Howell v Kelly

[2021] NSWSC 1422

Supreme Court

New South Wales

Medium Neutral Citation:

Howell v Kelly [2021] NSWSC 1422

Hearing dates:

25 October 2021

Decision date:

04 November 2021

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

See at [53] of the judgment

Catchwords:

CIVIL PROCEDURE — Preliminary Discovery — To identify potential cause of action — Reasonable inquiries

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW), r 5.3

Cases Cited:

Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 1500

Contour Building and Construction Pty Ltd v Kerr [2008] NSWSC 883

Findex Group Ltd v iiNet Ltd [2019] NSWSC 1198

Glencore International AG v Selwyn Mines Ltd (2005) 223 ALR 238; [2005] FCA 801; (2005) 223 ALR 238

Hatfield v TCN Channel 9 Pty Ltd (2010) 77 NSWLR 506; [2010] NSWCA 69

Matrix Film Investment One Pty Ltd v Alameda Films LLC [2006] FCA 591

Murray v Wheeler [2013] NSWSC 137 per Bergin CJ in Eq

O’Connor v O’Connor [2018] NSWCA 214

Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435; [2008] FCAFC 133

Pharmacy Guild of Australia v Ramsay Health Care Ltd [2019] NSWSC 1045

St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147; [2004] FCA 1360

Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49

Wang v Cai [2021] NSWSC 1162

Texts Cited:

Taylor P SC and Dr E Elms OAM, Ritchie’s Uniform Civil Procedure NSW (Looseleaf, LexisNexis Australia)

Category:

Principal judgment

Parties:

Harry Richard Howell (First Plaintiff)
Jeremy Robert Howell (Second Plaintiff)
Rosemary Edythe Kelly (Defendant)

Representation:

Counsel:
S Chapple (Plaintiffs)
P Folino-Gallo (Defendant)

Solicitors:
Armstrong Legal (Plaintiff)
Coleman Greig Lawyers (Defendant)

File Number(s):

2021/00067283

Publication restriction:

Nil

Judgment

1. HER HONOUR: By summons filed on 9 March 2021, the plaintiffs (Harry Richard Howell and his brother, Jeremy Robert Howell) seek discovery pursuant to r 5.3 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) from the defendant (Rosemary Edythe Kelly).

2. The hearing of the application for preliminary discovery commenced on 25 October 2021 but, due to personal difficulties, was not able to be completed on that day. The parties agreed that the application should then be dealt with on the papers having regard to the written and oral submissions that had been made.

Background

3. The following background to this application is drawn from the affidavits read on the application and the submissions made by the respective parties. I here make no findings as to any disputed facts that may arise in the substantive proceedings.

4. The plaintiffs are two of the three children of the late Harry Edmund Hector Howell (the deceased) and his first wife, Veronica. The deceased and his first wife divorced in 1990. In around 1995, the deceased commenced a relationship with the defendant.

5. The deceased owned a property in Lane Cove (the Lane Cove Property). The defendant owned properties located at St Ives, Naremburn and Woolloomooloo.

6. Until 2013, the deceased and the defendant maintained separate residences; the deceased living at the Lane Cove Property; the defendant at her property in St Ives. In 2013, the defendant moved into the Lane Cove Property.

7. On 7 January 2014 (one of the five critical events on which the plaintiffs here relies as the basis for this preliminary discovery application), the deceased executed an Enduring Power of Attorney in favour of the defendant. The plaintiffs emphasise that the Enduring Power of Attorney so granted did not include a clause permitting the defendant to give reasonable gifts or to confer benefits on herself or others.

8. The second of the said critical events is that, in late 2014, the deceased sold the Lane Cove Property for the sum of $1.62 million. At around the same time (the third of the critical events) the deceased and the defendant opened two joint accounts with Westpac (a Westpac Choice Account and a Westpac eSaver Account). Up until then the couple had maintained separate finances. In 2015, the deceased moved in to live with the defendant at the Wolloomooloo Property. The defendant has deposed that, shortly before the deceased moved to live with her at the Wolloomooloo Property, the deceased suggested that they open joint accounts because it would “expedite things and make it easier for us both”.

