Moss v Cave

[2010] SASC 72

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

MOSS v CAVE & ORS

[2010] SASC 72

Reasons of Judge Lunn a Master of the Supreme Court

29 March 2010

PROCEDURE

Disclosure of documents - application for non party disclosure under 6R 146 - held a defendant which had not filed an address for service was not a non party against whom an order could be made under 6R 146 - held party which had not filed an address for service was obligated to make disclosure under 6R 136 (1) - no order against other non parties for disclosure by them as the documents should be obtainable from the defendant which had not filed an address for service.

MOSS v CAVE & ORS
[2010] SASC 72

Reasons on plaintiff’s application for disclosure of documents by non parties and better disclosure by the first and second defendants.

1. JUDGE LUNN:     The plaintiff and the first defendant’s superannuation fund are the shareholders in the third defendant.  The plaintiff alleges that he and the first defendant operated the third defendant as a quasi partnership.  On 27 October 2003 the plaintiff was removed as a director of the third defendant by a resolution of a general meeting whose validity the plaintiff disputes.  Thereafter the second defendant has acted as a director of the third defendant with the first defendant.  The plaintiff alleges that the first and second defendants have conducted the affairs of the third defendant in their own interests and to his financial disadvantage.

2. The plaintiff instituted this action under the Corporations Rules 2003 (South Australia) seeking various relief under the Commonwealth Corporations Act 2001 (“the Act”) against the first and second defendants.  On 1 August 2008 I directed that the action proceed on pleadings which has occurred.

3. On 9 June 2009 Gray J gave leave to the plaintiff to join the third defendant as an additional defendant in the action.  He directed the plaintiff to file an amended statement of claim and the defendants to file their defences by 30 June 2009. 

4. On 10 June 2009 the plaintiff filed an amended originating process naming the third defendant as a defendant, but he did not amend the relief sought in the originating process to show any relief being claimed against the third defendant. As yet no point has been taken about that omission. On the same day the plaintiff filed an amended statement of claim in which he sought the winding up of the third defendant under s 461(1)(e) and (f) of the Act on the grounds of unfairness and oppression.

5. The third defendant has not filed a notice of address for service, a defence or any other document in this action.  As far as I can ascertain the plaintiff has not filed any affidavit of service proving formal service of the amended originating process or the amended statement of claim on the third defendant.  However, the first and second defendants are apparently still the directors of the third defendant and the plaintiff has proved sending of a number of letters to it.  For the purposes of the present applications before me I am satisfied that the third defendant does have proper notice of the proceedings and is in default in not having filed an address for service and a defence well before now.

6. The first and second defendants have recently become unrepresented and have each filed separate notices of acting in person.  The first defendant, who is now resident in Queensland, has not attended on the hearings of the applications before me, but has filed an affidavit and written submissions.  The second defendant attended in person on the hearing on 16 February, but she did not attend at the argument on 11 March.  Since acting in person she has not filed any documents.

   Application for non party disclosure.

7. By an application of 13 January 2010, FDN 31, the plaintiff seeks orders for non party disclosure of documents under 6R 146 against each of Rinaldi & Co Financial Services Pty Ltd (“Rinaldi”), Eleonora Zappia (“Zappia”) and the third defendant.  Rinaldi was a former accountant of the third defendant and Zappia is its current accountant.  Zappia has responded to the application that she will abide by the order of the Court.  Rinaldi has made no response.  The first defendant opposes any order for disclosure being made on this application.  The application is to be dismissed for the reasons which follow.

8. By its express terms 6R 146 only applies to orders sought against persons who are not then parties to the action.  There can be no such order against the third defendant under 6R 146 because for the reasons set out below it is still a party to the action.

9. The term “party” is not defined by the Rules.  However from the definition of “defendant” in 6R 4, and the provisions of 6RR 36, 37 and 38(4), “party” encompasses any defendant against whom relief is sought in the action.  Here the third defendant is expressly named as a defendant and relief is sought against it in that the plaintiff seeks its winding up. 

10. The failure of the third defendant to file an address for service or a defence does not mean that it has ceased to be a party to the action. Under RR 59-60 the only consequence of it not filing an address for service is that other parties do not have to serve it thereafter with Court process. The consequence of it not filing a defence within the time prescribed by Gray J and the Rules is that it becomes liable to orders to be made against it in default of defence under 6R 228, but the plaintiff has not applied for any such order. (I need not go into the question of whether 6R 228 has any effect in lessening the onus on the plaintiff in establishing the requirements of s 461 of the Act for the winding up of the third defendant). Insofar as the failure of the third defendant, assuming that it has been properly served, to file an address for service or a defence is a procedural irregularity, as defined in 6R 4, no order has been sought or made under 6R 12. I doubt that any order made under 6R 12 would have the effect of removing the third defendant as a party to the action.

11. While no order for non party disclosure of documents is to be made against the third defendant under 6R 146 it does have obligations under the Rules to make disclosure of documents.  As it is a party to the action, 6R 136(1), (2) and (4) obligate it to make disclosure of documents as required by that Rule.  Its obligations under that Rule are not conditional upon it having filed either an address for service or a defence.  As there has been no settlement conference the time for filing its list of documents ran from the close of pleadings, which under the Order of Gray J was 30 June 2009.  Even if that is not the correct date, it would seem clear that the pleadings against it have closed long ago under 6R 92(2).

