Indtex Pty Ltd v Knight Homes Pty Ltd
[2020] VSC 427
•14 July 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2018 01885
| INDTEX PTY LTD (ACN 075 711 125) | Plaintiff |
| v | |
| KNIGHT HOMES PTY LTD (ACN 121 402 480) | Defendant |
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JUDGE: | Derham AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 May 2020 |
DATE OF JUDGMENT: | 14 July 2020 |
CASE MAY BE CITED AS: | Indtex Pty Ltd v Knight Homes Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2020] VSC 427 |
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PRACTICE AND PROCEDURE – Discovery of documents – Particular discovery pursuant to r 29.08 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) – Whether order should be made – Application also pursuant to s 55 of the Civil Procedure Act 2010 (Vic) – Applications refused.
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| APPEARANCES: (By Written Submission) | Counsel | Solicitors |
| For the Plaintiff | Mr R G Squirrel | Efron & Associates |
| For the Defendant | Mr C A Connor | KCL Law |
HIS HONOUR:
Introduction
The plaintiff applies by summons filed on 2 March 2020 for the defendants to make ‘further discovery’ pursuant to r 29.08 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules). As can be seen from the reference to r 29.08 of the Rules, the application is in fact for what is generally called ‘particular discovery’, a matter of some importance to which I will return.
Background
The plaintiff (Indtex) was the registered proprietor of the land at 892 Glen Huntly Road, Caulfield South (Land).[1] The defendants are Knight Homes Pty Ltd, a registered builder (Builder), and Ronan Kavallero, who is the sole director of the Builder (Kavallero).
[1]The land more particularly described in Certificate of Title Volume 09080 Folio 470.
The proceeding was commenced by generally indorsed writ on 23 October 2018 and came before the Judge in the Practice Court as an application for removal of a caveat lodged by the builder over the Land. The general indorsement was that:
(a) on about 2 September 2015, Indtex and the Builder entered a Building Contract for the construction of 9 apartments (the apartments) on the Land;
(b) Indtex agreed with Kavallero to appoint him as an independent consulting project manager for the development of the apartments at a fee of $50,000 (Consulting Agreement);
(c) on about 3 January 2017, Indtex and the Builder entered a Profit Share Deed whereby, amongst other things, Indtex agreed to pay 50% of the profit on the construction and on-sale of the apartments to the Builder and to charge the land with payment of that amount (Profit Share Deed);
(d) the Builder and Kavallero engaged in misleading and deceptive conduct and unconscionable conduct, all in trade and commerce, to secure the entry into both the Consulting Agreement and the Profit Share Deed in breach of ss 18, 20 and 21 of the Australian Consumer Law (ACL), in consequence of which Indtex has suffered loss and damage;
(e) the Builder caused a Caveat to be lodged against the land and has refused to remove it despite requests that it do so;
The application for removal of the caveat, made under s 90(3) of the Transfer of Land Act 1958 (Vic), was supported by an affidavit of Henry Zelman, the sole director of Indtex. That affidavit disclosed that the caveat was holding up settlement of the sale of apartments in the development. After an adjournment and an interim undertaking which enabled the removal of the caveat so far as it affected the apartments to be sold, on 31 October 2018 Riordan J ordered that upon the sum of $533,560 being deposited into an interest bearing account by the solicitors for Indtex and retained until the final determination of the proceeding, not to be released save and except in accordance with the written consent and direction of all parties, or further order, the caveat be withdrawn. The sum of $533,560 was the amount calculated by the Builder as its profit share under the Profit Share Deed. Directions were then made for the conduct of the proceeding.
It was not until November 2018 that the caveat was removed and the security for the profit share paid into an interest bearing account in accordance with the order of 31 October 2018.[2]
[2]Affidavit of David Stuart Brown made 21 August 2019, [4(h) & (i)].
Thereafter, pleadings were filed, including a counterclaim by the Builder, discovery of documents made by all parties, numerous particulars of pleadings requested and provided, orders extending dates for compliance with orders, and considerable delay encountered, particularly on the part of Indtex.