9. The fourth of the five critical events is that the deceased suffered a serious stroke on 12 April 2015. After his stroke, the deceased was in a hospital in Waverley for approximately three months and then moved, on 22 July 2015, to an aged care facility in Northbridge, where he remained until his death on 15 April 2019.

10. The deceased executed his last Will on 25 November 2016, appointing the defendant as his executor and trustee and, apart from a small pecuniary legacy (to the “Sydney Hash House Harriers”), the deceased left the residue of his estate: as to one half to the defendant and as to the other half to be divided equally among his three children.

11. The fifth critical event to which the plaintiffs point on the present application is that, at the time of the deceased’s death (and notwithstanding the sale of the Lane Cove Property), the only asset of the deceased’s estate (other than his superannuation) was a Refundable Accommodation Deposit (in respect of his aged care accommodation) valued at $750,000.

12. As adverted to above, the deceased held superannuation at the date of his death in an amount just over $650,000. The deceased had executed a binding nomination which provided for a distribution of the superannuation as to 52% to the defendant, and as to 16% each to his three children.

13. Probate of the Will was granted to the defendant on 25 July 2019.

14. The defendant has provided to the plaintiffs statements for both the Westpac Choice Account and the Westpac eSaver Account, covering the period from the deceased’s stroke in April 2015 until his death in April 2019. The defendant has also provided to them superannuation records from 24 June 2016.

15. In relation to the Westpac eSaver Account, the plaintiff says that the documents produced by the defendant record that, between April 2015 and April 2019, funds in excess of $2.5 million were deposited into the Westpac eSaver Account. The plaintiffs point in this regard to the following: the deposit of a sum of $1,458,131.43 into the Westpac eSaver Account on 7 April 2015 (which the plaintiffs say it might be inferred comprised the proceeds of sale of the Lane Cove Property); a sum of $51,403.01 (described as “Principal Paid on Term Deposit [#xx8]”) deposited on 3 July 2015; a sum of $34,468.96 (described as “Principal Paid on Term Deposit [xx93]”) deposited on 10 November 2015; and a sum of $1,009,421.92 (described as “Principal Paid on Term Deposit [#xx85]”) deposited on 12 May 2016. At the time of the deceased’s death, a balance of only $10,858.37 was remaining in that Westpac eSaver Account.

16. In relation to the Westpac Choice Account, the records show that, between April 2015 and April 2019, the majority of the funds deposited into the Westpac Choice Account were transferred from the Westpac eSaver Account. The plaintiffs point, however, to the following additional deposits, totalling in excess of $600,000: monthly pension payments from the deceased’s superannuation, commencing in July 2016 of $4,103.34 (increasing to $4,295 by the date of the deceased’s death); a total of $42,321.91 from Challenger Life between 16 September 2016 and 15 September 2017; a sum of $28,509.68 from Pershing Securities on 22 June 2017; a sum of $50,000 from an account with ING on 5 December 2016; a sum of $30,000 from an account with ING on 15 March 2017; a sum of $104,422 from an account with ING on 18 April 2017; a sum of $57,000 from an account with ING on 29 June 2018; a sum of $100,623 (described as “Principal Paid on Term Deposit [xx17]”) on 28 August 2017; and a sum of $75,261.61 (described as “PIML UT Redemption”) on 31 August 2017. By the time of the deceased’s death, there was a little under $20,000 remaining in the account.

17. The plaintiffs maintain that it is remarkable that in the space of four years (during which time the deceased was either in hospital or in a nursing home) in excess of $3 million was transferred out of the Westpac eSaver Account and the Westpac Choice Account. The plaintiffs accept that some of those transfers were for the deceased’s benefit (such as the payment of the Refundable Accommodation Deposit of $750,000 and other nursing home fees). However, the plaintiffs have identified transactions totalling at least $1,840,674.58 which they say, by their size, volume or nature, attract a suspicion that they were not for the benefit of the deceased.

