JUDGMENT OF THE COURT: This is an appeal from a decision of Master Sanderson granting an application by the respondent for discovery before action.
The authority to make such an order is contained in O 26A which, so far as is relevant, provides:
"4(1)This rule applies if a person who may have a cause of action against a person … ('the potential party') wants ‑
(a)to commence proceedings against the potential party
…
but the person, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings
(2)If there are reasonable grounds for believing that the potential party had, has, or is likely to have…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
McCarthy v Dolpag Pty Ltd [2000] WASCA 106
Case
[2000] WASCA 106
Decision Date
CaseChat Overview and Summary
The case of McCarthy v Dolpag Pty Ltd involved an appeal against a decision by Master Sanderson, which granted the respondent’s application for discovery before action. The appellants, who were employees of the respondent, were seeking information regarding their employment and subsequent business dealings after leaving the respondent's employment. The respondent, a finance broker, argued that the appellants had access to confidential information and client referrals that were crucial to its business, which were potentially misappropriated when the appellants left and started their own finance brokerage business. The legal issues that needed to be addressed were primarily whether the appellants had misappropriated confidential information and whether there were reasonable grounds for the application of discovery before action under O 26A of the Supreme Court Rules.
The court considered the principles governing discovery before action, focusing on whether the appellants had, had, or were likely to have had documents in their possession that could assist in determining whether to proceed with legal action. The court found that there were reasonable grounds for the belief that the appellants had access to and potentially misappropriated confidential client information and referral arrangements. The reduction in business from key referral sources shortly after the appellants left the respondent's employment supported this belief. The court determined that the respondent had made reasonable inquiries but was unable to obtain sufficient information to decide whether to proceed with legal action. Consequently, the application for discovery before action was justified.
The court upheld the decision of Master Sanderson, affirming that the appellants were indeed likely to have documents that could assist in deciding whether to proceed with legal action. The appeal was dismissed, and the order for discovery was maintained. The appellants were directed to provide the requested documents to the respondent, enabling the respondent to make an informed decision about pursuing further legal action.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
JUDGMENT OF THE COURT: This is an appeal from a decision of Master Sanderson granting an application by the respondent for discovery before action. The authority to make such an order is contained in O 26A which, so far as is relevant, provides:"4(1)This rule applies if a person who may have a cause of action against a person … ('the potential party') wants ‑(a)to commence proceedings against the potential party …but the person, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings(2)If there are reasonable grounds for believing that the potential party had, has, or is likely to have had or to have, possession of documents that may assist in making the decision, the person may apply for an order under this rule." The respondent carried on business as a finance broker and the first and second appellants were its employees. They were initially engaged under employment agreements dated 13 May 1998 and 28 November 1998 respectively. The involvement of the third appellant, Money Talks (WA) Pty Ltd, comes about in the following way. At some time prior to March 1999, the respondent wanted to change the status of its employees. They were all offered engagement as contractors. The first appellant, Mr McCarthy, did not accept that offer. The second appellant, Mr Mayor, agreed to do so, subject to some further negotiation. While these negotiations were in train, there was an oral arrangement that the second appellant's remuneration would be paid to the third appellant. We gather this was in anticipation that a contractual arrangement would be concluded whereby the third appellant would contract with the respondent to provide the services of the second appellant to the respondent as a finance manager for a contract fee payable to the third appellant. So far as appears, that contract was never signed and by June 1999, both Mr McCarthy and Mr Mayor had left the respondent's employment. In the affidavit in support of the application for discovery before action, Mr Crouch, of the respondent, deposed that the respondent had an arrangement with a real estate group known as "The Professionals" and with a real estate and building organisation known as "The Summit Group". The arrangement was that persons dealing with these groups who required finance to build or buy homes might be referred to the respondent as a "preferred finance broker". The respondent did a lot of business with people referred under these arrangements. One or other or both of the appellants handled some or most of this business in the course of their employment with the respondent. According to Mr Crouch, from shortly after the appellants left the employment of the respondent, business from these two sources substantially reduced. He said that in the case of The Summit Group it "totally dried up". There is evidence that the appellants now carry on business together under the name M & N Mortgage Finance as finance brokers in competition with the respondent and that this organisation now receives business from the Summit Group.