In the first statement of claim it was alleged that:
(a) on or about 2 September 2015, Indtex entered in to a Building Contract with the Builder for the construction of the apartments (Building Contract);
(b) before the entry into the Building Contract, in about August 2015, Indtex entered in to an agreement with Kavallero for him to provide consulting services as project manager to Indtex for the construction of the apartments by the Builder. The fee was $50,000.00 in two instalments (Consulting Agreement);
(c) in order to induce Indtex to enter into the Building Contract and the Consulting Agreement, Kavallero, in contravention of s 18 of the Australian Consumer Law (ACL), made representations to Indtex in trade or commerce as to a number of matters (Independent Management Representations) which were false or misleading;
(d) Indtex entered into the Building Contract and the Consulting Agreement in reliance on the Independent Management Representations and has suffered loss and damage in consequence of Kavallero’s breaches of the ACL;
(e) in or about June 2016, Kavallero, on behalf of the Builder, made representations in trade or commerce to Indtex regarding the benefits of entering into a profit share agreement with the Builder (Profit Share Representations) which were false or misleading in contravention of the ACL. One of the critical representations was that the Builder would not charge a builder’s margin on any variations to the building works under the Building Contract;
(f) in reliance on the Profit Share Representations, Indtex entered into the Profit Share Deed under which Indtex agreed to pay 50% of the profit from the sale of the apartments to the Builder and to charge the Land with payment of that amount;
(g) the Builder lodged a caveat over the Land claiming an interest as chargee under the Profit Share Deed, in relation to the profit share; and
(h) by reasons of the contraventions of the ACL constituted by the Independent Management Representations and the Profit Share Representations, the Consulting Agreement and the Profit Share deed should varied pursuant to s 243(b) of the ACL to remove any liability of Indtex under them.
The first statement of claim was very broadly framed, did not include the terms of the Profit Share Deed and lacked proper particulars. It might be suggested that the claims were framed primarily as claims for misleading or deceptive conduct under the ACL so as to by-pass the exclusive jurisdiction of the Victorian Civil and Administrative Tribunal (VCAT) under the Domestic Building Contracts Act 1995 (Vic) (DBCA). The defendants’ defences made many objections to the formulation of the claim and generally denied the misrepresentation claims. It was common ground that the Building Contract and Profit Share Deed were entered into. The Consulting Agreement was said to have been entered into with the Builder and not Kavallero. The builder counterclaimed for the second instalment payable under the Consulting Agreement, for the profit share of $533,560 and for the sum of $207,600 for improvements to the apartments if the Profit Share Deed is declared to be void or unenforceable.
By August 2019, the defendants were pressing for the proceeding to be set down for trial.[3] The pleadings had closed on about 20 April 2019. The pre-trail directions hearing had been adjourned several times from the original date of 15 March 2019 to 27 August 2019. There were extensive delays in the progress of the proceeding because, in part, counsel previously engaged had ceased to practice and new counsel had been engaged. Indtex had foreshadowed an application to amend the statement of claim since May 2019, but were delayed by a number of factors, particularly the absence of Mr Zelman, but also the solicitor and counsel, at critical times causing substantial delays.
[3]Affidavit of David Stuart Brown made 21 August 2019.
The plaintiff sought leave to amend its statement of claim at the scheduled directions hearing on 27 August 2019 and, after extensive argument, leave was granted. In the course of the argument, Counsel for Indtex conceded that the delays encountered in the matter were in part due to Henry Zelman not being available to give instructions due to taking numerous holidays. In the course of my Ruling in favour of Indtex amending its statement of claim I commented that:
The Plaintiff’s solicitor and Mr Henry Zelman should understand that they will need to organise their work as a priority to their vacations. And if that does not take place, and directions that are given are not followed as a result of what might be called discretionary matters - I treat discretionary matters as the taking of a vacation and overseas trips - then there could be very serious consequences for the Plaintiff’s claim.[4]
[4]Indtex Pty Ltd v Knight Homes & Anor, Transcript 27 August 2019, p. 8.
I also said that the amended statement of claim must provide the best particulars that Indtex is able to provide. The proposed amended statement of claim did not include particulars of matters that had already been the subject of further and better particulars provided in response to requests directed to the first statement of claim.
When the amended statement of claim was delivered it did not, it seems to me, include sufficient particulars. The amended statement of claim raised new issues broadly as follows:[5]
[5]Affidavit of Graeme David Efron made 26 August 2019, [9].