18. Those transactions include a withdrawal on 16 May 2016 of $1,013,564.70 from the Westpac eSaver Account as well as withdrawals (from the time of the deceased’s stroke) of at least $827,109.88 from the Westpac Choice Account in the following categories: $53,139.52, in respect of groceries and restaurants; $45,642.83, in respect of general shopping; $86,075.39, in respect of home improvements and renovations; $114,106.03, in respect of credit card payments; $19,874, in respect of the defendant’s grandson’s school fees; $12,129.90, in respect of insurance; various cheques totalling $474,643.11; and various other withdrawals of $21,500.

19. In summary, the plaintiffs here seek preliminary discovery from the defendant to allow them to determine whether or not to commence proceedings against the defendant to recover funds missing from the joint account. For that purpose it is said that preliminary discovery is necessary to assess, first, the prospects of success of any claim and, second, the possible quantum of any claim. The potential claim is a claim either for breach of fiduciary duty or for unconscionable conduct (it being said that, although the funds were held in a joint account, the whole of the proceeds were held on trust for the deceased) (see T 3.49).

Plaintiffs’ submissions

20. As noted above, the claim is brought pursuant to r 5.3 of the UCPR (which is set out below). The plaintiffs accept that a threshold question is whether they “may be entitled to make a claim” but they say that it is not necessary that they establish a prima facie case for relief; nor is it necessary that they specify with precision the cause of action proposed.

21. The plaintiffs nevertheless accept that it is necessary that an applicant seeking preliminary discovery provide some particularisation of the nature of the relief in contemplation so that a view can be formed as to whether the applicant may be entitled to make a claim for relief and to determine which, if any documents, in the possession of the prospective defendant are to be discovered (referring here to O’Connor v O’Connor [2018] NSWCA 214 (O’Connor v O’Connor) at [30] per Simpson AJA (with whom McColl and Macfarlan JJA agreed)). It is said that it is only if a prospective claim is so weak as to be untenable or unarguable that the application ought to be dismissed on the basis that the applicants cannot establish that they may be entitled to make a claim for relief (see O’Connor v O’Connor at [70]).

22. It is noted that information bearing upon an applicant’s decision whether or not to commence proceedings against a prospective defendant may include questions such as: (i) whether there exist defences that might defeat a claim; and (ii) whether a claim would potentially be worthwhile in the sense of yielding an award of damages or other order sufficient to justify the commencement of proceedings. Accordingly, it is noted that an order for preliminary discovery may extend to an order for discovery for documents going only to the quantum of relief that might be claimed (citing O’Connor v O’Connor at [24]).

23. The first prospective claim here identified is that the funds transferred from the Westpac eSaver Account and the Westpac Choice Account were transferred by the defendant in breach of trust, breach of fiduciary duty, or by reason of unconscionable conduct. It is noted that such a claim would require, as a threshold matter, a finding that the deceased was at all times entitled beneficially to the whole of the funds in the joint Westpac eSaver Account and the Westpac Choice Account.

24. The plaintiffs say that there is a reasonable objective basis for such a belief, for the following reasons.

25. First, the evidence of Jeremy that, throughout the deceased’s relationship with the defendant (at least until 2014), the couple maintained separate finances, splitting their shared expenses (such as food and outings) equally. It is said that this is consistent with the defendant’s evidence that each personally paid the outgoings of his or her respective properties and that they maintained separate bank accounts from which they paid their respective living expenses and outgoings (although it is noted that the defendant deposes that each would pay the other’s expenses from time to time).

26. Second, the execution by the deceased of a “Memorandum of Understanding” in which the deceased provided his consent to the defendant “to use our joint account for all household expenses, including personal items and other expenses as she sees appropriate”. It is submitted that if the deceased and the defendant each had a true joint entitlement to the funds in the accounts, then there would have been no need to execute that document. The plaintiffs say that its execution is more consistent with the deceased being beneficially entitled to the funds in those accounts. Further, it is noted that the deceased’s consent is expressly limited to only certain types of expenses (which it is said also suggests that the couple considered that the deceased was the beneficial owner of the accounts).

