Karri Country Produce Pty Ltd as trustee for the Franceschi Trust v Advance Packing & Marketing Services Pty Ltd as trustee for the APMS Unit Trust [No 2]
[2022] WASC 382
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: KARRI COUNTRY PRODUCE PTY LTD AS TRUSTEE FOR THE FRANCESCHI TRUST -v- ADVANCE PACKING & MARKETING SERVICES PTY LTD AS TRUSTEE FOR THE APMS UNIT TRUST [No 2] [2022] WASC 382
CORAM: PRINCIPAL REGISTRAR MCDONALD
HEARD: 24 MAY 2021 AND FURTHER SUBMISSIONS DATED 1 AUGUST 2022, 2 AUGUST 2022 & 26 AUGUST 2022
DELIVERED : 11 NOVEMBER 2022
PUBLISHED : 11 NOVEMBER 2022
FILE NO/S: CIV 3076 of 2019
BETWEEN: KARRI COUNTRY PRODUCE PTY LTD AS TRUSTEE FOR THE FRANCESCHI TRUST
Plaintiff
AND
ADVANCE PACKING & MARKETING SERVICES PTY LTD AS TRUSTEE FOR THE APMS UNIT TRUST
Defendant
Catchwords:
Practice and procedure ‑ Discovery ‑ Application for further and better discovery - Relevance of valuation advice obtained pre‑litigation - Waiver of legal professional privilege - Relevance of plaintiff's financial position to defences - Laches - Acquiescence - Whether plaintiff able to do equity
Legislation:
Rules of the Supreme Court 1971 (WA), O 26 r 6, O 26 r 7
Result:
Defendant's application allowed in part
Category: B
Representation:
Counsel:
| Plaintiff | : | S Stewart |
| Defendant | : | T Langdon |
Solicitors:
| Plaintiff | : | Johnson Winter & Slattery |
| Defendant | : | HWL Ebsworth Lawyers |
Case(s) referred to in decision(s):
Alati v Kruger (1955) 94 CLR 216
Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd (No 4) [2013] FCA 1044
Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd (No 5) [2013] FCA 1045
Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2010] FCA 1415
Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2012] FCA 290
Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd and Anor (No 4) [2013] FCA 1044
Ambridge Investments Pty Ltd (in liq) v Baker [2010] VSC 59
Archer Capital 4A Pty Ltd (atf Archer Capital Trust 4A) v Sage Group plc (No 3) [2013] FCA 1160; (2013) 306 ALR 414
Astra-National Productions Ltd v Neo-Art Productions Ltd [1928] WN 218
Atlas Copco Australia Pty Ltd v Oxair Gases Pty Ltd [2013] WASCA 43
Attorney-General (NT) v Maurice (1986) 161 CLR 475
AWB Ltd v Cole (No 2) [2006] FCA 913; (2006) 233 ALR 453
AWB Ltd v Cole (No 5) [2006] FCA 1234; (2006)155 FCR 30
Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; (2004) 40 FCR 101
British American Tobacco Australia Ltd v Secretary, Department of Health and Ageing [2011] FCAFC 107; (2011) 195 FCR 123
British American Tobacco Australia Services Ltd v Cowell [2002] VSCA 197 [121]; (2002) 7 VR 524
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Cargill Aust Ltd v Viterra Malt Pty Ltd (No 7) [2018] VSC 99
Chapman v Michaelson [1909] 1 CH 238
Commercial Developments Pty Ltd v Mercantile Mutual Insurance (Workers' Compensation) Limited (1991) 5 WAR 208
Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Company (1882) 11 QBD 55
Co-operative Bulk Handling Ltd v Brookfield Rail Pty Ltd [2014] WASC 31
Crown Resorts Ltd v Zantran Pty Ltd [2020] FCAFC 1; (2020) 374 ALR 739
Duckworth v Water Corporation [2012] WASC 30, [27]-[31]; (2012) 261 FLR 185
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303
GR Capital Group Pty Ltd v Xinfeng Australia International Investment Pty Ltd [2020] NSWCA 266
Grove v Kenworthy-Groen [2020] WASC 363
Hobart International Airport Pty Ltd v Clarence City Council [2022] HCA 5; (2022) 399 ALR 214
Jervis v Berridge (1873) 8 Ch App 351
Karri Country Produce Pty Ltd as Trustee for the Franceschi Country Produce Pty Ltd as Trustee for the Franceschi Trust v Advance Packing & Marketing Services Pty Ltd as Trustee for the APMS Unit Trust [2022] WASC 37
Krok v Federal Commissioner of Taxation [2015] FCA 51 [26]; (2015) 100 ATR 595
Langman v Handover (1929) 43 CLR 334
Leighton v Garnham (No 4) [2016] WASC 134
Mann v Carnell [1999] HCA 66
Mercanti v Mercanti [2015] WASC 297
Mulley v Manifold [1959] 103 CLR 341
Orr v Ford (1989) 167 CLR 316
Osland v Secretary, Department of Justice [2008] HCA 37; (2008) 234 CLR 275
Perpetual Trustees Company Ltd v Burniston [2012] WASC 26
Perth Airport Pty Ltd v Qantas Airways Ltd [No 2] [2021] WASC 342
Pisano v Thrum [2007] WASC 109
Rafferty v Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd) [2017] WASC 18
Roe v State of Western Australia [2013] WASC 130
Streeter v Western Areas Exploration Pty Ltd [No 2] [2011] WASCA 17 [634] – [635]; (2011) 278 ALR 291
TEC Hedland Pty Ltd v The Pilbara Infrastructure Pty Ltd [2020] WASC 364
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2010] WASC 218
The Bell Group (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 39 WAR 1
Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2005] WASC 60
TABLE OF CONTENTS
Summary
Background
Application
Issues for Determination
Further and better discovery ‑ applicable principles
Waiver of Privilege – applicable principles
Scope of Waiver – applicable principles
Issue 1: Relevance of the Morris Forensic Documents
Pleadings
Plaintiff's statement of claim
Defence
Plaintiff's reply
Parties' opposing contentions
Defendant's submissions
Plaintiff's submissions
Defendant's responsive submissions
Disposition: Issue 1 - relevance of the Morris Forensic Documents
Issues 2 & 3: Has privilege been waived?
Parties' opposing contentions
Defendant's submissions
Plaintiff's submissions
Disposition: Issues 2 & 3 - has privileged been waived and over which documents?
Issue 4: Redemption Price documents
Legal Principles
Laches and Acquiescence
Pleadings
Payment of Redemption Price
Acquiescence
Laches
Contract
Disposition: Issue 4 - relevance of Redemption Price documents to defences of laches and acquiescence and contract
Issue 5: Financial Documents
Legal principles
Parties' opposing contentions
Defendant's submissions
Plaintiff's submissions
Defendant's responsive submissions
Disposition: Issue 5 - Relevance of the Financial Documents to doing equity
Issue 6: Is the discovery of the Financial Documents and Redemption Price Documents Oppressive
Conclusion
PRINCIPAL REGISTRAR MCDONALD:
Summary
This is an application by the defendant for further and better discovery from the plaintiff pursuant to O 26 r 6 and O 26 r 7 of the Rules of the Supreme Court1971 (WA) (RSC). The application relates to two categories of documents. The first category is comprised of advice received by the plaintiff from forensic accountants and related correspondence. It is accepted that if these documents are relevant, they are subject to legal professional privilege. The defendant contends that privilege has been waived. The second category is comprised of documents that reveal the manner in which the plaintiff dealt with the payment it received from the defendant for its units in a unit trust and the financial status of the plaintiff.
For the reasons that follow I find:
(a)the Morris Forensic Advice and any instructions to Morris Forensic necessary to inform the Morris Forensic Advice are discoverable, the legal professional privilege claimed in relation to those documents has been waived and the documents should be produced for inspection;
(b)the financial documents comprised of the plaintiff's financial statements, the plaintiff's tax returns and bank statements from 6 May 2019 onwards, whether sought for the purpose of ascertaining the manner in which the plaintiff dealt with payment received for its units in the Trust or the plaintiff's financial status, are not discoverable on the basis that I am not satisfied they are relevant or that they are necessary for fairly disposing of the proceedings.
Background
The background to the action is set out in my decision Karri Country Produce Pty Ltd as Trustee for the Franceschi Country Produce Pty Ltd as Trustee for the Franceschi Trust v Advance Packing & Marketing Services Pty Ltd as Trustee for the APMS Unit Trust.[1]
[1] Karri Country Produce Pty Ltd as Trustee for the Franceschi Country Produce Pty Ltd as Trustee for the Franceschi Trust v Advance Packing & Marketing Services Pty Ltd as Trustee for the APMS Unit Trust [2022] WASC 37.
The defendant is the trustee of the APMS Unit Trust (the Trust). The plaintiff owned 25% of the units in the Trust. The action concerns the validity of the steps taken by the defendant to compulsorily redeem the plaintiff's units in the Trust on 6 May 2019. Prior to the redemption of the plaintiff's units, the parties had been in discussions about how to value the plaintiff's units for the purpose of its exit from the Trust. As part of those negotiations, in April 2018 the defendant obtained a valuation of the units held by the Trust from chartered accountants, Nexia Australia (the Nexia Valuation).[2]
[2] Affidavit of David Schirripa sworn on 25 March 2021 [14] (Mr Schirripa's affidavit); affidavit of Alison Jane Robertson sworn on 8 March 2021 [14] (Ms Robertson's affidavit).
On 23 August 2018 the plaintiff, through its former solicitors, Schirripa Evans Lawyers, engaged forensic accounting advisers, Morris Forensic, to undertake a review of the Nexia Valuation.[3] The nature of the alleged mistakes contained in the Nexia Valuation were outlined in a letter dated 9 November 2018 from the plaintiff's former solicitors to the directors of the defendant (the Schirripa Evans Letter).[4] It is apparent from that letter and subsequent correspondence that the comments made about the Nexia Valuation were based on advice from the plaintiff's forensic accounting advisors, Morris Forensic[5] (the Morris Forensic Advice). As a result of the advice from Morris Forensic the plaintiff contended that the Nexia Valuation should not be relied upon for an accurate valuation of the Trust or the units in the Trust.[6]
[3] Mr Schirripa's affidavit [14].
[4] Ms Robertson's affidavit [13] AJR-2, 23 ‑ 27.
[5] Ms Robertson's affidavit AJR-2, 25 ‑ 26, AJR-4, 31.
[6] Ms Robertson's affidavit AJR-2, 26.
On 28 November 2018 the directors of the defendant resolved, among other things, to appoint an independent accountant to carry out a valuation of the plaintiff's units for the purposes of the redemption of those units by the defendant, as trustee.[7]
[7] Amended Statement of Claim filed 15 January 2021 (Amended Statement of Claim) [17]; Further Amended Defence filed 19 February 2021 (Further Amended Defence) [17].
On 1 February 2019, the defendant engaged BDO (Australia) Pty Ltd (BDO) to value the Trust and the units of the plaintiff.[8] This culminated in BDO providing the defendant on 3 April 2019 with a report which both parties admit was its final valuation report (the BDO Valuation).[9]
[8] Amended Statement of Claim [17A]; Further Amended Defence [17A].
[9] Further Amended Statement of Claim filed 29 July 2022 (Further Amended Statement of Claim) [17H]; Second Further Amended Defence filed 22 August 2022 (Second Further Amended Defence) [17H].
On 18 April 2019, the defendant sent the plaintiff the BDO Valuation and a notice of meeting of directors of the trustee to be held on 6 May 2019 together with information relevant to the proposed resolution to redeem the plaintiff's units at the value stated in the BDO Valuation.[10]
[10] Amended Statement of Claim [18] ‑ [20]; Further Amended Defence [18] ‑ [20].
At the meeting on 6 May 2019 it was resolved by majority to approve the redemption of the plaintiff's units for the price recommended in the BDO Valuation, namely $412,500 ($1,375 per unit) (the Redemption Price).[11] These funds were subsequently transferred to the plaintiff on or about 10 May 2019.[12]
[11] Amended Statement of Claim [27] – [28]; Further Amended Defence [27] – [28].
[12] Amended Statement of Claim [34]; Further Amended Defence [34].
Also relevant to the defendant's application are aspects of this action's procedural history. On 26 March 2020, in response to a request by the defendant that the plaintiff provide security for costs, the plaintiff advised the defendant that it had, or had access to, cash in the sum of $344,862.12. In addition, the plaintiff confirmed that, as trustee of the Franceschi Family Trust it had assets valued at approximately $380,000.[13] The defendant amended its defence to claim that, in addition to the plaintiff refusing to do equity by retaining the Redemption Price, the plaintiff was unable to do equity as it has disposed of the Redemption Price and lacks the financial resources to repay it.[14] Since the hearing of the application the plaintiff has admitted it has subsequently dealt with or disposed of some of the Redemption Price.[15]
[13] Ms Robertson's affidavit [25] – [27], AJR-11, 83 – 85.
