Pollock v Piggott - [2016] WASC 398

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: POLLOCK -v- PIGGOTT [2016] WASC 398

CORAM: MASTER SANDERSON

HEARD: 3 NOVEMBER 2016

DELIVERED : 6 DECEMBER 2016

PUBLISHED : 7 DECEMBER 2016

FILE NO/S: COR 165 of 2016

BETWEEN: JAMIE KEVIN POLLOCK
First Plaintiff
STYLE SHOW PTY LTD
Second Plaintiff
AND
LEILA CLAIRE PIGGOTT
Defendant

Catchwords:

Pre-action discovery - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA)
Transfer of Land Act 1893 (WA)

Result:

Application for pre-action discovery dismissed

Category: B

Representation:

Counsel:

First Plaintiff                  :     Mr J E Scovell
Second Plaintiff             :     Mr J E Scovell
Defendant:     Mr K L Christensen

Solicitors:

First Plaintiff                  :     Edwards Mac Scovell Legal
Second Plaintiff             :     Edwards Mac Scovell Legal
Defendant:     Gadens Lawyers

Case(s) referred to in judgment(s):

Nil

MASTER SANDERSON: This is the plaintiffs' application for pre‑action discovery. The application was supported by an affidavit of the first plaintiff sworn 15 March 2016. There was an additional affidavit of Bonnie Adele Scovell sworn 3 November 2016. That affidavit dealt with conferral and did not impact upon the outcome of the application. The defendant relied upon her affidavit sworn 20 September 2016.
The following summary of the relevant facts is taken from the submissions in support of the application filed on behalf of the plaintiffs. Nothing in this outline of facts is controversial.
In or about February 2013 the first plaintiff became aware that property situated at 665 Welshpool Road East, Wattle Grove (the Property) was for sale by the mortgagee in possession. He thought that the mortgagee might sell the Property for around $2.5 million.
Being familiar with the Property the first plaintiff knew that the land adjoining the Property had earlier been rezoned to allow urban residential development and he suspected that the Property could attract similar rezoning in time to come, which could result in a significant increase in its value. The Property also had good rental return prospects in the meantime, such that the first plaintiff thought such income could wholly cover repayments on borrowing used to purchase the Property.
The first plaintiff wished to purchase the Property, but he had insufficient funds to do so, and so he set about finding a co‑investor.
To this end the first plaintiff approached a Mr Lewis Piggott (Lewis) and they agreed to meet at the Property on 20 February 2013. Present at the meeting also was Leila Claire Piggott (the defendant), and Mr Ben Piggott (Ben). The defendant, Lewis and Ben (collectively the Piggotts) are siblings.
At the 20 February 2013 meeting, the first plaintiff told the Piggotts why he thought the Property was a good investment prospect. A speaker telephone call was made, at the meeting, to the seller. The seller told the first plaintiff the terms on which he would be prepared to sell the Property. While still at the meeting, the first plaintiff and Lewis agreed to the terms proposed by the seller and resolved to jointly purchase the Property in equal shares. They agreed on the material terms on which this purchase would be made, including that:
(a)the first plaintiff and Lewis would each pay half of the deposit;
(b)a shelf company held by Lewis, namely ACN 159 520 000 Pty Ltd (ACN) would be used as the notional purchasing entity, in which the first plaintiff (or his nominee) would take both a shareholding and position as a director; and
(c)that a formal unit trust would be drawn to reflect the respective interests.
The seller and purchasers met the following day (21 February 2013), and material terms of the sale of the Property were agreed. Later the same day the first plaintiff and the Piggotts meet at Ben's offices. The defendant prepared an Offer and Acceptance, in which the buyer is described as 'ACN 159 520 000 Pty Ltd as trustee for the ACN 159 520 000 Unit Trust'.
For reasons that are immaterial, the 21 February 2013 Offer and Acceptance was terminated or otherwise failed and the seller of the Property accepted an offer from a third party. However, in or about March 2013, the first plaintiff was told by the seller that the Property was, once more, available for sale.
On or about 11 March 2013, the first plaintiff telephoned Lewis and they agreed that they would make a second attempt to purchase the Property, on terms that differed slightly but not materially to the 21 February 2013 Offer and Acceptance.