27. Third, that on 6 June 2017, the defendant transferred a sum of $2,000 into the Westpac Choice Account, and referred to that payment as a “Loan to HH”; and on 21 December 2018, the defendant deposited $10,000, using the same narrative. The plaintiffs say that those narratives are wholly consistent with the deceased being the sole beneficial owner of the joint accounts.

28. Ultimately, however, the plaintiffs say that the critical evidence (for the success of any claim that the joint accounts were held beneficially for the deceased) will be evidence as to the source of funds in the two Westpac accounts. Thus, the plaintiffs seek disclosure of bank statements that are sufficient to allow them to determine the source of the funds identified in the transactions referred to above. In particular, the plaintiffs seek (see items 1-5 of Annexure A to the plaintiffs’ submissions), the following:

1.   Copies of all bank statements for the period 1 January 2015 to 15 April 2019 in respect of any account in the sole or joint name of the deceased, including but not limited to [an identified ING account and four specified term deposits];

2.   Copies of any financial statements recording money held on behalf of the deceased and/or [the defendant], or paid to the deceased and/or [the defendant] by Challenger Life;

3.   Copies of any financial statements recording money held on behalf of the deceased and/or [the defendant], or paid to the deceased and/or [the defendant] by Pershing Securities;

4.   Copies of any financial statements recording money held on behalf of the deceased and/or [the defendant], or paid to the deceased and/or [the defendant] by Perpetual Investment Management Limited; and

5.   Copies of any statements recording money held in any superannuation fund in the name of the deceased between 1 April 2015 and 15 April 2019.

29. The plaintiffs say that, assuming that the deceased was beneficially entitled to the funds in the two Westpac accounts, the precise characterisation of the plaintiffs’ prospective claim against the defendant depends on the manner in which she carried out the various transactions.

30. In that regard, it is said that, to the extent that the defendant used the Power of Attorney to transfer funds to herself, or for her benefit, the plaintiffs’ prospective claim is that those transfers were in breach of fiduciary duty that she owed to the deceased, arising from the relationship of principal and attorney. The plaintiffs say that there can be little doubt that the deceased was in a position of special disadvantage vis-à-vis the defendant; in that he had suffered a significant stroke in April 2015; he was hospitalised for three months and was not able to return home; and he was subsequently moved to a nursing home in July 2015 where he remained until his death. It is said that the defendant had oversight and control of his bank accounts to the extent that (on the plaintiffs’ evidence) the deceased complained that he no longer knew his financial circumstances. The plaintiffs say that the deceased was in no position to look after his own interests. To the extent that the defendant asserts that she was authorised by the deceased to transfer funds to herself, or for her benefit, the plaintiffs’ prospective claim is that, by virtue of the position of the deceased’s special disadvantage, it was unconscionable in all the circumstances for the defendant to accept the benefit of transactions that were to the clear detriment of the deceased (referring to Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49 at [38] per Kiefel CJ, Bell, Gageler, Keane, and Edelman JJ and at [109]-[113] per Gordon J).

31. To the extent that the defendant did not use the Power of Attorney, but was not otherwise authorised to transfer the funds by the deceased, the plaintiffs say that such transfers were in breach of trust.

32. The plaintiffs say that in relation to these prospective claims, they do not know: whether some or all of the money that was withdrawn from the accounts was used for the deceased’s direct or indirect benefit; whether some or all of the money that was withdrawn from the accounts was transferred directly to the defendant; or whether some or all of the money that was withdrawn from the accounts was transferred to a third party. They contend that the answer to each of those questions will materially affect: first, the prospects of success of the plaintiffs in any claim against the defendant to recover those funds; and, second, the quantum of any claim that the plaintiffs may have against her. It is submitted that discovery of the following documents sought in Annexure A to their submissions will assist the plaintiffs by providing at least a partial answer to those questions and, therefore, will assist in determining whether to bring a claim against the defendant:

6.   All documents recording the purpose of the following payments, and the person or entity to whom the payments were made:

(i)   Cheque 200058 dated 30 July 2015 for $230,000

(ii)   Cheque 200062 dated 14 August 2015 for $200,000

(iii)   Cheque 200075 dated 16 June 2016 for $24,975

(iv)   Cash withdrawal of $1,013,564.70 on 16 May 2016

(v)   Cash withdrawal of $100,000 on 21 April 2017

(vi)   Cash withdrawal of $100,000 on 30 August 2017

7.   Copies of credit card statements from 1 April 2015 until 15 April 2019 in respect of the following cards:

(i)   Qantas Altitude card referred to in transaction dated 30 January 2017 in account [#xxx] 696;

(ii)   American Express card referred to in transaction dated 26 March 2019 in account [#xxx] 696;

(iii)   The unnamed credit card referred to in transaction dated 19 February 2019 in account [#xxx] 696; and

(iv)   The ANZ card referred to in transaction dated 22 June 2015.

8.   Copies of all bank statements for any account held with any financial institution in the name of [the defendant] from 1 April 2015 until 15 April 2019.

33. Insofar as reference is made to documents “recording the purpose of” the payments (see [6] above), the plaintiffs say that they are hoping to obtain, at least in relation to the cheques, the relevant cheque butt; and in relation to the cash withdrawals some record of where the money was deposited (say into a bank account) or an invoice for which the money was paid (see at T 5.30-40) (i.e., cheque butts, withdrawal or deposit slips, invoices and the like).

33. As to categories [7] and [8], while the plaintiffs pressed for them, it was accepted that whether or not the moneys were paid to the plaintiff or to a third party would not, on one view, impact the quantum of the claim or the prospects of success.

34. The second prospective claim here identified is that of an administration suit against the defendant in her capacity as executor of the deceased’s estate.

35. The plaintiffs say that their review of the statements of the Westpac Choice Account and the Westpac eSaver Account reveals that significant funds were deposited from various term deposits, accounts with other banks, and by Challenger Life and Perpetual Investment Management Limited. They say that the presence of significant deposits from those various accounts means that there is a material possibility that those assets remained in existence at the time of the deceased’s death (and have not been disclosed in the inventory of property annexed to the grant of probate). It is said that discovery of the documents identified in items one to five of Annexure A will allow the plaintiffs to determine whether to bring an administration suit against the defendant.

36. The plaintiffs say that the prospective proceedings are likely to be time consuming and expensive; and therefore they seek disclosure of documents to assist them to make a reasoned, commercial and early determination as to their prospects of success and the quantum of any claim.

Defendant’s submissions

38. The defendant does not take issue with the proposition that the plaintiffs may be entitled to make a claim, having regard to the low threshold that the plaintiffs are required to discharge in this regard (citing O’Connor v O’Connor at [30]); noting that the test to be applied (whether it appears to the court) is wider than a test requiring there to be “reasonable cause to believe”.

39. The defendant concedes that information bearing upon an applicant’s decision whether or not to commence proceedings against a prospective defendant may include questions such as: whether there exist defences that might defeat a claim; and whether a claim would potentially be worthwhile in the sense of yielding an award of damages or other order sufficient to justify the commencement of proceedings; and hence accepts that an order for preliminary discovery may extend to an order for discovery for documents going only to the quantum of relief that might be claimed (O’Connor v O’Connor at [24]; reference here being made to Hatfield v TCN Channel 9 Pty Ltd (2010) 77 NSWLR 506; [2010] NSWCA 69 at [51] per McColl JA).

40. Reference is made by the defendant to Morton v Nylex Ltd [2007] NSWSC 562, where White J, as his Honour then was, dismissed an application for preliminary discovery under r 5.3 UCPR for failure of the plaintiff to prove the negative requirement that the plaintiff was unable to obtain sufficient information to decide whether or not to commence proceedings (see at [33]). His Honour there noted that preliminary discovery cannot be used to build up a case which an applicant has already decided, or could decide, to bring (citing Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 1500 (Alphapharm v Eli Lilly) per Lindgren J; Glencore International AG v Selwyn Mines Ltd (2005) 223 ALR 238; [2005] FCA 801; (2005) 223 ALR 238 (Glencore International v Selwyn Mines) at [15] per Lindgren J; Matrix Film Investment One Pty Ltd v Alameda Films LLC [2006] FCA 591 at [15]-[19], [25] per Tamberlin J).