[14] Amended Defence filed 7 December 2020 [68] – [69].
[15] Further Amended Reply filed 5 September 2022 (Further Amended Reply) [18] – [19].
Application
The defendant requires the plaintiff to discover and produce for inspection:
(a)all correspondence to or from Morris Forensic and any other forensic accountant engaged by or on behalf of the plaintiff in relation to:
(i)any valuation of the assets of the Trust;
(ii)any valuation of units in the Trust held or formerly held by the plaintiff; or
(iii)the manner in which any such valuation may or ought to be carried out (together the Valuation Issues),
whether or not the plaintiff is party to any such correspondence;
(b)any report, including any draft report, by Morris Forensic in relation to the Valuation Issues, whether or not any such report or draft report is addressed to the plaintiff or to any other person;
(c)any correspondence, record or other document referring to any advice, report, correspondence or other communication involving Morris Forensic relating to the Valuation Issues;
(d)the plaintiff's financial statements in respect of the period from 6 May 2019 onwards;
(e)the plaintiff's tax returns in respect of the financial years ending on 30 June 2019 and each financial year after that date; and
(f)the plaintiff's bank statements for the period from 6 May 2019 onwards.
In summary, the two categories of documents sought are:
(a)any document to or from or involving Morris Forensic and any other forensic accountant regarding the valuation of the Trust and the manner in which the valuation ought to be carried out (Morris Forensic Documents);
(b)the plaintiff's financial documents which:
(i)evidence whether, and the manner in which, the plaintiff dealt with the Redemption Price (the Redemption Price Documents); and
(ii)reveal the plaintiff's current financial position (the Financial Documents).
Issues for Determination
The plaintiff submits the following issues require determination in this application:
(1)whether the Morris Forensic Documents relate to a matter in question in the action;
(2)whether, by referring to comments provided by Morris Forensic in the Schirripa Evans Letter to the defendant's solicitors, the plaintiff has waived privilege in the Morris Forensic Documents;
(3)whether, by reason of the issues raised in the proceedings, the plaintiff has impliedly waived privilege in the Morris Forensic Documents;
(4)whether the Redemption Price Documents relate to a matter in question in the action;
(5)whether the Financial Documents relate to a matter in question in the action; and
(6)whether discovery of the Redemption Price Documents or Financial Documents would be oppressive or unnecessary for fairly disposing of the proceedings.
Further and better discovery ‑ applicable principles
The defendant's application is brought pursuant to O 26 r 6 and O 26 r 7 of the RSC and the inherent jurisdiction of the court. The onus is on the party seeking discovery under O 26 r 6 of the RSC to satisfy the court of the following matters: [16]
(a)that there are reasonable grounds for being fairly certain that the documents or the class of documents sought are in existence;
(b)the documents sought are relevant; and
(c)the documents ought to have been disclosed.
[16] As summarised in Perpetual Trustees Company Ltd v Burniston [2012] WASC 26 [29].
An application for discovery under O 26 r 7 of the RSC may be made by a party whose request under O 26 r 1 has not been satisfied.
Any order based on the court's inherent power must additionally take into consideration the rebuttable presumption that an affidavit of discovery is conclusive as to the sufficiency of discovery of the documents in that party's possession, custody or power unless an insufficiency appears:[17]
(a)from the pleadings;
(b)from the affidavit itself;
(c)from the documents that are referred to in the affidavit or subsequently disclosed by the party as relevant;
(d)as a result of an admission by the party; or
(e)because the party had excluded documents by a misapprehension of its own case.
[17] Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2010] WASC 218 [3] ‑ [8], adopted in Perpetual Trustees v Burniston [33].
The court must be satisfied that it ought to exercise its discretion in ordering further discovery, having regard to the overriding objects of case management and the just resolution and determination of litigation in accordance with O 1 r 4B RSC.[18]
[18] Perpetual Trustees v Burniston [34].
The court will only exercise its discretion and make an order for further and better discovery if such an order is necessary for the fair determination of the issues in contention.[19] When considering what is necessary, the court will have regard to factors that include the utility of the investigative process and the documents likely to be discovered, balanced against the burden such a process would impose.[20] In balancing these considerations, the court will also have regard to the importance and complexity of the subject matter in issue and the financial standing of the parties, together with case management considerations.[21]
[19] Rafferty v Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd) [2017] WASC 18 [16]; Roe v State of Western Australia [2013] WASC 130 [10].
[20] Rafferty v Amaca [16].
[21] Roe vf State of Western Australia [10].
The court is to have regard to the pleadings when determining relevance. A document relates to a matter in question in the action which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may either directly or indirectly enable the other party to advance its own case or to damage the case of the other party.[22] Relevance may appear from either the character of the document or its contents. It is not enough to establish the likelihood that the documents exist unless the mere fact that they belong to the class is sufficient to establish relevance. If the mere fact that they belong to the class is not sufficient to establish relevance and the relevance depends upon the contents of the particular documents, there must be a prima facie case as to their contents before discovery of the documents will be ordered.[23]
[22] Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Company (1882) 11 QBD 55; Mulley v Manifold [1959] 103 CLR 341, 345; Atlas Copco Australia Pty Ltd v Oxair Gases Pty Ltd [2013] WASCA 43 [20].
[23] Rafferty v Amaca [15] citing Astra-National Productions Ltd v Neo-Art Productions Ltd [1928] WN 218, 219; Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2005] WASC 60 [3].
The obligation to give discovery does not extend to irrelevant allegations in the pleadings which, even if substantiated, could not affect the ultimate result of the action.[24]
[24] Pisano v Thrum [2007] WASC 109 [33] ‑ [34] approved in Co-operative Bulk Handling Ltd v Brookfield Rail Pty Ltd [2014] WASC 31 [37]; Grove v Kenworthy-Groen [2020] WASC 363 [34].
Waiver of Privilege – applicable principles
Privilege can be waived expressly or by implication.[25] In either case, privilege will be waived if the party holding the privilege does an act that is inconsistent with the confidentiality of the privileged information.[26] The test for waiver is an objective one. The law may impute waiver even if this was not intended by the party claiming the privilege. The intention will be imputed where the actions of a party are 'plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect'.[27]
[25] Attorney-General (NT) v Maurice (1986) 161 CLR 475; Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 [29].
[26] Mann v Carnell [13]; Osland v Secretary, Department of Justice [2008] HCA 37; (2008) 234 CLR 275, [35], [44] – [46], [48] – [50].
[27] Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303 [30].
If the party discloses the 'substance and effect' of the content of the privileged document, that disclosure is inconsistent with the maintenance of confidentiality, and privilege will be waived as a result.[28]
[28] Bennett v Chief Executive Officer of the Australian Customs Service [2004] FCAFC 237; (2004) 40 FCR 101 [5].
Whether a disclosure of the existence and effect of the privileged communication is inconsistent with maintaining confidentiality will depend upon the circumstances of the case.[29] Key factors will be the purpose of the disclosure and the legal and practical consequences of limited rather than complete disclosure.[30]
[29] Osland v Secretary, Department of Justice [49].
[30] Osland v Secretary, Department of Justice [46].
Where a party to litigation (or, by extension, contemplated litigation) partially discloses legal advice (or other privileged advice) in order to achieve some forensic advantage, while claiming privilege and thereby denying the other party an opportunity to see the full text of the communication, this may amount to conduct inconsistent with the maintenance of privilege.[31]
[31] Krok v Federal Commissioner of Taxation [2015] FCA 51 [26]; (2015) 100 ATR 595; British American Tobacco Australia Ltd v Secretary, Department of Health and Ageing [2011] FCAFC 107; (2011) 195 FCR 123 [46].
To establish implied waiver of privilege by reason of the issues raised in the proceedings, the content of the communication must have been put in issue by the holder of the privilege. There must be an assertion (express or implied) 'either about the contents of a confidential communication or which necessarily lays open the confidential communication to scrutiny'.[32]
[32] GR Capital Group Pty Ltd v Xinfeng Australia International Investment Pty Ltd [2020] NSWCA 266 [55] – [57].
One circumstance in which an implied waiver of privilege will occur is where the party claiming the privilege has put its state of mind in issue in the proceedings, and where the legal advice or other privileged communication would have had an effect on the party's state of mind.[33]
[33] See for example, Archer Capital 4A Pty Ltd (atf Archer Capital Trust 4A) v Sage Group plc (No 3) [2013] FCA 1160; (2013) 306 ALR 414 [8] – [26].
Putting a state of mind in issue, even together with a likelihood that legal advice was obtained that might be relevant to the issue, is not necessarily enough. The privileged communication must itself be central to the case or, in other words, there should be a relation of 'necessity, inevitability or indispensability between recourse to the contents of the confidential communication and the resolution of the question that the privilege holder has put in issue'.[34]
[34] Cargill Aust Ltd v Viterra Malt Pty Ltd(No 7) [2018] VSC 99 [124].
In TEC Hedland Pty Ltd v The Pilbara Infrastructure Pty Ltd in relation to whether the advice is purportedly relevant to a pleaded state of mind, Hill J held: [35]
Where a party, by its pleadings or evidence, expressly or impliedly makes an assertion about the contention of its legal advice, this may constitute a waiver of privilege. However, a pleading of a statement of mind to which legal advice is or might be materially relevant will not, of itself, be sufficient; there must be inconsistency between the pleaded case and the maintenance of privilege which causes privilege to be lost (DSE (Holdings) Pty Ltd v Intertan Inc [95]). This requires a 'fact-based inquiry' as to whether the contents of otherwise privileged communications have been directly or indirectly put in issue in the litigation by making a claim or by way of defence (Commissioner of Taxation v Rio Tinto Ltd [2006] FCAFC 86; (2006) 151 FCR 341 [61]). It is the acts of the party claiming the privilege that must be considered. A denial or joinder of issue on a question of fact or matter raised by another party will not constitute an implied waiver of privilege (DSE (Holdings) Pty Ltd v Intertan Inc [115], [121] citing with approval Commonwealth v Temwood Holdings Pty Ltd [2002] WASC 107 [10] (Wheeler J)).
Scope of Waiver – applicable principles
[35] TEC Hedland Pty Ltd v The Pilbara Infrastructure Pty Ltd [2020] WASC 364 [41].
In determining the scope of the waiver, the issue is whether the material the party has voluntarily disclosed is the whole of the material which is relevant to the issue or subject matter.[36] As Young J stated in AWB Ltd v Cole (No 5): [37]
[T]he limits of any waiver of associated material depend upon the nature of the advice that has been disclosed, what was represented by means of the disclosure, and the character of the transaction that gave rise to the disclosed legal advice.
[36] Attorney-General (NT) v Maurice, 482, 484, 488, 498 - 499; AWB Ltd v Cole (No 5)[2006] FCA 1234; (2006)155 FCR 30 [164].
[37] AWB Ltd v Cole (No 5) [200].
In British American Tobacco Australia Services Ltd v Cowell[38] the Victorian Court of Appeal held that where privilege has been waived in relation to an advice, privilege will only be impliedly waived in other advice or associated materials where those documents are necessary to understand the advice over which privilege has been waived. Where the advice is complete, there will be no implied waiver.[39]
[38] British American Tobacco Australia Services Ltd v Cowell [2002] VSCA 197; (2002) 7 VR 524.
[39] British American Tobacco Australia Services Ltd v Cowell [121].
However, Young J expressed the view that the Court of Appeal in British American Tobacco Australia Services Ltd v Cowell had expressed the proposition too narrowly. In expressing this view, his Honour noted that: [40]
The principle propounded by the Court of Appeal may work adequately enough in some circumstances, particularly where privilege is sought to be maintained over one part of a single piece of legal advice, but in other circumstances it will not give effect to the principles explained in Maurice.
[40] AWB Ltd v Cole (No 5) [167].
Attorney General (NT) v Maurice to which Young J in AWB Ltd v Cole (No 5)[41] was referring held that to determine the scope of waiver of associated material the test is whether the material that the party has chosen to release from privilege represents the whole of the material relevant to the same issue or subject matter.[42]
[41] AWB Ltd v Cole (No 5)[164].
[42] Attorney General (NT) v Maurice, 482, 484, 488, 498 - 499.
