Kusa v Vong (trading as Allen Vong and Associates)
[2018] ACTSC 254
•7 September 2018
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Kusa v Vong (trading as Allen Vong & Associates) |
Citation: | [2018] ACTSC 254 |
Hearing Date(s): | 23, 30 September 2016 |
DecisionDate: | 7 September 2018 |
Before: | Refshauge J |
Decision: | 1. The application be dismissed 2. Unless the Second Defendant files within 14 days written submissions seeking any other order, there be no order as to costs. |
Catchwords: | PRACTICE AND PROCEDURE –Discovery – Preliminary Discovery – principles applicable to applications for Preliminary Discovery - differences between rr 650 and 651 of the Court Procedures Rules 2006 (ACT) – application under r 650 cannot be used to identify which of known persons is the correct potential defendant - need for an identifiable cause of action |
Legislation Cited: | Evidence Act 2011 (ACT), s 75 |
Cases Cited: | Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd (Unreported, Federal Court of Australia, Lindgren J, 24 May 1996) Arrow International Australia Ltd v Group Konstrukt Pty Ltd [2012] ACTCA 37; 7 ACTLR 48 |
Texts Cited: | A S Scott and W F Fratcher, The Law of Trusts (Little Brown & Co: Boston; 1988), 4th ed |
Parties: | Eric Kusa (Plaintiff) Allen Vong (trading as Allen Vong & Associates) (First Defendant) Commonwealth Bank of Australia (Second Defendant) |
Representation: | Counsel Mr T Crispin (Plaintiff) No appearance (Defendants) |
| Solicitors Concorde Legal (Plaintiff) No appearance (First Defendant) HWL Ebsworth Lawyers (Second Defendant) | |
File Number(s): | SC 378 of 2016 |
REFSHAUGE J:
The plaintiff, Eric Kusa, says he paid $700,000 on 1 July 2014 to Muni Kusa. I shall refer to the plaintiff as “Eric Kusa” and the payee as “Muni Kusa” because of the commonality of surname with each other and, indeed, other persons against whom Eric Kusa appears to wish to take proceedings.
Eric Kusa asserts that the funds were subject to an express trust or, in the alternative, a constructive trust. Unfortunately, no trust document, if any existed, was produced at the hearing of the application, nor did he disclose the precise terms of the trust.
For reasons that will become apparent shortly, Eric Kusa is concerned that the trust sum or some part of it may have been transferred to the control of other members of the Kusa family, used to purchase assets in their names or in some other fashion been used for their benefit. While it is not asserted expressly that this is inconsistent with the terms of the trust, nor is there any evidence of this, I am prepared to infer that this is what is alleged.
Eric Kusa now wishes to recover any funds transferred as alleged.
As Eric Kusa does not know which of the named persons, if any, are those to whom those funds have been transferred, he now seeks, by Originating Application dated 18 August 2016 Preliminary Discovery under r 650 of the Court Procedures Rules 2006 (ACT).
The proceedings
As is appropriate, Eric Kusa commenced these proceedings by Originating Application. It was supported, as is also appropriate (see rr 64 and 650(4) of the Court Procedures Rules) by an affidavit.
The Originating Application and supporting affidavit were served on the defendants, Allen Vong and the Commonwealth Bank of Australia (‘the Commonwealth Bank’). The Commonwealth Bank filed a submitting Notice of Intention to Respond (see r 106 of the Court Procedures Rules). It did not appear at the oral hearing of the Application. Mr Vong did not file a Notice of Intention to Respond nor appear at the oral hearing. Thus, the proceedings proceeded ex parte, though I was satisfied that both defendants had been served and had had a reasonable opportunity to make any submissions to the Court that they may have wished to make.
Initially, I was attracted to the Application but when I returned to my chambers to prepare the foreshadowed short reasons for the orders I had made and I realised that there were substantial problems with the Application that, being made without any contradictor, I had not appreciated. Accordingly, I recalled the orders that I had made (see Lewis v Australian Capital Territory (No 8) [2018] ACTSC 218 at [11]-[19]) and sought further submissions.
After a short delay, I heard counsel further and reserved my decision. I regret that the business of the Court and medical intervention has delayed my completion of these reasons. I apologise to the parties.
As noted above (at [6]), an affidavit was filed with the Originating Application setting out the facts on which Eric Kusa relies. It is, however, an affidavit made by his lawyer. This is relatively common in such applications. See McFarlane as Trustee of the S McFarlane Superannuation Fund v IOOF [2018] FCA 692 at [8]; Hall v Commonwealth of Australia [2018] ACTSC 79 at [2]; Brydon v Australian Rail Track Corporation Ltd [2014] NSWSC 1560 at [2]; Papaconstuntinos v Holmes à Court [2006] NSWSC 945 at [4].
That evidence is, of course, hearsay evidence. Such evidence is admissible but only if either no objection is raised to it or the proceedings are interlocutory. As to the latter, see s 75 of the Evidence Act 2011 (ACT).
I have pointed out in Arrow International Australia Ltd v Group Konstrukt Pty Ltd [2012] ACTCA 37; 7 ACTLR 48 at 52; [9], that the question of whether an order is final or interlocutory is notoriously difficult to answer.
In the case of The Herald and Weekly Times Ltd v The Guide Dog Owners’ and Friends’ Association [1990] VR 446 at 455, however, the Appeal Division of the Supreme Court of Victoria held that such a decision was interlocutory. It seems to me that, if the order made for preliminary discovery is interlocutory, then the application is, in this case, interlocutory and, accordingly, hearsay evidence is admissible. See also London Economics (Aust) Pty Ltd v Frontier Economics Pty Ltd [1999] FCA 932 at [17]-[22]; Liu v The Age Company Ltd [2016] NSWCA 115; 92 NSWLR 679 at 714; [164] and the cases there cited.
