Knell v Harris

[2018] WADC 85

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CIVIL

LOCATION:   PERTH

CITATION:   KNELL -v- HARRIS [2018] WADC 85

CORAM:   STAUDE DCJ

HEARD:   25 JUNE 2018

DELIVERED          :   13 JULY 2018

FILE NO/S:   CIV 3385 of 2013

BETWEEN:   SIDNEY CHARLES KNELL

First Plaintiff

QAV PTY LTD

Second Plaintiff

AND

KATHRYN ISABEL HARRIS

First Defendant

WARREN MATHESON LANCE

Second Defendant

NETLINE PTY LTD

Third Defendant

Catchwords:

Practice and procedure - Discovery of documents - Application for further and better discovery - Defamation - Scope of discovery where defence pleads justification of alternative imputations

Legislation:

Defamation Act 2005 (WA)

Result:

Application allowed in part

Representation:

Counsel:

First Plaintiff	:	Mr A M Freund
Second Plaintiff	:	Mr A M Freund
First Defendant	:	Mr C P K Russell
Second Defendant	:	Mr C P K Russell
Third Defendant	:	Mr C P K Russell

Solicitors:

First Plaintiff	:	Lawton Gillon
Second Plaintiff	:	Lawton Gillon
First Defendant	:	Pragma Legal
Second Defendant	:	Pragma Legal
Third Defendant	:	Pragma Legal

Case(s) referred to in decision(s):

Beecham Group Ltd v Bristol Myers Co [1979] VR 273

Cazaly Iron Pty Ltd v Minister for Resources [2007] WASCA 60

Compagnie Financiere et Commerciale Du Pacifique v Peruvian Guano Co (1982) 11 QBD 55

Kent Coal Concessions Ltd v Duguid [1910] 1 KB 904

Kingsfield Holdings Pty Ltd v Sullivan Commercial Pty Ltd [2013] WASCA 347

Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341

Netline Pty Ltd v QAV Pty Ltd [2015] WASC 113

Schutz DSL (Australia) Pty Ltd v VIP Plastic Packaging Pty Ltd (No 14) [2011] FCA 1159

Technomin Australia Pty v Xstrata Nickel Australasia Operations Pty Ltd [2010] WASC 218

Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2005] WASC 60

STAUDE DCJ:

Introduction

1This is an appeal from a decision of a registrar with respect to the defendants' application for further and better discovery of documents.  The action is for damages for defamation and is listed for trial for four days commencing on 23 July 2018.

2The action has a long history, the writ having been issued on 18 October 2013 and the pleadings having gone through numerous iterations, the most recent version of the statement of claim dated 27 September 2017 being the second further amended statement of claim.  It is obvious that discovery and other interlocutory processes have been contested at considerable expense to the parties.  It is also obvious, having regard to the nature and limited publication and republication of the alleged defamatory imputations, and the circumstances in which they are said to have been made, that any award of damages to either or both plaintiffs, if the action is successful, is likely to be greatly exceeded by the costs of the action to the parties. Clearly, the action is driven by each side's desire for vindication and is unlikely to be resolved other than by a verdict.  These observations are pertinent to the issue of proportionality raised by the plaintiffs in their submissions and the case management objects to which the court must have regard.

3The action should not have been listed before all interlocutory steps had been completed. It is a conspicuous feature of the case that it has been contested fiercely throughout its long history. Indeed, it has been taken as far as the Court of Appeal on a pleading amendment issue. Further interlocutory disputes should have been anticipated, so it is particularly unsatisfactory that the action was listed for trial before discovery was given. As events have transpired, the court is now required to deal with complicated issues affecting the scope of discovery within a month of the trial. That situation could and should have been avoided. It does, however, bring into play case management considerations. Although the application appears to be made pursuant to O 26 r 6 of the Rules of the Supreme Court 1971, it is expressed to be subject to O 26 r 7 by virtue of which the court may order discovery at any time having regard to the objects of case flow management in O 1 r 4B.

4An order was made for mutual discovery on 26 September 2017.  Discovery was to be exchanged by 7 November 2017.  The plaintiffs' affidavit of discovery was not filed until 4 December 2017.  The defendants took issue with the adequacy of the discovery by email on 5 February 2018, some two months after the affidavit was served: see conferral certificate dated 8 March 2018.  At a directions hearing on 6 February 2018 the defendants were granted leave to apply for further discovery by 13 February 2018.  The application was not made until 8 March 2018.  It was not made timeously for the reasons set out in the affidavit of Aaron David McDonald sworn 7 March 2018.  An extension of time was granted and the application was allowed in part, but substantially disallowed on 3 May 2018.  This appeal was lodged on 9 May 2018 and heard on 25 June 2018.

5As the appeal is by way of a fresh hearing of the application, I will refer to it as the application.

Extension of time

6An extension of time is resisted by the plaintiffs on the grounds that the explanation for delay is inadequate, that the plaintiffs are prejudiced by the potential delay in the resolution of the action, and that the application offends the principles of case flow management.  An explanation has been given for the delay in bringing the application by reference to counsel's unavailability.  I accept that trial counsel's involvement was reasonably necessary in this case. I also accept that counsel underestimated the time that would be required when the 6 February 2018 direction was made and could not attend to it within the prescribed time due to other commitments. 