In Perth Airport Pty Ltd v Qantas Airways Ltd [No 2][43] Le Miere J had to consider whether to allow inspection of associated documents underpinning expert advice which was disclosed during negotiations between the parties and in respect of which privilege was found to have been waived. In that case, Qantas, being the party in whose favour inspection of the otherwise privileged document was allowed, submitted that waiver is not limited to the specific material deployed by the person entitled to the privilege, but the waiver extends to 'associated material' as referred to by Young J in AWB Ltd v Cole (No 5),[44] including material that underpinned or influenced the legal advice. Le Miere J reviewed the authorities dealing with how far waiver extends in relation to the disclosure of advice: [45]
[43] Perth Airport Pty Ltd v Qantas Airways Ltd [No 2] [2021] WASC 342.
[44] AWB Ltd v Cole (No 5) [200] – [202].
[45] Perth Airport Pty Ltd v Qantas Airways Ltd [No 2] [30] – [32].
The scope of an imputed waiver of discovery was considered recently by O'Callaghan J in Zantran Pty Ltd v Crown Resorts Ltd (No 2). Zantran submitted that passages from the judgement of Young J in AWB Ltd v Cole (No 5) under the rubric 'Associated material' stand for the proposition that 'a voluntary disclosure of privileged documents can result in a waiver of privilege over those documents and associated material', and that 'the test applied to determine the scope of any waiver of associated material is whether the material that the party has chosen to release from privilege represents the whole of the material relevant to the same issue or subject matter.' Zantran argued that the voluntary provision of one privileged communication gives rise to a waiver of legal professional privilege over all other privileged communications relevant to the same issue or subject matter as the communication voluntarily provided.
Justice O'Callaghan rejected Zantran's contentions. His Honour held that there is no species of waiver called 'associated material'. His Honour said that he did not read anything that Young J said in AWB Ltd v Cole (No 5) to suggest that there is some species of waiver involving so-called 'associated material' that involves an expansion of the principles in Mann v Carnell. His Honour said:
It is clear from his Honour's reasoning…. that his Honour held that the AWB had waived privilege in that case because:
(1)by disclosing the results of its legal reviews and legal advice it had obtained to the Australian Government and others, the AWB had deployed the gist or substance of that advice;
(2)it had made a conscious and voluntary decision so to deploy the advice because it considered that it was in its commercial interests to do so;
(3)those actions were inconsistent with the maintenance of confidentiality in the advice; and
(4)having regard to the nature, purpose, terms and extent of its disclosures, the AWB had acted inconsistently with the maintenance of confidentiality over the associated material which underpinned the advice.
The extent of any waiver is to be determined in accordance with the principles expounded in Mann v Carnell. The critical question is to identify the relevant subject matter that the party has released from privilege.
Issue 1: Relevance of the Morris Forensic Documents
Pleadings[46]
Plaintiff's statement of claim
[46] References to the pleadings are to the pleadings filed and relied upon at the hearing of the application. If the relevant paragraphs of the pleadings have been superseded by pleadings which have been subsequently filed in the action, to the extent that it is relevant to the application, the paragraph in the current pleading will also be referenced.
The plaintiff alleges that neither the process of obtaining the BDO Valuation nor the valuation itself, was done in accordance with the Trust Deed. It is pleaded that contrary to the terms of the Trust Deed:[47]
(a)the defendant did not first give all unit holders details of the valuer appointed to undertake a valuation for the purposes of the proposed trustee redemption notice, so as to give a reasonable time within which to make submissions to the valuer, before the valuation was completed;[48]
(b)the BDO Valuation did not value the assets of the Trust in their entirety by assessing the price that would be struck for all those assets by a willing buyer and seller, but on the erroneous assumption that what was to be assessed was the hypothetical sale price for a sale of only a share of those assets which would not deliver control of those assets, resulting in an erroneous discounting of an assessed multiplier of earnings on account of an absence of control;[49]
(c)BDO relied upon evidence of other sales which did not relate to businesses conducted in Australia and without giving any reasons why those sales could possibly be relevant to the value of the assets of the Trust Fund,[50] or why potential buyers or sellers would have regard to other sales in assessing the value of the assets;[51]
(d)BDO's assessment relied on a 'net asset based equity value' as a cross-check of its valuation when its valuation of the Trust was greater than the net assets based equity value and considered that an element of goodwill would make up the difference without attempting to assign a value to goodwill independently of its primary valuation methodology and, as a result, the cross‑check did not support BDO's assessment of the valuation of the assets of the Trust Fund;[52] and
(e)the defendant did not give each unit holder a copy of the final draft of the BDO Valuation and did not provide unit holders with a reasonable opportunity to make further submissions to BDO about the draft, including as to factual accuracy, before the purported valuation was completed by BDO.[53]
[47] Amended Statement of Claim [35A].
[48] Amended Statement of Claim [35B].
[49] Amended Statement of Claim [35C].
[50] Amended Statement of Claim [35D].
[51] Further Amended Statement of Claim [35D].
[52] Amended Statement of Claim [35E].
[53] Amended Statement of Claim [35F].
The plaintiff also pleads the defendant's failure to give unit holders details of the valuer so as to give the unit holders reasonable time to make submissions about the proposed valuation, was in breach of its duties as trustee to the plaintiff as a unit holder to administer the Trust in accordance with the Trust Deed.[54]
[54] Amended Statement of Claim [12(a)], [37].
Consequently, the plaintiff says the BDO Valuation and the subsequent trustee redemption notice are invalid, or of no force or effect.[55]
[55] Amended Statement of Claim [38].
The plaintiff pleads that had it been given the details of BDO's appointment before the BDO Valuation was completed, it would have made submissions to BDO in relation to the valuation of the Trust and its units.[56] The plaintiff provides particulars of the matters in respect of which it would have made submissions if given the opportunity.[57] However, in supplementary answers to a request for particulars the plaintiff states that the content of any submissions that it would have made to BDO is not in issue on the pleadings and, in any case, is irrelevant to the plaintiff's allegation that it was denied the right to make submissions and that it would have made them.[58]
[56] Amended Statement of Claim [23].
[57] Plaintiff's Answers to Request for Further and Better Particulars filed 28 January 2020 [23].
[58] Supplementary Answers to Request for Further and Better Particulars filed 16 March 2021 [5].
In addition to damages and equitable compensation the plaintiff seeks the following relief:
(a)a declaration that the purported trustee redemption notice issued on 6 May 2019 is invalid and of no effect;[59]
(b)a declaration that the plaintiff's units have not been validly redeemed, the alteration of the register of unit holders and removal of the name of the plaintiff and its unit holding from the register is void, unlawful[60] and is of no force or effect, and that the plaintiff is the holder of 300 units in the Trust;[61]
(c)an order that the register of unit holders be rectified accordingly;[62]
(d)a declaration that the plaintiff is entitled to appoint Ms Jennifer Franceschi as a director of the trustee;[63]
(e)a full and proper account of the defendant's dealings with the Trust since 6 May 2019 and of what is due to the plaintiff from the trustee[64] ascertained on the footing of the above declaration and orders;[65]
(f)an order for payment by the defendant of all sums found to be due from the defendant on the taking of the account;[66] and
(g)a declaration that for the purposes of a proposed trustee redemption notice to redeem the plaintiff's units, BDO by its director, Mr Sherif Andrawes, is not an independent accountant or expert valuer within the meaning of the Trust Deed and a valuation for the purposes of the proposed trustee redemption notice to redeem the plaintiff's units will be of no force and effect if undertaken by him;[67] and
(h)such further order as the court considers appropriate including all further necessary or appropriate accounts, inquiries and directions.[68]
Defence
[59] Amended Statement of Claim, Prayer for Relief [A].
[60] Amended Statement of Claim, Prayer for Relief [B].
[61] Further Amended Statement of Claim, Prayer for Relief [B].
[62] Amended Statement of Claim, Prayer for Relief [CA].
[63] Amended Statement of Claim, Prayer for Relief [CB].
[64] Amended Statement of Claim, Prayer for Relief [CC].
[65] Further Amended Statement of Claim, Prayer for Relief [CC].
[66] Amended Statement of Claim, Prayer for Relief [CD].
[67] Further Amended Statement of Claim, Prayer for Relief [C].
[68] Amended Statement of Claim, Prayer for Relief [E].
The defendant:
(a)while it admits that in the time between the meeting of directors of the trustee held on 28 November 2018 and 18 April 2019 the trustee did not provide the plaintiff with notice or details of the appointment of BDO to value the Trust and the units, says the plaintiff knew the defendant intended to seek a valuation for the purposes of redeeming the plaintiff's units, and that the plaintiff made no inquiry of the defendant or any other person about the identity of the valuer;[69]
(b)admits that the Trust Deed imposes an obligation on the defendant to follow the process for obtaining a valuation specified by the Trust Deed, but denies that a valuation will be of no force or effect if not so undertaken;[70]
(c)admits that it is an express term of the Trust Deed that a copy of the valuation report is to be provided to all unit holders as soon as is reasonably practicable following receipt by the defendant of the final draft, but denies that the defendant must give each unit holder a copy of the final draft valuation report and provide unit holders with a reasonable opportunity to make further submissions to the valuer about the draft before the valuation is completed;[71]
(d)says the plaintiff had the opportunity to request from the defendant details of the valuer from 28 November 2018 and had the opportunity to make submission between 18 April 2019 and 6 May 2019 and did not;[72] and
(e)says the plaintiff accepted the Redemption Price as payment for its units[73] and relies on the defences of acquiescence,[74] estoppel,[75] laches,[76] the formation of a contract of sale for the 300 units,[77] and a refusal by, and an inability of, the plaintiff to do equity.[78]
Plaintiff's reply
[69] Further Amended Defence [21].
[70] Further Amended Defence [8A(a)].
[71] Further Amended Defence [8A](e)].
[72] Further Amended Defence [22].
[73] Further Amended Defence [34].
[74] Further Amended Defence [54].
[75] Further Amended Defence [55(e)].
[76] Further Amended Defence [55(f)].
[77] Further Amended Defence [55A].
[78] Further Amended Defence [69].
The plaintiff denies there was any obligation to inquire as to the identity of the valuer appointed by the defendant.[79] Although not specifically pleaded, the plaintiff's case is that the Redemption Price was accepted as part payment.[80] The plaintiff pleads that any acceptance of the Redemption Price by the plaintiff did not release the plaintiff's right to full performance of the obligations.[81]
[79] Amended Reply filed 5 March 2021 (Amended Reply) [3].
[80] Plaintiff's Submissions filed 30 April 2021 [14].
[81] Amended Reply [9](c)].
Since the hearing of the application the plaintiff denies that the equitable defences of laches and refusal or inability to do equity apply.[82]
Parties' opposing contentions
[82] Further Amended Reply [20A].
The defendant's request for discovery of the Morris Forensic Documents arose from the Schirripa Evans Letter. That letter, from the plaintiff's former solicitors to the defendant, refers to advice the plaintiff received from Morris Forensic in relation to the Nexia Valuation.[83]
[83] Ms Robertson's affidavit [13] – [15], AJR-2, 23 ‑ 27.
In that letter the plaintiff is critical of the steps, procedures and reasoning undertaken by Nexia Australia. It is clear that the source of those criticisms is based on advice received by the plaintiff from its accounting advisors, Morris Forensic.[84]
Defendant's submissions
[84] Ms Robertson's affidavit [13] – [16], AJR-2, 25 – 26, AJR-4, 31.
The defendant submits that although the comments attributed to Morris Forensic in the Schirripa Evans Letter relate to the earlier Nexia Valuation and not the BDO Valuation which was ultimately relied upon by the defendant, the comments include a consideration of issues that are generally relevant to the proper manner for valuing the units.[85]
[85] Defendant's Submissions filed 13 April 2021 [15].
Specifically, the defendant submits that the Morris Forensic Documents are relevant to the following issues in the pleadings:
(a)whether it was erroneous for the BDO Valuation to assess the value of the assets of the Trust Fund by relying upon evidence of other sales which did not relate to businesses conducted in Australia;[86]
[86] Amended Statement of Claim [35D].
(b)whether it follows that the valuation contained in the BDO Valuation was not reasonable if, as the plaintiff pleads:[87]
[87] Amended Statement of Claim [35E].
