In the matter of Graziers Pastoral Pty Ltd

[2020] NSWSC 1818

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Graziers Pastoral Pty Ltd [2020] NSWSC 1818
Hearing dates:	14 December 2020
Decision date:	14 December 2020
Jurisdiction:	Equity - Corporations List
Before:	Leeming JA
Decision:	See [25].
Catchwords:	PROCEDURE – discovery – disputed categories of documents in oppression suit – no question of principle.
Legislation Cited:	Civil Procedure Act2005 (NSW), s 56
Category:	Procedural and other rulings
Parties:	John Parilo (1st Plaintiff) WD Capital Pty Ltd ACN 146 628 837 (2nd Plaintiff) Parilo Holdings Pty Ltd ACN 605 816 297 (3rd Plaintiff) Graziers Pastoral Pty Ltd ACN 162 960 634 (1st defendant) Windsor Livestock Holdings Pty Ltd ACN 605 816 304 (2nd defendant) Windsor Livestock Pty Ltd ACN 169 917 793 (3rd defendant) Suelen McCallum (4th defendant) Riad Tayeh (5th defendant) Alan Gordon Taylor (6th defendant) Free Flight Australia Pty Ltd ACN 162 958 563 (7th defendant) Redglint Pty Ltd ACN 003 922 638 (8th defendant)
Representation:	Counsel: D Smith (Plaintiffs) J Hogan-Doran SC (1st-5th defendants) A Combe (6th-8th defendants) Solicitors: StevensVuaran Lawyers (Plaintiffs) Coleman Greig Lawyers (1st-5th defendants) William Roberts Lawyers (6th-8th defendants)
File Number(s):	2020/106004
Publication restriction:	Nil

Judgment

1. LEEMING JA: By paragraph 1 of their interlocutory process filed 24 November 2020, the plaintiffs seek orders concerning discovery.

2. Helpfully and constructively, in accordance with directions made by the list judge, there has already been a very substantial narrowing of the disputed discovery categories from originally 44 to a small handful.

3. The essential background is that the plaintiffs maintained there was an informal joint venture with the sixth, seventh and eighth defendants to exploit land, including in western Sydney. The joint venture broke down, leading to the execution of a Deed of Mandate on 11 May 2018.

4. The deed provided that the shareholders granted a mandate to two “Incoming Directors”, who have become the fourth and fifth defendants, to manage the day to day affairs of the companies, undertake the orderly and arm’s length sale of all of the assets the companies, either for cash or in specie, and place the proceeds of sale of all the assets of the companies into a trust account under the control of the Incoming Directors to be used to (A) meet all day to day expenses of the companies; (B) satisfy all liabilities of the companies (including but not limited to the fees of the Incoming Directors and any other fees and expenses they may incur in fulfilment of the Mandate); and (C) return the balance of the proceeds of sale to the shareholders in proportion to their respective shareholdings.

5. Following some correspondence in 2019 which the plaintiffs regarded as unsatisfactorily answered, the plaintiffs commenced proceedings in 2020 in the nature of oppression concerning the newly appointed directors under the deed of mandate. Those are the proceedings which give rise to the present dispute as to discovery. It will be necessary as we go on to identify more particular aspects of the evidence and pleadings, but that will suffice for present purposes.

Category 3

6. The first item of disputed discovery is category three. In part, the plaintiffs seek pre-May 2018 (which I shall call “pre-appointment”) financial reports, including periodic reports, commencing from 1 March 2013, which is approximately when the joint venture came into existence.

7. All of those reports are, by definition, by virtue of their being “reports”, documents that will have been provided to the first plaintiff, Mr Parilo, in his capacity as either director or shareholder. Further, there is no opposition to the provision of annual financial reports prior to May 2018, but the first to fifth defendants maintain that the category is too broad otherwise. I agree with the latter submission.

8. There is evidence that Mr Parilo's record keeping over this period of time, despite his being a director, was poor, and that Mr Parilo and his solicitors have “little information in their possession”. But putting to one side the deficiencies in their record keeping, these documents are only relied upon in order to seek to establish the terms of the joint venture between the parties. I do not think it is necessary for the resolution of the real issues in dispute within the meaning of the Practice Note SC Eq 11 for more than the annual financial reports to be provided.

9. The next dispute concerns category 3(c), which is the bank statements of four nominated accounts of the first and either the second or third defendant, for the period from March 2013 to date.

10. There is qualified opposition to producing those bank statements. As I understood it, no part of the objection goes to the burden of producing four nominated bank accounts, from particular accounts maintained at the Commonwealth Bank of Australia and St George Bank. It is likely that the costs or time of production, which as I can see would not be needed to be done otherwise than electronically, would be less than an hour.

11. I bear in mind that there is an unfortunate history of these proceedings involving claims of distrust by the plaintiffs. I am expressing no view whatsoever as to whether any of those claims are well founded or not. I take on board Mr Hogan-Doran’s submissions that these documents, especially in so far as they are pre-appointment, are of limited utility, and that it is already agreed to provide some of the information in answer to other categories. But in the circumstances of this dispute, it seems to me that the way most consistent with s 56 of the Civil Procedure Act to resolve as much as may be the dispute between the parties is to provide primary financial records of the company so that Mr Parilo and his advisers can readily be satisfied as to what is happening to the money in their companies. The idea that there should be the time and cost of producing redacted copies, not to mention the possibility of further dispute concerning the redactions, tells powerfully in favour of complete production. In the circumstances of this dispute, I regard the bank statements as falling within the Practice Note.