7The application has now been fully argued on its merits.  By reason of the long history of the matter I do not consider that any further delay occasioned by the resolution of the application will be prejudicial to the plaintiffs.  I accept that the plaintiffs desire vindication sooner rather than later, but it must be observed that the action is based on the publication of certain statements in an email on 23 October 2012, almost six years ago.  The alleged publication was made to one person who republished to five others who appear to have been au fait with the concerns of the second defendant that motivated the publication.  The status quo of the business relationship between the plaintiffs and those to whom the publication and republication was made has not changed. 

8Having regard to all the circumstances I am satisfied that the interests of justice favour the resolution of the discovery issue, even at the risk of a consequential adjournment of the trial, such is the obvious importance of the case to the parties.  The extension of time is granted accordingly.

Background

9The alleged defamatory imputations are contained in an email sent by the second defendant on 23 October 2012 to one Eleanor Logiudice, whose company, Logiudice Property Group Pty Ltd, is the manager of the Owners of Ascot Village Strata Plan 46542, the body corporate of a strata titled residential unit complex (Ascot Village) to which the second plaintiff was contracted as the letting agent and caretaker.  The first plaintiff is a director of the second plaintiff.

10The second defendant is a director of the third defendant.  The third defendant and the first defendant jointly owned a residential unit in Ascot Village.  The second defendant sent the email purportedly on behalf of the first and third defendants.

11Neither plaintiff claims damages for any economic loss, but each alleges injury to their credit, reputation and occupation, and pleads that they have been brought into public scandal, odium and contempt.  General damages are claimed accordingly.  In the prayer for relief aggravated damages are claimed on the basis that the alleged defamatory imputations were made maliciously.

12Malice is alleged on the basis that the defendants did not believe the pleaded imputations to be true and did not investigate them to be true, that the defendants stood to gain financially by making them, that the defendants failed to made a timely apology, and that the email was sent to Ms Logiudice with the intention that she would forward it to the committee of owners, as she did.

13The alleged defamatory imputations are pleaded by reference to the whole of the email, and specifically the statements contained in the following paragraph:

Also, my complaint to the Fraud Squad is with the Assistant Commissioner of Police for review and Hon. Stephen Smith (Minister for Defence and Member for Perth) has written to the Attorney General re lack of action by ASIC (over countless complaints against Knell and Pye) and to the Treasurer for lack of action against Knell re taxation evasion complaint.

14This paragraph obviously does not specify any particulars of the complaints referred to.  The pleadings refer to them as the Fraud Squad statement, the ASIC statement and the Tax Evasion statement.

15Paragraph 8A of the second further amended statement of claim pleads that the Fraud Squad statement meant that the first plaintiff had behaved unlawfully, fraudulently, and dishonestly, and was a crook, generally, and in his conduct relating to Ascot Village.

16Paragraph 8B pleads that the Fraud Squad statement bore the same meaning by innuendo.  Paragraph 8C pleads that the Fraud Squad statement meant that the conduct of the first plaintiff gave rise to a well-founded belief on the part of the second defendant that the first plaintiff had behaved in the manner alleged in par 8A, and was a crook, generally, and in relation to Ascot Village.  Paragraph 8D pleads that the Fraud Squad statement meant the same thing by innuendo on the basis that it implied a well-founded complaint and for other reasons there pleaded.

17Paragraph 9A pleads that the ASIC statement meant that the first plaintiff had behaved unlawfully and on countless occasions in breach of laws administered by ASIC, had behaved dishonestly, and was a crook, generally, and in relation to Ascot Village.

18Paragraph 9B pleads that the ASIC statement bore the same meaning by innuendo.  Paragraph 9C pleads that the ASIC statement meant that the conduct of the first plaintiff gave rise to a well-founded belief on the part of the second defendant that he had behaved in the manner pleaded in par 9A.  Paragraph 9D pleads that the ASIC statement had the same meaning by innuendo.

19Paragraph 10A pleads that the Tax Evasion complaint meant that the first plaintiff behaved unlawfully in that he had engaged in tax evasion, that he had behaved dishonestly and that he was a crook, and that he had engaged in tax evasion and behaved dishonestly in relation to Ascot Village.  Paragraph 10B pleads that the Tax Evasion statement bore the same meaning by innuendo.

20Paragraph 10C pleads that the same statement meant that the conduct of the first plaintiff gave rise to a well‑founded belief on the second defendant's part that he had engaged in tax evasion and the other behaviour and conduct pleaded in par 10A.  Paragraph 10D pleads that that statement meant the same by innuendo.

21Paragraph 10AA pleads that the Fraud Squad statement, the ASIC statement and the Tax Evasion statement, individually and together, meant that the management of the second plaintiff was dishonest or fraudulent or unlawful, generally, and in relation to Ascot Village.  Paragraph 10AB pleads that the same statements bore the same meaning by innuendo and par 10AC pleads that those statements meant that the second defendant had a well-founded belief that the management of the second plaintiff was dishonest or unlawful generally, and in relation to Ascot Village.  Paragraph 10AD pleads that the statements meant the same by innuendo.