(i)BDO relied upon a 'net asset based equity value' as a cross-check of its valuation when its purported assessment of the valuation of the assets of the Trust Fund was greater than the 'net asset based equity value';
(ii)BDO stated that it expected there would be an element of goodwill that would make up the difference but made no attempt to assign a value to goodwill independently of its primary valuation methodology; and
(iii)as a result, the cross-check did not support BDO's assessment of the valuation of the assets of the Trust Fund;
(c)whether, if the defendant had notified the plaintiff of BDO's appointment before 18 April 2019, the plaintiff would have made submissions to BDO regarding the valuation of the assets of the Trust Fund;[88]
(d)what submissions the plaintiff would have made to BDO;[89] and
(e)whether the plaintiff acquiesced to any breach of duty by the defendant in relation to the process of obtaining the BDO Valuation and issuing the trustee redemption notice on 6 May 2019,[90] or whether the plaintiff's claim is barred by reason of laches.[91]
Plaintiff's submissions
[88] Amended Statement of Claim [23].
[89] Defendant's request for further and better particulars of statement of claim filed 20 January 2020 [2]; Plaintiff's answers to the Defendant's request for further and better particulars of statement of claim filed 28 January 2020; Plaintiff's answers filed 24 February [5]; Plaintiff's supplementary answers filed 16 March 2021 [5].
[90] Further Amended Defence [54]; Amended Reply [16].
[91] Further Amended Defence [55(f)].
The plaintiff's response to each of the matters which the defendant claims are in issue to which the Morris Forensic Documents are said to relate is as follows:
(a)the mere fact that the Morris Forensic Documents may contain comments with respect to the earlier Nexia Valuation, does not establish relevancy. The validity of the Nexia Valuation is not in issue. None of the four comments made by Morris Forensic with respect to the earlier Nexia Valuation[92] address the relevance of non-Australian sales, upon which the defendant relies to establish relevancy of the comments made in the Morris Forensic Documents to the BDO Valuation;[93]
[92] Ms Robertson's affidavit [15] – [16], AJR-2, 25.
[93] Ms Robertson's affidavit [16], AJR-2, 25.
(b)none of the comments that related to the Nexia Valuation related to the issue of whether BDO's assessment was unreasonable because it relied on a cross-check that did not support its assessment of the value of the Trust, and it is not possible to infer from the nature of the document that it addressed an error that had not yet occurred;
(c)the content of the Morris Forensic Advice is not probative of whether the plaintiff would have made submissions. None of the three errors identified in the Schirripa Evans Letter are alleged to have been replicated in the BDO Valuation;[94]
(d)how any advice on them bears on whether the plaintiff would have made submissions is unclear and at best speculative. The defendant's submissions assume that the Morris Forensic Advice represents the entirety of the plaintiff's knowledge on the subject of the valuation of the plaintiff's units. There is no basis for this assumption. Further, it is misconceived to suggest that the fact that matters might have been dealt with differently in an earlier valuation is relevant to whether submissions would have been made on a later valuation; [95]
(e)the material fact pleaded by the plaintiff is that the plaintiff would have made submissions to BDO had it been given notice of its appointment.[96] Other than the fact that the plaintiff disagrees with the BDO Valuation, the content of the submissions that would be made by the plaintiff is pure speculation;[97] and
(f)finally, there is no basis to infer that comments made by Morris Forensic would inform the plaintiff whether the BDO Valuation was carried out properly and reasonably or was invalid.[98] There is more than one way of valuing units.
Defendant's responsive submissions
[94] Ms Robertson's affidavit AJR-2, 23 – 27.
[95] Plaintiff's Submissions filed 30 April 2021 [16.3].
[96] Amended Statement of Claim [23].
[97] Plaintiff's Submissions filed 30 April 2021 [16.4].
[98] Plaintiff's Submissions filed 30 April 2021 [16.5].
The defendant says that what was in the Nexia Valuation informed the plaintiff about the proper manner in which Morris Forensic said the units should be valued and what matters should be taken into account in any proper valuation of the units. It follows, according to the defendant, that the Morris Forensic Documents are relevant to the plaintiff's state of mind before 18 April 2019. The plaintiff's knowledge and belief as to the proper manner for conducting a valuation would have informed whether a submission, and what submission, would have been made,[99] as well as being relevant to the pleaded defences.[100]
[99] Defendant's Submissions filed 13 April 2021 [16].
[100] Defendant's Submissions filed 13 April 2021 [17].
Counsel for the defendant during the hearing also disputed that the alleged errors identified in the Nexia Valuation had not been replicated in the BDO Valuation. For example, the Schirripa Evans Letter refers to the fact that the Nexia Valuation did not carry out a proper valuation of goodwill and did not properly assign a value to goodwill in its cross‑check, when a similar complaint is pleaded by the plaintiff in relation to the BDO Valuation.[101] The Schirripa Evans Letter also discloses that Morris Forensic referred to there being 'other matters in the Nexia valuation that might be dealt with differently'[102] as evidence of the fact the comments made by Morris Forensic were not confined to the alleged errors outlined in the letter.
Disposition: Issue 1 - relevance of the Morris Forensic Documents
[101] Amended Statement of Claim [35E].
[102] Ms Robertson's affidavit AJR-2, 26.
According to the plaintiff, it was a requirement under the Trust Deed that, before issuing a trustee redemption notice, the trustee must commission a valuation of the units to be redeemed and give unit holders details of the valuer to enable unit holders to make submissions to the valuer,[103] who must take any submissions into account before the valuation is completed.[104] It is further claimed that a copy of the final draft was to be provided to all unit holders as soon as reasonably practicable.[105]
[103] Amended Statement of Claim [8A(b)].
[104] Amended Statement of Claim [8A(c)]
[105] Amended Statement of Claim [8A(d)].
The plaintiff pleads the defendant failed to give it notice of the valuer appointed so that it could make submissions before the valuation was completed,[106] which the plaintiff particularises occurred on 3 April 2019.[107] What would have been a reasonable period of time to make submissions is particularised as depending on all the circumstances, but before 3 April 2019 or, alternatively, before 18 April 2019.[108] Further, it is claimed that there was a failure to give the plaintiff a copy of the final draft of the BDO Valuation thereby not providing the plaintiff with a reasonable opportunity to make further submissions to BDO about the draft, including as to factual accuracy, before the draft was completed.[109]
[106] Amended Statement of Claim [35B].
[107] Answers to the Defendant's Request for Further and Better Particulars filed 24 February 2021 [7].
[108] Further Amended Statement of Claim [35B].
[109] Amended Statement of Claim [35F].
It is the defendant's case that the plaintiff had reasonable opportunity to make submissions and did not,[110] despite having the benefit of the Morris Forensic Advice since November 2018.[111] That window, on the defendant's case, is not restricted to before the BDO Valuation was provided on 18 April 2018 but extends to 6 May 2019.
[110] Further Amended Defence [22].
[111] Further Amended Defence [53A].
In my view, an expert opinion commissioned by the plaintiff in relation to the valuation of the Trust which discredited the earlier Nexia Valuation must have provided the plaintiff with some knowledge of how the Trust should be valued. Regardless of whether there was any overlap in the alleged errors Morris Forensic identified in the Nexia Valuation with any contained in the BDO Valuation, the advice from Morris Forensic would have informed the plaintiff on matters such as how the valuation should have been done, what matters should or should not have been considered and the methodology used. For example, if BDO made none of the alleged errors referred to in the Morris Forensic Advice, that might directly or indirectly enable the defendant to damage the plaintiff's claim that, given the opportunity, it would have made submissions to BDO.
The fact that there are other ways of valuing a Trust or that the Morris Forensic Advice did not form the entirety of the plaintiff's knowledge on the subject, does not make the advice any less relevant. The content of any submissions that might have been made is not pleaded as an issue. The issue is whether submissions would have been made and expert advice about the valuation of the Trust is one of the circumstances that would have informed the plaintiff about whether or not to do so and whether it could have done so prior to 18 April 2019 or alternatively, 6 May 2019.
In my view, the Morris Forensic Advice contains information about how a valuation of the Trust should have been carried out, and that advice, plus any instructions given to Morris Forensic about the Trust for the purposes of Morris Forensic providing its report, is relevant to whether a submission would have been made and ought to have been discovered.
Issues 2 & 3: Has privilege been waived?
It is accepted that if the Morris Forensic Documents are relevant then they are protected by legal professional privilege.[112] The defendant submits that privilege has been waived by what was disclosed in the Schirripa Evans Letter or by reason of the issues raised in proceedings.
[112] Defendant's Submissions filed 13 April 2021 [19].
The Morris Forensic Advice was procured for legal advice and for use in relation to potential legal proceedings that were within the plaintiff's reasonable contemplation at the time.[113] The existence of the Morris Forensic Advice was first disclosed to the defendant in the Schirripa Evans Letter. The letter discloses that:
(a)a meeting of directors of the defendant had been called for the purposes of taking 'the initial steps required to enliven the unit redemption provisions set out in the APMS Unit Trust Deed';[114]
(b)one of the resolutions to be discussed at the meeting proposed that a valuation be obtained for the purposes of the proposed redemption of the plaintiff's units and that the expert carrying out that valuation would seek details of the 'steps, procedures and reasoning that Nexia Australia undertook and applied in preparing its valuation in June 2018';[115]
(c)the plaintiff had engaged 'forensic accounting advisors', who had provided comments with respect to the Nexia Valuation;[116] and
(d)the plaintiff considered that there were 'clear errors' in the Nexia Valuation.[117]
[113] Mr Schirripa's affidavit [14].
[114] Ms Robertson's affidavit [14] AJR-2, 25 ‑ 26.
[115] Ms Robertson's affidavit AJR-2, 25.
[116] Ms Robertson's affidavit AJR-2, 25.
[117] Ms Robertson's affidavit AJR-2, 26.
The plaintiff goes on to assert in the Schirripa Evans Letter that the 'forensic accounting advisors' had provided the 'following comments with respect to the Nexia Valuation':[118]
[118] Ms Robertson's affidavit AJR-2, 25 ‑ 26.
16.1 The amount owed to The Franceschi Trust was $2.066 million at 30 June 2018, which comprised the initial loan of $300,000 and unpaid distributions of $1.766 million (including in respect of the 2018 financial year).
16.2 The Nexia Valuation only recognises liabilities to Unit holders in respect of the initial loans, totalling $1.2 million. It treats unpaid distributions as equity rather than debt, which is contrary to accounting standards and historical accounting practice of APMS. This is a clear error.
16.3 The Nexia Valuation also contains an error in the calculation of APMS's goodwill, which has the effect of understating the value of goodwill by $1 million. The calculation of goodwill (set out at paragraph 7.10 of the Nexia report) deducts an amount of $1 million for Land and Buildings from the value of the business. Such a deduction should not have been made as the EBITDA used to calculate the value of the business was arrived at after the deduction of a notional rent for the Land and Buildings (effectively making the land and buildings surplus assets for valuation purposes). All other things being equal, Mr Spooner should have calculated goodwill to be $1.41 million.
16.4 There are other matters in the Nexia Valuation which might be dealt with differently, in particular the estimate of future maintainable EBITDA (which Mr Spooner bases largely on historical performance rather than forecasts of future performance, which is likely to improve due to an increase in fruit volumes). Any increase in the estimate of future maintainable EBITDA would further increase goodwill.
Parties' opposing contentions
Defendant's submissions
The defendant claims there has been an express waiver. The comments go beyond a mere statement of the effect or mere conclusion reached by Morris Forensic. It is detailed and extensive and refers to specific matters that Morris Forensic considered along with a description of Morris Forensic's reasoning.[119] The plaintiff's purpose for including that lengthy description of the Morris Forensic Advice was to bolster the plaintiff's assertion that the Nexia Valuation contained 'clear errors' and that it did not reflect the true value of the plaintiff's units. It is contended that the plaintiff's former lawyers, sought to conscript Morris Forensic to lend objectivity to what otherwise constituted the plaintiff's self-interested assertions in relation to the Nexia Valuation.[120]
[119] Defendant's Submissions filed 13 April 2021 [23].
[120] Defendant's Submissions filed 13 April 2021 [27].
In the alternative, the defendant asserts there has been an implied waiver on the basis the plaintiff pleads that, had it been notified that BDO had been appointed to value the units before 18 April 2019, it would have made submissions to BDO.[121]
Plaintiff's submissions
[121] Defendant's Submissions filed 13 April 2021 [31].
The plaintiff submits that the disclosure of the gist or summary of advice, or comments relayed by the plaintiff's former lawyers to the defendant in support of the plaintiff's position, is not inconsistent with the maintenance of privilege. The purpose was to argue that the Nexia Valuation should not be provided to the new valuer which is consistent with the maintenance of confidentiality and privilege.[122]
[122] Plaintiff's Submissions filed 30 April 2021 [25] ‑ [26].
