Naldoni v Venaldo Corporation Pty Ltd
[2019] WASC 490
•21 MAY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: NALDONI -v- VENALDO CORPORATION PTY LTD [2019] WASC 490
CORAM: MASTER SANDERSON
HEARD: 10 DECEMBER 2019
DELIVERED : 25 MARCH 2020
FILE NO/S: CIV 2308 of 2018
BETWEEN: LUCA NALDONI
First Plaintiff
WINDCHEF PTY LTD
Second Plaintiff
AND
VENALDO CORPORATION PTY LTD
First Defendant
SOROCCO NOMINEES PTY LTD
Second Defendant
MAJORS GROUP AUSTRALASIA PTY LTD
Third Defendant
ANTHONY COLIN VENEMA
Fourth Defendant
Catchwords:
Practice and procedure - Application for discovery in corporation action - Turns on own facts
Legislation:
Corporations Act 2001 (Cth)
Result:
Plaintiffs' application for further and better discovery dismissed
Category: B
Representation:
Counsel:
| First Plaintiff | : | Mr G M Abbott |
| Second Plaintiff | : | Mr G M Abbott |
| First Defendant | : | Mr R C Di Renzo |
| Second Defendant | : | Mr C K Pearce |
| Third Defendant | : | Mr R C Di Renzo |
| Fourth Defendant | : | Mr C K Pearce |
Solicitors:
| First Plaintiff | : | Armeli & Molony Lawyers |
| Second Plaintiff | : | Armeli & Molony Lawyers |
| First Defendant | : | Nova Legal |
| Second Defendant | : | Blackwall Legal Llp |
| Third Defendant | : | Nova Legal |
| Fourth Defendant | : | Blackwall Legal Llp |
Case(s) referred to in decision(s):
Nil
MASTER SANDERSON:
This is the plaintiff's application for further and better discovery. The action was commenced by writ of summons issued on 26 July 2018. In broad terms it is an oppression claim. The action should have been commenced by way of originating process issued pursuant to the Corporations Act 2001 (Cth). Be that as it may, the action has proceeded and a statement of claim was delivered on 14 August 2018. The nature of the plaintiff's cause of action can be summarised by reference to the pleading and the affidavit of Anita Zaba‑Czader sworn 21 October 2019 and filed in support of the application. The second plaintiff and the second defendant are shareholders in the first defendant with the second defendant holding a majority interest.[1] The first defendant is the parent company of the third defendant and two other related entities – Majors Group Philippines Pty Ltd and Majors Group Finance Pty Ltd.[2] The first plaintiff is a director and shareholder of the second plaintiff and a former director of the first defendant and the third defendant. The fourth defendant has been and remains a director of the first defendant and a director and employee of the third defendant. The fourth defendant is also a shareholder in the third defendant. The first plaintiff has been removed as a director of the first and third defendants and the circumstances of his removal are said by the plaintiffs to be relevant to their oppression claim.[3]
[1] Statement of Claim filed 14 August 2018, par 9.
[2] Plaintiffs' submissions filed 28 November 2019, par 5.
[3] Plaintiffs' submissions filed 28 November 2019, par 6.
As is generally the case in oppression actions, the plaintiffs complain the defendants have conducted the affairs of the first and third defendants in a manner which benefits the majority interests and to the prejudice of the plaintiffs. (Although claims are made against the first, second and third defendants, it is really the actions of the fourth defendant which are in issue. With respect to each of the defendants, he is the guiding hand). Without going into detail, the plaintiffs complain of a number of matters. These include termination of the first plaintiff's employment from the third defendant and his removal as a director of the first defendant. Complaint is also made that the first plaintiff has been refused access to the first defendant's books and records. There is an allegation that payments have been made from the third defendant to the benefit of entities associated with the fourth defendant in breach of directors' duties.[4] These payments are said to be to the detriment of the third defendant and the consequential detriment to the second plaintiff. Although the facts are particular to each oppression action it has to be said that there is a certain similarity in all of these types of claims and this action is not really much different from any other such claim.
[4] Plaintiffs' submissions filed 28 November 2019, par 8.
