JCorp Pty Ltd v Oswald Homes (1972) Pty Ltd
[2006] WASC 20
JCORP PTY LTD & ORS -v- OSWALD HOMES (1972) PTY LTD & ORS [2006] WASC 20
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 20 | |
| Case No: | CIV:2375/2003 | 3 FEBRUARY 2006 | |
| Coram: | MASTER SANDERSON | 10/02/06 | |
| 15 | Judgment Part: | 1 of 1 | |
| Result: | Leave granted | ||
| B | |||
| PDF Version |
| Parties: | JCORP PTY LTD (ACN 009 063 076) KIMPURA PTY LTD (ACN 006 048 479) ESTHER INVESTMENT PTY LTD (ACN 004 459 536) LEONARD WALTER BUCKERIDGE OSWALD HOMES (1972) PTY LTD (ACN 092 237 879) RURAL BUILDING COMPANY PTY LTD (ACN 105 364 823) WA COUNTRY BUILDERS PTY LTD (ACN 105 402 140) JWH GROUP PTY LTD (ACN 098 664 709) JULIAN WALTER HOLDINGS PTY LTD (ACN 008 872 357) JULIAN ALAN WALTER |
Catchwords: | Practice and procedure Application for leave to administer interrogatories Turns on own facts |
Legislation: | Nil |
Case References: | Dalecoast Pty Ltd v Monisse [1999] WASCA 103 Irvine v The State of Western Australia [1999] WASC 224 Treacy v Rylestone Pty Ltd [2005] WASC 197 Aitken v Neville Jeffress Pidler Pty Ltd (1991) 22 IPR 605 AttorneyGeneral v Gaskill (1882) 20 Ch D 519 Austin v Austin [1905] VLR 377 Davis & Ors v Sagar Pty Ltd & Anor, unreported; SCt of WA; Library No 980443, 10 August 1998 Hawke v Tamworth Newspaper Co Ltd [1983] 1 NSWLR 699 Hennessy v Wright (No 2) [1890] 24 QBD 445 Marriott v Chamberlain (1886) 17 QBD 154 Parnell v Walter (1890) 24 QBD 441 Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 Potter's Sulphide Ore Treatment Ltd v Sulphide Corp Ltd (1911) 13 CLR 101 Ugle v State of Western Australia [2002] WASCA 117 Verdell Pty Ltd v F & D Nominees & Anor, unreported; SCt of WA; Library No 970588; 5 November 1997 White & Co v Credit Reform Association and Credit Index Ltd [1905] 1 KB 653 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
KIMPURA PTY LTD (ACN 006 048 479)
Second Plaintiff
ESTHER INVESTMENT PTY LTD (ACN 004 459 536)
Third Plaintiff
LEONARD WALTER BUCKERIDGE
Fourth Plaintiff
AND
OSWALD HOMES (1972) PTY LTD (ACN 092 237 879)
First Defendant
RURAL BUILDING COMPANY PTY LTD (ACN 105 364 823)
Second Defendant
WA COUNTRY BUILDERS PTY LTD (ACN 105 402 140)
Third Defendant
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- JWH GROUP PTY LTD (ACN 098 664 709)
Fourth Defendant
JULIAN WALTER HOLDINGS PTY LTD (ACN 008 872 357)
Fifth Defendant
JULIAN ALAN WALTER
Sixth Defendant
Catchwords:
Practice and procedure - Application for leave to administer interrogatories - Turns on own facts
Legislation:
Nil
Result:
Leave granted
Category: B
Representation:
Counsel:
First Plaintiff : Mr B D Luscombe
Second Plaintiff : Mr B D Luscombe
Third Plaintiff : Mr B D Luscombe
Fourth Plaintiff : Mr B D Luscombe
First Defendant : Mr M H Zilko SC
Second Defendant : Mr M H Zilko SC
Third Defendant : Mr M H Zilko SC
Fourth Defendant : Mr M H Zilko SC
Fifth Defendant : Mr M H Zilko SC
Sixth Defendant : Mr M H Zilko SC
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Solicitors:
First Plaintiff : Mallesons Stephen Jaques
Second Plaintiff : Mallesons Stephen Jaques
Third Plaintiff : Mallesons Stephen Jaques
Fourth Plaintiff : Mallesons Stephen Jaques
First Defendant : Clayton Utz
Second Defendant : Clayton Utz
Third Defendant : Clayton Utz
Fourth Defendant : Clayton Utz
Fifth Defendant : Clayton Utz
Sixth Defendant : Clayton Utz
Case(s) referred to in judgment(s):
Dalecoast Pty Ltd v Monisse [1999] WASCA 103
Irvine v The State of Western Australia [1999] WASC 224