Further, the plaintiff submits there has been no abandonment of the privilege based on the summary in the Schirripa Evans Letter of the effect of the Morris Forensic comments and no loss of privilege in relation to the remainder of the advice or the instructions and related documents. The assertions made stand alone and speak for themselves. Disclosure of the conclusion, gist, substance or effect of advice does not necessarily give rise to a waiver of privilege in respect of the whole of the advice. No further context is required.[123]
[123] Plaintiff's Submissions filed 30 April 2021 [27].
The plaintiff asserts the pleadings do not assert the plaintiff believed or knew anything, only that the plaintiff would have made submissions to BDO before their report was finalised. The content of the communications are not 'laid open to scrutiny' or 'central to any state of mind asserted'.[124] There is no reason to believe the documents contribute to the question of whether the plaintiff would have made submissions.[125]
Disposition: Issues 2 & 3 - has privileged been waived and over which documents?
[124] Plaintiff's Submissions filed 30 April 2021 [30].
[125] Plaintiff's Submissions filed 30 April 2021 [31].
The purpose of disclosing the substance and effect of the Morris Forensic Advice was to undermine the value of the Nexia Valuation as evidence of the value of the plaintiff's units. Had it been the Nexia Valuation that was the relevant valuation, clearly that disclosure was entirely inconsistent with the maintenance of confidentiality in the advice, and it would be unjust to disclose part of that advice without disclosing it in its entirety.
The guiding principle is to avoid the unfairness that arises when a party uses privileged material in a way that makes express or implied assertions about their content but maintains confidentiality.
The disclosures in the Schirripa Evans Letter constituted an express waiver of privilege in the Morris Forensic Advice. Even if, as the plaintiff contends, it is only the fact of whether the plaintiff would have made a submission that is relevant, and not what it would have submitted, that fact will depend in part upon the plaintiff's knowledge regarding the proper manner in which the valuation should be conducted, and the matters that should be considered in valuing the Trust. The Morris Forensic Advice contains a critique of how Nexia valued the Trust and extracts from that advice were disclosed by the plaintiff to convince the defendant that an alternate valuation should be obtained, which did not make the same mistakes that were purportedly made in the Nexia Valuation. Whether or not the Morris Forensic Advice discloses no overlap in the identification of errors made in both the Nexia and BDO valuations, that is at least relevant, even if not determinative, to whether the plaintiff would have made submissions. The plaintiff cannot now keep confidential the remainder of that advice.
Further or alternatively, if there has not been an express waiver of privilege, there has been an implied waiver on the basis of it being in issue whether the plaintiff would have made submissions to BDO and, in light of its knowledge, whether it had a reasonable opportunity in which to do so prior to 18 April 2019 or alternatively, 6 May 2019.
It should be open to the defendant to test the plaintiff's assertion that it would have made submissions to BDO if it had been told of its appointment or before its valuation was complete, by reference to what it had been advised by Morris Forensic, not just by reference to the extracts from that advice provided by the plaintiff, especially given the defendant's case is that the plaintiff did have the opportunity to make submissions.
The defendant contends that it would be unjust to disclose part of the advice without disclosing its entirety and any related communications, such as instructions.[126] The plaintiff rejects the contention on the basis that there is no loss of confidentiality in the entirety of the advice or related communications as they are capable of being separated and isolated.[127]
[126] Defendant's Submissions filed 13 April 2021 [28].
[127] Plaintiff's Submissions filed 30 April 2021 [32] – [33].
The waiver of privilege applies to the Morris Forensic Advice and does not apply to any other forensic accountant engaged by or on behalf of the plaintiff, of which there has been no evidence and about which there has been no ventilation of any argument about privilege or waiver.
There has been no evidence drawn to my attention that there are written instructions or related correspondence to or from Morris Forensic in relation to the Valuation Issues. The affidavit of George Alexander Croft sworn on 25 March 2021 discovering documents relevant to this application, appears to be communications between the plaintiff and its former legal representatives as opposed to instructions to Morris Forensic. There has been no submission about these documents. It does not follow that this related material is necessarily caught by any waiver.
Production is therefore confined to the Morris Forensic Advice and only those instructions necessary to inform and understand the advice provided. Inspection is confined to those matters in the Morris Forensic Advice dealing with any valuation of the assets of the Trust, any valuation of units in the Trust held or formerly held by the plaintiff or the manner in which any such valuation may or ought to be carried out.
Issue 4: Redemption Price documents
The defendant seeks discovery of documents which evidence whether, and the manner in which, the plaintiff dealt with the Redemption Price, such as bank statements and other financial documents.
The defendant claims these documents are relevant to whether the plaintiff disposed of the Redemption Price and the defendant's defences of laches, acquiescence and whether a new contract was created between the parties to redeem or buy back the units at the Redemption Price.
Legal Principles
Laches and Acquiescence
In Byrnes v Kendle French CJ distinguished between the defences of acquiescence and laches as follows: [128]
Acquiescence as a defence to a claim for equitable relief is used in at least two different senses:
·A person who is aware that an act is about to be done to his or her prejudice takes no step to object to it.
·A person being aware of a violation of his or her rights which has occurred fails to take timely proceedings to obtain equitable relief. This is acquiescence after the event which founds the defence of laches. (footnotes omitted).
[128] Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 [27].
Gummow and Hayne JJ, in that case, held the term acquiescence:
… is best understood as requiring calculated (that is, deliberate and informed) inaction by [the plaintiff] or standing by, which encouraged [the defendant] reasonably to believe that the [the defendant's] omissions were accepted or not opposed by [the plaintiff].[129]
[129] Byrnes v Kendle [79].
Heydon and Crennan JJ adopted the analysis of the various meanings of acquiescence by Deane J in Orr v Ford.[130]
[130] Byrnes v Kendle [133] – [139] citing Orr v Ford (1989) 167 CLR 316.
In Orr v Ford, Deane J held: [131]
… Strictly used, acquiescence indicates the contemporaneous and informed ('knowing') acceptance or standing by which is treated by equity as 'assent' (ie consent) to what would otherwise be an infringement of rights … . The word is commonly also used to refer: (i) to a representation by silence of a type which may found an estoppel by conduct; or (ii) to acceptance of a past wrongful act in circumstances which give rise to an active waiver of rights or a release of liability; or (iii) to an election to abandon or not enforce rights. … A plaintiff may, however, lose his right to relief by an 'inferior species of acquiescence' which does not amount to assent, waiver or election or give rise to an estoppel. In these cases, acquiescence may be used in at least one of three ways. First, it is sometimes used as an indefinite overlapping component of a catchall phrase also incorporating 'laches' or 'gross laches' and/or 'delay' … . Secondly, acquiescence is used as a true alternative to 'laches' to divide the field between inaction in the face of 'the assertion of adverse rights' ('acquiescence') and inaction 'in prosecuting rights' ('laches') … . Thirdly, and more commonly, acquiescence is used, in a context where laches is used to indicate either mere delay or delay with knowledge of the acts of another person, which encourages that other person reasonably to believe that his acts are accepted (if past) or not opposed (if contemporaneous).' (references omitted).
[131] Orr v Ford, 337 - 338.
In Streeter v Western Areas Exploration Pty Ltd [No 2], Murphy JA held: [132]
In Orr v Ford (1989) 167 CLR 316, 341 Deane J said: The ultimate test effectively remains that enunciated … in Lindsay Petroleum Co v Hurd, namely, whether the plaintiff has, by his inaction and standing by, placed the defendant or a third party in a situation in which it would be inequitable and unreasonable 'to place him if the remedy were afterwards to be asserted': see Erlanger v New Sombrero Phosphate Co, and also, per Rich J, Hourigan.
The doctrine of laches comprehends two themes. One is delay implying not just quiescence, but rather acquiescence and assent, and the other is delay involving prejudicial change of circumstances - as to which see Bell Group v Westpac [9307] and see generally Meagher RP, Heydon JD & Leeming MJ, Meagher, Gummow and Lehane's Equity: Doctrines & Remedies (4th ed, 2002) [36-005] - [36-020].
[132] Streeter v Western Areas Exploration Pty Ltd [No 2] [2011] WASCA 17; (2011) 278 ALR 291 [634] – [635].
In The Bell Group (in liq) v Westpac Banking Corporation [No 9] Owen J held: [133]
[133] TheBell Group (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 39 WAR 1 [9307] ‑ [9312].
Unreasonable delay alone will not be sufficient to attract the laches defence. The delay must render it unjust in all the circumstances of the case for relief to be granted (Spry, Equitable Remedies, 6th edition, 2001 at 43). The doctrine can be relied upon where a plaintiff, in delaying to take or pursue an action, has:
(a) acquiesced to the defendant's conduct; or
(b) caused the defendant or a third party to alter their position in reasonable reliance on the plaintiff's acceptance of the status quo or otherwise permitted a situation to arise that would be unjust to disturb.
The question is whether the balance of justice favours granting the remedy or withholding it. In Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, the Privy Council looked at, among other things, the nature of the claim, the nature of the property to which the claim relates, the identity of the party against whom the defence is raised, the length of the delay, the extent to which the delay has prejudiced the defendant and the acts of each party during the delay.
34.1.3.2. Delay with acquiescence
9309 The word 'acquiescence' in the context of the laches defence refers to the imputed assent of a person who, knowing they have an available remedy, stands by and allows the continuance of the state of affairs flowing from the violation of their rights: Fitzgerald v Masters (1956) 95 CLR 420, 432 (Dixon CJ and Fullagar J). As McLure J said in Powell v Powell [2002] WASC 105 [142]:
[A]cquiescence refers to the action of a plaintiff over a long period with full knowledge of his or her rights refraining from exercising the rights in circumstances where it can properly be inferred that they are abandoned.
…
34.1.3.3. Delay with prejudice
9312 This species of laches occurs where the plaintiff's delay causes prejudice to the defendant. In order to raise this defence, a defendant must show that the plaintiff's delay caused such detriment to it or a third party that it would be unjust for the court to grant the relief sought. The classic example of prejudice is where the defendant has reasonably acted to his or her detriment in reliance on the plaintiff's delay: Lamshed v Lamshed (1963) 109 CLR 440. Prejudice may also arise where evidence is lost or witnesses have passed away. The issue is not whether evidence per se may have been lost, but whether evidence that may have cast a different complexion on the matter has been lost: Orr v Ford, 330. The disadvantage caused by a delay must be more than merely marginal.
In relation to the defence of laches, Dal Pont in Equity and Trusts in Australia states there are two circumstances always germane to cases of alleged delay: the length of the delay and the nature of the acts done during the interval. In relation to the latter, the authors state: [134]
What has occurred during the period of delay, and how this impacts on the relative positions and circumstances of the parties (and others), is often weighty evidence of whether the defendant would suffer prejudice were the defence denied. Generally, that the defendant has been lulled into believing that it will not be sued is not, of itself, prejudice sufficient to attract equity's intervention. Yet the longer the delay, the more likely that it is that enforcing the plaintiff's right will prejudice the defendant or third parties, though prejudice is not assumed without proof merely from the passing of time.
Pleadings
Payment of Redemption Price
[134] Dal Point, G.E, Equity and Trusts in Australia (7th ed, 2018) [30.20].
The plaintiff disputes that the Redemption Price paid to it on 10 May 2019 was accepted as full payment for its units.[135] The plaintiff pleads that it was paid a total amount of $2,478,490.77, comprising the Redemption Price as payment for the purported redemption of the plaintiff's units and $2,065,990.77 for repayment of a unit holder loan previously advanced by the plaintiff.[136]
[135] Plaintiff's Submissions filed 30 April 2021 [14].
[136] Amended Statement of Claim [34].
The defendant pleads the plaintiff accepted the Redemption Price as payment for the redemption of its units pursuant to the trustee redemption notice and failed to return it within a reasonable time.[137]
[137] Further Amended Defence [34].
In addition to failing to return the Redemption Price, the matters relied upon by the defendant to infer the plaintiff accepted the sum as full payment for the units are as follows: [138]
28.Paragraph 28 is admitted, and the Trustee says further that:
(a) Jennifer Franceschi was present at the meeting in her capacity as a director of the Trustee;
(b) Ms Franceschi had been appointed as a director of the Trustee by KCP pursuant to the Unitholders' Agreement pleaded in paragraph 4 of the statement of claim in order to represent KCP's interests on the board of directors of the Trustee;
(c) Ms Franceschi made no objection at the meeting to the approval of and adoption of the BDO Valuation on the ground that the identity of the Valuer had not been disclosed to KCP, or that KCP had been deprived of any opportunity to make submissions to the Valuer;
(d) Ms Franceschi otherwise gave no indication to those present that KCP objected to the approval of and adoption of the BDO Valuation on the ground that the identity of the Valuer had not been disclosed to KCP, or that KCP asserted that it had been deprived of the opportunity to make submissions to the Valuer; and
(e) the directors of the Trustee resolved to cause the Trustee to repay the balance of KCP's loan account, in the amount of $2,065,990.78.
