Hayden, Rodney James v Teplitzky, David Raymond
[1997] FCA 1577
•20 NOVEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 855 of 1996
BETWEEN:
RODNEY JAMES HAYDEN
FIRST APPLICANTPETER SCHWEITZER
SECOND APPLICANTDAYA JAYASINGHE
THIRD APPLICANTGORDON WRIGHT
FOURTH APPLICANTAND:
DAVID RAYMOND TEPLITZKY
FIRST RESPONDENTRUSSELL JOHN HODGE
SECOND RESPONDENTJOHN JOHNSON
THIRD RESPONDENTANTHONY STAVRIANOS
FOURTH RESPONDENTTOP OF THE CROP NQ PTY LTD (ACN 001 018 645)
FIFTH RESPONDENTLIVERPOOL GROWERS (AUSTRALASIA) PTY LIMITED (ACN 003 950 105)
SIXTH RESPONDENTJUDGE:
LINDGREN J
DATE:
20 NOVEMBER 1997
WHERE MADE:
SYDNEY
REASONS FOR JUDGMENT
(ex tempore)
INTRODUCTION
There is before the Court a motion of the applicants brought by notice of motion filed on 13 November 1997, returnable on 18 November, and then stood over to yesterday. Yesterday counsel who appeared for the applicants as moving parties and for the second respondent in the proceeding (“Mr Hodge”), who is the respondent to the motion, expressed the view that the hearing would occupy only a quarter of an hour to half an hour, and that I would need only to look at two letters. Several considerations have made this manner of resolving the issues less than satisfactory. What I propose to do is to publish these reasons and to stand over the motion for the making of orders.
THE MOTION
The motion seeks an order that the second respondent give “further and better discovery”.
It will be seen that the form of order sought is expressed in very general terms. The relevant provision of the Rules is found in O 15 r 8 which is as follows:
“8 Where, at any stage of the proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any matter in question in the proceeding may be or may have been in the possession, custody or power of a party, the Court may order that party -
(a)to file any affidavit stating whether that document or any document of that class is or has been in his possession, custody or power and, if it has been but is not then in his possession, custody or power, when he parted with it and what has become of it; and
(b) to serve the affidavit on any other party.”
The test of whether a document is discoverable by a party required to give discovery is that it must be a document “relating to any matter in question between [the discovering party] and the [other] party” (O 15 r 2(2)(a)). The question before me under O 15 r 8 is whether it appears from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for a belief that a document or class of document fitting that description may be or have been in Mr Hodge’s possession. It seems reasonable to expect, therefore, that there would be some attempt to identify the document or class of document in the notice of motion. The word “may” in O 15 r 8 merely relates to the question whether the document or class of document is or has been in the possession, custody or power of the party in question.
THE SECOND AMENDED STATEMENT OF CLAIM
It is necessary to understand the issues between the applicants and Mr Hodge. The present proceeding is complex and it is not easy to identify those issues. However, based on the second amended statement of claim filed on 18 February 1997, I give the following outline.
The applicants are medical practitioners who were members of a syndicate called “Delta 6 Mangoes”. They each owned a mango farm in Queensland. They engaged the first respondent, Mr Teplitzky, to manage their businesses of growing and marketing mangoes. The third and fourth respondents, Messrs Johnson and Stavrianos, were directors of, and to different extents shareholders in, the fifth respondent, Top of the Crop NQ Pty Limited (“TOCNQ”), and the sixth respondent, Liverpool Growers (Australasia) Pty Limited (“Liverpool Growers”).
Paragraph 7 of the second amended statement of claim alleges that Mr Hodge was, at all material times, a solicitor and commercial adviser to Mr Johnson and Mr Stavrianos and the companies controlled by them, TOCNQ and Liverpool Growers.
The second amended statement of claim comprises 171 paragraphs spread over 42 pages and annexures extending over 48 pages. At the risk of lack of clarity, I proceed immediately to those parts of it that relate to Mr Hodge. In par 70 it is alleged that on 27 August 1993, Mr Hodge, among others, gave a written proposal to the applicants. A key part of the proposal was that the applicants should invest money in the purchases of units in the “Burdekin Packers Unit Trust”. Subsequent paragraphs allege that the applicants did invest money. In par 76 it is alleged that on 29 October 1993 there was a meeting attended by, inter alia, the four applicants and Mr Hodge, at which Mr Hodge made representations to the applicants. The representations, which it is subsequently alleged were false, were:
“(1)That all of the statements contained in the written proposal were accurate;
(2) that TOCNQ was in a sound financial position;
(3)that a solicitor retained by the applicants named John Jeweller said that it was in order for the applicants to execute the certain agreement.”
According to par 79, on 29 October 1993 the applicants executed a “Deed Evidencing Heads of Agreement.”
It is alleged that Mr Hodge drew, but did not settle, the Burdekin Packers Unit Trust Deed (par 82); that recitals to a document purporting to be that deed stated that the Trust was established by a trust deed dated 25 October 1993, although no such document existed on that day (par 83); and that on 17 April Mr Hodge delivered to the applicants unit certificates (par 84).
