Lamers v Arvind Pty Ltd
[2020] WASC 52
•25 FEBRUARY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: LAMERS -v- ARVIND PTY LTD [2020] WASC 52
CORAM: ACTING JUSTICE STRK
HEARD: 13 JUNE 2019 AND ON FURTHER WRITTEN SUBMISSIONS FILED ON 14 JUNE 2019 AND ON 19 JUNE 2019
DELIVERED : 25 FEBRUARY 2020
FILE NO/S: CIV 2404 of 2017
BETWEEN: BERNARD HENRICUS LAMERS as trustee for THE BEN AND DEBRA LAMERS FAMILY TRUST
Plaintiff
AND
ARVIND PTY LTD
First Defendant
SARO VINZI CARBONE
Second Defendant
BRIGHT IMAGE DENTAL PTY LTD
Third Defendant
Catchwords:
Practice and procedure - Discovery - Application for further and better discovery - Sufficiency of supporting affidavit - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA)
Result:
Application granted
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr WCJ Zappia |
| First Defendant | : | Mr A Metaxas |
| Second Defendant | : | Mr A Metaxas |
| Third Defendant | : | Mr A Metaxas |
Solicitors:
| Plaintiff | : | Kott Gunning |
| First Defendant | : | Metaxas Legal |
| Second Defendant | : | Metaxas Legal |
| Third Defendant | : | Metaxas Legal |
Case(s) referred to in decision(s):
Agricultural Land Management Ltd v Jackson [No 2] [2014] WASC 102
Ancient Order of Foresters in Victoria Friendly Society Limited v Lifeplan Australia Friendly Society Limited & Anor [2018] HCA 43
Astra‑National Productions Ltd v Neo‑Art Productions Ltd [1928] WN 218
British Association of Glass Bottle Manufacturers Ltd v Nettlefold [1912] AC 709
Burrows v Walls (1885) 5 De G M & G 233; 43 ER 859
Byrnes v Kendle (2011) 243 CLR 253
Chvojka v Lockwood [2019] WASC 440
CVW Group Holdings Pty Ltd v Addison [2011] WASC 267
Dense Medium Separation Powders Pty Ltd v Gondwana Chemicals Pty Ltd [2010] NSWSC 1309
Gava v Grljusich [1999] WASC 13
Glazier v Australian Men's Health (No.2) [2001] NSWSC 6
Hancock v Rinehart [2015] NSWSC 646
In re Ellis; Ellis v Ellis [2015] WASC 77
Mann v Carnell (1999) 201 CLR 1
Meehan v Glazier Holdings Pty Ltd (2002) 54 NSWLR 146; [2002] NSWSC 22
Mulley v Manifold (1959) 103 CLR 341
Partington v Reynolds 62 ER 98
Perptetual Trustees Company Ltd v Burniston [2012] WASC 26
Rafferty v Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd) [2017] WASC 18
Roe v The State of Western Australia [2013] WASC 130
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2010] WASC 218
Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2005] WASC 60
ACTING JUSTICE STRK:
The plaintiff brings an application for further and better discovery from the defendants pursuant to the Rules of the Supreme Court 1971 (WA) (RSC) O 26 r 6(1) and, in the alternative, the inherent jurisdiction of the court.
The plaintiff seeks orders compelling the defendants to give further and better discovery of documents which fall within the scope of four categories identified in the plaintiff's proposed minute of orders, as amended. A re‑amended minute of proposed orders for further and better discovery was filed on behalf of the plaintiff on 31 May 2019. A copy of the re‑amended minute is reproduced at sch A to these reasons.
The defendants do not oppose the making of orders 1, 2 and 4 as now framed (without concession that there are documents to be discovered),[1] and it is appropriate that such orders be made.
[1] Defendants' submissions filed 7 June 2019 par 4.
The defendants oppose the making of order 3. For the reasons set out below, I find that the plaintiff's application for further and better discovery should succeed.
In these reasons for decision, I deal with the following matters:
1.background and the relief sought by the plaintiff in the action;
2.the application;
3.the applicable principles;
4.the plaintiff's position;
5.the defendant's response;
6.determination; and
7.conclusion and orders.
Background and the relief sought by the plaintiff in the action
It is common ground in the action that the plaintiff, Mr Bernard Henricus Lamers as trustee for The Ben and Debra Lamers Family Trust, is one of two unit holders of the Arvind Property Trust. In these reasons, I will refer to that trust as the Arvind Property (Unit) Trust.
It is also common ground that the first defendant, Arvind Pty Ltd, is the trustee of the Arvind Property (Unit) Trust, and the second defendant, Mr Saro Carbone, is a director of Arvind Pty Ltd. The third defendant, Bright Image Dental Pty Ltd as trustee for the V & H Carbone Family Trust, is the second unit holder. Mr Saro Carbone was the sole director of Bright Image Dental Pty Ltd until 24 March 2015, whereupon Ms Henrica Elisabeth Carbone, Mr Carbone's wife and Mr Lamer's sister, became the sole director of Bright Image Dental Pty Ltd.
It is not in dispute that the first defendant became the registered proprietor of 404 Ranford Road, Canning Vale, being more particularly described as Lot 1008 on Deposited Plan 63005 and being the whole of the land in Certificate of Title volume 2736 folio 964 (described in the pleading and in these reasons as 404 Ranford Road).[2] However, the defendants deny that upon its acquisition and at all material times thereafter, 404 Ranford Road was (and remains) the primary asset of the Arvind Property (Unit) Trust.[3]
[2] Re-amended substituted statement of claim filed 21 May 2019 par 9.10; re-amended substituted defence filed 5 June 2019 par 9.7.
[3] Re-amended substituted statement of claim filed 21 May 2019 par 12; re-amended substituted defence filed 5 June 2019 par 12.
It is common ground that a mortgage over 404 Ranford Road was registered on 17 December 2010 and the mortgage secures a loan facility from the National Australia Bank in favour of the third defendant.[4]
[4] Re-amended substituted statement of claim filed 21 May 2019 par 34 ‑ 35; re-amended substituted defence filed 5 June 2019 par 34 ‑ 35.