I note, however, the comment of Connolly J in Elmaraazey v The Law Society of the Australian Capital Territory [2006] ACTSC 124; 205 FLR 445 at 448; [18]-[19], that the power of preliminary discovery is an extraordinary one and that an applicant must make out his, her or its case obviously to the reasonable satisfaction of the court. In an appropriate case, direct rather than hearsay evidence may be required.
The Facts
Eric Kusa’s lawyer deposed that the trust sum (referred to above (at [1]), was paid into an account held by Muni Kusa but, at this stage, is unable to say whether funds have subsequently been transferred from it and, if so, to whom.
As I have noted above (at [2]), the terms of the trust arrangement were not set out in the supporting affidavit. Despite the supporting affidavit stating that the trustees were “named”, suggesting that there was a trust document, no copy was in evidence, nor was any explanation offered as to why it was not produced. Nor did the evidence show how much of the $700,000 was paid to each trustee. Indeed, the situation was confusing and nothing in the affidavit or submissions clarified that confusion.
It appears that there were two trusts; for one of them, the Kusa Family Business Trust, Jennifer Kusa was trustee; for the other, the Kusa Family Building Trust, Eric Kusa, the plaintiff, was the trustee.
As noted above (at [1]), the funds were paid to Muni Kusa, by being paid into an account with the Commonwealth Bank, in his name.
The affidavit is further silent on how that came about when Muni Kusa was not a trustee. Neither Eric Kusa nor Jennifer Kusa seem to have discharged their obligations as trustees in ensuring that the funds in that account could not be dealt with without their consent, such as by being a required signatory on the account. Though it may not be relevant, I note that this may constitute a breach of trust of the two trustees who did not protect the trust funds. I was not told why Eric Kusa could not simply sue Muni Kusa for an accounting of the affairs of the Kusa Family Building Trust, as he appears to have been its trustee.
It may be, however, that it could be alleged that Muni Kusa was a constructive trustee of the funds received. If so, it is by no means clear who the beneficiaries were of such a trust. Prima facie, it would appear that the beneficiaries of the constructive trust would be the beneficiaries of the two trusts.
The affidavit further failed to identify the beneficiaries of either trust. In particular and significantly, there is no mention of whether Eric Kusa is a beneficiary.
Eric Kusa’s lawyer deposed in the affidavit that, in April 2016, Eric Kusa requested the return of the trust sum. No detail was given of the basis on which Eric Kusa, apparently as settlor, would be entitled to the return of any funds. In reply, he received a letter from the first defendant, Mr Vong, in which it was said that Eric Kusa should only receive $157,000. The letter was said to have been prepared in consultation with a number of members of the Kusa family whose names were mentioned in the letter. A copy of the letter was not annexed to the affidavit. I do not know, therefore, whether anything else in the letter explained the response, such as how that sum was calculated.
Eric Kusa’s concern is that these persons were consulted because they may have received some portion of the trust fund or some of that money may have been used to purchase assets in their name or for their benefit. Again, the evidence is silent as to whether they were beneficiaries of either trust.
Apparently, Allen Vong & Associates had been retained as accountants for the Kusa family generally for many years and, for this reason, it was said that it was likely that any records demonstrating the transfers of the trust fund would be records within their control.
Eric Kusa’s lawyer also deposed that the trust sum was deposited into the Commonwealth Bank and, accordingly, any records showing the withdrawal or transfer of sums from the trust fund would be shown in the records of the Commonwealth Bank.
An approach has been made to the Commonwealth Bank but it indicated that it could not release the documents without a relevant authority from the account owner.
A similar request has been made to Allen Vong & Associates but no response has been received.
The Application
The Originating Application sought from Allen Vong & Asociates, access under r 650 of the Court Procedures Rules to copies of all records from 1 July 2014 to the date of the order concerning the financial affairs of Muni Kusa and of all the persons whose names were referred to in the correspondence from Allen Vong & Associates together with any trust, company or other entity in the name or control of Muni Kusa or any of those other persons.
In addition, an application was made seeking production of records held by the Commonwealth Bank, concerning the financial affairs of Muni Kusa and of any trust company or other entity in the name of Muni Kusa.
Preliminary Discovery
Before 1873, the Court of Chancery had crafted a remedy where, by bill of discovery, a plaintiff in existing litigation could obtain documents relevant to the litigation. This has been adopted in modern litigation where a party has a right to obtain from another party access to documents relevant to the litigation. See, in this Territory, the provisions relating to Disclosure in the Court Procedures Rules, especially Div 2.8.2, 2.8.3 and 2.8.4.
The Court of Chancery did extend the remedy to permit its use for assisting a party in existing litigation or contemplated litigation to discover the identity of a person who might be joined to the litigation or against whom litigation might be commenced. It was required, however, that the plaintiff or prospective plaintiff had a cause of action against the person from whom such discovery was sought. Such discovery was not available against a “mere witness”.
As Lord Reid in Norwich Pharmacal Co v Customs & Excise Commissioners [1974] AC 133 at 174-5 described the limits of the “mere witness rule”, namely
a very reasonable principle that if through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrong-doing he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers. I do not think that it matters whether he became so mixed up by voluntary action on his part or because it was his duty to do what he did. It may be that if this causes him expense the person seeking the information ought to reimburse him. But justice requires that he should co-operate in righting the wrong if he unwittingly facilitated its perpetration.
Since then, however, the Courts, through rules of court, have codified the procedure for such discovery, now termed “Preliminary Discovery”, somewhat expanding it but also providing for more precise requirements.
