Octagon Inc v Hewitt
[2011] VSC 138
•13 April 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. S CI 2008 04813
B E T W E E N:
| OCTAGON INC | Plaintiff |
| - and - | |
| LLEYTON GLYNN HEWITT and | Defendants |
| LLEYTON HEWITT MARKETING PTY LTD (in its capacity as trustee of the Lleyton Hewitt Marketing Trust) |
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JUDGE: | MUKHTAR, As J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 30 November, 1 December 2010, 23 March 2011 (and plaintiffs’ written submissions on 30 March 2011) | |
DATE OF JUDGMENT: | 13 April 2011 | |
CASE MAY BE CITED AS: | Octagon Inc v Hewitt and anor | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 138 | |
DISCOVERY ― Relevance ― Content of pleadings ― Action on agreement for personal management services and investment of earnings ― Fiduciary relationship ― Allegation of inadequate rate of return on investments ― Comparison with expectable rate of return ― Existing discovery of actual interest earned on investments ― Whether existing discovery sufficient to enable comparison as pleaded to be made ― Whether relevant to require further discovery of the composition or financial basis of the interest earned ― Court’s regulation of discovery ― Civil Procedure Act (No 47 of 2010), s 55.
* * *
REASONS FOR DECISION
APPEARANCES: | Counsel | Solicitors |
| For the defendants (plaintiffs by counterclaim) | Mr T Walker | Kelly & Co Lawyers |
| For the plaintiff (defendants by counterclaim) | Mr P T Nugent | Mills Oakley Lawyers |
HIS HONOUR:
Lleyton Hewitt is a famous Australian and international professional tennis player. In this case, he and Lleyton Hewitt Marketing Pty Ltd (“LHM”) have been sued by Octagon Inc, an American company that promotes, markets and manages the affairs of athletes. LHM is a trustee company in the business of promoting Lleyton Hewitt’s name, likeness, image and reputation. The pleadings are extensive but in essence it is a claim for fees or commissions payable under agreements by which Octagon represented Hewitt as his agent. As might be expected in modern sport, such agreements involve the management of commercial affairs such as merchandising and promotional activities, product endorsements, tournament guarantee payments (that is, appearance money), licensing agreements, exhibition matches, and television appearances.
A related company, Octagon Financial Services Inc (“Octagon Financial”) was in the business of providing cash management and related advisory services for the investment of an athlete’s earnings. Neither Octagon nor Octagon Financial is a financial institution. As pleaded by counterclaim, Octagon Financial was involved in the management of Hewitt’s affairs because Octagon was allegedly bound to procure Octagon Financial to provide financial services to Hewitt such as maintaining an interest bearing account, collecting his earnings, converting foreign currency, transferring money, paying his bills, managing his insurance needs, preparing United States federal income tax returns and such matters.
In the counterclaim, with which this application is concerned, the case directly against Octagon Financial is that the company not only held funds but also served Hewitt as his investment advisor and strategist, and likewise served LHM. In essence, the Hewitt parties claim that Octagon Financial failed to obtain a sufficient rate of interest on their funds.
The parties are in an intensive and prolonged dispute over discovery of documents. Generally speaking the dispute concerns the adequacy of discovery due from the Octagon parties for the alleged misfeasance in the way Hewitt’s cash investments were handled up to, and a little time after, the termination of the relationship with Octagon. Another dispute concerns the legitimacy of the redactions made to documents. In this application brought by summons filed 9 November 2010 the Hewitt parties seek particular discovery under rule 29.08 of three categories of documents.
Fortunately, this application does not involve a party having to overcome the conclusiveness that is ordinarily attributable to an affidavit of documents. In that situation, a challenging party needs to show grounds for being fairly certain that there are other relevant documents which a litigant has not disclosed out of some misunderstanding about its discovery obligations, or which have been excluded out of a misconception of the case: see Beecham Group Limited v Bristol-Myers Co.[1] Rather, the question here involves the lower test of whether Hewitt can demonstrate from evidence or from the nature and circumstances of the case or from any document filed in the proceeding that there are “grounds for a belief” that the Octagon parties might have particular documents in their power possession or control, or at least should be compelled by the Court order to say, on oath, whether they do or once did.
