) and/or Ms Aras;
(b)the legal or beneficial ownership of Shoe Source Group Importing Pty Ltd including any documents disclosing its shareholders.
(It is ambiguous whether the discovery sought is only for documents created in the period 1 January 2004 to 30 April 2005 or is for documents relating to events in that period whenever the documents were created).
The application was supported by an affidavit of the plaintiff’s solicitor, Mr Walsh, also filed on 16 May 2008, and the numerous exhibits to it.
History of relevant discovery applications by the plaintiff.
These applications have a long and complicated history. On 14 October 2005 the plaintiff’s solicitors wrote to the respective Melbourne solicitors of the 1st and 5th defendants, and of the 2nd to 4th defendants, alleging their discovery had been inadequate and seeking, inter alia, bank statements of the defendants and documents relating to payments made, or received, by any of the defendants to or from any other defendant. No response was apparently received to those requests.
On 23 November 2005 the plaintiff’s solicitors took out a notice for specific directions, FDN 27, seeking, inter alia, orders for further and better discovery by the defendants as specified in an affidavit of Leo Walsh. That affidavit, FDN 30, also filed on 23 November 2005, sought orders for discovery as requested in the letters of 14 October 2005.
On 20 January 2006 I directed that all parties make further discovery by 13 March. On 29 March, another Master extended the time for making that further discovery to 26 April. On 31 May, FDN 27 was set for argument on 30 June. After hearing argument on 30 June, but without publishing any reasons, I refused the plaintiff’s application for further discovery and ordered all parties to file affidavits verifying compliance with their respective obligations to make discovery of documents as required by R 58A.03. As far as I am now aware no particular submissions were then addressed specifically to bank statements as distinct from the general financial records of the defendants. All of the parties have since filed affidavits verifying the completeness of their discovery.
On 11 September 2006 the plaintiff took out another notice for specific directions, FDN 55, seeking further and better discovery against various defendants in terms set out in another affidavit of Mr Walsh, sworn on 11 September 2006. The further discovery sought in that affidavit, which is relevant to the present application, was:
14.2documents going to the management of the first defendant in the period December 2003 to April 2005 comprising documents going to the involvement of the second or third defendants in the management of the first defendant.
14.3Documents relating to the change in shareholding of the first defendant and the negotiations involving the second, third and fifth defendants relating to that shareholding.
…..
16….. That the second and third defendants now make discovery of any documents comprising books and financial records evidencing remuneration paid to or entitlements owing to either the second or third defendants by the first defendant, dividends payable to the second defendant by the first defendant or loans between the first defendant of the one part and either or both the second or third defendants of the other part.
FDN 55 was argued before me on 30 October 2006. On 17 November 2006 I published Reasons and refused to order further discovery. The principal reason for refusing the order was that the plaintiff had not shown under 87R 58.04(e) grounds for the necessary belief that the documents in question were in the possession of the any of the defendants or were directly relevant to any issue raised by the pleadings. As far as I am now aware no issue was expressly raised in the argument on FDN 55 about discovery of bank statements by any defendant.
Discovery of the defendants’ bank statements.
Ordinarily an order will not be made under 87R 60 for discovery by non parties of documents which could have been obtained by discovery from other parties to the action: Williams Aviation Pty Ltd v Santos Ltd (1985) 40 SASR 272; Sands v State of South Australia, Perry ACJ, 27 September 2005, [2005] SASC 381. There was no suggestion that the defendants do not have the bank statements in question, but their position was that they were not directly relevant to any matter raised on the pleadings. The affidavits filed by the defendants verifying their discovery must mean that there is nothing in any of their bank statements which evidences a debit or a credit relating to any transaction which is in issue on the pleadings. (As I held in my Reasons published on 17 November 2006 at [9] they were not required to discover their financial records merely to prove a negative that no transaction of the type alleged appeared in them). It has been held that the obligation of a non-party to make discovery under 87R 60 is the same as the obligation of a party under 87R 58A: Southern Equities Corporation Ltd v Arthur Andersen (No 8) Bleby J, 31 January 2002, [2002] SASC 20. It follows from this that the obligation under 87R 60 is no greater than under 87R 58A. Thus, if a particular document is not discoverable under 87R 58A, it cannot be obtained by discovery under 87R 60. As counsel for the 2nd to 4th and 6th defendants put it, the plaintiff cannot get by the back door what it cannot get by the front door. (There has never been an application by the plaintiff under 87R 58A.04 for discovery of indirectly relevant documents and so I do not need to consider here whether 87R 60 applies to indirectly relevant documents). There will be no order for the discovery of the bank statements of the defendants.