41. In Alphapharm v Eli Lilly, to which White J referred, Lindgren J refused an application for preliminary discovery under the equivalent Federal Court rule on the basis that the applicant had sufficient information to decide whether to commence proceedings (see at [41]; [55]). In Glencore International v Selwyn Mines (at [13]), Lindgren J indicated that the measure of preliminary discovery extends to information that is necessary, but no more than that which is reasonably necessary, to overcome the insufficiency of information already possessed by the plaintiff after the plaintiff has made “all reasonable inquiries” to enable it to make a decision as to whether to commence proceedings.

42. In the present case, the defendant’s position is that the documentation that has already been provided by way of informal discovery is sufficient for the plaintiffs to articulate their claim against the defendant (whether or not it is sufficient to enable the plaintiffs properly to quantify their claim). The defendant says that the payee of any money withdrawn from the accounts will not enable the plaintiffs to advance or better to articulate the nature of the claim or the quantum of the claim.

43. The defendant says that (contrary to the plaintiffs’ submission that the deceased’s consent was expressly limited to certain types of expenses – see at [28(b)]), the document executed by the deceased contemplated the defendant using the joint account for all household expenses including personal items and other expenses as the defendant saw appropriate. The defendant says that, on its face, this is a broad and unfettered discretion to apply funds (and that how the funds were applied does not affect the viability or quantum of the claim). The defendant says that if the validity of the Memorandum of Understanding is maintained, then there is no utility in demarcating between the transactions that are for the deceased’s benefit and those that are not. (The defendant accepts that, in the event that the Memorandum of Understanding is held to be invalid, there may be an argument that the demarcation between money paid for the benefit of the deceased and the money that was not so applied could inform the quantification of the claim.) (As adverted to above, the defendant takes issue with the proposition that information as to whether funds were directly paid to the defendant or a third party will have a bearing upon the viability of the claim, nor the quantum of the claim.)

44. The defendant submits that there is sufficient material in the plaintiffs’ possession for them to make a reasoned, commercial and early assessment of both the prospects of success and the quantum for any claim they intend to bring. The defendant submits that the plaintiffs are here seeking to bring the present application in order to bolster the evidence in support of their claim in a manner that is impermissible and falls outside of the contemplation of r 5.3 of the UCPR. Thus, the defendant submits that the summons should be dismissed with costs as agreed or assessed.

Determination

45. Rule 5.3 of the UCPR provides, relevantly:

5.3   Discovery of documents from prospective defendant

(1)   If it appears to the court that:

(a)   the applicant may be entitled to make a claim for relief from the court against a person (“the prospective defendant”) but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and


(b)   the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and


(c)   inspection of such a document would assist the applicant to make the decision concerned


the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person’s possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief.

…

46. The purpose of preliminary discovery is to obtain information for the purpose of enabling a decision to be made as to whether there is a cause of action (see Findex Group Ltd v iiNet Ltd [2019] NSWSC 1198 at [54]).

47. As I noted in Pharmacy Guild of Australia v Ramsay Health Care Ltd [2019] NSWSC 1045 (Pharmacy Guild) (see from [252]-[254], with reference to Murray v Wheeler [2013] NSWSC 137 per Bergin CJ in Eq; Contour Building and Construction Pty Ltd v Kerr [2008] NSWSC 883 per Barrett J, as his Honour then was), an order for preliminary discovery can only be made if it appears to the Court that the applicant has made reasonable enquiries and, notwithstanding the reasonable enquiries, the applicant has been unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant. The preliminary discovery jurisdiction is not appropriately invoked in order to “build up a case which an applicant has already decided, or could decide to bring” (see Taylor P SC and Dr E Elms OAM, Ritchie’s Uniform Civil Procedure NSW (Looseleaf, LexisNexis Australia) at [5.3.15] and the cases there cited, including St George Bank Ltd v Rabo Australia Ltd(2004) 211 ALR 147; [2004] FCA 1360; cited with approval in Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2008) 169 FCR 435; [2008] FCAFC 133 at [36] per Heerey, Gyles and Middleton JJ). I had cause to consider those principles more recently in Wang v Cai [2021] NSWSC 1162; and I do not here need to restate those principles.

