Kieren Leslie Welzel v Stephen Paul Francis

[2011] NSWSC 233

Supreme Court

New South Wales

Medium Neutral Citation:	Kieren Leslie Welzel v Stephen Paul Francis [2011] NSWSC 233
Hearing dates:	24 March 2011
Decision date:	25 March 2011
Before:	Einstein J
Decision:	The defendant is to pay 70% of the plaintiffs' costs of the motion
Catchwords:	Interlocutory application Costs of Notice of Motion Negotiated settlement Scope of discovery Restrictive approach to general discovery
Legislation Cited:	Uniform Civil Procedure Rules 2005
Category:	Procedural and other rulings
Parties:	Kieren Leslie Welzel (First Plaintiff) OpenIn Pty Limited (Second Plaintiff) OpenIn Holdings Pty Limited (Third Plaintiff) OpenIn Assets Pty Limited (Fourth Plaintiff) Stephen Paul Francis (Defendant)
Representation:	Counsel: Mr R Gration (Plaintiffs) Mr A Spencer (Defendant) Solicitors: HWL Ebsworth Lawyers (Plaintiffs) Holding Redlich (Defendant)
File Number(s):	2008/00290489

Judgment

The notice of motion

1. There is before the Court a notice of motion under cover of which the plaintiff seeks to recover from the defendant, the plaintiffs' costs of its amended notice of motion filed on 11 February 2011.

The nature of the proceedings

1. The plaintiff seeks declaratory relief concerning a partnership business between himself and the first defendant where under the respective partners would share in the profits and bear the losses of the business in Equal shares, such that the assets of the partnership business would belong to the plaintiff and the defendant in Equal shares.

1. Amongst the other claims for relief, the plaintiff claims sundry orders calculated to wind up the partnership business and to take an account of the alleged profits made by the defendant in breach of his fiduciary duty.

1. The issues put forward by the plaintiff for determination include whether or not the plaintiff and the defendant conducted a partnership, if so what were the dealings and transactions of the defendant in relation to the partnership and in particular what were the dealings and transactions of the defendant in relation to the business conducted by certain companies.

1. The notice of motion sought:

(1)   The defendant attend Court, whether in person or by video link on a date to be set, for cross examination on his affidavit verifying his List of Documents sworn 7 July 2010.

(2) The defendant file and serve within 14 days, a further and better list of documents, in accordance with rule 21.2 of the Uniform Civil Procedure Rules (other than excluded documents) including documents and documents falling within the categories identified in "Schedule A" to these orders.

(3)   The defendant pay the plaintiff's' costs of the Motion.

The manner in which the notice of motion was dealt with

1. The parties were before the Court on a number of occasions where each of them sought to place before the Court affidavits in which :

(1)   The plaintiff sought to make good the proposition that be defendants had for a very considerable time failed to comply with the case management regime set out by the then list judge insofar as discovery by the parties was to take place;

(2)   The defendant sought to make good the proposition that its approach to that case management regime was appropriate in the circumstances particularly where close questions of what were the real issues for determination were unclear.

1. It is now common ground that following an extended period during which the parties further negotiated a compromise situation, orders were made putting that compromise in place.

1. In consequence the Court heard the respective applications first by the plaintiff to have the whole of its costs of the Notice of Motion paid by the plaintiff; and secondly the contention by the defendant that it was appropriate for no costs order to be made in view of the accommodation consent surely reached; or alternatively that the costs of and thrown away by the need for the Notice of Motion should be costs in the course.

The original order

1. Bergin CJ in Eq gave the original order for discovery on 27 November 2009.

1. Her Honour made an order for "general discovery" and also made adverse comments relating to the defendant's "Easter Island approach" to the matter. By this, Her Honour meant the defendant had taken a restrictive approach to discovery and directed the defendant engage better with this litigation.

1. Despite Bergin CJ orders, the matter was subject to a later Notice of Motion to which these proceedings relate.

The plaintiffs' submissions

1. The essence of the plaintiffs' submissions was that the defendant has consistently attempted to restrict and stall the plaintiff's discovery efforts.