In par 100 the applicants allege that although Mr Hodge knew that the matters represented were false, he remained silent and did not reveal to them what he knew. In par 101 they allege, further, that from April 1993 to 29 October 1993, Mr Hodge, among others, represented to the applicants that at all material times from April 1993, TOCNQ was in a sound financial position, TOCNQ was carrying on its business profitably, and a certain packing shed was operating profitably, or alternatively, he was not aware that those representations were false.
In par 103 it is alleged that certain representations made by Mr Hodge, pleaded in pars 99(3), 99(4), 99(5) and 99(6), were representations as to future events which Mr Hodge did not have reasonable grounds to make. In particular, it is alleged that the Burdekin Packers Unit Trust, by operating the packing shed, was not likely to make profits and had made a substantial loss in its operations in 1993 and 1994.
In par 104, the applicants allege that Mr Hodge knew certain information set out in that paragraph and deliberately refrained from passing it on to them.
The pleading alleges inducement and suffering of loss by the applicants and, commencing in par 111, sets out the causes of action against the respective respondents. Those pleaded against Mr Hodge appear in pars 124-127A. They are misleading and deceptive conduct in contravention of s 42 of the Fair Trading Act and s 52 of the Trade Practices Act, and, further, that Mr Hodge is liable as an accessory to other principal contraveners of those Acts. In pars 127 and 127A, it is alleged that the representations allegedly made by Mr Hodge in pars 99 and 103 were made by him when he knew them to be false or was recklessly indifferent as to whether they were true or false. It is pleaded that Mr Hodge engaged in the conduct pleaded in par 104 “with dishonest intent”.
THE TWO LETTERS
Against the above background I turn to the two letters, to which I referred earlier. One is a letter dated 23 October 1997 from Mr Sloane, the solicitor for the applicants, to Henry Davis York, the solicitors for Mr Hodge. The other is a reply dated 13 November 1997 from Henry Davis York to Mr Sloane. It is convenient to deal with the documents or classes of document of which discovery is sought, separately and under headings.
Copies of Mr Hodge’s income tax returns for the years 1992 to 1996.
In his letter of 23 October, Mr Sloane asserted that Mr Hodge’s income tax returns were relevant to the issue of the capacity in which Mr Hodge had acted for TOCNQ, Liverpool Growers, Mr Johnson and Mr Stavrianos. He said that the capacity “may be disclosed from his tax returns and associated financial information”. Counsel for Mr Hodge did not dispute that the question of the capacity in which Mr Hodge had acted was in fact a matter in question in the proceeding. In addition, Mr Sloane observed in that letter that Mr Hodge had claimed to be the secretary of Liverpool Growers and that his tax returns “may also be relevant to this issue”.
Henry Davis York replied to the effect that they had reviewed their client’s tax returns and that the returns were not relevant to the present proceeding. Henry Davis York continued, however, by advising that they would provide Mr Sloane with copies of Mr Hodge’s “relevant fee notes for work done on this matter”.
It does not appear to me that there are grounds for a belief that the tax returns are relevant to the issue of the capacity in which Mr Hodge acted. As a class they are not obviously relevant to that issue. Perhaps they merely disclose income derived from personal exertion in a most general form. Mr Sloane’s letter suggests a misconception. He suspects that certain matters relevant to an issue may be revealed by documents. But this is no way of satisfying the terms of O 15 r 8. It is possible that a tax return may or may not contain information of a kind referred to by Mr Sloane. Henry Davis York say that the tax returns do not in fact contain that information. Order 15 r 8 cannot be used in order to enable Mr Sloane to check that Henry Davis York's opinion is correct.
What must be made to appear to the Court is that “there are grounds for belief” that the tax returns do relate to an issue in the proceeding between the applicants and Mr Hodge. On the evidence, this does not appear. I would not make an order in respect of the tax returns.
Correspondence
I set out the following relevant paragraphs from Mr Sloane’s letter:
“The Discovery given by your client is obviously grossly inadequate. I have seen numerous faxes from Teplitzky to Hodge which were discovered by Teplitzky. Many of these have not been discovered by Hodge. Obviously he received them. There are a number of other examples. One glaring omission is the letter from Hodge to the ANZ Bank of 20th October 1993. This letter is referred to in the ANZ Bank’s letter to Hodge of 28th October 1993 (Document 53 in your List of Documents) but Hodge fails to give discovery of his letter to which the Bank refers. Related to this is the other documents and correspondence which Hodge undoubtedly has connected with the TOCNQ debt to the ANZ Bank. Obviously this is highly relevant to the subject matter of the proceedings.”
Henry Davis York replied in relation to this issue as follows:
“First, we are instructed by Russell Hodge that he has discovered all of the correspondence with David Teplitzky in his possession. There may well be some faxes from David Teplitzky to our client which were discovered by Teplitzky but not discovered by our client. He no longer holds copies of those documents.
Secondly, our client no longer holds a copy of the letter to the ANZ Bank dated 20 October 1993. He holds no other correspondence with the ANZ Bank regarding this issue.”