12. In relation to category 3(a) there will be discovery confined to annual financial reports pre-appointment. In relation to category 3(c), there will be an order in accordance with the whole of category 3(c).

Categories 11 and 12

13. Disputed categories 11 and 12 are all documents recording or referring to the work to be done by Monty Managers for the JB companies or the DVT directors, and all documents recording or referring to calculations of the cost or value of work to be done by Monty Managers for the JB companies or the DVT directors. This is directed, at least principally, to the allegation that Monty Managers, which the plaintiffs allege is controlled by the sixth defendant Mr Taylor, performed work and was paid at least $154,000 in fees after appointment in a way which is contrary to what is defined in the pleading as either the “contracting prohibition” or the “payment prohibition”: see paragraphs 70-73 of the points of claim.

14. The forensic purpose underlying category 12, as I understand it, is an attempt to identify the profits achieved by Monty Managers for the work it has performed.

15. These two categories are, at least potentially, very broad. They are limited in time, by reference to when Monty Managers was retained to do work, but the evidence before me in the form of Mr Taylor's affidavit makes it plain that a very wide range of work was undertaken by either or both of him and his company.

16. Against that it is said by the plaintiffs that discovery is only sought from the DVT directors and the joint venture companies, namely the first to fifth defendants. Even so, I see real scope for these categories as formulated to amount to a great deal of work. Further, it is said that these documents are necessary for the briefing of an expert who will opine on, speaking generally, the work done by Monty Managers. The need for an expert is contested, and without expressing a view one way or the other, it is not self-evident.

17. Part of the plaintiffs’ submission referred to the possibility of a subpoena to Monty Managers, that is something that is obviously not before me today.

18. In all the circumstances I am not persuaded that either of those categories is necessary for the purpose of discovery. I rule against the provision of the entirety of categories 11 and 12.

Category 17

19. Discovery category 17 seeks “all records required to be kept under clause 3 annexure D of the bio-banking agreements”. One of those agreements is in evidence. It is an agreement between Windsor Livestock Holdings Pty Ltd and a State Government Minister which, simplifying very considerably, confers a right to payments well in excess of a million dollars over a more than 20 year period, but which imposes record keeping requirements by cl 3 for the various management actions that are done in order to qualify for the payments.

20. Against the production of this category, the first to fifth defendants maintain that what work actually was done is not an issue in the proceedings, they also rely upon the rejection by me of earlier categories which are directed to documents for the provision of expert evidence about the value and cost of work done by Monty Managers.

21. In my view there is merit in the alternative submission advanced by the plaintiffs, namely that the documents which the agreement requires, as the quid pro quo for the payment of very substantial amounts of money from the government, are likely to be “much better evidence of the work required to be done” and “much more readily comprehensible” than other forms of evidence as to the work being done. There is no suggestion that there is any element of oppression in providing the documents which are already required to be maintained pursuant to the bio-banking agreements. I repeat the sentiment which underlay my ruling on the first category, namely, that there is a history of disputation between these parties and in my view s 56 favours the provision of primary documents which are apt to resolve as best as may be at this stage that dispute. An order for discovery will be made in relation to category 17.

Category 29(f) and (g)

22. The next disputed category is 29(f) and (g), which seeks all documents recording or referring to the correspondence and meetings between the DVT directors and Mr Taylor in which the following is discussed “the work done or to be done by Monty Managers or EnviroCom and payments to Mr Taylor, Monty Managers or EnviroCom”.

23. For substantially the same reasons as related to category 11, I am not persuaded that discovery of that category, which has real capacity to be onerous and oppressive, is necessary for the resolution of these proceedings. Against the submission that its denial would lead to a real forensic disadvantage to the plaintiffs, I can confirm what was raised in argument, namely, that the rejection of a discovery category does not stand in the way of a subsequent narrower notice to produce directed squarely to particular paragraphs of Mr Taylor's evidence. I reject the application for discovery of category 29(f) and (g).

Category 38

24. The last disputed category is “reports from Mr Taylor or his related entities used to compile the reports to shareholders referred to at paragraphs 31-40 of Ms McCallum's affidavit”. Although my ruling is without prejudice to the plaintiffs’ right more specifically to identify underlying reports, which were stated to have been attached to the reports to shareholders in those paragraphs, an example of which appears to be at pages 2 and 3 of the report of 22 July 2019, which was the only report to which I was taken, I am against the plaintiffs’ request for the whole of this category in its breadth to be the subject of discovery. Again, it is potentially very broad, and there is room for disputation as to what precisely a “report” is for the purposes of that category. I reject the application for discovery of category 38.

25. I direct the parties to incorporate the rulings in these reasons with the matters already agreed into a single document, and to provide that document and an agreed timetable for the provision of discovery, or in default of agreement, the timetable for which each party contends and short submissions in support.

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Decision last updated: 15 December 2020