Mirco Bros Pty Ltd v Palermo Nominees Pty Ltd - [2000] WASC 224

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: MIRCO BROS PTY LTD -v- PALERMO NOMINEES PTY LTD [2000] WASC 224

CORAM: MASTER SANDERSON

HEARD: 1 SEPTEMBER 2000

DELIVERED : 13 SEPTEMBER 2000

FILE NO/S: CIV 1963 of 1999

BETWEEN: MIRCO BROS PTY LTD (ACN 008 831 294)
Plaintiff
AND
PALERMO NOMINEES PTY LTD (ACN 008 871 618)
Defendant

Catchwords:

Practice and procedure - Application for order to compel further and better answer to interrogatory - Extent of enquiry required before consent given - Use to be made of interrogatory

Legislation:

Evidence Act, s 79C

Result:

Application refused

Representation:

Counsel:

Plaintiff: Mr S Davies
Defendant: Mr R A Metaxas

Solicitors:

Plaintiff: Mackinlays
Defendant: Metaxas & Vernon

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

Commissioner for Railways v South Queensland Transport Pty Ltd (1950) QLR 59 QWN 45
Gilchrist v R Wallace Mitchell Pty Ltd [1972] VR 481
Sharpe v Smail (1975) 5 ALR 377

Case(s) also cited:

Adams v Dickenson [1974] VR 77
Bolckow Vaughan & Co v Fisher (1882) 10 QBD
Looker v Murphy (1889) 15 VLR 348