It was not disputed on the hearing that Mr Hodge is obliged to give discovery in relation to the correspondence. It is no answer that the documents may no longer be in his possession, custody or power: clearly he must file an affidavit stating whether the documents are or have been in his possession, custody or power, or if they have been, but are no longer, when he parted with them and what has become of them. If necessary, I would make an order in favour of the applicants in respect of the items of correspondence.
Prosecutions
Again, it is convenient to set out the contention for the applicants by quoting from Mr Sloane's letter of 23 October:
“In addition, Hodge has failed to give discovery of documents relating to the prosecution of Liverpool Growers by NSW Agriculture. In this respect, my enquiries reveal that, as a result of numerous underpayments by Liverpool Growers to various growers during the 1993 season, a total of 55 summonses were issued against Liverpool Growers on 14th March and 27th June 1994. Hodge represented Liverpool Growers in the proceedings and on 22nd September 1994 entered a plea of guilty to all matters in the Liverpool Local Court. Hodge subsequently lodged an Appeal on behalf of Liverpool Growers in the Parramatta District Court (at which he failed to appear).”
In their letter of 13 November 1997 in reply, Henry Davis York replied:
“Thirdly, you have requested that our client give discovery of documents relating to the prosecution of Liverpool Growers by the Department of New South Wales Agriculture. Please note that this is not relevant to any issue between your clients and our client. Our client is therefore not required to give discovery of these documents. If you require discovery of such documents, you should seek discovery from Liverpool Growers or issue a subpoena.”
The question for decision is whether it is made to appear to the Court that there are grounds for belief that Mr Hodge’s papers relating to prosecutions of Liverpool Growers by “NSW Agriculture” are relevant to an issue between the applicants and Mr Hodge. There was tendered on the hearing of the motion a list of the prosecutions in question. Because of the nature of the allegations made in the pleading, I think that there are grounds for belief that papers of this kind do relate to matters in question as between the applicants and Mr Hodge. Accordingly, I would order discovery of documents in the possession, custody or power of Mr Hodge relating to the prosecutions of Liverpool Growers by NSW Agriculture.
Files
In his letter of 23 October, Mr Sloane said this:
“All of Hodge’s files which he has held (or once held) relating to the general affairs of Liverpool Growers, TOCNQ, Johnson and Stavrianos are relevant to these proceedings as they may impact on the circumstances in which my clients made their investment in the joint venture. Documentation Hodge drew relating to the mortgage of shares by Joseph Anthony Prestia to Charjon Holdings Pty Ltd and related correspondence is relevant. Hodge’s correspondence with the Liquidator of Burdekin Packers is relevant. None has been discovered.”
Henry Davis York replied on 13 November 1997 as follows:
“Fourthly, you have requested files relating to the general affairs of Liverpool Growers, Top of the Crop (NQ) Pty Limited, John Johnson and Anthony Stavrianos. Our client does hold files relating to Liverpool Growers and John Johnson. However, none of these files are relevant to the present proceedings. Our client has not acted for Anthony Stavrianos and holds no files in relation to him. Our client has provided discovery of all documents in relation to Top of the Crop (NQ) Pty Limited.
Fifthly, any documents in our client’s possession relating to the mortgage of shares by Joseph Prestia to Charjon Holdings Pty Limited does not relate to any issue between your clients and our client.
Sixthly, our client’s correspondence with the liquidator of Burdekin Packers is also not relevant to any issue between your client and our client.”
In my opinion, it does not appear that there are grounds for belief that files generally relating to the affairs of Liverpool Growers, TOCNQ, Mr Johnson and Mr Stavrianos are relevant. Mr Sloane mentions specifically documents which Mr Hodge drew relating to the mortgage of shares by Mr Prestia to Charjon Holdings Pty Limited, and related correspondence, but I do not see that those documents are relevant to an issue between the applicants and Mr Hodge.
However, if there is correspondence held by Mr Hodge in the form of correspondence with the liquidator of Burdekin Packers Pty Ltd, I think that such correspondence is relevant to an issue between the parties, that is, between the applicants and Mr Hodge, in view of the allegation made in the second amended statement of claim as to the insolvency of Burdekin Packers Pty Ltd.
CONCLUSION
In summary, the parties have agreed on the result as to the correspondence, I would order discovery of the papers relating to the prosecutions and correspondence with the liquidator of Burdekin Packers Pty Ltd. Otherwise, I would not order discovery.
Both parties have had some success on the motion. I think it appropriate that there be no order as to the costs of the motion.
The only order of the Court at this stage is that the motion will be stood over to next Friday, 28 November at 9.30 am for the making of formal orders.
I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren
Associate:
Dated: 18 March 1998
Counsel for the Applicants (moving parties on the motion): Mr R E Dubler Solicitor for the Applicant (moving parties on the motion): James G Sloan Counsel for the Second Respondent (respondent to the motion): Mr M R Speakman Solicitors for the Second Respondent (respondent to the motion): Henry Davis York Date of Hearing: 19 November 1998 Date of Judgment: 20 November 1998
0
0
0