Remasys Pty Ltd & Anor v McLauchlan & Anor
[2008] VSC 594
•19 December 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7294 of 2007
| REMASYS PTY LTD (ACN 085 329 719) and PETER YUNGHANNS | Plaintiffs |
| v | |
| DAVID McLAUCHLAN and BRENDAN REDDEN | Defendants |
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JUDGE: | WILLIAMS J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 December 2008 | |
DATE OF JUDGMENT: | 19 December 2008 | |
CASE MAY BE CITED AS: | Remasys Pty Ltd and Anor v McLauchlan and Anor | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 594 | |
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PRACTICE AND PROCEDURE – Discovery of documents – Appeal from Master’s refusal of application for further discovery.
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APPEARANCES: | Counsel | Solicitors |
| For the First and Second Plaintiffs | Mr P Corbett of Counsel | Strongman and Crouch |
| For the First Defendant | Mr R Cook of Counsel | Mr James D Mapleston |
| For the Second Defendant | No appearance |
HER HONOUR:
This is an appeal from the order of Master Evans on 27 November 2008 dismissing the plaintiffs’ application for particular discovery by their amended summons filed that day.
The plaintiffs seek discovery from the first defendant (“Mr McLauchlan”) of:
(a)his tax returns for the years ending 30 June 2001 to 30 June 2003;
(b)bank statements for the period from 1 June 2002 to 31 December 2002;
(c)any returns to the Bookmakers Licensing Authority reflecting his financial position during the period from 1 June 2002 to 31 December 2002;
(d)all applications and position statements made or given by him to HSBC Bank Australia Limited and/or Suncorp Metway Limited during the period from 1 June 2002 to 31 December 2002;
(e)balance sheet and profit and loss accounts as at 30 June 2001 and 30 June 2002 of Dealbase Pty Ltd (ACN 074 565 361), Tapeflow Pty Ltd (ACN 052 970 680), Vojo Pty Ltd (ACN 098 099 828), and David McLauchlan and Company Pty Ltd (ACN 005 303 186); and
(f)bank statements for the period from 1 June 2002 to 31 December 2003 of Dealbase Pty Ltd, Tapeflow Pty Ltd, Vojo Pty Ltd and David McLauchlan and Company Pty Ltd.
I note that the documents now sought include tax returns for the year ending 30 June 2003 not sought in the plaintiffs’ amended summons filed on 27 November 2008.
The proceeding
The first plaintiff (“Remasys”) commenced this proceeding against Mr McLauchlan by a generally endorsed writ filed on 18 July 2007. It sought orders to the effect that a loan facility agreement made in about June 2002 (“the LFA”) should not be enforced. (I note, by way of background, that the Court was informed by counsel that the proceeding was commenced after a statutory demand had been made by Mr McLauchlan in relation to monies advanced under the LFA.) The second plaintiff (“Mr Yunghanns”) and the second defendant (“Mr Redden”) were subsequently added as parties.
By a second further amended statement of claim, the plaintiffs allege that :
(a)under the terms of the LFA:
(i)Mr McLauchlan was to make available a secured loan facility of $1m to be advanced by progress payments made upon the production of duly certified accounts;
(ii)Mr McLauchlan was to make payments totalling $250,000 by 31 July 2002;
(iii)Mr McLauchlan was to advance the balance “at such time or times as may be agreed by the parties, in particular in accordance with the budgets tabled & approved or to be approved at the Board meetings dating [sic] the 20th May 2002 and 13th June 2002”;
(iv)the advances were to be secured by a charge;
(v)Remasys would issue or transfer to Mr McLauchlan 25% of its issued shares;
(b)Mr McLauchlan breached the LFA by failing to advance more than $200,000 to Remasys;
(c) in about July 2002, Mr Redden, a director of Remasys acting as an agent for Mr McLauchlan, told Remasys that Mr McLauchlan did not have the wherewithal to advance any more funds under the LFA;
(d)a further agreement was made in about early August 2002 under which :
(i)Mr Yunghanns agreed to supply funds to Remasys in consideration of Mr McLauchlan waiving his right to recover the monies advanced and the shares and removing the charge securing the loan; and
(ii)Mr Redden agreed to procure the removal of the charge and the release from Mr McLauchlan.
(e) Mr Redden as Mr McLauchlan’s agent had made representations to Mr Yunghanns inducing him to assume that the August 2002 agreement would be carried out and to advance funds to Remasys.
(f)Mr Redden advanced funds to Remasys in accordance with the August 2002 agreement; and
(g)Mr McLauchlan and Mr Redden had breached their obligations with regard to the waiver, the release and the removal of the charge.
Significantly, for the purposes of this appeal, the plaintiffs also allege in paragraph 16A of the second amended statement of claim that, between July 2002 and December 2002, Mr McLauchlan was not ready, willing or able to perform his obligations under the LFA to advance up to $800,000 to Remasys.