In summary, part of the plaintiff's case is that:
1.the first defendant permitted the registration of a mortgage (registration number L510708), over trust property, being 404 Ranford Road, in December 2010, to secure a loan facility offered by the National Australia Bank on 13 January 2011, with a monetary limit of $6,295,000 in favour of the third defendant;[5]
2.that the mortgage and the loan facility secured by the mortgage were, among other things, transactions which dealt with the asset of the Arvind Property (Unit) Trust solely to benefit the defendants;[6]
3.the mortgage and the loan facility secured by the mortgage were transactions which enabled the third defendant, further or alternatively the defendants, to profit from the asset of the Arvind Property (Unit) Trust to the exclusion of the Arvind Property (Unit) Trust and the plaintiff;[7]
4.the conduct of the first defendant constituted a breach of the first defendant's fiduciary duties as pleaded (described in the pleadings as the Mortgage Breach); alternatively, it constituted a breach of the terms of the unit trust deed (described in the pleadings as the APT Deed), and a misuse of the first defendant's power under cl 61 of the APT Deed to mortgage trust assets (described in the pleadings as the Alternative Mortgage Breach);[8]
5.the plaintiff has suffered loss and damage by reason of the Mortgage Breach, alternatively the Alternative Mortgage Breach, in that the plaintiff has not had the benefit of an unencumbered beneficial interest in 404 Ranford Road since 17 December 2010; and the plaintiff is entitled to equitable compensation as a result of the Mortgage Breach, alternatively the Alternative Mortgage Breach;[9]
6.alternatively, to the extent that the first defendant, the second defendant and/or the third defendant have made unauthorised profits as a result of the Mortgage Breach, alternatively the Alternative Mortgage breach, one third of those profits are held on constructive trust for the plaintiff;[10]
7.the second and the third defendants procured the loan facility and enabled, or alternatively caused the registration of the mortgage and by doing so, knowingly participated and assisted the first defendant in the Mortgage Breach; alternatively, in the Alternative Mortgage Breach;[11] and by reason of the breach, the plaintiff has suffered and continues to suffer loss and damage;[12] and
8.by reason of the Mortgage Breach, alternatively the Alternative Mortgage breach, the second defendant and/or the third defendant have gained a profit.[13]
Relief sought by the plaintiff in the action
[5] Re-amended substituted statement of claim filed 21 May 2019 par 34.
[6] Re-amended substituted statement of claim filed 21 May 2019 par 36.6.
[7] Re-amended substituted statement of claim filed 21 May 2019 par 36.7.
[8] Re-amended substituted statement of claim filed 21 May 2019 par 38 ‑ 39.
[9] Re-amended substituted statement of claim filed 21 May 2019 par 40 ‑ 41.
[10] Re-amended substituted statement of claim filed 21 May 2019 par 42 ‑ 62.
[11] Re-amended substituted statement of claim filed 21 May 2019 par 57, read with par 38 ‑ 39.
[12] Re-amended substituted statement of claim filed 21 May 2019 par 60. Further particulars were to be provided prior to trial.
[13] Re-amended substituted statement of claim filed 21 May 2019 par 61.
By this action, the plaintiff primarily seeks for the first defendant to be removed as the trustee of the Arvind Property (Unit) Trust, and replaced.
The plaintiff also seeks as against the first defendant, among other things, equitable compensation; an account of profits; an account of administration in common form; and further or alternatively to an account of administration in common form, an account for administration on the basis of wilful default by the first defendant.
As against the second and third defendants, among other things, the plaintiff seeks equitable compensation; and an account of profits.
The application
Background to the application
In March 2018, the parties were ordered to give discovery,[14] and affidavits verifying lists of documents were filed on behalf of the plaintiff and the defendants in May and June of 2018, respectively.[15]
[14] Order 9 of the orders of Sanderson M made 1 March 2018.
[15] Affidavit of Mr B Lamers was sworn and filed 30 May 2018, and a certificate of discovery was also filed pursuant to the RSC O 26 r 16A. Affidavits of Mr S Carbone were sworn and filed 12, 13 and 22 June 2018.
By an affidavit sworn on 12 June 2018, the second defendant gave discovery on behalf of all defendants. He did so on the basis that he was a director of the first and third defendant and was authorised to do the same. The second defendant had ceased to be a director in 2015, and in his further affidavit sworn on 22 June 2018, corrected his error and clarified the basis of his authority to swear the affidavit of discovery on behalf of all defendants.
The affidavit sworn on 12 June 2018 contained a list of documents relating to the matter in question in the proceeding that were in the possession, custody or power of the defendants. The second defendant deposed that the defendants made all reasonable enquiries, including of their employees and agents, to identify all documents of any description whatever relating to any matter in question in the action that are or were in their possession, custody or power. He also deposed that, to the best of his knowledge, information and belief, neither the defendants nor their practitioner, nor any other person on their behalf, has now, or ever had possession, custody or power over any documents of any description relating to any matter in question in the action that are or were in their possession, custody or power other than the documents listed in Parts 1A and 2A of attachment 'A'.
The plaintiff complained that the defendants' discovery was inadequate and requested further and better discovery.[16] On behalf of the defendants, four documents were provided informally to the plaintiff on 7 August 2018,[17] which included a letter of offer from the National Australia Bank to the third defendant dated 13 January 2011 in relation to a NAB Business Markets – Flexible Rate Loan facility with a facility limit of $6,295,000. In these reasons, I adopt the plaintiff's definition and refer to the letter as the 13 January Letter.
[16] Affidavit of Mr C Breheny sworn 11 April 2019, 'CB-1'.
[17] Plaintiff's submissions filed 11 April 2019 par 7; see also the affidavit of Mr S Carbone sworn 12 June 2018.
The plaintiff maintained his complaint as to the adequacy of the discovery provided by the defendants, and on 11 April 2019 filed an application for orders compelling the defendants to give further and better discovery of documents which fell within the scope of four categories identified in the plaintiff's minute of proposed orders of the same date. In support of the application, the plaintiff filed the affidavit of Mr Conor Breheny, a solicitor with day to day conduct of the action on behalf of the plaintiff, sworn 11 April 2019; a written outline of submissions; and a memorandum of conferral.
Scope of the application for further and better discovery
A re‑amended minute of proposed orders for further and better discovery was filed on behalf of the plaintiff on 31 May 2019. The minute reflects the form of order that was pressed and the subject of submissions at the hearing of the application on 13 June 2019. As noted above, a copy of the re‑amended minute is reproduced at sch A to these reasons.
The defendants conceded that it was appropriate that proposed orders 1, 2 and 4 of the plaintiff's minute be made, but made no concession that there were documents to be discovered.[18] Only proposed order 3 remained opposed. In the plaintiff's submissions, the class of documents falling within the scope of proposed order 3 was described as the 'profit documents'.
[18] Defendants' submissions filed 7 June 2019 par 4.
After the hearing of the application, the form of order 3 was further refined.The plaintiff submitted that the refinement was not a concession that the orders sought in the re‑amended minute were inappropriate, but was intended to address the concerns raised by the defendants about the apparent uncertainty surrounding the breadth of subparagraph 3(b), and to minimise the likelihood of further interlocutory disputation on the issue.[19]
[19] Plaintiff's submissions filed 19 June 2019 par 24.
The plaintiff now presses for an order (in addition to conceded orders 1, 2 and 4), that the defendants file and serve a supplementary list of discovered documents verified by affidavit in respect of the following documents or classes of documents:
3(a)documents evidencing the use of funds advanced by the National Australia Bank to the third defendant as described in the 13 January Letter, such documents including but not limited to financial statements, tax returns, sale contracts, Landgate documents, subdivision applications and bank statements;
3(b)documents in the following classes:
(i)financial statements, including profit and loss statements, balance sheets and general ledgers, produced by or for the defendants for the period on or after 17 December 2010 to date;
(ii)tax returns completed by or for the defendants for the financial years ending 2011 to 2018;
(iii)sale contracts for the transfer of real property referred to in the 13 January Letter (whether as referred to in the 13 January Letter, or having been subsequently subdivided and transferred) by the defendants, or any related party, executed on or after 17 December 2010; and
(iv)bank statements of accounts held by the defendants evidencing the drawdown of funds advanced by the NAB for the period on or after 17 December 2010 to date.