(a) the consultancy agreement is void by reason of an absence of necessary terms;
(b) the Profit Share Deed is unenforceable by reason of s 16 of the DBCA;
(c) the Profit Share Deed does not include the agreed terms of the agreement; and
(d) the Builder breached the terms of the Building Contract, causing loss to the Indtex.
The consequences of the amendments were, of course, that the pleadings started again and directions were made to ready the proceeding for trial. Another matter was that the anticipated defences meant that it was appropriate that the trial be heard by a Judge with a dual appointment, that is a Judge who was also appointed as a Member at VCAT so that certain provisions of the DBCA could be brought into account for the potential benefit of the Builder.
The next directions hearing after the hearing at which leave was given for the plaintiff to amend its statement of claim was 7 February 2020. For that hearing, the defendants’ solicitor made an affidavit that set out the history of the proceeding and identified the many delays that had been brought about by the plaintiff or its Lawyers.[6] At the hearing, Indtex foreshadowed an application for particular discovery. Matthews JR made orders setting the proceeding down for trial, with the usual directions, and provided that any application for particular discovery be made by 28 February 2020. On 18 February 2020, the proceeding was set done for trial on an estimate of 10 days commencing on 11 May 2021.
[6]Affidavit of David Stuart Brown made 3 February 2020, particularly at [5]-[14] which details the interlocutory steps taken and the numerous periods of delay as a result of the plaintiff’s inactivity.
The application to for particular discovery was not filed and served on the date fixed by the order of Matthews JR, 28 February 2020. The evidence shows that at 4:15pm on 28 February the defendants’ solicitor received an email from Indtex’s solicitor attaching an unissued summons seeking particular discovery. The email purported to attach an affidavit in support together with the exhibits. No affidavit was attached to the email. After an exchange of emails with the plaintiff’s solicitors, a copy of the affidavit of Graeme David Efron affirmed on 28 February 2020 (Mr Efron’s affidavit) was sent by email to the defendants’ solicitor a little later.[7]
[7]Affidavit of David Stuart Brown made on 13 March 2020, [7]-[8].
The plaintiff’s Summons was not filed until 4:55 pm on 2 March 2020, and a filed copy of the Summons was not served on the defendants’ solicitor until 2:03 pm on 3 March 2020.
Nature of relief sought
The regime for particular discovery is established by r 29.08, which applies to any proceeding in the Court.[8] Rule 29.08(2) provides:
(2)Where, at any stage of a 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 question in the proceeding may be or may have been in the possession of a party, the Court may order that party to make and serve on any other party an affidavit stating—
(a)whether that document or any, and if so what, document or documents of that class is or has been in that party’s possession; and
(b)if it has been but is no longer in that party’s possession, when the party parted with it and that party’s belief as to what has become of it.
[8]Rule 29.08(1), which makes clear that the procedure applies notwithstanding the general limitation on discovery in proceedings commenced by originating motion where, absent an order under r 4.07, there are no pleadings and no discovery of documents as of right.
By sub-rule 29.08(3), an order may be made against a party under this rule notwithstanding that the party has already made or been required to make an affidavit of documents.
Documents sought
The documents that the plaintiff initially sought are not set out in the summons. They are generally described only in Mr Efron’s affidavit in support of the application as follows:
(a) all invoices relating to the charges by the builder for variations;
(b) all invoices relating to the claim for $207,600.00; and
(c) a copy of the builder’s MYOB ledgers and accounts for the construction of the apartment (sic).
These categories are then expanded in the submissions filed on 16 April 2020 to specify:
(a) (Category A) All invoices relating to the charges by the builder, listed and indexed for:
(i) Contract variations list #1 [5/6/16];
(ii) Contract variations list #1A [5/6/16];
(iii) Contract variations list #2 [3/1/17];
(iv) Contract variations list #3 [29/11/17].
(b) (Category B) All documents, listed and indexed for each variation, evidencing how the Builder calculated the cost for the variations listed in:
(i) Contract variations list #1 [5/6/16];
(ii) Contract variations list #1A [5/6/16];
(iii) Contract variations list #2 [3/1/17];
(iv) Contract variations list #3 [29/11/17];
(c) (Category C) All invoices listed and indexed relating to the claim by the Builder for $207,600
(d) ((Category D) A copy of the Builder’s MYOB ledgers and accounts for the construction of the apartment development.