[138] Further Amended Defence [28].
In reply the plaintiff says: [139]
[139] Amended Reply [8(a) - (e)].
8.As to paragraph 28 of the Defence, KCP:
(a)admits paragraph 28(a);
(b)admits that Ms Franceschi had been appointed as a director of the Trustee by KCP pursuant to the Unitholders Agreement pleaded in paragraph 4 of the SOC and that a purpose or expectation of the appointment was that KCP would represent KCP's interest on the board of directors of the Trustee;
(c)admits paragraph 28(c);
(d)otherwise denies this paragraph; and
(i)during the meeting, Ms Franceschi said words to the effect that she was unhappy that KCP had been excluded from the valuation process and that KCP had not been given the opportunity to make submissions to BDO, the figures and assumptions provided to BDO were not correct, and that KCP would be taking the matter further;
(ii)says further that Ms Franceschi voted against the resolutions set out in paragraphs 28(a) to (d) of the SOC; and
(iii)KCP had no obligation to object at the meeting (or indicate to those present that KCP objected) to the approval of and adoption of the BDO Valuation on the ground that the identity of the Valuer had not been disclosed to KCP, or that KCP had been deprived of any opportunity to make submissions to the Valuer, or on any other ground.
The plaintiff denies the defendant's allegation that it accepted the Redemption Price as payment for the plaintiff's units and further pleads:[140]
(i) by reason of the matters pleaded in paragraphs 12, 16 and 17A to 17H of the SOC, the Trustee had an obligation to KCP to ensure that the process of obtaining a valuation under the Trust Deed for the purposes of a proposed Trustee Redemption Notice from BDO, and the valuation itself, was undertaken in accordance with the terms of the Trust Deed; and
(ii) transfer of the sum of $412,500 to KCP was less than full performance of the obligation pleaded immediately above, such that any acceptance of the sum by KCP did not release KCP's right to full performance of the obligation and the Trustee's Duties.
Particulars
There was less than full performance because the process of obtaining a valuation under the Trust Deed for the purposes of a proposed Trustee Redemption Notice from BDO, and the valuation itself, did not comply with the terms of the Trust Deed pleaded in paragraph 8A(b), (d) and (e) of the SOC for the reasons pleaded in paragraphs 35B to 35F of the SOC.
Acquiescence
[140] Amended Reply [9(c)].
The defendant pleads that if, which is denied, the defendant failed to act in accordance with the Trust Deed or in breach of any duty owed to the plaintiff, the plaintiff acquiesced to the failure or the breach as the case may be.[141] The circumstances relied on by the defendant are the plaintiff:
(a)was present, stood by, and made no inquiry or objection despite being present at the meeting of 28 November 2018 when the trustee decided to obtain a valuation for the purpose of redeeming the plaintiff's units;[142]
(b)knew a valuer had been appointed by 18 April 2019;[143]
(c)was present at the meeting of 6 May 2019 when it was resolved that the plaintiff's units would be redeemed for the value made by the valuer[144] and the unit holders were asked to discharge the plaintiff's loan account;[145]
(d)made no objection to the approval of the BDO Valuation on the basis the identity of the valuer had not been disclosed or that the plaintiff had been deprived of the opportunity to make submissions;[146] and,
(e)ultimately accepted the transfer of the Redemption Price on 10 May 2019.[147]
This was all while the plaintiff had its own solicitors[148] and had the benefit of its own forensic accountants as to the value of the units.[149]
[141] Further Amended Defence [54].
[142] Further Amended Defence [21].
[143] Further Amended Defence [22].
[144] Further Amended Defence [28], [32].
[145] Further Amended Defence [32(d)].
[146] Further Amended Defence [28].
[147] Further Amended Defence [34].
[148] Further Amended Defence [53].
[149] Further Amended Defence [53A].
In reply the plaintiff admits that it knew that BDO had been appointed as the valuer after 18 April 2019 and admits that the plaintiff did not make any submission to BDO between 18 April 2019 and 6 May 2019.[150] However, the plaintiff denies there was any duty by the plaintiff to make any inquiry of the trustee, or of anyone, as to the identity of the valuer or request the trustee[151] to provide information or submissions to the valuer on the plaintiff's behalf between 28 November 2018 and 18 April 2019.[152] The plaintiff also pleads Ms Franceschi said at the meeting held on 28 November 2018 that the plaintiff reserves all its rights[153] and at the meeting on 6 May 2019, made it clear she was against the resolutions, had been excluded from the valuation process and had not been given the opportunity to make submissions.[154]
Laches
[150] Amended Reply [16].
[151] Amended Reply [3(b)].
[152] Amended Reply [4(b)].
[153] Amended Reply [6(b)].
[154] Amended Reply [8(e)].
The defence of laches arises in the following circumstances as pleaded by the defendant:[155]
[155] Further Amended Defence [55].
55. Further and in the alternative to paragraph 54, the Trustee:
(a)repeats paragraphs 21, 22, 28, 32, 34 and 53 of this Defence;
(b)says that KCP did not raise any objection to the process by which:
(i) the Trustee obtained the BDO Valuation;
(ii) the Trustee resolved to issue the Trustee Redemption Notice;
(iii)the Trustee convened the extraordinary general meeting of Unitholders on 6 May 2019;
(iv)the Unitholders passed the Unitholder Special Resolutions at that meeting; or
(v)the Trustee came to issue the Trustee Redemption Notice,
until 27 August 2019, more than three months after the Trustee Redemption Notice was issued;
(c) had KCP raised one or more of those objections in a timely manner:
(i) the board of Directors of the Trustee would not have resolved to cause the Trustee to repay the balance of KCP's loan account, that amount not being due for repayment; and
(ii) the Unitholders (other than KCP) would not have advanced funds to the Trustee to enable it to do so;
(d) by reason of the matters pleaded in paragraph (c):
(i) the Trustee lost the use of the $412,500 paid to KCP pursuant to the Trustee Redemption Notice and the $2,065,990.78 paid to discharge KCP's loan account; and
(ii) each of the other Unitholders lost the use of the $826,162.59 it paid to the Trustee to enable the Trustee to make the payments pleaded in paragraph (d)(i);
(e) in the premises, KCP is estopped from asserting that the Trustee:
(i) failed to act in accordance with the Trust Deed, whether as alleged in the statement of claim or otherwise; or
(ii) otherwise acted in breach of any duty owed to KCP; and
(f) alternatively to paragraph (e), the claims made by KCP in paragraphs 1 to 51 are not maintainable by reason of KCP's laches.
In reply the plaintiff states:[156]
[156] Amended Reply [17].
17.As to paragraph 55 of the Defence, KCP:
(a) admits that KCP knew that BDO had been appointed as the Valuer after receipt by Ms Franceschi of the email from Mr Crockett sent on 18 April 2019 (as pleaded in paragraph 18 of the SOC);
(b) admits that KCP did not make any submission to BDO between 18 April 2019 and 6 May 2019;
(c) otherwise denies each and every allegation in the paragraph;
(d) specifically as to sub-paragraph 55(d)(ii), KCP says that it was not the case that each one of the Unitholders (other than KCP) paid to the Trustee $826,162.59 to enable the Trustee to make the payments pleaded in sub-paragraph 55(d)(i) of the Defence to KCP;
(e) refers to and repeats paragraphs 3(b), 4(b), 6(b) and 8(e) of this Reply; and
(d) says further that:
(i) KCP had no obligation to raise any objection to the matters in paragraph 55(b)(i)-(v) before 27 August 2019;
(ii) it is a term of the Unitholders' Agreement as amended by the Deed of Variation, in effect, that loans by a Unitholder to the Trustee will be repaid to the Unitholder upon the Unitholder ceasing to hold Units in the Trust (cl 6.7);
(iii) it is a term of the Trust Deed, in effect that:
a. any Unitholder may request the Trustees to redeem the whole or any part of their Unit holding by written notice to the Trustee (cl 8.1(a));
b. the notice may propose that the Units be redeemed at the value placed on the Units by a valuer appointed by the Trustee (cl 8.3);
c. upon receipt of the valuation (if the Unitholder has paid the amount stated in a quote for the valuation sought by the Trustee within 14 days of receipt of the quote), the Unitholder has seven days to withdraw the notice (cl 8.4, cl 8.6);
d. if the Retiring Unitholder does not withdraw the Redemption Notice, the Trustee may redeem the Units for the price stated in the valuation (cl 8.7); and
e. any redemption is to be conditional upon the approval of Unitholders holders by Special Resolution (cl 8.2);
(iv) in the premises in paragraphs (ii) and (iii) above, if (which is denied), the Trustee had any assumption or expectation before 27 August 2019 that KCP would not enforce any right(s) it then held, the Trustee will not suffer relevant detriment if the assumption is not maintained; and
(v) further or alternatively, in the premises in paragraph 9(c)(ii) above, if (which is denied), the Trustee had any assumption or expectation before 27 August 2019 that KCP would not enforce any right(s) it then held, departure from any assumption that KCP would not enforce its rights is not unjust or unconscionable.
Contract
The defendant pleads further, and in the alternative, that the conduct of the parties culminated in there being a contract of sale made around 6 May 2019 by which the plaintiff agreed to sell its units to the defendant for the Redemption Price and in respect of which the defendant seeks to compel performance of the following obligations: [157]
(a)the return of the cancelled unit certificate in respect of the redeemed units formerly held by the plaintiff (cl 8.11 of the Trust Deed); and
(b)the execution of a share transfer form in respect of the shares held by the plaintiff in the trustee (cl 10.4 of the Unitholders Agreement).
[157] Further Amended Defence [55A] ‑ [55C]; Answers to the Plaintiff's Request for Further Particulars of Amended Defence filed 21 January 2021 [1(a) – (b)].
The conduct relied upon is the issue of the trustee redemption notice, the payment of the Redemption Price and the units being redeemed, the plaintiff's acceptance of the Redemption Price and the subsequent dealing with and disposing of the Redemption Price.[158]
[158] Further Amended Defence [55A].
The plaintiff admits it received, dealt with and disposed of some of the Redemption Price[159] but denies there was any intention by the defendant to embark on any consensual dealing with the plaintiff and at no time did the plaintiff consent to its units being acquired or redeemed by the defendant or reach any agreement with the defendant to alter or forego its rights under the Trust Deed.[160]
Disposition: Issue 4 - relevance of Redemption Price documents to defences of laches and acquiescence and contract
[159] Further Amended Reply [18].
[160] Amended Reply [18].
The allegation that the plaintiff has disposed of some of the Redemption Price is no longer disputed.[161] The issue is therefore whether the manner in which the Redemption Price was dealt with is relevant to the defences claimed. The disposal of the Redemption Price was brought to the defendant's attention in correspondence in response to whether the plaintiff could pay security for the defendant's costs.[162] The defence was subsequently amended on 20 December 2020 to plead the plaintiff had disposed of the Redemption Price.[163]
[161] Further Amended Reply [19(b)].
[162] Ms Robertson's affidavit [27], AJR-11, 83 – 85.
[163] Amended Defence [68(c)] and [69].
The defendant submits the plaintiff acquiesced to the transaction and has waived any right to be reinstated as a unit holder as it accepted the Redemption Price as payment for its units and has since used the funds as though entitled to them. This, the defendant submits, is inconsistent with the plaintiff's case that the units were not validly transferred and the plaintiff remains a unit holder. In the premises, the defendant pleads the plaintiff is barred from relief due to the delay in the plaintiff raising any objection until 27 August 2019, some three months after the Redemption Price was transferred.
The defendant says any documents that evidence whether, and the manner in which, the plaintiff dealt with the Redemption Price, are relevant to a fact in issue in the proceedings. The defendant says the financial documents up to the date by which the Redemption Price was disposed of, are relevant as primary and secondary evidence of those matters.[164]
[164] Defendant's Submissions filed 13 April 2021 [36].
The nature of acquiescence, as indicated by the authorities summarised above, is inaction by the plaintiff, lack of objection to the course undertaken by the defendant which, on the view of Orr v Ford adopted by Gummow and Hayne JJ in Byrnes v Kendle, encouraged the defendant reasonably to believe that the defendant's omissions were accepted or not opposed by the plaintiff.