22The amended defence pleads in answer to the claim based on the Fraud Squad statement that it did not give rise to the defamatory imputations pleaded in pars 8A and 8C, or the corresponding innuendoes.  No plea of justification is made in relation to the pleaded imputations and innuendoes.  Alternatively, the defendants plead (by way of a Polly Peck defence) that the Fraud Statement meant that the conduct of the first plaintiff had given rise to a belief on the second defendant's part there were grounds for investigating whether the first plaintiff had behaved unlawfully in relation to Ascot Village and that that meaning was true in substance and in fact, in that (par 12):

(a)At all material times Mr Knell was a director of QAV and Ascot Residential Management Pty Ltd (ARM);

(b)In or about February 2008 Mr Knell caused ARM to be interposed between QAV and certain owners of units in Ascot Village in the management of those units such that ARM was able to, and in fact did, retain monies that was [sic] lawfully due to those owners;

(c)Between 2008 and 2011 Mr Knell caused QAV to deduct booking fees from the returns due to certain owners of units in Ascot Village.  Mr Lance obtained a determination in the Magistrates Court of Western Australia on 30 August 2011 that it was not lawful to deduct those booking fees.  Mr Knell has caused QAV to:

(i)retain the unlawfully deducted booking fees;

(ii)fail or refuse to repay those fees to owners of units in Ascot Village; and

(iii)continued to deduct booking fees from the returns due to certain owners after 30 August 2011; and

(d)In or about late 2010, Mr Knell caused QAV to incorrectly represent to owners of units in Ascot Village that they had to sign a new letting and services agreement which was more favourable to QAV and less favourable to the owners of units in Ascot Village.

23The amended defence pleads further that the Fraud Squad statement was made in circumstances that attracted qualified privilege, given that the recipient, Ms Logiudice, as the manager of the body corporate, had an interest in being informed of the status of the complaint to the police and was published to her in the course of supplying information on the status of the complaint in circumstances that made the defendants' conduct reasonable.

24In relation to the ASIC and Tax Evasion statements the same defences are pleaded.  Paragraph 15 pleads an alternative meaning to the ASIC statement as follows:

(a)The conduct of Mr Knell gave rise to a belief on the part of unnamed complainants that there were grounds for investigating whether Mr Knell had behaved unlawfully and the said meaning was true in substance and fact by reason of the matters pleaded in paragraph 12(a) to 12(d) of this defence;

(b)The Hon Stephen Smith had written to the Attorney General of the Commonwealth regarding the lack of action by ASIC in relation to complaints against Mr Knell and the said meaning was true in substance and in fact by reason of the following matters:

(i)prior to the date of the email being sent, Mr Lance was informed by a member of the Hon Stephen Smith's staff that Mr Smith had written to the Attorney General in relation to ASIC's failure to act upon numerous complaints made against Mr Knell;

(ii)prior to the date of the email being sent, at least three complaints had been made to ASIC about Mr Knell (ASIC complaints).

25In relation to the Tax Evasion statement, the alternative imputation pleaded is pleaded in par 18 as follows:

(a)The conduct of Mr Knell gave rise to a belief on the part of an unnamed complainant that there were grounds for investigating whether Mr Knell had behaved unlawfully by way of evading the payment of tax and the said meaning was true in substance and in fact by reason of the following matters:

(i)at all material times Mr Knell was a director of Prime Property Investment Pty Ltd (PPI), Nationwide Development Corporation Australasia Pty Ltd (Nationwide) and Endeavour ACT Pty Ltd (Endeavour);

(ii)Fieldland Corporation Pty Ltd (Fieldland) was the original owner of all of the short-stay units in the Ascot Village development;

(iii)at all material times, Nationwide held 40% of the share capital in Fieldland;

(iv)between 2006 and 2008, on behalf of Fieldland, PPI marketed for sale and sold all of the short-stay units in the Ascot Village development for which sales Fieldland was liable to pay PPI commissions totalling approximately $1.1 million dollars;

(v)rather than PPI the commissions, Fieldland credited the $1.1 million to Nationwide's shareholders equity or loan account; and

(vi)Endeavour purchased one of the units in the Ascot Village development (Lot 17 on Strata Plan 46452).  Rather than pay the purchase price of $291,500 this amount was offset against Mr Knell's or Nationwide's loan account;

(b)The Hon Stephen Smith had written to the Treasurer of the Commonwealth in respect of the Australian Taxation Department's failure to act upon a complaint concerning Mr Knell and the said meaning was true in substance and in fact by reason of the following matters:

(i)prior to the date of the email being sent, Mr Lance was informed by a member of the Hon Stephen Smith's staff that Mr Smith had written to the Treasurer in relation to the Australian Taxation Department's failure to act upon a complaint concerning Mr Knell; and

(ii)prior to the date of the email being sent, Mr Lance had made a complaint to the Australian Taxation Department concerning Mr Knell (Tax complaint).