Treacy v Rylestone Pty Ltd [2005] WASC 197
Case(s) also cited:
Aitken v Neville Jeffress Pidler Pty Ltd (1991) 22 IPR 605
AttorneyGeneral v Gaskill (1882) 20 Ch D 519
Austin v Austin [1905] VLR 377
Davis & Ors v Sagar Pty Ltd & Anor, unreported; SCt of WA; Library No 980443, 10 August 1998
Hawke v Tamworth Newspaper Co Ltd [1983] 1 NSWLR 699
Hennessy v Wright (No 2) [1890] 24 QBD 445
Marriott v Chamberlain (1886) 17 QBD 154
Parnell v Walter (1890) 24 QBD 441
Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728
Potter's Sulphide Ore Treatment Ltd v Sulphide Corp Ltd (1911) 13 CLR 101
Ugle v State of Western Australia [2002] WASCA 117
Verdell Pty Ltd v F & D Nominees & Anor, unreported; SCt of WA; Library No 970588; 5 November 1997
White & Co v Credit Reform Association and Credit Index Ltd [1905] 1 KB 653
(Page 4)
1 MASTER SANDERSON: By application to the Case Management Registrar made 20 October 2005, the defendants in this action sought leave to administer interrogatories to the plaintiffs. A document entitled "Notice to Answer Interrogatories" was filed with the application. This document sets out the interrogatories which would be administered by the defendants to the plaintiffs were leave to be granted. The proposed interrogatories are 42 in number (they were originally 43 but one is not pursued). Most of the interrogatories are broken down into a number of parts, with the effect that the total number of questions the defendants would have the plaintiffs answer is just on 100. The plaintiffs object to answering any or all of the interrogatories.
2 The objections taken by the plaintiffs will become apparent later in these reasons. However, it is convenient to note at this point that the plaintiffs' complaint is not that the interrogatories are in an improper form or that they are fishing or that in some way they offend the principles governing the administering of interrogatories. The plaintiffs raise three objections. First, they say that the interrogatories are designed to obtain discovery of documents where an order seeking to have those documents discovered was refused. Second, they say that in relation to some of the questions, affidavit material already filed deals with the issues, and providing answers to interrogatories is unnecessary. Thirdly, they say that with respect to a number of the interrogatories the information is within the purview of the defendants and the interrogatories are unnecessary. As an overarching point, the plaintiffs maintain that the interrogatories address issues which are not germane to the dispute between the parties. That is another way of saying the interrogatories are irrelevant. Given the nature of the objections taken by the plaintiffs, it is a necessary first step to provide some background to the present dispute.
3 For many years the fourth plaintiff and the sixth defendant were business associates. Between them and through a number of companies, most of whom are either plaintiffs or defendants in this action, they developed a substantial business constructing domestic dwellings. Eventually the relationship soured and proceedings were issued. The action promised to be long, complex and expensive for all concerned. Mercifully, the action was settled. As part of what was a very complex settlement, in June 2003 the second, third and fourth plaintiffs and the fourth, fifth and sixth defendants entered into a deed concerning the first plaintiff. This deed was known as the "Deed Governing Sale".