[1](1979) VR 273 at 275-279.
Although there was some evidence from Octagon personnel to say there has been complete discovery, the real question was an orthodox one of relevance. That of course depends on an analysis of the pleadings. The Court’s rules on discovery as endorsed under the Civil Procedure Act 2010 require Octagon to discover documents that might adversely affect, or support Hewitt’s case as pleaded. The elements of the counterclaim by Hewitt and LHM are as follows, in an abbreviated fashion.
Hewitt alleges first that between September 1999 and March 2000, Octagon Financial held funds as agent on his behalf and LHM “on the basis of an understanding”. The funds were also held on behalf of LHM between December 1999 and September 2005. Moneys were received on behalf of LHM and reports were given to LHM from Octagon Financial in the form of documents described as Account Transactions Summaries and Account Transaction Details.
Then, paragraph 99 of the counterclaim alleges that in March 2000 Hewitt and Octagon Financial made a written agreement called a “Financial Advisory and Investment Management Services Client Agreement”. Under that agreement Octagon Finance expressly agreed it would manage all elements of the client’s business and financial affairs, develop plans and strategies to reach the client’s goals, serve as the client’s investment advisor, and supervise, review and advise on the investment and reinvestment of the client’s cash and other investments. The client was Hewitt and LHM.
Paragraph 99.5 is especially important. It alleges an express term of the agreement that:
The Client’s funds will be placed into a single trust with the funds of other OFS’ [i.e. Octagon Financial] clients. This trust will be managed by First Union National Bank…and OFS will maintain account balances and interest earned on an individual basis for each client.
Paragraph 99.6 alleges that a financial adviser from OFS would be responsible for making investment and investment management decisions for the client subject to OFS supervision. Paragraph 101 alleges that between March 2000 and September 2005 Octagon Financial provided financial services under the agreement in the way of managing Hewitt’s cash flow requirements. The particulars say that Octagon Financial received money from Hewitt and reported to him by Account Transaction Summaries and Account Transaction Details. The Hewitt parties have those documents. They know the amount of interest earned.
What is the alleged cause of action against the Octagon parties? First, there is a case in tort based on an implied term of the agreement that Octagon Financial would exercise reasonable skill and care in managing Hewitt’s financial affairs by a prudent investment of funds that were a surplus to Hewitt’s current financial requirements. The counterclaim alleges that over six years Octagon Financial held funds on behalf of Hewitt and LHM which were surplus to living or business expenses. In that regard, the agreement stated that OFS would have the sole discretion with respect to the direction of the investment and re-investments, and that investments could be made in securities including mutual funds, bonds, securities of investment companies, municipal securities, US Government securities and certificates of deposit.
Next it is alleged that as agent, Octagon Financial was Hewitt’s fiduciary. But there is no discrete claim, as I see it, under the fiduciary principle. Of course, the relationship between agent and principal is accepted as a category of fiduciary relationship. That is because it satisfies the critical feature of a fiduciary as someone who agrees to act in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. Although under Australian law at least the fiduciary obligations are largely proscriptive in nature, the fiduciary relationship is generally speaking also a basis for a principal to request a Court to compel an agent to deliver up documentation or information concerning performance of the agency. That enforces the general legal duty for an agent to give full disclosure or to account and to explain dealings with the principal’s property. A similar right, or remedy, arises as between trustee and beneficiary.
In the counterclaim it is not claimed that a conflict arose, or there was an improper gain, or a failure by the fiduciary to account. It is not a claim asserting a right to information from a fiduciary about the conduct of the agency. The counterclaim states that Hewitt and LHM received from the Octagon parties an account of their moneys in the account transaction summaries and account transaction details. But this discovery application is all about the underlying financial dealings.