In the orders sought against the National Bank there was also an order sought in respect of accounts held by Gilberton for the period from 1 January 2004 to 30 April 2005. The order sought in respect of the bank statements of Gilberton is framed too broadly. They can only be relevant if they contain some entry relating to matters which are in issue on the pleadings. If there are no such entries, the bank statements would not be discoverable. I do not intend to draft any alternative form of order to which the plaintiff may be entitled under 87R 60: Wildbore v Amatek Ltd (1998) 199 LSJS 49. I leave open for argument on any further application filed by the plaintiff whether it should be brought initially against Gilberton rather than the National Bank, and whether “bank statements” are a single document or a class of documents.
At the hearing the plaintiff’s counsel amended the orders sought to insert the word “(including as trustee)” in a number of places to describe the role of the first defendant. As a matter of law it adds nothing to the scope of the discovery sought. If the relevant issue on the pleadings includes the first defendant in a capacity as a trustee as well as in its own right, then any documents in relation to it in its capacity as a trustee are discoverable if they are otherwise directly relevant.
Discovery sought against the accountants, Webb & Co.
Webb & Co as the accountants for Speeds, Mr Jongebloed, Ms Dixon and their companies were the agents of some of the defendants, and hence the documents they held for those defendants as their clients were in the power of those defendants for the purpose of making their discovery. Those defendants have sworn that all the documents in their power have been discovered. For the reasons given any further discovery of such documents should have been pursued through the parties. Insofar as any of the documents held by Webb & Co were held for Speeds the application should be pursued against the liquidator of Speeds. There will be no order for discovery against Webb & Co.
Directly relevant documents.
The plaintiff’s case on the application was that all of the documents sought were directly relevant to issues arising on the pleadings, albeit that some of them went to strands, or links in a chain, of circumstantial evidence which would be relied upon to prove the matters in issue. The applicable law on discovery of directly relevant documents is set out in reasons of Duggan J, with whom the other members of the Full Court concurred, in Channel Seven Adelaide Pty Ltd v Lane (2004) 234 LSJS 225 at 229-233.
The scope of the parties’ duty of discovery for lists of documents and affidavits of discovery filed after 3 June 2000 is defined in R 58A which provides:
The parties must discover in their lists of documents, but discover only, the documents which are or have been in their possession custody or power which are directly relevant to any issue arising on the pleadings.
R 58A significantly narrows the obligation to provide discovery.
…..
In Southern Equities Corporation Ltd (in liquidation) v Arthur Anderson & Co (No 5) [2001] SASC 335 Bleby J expressed the view that the new test required a greater focus on the pleadings and the issues which arose thereon. He said that the test of relevance is the same as that which is applied to admissibility, but that it is not a test which includes only those documents which are strictly admissible in that documents, although relevant, may not be admissible under the common law or various statutory provisions.
Referring to the use of the word “directly” his Honour said at [10]:
However, there is a further qualification, in that the documents must be ‘directly’ relevant. I doubt whether that qualification effectively narrows, for the purposes of discovery, ordinary concepts of relevance for the purpose of admissibility into evidence. In my opinion, it cannot mean, if the document is not itself proof of a fact in issue but is merely a piece of circumstantial evidence tending, along with other evidence, to prove the fact in issue, that it is not discoverable. Many a case is provable and in fact proved by circumstantial evidence, including documents. …..
What the qualification does reinforce is the notion of relevance to proof or disproof of a fact in issue, and the unquestionable abolition of the rule which required discovery of a document which might directly or indirectly lead to a train of inquiry or which might, in some other way, otherwise advance the party’s case or damage that of the adversary. ….. However, it is inappropriate to attempt to define exhaustively what will and what will not be discoverable under this Rule.
Doyle CJ agreed with these observations in Quenchy Crusta Sales Pty Ltd v Logi-Tech Pty Ltd. He added:
It is not wise to attempt to state in comprehensive terms the effect of the requirement that the document be ‘directly relevant’. The adverb ‘directly’ is probably intended to emphasise the requirement of relevance, and to be used in the sense of requiring that the document be directly in point, excluding as sufficient indirect relevance which might be established through another linking circumstance. That is not to say, as I have already said, that a document is not directly relevant if it is merely a piece of circumstantial evidence. The point is that a document will not be directly relevant if, rather than tending to prove an issue on the pleadings, it merely tends to prove something that may be relevant to an issue.