12. Under 6R 136(1) the third defendant was required to disclose all directly relevant documents which are or have been in its possession.  Under the definition of “possession” in 6R 4 this includes documents held by its agents which it could require them to hand over to it.  As Rinaldi and Zappia were and are its accountants, I conclude that directly relevant documents held by them are likely to be in the possession of the third defendant.  If there was some particular reason why those documents were not in the “possession” of the third defendant, this is a matter peculiarly in its knowledge, and none of the third defendant, Rinaldi or Zappia have put any evidence of it before the Court.

13. It is established law under 6R 146 and its predecessors that no order for disclosure is to be made against a non party for documents which should be obtained from parties to the action by available processes of disclosure: Williams Aviation Pty Ltd v Santos Ltd (1985) 40 SASR 272; Sands v State of SA, Perry ACJ, 27 September 2005, Judgment No [2005] SASC 381 (unreported). If the plaintiff is unable to obtain the documents in question from the third defendant by pursuing its available remedies against it, he can then renew his application for non party discovery against non parties who may also have the documents: Harris Scarfe Pty Ltd v Shoe Source Group Importing Pty Ltd, Lunn M, 10 July 2008, Judgment No [2008] SASC 187.

14. The third defendant would appear to be in breach of its obligations to make disclosure under 6R 136(1)(a).  It has not seen fit to respond to the process of the Court to enable it to be heard to the contrary.  I am prepared to make an order under 6R 145 without any formal application for it by the plaintiff that the third defendant file a list of documents.

    Application for production and better disclosure of documents by the first and second defendants.

15. By an application of 5 February 2010, FDN 33, the plaintiff has sought an order for production, and further and better disclosure, of documents by the first and second defendants (incorrectly referred to in the application as the first and second plaintiffs).  The orders sought are those set out in a letter of 13 January 2010 from the plaintiff’s solicitors to the then solicitors for the first and second defendants.

16. The first defendant has responded to this application by written submissions dated 8 March 2010.  Those submissions refer to a letter of 29 September 2009 from his then solicitors which does not appear to be exhibited to any affidavit.  However, in the light of the conclusions which I have reached it is not relevant.

17. The first part of the letter of 13 January states:

    Could you please provide the following as a matter of urgency.

    Five categories of documents are then referred to apparently by their designations in the first and second defendants’ list of documents.  The first item is not pursued.  Although it is not stated in FDN 33, the application is apparently made under 6R 142 which provides:

    (1)The Court may order a party to produce documents for inspection and copying by another party at a time and place specified in the order.

    The request is not for copies of the documents, but apparently for the first and second defendants to send to the plaintiff the documents in question.  There was no obligation on the first and second defendants to do so.  There is no evidence that the solicitors for the first and second defendants have failed to disclose the documents in question on the physical inspection which had previously occurred.  No proper foundation has been laid for any order under 6R 142(1).  The first defendant has made various responses about particular documents which may or may not deal with the requests for their production.  If the plaintiff seeks copies of the documents in question, he should specifically request it under 6R 142(3)(a) and undertake to pay the appropriate fee.

18. The second part of the letter of 13 January seeks further and better disclosure of eight categories of documents.  Although it is not stated in FDN 33, presumably the application is made under 6R 145.  That requires that on the evidence before it the Court has “reason to doubt” that the first and second defendants have fully complied with their obligations for disclosure of such documents.  This means that the Court must be satisfied there is a reasonable basis for doubting that the disclosure is adequate, but it goes beyond the mere possibility of inadequate disclosure: Ceneavenue Pty Ltd v Martin, White J, [2008] SASC 332. No order is to be made unless the plaintiff provides that reasonable basis for doubting.

19. The requests 1-4 are for the personal bank accounts and tax returns of each of the first and second defendants.  A relevant matter on the pleadings is what income each of the first and second defendants has received from the third defendant.  If they have received such income, it is a reasonable inference that it may be reflected in their bank statements and income tax returns.  If records of such income are contained in such documents, they will be disclosable.  However, they are not disclosable where they do not contain such entries merely to show they do not disclose such entries: Hancock v South Australian Tourism Commission, Duggan J, [2000] SASC 172 at [14].

20. Items 5 and 8 in this category relate to minutes of meetings of the third defendant on 24 September 2003 and a meeting of 12 November 2006.  The first defendant says that such minutes as exist have been disclosed.  There is no evidence to suggest to the contrary.  No proper basis for further disclosure has been made out for these items.

21. Item 6 relates to subleases for the premises at 148 Greenhill Road.  The first defendant says in his submissions that there are none.  Again, there is no evidence to show a reasonable basis to doubt this.

22. Item 7 relates to correspondence with Virgin Money Australia or Virgin Home Loans.  The first defendant says that any such correspondence has been disclosed.  Again, there is no reasonable basis to doubt this.

    I have today made the following orders:

    1Application, FDN 31, for non party disclosure against Rinaldi, Zappia and the third defendant is dismissed.

    2The third defendant is to file a list of documents in accordance with 6R 136(1)(a) within 21 days of service of this order upon it.

    3Application, FDN 33, for production of documents by the first and second defendants is dismissed.

    4The first and second defendants are to file within 21 days a further list of documents disclosing such of their bank statements and tax returns as contain entries directly relevant to moneys or benefits which they have received from the third defendant.

    5The balance of the application for further disclosure in FDN 33 is dismissed.

    6The question of costs is reserved.

    7Adjourned to a Directions hearing on Thursday 5 May at 10.40 am.