A second aspect of the claim in tort is a duty owed to Hewitt by Octagon Financial to plan investments for Hewitt’s particular circumstances and financial objectives, and to manage his financial affairs by prudent investment of funds. This is pleaded in the context of Hewitt having significant current earnings but having an uncertain future earning capacity such that the investment plan was to secure his financial future by investing his current earnings in a conservative manner. It is alleged that an appropriate investment plan would have emphasised the production of stable income through low risk investments, a small component of higher risk investments and would not place his surplus funds primarily in the money market alone. The same was said of LHM’s financial objectives and circumstances.
A second case is put in contract. It is alleged that the agreement was breached in that Octagon Financial did not develop plans and strategies to reach Hewitt’s goals and did not supervise, review or advise him on the investment of his discretionary account. It is alleged Octagon Financial failed to manage his financial affairs by a prudent investment of funds in a mix of investments consistent with Hewitt’s particular financial objectives and circumstances. The gist of the allegation is that Octagon Financial obtained for Hewitt a return equivalent to investments in the money market rate only.
The principal accusation of wrongdoing is in paragraph 118. Octagon Financial seizes on this. The allegation says that had Octagon Financial performed its obligations under the agreement, or under its concurrent duty in tort, then “Octagon Financial would have made investments on behalf of Hewitt which would have yielded a greater return than the investments which were made”. In particulars under that allegation, there is a comparison of the interest that was obtained for Hewitt by Octagon Financial in the sum of US$79 856 as against the return which should have been obtained for Hewitt in the sum of US$255 520. The same is said when it comes to LHM. The return that was obtained was US$173 155, and the return which should have been obtained was US$495 655. The claim is for damages referable to the greater amount that the Hewitt parties say should have been earned.
Before the summons was filed, the Octagon parties resisted complaints about the sufficiency of their discovery by asserting that all relevant documents had been discovered. They were pressed for bank statements; interest calculations; documents showing how funds were actually held on behalf of the Hewitt parties; and documents in relation to guarantee payments from tournament organisers. I will not refer to the traffic of correspondence. The response was that Octagon Finance received a single bank statement for the single trust in which it holds all its clients’ money. It then uses a computer program to calculate the average daily balance of a particular client’s account, and that program also calculates the interest payable on each particular account. As for the guarantee documents, they said numerous documents were already discovered on this topic.
More correspondence ensued. The outcome was that the Octagon parties insisted that all relevant documents had been discovered. As for bank statements, these were contended to be not relevant to the claim as pleaded. By way of explanation they said that the accounts of the Octagon parties do not separately record the funds held on behalf of the Hewitt parties and never did.
The solicitor for the Hewitt parties swears that the documents discovered do not: show where or into what accounts the money was invested; do not refer to any rate of interest, do not record the interest paid by a third party on the funds, do not record the principal amount upon which interest was calculated, and do not show how calculations of interest were derived. The only discovered documents showing what was done with his money are the account transaction summaries which were produced by the Octagon parties anyway in the course of the relationship. They show an interest figure earned by the client presumably after the clients funds were, in accordance with the agreement as pleaded, placed into a single trust with the funds of other clients and managed by First Union National Bank.
Octagon Financial swears (and this seems to me to be faithful to the express term of the agreement as pleaded in paragraph 99.5) that all its clients’ funds were held at First Union National Bank and then the successor bank. The bank was a single custodian which held the funds belonging to Hewitt, LHM and all other clients. In that sense, there was a single account. For itself, that is, for its own management, Octagon Financial says it maintained separate account records for Hewitt and LHM, as one would expect. Those separate account records have been discovered.