4 Under the terms of the Deed Governing Sale, the first plaintiff agreed to sell and transfer to the sixth defendant and the fifth defendant (or
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- parties nominated by them) certain businesses of the first plaintiff. For the purposes of determining the purchase price of each business, the first plaintiff was required to prepare the Estimated Completion Accounts prior to completion of the sale. Within 60 business days following completion of the sale, the first plaintiff was required to prepare the Audited Completion Accounts and the Adjustment Statements (the latter documents showing the net changes from certain amounts shown in the Estimated Completion Accounts and the Audited Completion Accounts). The Adjustment Statements were to be reviewed by the auditor who would provide an opinion as to whether the Adjustment Statements had been prepared in accordance with the Deed Governing Sale. The Audited Completion Accounts were required to be prepared in a manner consistent with the Audited Consolidated Financial Statements of the first plaintiff as at 30 June 2002 (these accounts were defined in the Deed Governing Sale as the "Last Accounts"). The auditor's opinion as to the Adjustment Statements was agreed to be "final and binding on the parties, in the absence of manifest error". If the net change in the Adjustment Statements was a positive amount, it was to be paid by the defendants' nominated purchaser to the first plaintiff. If it was a negative amount, it was required to be paid by the first plaintiff to the defendants' nominated purchaser.
5 On about 31 July 2003 the first plaintiff transferred its business known as "Oswald" to the first defendant, which was the relevant nominee. On the same date the first plaintiff transferred its business known as "Rural Building Company" to the second defendant, the relevant nominee, and transferred its business known as "Country" to the third defendant as relevant nominee. The first plaintiff was paid a purchase price for these businesses based on the Estimated Completion Accounts. The first plaintiff then prepared the Adjustment Statements and the Audited Completion Accounts. PricewaterhouseCoopers (as auditor under the Deed Governing Sale) reviewed each of the Adjustment Statements. The Adjustment Statements showed a positive net change totalling $698,947. In other words, the accounts showed that the defendants were indebted to the plaintiffs in an amount of $698,947. On 23 October 2003 the Adjustment Statements were delivered to the defendants. The amounts the subject of the Adjustment Statements have not been paid by the defendants to date on the basis, amongst others, that the plaintiffs have not complied with the terms of the Deed Governing Sale and there is no obligation on any of the defendants to pay such accounts.
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6 These proceedings were commenced on 12 November 2003. On 4 December 2003 the plaintiffs filed an application for summary judgment. Both the plaintiffs and the defendants filed extensive affidavit material in relation to that application. The plaintiffs' summary judgment application failed. On 8 October 2004 a substituted statement of claim was filed and on 15 October 2004 an amended defence set off and counterclaim was filed. Between December 2004 and July 2005 the parties gave discovery and subsequently supplementary discovery. On 1 September 2005 I dismissed the defendants' application for further and better discovery of the plaintiffs' documents regarding its 2004 accounts. In the course of delivering extempore reasons for dismissing the application, I said (at page 189 of the transcript):
"What has happened in this case is that there were settlement accounts prepared which led to the parties resolving their dispute and subsequently these accounts were audited. That happened, as I understand it, in 2003. Quite how the 2004 accounts would in any way assist the defendants in advancing their case I simply can't see. It may be that there has been some differing treatment of particular items, but I wouldn't have thought that that would have in any way been relevant to a dispute between the parties about earlier accounts."
7 It is necessary to say something about that application for further and better discovery and the documents at which it was directed. However, those comments are best left until after the issues which arise on the pleading are detailed.
8 The alleged cause of action against the fourth, fifth and sixth defendants is to be found in par 31 of the substituted statement of claim (I will refer to this substituted statement of claim as simply the "statement of claim"). It is pleaded that in breach of the terms of the Deed Governing Sale, the fourth, fifth and sixth defendants failed to cause any of the first to third defendants to pay the amounts referred to in the preceding paragraphs of the statement of claim. It is common ground between the parties that, as I have set out above, the payment obligation arises under the mechanism set out in the Deed Governing Sale and the Deed of Variation. Both of these documents can be found as annexure "AT 9" to the affidavit of Andrew Boon San Teo sworn 2 December 2003.