Between 11 and 12 March 2013 the defendant sent to the first plaintiff an Offer and Acceptance again noting the buyer as 'ACN 159 520 000 Pty Ltd as trustee for the ACN 159 520 000 Unit Trust'. It can be inferred from the contents and service of the Offer and Acceptance and her preparation of the earlier Offer and Acceptance that it was the defendant who prepared the document. The defendant proceeded to participate in the negotiation of the contract, which was ultimately accepted by the seller on or about 19 March 2013.
On or about 22 March 2013, the first plaintiff paid a sum of $200,000 to ACN towards the purchase price of the Property in accordance with the agreement struck between the first plaintiff and Lewis on 11 March 2013.
After 11 March 2013 the first plaintiff went about securing leases to maximise the Property's rental value. In or about April 2013 the first plaintiff registered the second plaintiff, which was to be the nominee entity in which his interest in the Property was to be held.
In readiness for settlement the first plaintiff made several representations to Lewis and the defendant seeking that they formalise the unit trust and other arrangements relating to the purchase of the Property. Notably, at a meeting on or about 2 July 2013, Lewis and the defendant confirmed to the first plaintiff that they would arrange the share transfer and appointment of the first plaintiff as a director of ACN, and drawing of the unit trust deed, by their lawyer.
After persistent failure by Lewis and/or ACN to give effect to the representation described above, on 26 September 2013 the second plaintiff's solicitors lodged a caveat over the Property and sent a copy of it to ACN. But by 9 October 2013 it appeared the parties had resolved the matter on certain terms.
On 15 October 2013, the Property was transferred to ACN, and a mortgage in favour of the defendant was registered over the Property, purportedly securing monies loaned to it (being $2,557,897.20) for the purchase of the Property (the Mortgage). Under the terms of the Mortgage:
(a)the principal was repayable upon demand by the defendant, or upon expiry of the term (10 years);
(b)interest was payable at the ordinary rate of 15% compounded daily not including any default interest; and
(c)in the event of a default, interest was payable at the additional rate of 25% compounded daily from the date of default.
On 1 November 2013 (that is, two weeks after the purchase of the Property) a notice of demand was issued by the defendant to ACN, requiring payment of the entirety of the loan funds secured by the Mortgage, by 11 December 2013. The demand was issued to ACN's address noted on the title to the Property, which also happened to be the defendant's postal address.
Lewis and/or ACN had refused or otherwise failed to give effect to the plaintiffs' interest in the Property in the manner that was agreed, or at all. Accordingly, on 21 January 2014 proceedings were filed by the plaintiffs against ACN seeking declaratory relief in respect of that Property.
On 25 March 2015 an auction was held on the defendant's behalf. The plaintiffs took no action to prevent the sale of the Property because the defendant had determined, and communicated to the plaintiffs though her lawyers, that there would be no surplus from the sale proceeds.
At the auction a bid of $3,005,000 was rejected, and an offer of $3 million after the auction was also rejected. About two months later (on 23 April 2015) the Property was sold to an entity related to the defendant for $3 million.
Against that background the plaintiffs sought discovery of the following documents:
1.Any and all notices issued by Leila Piggott (Leila) to ACN 159 520 000 Pty Ltd (ACN) pursuant to mortgage M432183 dated 15 October 2013 (Mortgage), including but not limited to that notice of demand dated 1 November 2013.
2.Any loan agreement underlying the Mortgage and any variations thereto.
3.Evidence of any and all payments made by ACN (or by any person on its behalf) to Leila pursuant to any underlying loan agreement or the Mortgage.
4.Copies of any loan account created and/or maintained by Leila or on her behalf with respect to the loan monies secured by the Mortgage.
5.Any and all documents (including contemporaneous records of verbal communications) recording or relating to the negotiation and execution of the Mortgage and/or any underlying loan agreement.
6.Any and all valuation/s (irrespective of who it was obtained by) in support of the sale of the Property pursuant to the Mortgage and any letter/s of instruction relevant to the same.