In the common law adversary system of civil justice, the plaintiff is required to prepare his, her or its own case and to show that there is, at least, an arguable case. If the plaintiff does not do this, then, while the originating process will usually be issued by the court, it is likely to be summarily dismissed by summary judgment or as disclosing no cause of action. The plaintiff, therefore, has to have a basis for the claim made, without relying on information from the defendant.
Clearly, a plaintiff is unlikely to know all the relevant facts of the claim, some probably being in the exclusive possession of the potential defendant or a “mere witness”.
Lord Kilbrandon, in Norwich Pharmacal Co v Customs & Excise Commissioners, at 205, adopted the words of Beaumont AJ in Colonial Government v Tatham (1902) 23 Natal LR 153 at 158, that:
The principle which underlies the jurisdiction which the law gives to courts of equity in cases of this nature. Is where discovery is absolutely necessary in order to enable a party to proceed with a bona fide claim, it is the duty of the court to assist with the administration of justice by granting an order for discovery, unless some well-founded objection exists against the exercise of such jurisdiction.
The jurisdiction, however, is not seen as permitting a roving inquiry for a prospective plaintiff to find out if there is a claim against the prospective defendant or to prove the case against such a defendant. The rules of court and the authorities have set some limits to the inquiry.
In Australia, the first court to make provision in its rules for Preliminary Discovery was the Supreme Court of New South Wales in 1970 in Pt 3 of the Supreme Court Rules 1970 (NSW). The provisions were substantially amended in 1974 into the current form. In this Territory, O 34A of the Supreme Court Rules 1937 (ACT) made provision for Preliminary Discovery. A provision for Preliminary Discovery was later made in the Court Procedures Rules in Div 2.8.6. These latter provisions are somewhat different from those in the earlier Rules.
The constitutional validity of such rules, though in the context of prospective defamation proceedings and the implied freedom of political expression on matters of government and politics, has been upheld: The Age Company Ltd v Liu [2013] NSWCA 26; 82 NSWLR 268 at 290; [99].
Discovery under the principles of Norwich Pharmacal Co v Customs & Excise Commissioners continues to be available, notwithstanding the subsequent making of court rules: McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 643‑5. One of the criteria under that procedure, however, is that such discovery is only available where it is alleged that there has been a tortious breach and is not available for proceedings alleging a breach of an equitable obligation: National Education Advancement Programs (NEAP) Pty Ltd v Ashton (1995) 128 FLR 334 at 343. I do not need to consider this matter further as no application was made in reliance on those principles.
The Law Relating to Preliminary Discovery
As noted, Div 2.8.6 of the Court Procedures Rules makes provision for Preliminary Discovery. The need for Preliminary Discovery is, in part, in order to give effect to what Smithers J, with whom Bowen CJ and Nimmo J agreed, described, in Lucas Industries Pty Ltd v Hewitt (1978) 18 ALR 555 at 556, as
The principle when, according to the nature of any particular proceeding, consideration of justice and convenience require production of relevant documents at some particular time, whether before or after trial, production should then be ordered.
The Division provides for two kinds of Preliminary Discovery in rr 650 and 651. Those two kinds of discovery are broadly replicated in other rules. In NSW, r 5.2 and 5.3 of the Uniform Civil Procedure Rules 2005 (NSW) are broadly the same as rr 650 and 651 respectively. Of these, Campbell J explained in Brydon v Australian Rail Track CorporationLtd at [20]:
The circumstances in which the two rules operate are to be distinguished. Rule 5.3 provides for preliminary discovery to be given to assist a party to determine whether to commence a proceeding on the basis that the applicant may have a right to obtain relief against an identified party. Conversely r 5.2 is enlivened in circumstances where a cause of action has been identified but proceedings cannot be commenced until the identity of the defendant is ascertained. Rule 5.2 is correspondingly limited to discovery revealing identity as defined by r 5.1: Cape Australia Holdings Pty Ltd v Iannello[2009] FCA 709 at [64]; Lynx Engineering ConsultantsPty Ltd v The ANI Corporation Ltd (No 2)[2007] FCA 1510; (2007) 163 FCR 372 at [26], albeit in the context of the equivalent Federal Court Rules.
His Honour was clear that the two provisions were distinct and that they could not be merged; each had to be dealt with separately. His Honour said at [22]:
The case law makes it clear that it is impermissible to blend the two rules: ED Oates Pty Ltd v Edgar Edomonson Imports Pty Ltd[2012] FCA 607 at [19]. Each rule is enlivened by separate criteria. To put it simply an applicant who has not identified a defendant cannot engage r 5.3. Similarly an applicant with no identified cause of action cannot engage 5.2.
These comments are equally applicable to rr 650 and 651 of the Court Procedures Rules.
Rule 650 of the Court Procedures Rules is directed towards the discovery of the identity or whereabouts of a defendant or potential defendant against whom the applicant for discovery has or is likely to have a cause of action. The phrase, “identity or whereabouts”, is defined to include, where the potential defendant is an individual, “the potential defendant’s name, home address or other whereabouts, occupation and sex”.
Rule 651 of the Court Procedures Rules is directed towards the discovery of information to show the applicant for discovery that is sufficient to decide whether proceedings should be started against the potential defendant.
The relevant provisions of the two rules are as follows:
650 Discovery to identify potential defendant
(1) This rule applies if -
(a) a person (the applicant) has, or is likely to have, a cause of action against someone (the potential defendant); and
(b) either -
(i) the applicant wants to start a proceeding in the court against the potential defendant for the cause of action; or
(ii) the following provisions apply:
(A) the applicant is a party to a proceeding in the court;
(B) the potential defendant is not a party to the proceeding;
(C) the applicant wants to make a claim for relief in the proceeding against the potential defendant for the cause of action;
(D) the claim for relief could properly have been made in the proceeding against the potential defendant if the potential defendant were a party; and
(c) the applicant, after making reasonable inquiries, cannot ascertain the identity or whereabouts of the potential defendant sufficiently to start the proceeding, or make the claim for relief, against the potential defendant; and
(d) someone else (the other person) may have information, or may have or have had possession of a document or thing, that tends to assist in ascertaining the identity or whereabouts of the potential defendant.