In Rehn v Australia Football League and Ors (2003) LSJS 378 Doyle CJ again considered the rule. He said at [24]:
However, as I commented in Quenchy Crusta, it is not possible to state precisely the effect of the adverb ‘directly’ in R 58A.03. Indirect relevance to an issue is not enough for the purposes of R 58A.03, but distinguishing between direct and indirect relevance is not easy.
It is consistent with the intent of R 58A.03 to apply the requirement of direct relevance firmly, and to give it a relatively narrow meaning. To hold that a document is not directly relevant to an issue arising on the pleadings is not to deprive a party of access to the document. The effect of such a holding is merely that the requirement to discover the document is not imposed by R 58A.03, and the court will decide, on application to it, whether the document must be discovered. In other words, R 58A.03 draws the line between an obligation to make discovery as a matter of course, and an obligation to make discovery upon application to the court and after the court has considered whether the interests of justice requires that discovery should be made.
Another point relevant to the meaning of R 58A.03 is that the rule assumes that a party is able to decide, from the pleadings, what documents must be discovered. This also suggests a narrow meaning for ‘directly relevant’. It would be counter-productive if a party was expected to discover documents because they might be relevant, depending on how the other party’s case was put at trial. R 58A.03 assumes that a party can determine that party’s obligation to make discovery by reference to the pleadings.
…..
I respectfully agree with the observations made in these cases.
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In Southern Equities Corporation Ltd (in liquidation) v Arthur Anderson & Co (No 5) Bleby J pointed out that documents may be ‘directly relevant’ by reason of the fact that they constitute an item of circumstantial evidence tending, along with other evidence, to prove a fact in issue. However, R 58A.03 contemplates that the relevance of the documents is apparent at the time when discovery is under consideration. The possibility that a financial statement of this nature could lead to an inquiry which might uncover other aspects of circumstantial evidence or that it could be used along with other circumstances not apparent on the pleadings to establish the existence of an item in the house at the time of the valuation, cannot lead to the conclusion that the document is directly relevant for the purposes of the rule.
(Underlining added).
In Harris Scarfe Ltd v Ernst & Young (No 4) (2005) 93 SASR 300 at [15] Bleby J said:
The document will be directly relevant if it tends to prove or disprove a matter which is in issue. It is not directly relevant if it merely tends to prove or disprove something that may be relevant to a matter in issue, or if there is a mere chance the document will prove or disprove a matter in issue.
Directly relevant on a circumstantial case.
It is not enough to make a document directly relevant merely to say that it is a piece of circumstantial evidence going to proof of a fact in issue. The passages underlined in the quotation above from Channel Seven Adelaide Pty Ltd v Lane make it clear that merely to label a document as a piece of circumstantial evidence does not necessarily make it directly relevant for the purposes of discovery. The document, or class of documents, in question need to be linked to other discernible pieces of evidence which collectively, if all proved, could constitute circumstantial proof of a fact in issue. If any such piece of the totality of the circumstantial evidence on a point is not discernible, then the document in question only may be relevant to an issue, and so is not shown to have been directly relevant to it. How the whole chain, or all of the strands, of circumstantial have to be discernible for this purpose at the time of the discovery of documents is made need not be pursued here. Whether it is from the pleadings alone, other documents discovered, well known and notorious background facts or evidence in affidavits does not matter here as on none of the possible views can all of the necessary alleged pieces of circumstantial evidence here be discerned.
From which non parties should discovery be sought?
An issue on this application is whether discovery of particular documents may be obtained from any of a number of different non parties who may have them. Can the applicant chose to obtain them from any of these non parties or is there some criterion determining where the application should initially be directed? I am not aware of any authority on the point. The Court has a wide discretion under 87R 60. In Commissioner of Police v Channel Seven Adelaide Pty Ltd, 19 June 2008, [2008] SASC 164, White J said:
The Court has a discretion with respect to the range of documents which a non-party should be ordered to disclose. That discretion must take account of a number of factors including the directness (or indirectness) of the relevance of the documents to the issues in the case; the coercive nature of the process; the extent to which the non-party is likely to incur expenses or experience difficulty in complying with the order; and the extent to which compliance with the order will impinge upon the confidentiality of the information held by the non-party, or upon the privacy of the non-party or other persons. A non-party should not be required, under the coercion of a Court order, to disclose any more documents than are necessary to dispose fairly of the proceedings. Ultimately the order should be framed so as to best serve the interests of justice in the particular case.