(e) (Category E) A copy of a readable electronic MYOB datafile for the construction of the apartment development.
It must be said at this stage, that this is a very unsatisfactory way of launching an application for particular discovery. In some cases, the correspondence that precedes the application means that the parties are in little doubt about the scope of the application - even if the Court is kept in the dark. In this case, however, the change from the affidavit to the submission appears unannounced and quite different to the prior correspondence (some of which is annexed to the defendants’ submissions and shows how long ago the debate was had in correspondence – since December 2019).
The defendants rely on two affidavits filed in response to the plaintiff’s application. These are the affidavit and accompanying exhibits of David Stuart Brown and the affidavit of Ronan Kavallero, both made on 13 March 2020.
Application Made Out of Time
The defendants’ preliminary point is that the summons was issued after the time allowed for it by the order of Matthews JR and the defendants object to the Court hearing it. This application was foreshadowed in the hearing before Matthews JR on 7 February 2020. There is no evidence of the explanation for the delay. The Builder supports its opposition to the hearing of the application partly by reference to delays by Indtex in the period up to the hearing on 27 August 2019, and the comments I made regarding the significant delay by Indtex during 2019.
Indtex said in its submission that the delay was because the solicitors for Indtex missing the deadline. It does not seek to excuse its prior failure to comply with procedural orders. It submitted that:
(a) the delay and non-compliance were minor. The sealed application and supporting affidavit were filed 1 day late;
(b) the defendants do not point to any prejudice that they could possibly suffer should the Court determine the application on the merits; and
(c) Indtex should not be penalised for an administrative oversight on the part of its solicitors.
Although I consider that a relatively minor delay in filing an application by the date fixed by the Court should, as a general rule, be excused where there is no prejudice or detriment to the opposite party, particularly in the early stages of a proceeding, in this case the history of the proceeding shows so many delays by Indtex that it has come to an inflexion point that makes forgiving the delay uninviting. Strictly speaking, what Indtex seeks is an extension of time within which to make its application pursuant to r 3.02 of the Rules. The grant of an extension under that rule is discretionary and turns on there being no prejudice to the opposite party and generally depends on what are the interests of justice in the particular circumstances. What is especially relevant to whether I should extend the time for the making of the application, is whether it is meritorious.
Previous Discovery
The defendants have filed three affidavits of documents, the first on 25 February 2019, the second on 27 November 2019 and the third on 24 February 2020.
Category A documents – the variations
Submissions
The dispute over the Profit Share Deed or Agreement[9] is a significant issue between Indtex and the Builder. Indtex says that the profit to be shared was to be calculated as the sum of the revenue from sales in excess of $5.8m, less all expenses incurred by the plaintiff in excess of the Building Contract price of $2.6m.[10] The profit share would therefore be $172,672. The Builder say that the profit was to be shared equally between the Builder and the plaintiff once the gross sales for all nine apartments exceeded $5.8m. This gives a significantly larger profit share of $533,560 + GST.[11]
[9]In the first statement of claim the allegation was that Indtex and the Builder entered into the Profit Share Deed. In the amended statement of claim it became an agreement, partly written, partly oral and partly to be implied.
[10]Paragraph 14A, Amended Statement of Claim filed 13 September 2019.
[11]Paragraph 7, Submissions of the defendants dated 20 April 2020.
The plaintiff alleges that a term of the oral part of the profit share agreement was that the Builder would not charge the plaintiff any builder’s margin on variations – the charges would be at cost, with no mark up. The defendant denies that there was an agreement to excluding the builder’s margin until after the Profit Share Deed was executed 7 months later in January 2017, and the scope of the agreement was such that the builder would not charge for further variations – not that a builder’s margin had been charged prior to the agreement.[12]
[12]Paragraph 46, Submissions of the defendants dated 20 April 2020.
Indtex maintains that discovery of the builder’s accounts and invoices is necessary to confirm the extent to which the Builder did in fact charge a margin on variations and the amount of the builder’s margins charged. This calculation is necessary in order to quantify the profit share.