26The amended defence also pleads that the ASIC and Tax Evasion statements were made in circumstances of qualified privilege.

27It is also pleaded by way of defence that the first plaintiff's credit and reputation has not been lowered in the estimation of Ms Logiudice having regard to findings made against him in two cited Queensland proceedings.

28Further and better particulars of the defence were filed on 13 September 2017 in relation to par 16(c)(vii) of the amended defence (that alleged that the ASIC statement was subject to qualified privilege).

29It appears from the pleadings that it is not in issue that Ms Logiudice and the members of the committee of owners had been aware for some time prior to the publication of the email in question, that the second defendant had concerns about the conduct of the first plaintiff as a director of the second plaintiff in relation to Ascot Village.

30Part 1A of the plaintiffs' discovery consist of only 22 specific documents (items 1 to 22) being the financial reports for Nationwide Development Corporation (Australasia) Pty Ltd for 2009 and 2010, the Knell Family Trust financial report for 2009, the Prime Property Investment Pty Ltd financial reports for 2010 and 2011, the Prime Property Investment Pty Ltd company extract, the Fieldland Corporation Pty Ltd tax returns for 2010 and 2011, the Fieldland Corporation tax return for 2012, the Ascot Residential Management Pty Ltd financial report for 2011, 2012 and 2013, the Ascot Residential Management Pty Ltd balance sheet of 30 June 2013, the individual tax return of the first plaintiff dated 8 July 2011, the individual tax return of Alison Camille Knell dated 25 May 2012, emails from the second plaintiff to Ms Logiudice dated 23 October 2012, 15 March 2011 (two) and 16 March 2011, an attachment to the last email described as 'Information Memorandum', an email from the second defendant to Ms Logiudice on 30 September 2011 and 18 October 2011.

31Documents related to the litigation are discovered in four categories (items 23 - 27).  There are no documents listed in pt 2A and pt 2B of the plaintiffs' list except for the originals of correspondence sent to the defendants' solicitors.

Submissions

32Affidavits have been read, for and against, and detailed submissions made, written and oral, by each side, on the merits of the application.

33The defendants enumerate 11 categories of documents in respect of which it is said that the discovery given by the plaintiffs is inadequate having regard to what they have identified as the principal factual issues arising on the pleadings.  These issues are set out in par 5 of the defendants' outline of submissions.

34The first three issues are patent: the number of people employed by the second plaintiff as at 23 October 2012, which goes to whether the second plaintiff is entitled to sue for defamation; Ms Logiudice's knowledge that the first plaintiff was a director of the second plaintiff or a person involved in the senior management of the second plaintiff, which goes to the alleged defamation of the second plaintiff; and the extent to which Ms Logiudice circulated the email which is pleaded as a fact giving rise to aggravated damages.

35The remaining issues arise indirectly.

36Dealing firstly with the plaintiffs' case, pars 8B, 9B and 10B of the second further amended statement of claim plead expressly, as extrinsic facts affording a basis for defamatory innuendo, that Ms Logiudice understood each statement to be made of the plaintiffs and the facts underlying the particular complaint to be true on account of certain emails she had received from the second defendant.  The emails and the enclosure to the email dated 16 March (described as 'information memorandum') are particularised.

37The contents of these emails detail specific acts and conduct of the first plaintiff of which Ms Logiudice had been informed prior to the publication of the email in question.  So, as I understand the plaintiffs' case, to the extent that the alleged defamatory statements may be seen as vague, the plaintiffs seek to show, by reference to these prior communications, precisely what Ms Logiudice would have understood the statements to mean.

38In my view, the prior emails may also be seen to show the beliefs and concerns of the second defendant, as at 23 October 2012, about the first plaintiff's conduct in relation to Ascot Village, as well as the context in which the second defendant communicated them to the body corporate through its manager.

39The basis, however, upon which the defendants assert a right to further and better discovery is that they have pleaded alternative imputations to those relied upon by the plaintiffs, that are in fact true.  The issues said by the defendants to arise from them are:

•whether the first plaintiff caused ARM Pty Ltd to be interposed between the second defendant and certain owners of units in Ascot Village and whether ARM Pty Ltd retained monies that were lawfully due to the owners;

•whether between 2008 and 2011 the first plaintiff caused the second plaintiff to deduct booking fees from the returns due to certain owners of units and retain those deductions;

•whether the second plaintiff continued to cause the second plaintiff to deduct booking fees from the returns due to certain owners and retained those deductions after the second defendant had obtained a determination in the Magistrates Court that it was not lawful for the second plaintiff to deduct such fees;

•whether, prior to 23 October 2012, the first plaintiff caused the second plaintiff to repay the owners of the units the booking fees that had been deducted;

•whether, in or about late 2010, the first plaintiff caused the second plaintiff to incorrectly represent to owners of units that they had to sign a new letting and services agreement that was more favourable to the second plaintiff and less favourable to the owners of the units;

•whether between 2006 and 2008 Prime Property Investment Pty Ltd or the first plaintiff earned commissions from selling units in Ascot Village and, if so, how the commissions were accounted for or paid;

•whether the first plaintiff caused a buyer to purchase a unit in Ascot Village using his or a related corporate entity's loan account to pay the purchase price by reducing the loan account by the amount due at settlement for the purchase price of the unit; and

•whether Prime Property Investment Pty Ltd or the second plaintiff declared the commission income in their taxation returns.

