Permanent Trustee Company Ltd v Gulf Import and Export Company
[2006] VSC 472
•8 December 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 8130 of 2002
| PERMANENT TRUSTEE COMPANY LIMITED | Plaintiff |
| v | |
| GULF IMPORT AND EXPORT COMPANY and EMIRATES TRADING AGENCY LLC | Defendants |
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JUDGE: | HANSEN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 17 November 2006 | |
DATE OF JUDGMENT: | 8 December 2006 | |
CASE MAY BE CITED AS: | Permanent Trustee Company Limited v Gulf Import and Export Company | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 472 | |
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PRACTICE AND PROCEDURE - Documents – Discovery.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P J Jopling QC and Mr J F Styring | Minter Ellison |
| For the Defendants | Mr R M Garratt QC and Mr A M Thomas | Aitken, Walker and Strachan |
HIS HONOUR:
On 17 November 2006 I heard counsel on the defendants’ application that the proceeding be permanently stayed or, alternatively, dismissed unless within a stipulated time the plaintiff filed a notice and affidavits specified in a proposed set of orders, the effect of which would be to require the plaintiff to state the provenance of documents in the Court Book. The proposed orders, duly initially by me, have been placed on the file. Due to a part heard trial, I had limited time in which to hear counsel. For that reason, I adjourned to consider counsel’s submissions.
The relevant history of how the parties have arrived at their present position is set out in the affidavit of the defendants’ solicitor Michael John O’Brien sworn on 8 November 2006. Counsel also referred to the history of the proceeding in their written and oral submissions. The written submissions, duly initially by me, have also been placed on the file. The plaintiff did not file an affidavit.
The premise of the defendants’ application is that the plaintiff’s notice dated 17 October 2006, and filed on 18 October 2006, did not comply with my orders made on 1 and 29 September 2006.
It is important to identify how the present situation came about and what it concerns.
The case is somewhat unusual in that the plaintiff was not a party to the subject events. Those parties were Rabo Bank and HSBC (as the four banks may conveniently be referred to) and Bustan which conducted business by its employees in Melbourne. The defendants, who are overseas companies, owned Bustan. As a result, it is said, of negligent or improper conduct by some of Bustan’s employees, Bustan fell into financial difficulty and ceased trading, leaving the banks, who had provided Bustan with financial accommodation, with a loss. By reason of commercial arrangements between the plaintiff on the one hand and the banks on the other hand it falls to the plaintiff to sue to recover the banks’ loss. The plaintiff seeks to recover those losses from the defendants under securities provided by them in support of the financial accommodation. The defendants opposed the claim contending in particular that in providing financial accommodation the banks knew or ought to have known that Bustan employees engaged in improper or fraudulent conduct which led to Bustan suffering loss. In those circumstances, it is said, the banks should not have provided such accommodation and the effect of doing so was to increase Bustan’s losses. The defendants claim to be entitled to recover those losses, by set off or otherwise.
What I have just said is but a short pen picture of the case for the purpose of indicating the relationship between the parties.
In May 2006, shortly before the trial commenced, the defendants’ solicitor sought from the plaintiff’s solicitor agreement as to the source of documents in the Court Book. From whose possession did they come? There was no such agreement, and the parties are still arguing about it. Of course a matter such as that should have been sorted out before trial. Moreover in a commercial case in particular, but doubtless in all litigation, the parties, led by their lawyers, should endeavour to conduct the case in an expeditious, economic and commonsense manner keeping in mind at all times the substance of the matter.
Unhappily the trial became disjointed at an early stage. Whereas the trial had been set down with the usual orders for a Court Book and witness statements, and the parties filed all their witness statements, when the trial commenced counsel for the plaintiff applied to split its case. I acceded to the application. The effect of doing so was to alter the basis on which the defendants had come to trial. Before the case was split, the reasonable apprehension was that the trial would be conducted in the usual way with each side calling all their evidence in turn. Usually the defendant will readily cope with any inconvenience in conducting its case consequent upon a plaintiff being permitted to split its case.
In the present case the situation was, I presently apprehend, more difficult than usual. That is because the defendants were not on the scene when relevant events occurred. It is for that reason that the defendants are not without difficulty in establishing their case, for the case, as pleaded, depends on establishing that certain information was before the banks at relevant times so that it may then be contended, on the basis of that information, that the banks knew or ought to have been aware of the alleged improper or fraudulent conduct of the Bustan employees. The information the defendants seek to rely on is documentary, in particular that which the banks had in their possession at relevant times.