It seems to be common ground that the defendant only became aware the funds had been disposed of, in part, after the action had commenced as part of an exchange of correspondence with the plaintiff about security for costs. In which case disposal of the Redemption Price could not have lulled the defendant into believing the action would not be brought or give rise to an inference the plaintiff had abandoned its rights to commence proceedings. It is not expressly pleaded by the defendant that the disposal of the Redemption Price gave rise to the defence of acquiescence or laches. [165] Rather, it is the failure of the plaintiff to raise any objection at the time of the resolutions and for a further three months after the transfer of the Redemption Price that gave rise to the defences of laches and acquiescence.
[165] Further Amended Defence [54] ‑ [55].
Therefore, documents revealing what the plaintiff did with the Redemption Price are not relevant to these defences.
The defendant contends that if the defendant did breach its duties as trustee, to the extent that the redemption of the units did not occur under the terms of the Trust Deed, it is to be inferred that the conduct of the parties, namely the defendant paying the Redemption Price pursuant to the trustee redemption notice, the redemption of the units and the plaintiff accepting and subsequently dealing or disposing of some of the Redemption Price, gave rise to a contract of sale.[166] That submission is not expanded upon.
[166] Further Amended Defence [55A].
The plaintiff denies there was any consensual dealing between the defendant and the plaintiff and that at no time did the plaintiff consent to the redemption of its units or agree with the defendant to alter or forgo its rights.
Ultimately, it is a matter for the trial judge as to whether a contract as alleged was formed at the meeting on 6 May 2019. However, the relevance of how the plaintiff spent the Redemption Price to the existence or otherwise of a contract has not been explained. I am not satisfied the plaintiff's financial documents showing what part of the Redemption Price was spent and on what it was spent are relevant.
Issue 5: Financial Documents
The defendant claims that the plaintiff's solicitors do not hold sufficient funds or access to sufficient cash reserves to repay the Redemption Price[167] which it would be required to do if the plaintiff was successful in reversing the redemption of the plaintiff's units. The defendant asserts the ability of the plaintiff to do equity is therefore in issue.[168]
[167] Ms Robertson's affidavit [30] AJR-10, 80.
[168] Further Amended Defence [68] – [69].
The defendant seeks discovery of:
(a)the plaintiff's financial statements in respect of the period from 6 May 2019 onwards;
(b)the plaintiff's tax returns in respect of the financial years ending on 30 June 2019 and each financial year after that date; and
(c)the plaintiff's bank statements for the period from 6 May 2019 onwards.
Legal principles
The maxim 'he who seeks equity must do equity' means that no plaintiff can get an equitable remedy unless that plaintiff fulfils his or her own legal and equitable obligations arising out of the subject matter of the dispute.[169] In Langman v Handover[170] Rich and Dixon JJ held: [171]
The true meaning of the maxim is that one who seeks the aid of a Court of Equity to enforce a claim, must be prepared to submit in that suit to any directions which the known principles of a Court of equity may make it proper to give (footnotes omitted).
[169] Heydon JD, Leeming MJ and Turner PG; Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2014) [3.050].
[170] Langman v Handover (1929) 43 CLR 334.
[171] Langman v Handover, 351.
Similarly, in Meagher Gummow & Lehane's Equity: Doctrines and Remedies (5th Edition) it is noted:[172]
The imperative to do equity where equitable relief is claimed means that, where the plaintiff fails to do what established principle requires to be done, the plaintiff lacks an equity to relief: under old equitable procedure a demurrer would have lain for want of equity.
[172] Heydon JD, Leeming MJ and Turner PG; Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2014) [3-070]:
According to the defendant, in order to obtain a reversal of the redemption of the plaintiff's units, the plaintiff will be required to pay the Redemption Price.[173] If the plaintiff is unable to do equity, it has no right to relief.
[173] Defendant's Submissions filed 13 April 2021 [37].
The plaintiff relies on Isaacs J's judgment in Langman v Handover who refers to the judgment of Lord Selborne LC in Jervis v Berridge (1873) 8 Ch App 351, stating:[174]
'… the general rule that a plaintiff in equity suing upon equitable grounds is not bound to offer on the face of his bill to submit to the terms which the Court may think fit on the hearing to impose as the price of relief. No submission is necessary for this purpose, and, if it were, the general prayer for relief would include it. But as the Lord Chancellor indicates, that general rule applies to cases where 'the question of terms is one which ought to be determined at the hearing'. That general class of suit is represented by the ordinary litigation in Courts of equity, such as specific performance, accounts, partnership suits and so on, where the circumstances have to guide the Court as to the proper and just terms, if any to impose, should relief be granted.
[174] Langman v Handover, 348 ‑ 349.
The plaintiff submits this is not one of the exceptional cases that Isaacs J goes on to describe in which the relief asked for is certainly and necessarily conditional upon particular terms.[175] What equity is required is not able to be determined as the plaintiff is only required to pay what is due, which is not yet known.[176] The plaintiff claims that it remains a unit holder and therefore what is due will depend on the account taken of the defendant's dealing with the Trust since the purported redemption and payment of all sums due to the plaintiff on the taking of an account.[177] Further, the plaintiff claims a set‑off against the amount paid to it, being a share of the net income from the Trust Fund during the financial years which the plaintiff says is held on trust by the plaintiff by reason of the plaintiff remaining a unit holder.[178]
[175] Plaintiff's Submissions filed 30 April 2021 [38].
[176] Plaintiff's Submissions filed 30 April 2021 [39].
[177] Amended Statement of Claim Prayer [CC] ‑ [CD].
[178] Amended Reply [19(b)]; Further Amended Reply [19(a)] [19(d)].
Therefore, the plaintiff claims that the plaintiff's current financial position, is not relevant to the plaintiff's ability to do equity at the time any relief is granted, which will be subject to terms or conditions.[179] According to the plaintiff, even if the plaintiff has retained the Redemption Price obtained pursuant to an invalid trustee redemption notice and is unable to repay it, that will not affect the ultimate result in the action.[180]
[179] Plaintiff's Submissions filed 30 April 2021 [40].
[180] Plaintiff's Submissions filed 30 April 2021 [41].
The plaintiff submits the obligation to give discovery does not extend to irrelevant allegations in the pleadings, namely those, which if substantiated, will not affect the ultimate result of the action.[181]
[181] Pisano v Thrum [33] - [34] approved in Co-operative Bulk Handling Ltd v Brookfield Rail Pty Ltd [37]; Grove v Kenworthy-Groen [34].
Neither party referred to the decision of Mansfield J in Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd and Anor (No 5)[182] (Alliance (No 5)) and were given the opportunity to make submissions on the application of the decision to this case.
[182] Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd (No 5) [2013] FCA 1045.
In Alliance (No 5), the applicant was seeking re‑transfer of a 75% interest in an exploration licence acquired by the first respondent from the applicant under an earn‑in arrangement[183] pursuant to a joint venture agreement. The applicant alleged that it should have been made aware of certain information by the first respondent before committing itself to the arrangement and that the respondents were liable for failure to convey those matters.[184] The second respondent pleaded that Alliance was not entitled to the relief sought because it was not in a position to do equity or make substantial restitution in respect of the expenditure by the respondents on the exploration licence since the date of commencement of the joint venture, or to make any just allowance on account of their services and expenditure to date.[185] The second respondent sought further discovery of recent financial statements. Mansfield J held that, given the state of the pleadings, whether Alliance could pay the price for the discretionary relief which it sought was a matter in issue to which the documents sought were directly relevant.[186]
[183] See Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2010] FCA 1415 [13]
[184] Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd (No 4) [2013] FCA 1044, [20] [24]. The pleaded causes of action are summarised briefly in Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2012] FCA 290, [21] - [22].
[185] Alliance (No 5) [6].
[186] Alliance (No 5) [8].
In response to the submission that any relief granted to the applicant could be made subject to the applicant complying with conditions which would require the appropriate adjustment in equity for the expenditure incurred by the respondents, Mansfield J held: [187]
In a matter such as this, where the pleadings raise the issue as to whether that 'price' may involve accounting for a very considerable expenditure by Quasar and Heathgate … it is at least arguable that the Court would not simply grant the equitable relief sought (assuming findings otherwise are made to support it) conditional upon Alliance meeting certain conditions, without having some basis for confidence that those conditions might be met in a timely manner. That is a matter for argument. I observe that there is no order that the hearing of this matter should be staged so that the issue as to the appropriate relief, depending on the findings otherwise made on the principal issues should be heard separately and after the hearing and determination of those issues.
[187] Alliance (No 5) [11].
It is apparent from an earlier decision in the action[188] that during a six‑year period before the action was commenced, the first respondent undertook exploration over the area at a cost of $42 million which was said would enure unfairly for the benefit of the applicant if the applicant was successful.[189]
[188] Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd and Anor (No 4) [2013] FCA 1044.
[189] Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd and Anor (No 4) [27].
Mansfield J ordered that the applicant provide verified discovery of its audited financial statements for the preceding two years and its management accounts as they become available for the prospective quarter.[190]
[190] Alliance (No 5) [12].
Both parties agree I should follow a decision of a single judge of the Federal Court unless it is plainly wrong.[191]
Parties' opposing contentions
Defendant's submissions
[191] Duckworth v Water Corporation [2012] WASC 30; (2012) 261 FLR 185 [27]-[31]; Leighton v Garnham (No 4) [2016] WASC 134 [24] - [25].
The defendant submits that the decision is directly analogous to the present application. Like in Alliance (No 5) the basis for the application for discovery is the disputed allegation that the plaintiff is unable to do equity and make substantial restitution disentitling the plaintiff to relief. The question is a fact in issue and if the Financial Documents are directly relevant to that question, as held by Mansfield J under the more rigorous test under the Federal Court Rules,[192] the Financial Documents must 'relate' to that question under the broader test in O 26 r 1 RSC.[193]
Plaintiff's submissions
[192] Federal Court Rules 2011 (Cth) r 20.14(1)(a).
[193] Defendant's Further Submissions filed 1 August 2022 [13].
The plaintiff claims Alliance (No 5) is authority for the proposition that, in circumstances where:
(a)recission sought by a plaintiff may be conditional on a plaintiff making substantial restitution in respect of expenditure incurred by a defendant; and
(b)the defendant alleges that the plaintiff is not entitled to the relief sought because it has not offered to, and is not in a position to do equity or make substantial restitution,
whether the plaintiff can 'pay the price' for the discretionary relief is a matter in issue and current financial statements may be directly relevant to that issue.[194]
[194] Plaintiff's Further Submission filed 2 August 2022 [9].
The plaintiff seeks to distinguish Alliance (No 5) on two grounds:
(a)unlike in Alliance (No 5) the relief sought by the plaintiff is not recission; and
(b)the discovery sought by the plaintiff is more extensive than that ordered in Alliance (No 5).
The brevity of the first of these two distinctions belies its complexity.
Relief sought is not recission
According to the plaintiff the defendant's application rests on a misconception that the plaintiff is seeking recission and that such relief is subject to a defence of doing equity.[195] Against that proposition the plaintiff submits:
(a)the plaintiff is seeking declaratory relief to the effect that the trustee redemption notice is invalid, and the units were not validly redeemed and the plaintiff remains a unit holder of the Trust. The plaintiff submits there is no contract, disposition or transaction to be rescinded;
(b)a mere declaration is statutory and not an equitable remedy[196] even if the subject matter is equitable;[197]
(c)the effect of a declaration is not to create rights but to merely indicate what they have always been,[198] cf equitable recission which is effected by and takes effect from the court order;[199]
(d)the mere declaration of equitable rights does not render the relief subject to equitable defences such as laches, unclean hands, hardship and the refusal or inability to do equity.[200]
[195] Plaintiff's Further Submission (filed 2 August 2022) [12] referring to Ms Robertson's affidavit [23(b)] and Defendant's Submission filed 13 April 2021 [37] stating the plaintiff is seeking 'an order reversing the redemption of the plaintiff's units'.
[196] Hobart International Airport Pty Ltd v Clarence City Council [2022] HCA 5; (2022) 399 ALR 214; [61]; AWB Ltd v Cole (No 2) [2006] FCA 913; (2006) 233 ALR 453 [45].
[197] Hobart International Airport Pty Ltd v Clarence City Council, [61]. Cf Commercial Developments Pty Ltd v Mercantile Mutual Insurance (Workers' Compensation) Limited (1991) 5 WAR 208, 217-219. See also Crown Resorts Ltd v Zantran Pty Ltd [2020] FCAFC 1; (2020) 374 ALR 739, [86].
[198] Ambridge Investments Pty Ltd (in liq) v Baker [2010] VSC 59, [64] - [66].
[199] JD Heydon, MJ Leeming and PC Turner in Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (5th ed.) [25-025] and [25-100].