7.Copy of the stamped Offer and Acceptance between Leila and Ciderberry (PHA) Pty Ltd (Ciderberry) dated 23 April 2015 (O&A).
8.Any valuation of the O&A by the Valuer General.
9.Any and all advertising material, and any marketing plan, relating to Leila's sale of the property located at 665 Welshpool Road, Wattle Grove, more particularly described as Lot 341 on Diagram 60958 (Property).
10.Copies of any and all correspondence between Leila (or her agent or representative) and Ciderberry (or any related entity) relating to, and/or in contemplation of, the purchase of the Property by Ciderberry or any related entity thereof.
11.Copies of any and all offers (i.e. other than the O&A) received by Leila (or her agent or representative) with respect to the Property.
...
13.Any and all notices received by Leila pursuant to the (undated) commercial lease agreement between ACN and Stonetraders Pty Ltd with respect to the Property.
(Access to document 12 was not pressed.)
Order 26A r 4 of the Rules of the Supreme Court 1971 (WA) is in the following terms:
4.Discovery from potential party
(1)This rule applies if a person who may have a cause of action against a person whose description has been ascertained (the potential party) wants -
(a)to commence proceedings against the potential party; or
(b)to take proceedings against the potential party in the course of an action to which the person is a party,
but the person, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings.
(2)If there are reasonable grounds for believing that the potential party had, has, or is likely to have had or to have, possession of documents that may assist in making the decision, the person may apply for an order under this rule.
(3)The application shall be supported by an affidavit and a copy of both shall be served on the potential party.
(4)On the application the Court may order the potential party to give discovery of all documents that are or have been in the potential party's possession and that may assist the applicant in making the decision.
It is for the plaintiffs to establish that:
1.they may have a cause of action;
2.they have made reasonable enquiries to obtain sufficient information to decide whether to commence proceedings;
3.at the time of making the application they have not reached a decision about whether to commence proceedings;
4.there are reasonable grounds for believing the defendant has in her possession documents that may assist in making the decision; and
5.the court should in the circumstances exercise its discretion to order pre‑action discovery.
In my view there are two insurmountable difficulties with this application. The first is the issue of whether or not the plaintiffs may have a cause of action. It is difficult to see what interest the plaintiffs had in the Property. Counsel in his submissions maintained the plaintiffs had some form of equitable right which subsists even in the face of s 68 of the Transfer of Land Act 1893 (WA). Without undertaking a detailed analysis of the applicable principles it seems to me there is real doubt as to whether or not the plaintiffs could maintain such a claim. But assuming they could, their cause of action would be limited to damages recoverable from the defendant on the basis that the Property was sacrificed. The defendant as a mortgagee in possession was under no duty of care with respect to the plaintiffs.
There is nothing in the evidence to suggest the Property was not properly marketed. It was offered by way of public auction and it did not sell. The plaintiffs have produced nothing to suggest the marketing campaign was inadequate or that the Property was not offered to the public at large. There seems to me to be nothing to suggest the plaintiffs could have any complaint about the sale proceeds. That means they could not succeed in any action they might bring.
This feeds in to the second point. On the evidence as it stands at the moment the plaintiffs' claim would be for around $5,000. The best offer at auction was $3,005,000. The Property was eventually sold for $3 million. There is no evidence provided by the plaintiffs the property was sold undervalue - some evidence from a valuer or perhaps even an opinion from a real estate agent practicing in the relevant locality might have advanced the plaintiffs' case. As it stands it looks very much as though any claim would be modest indeed. On that basis I am not satisfied it would be in the interests of justice to order the discovery sought by the plaintiffs.
The application will be dismissed. The plaintiffs ought pay the defendant's costs of the application including reserved costs.