…
(5) The court may order the other person -
(a) to attend before the court to be examined in relation to the identity or whereabouts of the potential defendant; or
(b) to produce to the court any document or thing that is, or has been, in the other person’s possession relating to the identity or whereabouts of the potential defendant; or
(c) to make and serve on the applicant a list of the documents or things that are, or have been, in the other person’s possession relating to the identity or whereabouts of the potential defendant; or
(d) to produce for inspection by the applicant any document or thing that is, or has been, in the other person’s possession relating to the identity or whereabouts of the potential defendant.
…
(9) In this rule:
identity or whereabouts, of the potential defendant, includes -
(a) whether the potential defendant is an individual or a corporation; and
(b) for an individual—the potential defendant’s name, home address or other whereabouts, occupation and sex; and
(c) for a corporation—the potential defendant’s registered office, business address or other whereabouts.
651 Discovery to identify right to claim relief
(1) This rule applies if—
(a) a person (the applicant) has, or may have, a cause of action against someone (the potential defendant); and
(b) either -
(i) the applicant, after making reasonable inquiries, cannot obtain sufficient information to decide whether to start a proceeding in the court against the potential defendant for the cause of action; or
(ii) the following provisions apply:
(A) the applicant is a party to a proceeding in the court;
(B) the potential defendant is not a party to the proceeding;
(C) the applicant, after making reasonable inquiries, cannot obtain sufficient information to decide whether to make a claim for relief in the proceeding against the potential defendant for the cause of action;
(D) the claim for relief could properly have been made in the proceeding against the potential defendant if the potential defendant were a party; and
(c) the applicant has reasonable grounds for believing that the potential defendant has or has had possession of a document or thing that can assist in deciding whether to start the proceeding, or make the claim for relief, against the potential defendant; and
(d) inspection of the document or thing by the applicant would help in making the decision.
In approaching these rules, it is important to do so with some contextual consideration in mind. As Connolly J said in Elmaraazey v The Law Society of the Australian Capital Territory at 448; [18]-[19], the provision provides for “an extraordinary form of relief”, and that the court must approach the rules with that consideration in mind, a passage quoted with apparent approval by Elkaim J in Hall v Commonwealth of Australia at [7].
Further, as noted by Lindgren J in Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd (Unreported, Federal Court of Australia, Lindgren J, 24 May 1996), the questions posed by the rule:
are to be answered in the context of an adversary system of forensic contest in which a proposed respondent is ordinarily entitled to withhold its evidence, certainly prior to the commencement of proceedings.
This is, of course, not an immutable principle, for the relevant rules do modify that context, but it is relevant to construe and apply the rules with that context in mind, especially, as was pointed out by Master Harper in Parsons v CB Richard Ellis (V) Pty Ltd [2007] ACTSC 37 at [24], since the rules constitute a significant infringement of the ordinary rights of the respondent, such as a right to privacy.
Nevertheless, as has been pointed out often, the rules are to be construed beneficially and given the fullest scope the language reasonably allows. See Paxus Services Pty Ltd v People Bank Pty Ltd (1990) 99 ALR 728 at 733; Scarletti Pty Ltd v Millwood Printing Co Pty Ltd (Unreported, Supreme Court of Victoria, Full Court, 28 July 1994); St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; 211 ALR 147 at 153; [26]; Steffen v ANZ Banking Group [2009] NSWSC 666 at [19].
Finally, the Court is not to be unmindful to the potential to interfere with rights of privacy of persons who are not wrongdoers and who may not have participated in any wrongdoing of the potential defendant, even unwittingly.
Principles for the Application of the Law of Preliminary Discovery
A number of decisions in this and other jurisdictions have identified the relevant issues. Thus, in Roads and Traffic Authority (NSW) v Australian National Car Parks Pty Ltd [2007] NSWCA 114; 47 MVR 502 at 505-6; [10]-[18], Mason P, with whom McColl JA and Bell J agreed, set out certain principles applicable to r 5.2 of the Uniform Civil Procedure Rules, the equivalent to r 650 of the Court Procedures Rules. There are, however, textual differences between the two rules so that care has to be taken in applying the principles to the latter rule.
This case relates to r 650(1)(a) and (b)(i) of the Court Procedures Rules, set out above (at [47]), to which, of course, (c) and (d) are also applicable.
The first requirement is that the applicant has, or is likely to have, a cause of action against the potential defendant. Thus, the applicant has to show the following matters.
One is that the applicant has or is likely to have a cause of action. This cause of action must be identified: Hall v Commonwealth of Australia at [9]-[10]. It need not be a good cause of action: Parsons v CB Richard Ellis (V) Pty Ltd at [22]-[23]. The applicant is not required to estimate the chances of success, but objectively there must be a “tangible” cause of action: Hall v Commonwealth of Australia at [17]-[18].
Rule 650(1)(a) of the Court Procedures Rules refers to the applicant having or being likely to have the cause of action. The first of these alternatives is clear enough; a court is well able to identify whether a cause of action exists, such as when a pedestrian is injured by a motor vehicle driven by the potential defendant, a cause of action in negligence is clearly apparent; whether it will be proved or not is another matter.