9 The payment mechanisms found in various clauses of the Deed Governing Sale and the Deed of Variation can be broken down into parts. The key document was the Audited Completion Accounts. That
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- document had to be prepared in a manner consistent with the Last Accounts. The Audited Completion Accounts had to include as a supplement a schedule for each business reflecting the assets, liabilities and turnover of that business. Each of those schedules had to be audited by the auditor to a level or materiality considered appropriate by the auditor, having regard to the appropriate account standards and nature of the transaction. The Audited Adjustment Statement had to be reviewed by the auditor who would provide an opinion as to whether it had been prepared in accordance with the terms of the Deed Governing Sale.
10 The defendants contend that there has been non-compliance with the payment mechanisms. They say that for these reasons. They say that the Audited Completion Accounts have not been prepared in a manner consistent with the Last Accounts. It is said that if the Audited Completion Accounts have not been prepared in a manner consistent with the Last Accounts, the relevant Adjustment Statements do not and cannot comply with the relevant deeds because these will have been prepared on a false premise - namely Audited Completion Accounts which are non-compliant with the relevant deeds. It is said further that there has been non-compliance with the terms of the relevant deeds because the Audited Completion Accounts do not include as a supplement a schedule for each of the relevant businesses. It is said that failing to include these schedules which are required to be audited means that the assets, liabilities and turnover of each of the relevant businesses have not been audited.
11 The position can be illustrated by reference to the business transferred to the first defendant. Clause 2.12A(a) of the Deed Governing Sale provided:
"… The Audited Completion Accounts must be prepared in a manner consistent with the Last Accounts and must include as a supplement a schedule for each of the Oswald Business, the RBC Business [Rural Building Company] and the Impressions Business reflecting the assets, liabilities and turnover of those businesses …"
12 The defendants allege that the auditor does not say that the Oswald Adjustment Statement has been prepared in accordance with cl 2.12A(b) and cl 2.12A(c) of the payment mechanism within the deeds. This requirement is expressly referred to in cl 2.12A(a) of the Deed Governing Sale. Instead, it is alleged, the auditor poses the question for himself whether, on the basis of the procedures described, anything has come to
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- his attention "that would indicate that the Statement is not presented fairly in accordance with the requirements in Clauses … 2.12A (b) and (c) … of the Deed, as modified by the Deed of Release dated 31 July 2003 and confirmation from the second plaintiff as to interpretation of the Deed (the Interpretation)." It is said that the auditor's language suggests a qualified view as to the preparation of the relevant Adjustment Statements in a form inconsistent with the requirements of the relevant clauses of the Deed Governing Sale and the Deed of Variation. Further, it is alleged that the auditor does not say that the relevant Adjustment Statements have been prepared in a manner consistent with the Last Accounts. Rather, it is said that the auditor has referred only to the Audited Completion Accounts which are irrelevant to this mechanism. In relation to the schedules, it is said that the auditor does not say that he has audited the schedules which were supposed to be attached as a supplement to the Audited Completion Accounts. The defendants allege that the effect of the failure to include the supplement is that assets, liabilities and turnover of each of the relevant businesses has not been audited. That means, it is said, that the protection intended to be afforded to the parties by the procedure set out in the various clauses has been ignored.
13 It is against this background that the application for discovery in relation to the 2004 accounts was made. No mention is made anywhere in the Deed Governing Sale or the Deed of Variation of the 2004 accounts. What is said is that the Audited Completion Accounts (the 2003 accounts) had to be prepared in a manner consistent with the Last Accounts (the 2002 accounts). It is alleged by the defendants that there are inconsistencies between the 2003 accounts (the Audited Completion Accounts) and the 2004 accounts. The defendants allege that these inconsistencies are relevant to determining whether the Audited Completion Accounts were consistent with the Last Accounts. The discovery application sought all of the documents relevant or related to the preparation of the 2004 accounts. I refused the application in part for the reasons I have set out above. However, prior to the hearing of that application, the plaintiffs, in an attempt to move the action on and to remove what they saw as misunderstandings on the part of the defendants in relation to the 2004 accounts, provided the defendants with certain documents in relation to the 2004 accounts. The plaintiffs are to be commended for their action. It was both proper and appropriate. It has now led the defendants to direct some of their interrogatories towards the documents voluntarily supplied to them. But the interrogatories are limited to just those documents. That being so, there is no substance in the plaintiffs' argument that this application is an attempt to circumvent
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- my decision not to order general discovery of the 2004 accounts. Nor is there any substance in the argument that this application for leave to administer interrogatories is in truth an application for supplementary discovery. If the application for leave is to fail, it will have to be on other grounds.