MASTER SANDERSON: This is the defendant's application seeking to dismiss the plaintiff's claim based upon the plaintiff's failure to comply with par 1 of the orders of Registrar Johnston made 23 May 2000. The order made by the learned Registrar is in the following terms:
"The plaintiff file and serve further and better answers to interrogatory number 1 and interrogatory number 3 as amended by substituting the words 'the addressees' for the words 'your solicitor' by 6 June 2000."
The plaintiff filed further and better answers to interrogatories and these are dated 5 July 2000. The defendant says that the answer to question 1 is inadequate. Although the application was to strike out the plaintiff's statement of claim for failure to properly answer the interrogatories in fact the application was argued on the basis that if the defendant's submissions were accepted the appropriate order was that a further further and better answer be provided by the plaintiff to the defendant's interrogatories.
To put the interrogatories in context it is necessary to say something of the facts of the case. In its statement of claim the plaintiff pleads that between 1988 and 1999 the plaintiff and the defendant operated the Rockingham Beach Resort Hotel in partnership. It is pleaded that at the commencement of the partnership it was agreed that the defendant would manage the business for a fee of $70,000 per annum. It is further pleaded that in 1992 it was agreed between the parties that the management fee would be increased to $80,000 per annum. The plaintiff pleads that in breach of that agreement the defendant drew against the business fees such that the defendant was overpaid the sum of $111,946. This sum is arrived at by an analysis of the fees drawn in 1996 and 1997.
The defendant filed an amended defence dated 10 April 2000. In answer to the plaintiff's claim the defendant pleads that the agreed fee for the defendant to manage the business was $100,000 per annum. It is further pleaded that in 1991 it was agreed the management fee would be increased to $120,000 per annum commencing on 1 July 1991. The defendant then counterclaims and says that between 1988 and 1998 it was paid $517,404 less than its proper entitlement. In essence the defendant says that it was paid less than the contracted rate in every year save for 1996 and 1997.
In answer to the defendant's counterclaim the plaintiff has filed a defence to counterclaim dated 20 April 2000. The plaintiff denies that it is indebted to the defendant as alleged in the counterclaim. However the plaintiff puts no positive case against the counterclaim. The plaintiff does deny that there was an agreement as pleaded by the defendant that the management fee would be $100,000 per annum and that this was subsequently increased to $120,000 per annum. But the defence to counterclaim does not go any further than that. For instance in par 6 of the defence, the defendant says that it was paid $38,166 in the year 1988/89. It says that it was entitled to be paid $100,000 as the management fee for that year and it has therefore been underpaid $61,834. There is, of course, the issue between the plaintiff and the defendant as to the rate of the management fee applicable in the 1988/89 year. But leaving that issue to one side the plaintiff does not take issue with the defendant as to the payment of the $38,166. It does not, for instance, say that the defendant was paid $50,000. What the plaintiff does is simply put the defendant to proof of the amount that it says it was paid.
Against that background the plaintiff sought and obtained leave to administer interrogatories. It is question 1 of the interrogatories and the answer to that question which are now in issue. Because of the importance of the form of the answer I will quote the question and the response in full:
"QUESTION 1
What management fees was the defendant paid in each of the following years:
1.11988;
1.21989;
1.31990;
1.41991;
1.51992;
1.61993;
1.71994;
1.81995;
1.91998.
ANSWER 1:
1.1I have no personal knowledge of the matters inquired into in this interrogatory, and to the best of my knowledge, information and belief, save as set out in 1.3 below, no director, officer servant or agent of the plaintiff, acting in the course of his office or employment with the plaintiff, and in his capacity of director, officer, servant or agent of the plaintiff has or has acquired any such knowledge.
1.2I have made enquiries of the directors, officers, servants and agents of the plaintiff as to what knowledge they have acquired in the course of their offices or employment and in their capacity as director, officer, servant or agent of the plaintiff as to the matters inquired into in the interrogatory and save as set out below I am unable to obtain any information whatever, the said directors, officers servants and agents informing me that in the course of their officers or employment with the plaintiff and in the capacity of and as such directors, officers, servants or agents they possessed no knowledge whatever of the matters inquired into the interrogatory.
1.3I have been informed by Mr Colin Blyth who as at August 1999 was the accountant who prepared the accounts of the partnership that existed between the plaintiff and the defendant that the partnership accounts for the years the subject of the interrogatory show amounts of managements fees paid to the defendant in the years the subject of this interrogatory and that those partnership accounts were prepared from financial information supplied to Mr Blyth by the defendant.
1.4I do not believe that the financial information provided to Mr Blyth by the defendant was accurate and I therefore do not have a belief in the truth of the management fees shown in the partnership accounts for the years the subject of the interrogatory.
1.5I have been informed by Mr Blyth and I verily believe that there is no other financial information in his possession apart from the information provided to him by the defendant from which the management fees paid to the defendant in the years the subject of the interrogatory can be calculated.
1.6Based on the financial information provided to me by Mr Blyth, the management fees paid to the Defendant for the year:
1.6.11998 is $10,499;
1.6.21989 is $46,101;
1.6.31990 is $65,408;
1.6.41991 is $84,302;
1.6.51992 is $77,473;
1.6.61993 is $86,254;
1.6.71994 is $59,165;
1.6.81998 is $64,119;