Whether the cause of action is likely to exist is more problematic. In Parsons v CB Richard Ellis (V) Pty ltd at [21], Master Harper identified this as meaning that the degree of probability of existence must be greater than possible but less than certain; he referred also to cases in competition law to suggest that the existence of the cause of action must be more probable than not; more than a 50% chance. I accept that characterisation.
The other is that the cause of action must be one to be made against a potential defendant. That is, as put by Siopis J in Lynx Engineering Consultants Pty Ltd v ANI Corporation Ltd [2007] FCA 1510; 163 FCR 372 at 377; [26], the rule applies “where the applicant has already identified a cause of action against an anonymous person or persons”.
It is not to be accepted that an application for an order under r 650 of the Court Procedures Rules can never be made in respect of a named potential defendant. The reference to “whereabouts” at least shows that the applicant may well know the name of the potential defendant but not know where he or she is so that in reality the potential defendant could not be served and so the plaintiff could not effectively commence proceedings as this would be difficult (the location of the potential defendant being a relevant matter in drafting the originating process) or futile (as the potential defendant could never be served).
The second requirement is that the applicant must show that he, she or it wants to start a proceeding against the potential defendant. In Roads and Traffic Authority of New South Wales v Care Park Pty Ltd [2012] NSWCA 35, Barrett JA, with whom Beazley and Campbell JJA agreed, considered the meaning in the NSW rule of the word “desire” where the requirement in r 5.1 of the Uniform Civil Procedure Rules is that the potential defendant is a person “against whom the applicant desires to bring proceedings”. I am satisfied that relevantly the reference in r 650(1)(b)(i) of the Court Procedures Rules to the requirement that the applicant “wants to start a proceeding in the court against the potential defendant” has the same meaning.
Barrett JA explained at [106]:
The ‘desire’ of the applicant might, in one sense, be seen as a subjective matter but it would, I think, be wrong to think that regard should only be had to what the applicant says about what he or she wishes to do. The relevant desire must be what Lopes LJ, in Midland Railway Co v Robinson (1887) 37 Ch D 386 at 405, referred to as ‘a bona fide desire’ and not merely ‘a capricious desire’ unsupported by any ground for believing that the object of the desire can be realised. In Lyle & Scott Ltd v Scott's Trustees [1959] AC 763 at 779, Lord Reid said that he would not hold a desire ‘proved by some equivocal words or acts’. The existence of a serious question to be tried is sometimes said to depend on whether there is a substantial question of fact or law, or both, which the claimant ‘bona fide desires to have tried’: Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] 1 AC 438. The same quality of genuinely held and objectively based desire is relevant in the present context. It is therefore for an applicant under rule 5.2 to do more than simply assert some subjective desire.
It is not necessary to consider the requirements in r 650(1)(b)(ii) of the Court Procedures Rules as they are not applicable here. Some are relevantly subject to the same consideration as I have already discussed.
The next requirement is to be found in r 650(1)(c) of the Court Procedures Rules, namely that the applicant shall have made reasonable inquiries and, nevertheless, cannot find the identity or whereabouts of the potential defendant.
As McDougall J noted in Steffen v ANZ Banking Group at [12]-[13, “reasonable” in this context is somewhat ambiguous – it could mean that each inquiry, however many or few there were, must be a reasonable inquiry, or it could mean that the totality of the inquiries made must be reasonable in number and extent to show that appropriate efforts had been made to find the information. His Honour held, in my respectful view correctly, that the latter meaning is to be preferred. That is, notwithstanding that an applicant had made some inquiries, each of which is in itself quite reasonable, the failure to make, for example, other “obvious and easy” inquiries would mean that the requirement to make reasonable inquiries had not been met.
The inquiries are as to the “identity or whereabouts” of the potential defendant. That phrase is defined in r 650(9) of the Court Procedures Rules. While it is an inclusive definition, it is clearly limited to information about identifying an otherwise anonymous person or a person whose location is needed, for example, for service, is unknown. That is to say, it is the anonymous person who is to be identified as mentioned by Siopis J in Lynx Engineering Consultants Pty Ltd v ANI Corporation Ltd at 337; [26].
This is to be contrasted with a meaning that is directed to determining whether there is a cause of action against a known potential defendant. As Hunt J explained in Cummings v 2KY Broadcasters Pty Ltd [1981] 1 NSWLR 246 at 249:
The provisions of Pt 3 (‘Preliminary Discovery’) which permit discovery before the commencement of proceedings apply only to where such discovery is necessary in order to identify the proper defendant; they do not enable the prospective plaintiff to establish a case against an already identified defendant.
This issue can arise where a number of persons may have acted wrongly but it is not clear which of the persons has so acted. In this case, the applicant could be said not to know which of the persons is the potential defendant.
It is clear on the authorities that this procedure is not available for that purpose. As Master Cantor QC said in Taylor v Osborne [1973] NSWLR 52 at 56:
The ambit of this investigation cannot, in my view embrace an examination of a person in order to determine which one or more of a number of possible defendants is the right defendant, or to supplement or establish a case for relief against a person where no prima facie case has been shown. As I read the rule it is aimed at the identification of a person so that the proceedings may be taken against him.
This is an approach followed since then. Thus, in National Education Advancement Programs (NEAP) Pty Ltd v Ashton at 343, Young J said:
In Survival & Industrial Equipment (Newcastle) Pty Ltd v Owners of the Vessel ‘Alley Cat’ (1992) 36 FCR 129, Sheppard J considered the Federal equivalent of Pt 3. He again made it clear that the power to order preliminary discovery could only extend to assist plaintiffs who are uncertain of the identity of those against whom they had a cause of action.
