Parsons Trading Pty Ltd v Van Der Walt
[2017] WADC 44
•31 MARCH 2017
PARSONS TRADING PTY LTD -v- VAN DER WALT [2017] WADC 44
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2017] WADC 44 | |
| Case No: | CIVO:192/2016 | 14 FEBRUARY 2017 | |
| Coram: | REGISTRAR KINGSLEY | 31/03/17 | |
| PERTH | |||
| 6 | Judgment Part: | 1 of 1 | |
| Result: | Application allowed in part | ||
| PDF Version |
| Parties: | PARSONS TRADING PTY LTD FREDERICK ZIETSMAN VAN DER WALT |
Catchwords: | Practice Application for pre-action discovery O 26A r 4 of the Rules of the Supreme Court 1971 (WA) |
Legislation: | Nil |
Case References: | Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94 Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 Waller v Waller [2009] WASCA 61 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Applicant
AND
FREDERICK ZIETSMAN VAN DER WALT
Respondent
Catchwords:
Practice - Application for pre-action discovery - O 26A r 4 of the Rules of the Supreme Court 1971 (WA)
Legislation:
Nil
Result:
Application allowed in part
Representation:
Counsel:
Applicant : Mr J Garas
Respondent : Mr F Robertson
Solicitors:
Applicant : Feinauer Commercial Lawyers
Respondent : Fort Knox Legal
Case(s) referred to in judgment(s):
Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94
Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14
Waller v Waller [2009] WASCA 61
1 REGISTRAR KINGSLEY: By an originating motion dated 22 November 2016 the applicant seeks orders, pursuant to O 26A r 4 of the Rules of the Supreme Court 1971, forpre-action discovery against a potential party, the respondent.
2 The documents sought are:
1 All books, records, accounts, financial statements, computer records, invoices, tax returns, or other documents relating to or recording the financial transactions and results of Hadida Pty Ltd and the Hadida Trust in so far as they relate to the business 'Whitfords City Lottery Centre' (Business) for the period 30 June 2012 to June 2015;
2 All business activity statements, and all drafts of such statements, in respect of the business for the period (whether hardcopy, electronic, originals or copies);
3 All bank statements recording banking transactions relating to business;
4 All tax return for the Hadida Trust for the years that it owned business;
5 The respondent's individual tax returns for the years that Hadida Trust owned the business;
6 All trial balances for the business.
3 The applicant's application is supported by three affidavits sworn by Jacques Parsons (Parsons) on 21 November 2016, 23 January 2017, and 7 February 2017. The respondent opposes the application and has filed an affidavit sworn 16 January 2017 (van der Walt affidavit).
Relevant principles
4 The application is made under O 26A r 4 RSC. Order 26A r 4(1) identifies, as a condition for the application of the rule, a requirement that the applicant 'may have a cause of action against' the respondent. This is referred to as the jurisdictional question: Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 [66]). Martin CJ in Waller v Waller [2009] WASCA 61at [4] commented:
… The jurisdictional question is whether there might be a cause of action which could be demonstrated by the provision of the document sought. However, something more than mere assertion, conjecture or suspicion is required to enable the court to conclude there might be such a cause of action.
5 For completeness, cause of action as it appears in r 4 should be understood in its ordinary sense of being the facts or combination of facts which give rise to a cause of action.
The prospective cause of action
6 On the applicant's part, the prospective cause of action arises out of a business acquisition in February 2015. The applicant purchased a lottery kiosk business at the Whitfords Shopping Centre from Hadida Pty Ltd (Hadida). The business comprised Lotterywest sales and non Loterywest sales.
7 The applicant contends that the respondent, as a director of Hadida, made representations concerning the profitability of the business. According to Parsons, the respondent expressly represented that the business was profitable, easy to manage, the profit had been static for some years, and that the respondent had improved sales since purchasing the business. Financial statements for Hadida for the year ended 30 June 2014 were provided and relevantly the profit and loss statement reported non-Lotterywest retail sales of $322,759.
8 Parsons deposes that upon taking over conduct of the business, he continued to operate the business in the same manner that Hadida had operated it. However, the non-Lotterywest sales for the year ended 30 June 2016 were only $112,763.