40The defendants also identify as an issue on the pleadings whether Ms Logiudice's opinion of the first plaintiff was affected by the findings in the Queensland proceedings.

41In answer to the plaintiffs' submission that discovery cannot be used as a means of eliciting material to ground a plea of justification, the defendants submit that their defences do not depend upon any proof that may be found in any discovered documents, but that further discovery is likely to support the reasonableness of the second defendant's beliefs in relation to the conduct of the first plaintiff and  facilitate the proper cross-examination of the plaintiffs' witnesses.

42It is also contended by the defendants that the discovery given by the plaintiffs can be shown not to be conclusive by reason of the plaintiffs' misconception of their case. 

43It may be seen from the plaintiffs' list of discoverable documents, as the defendants submit, that the plaintiffs have not discovered any correspondence by Chris Pye (a director of Fieldland Pty Ltd), the first plaintiff, or any officer or employee of the second plaintiff, nor any agendas, minutes or papers in relation to meetings of the body corporate, save for the information memorandum referred to as an enclosure of an email of the second plaintiff dated 18 March 2011, nor any financial or employment records of the second plaintiff or any financial records on which the taxation returns and financial reports have been discovered were prepared.

44Accordingly, the defendants submit that the plaintiffs' discovery is incomplete.  The affidavit in support of the application deposes to the belief of Mr McDonald, solicitor for the defendants, that the defendants would be hindered in their ability to properly and effectively prepare for trial and to defend the plaintiffs' claim without further discovery and may thereby be prejudiced.  Mr McDonald also deposes to the grounds upon which it is submitted that the documents described in the 11 categories may be inferred.

45Put simply, the defendants' submission is based on three main contentions.

46The first is that the existence of the documents described in the 11 categories may be inferred with reasonable certainty: Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2005] WASC 60 [3]; Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2010] WASC 218 [6]. The affidavit of Mr McDonald addresses each category on this basis.

47The second is that such documents are discoverable on the basis that they relate to matters in issue (applying the time‑honoured test set out by Brett LJ in Compagnie Financiere et Commerciale Du Pacifique v Peruvian Guano Co (1982) 11 QBD 55, 63), in particular the factual issues identified by the defendants as noted in [39] above.

48The third is that, even if the existence of the documents cannot be inferred, further and better discovery should be ordered because it is apparent that the plaintiffs have deliberately excluded documents from discovery.

49I understand the defendants' submission in this last respect to be that the conspicuous absence from the plaintiffs' discovery of documents relating to the dealings of the plaintiffs with Ascot Village and the primary documents on which the discovered annual reports are based can only be explained by a mistake on the part of the plaintiffs as to the scope of their discovery obligation, such that the presumed conclusiveness of the plaintiffs' affidavit of discovery has been displaced: Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341, 343; Technomin Australia Pty v Xstrata Nickel Australasia Operations Pty Ltd [7].

50Simon Christopher England, the plaintiffs' solicitor, has deposed in an affidavit sworn 29 March 2018 that discovery was given by the plaintiffs on 4 December 2017.  Mr England also deposes to the grounds upon which an application for discovery by categories was opposed at a directions hearing on 26 September 2017 and at a further directions hearing on 6 February 2018, and refused by the registrar on each occasion.  The affidavit states that the defendants have sought to obtain various documents by issuing subpoenas to produce documents to a number of parties including persons and entities related to the plaintiffs.  Mr England deposes that he is advised by his clients and believes that it would be 'a very time consuming and costly process to provide the defendant[s] with the documents sought by the defendants through their application for further and better discovery'.  There is no affidavit evidence to the effect that the documents in the 11 categories described by the defendants do not exist.

51The plaintiffs submit that the application for further and better discovery is a fishing expedition, that the defendants have not shown that the documents exist and are relevant, and that the court in its discretion should refuse the application having regard to principles of proportionality.  The reference to proportionality in my view invokes O 1 r 4B.

52The plaintiffs also invite the court to have regard to the findings of Beech J (as his Honour was) in Netline Pty Ltd v QAV Pty Ltd [2015] WASC 113. I have read the reasons in that case which involved a claim for breach of contract by the first and third defendant against the second plaintiff. His Honour's observations about the conduct of the second defendant were made with respect to the issue of whether specific performance should be ordered. They do not influence the court's decision in this matter.

53No positive assertion is made that the documents sought by the application do not exist, or have not existed.

Principles

54The general principles governing the court's jurisdiction to order further and better discovery are set out by Murphy JA in Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2] – [14].