The present case goes beyond this. The plaintiff believes it has a cause of action against one of its 138 customers. It does not know which one and it is seeking to find out which of those 138 people it wishes to sue. It is not a situation as illustrated by Sheppard J in the ‘Alley Cat’ where a person knows he wants to sue the owner of the ‘Alley Cat’ but does not know the identity of the owner.
See also G Breschi & Son Pty Ltd v AFT Ltd [1988] VR 109 at 113.
Cases where there are multiple potential defendants do not provide counter-examples to those principles. Thus, in the car park cases, Roads and Traffic Authority (NSW) v Australian National Car Park Pty Ltd and Roads and Traffic Authority of (NSW) v Care Park Pty Ltd [2012] NSWCA 35, the issue was not whether the applicant did not know which of a large number of persons to sue; it wanted to sue all drivers who had failed to pay the proper parking fee but simply did not know their names and addresses.
Similarly, in Dallas Buyers Club LLC v iiNet Ltd [2015] FCA 317; 327 ALR 670, Perram J rejected a challenge by the respondent to the application for various Internet Service Providers to provide identity details of their customers who had downloaded a film in apparent breach of the applicant’s copyright.
His Honour did so, on the basis that the application could determine not which of the many users had breached the copyright, but on the basis that all the persons whose identity was sought had likely (a “real possibility”: at 679; [31]) breached the copyright.
Thus, it is clear that the application under s 650 of the Court Procedures Rules cannot be used to ascertain which of a number of identified (or even unidentified) persons is the potential wrongdoer whom the applicant wants to sue and is already aware of the identity or whereabouts of the person or persons who should be the potential defendant or defendants.
The final matter is that the applicant must, under r 650(1)(d) of the Court Procedures Rules, show that someone else may have information or a document that tends to assist in ascertaining the identity or whereabouts of the potential defendant.
In Parsons v CB Richard Ellis (V) Pty Ltd at [27], Master Harper pointed out that under r 651 of the Court Procedures Rules, the person from whom the information is to be sought must be the potential defendant. No such restriction is applied to r 650.
Indeed, conceptually, that would be ludicrous, for the applicant, by virtue of the circumstances under which the application is made, has not been able to name or know the whereabouts of the potential defendant, so no order for examination or production of documents could not be made.
It is also relevant to note that the examinee (the “someone else” of the rule) need not be proved to be able to give the name or whereabouts of the potential defendant, but be able to give information which will help the applicant to find out that information. Thus, in Roads and Traffic Authority (NSW) v Australian National Car Parks Pty Ltd, it was held that “tends to assist” includes the identification of a person who may be able to provide the relevant identification. In that case, the identification to be provided by the authority would only identify the owner of the motor vehicle, the parking of which had occurred without payment of the proper fee, not the wrongdoer, the driver. The Court held at 507; [27], however, that this “would certainly assist [the applicant for an order] in its task of establishing the driver on the day in question”. It may provide other information. As Mason P explained, “preliminary discovery is not restricted to an applicant seeking the last piece of the jigsaw”.
Finally, there are three matters about making the application that should be mentioned.
The first is that the Court has a discretion not to make the order, as the word “may” in r 650(5) of the Court Procedures Rules makes clear, and this is so even where the rule applies because of r 650(1). As noted by Simpson J in Papaconstuntinos v Holmes à Court at [18]-[19], even if the applicant meets all the requirements, the power of the court remains discretionary. Her Honour concluded that considerations of the demands made by the order in the work to be done by the respondent, such as scrutinising documents, may be relevant to the discretion, for the power to make an order should not “be exercised lightly”.
The second matter is that, as noted by Elkaim J in Hall v Commonwealth of Australia at [22], the onus of satisfying the court is on the applicant. Thus, the applicant must show by admissible evidence that the requirements have been met. As Miles CJ noted in Bilbarin Holdings Pty Ltd t/as David Smash Repairs v NRMA Insurance Ltd (1997) 138 FLR 195 at 202, this will ordinarily require affidavit evidence, that is evidence on oath or affirmation, that will permit the court to make the findings that, under r 650(1) of the Court Procedures Rules, the rule applies, that the requirements have been proved to the relevant degree and that the discretion should be exercised favourably to the applicant.
The third matter is that the Court must be careful in the making of the relevant order that it does not improperly infringe on the rights of privacy of the respondent. The nature of the information that can be required of the respondent is, as Siopis J pointed out in Lynx Engineering Consultants Pty Ltd v ANI Corporation Ltd at 377; [26], “limited”. Gleeson J in McFarlane as Trustee of the S McFarlane Superannuation Fund v IOOF at [68], explained:
The measure of preliminary discovery is the extent of information that is necessary, but no more than that which is reasonably necessary, in order to overcome the insufficiency of information already possessed by the applicant after it has made all reasonable inquiries to enable it to make a decision as to whether to commence proceedings: Matrix at [16] citing Lindgren J in Glencore International AG v Selwyn Mines Ltd[2005] FCA 801; (2005) 223 ALR 238 at [13]. See also Costin v Duroline Products Pty Limited[2013] FCA 501 at [35] (per Yates J); Apache at [31] (per Flick J); Reeve v Aqualast Pty Ltd[2012] FCA 679 at [65] (per Yates J).
Consideration
In the light of the facts and the law as I have described them, I turn to the application of Eric Kusa itself.
(a) Cause of action
No cause of action was specified in the affidavit supporting Eric Kusa’s Originating Application. It might be inferred from the facts that he was alleging some kind of breach of trust. The paucity of specific attention to this issue in the light of the vague and incomplete facts, however, made it quite difficult to assess whether Eric Kusa had a cause of action.
The evidence was entirely unclear as to what breach of trust was alleged. Given the absence of any evidence about the terms of the trust and, thus, no evidence of objects, there was nothing on which the Court could rely to conclude that there had been even a possible breach of trust.