1.7In respect of the year 1995, the management fees paid to or at the direction of the Defendant is $132,959. I am advised by Mr Blyth and I verily believe that these figures were produced by him based upon trial balances supplied by the Defendant."
It is apparent that this answer has been drawn with great care. Nonetheless the defendant says that the answer is inadequate. The defendant says that the plaintiff has within its possession the financial documentation which would allow its proper officer to ascertain whether and, if so in what respect, the defendant is in error as to the management fees it was paid between the years 1988 and 1998. The defendant says that the failure of the plaintiff through its proper officer to make these inquiries means that the answer is inadequate.
The defendant's submissions go further. It is said that if the plaintiff is required to answer the interrogatory and is required to examine the financial information in its possession this will remove an issue between the parties at trial. By tendering the answer to interrogatories the defendant will be able to establish what payments have been made to it and will also be able to establish that the financial records do not in any way cast doubt on the defendant's claim. In other words, the only issue between the parties will be the contract rate. If the defendant is able to establish that the contract rate is as it pleads then it will succeed without doing more. The defendant says that this is a classic case where a proper answer to the interrogatory would both destroy the plaintiff's case and advance its own case. What is more it would substantially shorten the trial by eliminating as an issue the accounting records held by the plaintiff.
The plaintiff for its part says that the answer provided to date is, in all respects, adequate. Counsel pointed to the fact that by cl 1.6 of the answer the plaintiff acknowledged that the accounts showed amounts for management fees had been paid to the defendant which were in most cases less than the amounts the defendant says that it was paid (see par 6 of the defence). Counsel submitted that it was open to the plaintiff's officer to say that he did not believe the financial information was accurate thus leaving the defendant to prove its case at trial. It was submitted that to require any further and better answer to this interrogatory would be in effect to require the plaintiff's officer to undertake a detailed analysis of the financial records probably in consultation with an expert witness and then to verify the conclusions of that examination by affidavit. This it was said went beyond the scope of what was required of a person answering interrogatories.
There was no real difference between the parties as to the principles to be applied in a case such as this. Both parties referred to the judgment of Lush J in Gilchrist v R Wallace Mitchell Pty Ltd [1972] VR 481 where his Honour said (at 483):
"In my opinion, the present case is to be determined by reference to basic but simple principles. The first is that a party or the deponent answering in the case of a corporation for the party must answer to the best of his knowledge, information and belief after making of inquiries of his or its servants. I am not concerned here with questions of the time and scope of the employment. The second is that a party cannot be compelled to admit a fact which he does not believe to be true or a fact in the truth of which he has no belief. I know of no authority for this, but the law cannot be otherwise. The third principle, closely related to in this context to the second, is that a deponent cannot be required to swear that he has a belief in the truth of information when he has not. If these principles are correct, they dispose of the present case. The deponent must answer after considering the information supplied by the plaintiff and the second defendant. If he has a belief based on this information there is no reason why he should not state it and he must state it. But if he has none, then he is not obliged to say that he has. I do not think that he is obliged to act on the basis that, the information which he has from these two parties being the only information he has, he must find the truth within it. I think he is entitled to answer on the basis that he believes none of it. Whatever his answers, they are given on oath. It is to be remembered that it is the deponent's statement of belief in the fact which constitutes the admission of fact, and that in modern practice a statement of the information available to the deponent need not and should not be stated in the answer."
Based upon this passage it was submitted on behalf of the defendant that the plaintiff's officer did not state in his answer to the interrogatory that he had been through the financial records and could find nothing which cast doubt on the veracity of the entries showing payments made for management fees. For the plaintiff it was said that the deponent had made it clear that he did not believe the financial information was accurate. He had sworn that he did not have a belief in the truth of the information and he had also demonstrated he had made inquiries of the officers of the plaintiff. In taking both those steps he had done all that was necessary and the answer was therefore proper. Both parties also relied on the High Court decision in Sharpe v Smail (1975) 5 ALR 377. Gibbs J said (at 380):
"In my judgment this reasoning of Lush J (in Gilchrist v R Wallace Mitchell Pty Ltd) is logically compelling and I regard it as correct. But the limits of the principles which he stated should be understood. Belief is not the same as knowledge and a party cannot truthfully swear that he has no belief based on information in his possession simply because he does not know that the information is true. Although he is not bound to say that he believes what he does not, he is not entitled to treat any information that he may receive with baseless suspicion, refusing to entertain belief unless it has ripened into certain knowledge. He cannot, by refusing to believe information when there is no reason to doubt its truth, escape from his obligation to answer to the best of his knowledge, information and belief. Moreover, the fact that information comes from a suspect source will not always be enough to render it worthy of disbelief; for example, it may be supported by other credible material.