What has aroused apprehension is a reference to another account maintained by Octagon Financial described as a Client Trust Account. It is explained that when a third party makes a payment to an Octagon client (for example, a sponsorship fee) the money goes into a Client Escrow Account which is there for the purposes of segregating the funds received into Octagon’s fee on that payment received, and the client’s portion being the net amount less Octagon’s fees. The client’s portion is then transferred to the Client Trust Account held by Octagon. There is a bank statement for that account. But that is not a document that shows money invested, or return on money invested, on Hewitt’s behalf under their agency agreement.
There is also reference to a Zero Balance Checking Account. Octagon Financial says this account was set up and used to pay its clients’ bills to third parties. That was not an investment account or an account where particular client’s moneys were held. It was more a case of funds being put into this account by transfer to pay any sum to be immediately paid by cheque or transfer. The balance of the account is always zero. That explains the transactions summaries that are given to the clients.
This is what the Managing Director of Octagon Financial, Janet Plewes, had to say about the relevance of any bank statements which may show how Octagon Financial invested Hewitt’s money and what the returns were:
There is no allegation by the Hewitt parties that OFS [i.e., Octagon Financial] misappropriated Hewitt’s money, or that any of the balances recorded in the transactions summaries were wrong. Therefore, the only bank statements that are relevant to the issues in the proceeding are those detailing the monies invested by OFS on Hewitt’s behalf, being OFS documents No. 1080 to 1085 and the numerous transaction summaries already discovered by OFS.[2]
[2]See affidavit of Janet Plewes sworn 23 November 2010 at [14].
Octagon in its affidavits contends in any event that they have already made discovery of numerous documents “which evidence the calculation of interest” even though, Octagon says, there is no claim made that it incorrectly calculated interest due on the funds. They swear that Octagon Financial does not have nor has it ever had any documents “which go to the calculation of interest.”
I shall go no further with the evidence. The dispositive question is one of principle, to which I now turn.
In a measured and concise submission, Mr Nugent as counsel for Octagon, maintained that documents showing how and where Hewitt’s money was invested and the form and type of investment, and the return on the investment and the capital fund on which the particular investment was made are irrelevant. This is how he puts the argument:
(a)Hewitt’s case takes as a first step the return obtained for him and LHM by Octagon Financial, that is, the amount he received by way of return on funds;
(b)Hewitt’s case alleges the return which “should” have been obtained had Octagon Financial properly invested his funds;
(c)then, Hewitt alleges that his loss is the difference between the two;
(d)therefore, all that matters is the comparison with the actual return (which is known to the dollar by all concerned) as against the hypothetical return had the Octagon parties acted dutifully at law and under the agreement (a figure which has been posited by Hewitt in the counterclaim to the dollar);
(e)therefore, it is irrelevant for the case, and therefore by the laws of discovery, to know where Octagon Financial invested Hewitt’s money, when, and at what rate of return and what the actual interest figure was; and
(f)it is idle for the Hewitt parties to complain, for they do not and cannot complain they do not know how much interest was received, or that the interest was not passed on. Their complaint is that they should have obtained more and would have obtained more had the funds been invested differently.
To develop his argument Mr Nugent posited by way of illustration only, an imaginary situation where Octagon “allotted” interest from the single trust account in a perverse way amongst its clients by spinning a roulette wheel as if each number represented a particular client. The lucky client is then given all the interest from the trust account. He submitted that even if that situation, the “method of allocation” would not be relevant to the claims of the Hewitt parties in this case. Why so? Because, it was submitted, it does not matter how interest was “allocated”; the claim by Hewitt is that his money should have earned more interest than whatever Octagon obtained. That example seeks to portray or analyse Hewitt’s case to be totally unconcerned with what Octagon Financial actually did with his money (hence irrelevance); all that matters is what Octagon financial should have done with his money.
I think that to be a dangerous example. First, it is not an “allocation” point. Hewitt is not asking for documents about allocation in the sense of wanting to know the formula by which he gets a portion of the pool of funds from the trust. Secondly, and moreover, the example proceeds on an assumption that Hewitt’s cause of action is made out once it is proved, without more, that greater interest could have been earned.