1. Mr Gration took the Court at length through the history of correspondence between the party's solicitors in an attempt to explain this apparent pattern of behaviour.

1. The first such letter was from the plaintiff's solicitors (HWL Ebsworth) on 10 December 2010 in which they set out in length the inadequacy of the defendant's discovery. The letter concluded by requesting a further amended verified list from the defendant, which included all relevant documents, else, the plaintiff would request the matter be re-listed.

1. Mr Gration then took the Court to a number of letters by the defendant's solicitors (Holding Redlich) in which they sought to restrict the scope of Bergin CJ in Eq's orders. The defendant claimed that only documents relevant to a fact in issue, which are identifiable on the pleadings, and not documents in general were discoverable. The defendant asserted that any other documents would be produced only in accordance with a Notice to Produce. The first expression of such sentiment was a 23 December 2010 letter from Holding Redlich to the plaintiff's solicitors.

1. The plaintiffs submitted that in response to this restrictive attitude, they attempted to resolve the disagreement by opening up discussion on any disputed categories. Evidence of this was in the plaintiffs' 29 December 2010 letter. These requests were always met by difficulty from the defendant. This was the position right up until the Motion was first heard as evidenced by Holding Redlich's letter dated 22 February 2010.

1. Prior to the hearing the defendant only agreed to discovery of categories 32a, b and c in a limited sense and agreed to attempt to access certain bank statements.

1. The plaintiff submitted that it was this attitude taken by the defendant that warrants a cost order in their favour.

The defendant's submissions

1. The overriding submission of the defendant was that the plaintiff's discovery was too broad and it must be limited to relevant documents which are to be determined with reference to the plaintiffs' pleadings.

1. The defendant disputed that the substance of Bergin CJ order was for general discovery of all documents in relation to their business. It argued that it must be limited to documents that arise from the pleadings and not any document mentioned in the affidavits.

1. The defendant was steadfast in asserting that access to any other documents could be obtained only pursuant to a Notice to Produce. This approach was clearly set out in the defendant's first letter to the plaintiff dated 23 December 2010. This is the approach the defendant maintains is the correct approach and made this clear throughout all correspondence.

1. Mr Spencer submitted that the plaintiffs' request for broad and general discovery was not specific enough. He claimed there were too many irrelevant documents, for example a request for the defendant's separation agreement. Consequently, the defendant asked for clarification as to what should be discoverable, but this was never forthcoming.

1. Mr Spencer also submitted that should the Court be minded to make a costs order against the defendant, Order 1 of the Notice of Motion requesting the cross examination of the defendant failed. In these circumstances the defendant should not bear the cost of this Order.

1. Finally, it was submitted that as a matter of policy, where an agreement is reached, the Court should not conduct a factual inquiry or mini-trial into responsibility. It is the usual procedure for the Court to award costs in the course.

Decision

1. In my view the plaintiffs have succeeded in establishing a somewhat cavalier approach taken to the List Judge's directions over an extended period of time. However for the reasons, which follow, there were certain occasions when the approach taken by the defendant was not unreasonable.

1. The defendant was presented with a very lengthy schedule of documents to discover. There were over 80 categories and 800 documents.

1. I accept Mr Spencer's submission that there was no effort on the part of the plaintiff to link these documents to the pleadings. The plaintiffs throughout the bulk of correspondence were pushing for a very broad scope of discovery. While the plaintiffs did make offers to discuss any issues of contention, at no point did they attempt to explain the relevance of the categories of discovery to the facts at issue.

1. This approach was particularly evident where the defendant offered discovery of all company records. This offer was rejected and instead the plaintiffs insisted that discovery be made in accordance with the broad schedule.

1. In these circumstances it was not unreasonable for the defence to carefully consider and scrutinise the plaintiffs' list. Further, given the difficulties of communicating with a client overseas, the time frame for responding was not unreasonable.

1. Of course none of these factors excuse the general restrictive attitude taken to discovery by the defendant. They merely highlight that not all of the defendant's actions were without good reason.

1. In all of the circumstances, the principled approach to the costs question is to order that the defendant pay 70% of the plaintiffs' costs of the motion.

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Decision last updated: 30 March 2011