I consider that where there are no other factors influencing the exercise of the discretion the application should be directed first to the non-party which is most closely associated with the contents of the documents and which could be expected to raised any objections of privilege, confidentiality or the like about their production. Discovery should only be sought from other non-parties who may have possession of the documents if it is clear that the most closely associated non-party does not have them in its possession or power or where an earlier application against that non-party has been unsuccessful. It is a corollary to the principle mentioned earlier that documents are to be obtained, if possible, from the parties to the action.
The documents relevant to benefits paid by Shoe Source and the ownership of Shoe Source.
I now deal with paragraphs 2 of Schedules 1 and 2 which raise similar issues. The subparas 2(a) are directed to benefits paid by Shoe Source to the entities named in the subparagraphs. Paragraph 30 of the statement of claim pleads:
S&B and Jongebloed, by virtue of their interests in Speeds and Shoe Source, stood to benefit, and did in fact benefit from the introduction of Speeds and Shoe Source to Harris Scarfe, from the placement of the Orders and the payment of the monies to Speeds and Shoe Source.
It should be noted that it is only a plea that Strategy and Mr Jongebloed benefited through Shoe Source from the excessive amounts allegedly paid to Speeds and Shoe Source for the shoes which they had sold to the plaintiff. No particulars are pleaded. There is no plea here, or elsewhere, that any other defendant or relevant entity benefited in this way. I accept that paragraph 30 makes any benefits conferred by Shoe Source onto Strategy or Mr Jongebloed directly relevant issues, and so proper by the subject of discovery orders.
Counsel for the plaintiff submitted that the order was justified in respect of the other entities named in the Schedules because the plaintiff sought to make a circumstantial case that Strategy and/or Mr Jongebloed had benefited in some way from the benefits passing from Shoe Source through the other entities’ named. There is no pleading that any benefit passed through to these other persons or companies through Strategy and/or Mr Jongebloed. If there was, any documents on the topic would be directly relevant.
Counsel for the plaintiff sought to rely on an e-mail of 15 April 2004 from Mr Holway of Webb & Co, the accountants, to Mr Lanyon, the solicitor then acting for the Jongebloed/Dixon group, which said:
Further to our meeting with Sue yesterday, I would like to propose a few changes to the structure that supports the Jongebloed/Dixon group. The changes are recommended largely because Strategy & Business Pty Ltd has been mentioned in the press and could attract attention by a liquidator. Also, S & B is Trustee of all the trusts that are in the group of which several hold key assets. This is not ideal.
We propose:
1 Kirkwood Finance be used as the trustee of the Jongebloed Property Trust, Jongebloed Investment Unit Trust, and the Jongebloed Maintenance Trust. This would leave S & B as the sole trustee of the Jongebloed Family Trust (Clyde Park) which essentially is the trading arm for Clyde Park and holds no assets. It does have the liquor licence that is costly and painful to change.
2 Establishment of a Company as trustee for a discretionary trust to act as an employer of all staff (incl Sue and Terry) that is charged to the various entities. Essentially a service trust. This will enable us to justify more clearly management fees and any profits left in the trust can be dispersed at their discretion. I would expect this can be effective from 1.7.04.
The proposed name is Gilberton Pty Ltd ATF Dixon Discretionary Trust. We have searched and Gilberton is a available albeit a previously registered company.
Can you please consider these proposals and contact me when available?
He also sought to rely on a letter of 13 September 2004 from Mr Lanyon to Shoe Source which stated:
Allora Investment Trust
I refer to our meeting with Lindsay Holway in relation to the proposed structure of Shoe Source Group Importing Pty Ltd and your own company. We confirm that the preferred structure is as follows:
Shoe Source Group as trustee for the Shoe Source Group Unit Trust
' (
10%
90%
Urban Sand Investments Pty Ltd
as Trustee for the Urban Sand
Investment Trust.Urban Sand Investments Pty Ltd
as Bare Trustee for Gilberton Pty Ltd.We confirm that we are to prepare a Unit holders Agreement to set out the relationship between Urban Sand Investments Pty Ltd and Gilberton Pty Ltd in relation to the ownership of the Shoe Source Group business.