The problem as I see it is that Octagon Financial is confining itself to documents showing the payment of interest simpliciter, that is, documents going to the phenomenon of interest having been accrued. It is in that sense I apprehend Octagon are saying that it does not have any other documents “which go to the calculation of interest”. I can accept, as I must, on the evidence that they have discovered all documents concerning or which show the interest paid to Hewitt or LHM. That would be plain on the various summaries that were given throughout the currency of the relationship.
But that is not what the Hewitt parties seek in this application. Without yet looking at the precise terms of the summons, it is as if the Hewitt parties are saying to their agent ― their fiduciary ― who was investing their funds: “I am entitled to see if you have documents showing how you invested my money and the rate of return earned. I know under the agreement it was to go to a single trust fund with your other clients, but that tells me very little. I want discovery of documents from third parties which show me where my money was invested. I want to see what was invested. And I want to see at what rate of interest my money was invested.” Otherwise, the Hewitt parties complain, they and their advisors are left in the position where they must work with lump sum interest figures and then make assumptions to reverse engineer or deduce the rate of interest earned on his cash deposits from time to time.
I cannot accept the submission that the enquiry which informs the application for particular discovery is irrelevant. I think the submission on relevance is based upon a confined or convenient interpretation of the pleadings and overlooks the legal elements of the proper adjudication of the case. True it is, the measure of the claim for loss and damage is based upon a juxtaposition of what interest was actually earned as against what interest should have been earned. But just because the Hewitt parties show that their interest figure is higher than the Octagon figure does not ipso facto mean there was a breach in contract, or negligence. There is a fundamental question of breach; and there is a question of causation. The Octagon parties may, I suppose, say at trial that although the interest amount may have been lower, that does not mean they were negligent or acted in breach of the agreement. They can defend themselves by showing what they did, why they did it, how the trust was administered, what the rates were, and why that was all faithful to their legal obligations.
If Octagon does not adduce evidence about where, how and at what rate Hewitt’s money was invested, then the most Hewitt can be expected to do, with expert computation and reverse engineering, is to take the Octagon interest amount, make assumptions, deduce the interest rate, and compare that rate with real evidence about alternative investments or available interest rates at the time and try to make their case. But before then, so I would hold, Hewitt is entitled to ask for documents to find out as a matter of fact how and at what rate his funds were invested. The legal principle is: because it advances his case or impeaches the Octagon case.
It may be that Octagon says there are no such documents attributable to Hewitt’s money or LHM’s money. It may say that in accordance with the terms of the agreement, those moneys were aggregated on a dynamic basis with income streams from other athletes, funnelled into a single fund invested in a multitude of ways over different risk profiles, and the income was then “allocated”, akin to the treasury of a superannuation fund. If there are no such documents then the Octagon parties will face trial themselves not being able to adduce evidence about the rates and show they acted without fault. In that case, the Court ultimately will assess the expert evidence based upon the reverse engineering as I have described it and make the comparison exercise to see if breach and causation are established. But to say the documents are irrelevant on the pleadings is, I think, a fallacy.
As things stand, the evidence discloses that the information about what funds were held on behalf of the Hewitt parties, and information about how interest was calculated on those funds goes no further than the information given to the Hewitt parties during the course of the relationship. They reveal only the actual amount of interest credited. They do not enable a party to deduce what the interest was that was actually earned.
It hardly needs to be said, but discovery is a tool of justice and has to be deployed especially where, as in this case, the facts are uniquely in the possession of an adversary. And, although this is not a case seeking the remedy of a provision of information, it is correct, as Mr Walker submitted, to say that what informs the discretion about discovery and considerations of the burdens that discovery might impose on Octagon, is the fact that Octagon is a fiduciary who was bound to act in their clients’ interests. In essence, Octagon is being asked to do no more than produce documents that go to show what they did with their client’s money.