The applicable principles
As observed by Le Miere J in Chvojka v Lockwood,[20] the RSC O 26 does not expressly deal with insufficient discovery, providing only for two situations: the first being the giving of a notice followed by an application pursuant to the RSC O 26 r 2 for an order for discovery, and the second being an application pursuant to the RSC O 26 r 6 for discovery of particular documents. The court has inherent power to order further discovery and the RSC O 26 r 6 enlarges that power.
[20] Chvojka v Lockwood [2019] WASC 440 [5] - [6].
In determining whether to make an order for further discovery, the court must be fairly certain that there are other relevant documents which ought to have been discovered. Murphy JA summarised the relevant principles in Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd:[21]
3First, the court has, in its inherent jurisdiction, the power to order further and better discovery.
4Secondly, the court's inherent jurisdiction is exercised according to the former practice of the Court of Chancery. That practice was that an affidavit of documents by a party was conclusive as to the relevant documents in the possession, custody or power of that party unless the insufficiency of the discovery appeared from an admission in the pleadings by the party from whom discovery was sought, or from the affidavit of documents itself, or from the documents referred to in the affidavit, or from any source that constituted an admission by that party of a discoverable document, or where the party had excluded documents under a misconception of the case. Insufficiency could not, however, be demonstrated by a contentious affidavit from the party seeking to challenge the discovery. Thirdly, O 26 r 6 and its predecessors were introduced to relax the Chancery rule, and to allow a challenge to discovery based on a contentious affidavit seeking discovery of particular documents, or a particular class of documents.
5Fourthly, the introduction of O 26 r 6 enlarged, but did not modify, the court's inherent jurisdiction. Thus, if a party applies pursuant to both O 26 r 6 and the court's inherent jurisdiction, but the O 26 r 6 application is for some reason irregular, providing that the criteria for the exercise of the inherent jurisdiction are satisfied, an order may be made under the inherent jurisdiction for discovery, including for a particular class of documents.
6Fifthly, under the inherent jurisdiction, where the insufficiency of a party's discovery appears from the party's pleadings, or its affidavit of documents, or the documents referred to therein, or any source constituting an admission by that party of a discoverable document, the test is whether the court has reasonable grounds for being fairly certain that there are other relevant documents which ought to have been disclosed. That is also the test that is to be applied under O 26 r 6.
7Sixthly, under the inherent jurisdiction, it is not necessary to infer the existence of a particular document to ground an order for further and better discovery, where it appears that a party has excluded documents under a misconception of the case.
8Seventhly, although the misconception of the discovering party is relevant to the exercise of the court's inherent jurisdiction, it is also, in my view, a factor which may assist in the drawing of inferences for the purposes of determining an application under O 26 r 6. (citations omitted)
[21] Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2010] WASC 218 [3] ‑ [8].
The court will only exercise its discretion and make an order for further and better discovery if such an order is necessary for the fair determination of the issue(s) in contention.[22] When considering what is necessary, the court will have regard to factors which include the utility of the investigative process and the documents likely to be discovered, balanced against the burden such a process would impose.[23] In balancing these considerations, the court will also have regard to the importance and complexity of the subject matter in issue and the financial standing of the parties, together with case management considerations. [24]
[22] Rafferty v Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd)[2017] WASC 18 [16]. See also Roe v The State of Western Australia [2013] WASC 130 [10].
[23] Rafferty v Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd) [16].
[24] Roe v The State of Western Australia [10].
Whether an order for discovery is made pursuant to the court's inherent jurisdiction or the RSC, the court must find there are reasonable grounds for being fairly certain that the documents are, or were, in the possession of the party from whom sought, and the documents are relevant to an issue of contention between the parties.[25]
[25] Perpetual Trustees Company Ltd v Burniston[2012] WASC 26 [29], [32].
Thus, in order to succeed in his application for further and better discovery, the plaintiff must establish two things: [26]
(1)there are reasonable grounds for being fairly certain that the pursued further documents, or a class of further documents, actually do or did exist in the possession, custody or power of the party against whom the application is made;
(2)the pursued additional documents relate to a matter in issue in the action.
[26] Rafferty v Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd) [13].
In regard to the first requirement, the plaintiff must demonstrate there are reasonable grounds for being fairly certain that other relevant documents exist.[27] A speculative possibility as to the existence of other relevant documents will not suffice.[28]
[27] British Association of Glass Bottle Manufacturers Ltd v Nettlefold [1912] AC 709, 714.
[28] Dense Medium Separation Powders Pty Ltd v Gondwana Chemicals Pty Ltd [2010] NSWSC 1309 [47].
As to the second requirement, the court is to have regard to the pleadings when determining relevance. Every document relates to matters in question in the action which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may either directly or indirectly enable the other party to advance its own case or to damage the case of the other party. Relevance may appear from either the character of the document or its contents, it is not enough to establish the likelihood that the documents exist unless the mere fact that they belong to the class is sufficient to establish relevance. If the mere fact that they belong to the class is not sufficient to establish relevance and the relevance depends upon the contents of the particular documents there must be a prima facie case as to their contents before discovery of the documents will be ordered.[29]
[29] Rafferty v Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd) [15] citing Astra‑National Productions Ltd v Neo‑Art Productions Ltd [1928] WN 218, 219; Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2005] WASC 60 [3].
It is against that background that I turn to the specific issues raised on this application.
The plaintiff's position
The grounds for being fairly certain that the pursued class of further documents actually do, or did, exist in the possession, custody or power of the defendants
The plaintiff says that the court can be satisfied that the documents in the classes outlined in proposed orders 3(a) and 3(b) exist.
Bank statements
As to grounds for being fairly certain that the bank statements actually do, or did, exist in the possession, custody or power of the defendants, the plaintiff relies on the 13 January Letter, the terms of which disclosed that the third defendant was approved by the National Australia Bank for a NAB Business Markets – Flexible Rate Loan, which was secured over seven properties including 404 Ranford Road.
The plaintiff says that it is notorious that if a bank transfers funds to any person, there will be statements relating to that advance; and that it follows that statements relating to the use of the funds outlined in the 13 January Letter likely exist.[30]
Sale contracts, Landgate documents and subdivision applications
[30] Plaintiff's submissions filed 19 June 2019 par 32; ts 70 ‑ 71 (13 June 2019).
The plaintiff says that it can be reasonably inferred from the 13 January Letter that the purpose of the third defendant obtaining such a loan was to utilise the money advanced towards business activities.[31] Further, the plaintiff says that the properties listed in the 13 January Letter have, during the material time, been:
(a)subdivided by the second defendant or a related entity;
(b)transferred by the second defendant; and
(c)sold by the third defendant.
Subdivision applications
[31] Plaintiff's submissions filed 31 May 2019 par 15.
