Pearce v Shaw - [2011] VCC 330

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IN THE COUNTY COURT OF VICTORIA

Revised

(Not) Restricted

AT MELBOURNE
CIVIL DIVISION

DAMAGES & COMPENSATION LIST – APPLICATIONS DIVISION

Case No. CI-10-04997

ROBERT JAMES PEARCE	Plaintiff
v
GEOFFREY PAGE SHAW and ANOR	Defendants

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JUDGE:	HIS HONOUR JUDGE ANDERSON
WHERE HELD:	Melbourne
DATE OF HEARING:	31 March 2011
DATE OF JUDGMENT:	31 March 2011 (revised 1 April 2011)
CASE MAY BE CITED AS:	Pearce v Shaw & Anor
MEDIUM NEUTRAL CITATION:	[2011] VCC 330

REASONS FOR JUDGMENT

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Catchwords:

Practice and Procedure – Discovery from a prospective defendant – Little basis for obtaining final relief – Application refused – Rule 32.05 County Court Civil Procedure Rules 2008.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J. Ross	Brian Ward & Partners Pty Ltd
For the Defendants	Mr M. Black	Willerby’s
HIS HONOUR:

1         The plaintiff makes application for discovery from prospective defendants pursuant to Order 32 Rule 5. The plaintiff alleges that he may have a cause of action against the defendants arising from a deed executed between the plaintiff, the defendants and other parties in 2006. In part, the deed provided a procedure for compensating clients who had lost money as a result of unsuccessful investments in Macquarie protected loans.
2 The plaintiff alleges that he and the first defendant conducted a financial planning business in partnership. The first defendant says that there was no formal partnership, although clients were referred by him and the second defendant to the plaintiff. The plaintiff asserts that there is a possible cause of action against the defendants because the evidence presently available to the plaintiff indicates that false documents were submitted to Bongiorno Financial Advisers Pty Ltd (Bongiornos) in accordance with the procedures set out in the deed and, as a result, payments where made which may have financially disadvantaged the plaintiff. This involves an allegations of fraud against the defendants. Mr Ross on behalf of the plaintiff submitted that, as a result of the overarching obligations contained in section 18 of the Civil Procedure Act 2010 and the need to file a proper basis certificate pursuant to section 42 of the Act, the plaintiff was not in a position, without discovery of documents from the defendants, to issue proceedings against them.
3         The effect of the deed was that the plaintiff paid the sum of $170,000 to Bongiornos to be held in trust pending resolution of outstanding claims by the clients affected by the Macquarie protected loans. The sum of $170,000 was calculated as 50 per cent of an estimate of the likely liability of both the plaintiff and the defendants to those clients. Payment was only to be made by Bongiornos of the moneys received from the plaintiff upon receipt of an appropriate deed of release signed by the relevant client.
4         There were at least 18 relevant clients. The plaintiff points to discrepancies in relation to four of those clients and asserts that, as a result of those discrepancies, discovery should be ordered of to several specific categories of documents in relation to each of the clients. The purpose of the discovery is so that the plaintiff can ascertain whether the payments made by Bongiornos from his moneys were proper payments in accordance with negotiated settlements with the Macquarie protected loan clients.
5         The discrepancies raised by the plaintiff are as follows:

a.

In relation to the Stevens, there were apparently two deeds of release, one for $12,000 and one for $5,000. The plaintiff was provided with a photocopy deed of release from Bongiornos referring to a payment of $12,000. The Stevens provided the plaintiff with a copy of a deed of release which recorded a settlement amount of $5,000. The first defendant, Mr Shaw, in an affidavit said that the settlement amount was $5,000. That amount has been paid. Although an email from Mr Stevens dated 26 February 2007 has been exhibited to the affidavit of the plaintiff, Mr Pearce’s, there is no statement by Mr Stevens that the settlement was for anything other than the sum of $5,000. It does not appear that any of the funds supplied to Bongiornos by Mr Pearce were used to pay the Stevens.

b.