55There are also principles that apply specifically to discovery in defamation actions.  These have been summarised by Kenneth Martin J in Kingsfield Holdings Pty Ltd v Sullivan Commercial Pty Ltd [2013] WASCA 347 [40]. After citing a number of cases at [39], his Honour stated:

A position of principle seen to be taken in these cases is that a pleaded defence of justification in a defamation action ought to be pleaded by reference to existing materials, rather than on a hope of later locating some material upon which the plea might be legitimately based.  On the face of it, that presents as a completely orthodox proposition.  Obviously, the application of this principle in practice then needs to evaluated against the precise circumstances of every individual case.  For instance, in a scenario of an allegation as to somebody's asserted misconduct or criminality, it could never be legitimate to plead a defence of truth in an expectation that in due course the process of discovery, or answered subpoenas, will unearth some supporting evidence of criminality or misconduct.  There must exist an underlying factual base to support the plea as it is made.  But that does not mean a provided fact base which is sufficient cannot be augmented to be proved at trial, after properly invoking the forensic processes of the court.

56There is no strict entitlement to an order for discovery, including further discovery: Kent Coal Concessions Ltd v Duguid [1910] 1 KB 904, 910. A discovery order under O 26 r 6(1), or in the inherent jurisdiction of the court, can only be made if, at least, the court has 'reasonable grounds for being fairly certain that there are relevant documents which ought to have been disclosed': Beecham Group Ltd v Bristol Myers Co [1979] VR 273, 276, 279; Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd.

57The plaintiffs submit that the court has a discretion as to whether to order further and better discovery and submits that an order should not be made if it would be intrusive or oppressive.  In Schutz DSL (Australia) Pty Ltd v VIP Plastic Packaging Pty Ltd(No 14) [2011] FCA 1159 [13], McKerracher J stated:

In my view a stand must be taken against insistence of production of every last note of possible tangential relevance.  A number of authorities have recognised that discovery can be an intrusive and oppressive tool, particularly in the hands of a business or trade rival.

58Reference was also made to Cazaly Iron Pty Ltd v Minister for Resources [2007] WASCA 60, but that case was concerned with the terms of confidentiality orders limiting the production of discovered documents.

Threshold question

59The threshold question, assuming that the documents described in the 11 categories (or any of them) are or have been in the plaintiffs' possession, custody or power, is whether they relate to matters in issue in this action.  For ease of reference the schedule of the 11 categories of documents attached to the application is annexed to these reasons.  To determine the question of relevance a careful examination of the pleadings for the purpose of deciding what the matters in issue are.  I propose to deal with each category in turn.

Analysis

Category A: Employment records of QAV

60Paragraph 2A(b) of the second further amended statement of claim pleads that the second plaintiff is and was an excluded corporation within the meaning of s 9 of the Defamation Act 2005 (WA) employing fewer than 10 persons and not being related to another corporation. This fact is not admitted.

61Section 9 of the Defamation Act provides that a corporation has no cause of action for defamation unless it was an excluded corporation at the time of publication, and further provides that a corporation is an excluded corporation if, relevantly, it employs fewer than 10 persons and is not related to another corporation. Section 9(3) provides that in counting employees for this purpose, part‑time employees are to be taken into account as an appropriate fraction of a full-time equivalent.

62That the second plaintiff was an excluded corporation is a matter in issue.  Documents relating to the number and type of employment of any persons employed by the second plaintiff at the time of the publication relate to this issue. 

63The existence of such documents can be inferred. The learned registrar has already granted the defendants' application for further discovery of the documents described in category A. It is not submitted that the discovery of these documents would be unduly oppressive or intrusive. An order pursuant to O 26 r 6(1) is appropriate.

Category B: Logiudice communications regarding the email

64It is contended by the defendants, and not disputed by the plaintiffs, that the email by which it is alleged that Ms Logiudice republished the email sent to her by the second defendant has not been discovered. As the plaintiffs have pleaded the republication as justifying aggravated damages, and as the fact of republication is in dispute, a basis has been shown for an order pursuant to O 26 r 6(1) with respect to the communications described by this category, the existence of which, as documents that are or have been in the possession, custody or power of the plaintiff, can be inferred.

Category C: Knell senior management

65There is no real issue that the first plaintiff was involved in the senior management of QAV as a director, and that Ms Logiudice in her role was aware of such involvement.  It is clear that the statements in question were made with respect to the first plaintiff and the second plaintiff on the basis that their interests were identical.  There is no matter in issue to which this category relates.  In any event, the scope of this category is too broad and imprecise to be meaningful.  It would therefore be oppressive and unreasonable to order further discovery of documents in this category, having regard to the objects of case flow management.

Category D: Management of QAV and booking fees

66The schedule sets out eight sub-categories of documents that are also broad and imprecise. 

67The communications referred to in sub-categories (1), (2), (3), (4) and (7) are described as 'involving Chris Pye and/or Sidney Knell' between various periods, the longest being 1 January 2008 to 31 December 2012 (a period of five years), regarding 'the management of QAV', 'the charging of booking fees to owners of units in Ascot Village', 'the Magistrates Court of Western Australia case of Netline Pty Ltd and Kathryn Isabel Harris v QAV Pty Ltd', 'QAV seeking the owners of units in Ascot Village sign a new letting and services agreement' and 'the request by QAV for the owners to sign a new letting and service agreement'.