The second issue regarding the variations is that the plaintiff says that a number of these variations were made and charged in contravention of s 37 and s 38 of the DBCA, so that the Builder is not entitled to retain any money in respect of them,[13] and further, that it mistakenly believed that the builder was entitled to the claim for the variations and that it was obliged to pay for them. It claims damages in consequence of the payment for the variations, rather than seeking to recover the moneys paid for those variations as money had a received.
[13]Relying on s 16(1), 37(1) and 38(3) of the DBCA and the decision of the High Court in Mann v Paterson Constructions Pty Ltd [2019] HCA 32.
Indtex submits that no details regarding the costing of these individual variations and how they were calculated were ever provided and further says that the variation lists that were provided to the plaintiff did not disclose whether the Builder excluded builder’s margins from the variations. Indtex asserts that it has thus far been unable to ascertain the exact calculation details of the builder’s margin charged, if any, by the documents currently produced in discovery by the defendants.
However, by the Builder’s counterclaim, it says that any negotiation and discussion of variations was often informal; largely conducted verbally and by estimate on the subject of cost.[14] The Builder also says that the plaintiff did not request formal notification regarding the cost of variations, but rather preferred to negotiate proposed variations in person with Kavallero.[15]
[14]Paragraph 39(e) of the Defence to Amended Statement of Claim and Counterclaim of First defendant.
[15]Ibid.
The Builder says that all the documents in Category A have been discovered and that for the purposes of inspection copies were provided before the Summons was issued by the third affidavit of documents. The evidence for this is set out in the affidavit of Mr Brown and verified by the affidavit of Kavallero. In any event, the Builder submits that the documents do not relate to any question in the proceeding, and the request is a fishing expedition.
The invoices for variations do not identify any Builder’s margin. Thus Indtex needs the underlying invoices from third party suppliers of the work and materials and the accounting information relating to how the variation claims are made up and calculated.
In relation to the proposition that the documents have already been discovered, the evidence is as follows:
(a) On 14 February 2020, the defendants served an unsworn Further Supplementary Affidavit of Documents (noting that the particulars of jurat would be provided). At the same time, a USB stick on which were loaded digital copies of all the documents listed in the Further Supplementary Affidavit was sent with the covering letter.
(b) The Further Supplementary Affidavit was sworn by Kavallero on 24 February 2020 and was then filed and served.
(c) Until Mr Efron’s affidavit was received late on 28 February 2020, Indtex’s solicitors had received no response that indicated that Indtex was dissatisfied with the further discovery made and inspection given on 14 February 2020.
(d) Listed at items 160 -177 (and comprising 514 pages) in the Further Supplementary Affidavit are all of the invoices in the possession of the defendants that have been rendered by the suppliers of goods and services to the first defendant in relation to the building of the apartments for the period from December 2015 to June 2018 - by which later time the project had been completed.
(e) Mr Brown and Kavallero swear that the defendants have no further documents to discover under Category A.
Indtex responds that the third affidavit of documents of the defendants is deficient because:
(a) it amounts to no more than discovery by bundles, identified and grouped only by a letter; and
(b) if the discovery is discovery of all supplier invoices for the project, then it necessarily included documents going to matters not in issue between the parties. The issues are related to variations and margins on variations.
(c) It thus amounts to excessive discovery which has the tendency, if not the intention, of concealing relevant documents.
The defendants submit that the documents are not relevant to any issue in the proceeding because:
(a) The documents are alleged to be relevant to the oral component of the Profit Share Agreement pleaded by Indtex in which the builder agreed not to charge Indtex any builder’s margin on variations.
(b) There is no allegation in Indtex’s pleading that Profit Share Agreement was a variation to the Building Contract to construct the 9 apartments. Consequently, the provisions of the Building Contract in regard to the costing of agreed variations will prevail.
(c) Further, Indtex has not pleaded that such a term was breached by the Builder.
(d) In any event, if it is established that a builder’s margin has been incorrectly included in the variations (which the Builder denies), the arithmetical result, even on the plaintiff’s version of the method of calculation of the profit share, will be a reduction in the expenses and a corresponding increase in the net profit.