The plaintiff relies upon the affidavit of Mr Metaxas filed 18 April 2019 par 5 ‑ 6, in which Mr Metaxas deposes to having been informed by the second defendant that the second defendant or a related entity:
(a)purchased the property known as 112 Foreshore Drive, Singleton in 2003 and carried out a 5 lot sub‑division in about 2013‑2015; and
(b)purchased the property known as 88 Ayrton Street, Dawesville in 2001‑2002 and carried out a 14 lot subdivision in 2015.
The plaintiff says that the Singleton and Dawesville properties described above were properties identified in the 13 January Letter and were sub-divided after the advance of the Loan Facility funds to the third defendant.
The plaintiff says that subdivision of a lot within Western Australia is not possible without approval of the Western Australian Planning Commission;[32] a defendant, or the defendants, must have applied for subdivision approval; and it follows that subdivision application documents must exist.
Records of sale or transfer
[32] Planning and Development Act 2005 (WA) s 135; plaintiff's submission filed 19 June 2019 par 34.
As to the transfer of properties, the plaintiff contends that a number of the properties which were encumbered by the mortgage in favour of the National Australia Bank have been disposed of by the defendants. The plaintiff relies on the affidavit of Mr Breheny filed 11 April 2019, and the Landgate Sale Enquiry Details searches attached to his affidavit.[33]
[33] Affidavit of Mr Breheny filed 11 April 2019 par 9 ‑ 14, 'CB-5' ‑ 'CB-10'.
As to the sale of property by the third defendant, the plaintiff again relies on the affidavit of Mr Metaxas sworn and filed 18 April 2019 par 2, in which Mr Metaxas deposes to having been informed by the second defendant that the property known as 267 Kenwick Road, Maddington was purchased by the third defendant in 2007 or 2008 for $2,800,000; that the only development undertaken by the third defendant was to permit some blue metal to be used to create a hard-standing area at a cost of about $5,000; and that the property was sold in 2005 for $2,350,000.
The plaintiff says that it is notorious that records of the sale or transfer of land in Western Australia are maintained by the Western Australian Land Information Authority, trading as Landgate. In order to effect the sale or transfer of land, a defendant, or the defendants, must have lodged documents with Landgate. The plaintiff says documents relating to the disposals and the sub‑divisions must therefore exist.[34]
Financial statements and tax returns
[34] Plaintiff's submissions filed 19 June 2019 par 35.
The plaintiff notes that corporations must keep written financial records that correctly record and explain its transactions and financial position and performance, and would enable true and fair financial statements to be prepared and audited.[35] Further, it is a fundamental obligation of a trustee to keep a full and candid record of their stewardship, including all appropriate financial accounts.[36] That duty to account encompasses a duty to keep records.[37]
[35] Corporations Act 2001 (Cth) s 286; plaintiff's submissions filed 19 June 2019 par 36.
[36] Burrows v Walls (1885) 5 De G M & G 233; 43 ER 859, 866, approved in Hancock v Rinehart [2015] NSWSC 646; plaintiff's submissions filed 19 June 2019 par 37.
[37] Byrnes v Kendle (2011) 243 CLR 253 [42]; plaintiff's submissions filed 19 June 2019 par 37.
The plaintiff says that it follows that the first and third defendants must have records of their transactions and financial performance, including but not limited to financial statements and tax returns.[38]
How the pursued class of further documents relate to a matter in issue in the action
[38] Plaintiff's submissions filed 19 June 2019 par 38.
The remedies sought by the plaintiff in the proceeding as against the first defendant, among other things, include equitable compensation; an account of profits; an account of administration in common form; and further or alternatively to an account of administration in common form, an account for administration on the basis of wilful default by the first defendant.
As against the second and third defendants, among other things, the plaintiff seeks equitable compensation and an account of profits.
An account of profits is sought against the defendants in relation to alleged specific wrongdoing, being the breach of trust and fiduciary duty and the knowing assistance in that breach by way of the Mortgage Breach, alternatively the Alternative Mortgage Breach.
The plaintiff says that he is entitled to discovery of documents that will enable him to determine whether any of the defendants benefited from the alleged breach of fiduciary duty or knowing participation; and the quantum of any benefit so obtained.[39] Further, the plaintiff says that he must elect whether he seeks an account of profits or equitable compensation, and discovery of the classes of documents sought will enable him to make an informed choice as to the election, and may ultimately affect the manner in which he decides to conduct the proceeding.[40]
The defendants' position
[39] Plaintiff's submissions filed 31 May 2019 par 13.
[40] Plaintiff's submissions filed 11 April 2019 par 13, citing Mann v Carnell (1999) 201 CLR 1 [19].
In opposition to the application, the defendants relied upon the affidavits of Mr Arthur Metaxas sworn and filed 18 April 2019, 23 April 2019 and 7 June 2019. The defendants also relied upon the written outline of submissions filed on 7 June 2019 and 14 June 2019.
The defendants opposed the plaintiff's application for further and better discovery on numerous grounds. Some of the defendants' complaints were addressed by amendment to the form of the orders pressed on behalf of the plaintiff. However, from the written submissions filed on behalf of the defendants, and from the oral submissions made by counsel on at the hearing, I understood that the following complaints were maintained.
First, that the application for further and better discovery must fail by reason of there being no express allegation pleaded that the defendants (or any of them) made an unauthorised profit as a result of the Mortgage Breach or the Alternative Mortgage Breach.
In this regard, the defendants' focus is upon one part of the plaintiff's pleaded case, summarised on behalf of the defendants as follows.[41]
1.In the Re‑Amended Substituted Statement of Claim filed 21 May 2019:
1.1par.34 pleads the mortgage dated 8 December 2010 of the Ranford Road property in favour of the NAB pursuant to a loan facility offered on 13 January 2011 for $6.295m;
1.2par.40 pleads that the plaintiff thereby suffered loss and damage;
1.3par.42 pleads that 'to the extent that' the defendants 'have made unauthorised profits as a result of' using the Ranford Road property as security '1/3 of those profits are held on a constructive trust for the plaintiff'; and
1.4at page 49 in the prayer for relief the plaintiff claims an account in 'common form' and an account on the basis of wilful default.
[41] Defendants' submissions filed 14 June 2019 par 1.
The defendant say that there is no 'distinct allegation' of wilful default such as could enliven the relief claimed for an account on the basis of wilful default.[42]
[42] The defendants rely upon Glazier v Australian Men's Health (No.2) [2001] NSWSC 6 [38], [39] and [43], citing Partington v Reynolds 62 ER 98, 99; In re Ellis; Ellis v Ellis [2015] WASC 77 [123] ‑ [126]; [130] ‑ [131], [133], [148]; Agricultural Land Management Ltd v Jackson [No 2] [2014] WASC 102 [334]; Meehan v Glazier Holdings Pty Ltd (2002) 54 NSWLR 146; [2002] NSWSC 22 [46]; and Gava v Grljusich [1999] WASC 13.
That is, the defendants say that par 42 of the re‑amended substituted statement of claim does not allege that any of the defendants made 'unauthorised profits' as a result of the Mortgage Breach or the Alternative Mortgage Breach, as the plea is prefaced with the passage 'to the extent that' any of the defendants 'have made unauthorised profits'; and as there is no allegation that the defendants made 'unauthorised profits', there can be no issue (for the purposes of discovery) as regards an allegation not made.[43]
[43] Defendants' submissions filed 14 June 2019 par 4 ‑ 5.