68Subcategories (5) and (6) describe financial records of QAV which show booking fee charges passed on and charged to the owners of units in Ascot Village and the repayment by QAV of booking fees so charged between 1 January 2008 and 23 October 2012.  Sub-category (8) describes communications between QAV and the owners of units in Ascot Village between 1 January 2010 and 30 June 2011 regarding QAV's request to sign a new agreement.

69In my opinion, the documents described in this category, the existence of which can be demonstrated by inference, would relate to the issue of whether QAV did, in fact, deduct booking fees unlawfully, but they do not, in my view, relate to the second defendant's pleaded belief at the time of the publication in question.

70It is not pleaded that the imputations alleged by the plaintiffs with respect to the Fraud Squad statement were true.  It is clear, however, that by obtaining discovery of the documents described in category D, the defendants would hope to prove the second defendant's suspicion that the booking fees had been wrongfully deducted by QAV from payments due to the owners of units, as was established in the Magistrates Court in the decision referred to (and also by the finding of Beech J in Netline Pty Ltd v QAV Pty Ltd) with respect to the unit owned by the first and third defendants.

71The re-amended defence pleads in par 12, as the alternative and justifiable meaning of the Fraud Squad statement, that the conduct of the first plaintiff gave rise to a belief on the second defendant's part that there were grounds for investigating whether the first plaintiff had behaved unlawfully in relation to Ascot Village on the basis that, relevantly, between 2008 and 2011, the first plaintiff caused the second plaintiff to deduct booking fees from monies payable to certain owners of units in Ascot Village.  It is pleaded as a basis for this belief that the Magistrates Court had determined in relation to the first and third defendants that it was not lawful to deduct such fees.

72The manner in which pars 11 and 12 of the re-amended defence have been pleaded does not permit the second defendant to try in this action the issue of the conduct of the plaintiffs in relation to the owners of units at Ascot Village.  The issue raised by the Polly Peck plea is whether the Fraud Squad statement meant that the conduct of the first plaintiff, as known to the second defendant at the material time, gave rise to a belief on the part of the second defendant there were grounds for investigating whether the first plaintiff had behaved unlawfully in relation to Ascot Village.  The facts pleaded as the basis for that plea cannot be proved by documents of which the second defendant was, presumably, not aware. 

73Even if, contrary to this reasoning, it could be shown that the actual state of affairs as between the plaintiffs and the owners of units in Ascot Village was a matter in issue, the broad and imprecise scope of the category and the length of the period it covers would make an order under O 26 r 6 oppressive and unreasonable having regard to the objects of case flow management. I do not consider that any undue prejudice to the defence will be occasioned by denying further discovery in terms of this category.

Category E: Interposition of ARM

74The same considerations apply to this category.  It also describes sub‑categories of documents in broad and imprecise terms.  The timeframe, being from 1 January 2007 to 23 October 2012, is almost 6 years.

75Again, it can be seen that the defendants have pleaded an alternative meaning of the Fraud Squad statement to be that the conduct of the first plaintiff gave rise to a belief on the part of the second defendant that there were reasonable grounds for investigating whether the first plaintiff had behaved unlawfully.  The basis of this belief can only be established by what was known to the second defendant at the time of the publication.

76This trial, despite the manner in which the issues relating to ARM are sought to be raised, does not permit the defendants to prove, on the basis of documents of which discovery is sought, that the plaintiffs did, in fact, act unlawfully in relation to Ascot Village.

77The proof of the truth of the alternative meaning pleaded in par 12 of the amended defence does not depend upon showing as a fact that the first plaintiff did act unlawfully, but on the knowledge of the second defendant at the time of the publication.

78In any event, the broad and imprecise scope of the documents described in category E would make discovery of documents in this category oppressive and unreasonable having regard to the objects of case flow management.  I do not consider that any prejudice to the defence is likely to be occasioned by refusing to order discovery of this category of documents.

Category F: Strata company documents

79This category describes notices of agendas and minutes of meetings of the body corporate between 1 January 2010 and 31 December 2012.  The existence of these documents as documents that are or have been in the possession, custody or power of the plaintiffs can be inferred. 

80The documents described in this category relate to the alternative meanings pleaded by the defendants to the allegedly defamatory imputations arising from the Fraud Squad statement, the ASIC statement and the Tax Evasion statement, and also to the issue of whether the statements were made in circumstances that attracted qualified privilege.

81An order pursuant to O 26 r 6 is indicated.

Category G: Communications regarding commissions for sales

82This category comprises three subcategories of documents covering a period from 1 January 2005 to 30 June 2008, relating to the treatment of commissions earned on the sale of units in Ascot Village in that timeframe.