14 At the hearing of the application, there was no real dispute between the parties as to the principles upon which leave ought be granted. Both parties were content to rely upon what was said by Owen J in Dalecoast Pty Ltd v Monisse [1999] WASCA 103 at [5] and [6]. There was a submission put on behalf of the plaintiffs (at least in their written submissions) that there had been a delay on the part of the defendants in bringing the application for leave and that the delay had been inadequately explained. Reference was made to the decision of Master Bredmeyer in Irvine v The State of Western Australia [1999] WASC 224. I have set out the chronology in this matter above. Given the nature of the dispute between the parties and the extensive discovery involved, I am not satisfied that the delay is inordinate. What delay there has been is explained by an analysis of the progress of the action. In this case delay on the part of the defendants is not a reason to refuse an order for interrogatories.
15 It was also submitted on behalf of the plaintiffs that this was a case where there would be extensive expert evidence and where witness statements would be delivered prior to trial. In these circumstances it was said that there was no real role for interrogatories: see Treacy v Rylestone Pty Ltd [2005] WASC 197. In answer to that submission, Senior Counsel for the defendants submitted that this was one of those cases where answering interrogatories would narrow the issues. In particular, counsel submitted that if the interrogatories were answered, then the real issues could be debated at any mediation conference. While I accept that there is merit in the plaintiffs' submission, it seems to me that this is a case where it is not apparent on the face of the dispute and from a reading of the interrogatories that ordering answers will serve no forensic purpose. That is not to say that merely by reading the interrogatories and matching them against the pleadings it is immediately apparent that the interrogatories are necessary. But they are not so obviously unnecessary as to warrant the application for leave to administer being dismissed.
16 The interrogatories can be broken down into two parts. That is what the defendants did and I will adopt that course. Part 1 comprises questions 1 through to 10(b). These questions relate to the financial accounts of the first plaintiff and its subsidiaries for the year ended
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- 30 June 2004. Part 2 contains questions relating to the financial accounts of the first plaintiff and its subsidiaries for the year ended 30 June 2003 (that is the Audited Completion Accounts) and the terms of the Deed Governing Sale generally. In both written and oral submissions, the defendants addressed Pt 2 of the interrogatories first. I will follow that approach.
17 It was submitted that the answers to the questions in Pt 2 would explain the difference in accounting treatment between the Audited Completion Accounts and the Estimated Completion Accounts and the Audited Completion Accounts and the Last Accounts. Further, it was said that the interrogatories relating to the terms of the Deed Governing Sale would explain any differences between the steps required to be taken by the auditor under the Deed Governing Sale and the steps actually taken by him. Finally, it was said that the interrogatories related directly to the "discrepancies" pleaded in and annexed to the defence: see par 11 of the defence.
18 An example of the type of question put in Pt 2 can be illustrated by reference to questions 15 through to 20. They are in the following terms:
"15. Look at document 16.2 of the Plaintiffs' discovery styled 'Bartercard Tax Invoice/Statement' dated 30 June 2002, a copy of which is annexed hereto and marked 'N'.
(a) Was the value of the Bartercard receivable balance recorded therein as $76,303?
(b) Was the value of the Bartercard receivables balance recorded in the Last Accounts also shown as $76,303?
16. Look at the attachment to document 16.1 of the Plaintiffs' discovery, styled 'Bartercard Tax Invoice/Statement dated 30 June 2003', a copy of which is annexed hereto and marked 'O' (2003 Statement).
(a) Was the value of the Bartercard receivables balance recorded in the 2003 Statement as $139,292?
(b) Was the value of the Bartercard receivables balance recorded in the Estimated Completion Accounts also shown as $139,292?
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- 17. Was the value of the Bartercard receivables balance recorded in the Audited Completion Accounts shown as $46,432?