Secondly, that there is no evidence that the cost and delay in providing further and better discovery is proportionate to the forensic benefit to be derived.
Thirdly, that the application is not properly supported by affidavit.
Determination
I am persuaded that the plaintiff has demonstrated that there are reasonable grounds for being fairly certain that further documents actually do or did exist in the possession, custody or power of the defendants.
The plaintiff seeks discovery of statements of accounts held by the defendants evidencing the drawdown of funds advanced by the National Australia Bank for the period on or after 17 December 2010 to date; and bank statements evidencing the use of funds advanced by the National Australia Bank to the third defendant as described in the 13 January Letter.
The terms of the 13 January Letter and the registration of a mortgage in favour of the National Australia Bank provide a basis for being certain that further documents in the form of bank statements exist and are in the possession, custody or power of some, or all, of the defendants.
The plaintiff also seeks financial records and tax returns. I accept that statutory taxation obligations provide a basis for being certain that further documents in the form of tax returns exist and are in the defendants’ possession, custody or power.
Accepting the submissions made on behalf of the plaintiff, summarised at [41] – [42] above, I also accept the first and third defendants must have records of their transactions and financial performance, including but not limited to financial statements,[44] and that at least some such records are or were within the second defendants’ possession, custody or power in his capacity as a director of the first defendant, and as a former director of the third defendant.
[44] Plaintiff's submissions filed 19 June 2019 par 38.
The affidavit evidence supporting the application, albeit limited, records that some of the properties listed in the 13 January Letter were, during the material time:
(a) subdivided by the second defendant or a related entity;
(b) transferred by the second defendant; and
(c) sold by the third defendant.
The transfer and subdivision of any of the real property referred to in the 13 January Letter (whether as referred to in the 13 January Letter, or having been subsequently subdivided and transferred) would be documented, and I am therefore fairly certain that records of subdivision, transfer and sale actually do, or did exist in the possession, custody or power of the defendants.
Turning to consider whether the pursued class of documents relate to a matter in issue in the action, I note that the plaintiff pleads various claims and forms of relief.
The class of documents sought by way of further and better discovery are not relevant to all of the claims and remedies sought, as was emphasised in the submissions made on behalf of the defendants.
I note that the plaintiff's prayer for relief includes, among other things, various forms of account.
I accept the plaintiff's submission that, having pleaded material facts sufficient to ground the Mortgage Breach and the Alternative Mortgage Breach claims, it is open for the plaintiff to seek as a form of relief an account of profits.
I note that the nature of the remedy of an account of profits was the subject of discussion in Ancient Order of Foresters in Victoria Friendly Society Limited v Lifeplan Australia Friendly Society Limited & Anor.[45] At [75], Gageler J makes the following observation:
75The equitable remedy of account is a personal order. The order operates to require that a defendant pay to a plaintiff the monetary value of a benefit or gain to the defendant. Although commonly referred to as an "account of profits", there is no reason why a benefit or gain to be made the subject of an account must answer the description of a "profit" in conventional accounting terms. Nor is there any reason why that benefit or gain must answer the description of "property" or must have sufficient certainty as to be capable of forming the subject matter of a trust. The benefit or gain can be expectant or contingent. Indeed, it is commonplace that a benefit or gain the subject of an account might encompass an ongoing business. And it is commonplace that the benefit or gain to be made the subject of an order to account might extend to the whole of the ongoing business or be limited to a part of the business identified by reference to both a specified scope of commercial activities and a specified period of commercial activities which need not be confined to a past period but may be a period which extends into the future.
[45] Ancient Order of Foresters in Victoria Friendly Society Limited v Lifeplan Australia Friendly Society Limited & Anor [2018] HCA 43.
In this proceeding, it is pleaded that the first defendant permitted the registration of a mortgage over 404 Ranford Road (which the plaintiff pleads is trust property), for non‑trust purposes.
In this proceedings, among other things, the identification of the benefit or gain to the fiduciary or knowing participant, and the determination of whether the breach can be concluded to have played a material part in contributing to the benefit or gain of the fiduciary or knowing participant, are matters in issue.[46]
[46] Ancient Order of Foresters in Victoria Friendly Society Limited v Lifeplan Australia Friendly Society Limited & Anor [83], [88].
I am satisfied that the documents sought (which include bank statements and financial statements) are relevant to these matters in issue, and would also, or would lead to a train of inquiry which would, either advance the plaintiff’s own case or damage that of the defendants.[47] Further, given the nature of the pleaded claim and that the plaintiff seeks an account of profits, the mere fact that a document falls within the scope of the classes pressed is in this case sufficient to establish relevance.
Are the orders necessary for the fair determination of the issues?
[47] Mulley v Manifold (1959) 103 CLR 341, 345, referred to in the plaintiff’s submissions filed 19 June 2019 par 16.
I turn to consider whether the orders pressed by the plaintiff for further and better discovery are necessary for the fair determination of the issues in contention. This involves weighing in the balance a number of matters.
The defendants assert that there is no evidence that the cost and delay involved in the provision of further and better discovery is proportionate to the forensic benefit likely to be derived.[48]
[48] Defendants' submissions filed 18 April 2019 par 9.4; ts 81 (13 June 2019).
While I weighed in the balance case management considerations, I note that there was no evidence of the likely cost and delay involved in the provision of further and better discovery; the financial standing of any party; nor the extent of the likely burden on the defendants if the opposed order was made.
I have had regard to the information and documents proffered in the affidavits of Mr Metaxas sworn and filed on 18 and 23 April 2019. However, the voluntary provision of certain documents and information, presumably intended to exculpate the defendants, does not answer a proper request for further and better discovery on affidavit.
The defendants complain that the use of 404 Ranford Road as security by the third defendant, or another entity that was controlled by the second defendant, has been within the knowledge of the plaintiff since November 2011; that this proceeding was commenced in 2017; and 'the re‑amended pleading that seeks to enliven the issue was filed on 21 May 2019'.[49] It was submitted that this context bore on the issue of proportionality and costs. The argument was not further developed on behalf of the defendants and it is not a matter that weighed heavily in the balance.
[49] ts 73 ‑ 74 (13 June 2019).
How the documents are said to relate to matters in issue in the action weighed in favour of the making of the orders pressed.
The plaintiff says that he is entitled to discovery of documents that will enable him to determine whether any of the defendants benefited from the alleged breach of fiduciary duty or knowing participation; and the quantum of any benefit so obtained.[50]
[50] Plaintiff's submissions filed 31 May 2019 par 13.
I am persuaded by the plaintiff's submission that further discovery is necessary to enable the just resolution of a real and essential issue in the proceedings, namely whether any benefits have been derived by any of the defendants in breach of fiduciary duty or through knowing participation in that breach, and if so, the nature and extent of those benefits.[51] In this case, further discovery will facilitate an inquiry to determine whether the court's jurisdiction to order an account of profits is enlivened. I accept the plaintiff's submission that this is not an application for documents which are on the periphery of relevant, or relevant to a non‑essential issue.[52]
The supporting affidavit
Complaints made on behalf of the defendants
[51] Plaintiff's submissions filed 31 May 2019 par 23.
