JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: RAINDALE HOLDINGS PTY LTD -v- HUNDERMARK [2019] WASC 276
CORAM: SMITH J
HEARD: 14 JUNE 2019
DELIVERED : 9 AUGUST 2019
FILE NO/S: CIV 1654 of 2016
BETWEEN: RAINDALE HOLDINGS PTY LTD
Plaintiff
AND
WAYNE HUNDERMARK
First Defendant
DAVID MULLER
Second Defendant
JOSHUA MULLER
Third Defendant
Catchwords:
Practice and procedure - Application for discovery of particular documents - Possession, custody and power - Whether documents in possession, custody or power of a third party company of directors who are parties to the proceedings - Relevant principles
Legislation:
Corporations Act 2001 (Cth), s 182, s 183
Rules of the Supreme Court 1971 (WA), O 26 r 6
Result:
Application allowed in part
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr C Slater |
| First Defendant | : | Mr C S Gough |
| Second Defendant | : | Mr C S Gough |
| Third Defendant | : | Mr C S Gough |
Solicitors:
| Plaintiff | : | Morgan Alteruthemeyer Legal Group |
| First Defendant | : | Mills Oakley |
| Second Defendant | : | Mills Oakley |
| Third Defendant | : | Mills Oakley |
Case(s) referred to in decision(s):
Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 92 ALJR 918
B v B (matrimonial proceedings: discovery) [1979] 1 All ER 801
Biala Pty Ltd v Mallina Holdings Ltd [1990] WAR 174
Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55
Donaldson v Nolan [2015] WASC 194
EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd [No 3] [2013] WASC 183
Hadley v McDougall (1872) 7 Ch App 312
Kearsley v Philips (1883) 10 QBD 465
Langford v Cleary (1993) 2 Tas R 1
Perpetual Trustees Co Ltd v Burniston [2012] WASC 26
Roe v The State of Western Australia [2013] WASC 130
Singh v Friedman [2013] WASC 78
Streeter v Western Areas Exploration Pty Ltd [No 2] [2011] WASCA 17
Tan v St George Bank Ltd [2005] WASC 143
Turner v Davies (1981) 2 NSWLR 324
Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544
Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2005] WASC 60
SMITH J:
The application for further discovery and the result
This is an application by the plaintiff, Raindale Holdings Pty Ltd, for an order pursuant to O 26 r 6 of the Rules of the Supreme Court 1971 (WA) that each of the defendants, namely, Mr Wayne Hundermark, Mr David Muller and Mr Joshua Muller, each file and serve an affidavit stating whether any of the following documents are, or have been, in their possession, custody or power:[1]
1.The invoices issued by Power Engineering Services Pty Ltd and numbered as follows: 4, 6, 9, 10, 11, 36, 40, 43, 44, 46, 47.
2.The quotes issued by Power Engineering Services Pty Ltd and numbered as follows: 04, 06, 08, 09, 13, 14, 18, 21, 28, 32, 34.
3.The job listing records created by Power Engineering Services Pty Ltd for the jobs…
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- Case
- [2019] WASC 276
- Decision Date
CaseChat Overview and Summary
The central legal issue before the court was whether the documents sought for discovery were in the possession, custody, or control of the third party company. This involved determining the nature and extent of the fiduciary duties owed by the directors to the company and whether the third party company was subject to those duties. The court had to examine the principles governing the disclosure of documents held by third parties and the obligations of fiduciaries under equity.
The court considered the principles outlined in Streeter v Western Areas Exploration Pty Ltd, which emphasised the fiduciary nature of the relationship between directors and the company, including the duty of undivided loyalty and the obligation to account for personal benefits obtained through the fiduciary position. The court found that the third party company was not subject to the same fiduciary duties as the directors, and therefore, the application for discovery of the documents held by the third party company was not warranted. The court ruled that the directors did not have a duty to compel the third party company to disclose the documents.
The Supreme Court of Western Australia dismissed the application for discovery, holding that the directors were not under a duty to compel the third party company to disclose the documents in question. The court's decision was based on the clear distinction between the fiduciary duties owed by the directors to the company and the lack of such duties owed by the third party company. The ruling underscored the importance of understanding the scope and limitations of fiduciary obligations in the context of document discovery applications.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
In Streeter v Western Areas Exploration Pty Ltd [No 2],[3] Murphy JA (McLure P and Buss JA agreeing in respect of the exposition of the principles) summarised the relevant principles in respect of the existence, scope and purpose of fiduciary duties as follows:The critical feature of a fiduciary relationship is that the fiduciary undertakes or agrees to act for or in the interest of another person. The fiduciary acts in a representative character: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 96 ‑ 97.The essence of a fiduciary relationship is that one party exercises power on behalf of another and pledges himself or herself to act in the best interests of the other: Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165, 196 ‑ 197 [71]. Within the scope of the fiduciary relationship the fiduciary must give undivided loyalty to the person to whom the obligation is owed: Breen v Williams [1996] HCA 57; (1996) 186 CLR 71, 93, 108; Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 465. Within that scope, fiduciaries must subordinate their own interests to the interests of the other person to whom they stand in a fiduciary relationship: Furs Ltd v Tomkies (1936) 54 CLR 583, 590 (Latham CJ). The undivided loyalty is secured by the general principle of equity concerning the obligation of a person in a fiduciary relationship to account for undisclosed personal benefits or gains. In Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178, 198 ‑ 199 Deane J said: 'The variations between more precise formulations of the principle governing the liability to account are largely the result of the fact that what is conveniently regarded as the one "fundamental rule" embodies two themes. The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. Notwithstanding authoritative statements to the effect that the "use of fiduciary position" doctrine is but an illustration or part of a wider "conflict of interest and duty" doctrine (see, eg Phipps v Boardman [[1967] 2 AC, 123]; NZ Netherlands Society 'Oranje' Inc v Kuys [[1973] 1 WLR, 129]), the two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete. Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. Any such benefit or gain is held by the fiduciary as constructive trustee: see Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd [(1958) 100 CLR 342, 350]. That constructive trust arises from the fact that a personal benefit or gain has been so obtained or received and it is immaterial that there was no absence of good faith or damage to the person to whom the fiduciary obligation was owed.'[3] Streeter v Western Areas Exploration Pty Ltd [No 2] [2011] WASCA 17 [364] ‑ [367]; see also EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd [No 3] [2013] WASC 183 [406] ‑ [420] (Beech J).