Accordingly on the question of principle, I would hold that documents relating to the rate of interest by which the amount of interest was calculated on funds held on behalf of Hewitt and LHM are relevant. I would also hold, collaterally, that documents from third parties to Octagon Financial relating to funds held for the Hewitt parties and the rate of interest paid on those funds are also relevant.
I realise that Janet Plewes, the managing director, has sworn that her company does not have nor has it ever had any other, that is additional, documents which go to “the calculation of interest.” But I cannot be certain, in the way the relevance point has been taken throughout the correspondence and in this application that she is referring to no more than the calculation of the interest as a lump sum. What needs to be confronted and without any equivocation is whether the Octagon parties have any documents in their power possession or control concerning how or in what way the interest paid to the Hewitt parties was calculated or made up; that is, documents concerning: (a) the rate of interest; (b) the source of the interest; (c) the amount of the principal on which the interest was paid; and (d) the nature, type and identification of the investment to which the principal was applied. And that is the sort of consolidated order I would make on the first two categories in paragraph 1.1 and 1.2 of the summons.
The summons filed on behalf of Hewitt on 9 November 2010 identifies at paragraph 1.1(a) to (j) various banks or accounts where, according to documents already discovered, there is reason to believe his funds may have been deposited. In my view there is no need to make the order by reference to those particular institutions. The affidavit of Janet Plewes deals with each of those categories enough to make the Court think that pressing for discovery concerning those banks will not likely lead to relevant documents if the exercise, to be kept in mind, is to find the rate of return on funds lodged. The type of order as I have fashioned it in paragraph 37 ought capture all sources of that information.
Should it be that discovery of such matters can only occur by interrogating computers that are programmed to record financial data and perform financial calculations for clientele, then as a first step to avoid problematic and maybe invasive discovery of computerised information (particularly as Octagon is in the USA), I would see this case as requiring as a practical measure the provision of information (which is a different thing to discovery) about all of the above matters. That has legitimacy because of the fiduciary relationship. It is also something the Court must, in modern litigation do for practical purposes as recognised by section 55(1) and 55(2)(k) of the Civil Procedure Act. Otherwise what looms is a cross‑examination or an oral examination of any deponents under s 57 of the Civil Procedure Act (2010) which I would regard as a very effective way of containing fractious discovery disputes.
For completeness, I would hold that by the nature of this case it is reasonable to suppose that such documents do indeed exist. It would be certainly surprising for an enterprise of this nature to be heard to be saying that it cannot tell any particular athlete for whom it was acting where his money was deposited and the form of investment and the rate of interest on the sum so invested. If it be that the athlete’s money went into some amorphous fund which makes it not possible to isolate at least by documents an individual athlete’s investment then there would need to be very strong evidence before this matter went to trial from persons having personal knowledge to explain such a thing. Even if the money went into an amorphous fund, it would be strange to be told that no documents exist which show what rates of interest were being earned by that fund referable to classes of investment.
That leaves the documents sought in paragraph 1.3. It concerns guarantee fees paid to the Hewitt parties for various international tennis tournaments. Without going into details of the pleadings, it is apparent that the commission or fees chargeable by Octagon on gross income derived by Hewitt included income from guarantees received from tournament organisers.
The funds held by Octagon Investments from December 1999 and September 2005, it is not disputed, would include funds received by Hewitt or LHM for guarantees or appearance money. Hewitt now seeks documents concerning the arrangements made by Octagon and Octagon Financial on behalf of the Hewitt parties in relation to guarantee fees. The summons carefully identifies the tournaments according to year and place from 1999 to 2006.
The summons in this case was filed on 9 November 2010. Up until then, the Octagon parties were saying that discovery on the guarantee payments was complete. On 19 November 2010 (ahead of the return date of 30 November 2010) the lawyers for Octagon wrote to the Hewitt parties as follows:
We are instructed that our clients have located further documents regarding tournament guarantees. These documents are located in a box in an off-site storage facility. It was not obvious to our clients that this box contained documents pertaining to Hewitt because they are intermingled with other clients’ documents and simply categories of tournament, rather than by player.