As a general rule, discovery is not ordered in actions commenced by originating process under the Corporations Act. That is because it is for the plaintiff to identify the actions taken by a defendant which are oppressive. So, for instance, if it is said removal of a director who is a shareholder is oppressive, then it is the fact of removal in all the circumstances which is relevant. If a defendant wishes to establish the removal was justified, then it would be for the defendant to produce the documents that support that position. If, for instance, the defendant maintained the plaintiff was removed because the books and records of the company for which the plaintiff was responsible were not kept in a proper and orderly condition then it would be for the defendant to make good that claim. It may be that a plaintiff could then seek some form of discovery, perhaps to explain why certain books and records were not properly maintained. But the need for discovery arises out of the particular circumstances of the case. In actions such as this, the provision of discovery as a matter of course is not appropriate. Looking at the complaints made by the plaintiffs in this case it is difficult to see how a need for discovery, let alone extensive discovery, arises. By way of example the plaintiffs alleged the payments were made from the third defendant to the benefit of entities associated with the fourth defendant in breach of directors' duties. These matters are pleaded in paras 38 and 39 of the statement of claim. In par 36 of the second and fourth defendants' defence payments are admitted (there is some discrepancy as to the amounts) and an explanation is offered as to why the payments were made. Clearly that is a matter the second and fourth defendants will need to establish and they will need to produce documents to support their position. But the fact that these matters must be established by the second and fourth defendants does not give the plaintiffs an unlimited right to discovery.
To date four affidavits of discovery have been lodged – two by the fourth defendant and two by David Wheeler on behalf of the first and third defendants. After discussions between the parties certain further documents were produced and these are attached to the affidavit of Ms Zaba‑Czader. Subsequent to the application a further bundle of documents was produced. These appear as attachment DCW16 to an affidavit of Mr Wheeler sworn 21 November 2019. In addition, Mr Wheeler confirms the defendants intend to discover draft audited financial statements for the Majors Group for the year ended 2019. At present the auditor has not signed off on those financial statements.[5] In addition the defendants intend to discover, subject to a 'mutually agreed confidentiality regime', cash flow budget forecasts for 2020 for the Majors Group and minutes of directors' meetings.[6] The plaintiffs point out that as yet no attempt has been made to agree a confidentiality regime but for present purposes it can be assumed the documents referred to will, in due course, be produced.
[5] Affidavit of David Colin Wheeler sworn 21 November 2019, par 20.
[6] Affidavit of David Colin Wheeler sworn 21 November 2019, par 21.
The additional documents sought by the plaintiffs are set out in a schedule to the chamber summons. There are 38 separate categories of documents. A flavour of what the plaintiffs are seeking is provided by looking at the first category of documents sought. They are described as follows:
All documents, including financial records, in relation to matters referred to in the Venaldo Financials for 2018, including the financial records relating to the dividends paid by Venaldo in the sum of $4,615 in 2018 and $29,423 in 2017 referred to at page 3 of Venaldo Financials 2018 (those dividend payments are listed as 'income', see page 7 of the Venaldo Financials for 2018).
In the schedule there is a heading 'Reference to pleadings'. This is the plaintiffs' outline of why they say the described documents should be discovered. In relation to Category 1, the entry reads as follows:
Substantive Claim of oppression and breach of directors' duties. Also as a secondary matter, the Valuation Relief.
To ask for documents at this level of specificity goes well beyond what is necessary to conduct an action such as the present. There is nothing in the pleading to suggest that dividend payments made by the first defendant were in some way oppressive to the plaintiffs. The plaintiffs are simply fishing for evidence which might further advance their position.
In relation to the claim made with reference to a number of categories that the documents are necessary for the purposes of valuation, two comments can be made. First, if there is an order the defendants purchase the plaintiffs' shares then expert evidence would need to be obtained as to the value of those shares. It is then that certain documents would need to be produced to the valuer. But it might not get to that – there may be a winding up order made. That first point feeds into the second point – at present there is no issue between the parties which requires valuation evidence. The question is whether the defendants have engaged in oppressive conduct such as to give the plaintiffs the right to relief. If some steps have been taken by the defendants to in some way devalue the worth of the first, second and third defendants to the disadvantage of the plaintiffs then the plaintiffs' case will be advanced. The quantum of such detriment – at least in precise terms – is hardly relevant.
In the circumstances of this case and given the nature of the issues between the parties I am not satisfied that it would be a proper exercise of discretion to grant the orders for discovery sought by the plaintiffs. The extent of the discovery and its overall probative value are out of all proportion to the nature of the dispute between the parties. Furthermore, the documents sought seem to me to be sought on the basis that by trawling through this information the plaintiffs will be able to discover further information which may support their position. Perhaps they are right. But even if they are, the forensic value of such an exercise compared with the cost involved in providing the discovery make the orders sought by the plaintiffs inappropriate.