The benefit of having your interest in the Shoe Source Group Importing Pty Ltd held in a Discretionary Trust, is an ability to both distribute income, and deal with capital gains tax in the most satisfactory method. Whilst you do not have others to whom you wish to distribute income at the moment, it may be possible to use a corporate beneficiary in order to make payments to Sandy Aras as Vendor. These payments can either be:
1 repayment of the Mortgage which is now the responsibility of the Purchaser; or
2 payments to Sandy which she uses for her living expenses.
It is the intention that, over time, the Trust will have paid the full amount of $380,000 to Sandy and the property can then be transferred to Sandy. In the meantime, if it is clearly possible to show by direct evidence that the Trust has been making the payment under the Contract, then to the extent it has been making those payments, it will be entitled to the equity in the house which should be saved from creditors.
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Could you please confirm that you wish us to proceed to prepare the Terms Contract and the Option as set out above. Could you please advise us as to whom you wish us to forward the Company Register for each of the Shoe Source Importing Pty Ltd and Urban Sand Investments Pty Ltd. This would normally be held by your Accountant.
From these letters, the plaintiff sought to infer that arrangements had been made which could channel the excessive profits made by Speeds and Shoe Source from purchases by the plaintiff to other entities including Strategy and Mr Jongebloed. I do not accept that these e-mails in themselves, or combined with the other documents before me, could amount to a completed chain of circumstantial evidence showing that the other entities had in some way been vehicles for benefits to pass from Speeds or Shoe Source to Strategy and/or Mr Jongebloed. As stated above if the plaintiff wishes to rely on circumstantial evidence to prove paragraph 30 of the statement of claim, it has to identify at least sufficient strands, or links in a chain, of circumstantial evidence to make an arguable case on the point. Otherwise it is a fishing expedition for pieces of circumstantial evidence which the plaintiff does not have.
87R 60.01(3) requires the supporting affidavit for the application is to specify “the documents sought and their relevance to the proceedings”. The purpose of this rule is so that the relevance of the documents sought can be readily identified from the affidavit. There is nothing in the affidavit of Mr Walsh of 16 May 2008 which makes out a sufficient circumstantial evidence case for paragraph 30 of the statement of claim, or any of the other paragraphs of the statement of claim relating to benefits passing from Speeds or Shoe Source to Strategy and/or Mr Jongebloed to make any transactions between Shoe Source and any other entity directly relevant to what has been pleaded.
As his last resort counsel for the plaintiff submitted that even if the documents sought in respect of the other entities were only indirectly relevant, nevertheless the order should still be made. I do not agree. As stated elsewhere in these reasons, it is necessary for a party to exhaust its rights of discovery against the other parties before it can obtain discovery from a non-party. Here the plaintiff has not sought discovery of any indirectly relevant documents from any defendant. There is also the issue whether any non party discovery of them should be sought from particular non parties which are more closely associated with the documents than ANZ, Webb & Co and NAB.
Accordingly, I am prepared to make orders in terms of Schedule 2(a) in respect of documents for benefits paid by Shoe Source to Strategy and/or Mr Jongebloed, but not in respect of any other entity.
Subparagraphs 2(b) of Schedules 1 and 3 are directed to who are the beneficial owners of the shares of Shoe Source. (It is clumsily worded but there was no suggestion that it could mean the issue of the owner of the assets of Shoe Source). The plaintiff has pleaded in paragraph 3.2 of the statement of claim that Strategy was the sole shareholder of Shoe Source until about February 2005, but it has not otherwise pleaded anything else about it shareholding. Paragraph 3.2 implies that Strategy has remained a shareholder, although not necessarily the sole shareholder. There is no plea that whoever are its shareholders since February 2005 do not hold their shares beneficially. Any documents sought in (b) are then not directly relevant on the pleadings. Insofar as (b) is another circumstantial evidence argument that in some way Mr Jongebloed benefited from Shoe Source because he or some other entity associated with him beneficially hold shares in Shoe Source, it fails for similar reasons to those given in respect of subpara (a).
I will hear the parties on what order should be made in the light of these reasons.
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