These documents need to be transported to our clients’ offices, sorted and sent to our office for the purposes of preparing a further affidavit of documents. We can have this done by 3 December 2010. If you do not wish the documents to be verified by affidavit, we could have them to you soon. Please advise whether you wish for them to be verified by affidavit.
We note that the provision of these documents disposes of paragraph 1.3 of your clients’ summons. …
Argument on this matter did not finish on 30 November 2010 and was resumed on 1 December 2010. Even then, it was adjourned to a third occasion on 23 March 2011. In between the second and third occasion, the US Senior Counsel of Octagon, Paul Haase, swore a supplementary affidavit of documents on behalf of the Octagon parties on 17 December 2010 which specified “tournament guarantee documents” from the “1999 offer book through to the 2005 offer book.” There are many documents but they seem to be mainly e-mails or facsimiles.
The Hewitt parties now dispute that the further affidavit of documents deals adequately with guarantee agreements. An affidavit of Glynn Maxwell Hewitt sworn 17 March 2011 states he has reviewed the recently discovered documents. He says that tournament guarantees are negotiated typically between players (usually by a player’s representative) and tournament organisers. He says the documentation expected to be generated are offers from tournaments, negotiations, confirmation of terms, formal contracts, invoices from players and payment statements.
Mr Nugent complains that this complaint about the sufficiency of the supplementary documents comes belatedly and without any reasonable opportunities for the Octagon parties to consider the complaint.
Ordinarily, in discovery disputes particularly of the intensity of this kind, the courts expect litigants to seek by reasonable correspondence the provision of further discovery which can sometimes necessitate having to press the claim with supporting argument, all in the interests of avoiding skirmishes in court. I think in this case the Court needs to intervene to try and deal as comprehensively as it can on the one occasion with existing disputes and not leave matters hanging over only for further disputation. Even though I accept that for this part of the summons the Octagon parties might well have no dispute had they been given further time to consider it, I think it best that I make a determination.
It is clear to me that the documents concerning guarantee payments are relevant. There is sufficient evidence for me to conclude that it is reasonable to suppose that payments of guarantee fees would be referrable to business‑like arrangements which should be evidenced by agreements, invoices and payment statements from tournament organisers. I see no apparent relevance or real evidentiary utility in documents concerning negotiations or offers leading up to a formal contract for a guarantee payment. It is the contract that matters, together with the subsequent invoice and payment.
On category 1.3 in the summons I would order further discovery in relation to the guarantee fees for the tournaments as specified in the summons in addition to those already discovered in the affidavit of Paul Haase of 17 December 2010. I would re –express it by requiring discovery of: agreements, arrangements or understandings by which tournament guarantees were payable to Hewitt; invoices rendered on behalf of Hewitt seeking payment of guarantee fees from tournament organisers; and statements or some such documents showing payments made by tournament organisers to Hewitt under guarantees.
In closing, I make this remark. In any discovery application, the Court needs to ensure that discovery is not being used as a tactical weapon or as a means of harassing or weakening an opponent by putting them to labours and expenses which are not likely to result in the provision of information truly enabling a party to understand how to advance its case or impeach its opponent’s case. Closely related is the modern notion of proportionality which involves a judgment by the Court whether the extent of discovery being pursued is disproportionate to any possible gain that might be had from discovery. This is combative litigation, but I do not conclude that the tenacious request for discovery is overreaching or disproportionate. Hewitt is being sued for commission on his earnings. He is counterclaiming saying that his earnings were carelessly or improperly invested. The person making the claim and resisting this claim is his fiduciary. Hewitt is entitled to know by discovery how his money was dealt with in more precise terms than has been given so far. And he is entitled to know, from his agent, if there are more documents concerning the guarantee payments.
For those reasons I would allow the application.
I would ask counsel to bring in a draft order for the Court to authenticate. I will also hear counsel on the question of costs.
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