[200] Ambridge Investments v Baker, [70] - [73], [78]; Chapman v Michaelson [1909] 1 CH 238 at 242.
In contrast, equitable recission requires substantial restitutio in integrum. A court of equity can impose terms and conditions on the award of recission as part of the process of accomplishing 'practical justice'.[201]
[201] Alati v Kruger (1955) 94 CLR 216, 223-4); JD Heydon, MJ Leeming and PC Turner in Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (5th ed.) [25‑065] and [25-075].
Since the application was argued, the plaintiff has amended its reply to claim the declarations sought are not equitable in nature and therefore not subject to the equitable defences relied upon by the defendant. In the alternative, pleads that the rule is that the plaintiff must be prepared to submit to any directions which the known principles of a court of equity may make it proper to give and, to do equity, the plaintiff was not required to retain the Redemption Price but pay what is due after the taking of account and/or set-off sought by the plaintiff on such other terms as the court considers appropriate.[202]
[202] Further Amended Reply [20A].
To the extent the plaintiff is required to do equity the plaintiff says, unlike in Alliance (No 5), there is no substantial expenditure like that which was incurred by the respondents that would need to be repaid to set aside the joint venture agreement and to restore the applicant in that case to the position it would have been in as if no agreement had been entered. To the contrary, in this action, the application of equitable defences relied upon by the defendant might only arise if the plaintiff succeeds in its claim for declaratory relief, meaning the plaintiff is a unit holder. In which case, the plaintiff in this action would have rights under the Trust Deed, including the right to an account, net income since 2018/19 and distributions under the Trust in proportion with its unit holding. Therefore, the plaintiff submits, the question of whether the plaintiff can repay $412,500 paid to it in 2019 is never going to arise other than being subtracted from the plaintiff's share.
Discovery sought is more extensive than in Alliance
The second basis upon which the plaintiff distinguishes Alliance (No 5) is that in Alliance (No 5) discovery was confined to the most recent two years of audited financial statements (or management accounts if audited statements for the most recent two years were not yet available) and quarterly management accounts as they come into existence as part of the ongoing obligation of discovery.
Defendant's responsive submissions
The defendant claims that the application was not argued by the plaintiff on the basis that the equitable defences do not apply. The plaintiff's reply at the time of the hearing did not address the non‑application of these defences and the defences have not been the subject of any strike out application. Any argument as to the non‑availability of the defences is properly a matter for trial and cannot be pre-determined for the purposes of a discovery application.[203]
[203] Defendant's Further Submission filed 26 August 2022 [2] ‑ [5].
In any event, the defendant disputes the submission that the equitable defences are not applicable to the plaintiff's claim.[204] The power of the courts exercising exclusive equitable jurisdiction declaring equitable rights is equitable in nature.[205]
[204] Hobart International Airport v Clarence City Council [31], [61].
[205] Crown Resorts Ltd v Zantran Pty Ltd [86]; Commercial Developments Pty Ltd v Mercantile Mutual Insurance (Workers' Compensation) Limited (1991) 5 WAR 208, 217 - 219.
The defendant asserts the plaintiff seeks a declaration to vindicate an alleged breach of trust and to enforce the terms of the Trust as a beneficiary. Consequential upon any declaration, the plaintiff seeks to enlist equity to rectify the register of unit holders, obtain an account of the trustee's dealings with the Trust, the appointment of Ms Franceschi as director, the enforcement of the plaintiff's right under the Trust to receive distributions and such other orders as the court considers appropriate including all necessary or appropriate accounts, inquiries and directions.[206]
[206] Defendant's Further Submission (filed 26 August 2022) [13] – [14]. Further Amended Statement of Claim, Prayer for relief [CA], [CB], [CC], [CD] and [E].
At the risk of glossing over the defendant's submissions as to whether the power to make a declaration arises in equity or pursuant to statute or the court's inherent jurisdiction, its characterisation does not diminish the fact that a declaration is a discretionary remedy which may be informed by the principles governing equitable relief. As stated by the Hon E M Heenan KC in his essay 'History of Declaratory Relief' in relation to declarations: [207]
The fact that it may be granted or withheld in the exercise of such a broad discretion obviously means that the principles relating to the exercise of discretion or equitable remedies are a rich source of guidance, so long as it is appreciated that the modern jurisdiction is now much wider than the equitable origins and that the accompanying discretion are not constrained by discretions application to the grant or withholding of exclusive equitable remedies.
Disposition: Issue 5 - Relevance of the Financial Documents to doing equity
[207] The Hon EM Heenan KC, 'History of Declaratory Relief' in S K Dharmananda and A Papamatheos (eds), Perspectives on Declaratory Relief (Federation Press, 2009), 87 - 88;
It is not appropriate that I determine the application of the defences in an interlocutory hearing for discovery. The defendant has not had the opportunity to properly respond to the argument that the Financial Documents are irrelevant on the basis that the equitable defences do not apply. In any event, the plaintiff pleads in the alternative that its relief will be subject to terms.
In my view, the plaintiff's current financial status is not relevant to whatever terms the court might impose at the time if and when relief is granted. For example, the documents evidencing the plaintiff's current and historical financial status do not take into account the ability of the plaintiff to borrow any funds required to do equity or changes in the plaintiff's financial status prior to trial.
In Alliance (No 5) the applicant in that case disputed there was a requirement to make substantial restitution as claimed by the respondents in the event the court accepted the applicant's case.[208] Specifically, the applicant confirmed there was no agreement, arrangement or understanding concerning the applicant's ability, in that case, to do equity or make any substantial restitution in respect of the expenditure by the respondents on the tenement. That clearly raised as an issue between the parties whether the applicant was entitled to the equitable relief it seeks in the face of not just the ability to do equity but whether it was required.[209] The conditions upon which relief might be granted would require accounting for considerable expenditure over a lengthy period of time by the respondents over various mining tenements, to the value of $42 million. It was the court's view that whether the conditions for restitution would be required and could be met might require a staged trial.[210]
[208] Alliance (No 5)[6].
[209] Alliance (No 5)[7].
[210] Alliance (No 5) [11].
The facts of Alliance (No 5) are not analogous to this case. For these reasons I conclude Alliance (No 5) is distinguishable especially when considered against the application of r 20.11 of the Federal Court Rules 2011 which limits the circumstances in which an order for discovery may be sought, to that necessary for the facilitation of the just resolution of the proceeding as quickly, inexpensively and efficiently as possible. In Alliance (No 5) the discovery sought would facilitate the just resolution of proceedings in an expeditious way, namely, to avoid a staged trial.
In this case the allegation is that the plaintiff has refused to do equity by retaining the Redemption Price, is unable to do equity by having disposed of the Redemption Price and lacks the financial resources to repay it.[211] Leaving aside the question of whether there is a set-off and the taking of an account, the affidavit evidence indicates the plaintiff at least has access to funds and assets that exceed the Redemption Price.[212] In any event, the plaintiff submits any amount to be paid back will be set off against the entitlements of the plaintiff as a unit holder.[213]
[211] Further Amended Defence [69].
[212] Ms Robertson's affidavit AJR-11, 83 – 85.
[213] Amended Reply [19].
Even if the plaintiff's financial position is such that it may not be able to comply with whatever terms the trial judge imposes, the evidence that is relevant to the ability to do equity and any conditions that may be imposed is that which exists at the time of the relief. For the same reasons as it is not appropriate to determine the merits of the various defences on a discovery application, it is also not appropriate to attempt to ascertain what the amount owed might ultimately be by reference to whether the plaintiff has a right of set‑off against the amount owed by the plaintiff. That is a matter for the trial judge.
This approach appears to be consistent with that taken by Le Miere J in Mercanti v Mercanti [2015] WASC 297. Le Miere J heard an application by the defendant to amend its defence to give effect to the maxim he who seeks equity must do equity. The amendment sought was to make any relief granted to the plaintiff which would exclude the defendants from the business, conditional upon terms releasing those defendants from liabilities under various securities given to support the business and obligations under the lease in connection with the premises of the business. The amendments were sought after closing submissions at the end of the trial. The amendments were allowed. His Honour held:[214]
The maxim 'he who seeks equity must do equity' means that equity looks to the conscience of the applicant in determining whether to grant relief. It means that no plaintiff can get an equitable remedy unless that plaintiff fulfils his or her own legal and equitable obligations arising out of the subject matter of the dispute: Meagher RP, Heydon JD, Leeming MJ and Turner PG, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2014), [38-050]. Meagher, Gummow and Lehane caution that the limits of the maxim must be remembered: the maxim does not empower a court of equity to impose on a plaintiff as a condition of relief any term merely because it considers it reasonable.
[214] Mercanti v Mercanti [186].
Le Miere J refers to the passage of Rich and Dixon JJ in Langman v Handover referred to earlier in these reasons. Le Miere J, after rejecting the submission the plaintiffs must offer to do equity and prove their willingness to do so, held in relation to the defendants' case:[215]
In my opinion the defendants are not required to plead the maxim 'he who seeks equity must do equity' nor the way in which the pleaded facts and the maxim would operate. The defendants must plead the facts they intend to rely upon. The plaintiffs must also plead any matter which if not specifically pleaded might take the opposite party by surprise. In my view, that does not require the defendants to plead that they rely upon the maxim or how the pleaded facts and the maxim would operate. That is because when a plaintiff seeks equitable relief it should be part of his case to offer to do equity.
[215] Mercanti v Mercanti [193].
Le Miere J, in dismissing the plaintiff's objections that they had been denied the opportunity to cross‑examine the defendant with respect to whether the liabilities incurred by the defendant (that the plaintiff was required by equity to release the defendant from) were properly incurred, held:[216]
A condition of relief may only be imposed to give effect to legal or equitable rights of the defendants or legal or equitable obligations of the plaintiffs arising out of the subject matter of the dispute. That does not raise questions of what is fair or reasonable in all the circumstances requiring an examination of, amongst other things, the capacity of each party to discharge their legal or equitable obligations.
[216] Mercanti v Mercanti [199].
After the granting of relief, Le Miere J granted the parties the opportunity to make submissions to give effect to the maxim and what conditions should attach to the declarations made and what terms flow from the legal and equitable rights of the defendant as was established by the evidence in that case.[217]
[217] Mercanti v Mercanti [200].
It follows that if the requirement to repay the Redemption Price is a conclusion of law, albeit pleaded, that does not necessarily entitle the defendant to discovery of those documents evidencing the plaintiff's financial status in the event the relief is conditional on repayment.
What is sought by way of discovery, namely, the plaintiff's financial statements in respect of the period from 6 May 2019 onwards, the plaintiff's tax returns in respect of the financial years ending on 30 June 2019 and each financial year after that date and the plaintiff's bank statements for the period from 6 May 2019 onwards, goes well beyond what is necessary to the issue of whether the plaintiff can do equity if and when the time comes.
If the plaintiff succeeds in being restored as a unit holder and if an order for rectification is subject to the plaintiff repaying a sum being the amount paid for the units together with whatever legal and equitable rights flow from that relief, considering the sums involved, that will not require a staged or separate hearing as to what that might entail. I am of the view discovery of the Financial Documents are not necessary to fairly dispose of the issues in the proceedings.
Issue 6: Is the discovery of the Financial Documents and Redemption Price Documents Oppressive
In light of my conclusion that the Redemption Price Documents and the Financial Documents are not discoverable, I do not need to consider this issue.
I would add that I consider there to be some force in the submission that if the plaintiff is successful in being restored as a unit holder, if discovery of its Financial Documents was required, it will be in a disadvantaged position in terms of its commercial dealings vis-à-vis the other unit holders in the Trust, who are directors of the Trustee, who will then be privy to the plaintiff's financial position and history. If I was satisfied production of the Financial Documents was justified in order to fairly dispose of the case, which I am not, I would have restricted access to legal representatives.
Conclusion
I find as follows:
1.The Morris Forensic Advice plus any instructions given to Morris Forensic about the Trust for the purposes of Morris Forensic providing its advice, is relevant and discoverable although privileged;
2.Any privilege claimed in relation to the Morris Forensic Advice and any instructions given to Morris Forensic necessary to inform and understand the advice provided, is waived;
3.Inspection is confined to those matters in the Morris Forensic Advice dealing with any valuation of the assets of the Trust, any valuation of units in the Trust held or formerly held by the plaintiff or the manner in which any such valuation may or ought to be carried out.
4.The Redemption Price Documents are not discoverable on the basis they are irrelevant;
5.The Financial Documents are not discoverable on the basis they are not necessary for fairly disposing of the proceedings.
I will hear the parties as to what orders should be made.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TG
Court Officer
11 NOVEMBER 2022
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