For these reasons the plaintiffs' application will be dismissed. While the defendants have been successful in their opposition to the application it is the case that certain further material has been provided by way of discovery consequent upon the application being brought. In the circumstances if no agreement can be reached as to costs then the parties should file short written submissions on the question of costs within seven days of the date of publication of these orders.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
IW
Associate to Master Sanderson
25 MARCH 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: NALDONI -v- VENALDO CORPORATION PTY LTD [2019] WASC 490 (S)
CORAM: MASTER SANDERSON
HEARD: ON THE PAPERS
DELIVERED : 21 MAY 2020
PUBLISHED : 21 MAY 2020
FILE NO/S: CIV 2308 of 2018
BETWEEN: LUCA NALDONI
First Plaintiff
WINDCHEF PTY LTD
Second Plaintiff
AND
VENALDO CORPORATION PTY LTD
First Defendant
SOROCCO NOMINEES PTY LTD
Second Defendant
MAJORS GROUP AUSTRALASIA PTY LTD
Third Defendant
ANTHONY COLIN VENEMA
Fourth Defendant
Catchwords:
Costs - Discovery - Appropriate costs order following an unsuccessful application made by the plaintiffs for further and better discovery - Turns on own facts
Legislation:
Nil
Result:
Costs of the application, including reserved costs, be costs in the cause
Category: B
Representation:
Counsel:
| First Plaintiff | : | Mr G M Abbott |
| Second Plaintiff | : | Mr G M Abbott |
| First Defendant | : | Mr R C Di Renzo |
| Second Defendant | : | Mr C K Pearce |
| Third Defendant | : | Mr R C Di Renzo |
| Fourth Defendant | : | Mr C K Pearce |
Solicitors:
| First Plaintiff | : | Armeli & Molony Lawyers |
| Second Plaintiff | : | Armeli & Molony Lawyers |
| First Defendant | : | Nova Legal |
| Second Defendant | : | Blackwall Legal Llp |
| Third Defendant | : | Nova Legal |
| Fourth Defendant | : | Blackwall Legal Llp |
Case(s) referred to in decision(s):
Chvojka v Lockwood [2019] WASC 440
MASTER SANDERSON:
By their chamber summons dated 21 October 2019 the first and second plaintiff's sought orders that the defendants each give further and better discovery of documents. On 25 March 2020 I dismissed the application. The parties have been unable to agree a costs order. These reasons deal with that issue.
The defendants' position put simply is that they successful resisted the application and they are therefore entitled to their costs. Moreover, the defendants say that at all times they have attempted to cooperate with the plaintiffs. They say that as a rule, discovery is not ordered in corporation matters - although this matter was commenced by writ it is really a corporations matter. The defendants point out that after requests by the plaintiffs they provided discovery even before this application was issued. After the application was issued they provided further discovery and indicated the discovery process would be ongoing. They say in all the circumstances the issue of the application was unnecessary; but if the application had to be issued it failed.
The plaintiffs for their part rely on essentially the same facts. They say that when the application was foreshadowed, discovery which had been resisted was forthcoming. Subsequent to the application, further documents were provided and subsequent to the hearing further documents still were provided. The plaintiffs say that the defendants effectively conceded the plaintiffs were entitled to discovery and were entitled to have discovered more documents than were originally provided. The plaintiffs refer to the decision of Le Miere J in Chvojka v Lockwood [2019] WASC 440 to support the proposition that costs of the application should be costs in the cause.
On balance I am satisfied the costs of this application, including reserved costs, should be costs in the cause. Essentially I have reached that conclusion for the reasons detailed by the plaintiffs in their written submissions. The defendants conceded they should provide discovery and have done so in a stepped way. While I accept the defendants have cooperated with the plaintiffs, it seems the plaintiffs summons for further and better discovery has been the catalyst which had led to further discovery being provided. That is not in any way to denigrate the commendably cooperative efforts of the defendants. But I am satisfied the issuing of the summons was appropriate that it has led to further discovery by the defendants and it has in all probability furthered the litigation in a positive way.
The order will be that the costs of the application, including reserved costs, be costs in the cause.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson
21 MAY 2020
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