The highest that the evidence came was the following statement:
The Plaintiff is concerned that the reason the individuals identified above [namely the members of the Kusa family to which Mr Vong referred in his letter] were contacted by Allen Vong & Associates may be because the trust sum or some part thereof has been transferred to their control, used to purchase assets in their names or in some other fashion been used for their benefit.
This is insufficient evidence on which to find that there was a breach of trust much less an actionable breach of trust. For example, the beneficiaries of a trust may, if they are of legal capacity, concur in a breach of trust and, indeed, if all of them combine to do so, they may call for a distribution of the whole or any part of the trust property to them: Chillingworth v Chambers [1896] 1 Ch 685. The evidence was entirely silent about whether these matters were likely, much less possible.
Nevertheless, for the purposes of assessing this issue, I am prepared to proceed on the basis that there is a breach of trust.
It appears that Eric Kusa was the settlor of the two trusts. When a trust is created, of course, the settlor ordinarily disposes of both the legal and equitable estate in the trust property, here the sum of $700,000. See D.K.L.R. Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 at 442.
There are possible qualifications to this. For example, a settlor may reserve rights, such as to appoint a replacement trustee, though that would be unlikely to constitute any interest in the trust property. Sometimes, as in Wheeler v Humphreys [1898] AC 506, the settlor may reserve a reversionary right to the trust property where the trust fails. There is no evidence to show that any such provisions were included in the trust.
Thus, so far as the Kusa Family Business Trust, of which Jennifer Kusa was the trustee, the only conclusion that can be drawn from the evidence was that Eric Kusa was the settlor and the settlor alone.
As such, Eric Kusa had no interest in the trust such as to give him standing to commence any proceedings. I would find no express authority for this view in Australian court decisions for this, though it is in accordance with principle. In the magisterial work, A S Scott and W F Fratcher, The Law of Trusts (Little Brown & Co: Boston; 1988), 4th ed, 210-1; [2000,1], it is said:
Where a trust is created by will or where a trust is created inter vivos and the settlor has subsequently died, his heirs or personal representatives cannot maintain a suit to enforce a trust. Where a trust is created inter vivos and the settlor is still alive, it would seem that he [sic] cannot maintain a suit to enforce the trust.
That power is reposed in the beneficiaries who may take action to compel the trustee to comply with the terms of the trust and to remedy any breach.
Thus, in relation to the Kusa Family Business Trust, the evidence does not support Eric Kusa having a cause of action or being likely to have a cause of action.
The position in relation to the Kusa Family Building Trust is more complicated. Eric Kusa is said to be the trustee. If so, it is entirely unexplained why the trust property of that trust, unspecified as to amount, was paid to Muni Kusa. That would appear to be a breach of Eric Kusa’s duty, as trustee, to preserve and protect the trust property, unless the terms of the trust permitted it.
Even more troubling is the allegation in the supporting affidavit that “both trustees [namely Jennifer Kusa and Eric Kusa] acted only in accordance with instructions given them by Muni Kusa”. That, again, appears to be a complete derogation of the duties of the trustees, including Eric Kusa. See Turner v Turner [1984] Ch 100. Again, the terms of the trust may have may permitted this, but I was not given any evidence that would be needed to show it.
Thus, without more evidence about the terms of the trust, it cannot be shown that there has been an actionable breach of trust. Further, a breach seems to have been committed by Eric Kusa himself. He cannot, as trustee, commence proceedings against himself for breach of trust.
It may, however, be that the allegation of there being a constructive trust was created by the payment of the trust sum to Muni Kusa when he was not a named trustee. That, however, depends on the terms on which Muni Kusa received the funds and the basis on which it was received and his knowledge of that. See Commonwealth v Davis Samuel Pty Ltd (No 8) [2013] ACTSC 146; 95 ACSR 258 at 330-2; [474]-[494]. There is, here, no evidence that assists in showing that Muni Kusa had the relevant knowledge or was otherwise a constructive trustee. Again, the terms of such trust are unclear.
Thus, it is by no means clear who the beneficiary of the constructive trust was. It is possible that Eric Kusa was, but it is also and equally possible that the beneficiaries of the Kusa Family Building Trust were the beneficiaries. The absence of relevant evidence prevents any conclusion about whether Eric Kusa has some cause of action against Muni Kusa.
Finally, Eric Kusa has called for the return of the trust sum. It is not explained on the evidence what was his entitlement to call for that money. It seems inconsistent with the notion of a trust. It may be that there was some contractual relationship between Muni Kusa and Eric Kusa which provided for return of the funds on demand, but, again, there was no evidence of this.
Assuming for present purposes that Eric Kusa was entitled to call for the trust sum of the Kusa Family Building Trust, he was at least offered, perhaps paid, $157,000. There is no evidence that this does not properly represent the balance of the funds in that trust. There was no evidence as to the respective portions of the $700,000 paid into each trust. As the terms of the trust, including whether there was a provision permitting advances of capital to the beneficiaries and noting the possible entitlement to the beneficiaries of legal capacity to call for the funds, were never elucidated, it is by no means clear on the evidence that the $157,000 was not the proper sum to which Eric Kusa was entitled to receive for any call he was entitled to make.
I have tried to explore any basis on which there could be a cause of action that Eric Kusa has or is likely to have. Some are clearly unavailable to him; for the others, the evidence simply does not show that such a cause of action is available or more probably than not available.
On this basis, the application must be dismissed.
(b) Identification of the potential defendant
In deference to the submissions of counsel, I will consider briefly some other matters. The first is whether the application could be said to be seeking the identity or whereabouts of a potential defendant or potential defendants.