48. In the present case, there is no issue as to whether the plaintiffs satisfy the threshold that they be persons who might be entitled to bring a claim; nor that they have not made reasonable enquiries to obtain the information sought. The question is whether they have been unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant.

49. I accept that the information sought in categories one to six (with a limitation on six as I explain below) is information that is reasonably required in order for the plaintiffs to decide whether or not to commence the foreshadowed proceedings against the defendant and that a decision has not yet been made to do so. In particular, I accept that the source of the funds deposited into the joint account will be relevant in determining the prospects of success of a fiduciary duty claim of the kind being considered. The plaintiffs quite fairly concede that (and assuming that some $1.4 million deposited into the relevant Westpac account was referable to the proceeds of sale of the Lane Cove Property) if the balance of the moneys deposited into the joint account(s) was referable to moneys deposited by the defendant, then that would be harmful to the case that the account proceeds were held on trust for the deceased; whereas it is said that if the deposits all came from the deceased’s bank account then that would be strong evidence in support of the plaintiffs’ argument.

50. In the present case, this is not a situation where the decision has already been formed that there is a cause of action and there is an intention to proceed on that cause of action. I accept that the plaintiffs’ position is that they are seeking to obtain documents in order to assess the prospect of success and likely quantum of a claim before making the decision whether or not to commence proceedings against the defendant (whether for breach of fiduciary duty or the like or to bring an administration suit).

51. Relevant for that purpose also is the destination of the funds withdrawn from the joint accounts (in the transactions that the plaintiffs have identified). In that regard, I consider that the description of documents as those “recording the purpose” of the withdrawals is too broad. However, if category six is limited to cheque butts, withdrawal slips, deposit slips or invoices in payment of which the cheques were made, then I consider that it is appropriate for there to be preliminary discovery of those documents. I will not allow categories seven and eight for the reasons explored in the submissions.

52. As to costs, I consider that the plaintiffs have substantially succeeded in the relief sought and I see no reason why costs should not follow the event.

Order

53. Accordingly, I make the following orders in relation to the summons:

1. Order pursuant to pursuant to rule 5.3(1) of the Uniform Civil Procedure Rules 2005 that the defendant give discovery within 21 days of:

1. Copies of all bank statements for the period 1 January 2015 to 15 April 2019 in respect of any account in the sole or joint name of the deceased, including but not limited to: (i) ING Direct Account 011405198 0230562 (ii) Term Deposit 445485 (iii) Term Deposit 469217 (iv) Term Deposit 415948 (v) Term Deposit 365493.

2. Copies of any financial statements recording money held on behalf of the deceased and/or the defendant, or paid to the deceased and/or the defendant by Challenger Life.

3. Copies of any financial statements recording money held on behalf of the deceased and/or the defendant, or paid to the deceased and/or the defendant by Pershing Securities.

4. Copies of any financial statements recording money held on behalf of the deceased and/or the defendant, or paid to the deceased and/or the defendant by Perpetual Investment Management Limited.

5. Copies of any statements recording money held in any superannuation fund in the name of the deceased between 1 April 2015 and 15 April 2019.

6. Copies of cheque butts, withdrawal slips, deposit slips in relation to, and any invoices in respect of which any of the following amounts were paid: (i) Cheque 200058 dated 30 July 2015 for $230,000 (ii) Cheque 200062 dated 14 August 2015 for $200,000 (iii) Cheque 200075 dated 16 June 2016 for $24,975 (iv) Cash withdrawal of $1,013,564.70 on 16 May 2016 (v) Cash withdrawal of $100,000 on 21 April 2017 (vi) Cash withdrawal of $100,000 on 30 August 2017.

2. Order that the defendant pay the plaintiffs’ costs of the summons.

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Decision last updated: 05 November 2021