With respect of Ms Lewis, Mr Pearce has been provided with a deed of release from Bongiornos in the sum of $18,000. A deed of release obtained from Ms Lewis records a settlement amount of $6,500. Although Mr Pearce’s affidavit records Ms Lewis telling him on about 21 October 2006 that “she expected to be paid $6,500 by Mr Shaw soon”, there is no further information provided by Mr Pearce as to what sum Ms Lewis was paid or whether any further enquiry was made of Ms Lewis. Mr Shaw in his affidavit, said that the settlement with Ms Lewis was for $18,000 and she was paid that sum. Ms Lewis has sworn an affidavit in the proceeding, at the request of the defendants, confirming that the settlement sum was $18,000 and that she had been paid that sum.

c.

Mr Pearce was provided with a photocopy deed of release in relation to Mr Walsh referring to a settlement sum of $7,000. Mr Walsh apparently informed Mr Pearce in mid October 2006 that “the deed of release he signed was for $2,000 and Mr Shaw had only paid Mr Walsh $2,000”. Mr Walsh made a statutory declaration on 3 August 2010 that he had a discussion with Mr Shaw in October 2006 relating to the sum of $2,000 and a deed of release was signed in that sum. Subsequently, after further discussions with Mr Shaw, it was apparently agreed that a further sum of $5,000 would be paid. Mr Walsh said that that sum was never paid but “was used to ‘contra’ my assessable contribution to a salary sacrifice arrangement I had in place for a motor vehicle”. At the time, Mr Walsh was an employee of the defendant. Mr Shaw in his affidavit confirmed that an initial amount of $2,000 was paid and that the $5,000 balance of the settlement moneys of $7,000 was paid later, and in respect of which Mr Shaw said, “I intermingle[d] the settlement with other financial arrangements which I now acknowledge became confusing”.

d.

In relation to the Wallaces, the settlement sum was $22,200. Mrs Wallace has sworn an affidavit stating that she received a payment of $11,100 on 24 October 2006 and a further payment of $11,000 on 9 February 2007. This left a balance of $100 which Mrs Wallace said she had no intention of pursuing. In a reconciliation prepared by Bongiornos, It records that two payments were made to the Wallaces, a payment of $20,000 and a payment of $2,200.
6         I have set these matters out in some detail because they represent the high point of any suggestion by the plaintiff that the defendants may have fraudulently arranged documentation to misrepresent payments actually made to the clients whom it was agreed were entitled to compensation. Of the relevant 18 clients, 11 have sworn affidavits in the proceeding on behalf of the defendants confirming the settlement sums and the fact that they have been paid the settlement sum (apart from Mrs Wallace in respect of the balance of $100). The relevant deeds of release with respect to these clients have been exhibited to the defendants’ affidavit material.
7         That left a handful of clients in respect of which further explanation was necessary. Mr Shaw explained in his affidavit that two of the clients, Brealey and Morriss, made claims which were settled with a third party who was involved in the failed investments. That third party was
Lifespan Financial Planning. Lifespan settled those claims and then subsequently issued proceedings against both Mr Pearce and Mr Shaw. Those proceedings were settled by Mr Shaw and a copy of the deed of settlement and release with Lifespan Financial Planning is exhibited to Mr Shaw’s affidavit. Mr Pearce did not contribute to the settlement of that claim.
8         The remaining five clients are Stevens, Walsh, Mortensen, Moran and Pappettas. I have previously dealt with Stevens and Walsh. The deed of release with Mortensn is exhibited to Mr Shaw’s affidavit. He said that agreement was reached to pay $11,900 and that sum was paid. In relation to Moran, a copy of the settlement deed is exhibited to Mr Shaw’s affidavit. Settlement was reached in the sum of $28,000. $24,000 was paid by the second defendant and $4,000 from the last of the plaintiff’s money. In relation to Pappettas, the claim was settled for $8,000. Mr Shaw said that Mr Pappettas was paid in full and he exhibited a copy of the deed of release to his affidavit.
9         It appears, therefore, that the only basis for any claim for relief by the plaintiff against the defendants might relate to discrepancies revealed in relation to the payments to Stevens, Lewis and Walsh. Lewis has said that the full amount of $18,000 has been paid. Walsh has