9 Parsons deposes that the original business activity statements as lodged with the Australian Taxation Office records substantially lower sales than the total sales recorded in the Hadida 2014 financial statements. The respondent contends this was mere oversight on his part – par 15 Van der Walt affidavit. Parsons deposes that he relied on the assurances from the respondent.
10 The applicant contends that the respondent was directly involved in the preparation of the 2014 financial statements, and made representations about the profitability of the business. On the basis the respondent was involved in the contravention by Hadida, the applicant submits it may have a cause of action against the respondent for damages for misleading and deceptive conduct in contravention of the Competition and Consumer Act 2010 (Cth).
11 As Mitchell J observed in Kelbush at [92]:
… An applicant must establish that it suffered loss or damage before it can be awarded damages under s 236 of the Australian Consumer Law. The existence of such loss or damage is a fact which must be established before the applicant is entitled to final relief. However, it is not necessary for an applicant for pre-action discovery to establish that loss or damage has actually been sustained. It is sufficient there is some material before the court to indicate (beyond mere assertion, conjecture or suspicion) that some loss or damage may have been sustained.
12 It is the applicant's contention that despite operating the business in the same manner as Hadida, the non-Lotterywest sales were significantly less than the sales reported in the 2014 financial statements. There is sufficient material before me to suggest the respondent was directly involved in the preparation of those statements and made representations about the profitability of the business. In my opinion the applicant has satisfied me that there may be a cause of action, and the discretion as to whether pre-action discovery ought to be awarded has been enlivened.
The discretion
13 Once it is established that there may be a cause of action, the discretion to order pre-action discovery is not thereafter a matter of course. A court considering the exercise of the discretion will consider whether the order is reasonably necessary to achieve the proper administration of justice. Justice Mitchell in Kelbush refers to Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94 as identifying a non-exhaustive set of factors as relevant to the exercise of the court's discretion. Those factors are stated in [120] as follows:
1. The likelihood that a cause of action of the kind suggested will be found to exist;
2. The nature and significance of that potential cause of action;
3. The likely effect, on the person against whom discovery is sought, of the making of an order of a kind contended for;
4. Whether there is any other adequate means, available to the intending plaintiff, of obtaining the information which it seeks;
5. The nature and confidentiality of the documents proposed to be obtained;
6. The possible significance of the information contained within those documents to the decision whether or not to commence the contemplated proceedings;
7. Whether the applicant is able to compensate the potential party for its cost of complying with the order; and
8. Whether there is any evidence of bad faith on the part of the applicant.
14 To those factors, Justice Mitchell added at [121] a further relevant factor, being 'the extent to which the cost and effort involved in undertaking discovery and inspection is proportionate to the likely value of the claim if successful'.
The exercise of the discretion
15 The potential cause of action is for misleading or deceptive conduct and neither counsel for the applicant or respondent contended that the potential cause of action was not a serious matter.
16 The applicant contends that they have suffered significant financial loss, which is ongoing, as a result of the alleged conduct of the respondent. The potential cause of action is significant in terms of quantum. In my opinion no issue of proportionality arises.
17 The respondent has not in his affidavit indicated that there is any particular sensitivity or confidentiality surrounding the documentation. In any event, the implied undertaking is not to use the discovered document for purposes collateral to the contemplated proceedings is a factor to consider.
18 In my opinion there are no other means for the applicant to obtain the documents to advance its decision-making process as to whether to commence the contemplated proceedings. There is no suggestion there is an element of bad faith.
19 One of the documents sought is the respondent's individual tax returns for the years that Hadida owned the business. The applicant's contention is that those documents would reflect what were apparently referred to as contractor payments totalling $98,400 which were allegedly paid to the respondent. In my opinion the respondent's individual tax returns are not a relevant consideration at this point in the proceedings. This is not to say that those documents may not be discoverable should proceedings be launched.
20 Accordingly in my opinion the court should exercise its discretion to require pre-action discovery (excluding the respondent's individual tax returns for the years that Hadida Trust owned the business) in terms of the originating summons dated 22 November 2016.
21 I will hear counsel on the form of order and on costs.
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