(e) In relation to the misleading or deceptive conduct claim arising from the Profit Share Representations, it is alleged that the representations were false, misleading or deceptive in that the Builder charged a margin on variations and did not carry out variations at cost. The plaintiff gives no particulars of this allegation, but says:
The Plaintiff is undertaking an examination of the accounting of the first defendant and upon proper discovery and deduction of the builder’s margin incorrectly included in the variations, further particulars of expenses shall be provided.[16]
[16]Particulars to para 18D of the Amended Statement of Claim.
That particular was included at the time of filing the amended statement of claim on 13 September 2019.
(f) Particular discovery is only available to a party in respect of a definite case set up by that party. The plaintiff has merely made bald and unparticularised allegations that a builder’s margin was charged contrary to the alleged representation. The plaintiff has not given a single example of this having occurred, and no breach of the alleged contractual term is pleaded. Rather, the plaintiff now seeks particular discovery to ascertain whether it has any case at all, as opposed to supporting a case of some substance. This is the very essence of a fishing expedition, namely that -
discovery must not be used for the purpose of ascertaining whether a case exists, as distinct from the purpose of compelling the production of documents where there is already some evidence that a case exists.[17]
[17]Computershare Ltd v Perpetual Registrars Ltd [2000] VSC 139 at [21].
The defendants also justified the discovery made by the third affidavit of documents as a product of the demands for further discovery made by Indtex in its correspondence of 2 December 2019 where they sought all supplier invoices. If the defendants had instead made only limited discovery of those invoices they would now be accused of concealing relevant documents.
Indtex makes various answers to and criticisms of these submissions, but in light of my conclusion below it is unnecessary to recount them.
Consideration
It must be recalled that the particular discovery calls for an affidavit to be made by the party concerned as to whether a particular document or class of documents is or has been in that party’s possession, and so on.
The power to require an affidavit to be made under the rule is discretionary. Where, as here, the defendants have sworn that there are no other documents of the particular class in the party’s possession, etc, other than those disclosed in the previous three affidavits of documents, then the making of an order under the rule is pointless. It is therefore not necessary to consider the submissions regarding whether the documents do or do not relate to any question in the proceeding. My preliminary view is that the invoices ‘relating to the charges by the Builder’ for the listed variations are relevant to the issues raised in respect of the Profit Share Deed or Agreement and the fact that they might do so is pretty clearly why the Builder made the third affidavit of documents. But now that Kavallero has sworn an affidavit confirming the evidence given by Mr Brown on information and belief that there are no other such documents either in the defendants’ possession or that were so, then, as I have said, a further affidavit is pointless and in the exercise of the Courts discretion under the rule I decline to order another.
Category B documents – calculations of the cost of variations
What Indtex seeks by its written submission (rather than through the summons or affidavit of Mr Efron in support, and thus without prior notice to the defendants) is ‘all documents, listed and indexed for each variation, evidencing how the Builder calculated the cost for the variations listed. This is not an application pursuant to r 29.08 but an order pursuant to s 55(2)(g) of the Civil Procedure Act 2010 (Vic) (CPA). Section 55(1) of the CPA provides that the court may make any order or give any directions in relation to discovery that it considers necessary or appropriate. Section 55(2)(g) provides that without limiting subsection (1), the court may make any order or give any directions requiring a list of documents be indexed or arranged in a particular way.
Indtex submits that rather than simple bundles grouped in a way that does not assist the parties or the Court, as was done in the third affidavit of documents, the Builder should be directed to make discovery of the invoices grouped and indexed in a way that identifies as best the Builder can those invoices referable to each variation.
The defendants responded that although s 55(2)(g) of the CPA gives discretionary power to the Court to make an order or give directions that require a list of documents to be indexed or arranged in a particular way, there is no good reason for such type of order in this proceeding. It is unnecessary for the documents to be listed and indexed in a different manner to that used in the three affidavits of documents so far filed and served by the defendants. In particular, the request that the Court direct the first defendant to group and index the invoices referable to each variation is not part of the function of discovery.
The submissions made by the defendant in relation to Category A are also applicable to this Category. The difference is that in this case, Indtex wants to know which suppliers invoice relates to which variation.
