Octagon Inc v Hewitt - [2011] VSC 138

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.

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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…

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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Details

Case: [2011] VSC 138
Decision Date: 13 April 2011

CaseChat Overview and Summary

The case of Octagon Inc v Hewitt involves a dispute between the plaintiff, Octagon Inc, and the defendant, Hewitt, regarding an agreement for personal management services and the investment of the plaintiff's earnings. The matter was heard in the Supreme Court of New South Wales. The primary issue before the court was whether the plaintiff was entitled to further discovery of information relating to the composition and financial basis of the interest earned on investments, in order to facilitate a comparison of the actual rate of return on investments with the expectable rate of return. The plaintiff sought this information in order to substantiate their allegation that the defendant had failed to achieve an adequate rate of return on their investments.

The court considered the existing discovery of the actual interest earned on the investments and whether this was sufficient to enable the comparison as pleaded to be made. The court also examined whether it was relevant to require further discovery of the composition or financial basis of the interest earned. The court found that the existing discovery of the actual interest earned was not sufficient to enable the comparison as pleaded to be made, as the plaintiff needed information about the composition and financial basis of the interest earned in order to make the comparison. The court also found that it was relevant to require further discovery of the composition or financial basis of the interest earned in order for the plaintiff to substantiate their allegation of inadequate rate of return.

In light of the above findings, the court allowed the application for further discovery. The court considered that the information sought was necessary for the fair disposal of the proceeding and that the existing discovery was not sufficient to enable the comparison as pleaded to be made. The court also noted that the parties had a fiduciary relationship and that the plaintiff had an interest in ensuring that the defendant had acted in their best interests in relation to the investment of their earnings. The court exercised its discretion under section 55 of the Civil Procedure Act (No 47 of 2010) to order further discovery. The court's decision provides guidance on the court's regulation of discovery in cases involving complex financial allegations and fiduciary relationships.

Orders

Orders of the court

I would allow the application.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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