[52] ts 65 (13 June 2019).
The defendants raise a number of complaints regarding the affidavit of Mr Breheny sworn and filed on 11 April 2019 in support of the application.
As conveniently summarised in the plaintiff's further submissions filed on 19 June 2019,[53] first, the defendants complain that the affidavit did not offer any evidence to support the application for discovery of documents referred to in proposed orders 3(a) and 3(b) of the re-amended minute.[54] Secondly, par 8 of the defendants' further submissions dated 14 June 2019 suggests that the plaintiff has offended the proposition that there is no express provision for any further discovery which is not supported by affidavit. Thirdly, counsel for the defendants complained in the course of making oral submissions that as the plaintiff had amended the terms of the orders sought in the application, he was obliged to file a fresh affidavit in support of the amended orders.[55]
Disposition
[53] Plaintiff's submissions filed 19 June 2019 par 25 ‑ 27.
[54] Defendants' further submissions filed 14 June 2019 par 15; see also the defendants' submissions filed 7 June 2019 par 12.1.
[55] ts 86 (13 June 2019).
I am not satisfied that any of the complaints raised on behalf of the defendants are fatal to the application.
An application for further and better discovery made under the RSC O 26 r 6 must be supported by an affidavit which states that, in the belief of the deponent, the party from whom discovery is sought is in possession, or had been in possession, of the documents subject the application.[56]
[56] RSC O 26 r 6(3).
As a general principle, in the absence of an affidavit which states, in the belief of the deponent, the defendants have, or have had in their possession, the documents or class of documents sought, the court's power to make an order for discovery pursuant to the RSC O 26 r 6 is not enlivened.[57]
[57] CVW Group Holdings Pty Ltd v Addison [2011] WASC 267 [22].
Having regard to the terms of the RSC O 26 r 6, it is far from clear that where a proposed form of order for further and better discovery is refined after an application is made, the applicant is obliged to file a fresh affidavit in support of the amended orders.
In this case, the form of orders for further and better discovery pressed on behalf of the plaintiff was amended on 20 May 2019 and re‑amended on 31 May 2019. It was again refined after the hearing of the application as outlined in the plaintiff's submissions filed 19 June 2019 at par 21. The plaintiff did not file any further affidavits in support of the application and elected to continue to rely on Mr Breheny's affidavit.
However, the plaintiff had consistently pressed for further discovery of documents which disclosed the profits made by the defendants from December 2010 to present by reason of any investment activities enabled by the loan facility secured by the mortgage over 404 Ranford Road.
Mr Breheny's affidavit was largely a vehicle by which documentary evidence, including the Landgate Sale Enquiry Details searches referred to above, was put before the court for the purpose of the application.
Mr Breheny deposes at par 15 of his affidavit that '[g]iven the documents attached [to his affidavit], and for the reasons outlined in the plaintiff's submissions in support of this application, I believe that: (a) the defendants have, or at some time have had, in their possession, custody or power, the documents or class of documents specified in the plaintiff's application; and (b) those documents relate to one or more of the matters in question in this action.'
The defendants' complaint that the affidavit did not offer any evidence to support the application for discovery was not fair. Certainly, the Landgate Sale Enquiry Details searches were evidence that supported the making of orders for further discovery of transfer and sale documents.
However, the form of the supporting affidavit, in particular, the incorporation by cross reference to attached documents and submissions, lacked precision.
To the extent that the application made under the RSC O 26 r 6 is irregular by reason of the affidavit's lack of precision, or any of the complaints raised by or on behalf of the defendants, I note that providing that the criteria for the exercise of the inherent jurisdiction are satisfied, an order may be made under the inherent jurisdiction for discovery, including for a particular class of documents.
In this case, I am satisfied that the criteria for the exercise of the inherent jurisdiction are satisfied. There was sufficient evidence to overcome the second defendant's statement in the affidavit of discovery that to the best of his knowledge, information and belief, neither the defendants nor their practitioner, nor any other person on their behalf, has now, or ever had possession, custody or power over any documents of any description relating to any matter in question in the action that are or were in their possession, custody or power other than the documents listed in Parts 1A and 2A of attachment 'A'.
Conclusion and orders
Subject to hearing from the parties as to the final form of the orders, I propose to make orders in the following terms.
1.Within 14 days, the defendants file and serve a supplementary list of discovered documents verified by affidavit in respect of the following documents or classes of documents:
(a)account statements issued by the National Australia Bank (NAB) to the third defendant in respect of the loan facility secured by the mortgage registered over 404 Ranford Road, Canning Vale (404 Ranford Road) on 17 December 2010 and which has Landgate registration number L510708 (Mortgage) from 6 July 2017 to present (NAB Statement Documents);
(b)all documents comprising the 'application' to NAB as referred to in the letter from NAB to the third defendant dated 13 January 2011 (13 January Letter), including any correspondence between the second defendant and NAB in support of the application (NAB Loan Facility Application Documents);
(c)documents evidencing the use of funds advanced by the NAB to the third defendant as described in the 13 January Letter, such documents including but not limited to financial statements, tax returns, sale contracts, Landgate documents, subdivision applications and bank statements;
(d)documents in the following classes:
(i)financial statements, including profit and loss statements, balance sheets and general ledgers, produced by or for the defendants for the period on or after 17 December 2010 to date;
(ii)tax returns completed by or for the defendants for the financial years ending 2011 to 2018;
(iii)sale contracts for the transfer of real property referred to in the 13 January Letter (whether as referred to in the 13 January Letter, or having been subsequently subdivided and transferred) by the defendants, or any related party, executed on or after 17 December 2010; and
(iv)bank statements of accounts held by the defendants evidencing the drawdown of funds advanced by the NAB for the period on or after 17 December 2010 to date;
(e)correspondence from the defendants to Owen & Plaistowe accountants, from January 2009 to the present, being instructions as to the preparation of, and amendment of, the financial statements and accounts of Arvind Property Trust (Unit Trust) (Accounting Instructions Documents).
2.The practitioner of the defendants must sign a certificate addressed to the Court in compliance with the Rules of the Supreme Court 1971 (WA) Order 26A.
I am satisfied that such an order is necessary for the fair determination of the issues in contention in this proceeding.
It may be that there are in fact no documents that fit within a category. If that is the case, then an affidavit to that effect ought to be filed.
I will hear from the parties as to costs.