appear to depend upon the arrangements reached in relation to his entitlements and
obligations as an employee. It does not appear that any of Mr Pearce’s money went to him.
said there was an agreement to pay him $7,000. As to whether that sum has been paid would defendants. In relation to the Stevens, there is nothing in the material to suggest that the payment of $5,000 to them was not accepted. Although there is a deed of release in respect of the sum of $12,000, and therefore a possible discrepancy of $7,000, there is nothing to suggest that more than $5,000 was paid or that the plaintiff paid more than 50 per cent of that sum.
10       Mr Pearce was declared bankrupt on his own petition on 14 October 2002. There were, therefore, limited funds available from Mr Pearce to satisfy the claims by the clients. It appears that, at most, Mr Pearce contributed the sum of $170,000, with a possible further $20,000 to Bongiornos. In Mr Shaw’s affidavit, he has set out in detail the payments made to the clients both before and after the execution of the deed. Mr Shaw says that on his calculations he “paid approximately $108,767 more than Pearce before the 7 June 2006 deed and approximately $52,500 after the 7 June 2006 deed”. In those circumstances he says that he would have a potential counterclaim in the sum of $80,633 against Mr Pearce in relation to those matters and further unspecified claims in respect of “unpaid personal loans I made to Pearce”.
11       Pursuant to Order 32 Rule 5, an applicant is required to satisfy each of the matters set out in sub-paragraphs a, b and c. The Courts have, however, repeatedly said that the rule is to be “construed beneficially”, although it is limited by the language of the provision and the specific
matters an applicant is required to establish. In the present proceeding, I am satisfied that:

a. There is no reasonable cause to believe that the plaintiff has or may have the right to obtain relief from the defendants. An analysis of the circumstances of each claimant and the suggested “discrepancies” provides no support for the view that the defendants defrauded the plaintiff or the plaintiff paid any more than he was required to pursuant to the deed.
b. The plaintiff has not made reasonable enquiries. The affidavit material filed by the defendants demonstrates the deficiencies in the plaintiff’s material.
c. The documents sought in the originating motion are not all necessarily documents which the defendants would be likely to have.
12       Further, in the exercise of my discretion, I consider that there would be little utility in making the orders sought. An order would be inappropriate for the following further reasons:

a.

The breadth of the documents sought in the originating motion is such to indicate that the plaintiff seeks discovery far beyond what is necessary or allowed by the Rule;

b.

It is unlikely that the plaintiff would have the financial resources to pay the costs of the defendants providing the discovery he seeks;

c.

The defendants have, by the material they have filed in opposition to the application, provided a substantial disclosure of both relevant documents and information which I consider is a more than reasonable response to what might properly have been sought
by the plaintiff;

d.

The plaintiff failed in the initial material filed in support of the application to make appropriate disclosure of significant information, including his financial position at relevant times and has failed in his affidavit in reply to respond to matters raised in the affidavit material filed presently by the defendants, which therefore remain uncontested;
e. The plaintiff delayed over three years in pursuing the application.

13 For these reasons, the plaintiff’s originating motion filed 3 November 2010, will be dismissed.

Certificate

I certify that these 6 pages are a true copy of the reasons for decision of His Honour Judge
Anderson delivered on 31 March 2011 (revised 1 April 2011).
Dated: 1 April 2011
Hannah Christensen