83The category also includes documents relating to the purchase by Endeavour ACT Pty Ltd of a unit in Ascot Village.  The documents are said to relate to the issue raised in par 18 of the amended defence, addressing the Tax Evasion statement, which pleads an alternative meaning to that relied upon by the plaintiffs.  The relevant Polly Peck plea is that the Tax Evasion statement meant that conduct of the first plaintiff gave rise to a belief on the part of an unnamed complainant that there were grounds for investigating whether the first plaintiff had behaved unlawfully by evading tax on the commission earned for the sale of units in Ascot Village.

84That allegation does not in my view give rise to an issue capable of being tried in this action, as to whether the second plaintiff or any associated corporate entity, in fact, avoided taxation by the way in which the alleged commissions were treated from an accounting point of view, or whether the commission was used to purchase a unit in Ascot Village by Endeavour ACT Pty Ltd.

85The defence gives rise to an issue as to whether the known conduct of the first plaintiff gave rise to a particular belief on the part of an unnamed complainant.  Pleaded in that way, the truth of the belief is not a matter in issue.  Accordingly, further discovery is not indicated.

86In any event I consider having regard to the broad and imprecise scope of this category of documents that it would be oppressive and unreasonable to order discovery having regard to the objects of case flow management.  I do not consider that any prejudice to the defence is likely to be occasioned by refusing to order discovery of this category of documents.

Category H: Financial records relating to Ascot Village

87This category is also broad and imprecise in that it describes all financial records, financial reports and taxation returns of Sidney Charles Knell, Alison Camille Knell, QAV Pty Ltd, Prime Property Investments Pty Ltd, Nationwide Development Corporation Australasia Pty Ltd, Endeavour ACT Pty Ltd and/or Central Apartment Group (Australasia) Pty Ltd (formerly ARM), showing income derived from activities in relation to Ascot Village and units in Ascot Village acquired or disposed of during a seven year period from 1 January 2006 to 31 December 2012, and all financial records, financial reports and taxation returns showing monies paid by Hospitality Inns Pty Ltd to Endeavour ACT Pty Ltd and/or Central Apartment Group (Australasia) Pty Ltd in relation to income derived from activities relating to Ascot Village in the period 1 January 2007 to 30 June 2008.

88The reasons given in relation to categories D, E and G I would disallow the application for further discovery of documents in this category.  I do not consider that any prejudice to the defence is likely to be occasioned by refusing to order discovery of this category of documents.

Category I: Financial records in relation to Fieldland Corporation Pty Ltd

89The documents described in this category are financial records and taxation returns relating to the first plaintiff's loan account with Fieldland Corporation Pty Ltd in the period 1 January 2006 to 31 December 2012, a period of seven years, and all records and reports and taxation returns showing money is paid by the second plaintiff to Fieldland Corporation Pty Ltd in relation to income derived from or in relation to Ascot Village in the period 1 January 2007 to 31 December 2009, a period of three years, and all financial records and reports and taxation returns showing commissions payable or paid and of benefits provided for the sale of units in Ascot Village by Fieldland Corporation Pty Ltd in the period 1 January 2006 to 31 December 2012, a period of seven years.

90For the reasons given for refusing further and better discovery in relation to categories D, E, G and H, I would refuse the application in relation to this category. 

91These documents of which the second defendant was presumably unaware, or at least had no knowledge of, do not relate to the justification of the alleged alternative meaning of the Tax Evasion statement.  As the amended defence does not plead justification of the defamatory imputations pleaded by the plaintiffs, the issue of whether the first plaintiff was involved in evading tax on the commissions earned for the sale of units is not material. 

92Moreover, and any event, the scope of the category is so broad and imprecise as to render further discovery of such documents oppressive and unreasonable having regard to the objects of case flow management.  I do not consider that any prejudice to the defence is likely to be occasioned by refusing to order discovery of this category of documents.

Category J: Financial records in relation to Central Apartment Group (Australasia) Pty Ltd formally known as Ascot Residential Management Pty Ltd

93The scope of the documents described in this category and the period covered, namely 1 January 2008 to 31 December 2010, being five years, in the case of agreements between Central Apartment Group (Australasia) Pty Ltd and owners of units in Ascot Village, and/or correspondence between its company and the owners of units in Ascot Village regarding monies received by the company in relation to the letting of units in Ascot Village in the period 1 January 2007 and 30 June 2008, would render discovery of these documents oppressive and unreasonable. 

94These documents do not relate to a matter in issue in these proceedings as the reference to ARM (as Central Apartment Group (Australasia) Pty Ltd is said to have been formerly known) is not related to any matter in issue for the reasons given with respect to the documents described in category E.

Category K: Documents evidencing agency under the Real Estate and Business Agents Act 1978 (WA)

95Whether Prime Property Investment Pty Ltd or the second plaintiff was registered pursuant to the Real Estate and Business Agents Act 1978 is not a matter in issue in this action.  In any event, the existence of documents evidencing the registration cannot be inferred. 

Conclusion

96For these reasons I would allow the application with respect to the documents described in categories A, B and F, and otherwise refuse the defendants' application.

97I will hear the parties as to the terms of an appropriate order. 

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.

CZ

ASSOCIATE TO JUDGE STONE

10 JULY 2018