18. If the answer to question 16(a) and (b) is yes, why was this value not included in the Audited Completion Accounts?
19. Did the Plaintiffs provide for recovery of two-thirds of the Bartercard receivable debt (ie: $46,432 rather than $139,292) in the Audited Completion Accounts?
20. If the answer to question 19 is yes, why did the Plaintiffs provide for recovery of two-thirds of the debt."
19 As I have said above, there is no objection taken to the form of the request. On its face, it would appear to be a question designed to allow the defendants to understand the treatment of certain entries in the accounts. The plaintiffs' response is to suggest that the information is already available to the defendants. Counsel pointed out that by referring to annexure "N" to the interrogatories it is obvious that the value of the Bartercard receivable was $76,303. Therefore, it was submitted, interrogatory 15(a) was unnecessary. In relation to interrogatory 15(b), counsel referred to an affidavit of Deborah Helen Millard ("Millard") sworn 7 February 2004. Millard was at all relevant times, and still is, the finance and administration manager for the defendants. The plaintiffs point out that by par 63(c) of her affidavit she confirms that the Bartercard receivables balance in the Last Accounts was $76,303. Furthermore, it is submitted, the Last Accounts speak for themselves. On that basis it is said interrogatory 15 is unnecessary and irrelevant.
20 It is axiomatic that when drawing affidavits it is essential that underlying material facts are confirmed on oath prior to any questions being directed at those facts. Not to take that step runs the risk of a proper refusal to answer an interrogatory on the basis that facts which are not correct are assumed in the question. It may be that interrogatory 15 takes this principle to extremes. But, in my view, it is not a question which is either irrelevant or in strict terms unnecessary. It is not therefore objectionable.
21 The same can be said of question 16. The annexure marked "O" does indeed show that the value of the Bartercard receivables balance recorded in the 2003 statement was $139,292. Millard confirms this in par 63 of her affidavit. Nonetheless, the question is appropriate to provide
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- background to the questions that follow. The same reasoning applies to question 17.
22 We then come to the nub of the inquiry - questions 18, 19 and 20. The plaintiffs say that question 18 is answered by reference to par 63(c) of Millard's affidavit and par 18.5 of an affidavit of Steve Naumovski ("Naumovski") sworn 4 March 2004. With respect, par 63(c) of Millard's affidavit does not provide an answer to question 18. Nor does par 18.5 of Naumovski's affidavit. That paragraph is in the following terms:
"The figure of $46,432 appearing in the Audited Completion Accounts truly represented the Bartercard receivables balance."
23 Some explanation is provided by par 18.3 of Naumovski's affidavit. It is in the following terms:
"I agree the figures Debbie [Millard] has referred to in paragraph 63(c). 'Bartercard receivables' arose from a system of trade undertaken by a wholly owned subsidiary of J-Corp, Leon Enterprises Pty Ltd. The Bartercard system of trade resulted in trade credits which were entered in the balance sheet. There were concerns about the recoverability of the Bartercard credits. As a result of these concerns, and following discussions with the Auditor, this figure in the Estimated Completion Accounts was reduced by two-thirds to $46,432."
24 That paragraph does not provide any real insight as to why the adjustment was made. The paragraph makes clear that there were concerns about the recoverability of the Bartercard credits. Nothing is said as to how and why those concerns arose. Nothing is said as to why the reduction was two-thirds rather than a half or perhaps three-quarters. It is true that the paragraph goes some way to answering question 19, but that question is, it seems to me, directed again at establishing the fact situation on oath for the purposes of the interrogatory. The paragraph does not answer question 20.
25 It may well be the case that either the expert evidence or witness statements prepared prior to trial will deal with the issues raised by pars 15 through to 20 of the interrogatories. At this stage in the proceedings and given the complexity (at least in accounting terms) of the case, it is difficult to make an assessment as to whether or not these matters would be covered in the evidence or whether they are matters which the defendants would have to develop through cross-examination at
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- trial. On balance, I am satisfied that the questions put in Pt 2 are proper and that they should be answered.