The answer is in the affidavit of Mr Brown in dealing with the Category A documents and the request for documents comprising the Builder’s MYOB ledgers and accounts:
(a) first, the defendants have already made full discovery of the documents in this category and sworn that they have no further documents in this category;
(b) second, the amount to be charged to Indtex with respect to variations was calculated by the Builder’s estimator, Kriss Prieditis, using various excel spreadsheets which contained estimates for the amount of labour and materials involved in the particular variation. In doing so, he drew upon the hourly wage rates of the builder’s employee labourers and contractors,[18] upon the invoices rendered by the architectural consultants for design works[19] and upon the usual cost of materials derived from invoices for materials and services supplied for works within the original contract scope of works;[20]
[18]The documents relating to which the defendants have discovered at items 180 to 193 of the third affidavit of documents.
[19]Discovered at items 178 and 179.
[20]Discovered at items 160 to 177.
(c) the spreadsheets did not form part of, and were not entered into, the Builder’s MYOB accounting system. Rather, only the end result of Kriss Prieditis’ calculations, namely the final amount to be charged for the variation was entered in the MYOB system so as to generate the relevant invoice.
(d) the notes pertaining to the calculation of variations charges in relation to the Project was stored on the hard drive of a personal computer belonging to the Builder’s estimator Kriss Prieditis. On or about 13 February 2019, a power surge at the Builder’s offices destroyed the hard drive and the data stored on it. The notes are no longer recoverable; and
(e) the Builder’s MYOB system does not contain any record of how the amount of individual variations was made up, calculated or determined by Kriss Prieditis. Rather, as deposed to by Kavallero in paragraph 4 of Schedule 2 of the third affidavit of documents, those notes and excel spreadsheets were contained on Kriss Prieditis’ personal computer and have now been lost as a result of a power surge which destroyed the hard drive to that computer on 13 February 2019.
In a letter from the defendants’ solicitors of 6 December 2019 responding to Indtex’s request for discovery that lead to the current application, it was said that –
…the cost and expense of discovering the documents sought by you, if they exist, is disproportionate to their significance, if any, to the issues in this proceeding. By way of example, insofar as Knight has any suppliers’ invoices these are archived by reference to individual suppliers and not by reference to specific projects. Further, as noted above, any one particular supplier’s invoice may relate to materials supplied to a number of different projects. Given that that is so, not only would it be excessively difficult, time consuming and costly to retrieve such invoices, were they to be retrieved, they would be of little or no use in the proceeding.
The correspondence from the defendants confirms that any attempt to allocate invoices from suppliers to the Builder to the particular variations would be impossible. The Builder:
…typically buys materials from suppliers in bulk, with parts of each bulk purchase being used in multiple projects. Supplying such invoices would cast no light whatsoever on the make-up of individual variations invoices for this project, even if that was relevant, which it is not. It is simply not the case that for each variation invoice referred to in this proceeding that there was a corresponding supplier’s invoice behind that invoice which only related to that invoice, or this project.
Similarly, employee timesheets and wages records relating to time spent by employees and wages paid to employees …do not relate to any specific variations on this project and relate to wages paid to and time spent by employees on all projects being undertaken at any time by Knight. They would cast no meaningful light upon the amounts charged for the variations invoices. In any event, most construction work was done by subcontractors who are not employees, and so these records would be of little utility.[21]
[21]Letter from solicitors for defendants to solicitors for plaintiff dated 6 December 2019 annexed to the defendants’ written submission dated 20 April 2020, [13]-[14].
Although these statements were not the subject of confirmation by evidence before me, I have no reason to doubt their accuracy: they accord with common experience and have the ring of truth.
For the Court to require discovery in the way advanced in the submission of Indtex would, on the evidence before the Court, be ineffectual and be met with the response already given in Mr Brown’s affidavit and confirmed by Kavallero. Furthermore, the court’s powers in relation to discovery under s 55 of the CPA, although broad, should be directed to finding the most efficient, effective and economical management of the discovery exercise, bearing in mind the nature and complexity of the case.[22]
[22]Liesfield v SPI Electricity Pty Ltd & Ors (Ruling No 1) [2013] VSC 634, [25].
The making of the order sought would serve only to prolong the discovery process and unnecessarily burden the defendants. In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd[23] the High Court commented upon the increasingly burdensome task of discovery, and the distracting interlocutory applications that often accompany it. The Court was critical of discovery disputes which frustrate the overriding purpose of Civil Procedure statutes. This is just such a dispute.