In the first place, it is not clear whether Eric Kusa seeks to sue Muni Kusa. There is a weak inference that may be drawn from the following assertion in the supporting affidavit:
If any of the trust sum has been transferred to the control of any person or entity other than Muni Kusa, then in order for the Plaintiff to recover that portion of the sum so transferred, he will need to include that person or entity as a defendant in the recovery action.
This seems to suggest that there is a principal cause of action (against Muni Kusa?) to the proceedings for which the other recipients would have to be joined.
Of course, in order to maintain such a cause of action, Eric Kusa would seem to have to rely on one of the limbs of Barnes v Addy (1874) LR 9 Ch 244; 144 ER 643. There is simply no evidence to suggest that the preconditions of such an action exist.
In any event, Muni Kusa and the other six possible defendants are all named. The surname of all the potential defendants is Kusa. They are all identified; none are anonymous.
There is no evidence to show that Eric Kusa, contrary to the ordinary inference to be drawn about what appears to be members of his family, does not know the whereabouts of one or more of the named potential defendants. Such an inference would not be drawn in this case in any event, as the orders sought, namely that the defendants produce all records concerning the financial affairs of each potential defendant from 1 July 2014 until the present and the same records for the same period for any trust company or other entity in the name or control of each of the potential defendants. These orders are not consistent with a claim that Eric Kusa is seeking the whereabouts of the potential defendants.
It is clear and, indeed, was admitted in submissions, that the application was designed to provide evidence of any breach of trust and any receipt of fines from such breach of trust by any and, if so, which of the potential defendants.
This is not justified under r 650 of the Court Procedures Rules for the reasons set out above.
This also justifies the dismissal of the application.
(c) Wanting to start proceedings against a potential defendant.
Miles CJ in Bilbarin Holdings Pty Ltd t/as David Smash Repairs v NRMA Insurance Ltd at 202 made it clear that there needs to be evidence on oath of this desire. The evidence need not be extensive but must be realistic and not, as Barrett JA said in Roads and Traffic Authority of New South Wales v Care Park Pty Ltd at [110], be “unsubstantial or misguided so as to make any proceedings merely speculative, doomed to fail or otherwise not deserving of the discretion assistance that the court is empowered by rule 5.2 [the equivalent of r 650 of the Court Procedures Rules] to give”.
There is, in this case, an explicit statement in the supporting affidavit that Eric Kusa has given instructions to recover the sum of $700,000. I am satisfied that this requirement has been met.
(d) Reasonable inquiries
Compliance with this requirement is problematic in this case. As I have found that Eric Kusa is seeking not the identity or whereabouts of the potential defendants but whether there is evidence to determine which potential defendant should actually be sued, the inquiries were – and were reasonably – directed towards that issue.
There were no inquiries made about the identity or whereabouts of any of the potential defendants. This, of course, reinforces the inference I was prepared to draw that he already knew this information.
So far as the application under r 650 of the Court Procedures Rules is concerned, I am not satisfied that reasonable inquiries were made as to the matters for which the rule permits the Court to order an examination.
On the present evidence, I would dismiss the application for failure to comply with this requirement.
(e) Whether the application was really under r 651 of the Court Procedures Rules
As the application is so clearly not within the requirements of r 650 of the Court Procedures Rules, it may be suggested that it really was intended to be an application under r 651.
I am not satisfied that I can make that assumption nor that I could use my power under r 6 of the Court Procedures Rules to permit the application to be amended and become an application under r 651.
In the first place, the Originating Application expressly refers in a number of places to r 650 of the Court Procedures Rules.
In the second place, after I recalled the order I had earlier made and directed a further hearing, counsel for Eric Kusa supplied me with a reference to three authorities: Brydon v Australian Rail Track Corporation Ltd, Roads and Traffic Authority (NSW) v Australian National Car Parks Pty Ltd and Roads and Traffic Authority of New South Wales v Care Park Pty Ltd. All of these authorities were directed to the New South Wales equivalent of r 650 of the Court Procedures Rules and not to the equivalent of r 651.
Finally, a brief consideration of r 651 of the Court Procedures Rules shows that the application could not succeed if made under that rule. In the first place, there is still the same problem I have identified as to the cause of action that is asserted. The absence of evidence from which a cause of action can be discerned is still a breach of the threshold requirements.
I accept that the wording of r 651 of the Court Procedures Rules was changed following the decision in Parsons v CB Richard Ellis (V) Pty Ltd to make the threshold weaker – substituting “is likely to have a cause of action” to “may have a cause of action”. As Siopis J opined in relation to the relevant Federal Court Rules in Cape Australia Holdings Pty Ltd v Iannello [2009] FCA 709, “may” is a somewhat speculative word. It is clearly not as strong as “is likely to” and so the test is less stringent. I am not satisfied, however, that even this weaker test is satisfied in this case.
Further, as noted by Master Harper in Parsons v CB Richard Ellis (V) Pty Ltd at [27], that the person from whom access to the relevant document or thing is sought must be the potential defendant. This is not the situation here where there is no suggested claim against either of the respondents.
Disposition
There is no basis for the making of an order under r 650 of the Court Procedures Rules in this case. The application must be dismissed.
Since the first defendant did not appear and the second defendant filed a submitting Notice of Intention to Proceed, I do not think that there should be any order as to costs. I will, however, permit the Commonwealth Bank to file written submissions if it considers that it should recover any costs and the basis for such a claim. Though I will not so direct, if there are any submissions filed by the Commonwealth Bank, to file submissions in respect within fourteen days of receipt of such submissions, I will consider making an order for costs.
I will so order.
| I certify that the preceding one hundred twenty-nine [129] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Refshauge. Associate: Date: September 2018 |
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