26 Turning then to the questions in Pt 1, the primary objection taken by the plaintiffs was that all of these questions relate to the 2004 accounts. It was said that the treatment of a particular entry in the 2004 accounts was a matter entirely for the plaintiffs and was irrelevant to any issue in relation to the Last Accounts or the Audited Completion Accounts. On behalf of the defendants it was said that the 2004 accounts were relevant. It was said that if a particular entry was treated in one way in the Last Accounts, differently in the Audited Completion Accounts and then treated in the 2004 accounts in a way which was consistent with the Last Accounts, that could give rise to a question as to whether the entry had indeed been properly treated in the Audited Completion Accounts. This rather convoluted argument is best illustrated by reference to an interrogatory. Interrogatory 6 is in the following terms (by way of explanation, GLEB refers to General Ledger Account 73000, Provision for Employee Bonus):
"6. Look at GLEB, a copy of which is annexed hereto and marked 'G', specifically the Entries GJNL1 Batch F04004 therein and highlighted in the annexure hereto (EB Entries). Look also at document 31.2 of the Plaintiffs' discovery, a copy of which is annexed hereto and marked 'H'.
(a) Do the EB Entries described as 'Reverse provision for bonuses' relate to the bonuses paid to Rodney Harris, Roger Piggott and Lyn Wellman, as referred to in document number 31.2 of the Plaintiffs' discovery (annexure 'H' hereto)?
(b) Are the EB Entries recorded in any other general ledger account(s)?
(c) If the answer to question 6(b) is yes, identify the other general ledger accounts and say where same may be inspected?
(d) What general ledger account(s) were the bonus payments recorded against when they were paid?
(e) Why were the bonus payments not recorded against GLEB at the date the bonus payments were made?
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- (f) Why is the provision for employee bonus $Nil at 30 June 2004, compared with $157,015.80 at 30 June 2003 and $19,462 at 30 June 2002?"
27 In annexure "H" referred to in the question, the total of the provision of employee bonuses is $157,015.80. In the extract from J-Corp's general ledger list of transactions for the provision for bonus account for the period 1 July 2003 to 30 June 2004 (being annexure "G" to the notice), there are three debit entries made on 30 June 2004 that total $156,835.80 and share an accompanying comment in the following terms: "Reverse provision for bonuses". This affects the amount claimed by the plaintiffs. The defendants say that they are entitled to an explanation as to why this amount has been treated as it was in the 2004 accounts as opposed to the 2003 accounts.
28 As I have indicated above, the plaintiffs say that the question is irrelevant. They point out that the requirements of the Deed Governing Sale are that the Last Accounts be consistent with the Audited Completion Accounts. There is no mention of the 2004 accounts and they are therefore irrelevant. Counsel for the plaintiffs made the further point that there is no allegation in the defence of fraud on the part of the plaintiffs. Counsel submitted that, in effect, the defendants were saying that the plaintiffs had drawn the Audited Completion Accounts in a way designed to enhance their (the plaintiffs') entitlement and in a way that dishonestly distorted the Audited Completion Accounts.
29 In my view, the interrogatories in Pt 1 do not proceed on the basis that there was some fraudulent act on the part of the plaintiffs in drawing the Audited Completion Accounts. In this case it is a legitimate forensic inquiry to look at the consistency - or lack of it - between the 2004, the 2003 and the 2002 accounts. But how far that inquiry will assist the defendants' case is problematical.
30 Once again, the difficulty is to attempt to determine at this stage of the proceedings what relevance the interrogatories have to the overall dispute between the parties. It is very difficult to assess. On balance, I am prepared to allow the defendants to administer these interrogatories. There is no doubt that questions about the 2004 accounts could be put to the plaintiffs' witnesses in cross-examination. It seems most unlikely that the plaintiffs' expert evidence or the witness statements prepared prior to trial would deal with the 2004 accounts. There is no reason why they should do so. It may assist in the disposition of this case for the defendants to have explained to them now why certain matters were
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- treated in the 2004 accounts in the way that they were. It may assist at a mediation. Accordingly, I am prepared to allow the interrogatories to be administered.
31 In the circumstances, I will allow all of the interrogatories to be administered. I will hear the parties as to the precise form of orders and as to costs.
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