[23][2013] HCA 46 [7].
No order of the kind sought will be made.
Category C
Submissions
The Builder has, by counterclaim, alleged that in part performance of its obligations under the Profit Share Deed, substantial funds were spent by it on building improvements that enhanced the sale value of the properties, totalling $207.600.00 (GST excluded).[24] The Builder says that if the Profit Share Deed is found to be unenforceable, then the plaintiff has been unjustly enriched at the expense of the Builder by way of the $207,600 worth of improvements.[25]
[24]Paragraph 44, Submissions of the defendants dated 20 April 2020.
[25]Paragraph 45, Submissions of the defendants dated 20 April 2020.
The plaintiff says that no invoices have been provided to support the claim for this amount or outline the way in which the sum was calculated, and in any event say that the sum is not recoverable as the Profit Share Agreement is unenforceable and the amount claimed contravenes s 16 of the DBCA. The defendants point out that s 16 of the DBCA has no application to the Profit Share Deed or Agreement: see s 16(1) of the DBCA.
The defendants say that until Mr Efron’s affidavit was received by Indtex’s solicitors late on 28 February 2020:
(a) that no request for the documents in this category had been made despite the fact they had already been fully discovered in the Builders first affidavit of documents sworn 25 February 2019 and inspected by the plaintiff’s solicitors on 22 March 2019;
(b) Item 70 of the defendants’ first affidavit of documents comprises 36 pages of copies of invoices and spreadsheets which substantiates the amount of $207,600. The series of spreadsheets set out how each item in the claim for $207,600 was calculated; and
(c) importantly for this application for particular discovery, Mr Brown swears and Kavallero confirms the defendants have no more documents to discover in relation to this category.
Indtex responded (in its primary submission) that item 70 of the defendants’ first affidavit of documents cannot be full discovery for the following reasons:
(a) many of the documents are spreadsheets apparently created by the builder listing amounts. These are not third-party invoices and the existence of the spreadsheets strongly implies the existence of other source documents;
(b) the invoices included in exhibit DSB-3 to Mr Brown’s affidavit (which is a copy of item 70 from the affidavit) do not come close to totalling $207,600. There are 19 invoices, including one that is duplicated. The 18 invoices total $92,813 including GST. Ex GST the total is $84,375; and
(c) there is no explanation discernible in the discovery as to how $84,375 becomes a claim for specific work totalling $207,600. It cannot be builders’ margin, as the increase is about 240%.
The Builders answer to this argument is that the make-up of the total of $207,600 has always been put forward as a mixture of invoices and spreadsheets. The existence of spreadsheets does not imply that there are other extant source documents. If the defendants had them, they would have been included. In any event, since the onus will be on the defendants to establish that the sum of $207,600 was expended, if that cannot be done it will be to the advantage of Indtex. Furthermore, any possible discrepancy is a matter for trial. It is not the function of discovery.
Consideration
The reason I have given for not making an order in relation to the Category A documents applies here with equal force. The evidence given in Mr Brown’s affidavit (at [21]-[25]), and confirmed by Kavallero, provides the evidence that all the documents in this Category have been discovered and copies inspected by the plaintiffs solicitors well before the Summons was issued. The defendants have already de facto complied with any order for particular discovery that could be made. No order will be made in relation to this Category.
Categories D and E – MYOB documents
I have set out above some of the defendants’ evidence concerning the usefulness of the MYOB documents retained by the defendants ([46]-[47]). Discovery of the MYOB ledgers and accounts and data files of the Builder is not justified under r 29.08 for the reasons given above. On the evidence, they will not assist Indtex to further analyse and dissect the variations, even if, contrary to the defendants’ submissions, that is relevant to the issues in dispute.
Conclusion
For these reasons, Indtex has not satisfied the prerequisites required by Rule 29.08 and insofar as the application is ultimately made pursuant to that rule, it will be dismissed. The application lacks the merit to warrant and extension of time and that application is refused. Insofar as the application included one made pursuant to s 55(2)(g) of the CPA, it is refused. The costs should follow the event. I will make orders that the summons filed by Indtex on 2 March 2020 be dismissed with costs. I will also make an order requiring a mediation to be held within a reasonable time.
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