In these circumstances, broadly but sufficiently described for present purposes, it may be understood why it is important for the defendants to know what documents were in the possession of the banks, and the plaintiff, at relevant times.
It is evident that the defendants were astute to this point. As I have said, only days before the trial commenced, the defendants’ solicitor wrote to the plaintiff’s solicitor requesting agreement on the source of the documents in the Court Book. As mentioned, such agreement was not forthcoming.
The defendants raised the point during the trial in early June. In the end, on 6 June I ordered that Rabo Bank and HSBC provide discovery as if they were parties to the proceeding and stayed the proceeding until they did so. Affidavits of discovery were filed in response. I also adjourned the trial which has not yet resumed.
Unfortunately the provision of this discovery did not resolve the issue concerning the defendants. After hearing argument I made the orders in September which led to the plaintiff’s notice dated 17 October referred to earlier. The September orders in effect required the plaintiff to file and serve a notice, stating so far as it can, the provenance of documents in the Court Book.
That which has concerned the defendants and has been the point of these orders is this. The defendants wish to know which of the discovered documents in the Court Book were in the possession of the banks, and the plaintiff. A possible complication here is that the banks compulsorily provided documents to the Australian Securities and Investments Commission (ASIC) in connection with its investigations concerning Bustan and its employees. Hence much discovery has been by way of inspecting documents in the possession of ASIC. Most of the ASIC documents bear distinctive barcodes placed on them by ASIC. But, allowing for that, what the defendants require, and have required, is that the plaintiff and the banks state that the documents in the Court Book are copies of documents that were in the possession of Rabo Bank, or HSBC, or the plaintiff, or otherwise as the case may be. That is what might be expected from an affidavit of discovery but such clarity has not been provided in relation to some documents. The documents now in question include, but are not limited to, documents referred to in the defence as documents relied on to establish the defendants’ case.
Counsel for the defendants have satisfied me that there are instances in which the plaintiff has not properly complied with my September orders. For one thing, those orders were not concerned with who – such as Bustan – might have created a subject document, as distinct from the matter of whether the banks and the plaintiff had possessed in their files documents, copies of which are in the Court Book. All I do for the moment is state my view generally. If necessary, given further argument and the attendant time, I could rule as to particular documents.
I do not overlook the concern expressed by counsel for the plaintiff who continually emphasised that this is a fraud case and that it was for the defendants to establish their case. In particular, he said, the plaintiff should not be compelled to make admissions as to possession of the subject documents, by the plaintiff and the banks, when such admissions would be used by the defendants, by medium of tender of the documents, as evidence to establish the banks’ knowledge of the alleged fraud. The difficulty which this submission does not seem to meet is that the process of discovery (of which the present is part) involves identification of documents which are or have been in the possession, custody or power of the person making discovery; see Order 29 and Form 29B in the Rules. Considering the matter from that point of view provides the answer in the present situation, in my view. To the extent necessary orders can be made to fully effectuate the process and requirement of discovery.
If the result of discovery is to establish that a party had possession of a relevant document in the meaning of Order 29, then so be it. However, admissibility and probative value are different matters. To be admitted in evidence the document (or copy thereof) must be relevant to a matter in issue and properly admissible. There can be a misconception that merely because a document is in a Court Book and is received as part of a Court Book that it goes to establish the truth of whatever is stated in the document. That is not so. And, of course, probative value is another matter. But questions of admissibility and probative value arise at trial. The present point arises at the earlier stage of discovery and ascertainment of the documents in the possession of the plaintiff and the banks.
For these reasons I do not accept that the plaintiff’s submission constitutes an answer to the defendants’ submission.
The question is however what is the appropriate way in which to deal with the present application? I do not consider it appropriate to order a permanent stay of the proceeding or that the proceeding stand dismissed unless the plaintiff within a limited time file affidavits of the nature specified by the defendants. In appropriate circumstances, orders of that nature may be made but I would not do so in the present circumstances.
The appropriate course in my view is to afford the parties the opportunity to consider these reasons. Hopefully further argument may not be required. If it is then so be it but more time than I had on 17 November will be required. I will stand the case over to 15 December when I will hear counsel as to orders to be made or otherwise as to the further hearing of the matter.
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