Platt v Morris Appel & Ors
[1998] VSCA 48
•18 September 1998
SUPREME COURT OF VICTORIA
COURT OF APPEAL Not Restricted No. 4268 of 1996
JOEL DAVID PLATT
Plaintiff/Appellant
v
MORRIS APPEL & ORS
Defendants/Respondent
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JUDGES: CHARLES and BUCHANAN, JJ.A. WHERE HELD: MELBOURNE DATE OF HEARING: 18 September 1998 DATE OF JUDGMENT: 18 September 1998 MEDIA NEUTRAL CITATION: [1998] VSCA 48 ---
DISCOVERY OF DOCUMENTS - Application for discovery refused - Further application after amendment of statement of claim - Documents discoverable by reason of amendment
SUPREME COURT RULES, R.29.08
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APPEARANCES: Counsel Solicitors For the Plaintiff/Appellant Mr. K.C. Oliver Tress Cocks & Maddox For the Defendants/Respondents Mr. D.H. Denton Secombs CHARLES, J.A.:
I will invite Buchanan, J.A. to deliver the first judgment.
BUCHANAN, J.A.:
The applicant, who is the plaintiff in these proceedings, seeks leave to appeal from orders made by Beach, J. on 25 August 1998 allowing an appeal from an order by Master Evans.
The proceedings arise from a joint venture agreement to buy a property at 100 Flinders Street, Melbourne and re-sell it at a profit.
By his original Statement of Claim the appellant alleged that the first and second-named respondents, who are individuals, agreed to buy the land for themselves and the plaintiff. The plaintiff was to contribute to the price and the defendants were to hold the land as trustee for him as to a one half share. The plaintiff was to receive half any profit made by the venture. The third and fourth- named respondents are companies said to be controlled by the first and second- named respondents. The companies became registered as proprietors of the Flinders Street property. Various breaches of the agreement were alleged. Amongst those breaches were said to be mortgaging of the property without the applicant's consent and failing to properly apply the proceeds of sale of two floors of the building on the land.
By summons dated 21 November 1997 the applicant sought discovery of three classes of documents pursuant to R.29.08. On 8 December 1997 Master Wheeler ordered discovery of the first class, but refused to order discovery of the second and third classes, which were:
"(b)
documents which disclose or relate to the use or application by any of the defendants of sums derived from all loans obtained by one or more of the defendants which were secured by a mortgage over ... 100 Flinders Street Melbourne;
(c)
documents which disclose or relate to the use or application by any of the defendants of the sale proceeds obtained from the sale of any of the lots of 100 Flinders Street Melbourne."
The applicant amended his Statement of Claim pursuant to an order made by Master Kings on 21 April 1998. The amendment introduced new claims that the respondents owed the applicant fiduciary duties, including duties not to prefer their own interests to the interests of the joint venture and not to permit the property to be used and/or encumbered for any purpose other than the joint venture without the consent of the applicant. It was alleged that in breach of their duties the respondents raised money on the security of the property without the consent of the applicant and were liable to account as constructive trustees for the profit obtained by the respondents from the borrowed moneys. It was also alleged that in breach of their fiduciary duties the respondents failed to properly account to the applicant for income received by the joint venture. By an amendment to the prayer for relief the applicant now seeks, "An order that the defendant account to the plaintiff for any fund or profits received by them in breach of their fiduciary duty."
Having amended his Statement of Claim the applicant sought orders that the respondents discover further documents relating to the mortgages of the joint venture land and documents relating to the receipt and use by the respondents of the funds advanced under or secured by the mortgages and any profits made thereby, and documents relating to the entitlement of Mrs F. Appel to profits referred to in a letter from the second-named respondent to Mrs Appel. As to the last category of documents, the applicant's solicitor deposed that the respondents alleged that Mrs Appel contributed money to the joint venture entitling her to a 25% interest in the profits of the venture. The applicant disputed that such a contribution was made and contended that the money said to be the contributions was obtained by loans secured by mortgages over the property.
The application was heard by Master Evans. He ordered that the third and fourth-named respondents make discovery of documents "in relation to the fresh issues raised on the amended pleadings".
An appeal was brought from that order by the respondents in the Practice Court. On 25 August 1998 Beach, J. allowed the appeal and set aside the order for discovery.
Leave to appeal against an order made in an interlocutory application will not be granted unless the applicant shows that the decision is wrong or attended by sufficient doubt to warrant its being reconsidered on appeal and that substantial injustice would be done by allowing the decision to stand. Neimann v. Electronic Industries Ltd. [1978] V.R. 431, at pp.441-2; Australian Dairy Corporation v. Murray Goulburn Co-Operative Co.Ltd. [1990] V.R. 355, at pp.364-5, and 379. Furthermore, where the proposed appeal involves a matter of discretion, and in particular a question as to the practice and procedure, an appellate court exercises even greater restraint. See Re the Will of F.B. Gilbert Deceased (1946) 46 S.R.(N.S.W.) 318, at p.322 per Jordan, C.J.
In my opinion, substantial injustice will be done by allowing the decision to stand if it is wrong. It is hardly likely that the applicant is in a position to lead direct evidence of the use made by the respondent of any money borrowed on the security of the land. Discovery of documents as to that topic will be more than usually important to the applicant in the presentation of his case.
The applicant urged us to deal with the appeal itself, and we heard arguments from both sides as to the merits of the appeal. Having heard those arguments, I am of the opinion that the appeal should succeed.
There is no transcript of his Honour's reasons. According to an affidavit by the applicant, he was informed by his counsel that his Honour said that the amendments to the Statement of Claim did not raise any new issues, but simply particularized what was in the original Statement of Claim, and accordingly the appeal would be allowed.
The amended Statement of Claim goes further than the original Statement of Claim in alleging not merely that the respondent breached the terms of the joint venture agreement by mortgaging the property without the applicant's consent, but also that the respondent employed the funds obtained as a result of the mortgages to reap profits, and seeks an account of those profits. The breaches are now alleged to be breaches of fiduciary duty as well as breaches of contract, and it is said that the respondents are liable as constructive trustees for any profit derived by them from misusing joint venture property.
In my opinion that is a new claim which requires further discovery by the respondents. While the claim was restricted to one for breach of contract, the use which the respondents made of money received by them as a result of the breach was irrelevant. If the applicant established the breach, he was entitled to damages to compensate him for any loss that he sustained as a consequence of the breach; at least arguably he was not entitled to any share in the profits made by the respondents as a result of the breach. Once the amendments were made, the applicant was entitled to discovery of documents relating to the use made of any borrowed funds, that is, documents which related to the questions of whether any profit was made and, if so, the amount of the profit. The contributions made by Mrs Appel bear on these questions in that apparently there is an issue between the parties as to whether particular funds were derived from Mrs Appel by way of contribution to the joint venture or from loans raised on the security of the joint venture property.
I would grant leave to appeal and allow the appeal. I would set aside the orders made by Beach, J. and dismiss the appeal from Master Evans with costs.
CHARLES, J.A.:
I agree.
The Court will make orders in the following form:
1.
That the plaintiff/applicant have leave to appeal from the orders made by Beach, J. on 25 August 1998.
2. That the appeal be heard instanter and is allowed with costs. 3. Set aside the orders made by Beach, J. on 25 August 1998. 4.
In lieu thereof, that the appeal from the orders made by Master Evans on 6 August 1998 is dismissed with costs.
5.
That para.1 of the said order of Master Evans be varied so that the time for making discovery therein fixed be extended to 40 days from today.
We will grant a certificate to the defendant/respondent.
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