In the present case it may be surmised from what was said in argument that the first defendant or his advisers may have erroneously taken the view that he is entitled to say that he cannot swear to a belief in any information that he has obtained from Pethard because he has no knowledge of the facts and the latter has an interest adverse to his. The fact that some of the questions which have been answered in the terms already set out relate to matters which do not appear to be controversial and which one would have thought could be ascertained from records as from the oral statements of Pethard reinforces this suspicion;"
Based upon this passage counsel for the defendant argued that as the answer was framed the deponent's statement that he did not believe the financial information was nothing more than baseless suspicion. Counsel submitted that without setting out the reason why the information was not accepted or at the very least stating there had been a detailed analysis of the financial information the answer was inadequate. For the plaintiff it was said that the interrogatory had been answered by the deponent to the best of his knowledge, information and belief. Once again counsel pointed to the fact that payments made to the defendant based upon the financial information was set out in cl 1.6 of the answer. That, it was said, was enough.
Finally, counsel for the plaintiff relied upon the case of Commissioner for Railways v South Queensland Transport Pty Ltd (1950) QLR 59 QWN 45. This case concerned a collision between a train and a truck at a level crossing. The accident was witnessed by another truck driver in the employ of the defendant. The Commissioner for Railways issued interrogatories directed at ascertaining what the defendant's employee had seen of the accident. The response was in the following terms:
(a)I have no personal knowledge of the matters inquired into in the said interrogatories, and, to the best of my knowledge, information and belief, no director, officer, servant or agent of the defendant, acting in the course of his office or employment with the defendant, and in his capacity of director, officer, servant or agent of the defendant (and not accidentally) has or has acquired any such knowledge;
(b)I have made enquiries of the directors, officers, servants and agents of the defendant as to what knowledge they have acquired in the course of their offices or employment and in their capacity as director, officer, servant, or agent of the defendant (and not accidentally), as to the matters inquired into in the said interrogatories and I am unable to obtain any information whatever, the said directors, officers, servants and agents informing me that in the course of their offices or employment with the defendant and in the capacity of and as such directors, officers, servants, or agents, they possessed no knowledge whatever of the matters inquired into in the said interrogatories.
(c)I have been advised and believe that the defendant is not bound for the purpose of answering interrogatories to make enquiries of any person who may happen to be at present directors, officers, servants or agents of the defendant as to any knowledge or information they may possess accidentally not in the course of their offices or employment and not in their capacity of directors, officers, servants or agents, and I have therefore not made any such enquiries."
Mansfield ACJ refused to order the defendant to provide further and better answers. His Honour concluded that information acquired by the witness was not acquired by him as an incident of his employment. The witness simply happened to be driving a truck and he saw the accident occur. But that observation had not direct connection with his employment. That being the case no officer of the company was obliged to ascertain from the witness precisely what he had seen.
This decision seems to me not to be entirely on point. What is being suggested here is that the plaintiff's officer should have made his own inquiries with respect to the financial information available to him. It was his belief which was important. It was not a question of his obtaining further information from the accountant, Mr Blyth or anyone else. It is a question of whether he could be expected to make his own examination of the financial material and respond to the interrogatory accordingly.
In the end I am not satisfied that the plaintiff should be required to provide a further and better answer to the interrogatory. In reaching this conclusion I think it is important to consider just what the defendant must prove to establish its case and what response can be put by the plaintiff, limited as it is by its pleading. First, the defendant must prove the agreement between the parties as to the amount of its management fee. For present purposes that issue can be left to one side. The defendant then must prove what it was paid. It can do that by producing bank deposit receipts and the like or producing books of account which would be admissible as evidence under s 79C of the Evidence Act. That would presumably be enough to allow it to prove its case. What is more it would be in a position to tender the present answers to interrogatories and as I have indicated cl 1.6 would provide sworn evidence from the plaintiff as to what the financial information showed about amounts paid to the defendant. In that position it is difficult to see what more would be added to the defendant's case by having the plaintiff's officer swear that he had been through the financial information personally and that it showed what is set out in cl 1.6 of the answer. Conversely such evidence would not destroy the plaintiff's case. After all, as matters stand at present on the pleadings, all the plaintiff is doing is putting the defendant to proof of its claim. That position would not be altered no matter what was said in answer to the present interrogatory.

Finally I think it is necessary to bear in mind precisely what question is put to the plaintiff by the defendant. The plaintiff is asked what management fees were paid to the defendant in particular years. The plaintiff says that it has made inquiries of various employees and officers of the plaintiff. About that aspect of the answer there can be no query. The answer then goes on to say that the financial records show certain payments. The deponent says that he does not believe that information but that is neither here nor there. In my view given the nature of the question the answer is entirely appropriate.
I would dismiss the defendant's application. I will hear the parties as to costs.