Associate to His Honour Judge Anderson

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Citations

Pearce v Shaw [2011] VCC 330

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a.	In relation to the Stevens, there were apparently two deeds of release, one for $12,000 and one for $5,000. The plaintiff was provided with a photocopy deed of release from Bongiornos referring to a payment of $12,000. The Stevens provided the plaintiff with a copy of a deed of release which recorded a settlement amount of $5,000. The first defendant, Mr Shaw, in an affidavit said that the settlement amount was $5,000. That amount has been paid. Although an email from Mr Stevens dated 26 February 2007 has been exhibited to the affidavit of the plaintiff, Mr Pearce’s, there is no statement by Mr Stevens that the settlement was for anything other than the sum of $5,000. It does not appear that any of the funds supplied to Bongiornos by Mr Pearce were used to pay the Stevens.
b.	With respect of Ms Lewis, Mr Pearce has been provided with a deed of release from Bongiornos in the sum of $18,000. A deed of release obtained from Ms Lewis records a settlement amount of $6,500. Although Mr Pearce’s affidavit records Ms Lewis telling him on about 21 October 2006 that “she expected to be paid $6,500 by Mr Shaw soon”, there is no further information provided by Mr Pearce as to what sum Ms Lewis was paid or whether any further enquiry was made of Ms Lewis. Mr Shaw in his affidavit, said that the settlement with Ms Lewis was for $18,000 and she was paid that sum. Ms Lewis has sworn an affidavit in the proceeding, at the request of the defendants, confirming that the settlement sum was $18,000 and that she had been paid that sum.
c.	Mr Pearce was provided with a photocopy deed of release in relation to Mr Walsh referring to a settlement sum of $7,000. Mr Walsh apparently informed Mr Pearce in mid October 2006 that “the deed of release he signed was for $2,000 and Mr Shaw had only paid Mr Walsh $2,000”. Mr Walsh made a statutory declaration on 3 August 2010 that he had a discussion with Mr Shaw in October 2006 relating to the sum of $2,000 and a deed of release was signed in that sum. Subsequently, after further discussions with Mr Shaw, it was apparently agreed that a further sum of $5,000 would be paid. Mr Walsh said that that sum was never paid but “was used to ‘contra’ my assessable contribution to a salary sacrifice arrangement I had in place for a motor vehicle”. At the time, Mr Walsh was an employee of the defendant. Mr Shaw in his affidavit confirmed that an initial amount of $2,000 was paid and that the $5,000 balance of the settlement moneys of $7,000 was paid later, and in respect of which Mr Shaw said, “I intermingle[d] the settlement with other financial arrangements which I now acknowledge became confusing”.
d.	In relation to the Wallaces, the settlement sum was $22,200. Mrs Wallace has sworn an affidavit stating that she received a payment of $11,100 on 24 October 2006 and a further payment of $11,000 on 9 February 2007. This left a balance of $100 which Mrs Wallace said she had no intention of pursuing. In a reconciliation prepared by Bongiornos, It records that two payments were made to the Wallaces, a payment of $20,000 and a payment of $2,200.

a.	There is no reasonable cause to believe that the plaintiff has or may have the right to obtain relief from the defendants. An analysis of the circumstances of each claimant and the suggested “discrepancies” provides no support for the view that the defendants defrauded the plaintiff or the plaintiff paid any more than he was required to pursuant to the deed.
b.	The plaintiff has not made reasonable enquiries. The affidavit material filed by the defendants demonstrates the deficiencies in the plaintiff’s material.
c.	The documents sought in the originating motion are not all necessarily documents which the defendants would be likely to have.

a.	The breadth of the documents sought in the originating motion is such to indicate that the plaintiff seeks discovery far beyond what is necessary or allowed by the Rule;
b.	It is unlikely that the plaintiff would have the financial resources to pay the costs of the defendants providing the discovery he seeks;
c.	The defendants have, by the material they have filed in opposition to the application, provided a substantial disclosure of both relevant documents and information which I consider is a more than reasonable response to what might properly have been sought

d.	The plaintiff failed in the initial material filed in support of the application to make appropriate disclosure of significant information, including his financial position at relevant times and has failed in his affidavit in reply to respond to matters raised in the affidavit material filed presently by the defendants, which therefore remain uncontested;
e.	The plaintiff delayed over three years in pursuing the application.