Malaugh Holdings & Ors v Seal & Ors

[2005] SADC 146

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil: Appeal Against a Master's Decision)

MALAUGH HOLDINGS & ORS v SEAL & ORS

Judgment of His Honour Judge Boylan

21 October 2005

PROCEDURE - COSTS - APPEALS AS TO COSTS

Appeal from Master's decision to award costs to party obtaining order to cross examine on discovery affidavits.  No documents eventually discovered.  Test is "reasonable ground to suspect" not whether further documents discovered as result of cross examination.  Appeal dismissed. 

District Court Rules R.58.04(e) and R.58.04A, referred to.

MALAUGH HOLDINGS & ORS v SEAL & ORS
[2005] SADC 146

1. This is an appeal from a decision of Master Norman delivered on the 24^th of January 2005. 

2. Master Norman made various orders on that date.  This appeal is concerned with only one of them, namely, an order that the appellants in this appeal pay the respondents’ costs of and incidental to applications dealing with discovery, including the costs of cross-examination and subsequent arguments about that discovery.

3. In my view, it is not now necessary to set out the fairly tortuous history of these two sets of proceedings.  They arise out of a dispute between Mr and Mrs Seal and a company controlled by them, on the one hand, and Mr and Mrs Pearce and a company controlled by them, on the other, about a contract for the sale and purchase of a petrol station business.

4. There was a dispute about discovery.  The respondents, to whom I shall refer simply as the Seals, filed applications seeking leave to cross-examine the appellants ( to whom I shall refer as the Pearces) on their affidavits of discovery.  The Master order that the Pearces be cross-examined.  After hearing the cross-examination and submissions by counsel, the Master made orders that the Pearces discover certain specified documents.  As a result of that order, Mr Pearce filed an affidavit dated the 10^th of February 2005 together with a list of documents and a letter from the Pearces’ accountants.  The effect of the affidavits and the letter are that, with one exception, the documents which the Master had order to be discovered had either not existed or could no longer be located.

5. The appellants’ complaint is essentially this:  In correspondence between their solicitors and the solicitors for the Seals well before the orders for further and better discovery and for cross-examination were made, the Pearces had asserted that they no longer had the documents in their possession or that the documents the subject of the correspondence had not existed.  As a result of some further efforts at discovery made as a result of the cross-examination, it turns out that their assertions in that earlier correspondence between solicitors were substantially correct.  Accordingly the Pearces say that the cross-examination and associated costs only confirmed their earlier assertions and were a waste of time.  They say, therefore, that the Master was wrong to order that they pay the Seals’ costs.

6. On the appeal before me, there was no real dispute about that history.  Dr Baxter, who appeared for the Seals, argued that this appeal is misconceived.  It was his submission that the appeal is against the costs order made by the Master.  He said that the Pearces’ complaint is really about the Master’s initial order that the plaintiffs be cross-examined.  He argues that the Master was entitled, first of all, to order further and better discovery by way of affidavit if he was satisfied pursuant to Rule 58.04(e) that “there were grounds for a belief that some document or class of documents relating to any matter in question in the proceedings may be or may have been in the possession, custody or power of the parties”.  He further argued that, pursuant to Rule 58.04A(1) the Master had a discretion at any time to order the Pearces to attend before the court for cross-examination on the affidavit “if he was satisfied that there were reasonable grounds to suspect” that the Pearces had not made full and proper discovery of documents in the proceedings. 

7. Dr Baxter, submitted that the fact that no documents were eventually discovered is not to the point.  If the Master was satisfied that there were “reasonable grounds to suspect” that some documents had not been discovered then it was appropriate for him to make the order for cross-examination which he made.  Dr Baxter then goes on to argue that no complaint has been made about the Master’s not having reasonable  ground to suspect.  He says that provided the Master had such grounds then he was entitled to order that the Pearces be cross-examined and that it is not relevant that further documents were not discovered as a result of that cross-examination.

8. In my view Dr Baxter’s argument must be accepted.

9. There has been no submission made that there were not reasonable grounds for suspicion.  Indeed, in their outline of argument the Pearces say this:

   “Although there may arguably have been grounds for suspicion, the position put forward by the appellants all along was correct, and the challenge by the respondents failed.  The respondents should have accepted the position as stated and confirmed by the appellants’ solicitors.”

10. There has been no complaint that the Master did not have reasonable grounds for suspicion.  Indeed, the Pearces have conceded as much.  In any event there has been no appeal against the Master’s order for cross-examination.   The Seals were successful in their applications for further and better discovery and the order for cross-examination.   They were successful in their applications and costs should follow the event.

11. The appeal is dismissed.