SCHEDULE A
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MH
Associate to Acting Justice Strk
30 APRIL 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BERNARD HENRICUS LAMERS as trustee for THE BEN AND DEBRA LAMERS FAMILY TRUST -v- ARVIND PTY LTD [2020] WASC 52 (S)
CORAM: ACTING JUSTICE STRK
HEARD: ON THE PAPERS, SUBMISSIONS FILED ON 26 FEBRUARY 2020 & 9 MARCH 2020
DELIVERED : 28 APRIL 2020
FILE NO/S: CIV 2404 of 2017
BETWEEN: BERNARD HENRICUS LAMERS as trustee for THE BEN AND DEBRA LAMERS FAMILY TRUST
Plaintiff
AND
ARVIND PTY LTD
First Defendant
SARO VINZI CARBONE
Second Defendant
BRIGHT IMAGE DENTAL PTY LTD
Third Defendant
Catchwords:
Practice and procedure – Discovery – Application for further and better discovery – Appropriate costs order following a successful application made by the plaintiff for further and better discovery – Ordinary rule that costs should follow the event applies
Legislation:
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)
Result:
The defendants pay the plaintiff's costs of the application for further and better discovery, to be taxed if not agreed
Representation:
Counsel:
| Plaintiff | : | Ms A Spencer |
| First Defendant | : | Mr A Metaxas |
| Second Defendant | : | Mr M Handcock |
| Third Defendant | : | Mr M Handcock |
Solicitors:
| Plaintiff | : | Kott Gunning |
| First Defendant | : | Metaxas Legal |
| Second Defendant | : | Effective Legal |
| Third Defendant | : | Effective Legal |
Case(s) referred to in decision(s):
Lamers v Arvind Pty Ltd [2020] WASC 52
Latoudis v Casey (1990) 170 CLR 534
Naidoo v Williamson (2008) 37 WAR 516; [2008] WASCA 179; BC200807578
Northern Territory v Sangare [2019] HCA 25; BC201907074
Ohn v Walton (1995) 36 NSWLR 77; BC9504241
Strzelecki Holdings v Jorgensen [2019] WASCA 96; BC201905903
Westworth v Attorney-General (NSW) (1984) 154 CLR 518
ACTING JUSTICE STRK:
On 25 February 2020, I delivered my reasons for decision concerning the application made by the plaintiff for further and better discovery from the defendants pursuant to the Rules of the Supreme Court 1971 (WA) (RSC) O 26 r 6(1), and the inherent jurisdiction of the Court.[58] I recorded there my finding that the plaintiff is entitled to orders compelling the defendants to give further and better discovery of documents which fall within the scope of four categories identified in the plaintiff's proposed minute of orders, as amended.[59] Following the delivery of reasons, the parties sought programming directions for costs of the application to be determined on the papers.
[58] Lamers v Arvind Pty Ltd [2020] WASC 52.
[59] Lamers v Arvind Pty Ltd [92].
These reasons, in which I address costs, should be read in the context of what I have recorded in my reasons for decision on the substantive application.
For the reasons set out below, I find that costs ought to follow the event.
Applicable principles
Where costs should fall is at the discretion of the Court.[60] Where proceedings are adversarial, a court will not usually make an order other than on a party/party basis.[61]
[60] Supreme Court Act 1935 (WA) s 37.
[61] RSC O 66 r 1(1).
The discretion to order costs under the Supreme Court Act 1935 (WA) s 37 and the RSC O 66 r 1 is very wide.[62] The only restrictions are those provided elsewhere in the Supreme Court Act and the RSC, or in any other Act; and the fact that the discretion must be exercised judicially, in accordance with established principles and factors directly connected with the litigation.[63] The discretion must also be exercised so as to achieve what is fair and just between the parties according to the circumstances of the particular case.[64]
[62] Lexis Nexis, Civil Procedure Western Australia, Vol 1, (loose leaf as at 25 July 2019) 'Orders 56 ‑ 69' at [66.1.2] citing Westworth v Attorney-General (NSW) (1984) 154 CLR 518, 528; Naidoo v Williamson (2008) 37 WAR 516; [2008] WASCA 179; BC200807578 [39].
[63] Lexis Nexis, Civil Procedure Western Australia, Vol 1, (loose leaf as at 25 July 2019) 'Orders 56 ‑ 69' at [66.1.2] citing Naidoo v Williamson (2008) 37 WAR 516; [2008] WASCA 179; BC200807578 [39], [42]; Strzelecki Holdings v Jorgensen [2019] WASCA 96; BC201905903 [48] ‑ [50].
[64] Lexis Nexis, Civil Procedure Western Australia, Vol 1, (loose leaf as at 25 July 2019) 'Orders 56 ‑ 69' at [66.1.2] citing Latoudis v Casey (1990) 170 CLR 534, 558.
An order for the payment of costs by one party is compensatory in nature; it is not for the purpose of punishment. Costs generally follow the event because such an order is intended, at least to the extent that the costs incurred were not unreasonable or unreasonably incurred, as compensation (and vindication) for the successful action or application.[65]
[65] Lexis Nexis, Civil Procedure Western Australia, Vol 1, (loose leaf as at 25 July 2019) 'Orders 56 ‑ 69' at [66.1.2] citing Latoudis v Casey; Northern Territory v Sangare [2019] HCA 25; BC201907074 [30] ‑ [31]; Ohn v Walton (1995) 36 NSWLR 77; BC9504241.
The starting point in relation to an award of costs is that the Court will generally order that the successful party to the action recover their costs. This usual order may be displaced upon some sort of disentitling conduct on the part of the successful party, or if the circumstances either preceding or following the commencement of the litigation have resulted in costs being unnecessarily or unreasonably incurred.[66] In such circumstances, the Court may deprive that party of costs wholly or in part, and may further order the successful party to pay the costs of an unsuccessful party either wholly or in part.[67]
[66] Lexis Nexis, Civil Procedure Western Australia, Vol 1, (loose leaf as at 25 July 2019) 'Orders 56 ‑ 69' at [66.1.5] citing Strzelecki Holdings v Jorgensen.
[67] RSC O 66 r 1(2).
Where a party though generally successful in an action has, by the introduction of some issue or issues on which they have failed, increased the costs, the Court may order such party to pay the costs of such issue or issues.[68]
[68] RSC O 66 r 1(3).
Competing positions of the parties
The positions pressed by the parties in relation to costs are set out in the outline of submissions filed on behalf of the first defendant on 26 February 2020; and on behalf of the plaintiff on 9 March 2020. Neither the second defendant nor the third defendant filed submissions on the matter of costs, having indicated to the Court on 25 February 2020 that they would adopt the submissions lodged on behalf of the first defendant.
The parties' respective positions may be summarised as follows.
The defendants' position
The contest between the parties related to documents sought by the plaintiff by order 3 of the plaintiff's minute of proposed orders dated 11 April 2019, as subsequently amended and as finally framed on 19 June 2019.
The defendants say, and it appears uncontroversial, that conferral between the parties in early April 2019 (before the plaintiff made the application) narrowed the issues between the parties, such that the defendants did not oppose the making of orders 1, 2 and 4 of the plaintiff's minute of proposed orders, but opposed the making of order 3.[69]
[69] Lamers v Arvind Pty Ltd [20]; First defendant's submissions on costs par 3.
As to the procedural history, in summary, the defendants further say that:[70]
(a)by submissions filed on 18 April 2019, they joined issue in relation to proposed order 3 of the plaintiff's minute of 11 April 2019;
(b)on 20 May 2019, the plaintiff filed an amended minute of proposed orders, a re-amended substituted statement of claim, and an amended memorandum of conferral. The form of proposed order 3 at that time differed to that which was originally pressed;
(c) as a result of the late amendments, the hearing listed for 23 May 2019 was adjourned to 13 June 2019;
(d) on 31 May 2019, the plaintiff filed an outline of further submissions and a further amended the minute of proposed orders, which the defendants say was an attempt by the plaintiff to overcome the defendants' submissions of 18 April 2019 pars 12 – 16;
(e)the defendants filed further submissions on 7 June 2019; and
(f)the application was heard on 13 June 2019. By submissions filed after the hearing, the plaintiff, in effect, further amended the orders sought.
[70] First defendant's submissions on costs pars 1 ‑ 12.
The defendants contend it is appropriate that the usual order as to costs be departed from in the circumstances of this case for the following reasons.[71]
[71] First defendant's submissions on costs pars 13 ‑ 17.
First, the defendants had agreed to give discovery of documents in categories 1, 2 and 4 before the application was filed, which demonstrates that their opposition was narrow and bona fide.
Secondly, the plaintiff's inability to formulate an application and press that application to a hearing was the cause of unnecessary costs for both parties.
Thirdly, the plaintiff's amendment of the application in the submissions filed 19 June 2019 was not a narrowing of the application but the addition of further documents.
Fourthly, the affidavit filed in support of the plaintiff's application was described by the Court as lacking precision;[72] and the plaintiff had to resort to the Court's inherent jurisdiction.
[72] Lamers v Arvind Pty Ltd [89].
Finally, '[the] manner in which the application was prepared and prosecuted was not how these things should be done. The defendants are the 'innocent' parties so to speak'.[73]
[73] First defendant's submissions on costs par 17.
The defendants say that appropriate orders as to costs would be as follows:[74]
1.the plaintiff pay 50% of the defendants' costs of and incidental to the application;
2.alternatively, the plaintiff pay the defendants' costs of and incidental to the application between 2 April 2019 and 31 May 2019, such costs to be taxed;
3.alternatively, there be no order as to the costs of the application;
4.alternatively, the defendants pay the plaintiff 25% of the plaintiff's costs of and incidental to the application.
The plaintiff's position
[74] First defendant's submissions on costs par 18.
In summary, the plaintiff says that it was entirely successful in the application and that costs should follow the event. The plaintiff further says there was nothing in the way in which the plaintiff progressed the application that constitutes misconduct on the part of the plaintiff, and which would deprive him of his costs.
As to the procedural history, in summary, the plaintiff says that the defendants raised various issues and the plaintiff responded to the issues raised in the spirit of conferral and in an attempt to avoid further interlocutory disputation. The plaintiff summarises the procedural history as follows:[75]
(a)following the filing of the defendants' responsive submissions and affidavit dated 18 April 2019, further conferral took place between the parties, which ultimately led to the filing of an amended minute on 31 May 2019. Through amendment of the form of order pressed, the plaintiff sought to avoid argument about the defendants' characterisation of 'profits' by substituting the word 'benefit' in place of the word 'profit' in the minute;
(b)the amended minute set out the form of orders sought by the plaintiff at the hearing on 13 June 2019; and
(c)by the further submissions filed 19 June 2019 (after the hearing), the proposed form of orders was modified so as to meet objections raised in oral argument on behalf of the defendants, particularly to remove the uncertainty complained of (which uncertainty was not conceded), without the need for further interlocutory disputation.
[75] Plaintiff's submissions on costs pars 9 ‑ 14.
The plaintiff says that the grounds on which the defendants opposed the application were, in substance, the same grounds which were advanced on behalf of the defendants on 18 April 2019, and that such grounds ultimately failed.[76]
[76] Plaintiff's submissions on costs par 24.
Disposition concerning costs
The plaintiff was successful in prosecuting the application for further and better discovery. When exercising discretion to order costs in this case, the application of the general rule calls for the making of an order that the plaintiff's costs be paid by the defendants.
Through conferral the issues in dispute were narrowed. The defendants say that this demonstrates that their opposition to the application (that is, to the making of proposed order 3 only) was 'narrow and bona fide'.
The defendants' properly agreed to the making of orders 1, 2 and 4, and there is no basis on the materials before me to conclude that the defendants were anything but genuine in their opposition to proposed order 3. However, as a costs order in this context is intended to be compensatory in nature, the 'bona fide' conduct of the defendants is not a proper basis for departure from the general rule.
The defendants say that the plaintiff's inability to formulate an application and to press that application to a hearing was the cause of unnecessary costs for both parties. Having given careful consideration to the documents before me and to the submissions made, I find that the defendants' characterisation of the history of the application, and manner in which the form of order pressed by the plaintiff developed, to be unfair. It was appropriate for the plaintiff to engage with the defendants, to seek to attempt to address the defendants' concerns and to narrow the issues in dispute. No adjudication was made in relation to the earlier forms of order 3 and I note that at least one amendment to the form of order was expressly proffered without concession on the part of the plaintiff as to the need for amendment.[77]
[77] Plaintiff's submissions filed 19 June 2019 par 24.
The defendants raise the adequacy of the affidavit of Mr Breheny as a basis for departure from the general rule that costs should follow the event. In determining the application for further and better discovery, I weighed in the balance the complaints raised on behalf of the defendants and concluded that I was not satisfied that any of the complaints were fatal to the plaintiff's application.[78]
[78] Lamers v Arvind Pty Ltd [80] ‑ [91].
Ultimately, I found that the criteria for the exercise of the Court's inherent jurisdiction was satisfied, and that there was sufficient evidence before the Court to overcome the second defendant's statement in the affidavit of discovery that to the best of his knowledge, information and belief, neither the defendants nor their practitioner, nor any other person on their behalf, has now, or ever had possession, custody or power over any documents of any description relating to any matter in question in the action that are or were in their possession, custody or power other than the documents listed in pt 1A and pt 2A of attachment 'A'.[79] My observation at [86] of the decision as to the form of Mr Breheny's affidavit does not justify, in the proper exercise of discretion, a departure from the general rule.
[79] Lamers v Arvind Pty Ltd [91].
Finally, the defendants complain that the manner in which the application was prepared and prosecuted was 'not how these things should be done' and that the defendants 'are "innocent" parties so to speak.'[80]
[80] First defendant's submissions on costs par 17.
I am not satisfied that any of the issues raised on behalf of the defendants, when weighed in the balance, individually or cumulatively, provide an adequate or proper basis for a finding that the plaintiff's conduct was such as to disentitle the plaintiff to his costs. Further, having regard to the prosecution of the plaintiff's application for further and better discovery as a whole, there is no basis to conclude that the plaintiff's conduct resulted in costs being unnecessarily or unreasonably incurred.
I find that in all of the circumstances, the judicial exercise of discretion does not support the making of any of the alternate forms of order promoted on behalf of the defendants. I find that costs ought to follow the event.
Conclusion and order
For these reasons, subject to hearing from the parties as to the precise form of order, I propose to make an order to the effect that the defendants must pay the plaintiff's costs of the plaintiff's application for further and better discovery, including reserved costs, to be taxed if not agreed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MH
Associate to Acting Justice Strk
30 APRIL 2020