In his amended defence and counterclaim filed on 12 September 2008, Mr McLauchlan :
(a)admits the LFA;
(b)alleges a May 2002 “arrangement” constituted by :
(i)Mr Redden’s request (made as agent from Remasys) that Mr McLauchlan advance up to $1m in instalments from time to time, dependent upon Remasys producing certain accounts and “on the basis” that 25% of Remasys’ issued capital would be issued or transferred to him on making the first payment; and
(ii)Mr McLauchlan’s “accession” to the request;
(c)alleges that he made the advances under the arrangement and that the terms of the 18 July 2002 LFA “were meant to embody the terms of the arrangement”;
(d)denies that Mr McLauchlan was not ready willing or able to advance up to $800,000 to Remasys under the LFA and asserts that he was not obliged to do so; (this pleading has been recently amended by an amended defence filed on 17 December 2008 which alleged that Mr McLauchlan was not obliged to advance more than $200,000 or $250,000 to the company under the terms of the arrangement);
(e)counterclaims, seeking:
(i)rectification of the LFA to reflect the terms of the arrangement; and
(ii)specific performance of the LFA by the issue of the shares in Remasys and the return of the $200,000 loan.
On 27 November 2008, the Master dismissed the plaintiffs’ discovery application. Mr McLauchlan had not up to that point discovered any documents relating to his own financial records or to his own ability to perform his obligations under the LFA. The Master also ordered that the plaintiffs provide particulars of the allegation that Mr McLauchlan was not ready willing or able to perform his obligations under the LFA made in their 2 October 2008 reply and further defence to counterclaim.
The plaintiffs filed a reply and further defence to counterclaim pursuant to the Master’s 27 November 2008 order on 4 December 2008, providing the following particulars of that allegation :
Particulars
(a)During the period from about 1 July 2002 until at least December 2002 the first defendant did not have sufficient financial resources or moneys to fund his obligation to advance further moneys under the Loan Facility Agreement.
Mr McLauchlan has now filed a reply to defence to counterclaim on 17 December 2008 alleging that he has performed all his obligations under the LFA and is entitled to 25% of Remasys’ shares. Mr McLauchlan relevantly alleges that it is therefore, immaterial whether or not he was ready willing or able to perform any further obligations under the LFA.
The further discovery sought has been requested by the plaintiffs’ solicitors in letters to Mr McLauchlan’s solicitors from at least 15 May 2008. The relevant correspondence is exhibited to the 26 June 2008 and 17 July 2008 affidavits sworn by Mr Andrew Joseph of the plaintiffs’ solicitors in support of the application.
Submissions
Counsel for Mr McLauchlan resisted the application. He argued that the documents sought are not relevant to the questions in issue in the proceeding, that the classes of documents are too broad, that it is not plain why the particular documents sought are relevant and that it is premature to order discovery before the pleading process has been completed.
Counsel maintained that it was not until the reply and defence to counterclaim was filed on 4 December 2008 after the Master’s order, that the question of Mr McLauchlan’s ability to advance funds under the loan facility agreement was “squarely raised”. He pointed out that the time for a reply to the defence to counterclaim had not yet expired and argued that the matter should be permitted to go to mediation before the further discovery sought was ordered. Counsel characterised the application as a “fishing expedition” and asserted that it would cause significant hardship in the assembling and provision of documents.
I note at this point that Mr McLauchlan’s solicitor wrote to the plaintiffs’ solicitor on 29 May 2008 to the effect that he was then in the process of preparing a supplementary affidavit of documents, as further relevant documents had been located. When that affidavit was subsequently requested, the solicitor responded that counsel had advised that the documents sought were not discoverable. As counsel for the plaintiffs pointed out, it has not been contended that the documents do not exist.
Each party assisted the Court with written and oral submissions which I have taken into account, notwithstanding that I do not refer to all of them in detail.
Conclusion
I am satisfied that the documents of the character sought are relevant to the issue raised by Mr McLauchlan in paragraph 25 of his 25 November 2008 defence to the second further amended statement of claim, and, arguably, by inference as a result of his claim for specific performance of the LFA. They are relevant whether the amount which Mr McLauchlan might arguably have been obliged to advance under the LFA was limited to $50,000 (which he submits was the case in the event that he had agreed to advance any further moneys at all) or was as much as $800,000 (as the plaintiffs maintain).
As it appeared to be conceded that Mr McLauchlan was a bookmaker, the requested statements of position to the licensing authority appear relevant.
It is common ground that the subject period is that between June 2002 and the end of that year. This establishes the relevance of documents relating to the financial years to June 2002 and June 2003, but not any for the year to 2001. I am not persuaded by the submission that they are necessary at this stage for comparison purposes.
The issue as to whether or not Mr McLauchlan was ready, willing or able to meet any obligations under the LFA is squarely raised by the pleadings, notwithstanding the assertions in the 17 December 2008 reply to the 4 December 2008 defence to counterclaim. The documents sought do, in my view, fall within the description of discoverable documents given by McGarvie J in Australian Dairy Corp v Murray Goulbourn Co-operative,[1] being those which :
… contain information which may either directly or indirectly,. enable the defendant either to advance its own case or to damage the case of the plaintiff or which may fairly lead to a train of inquiry which may have either of those two consequences, or. throw light upon any matter in issue or relevant to any matter in issue in the proceeding, and. may be or may have been in the possession of the plaintiff.
[1](1990) VR 355 by McGarvie J at 369.
A number of further pleadings have been filed since the Master dismissed the application on 27 November 2008 and ordered the relevant particulars. Given the current state of the pleadings, I do not consider that the application is now premature or that the discovery should be delayed until after a mediation. The production of informative relevant documents may well assist the mediation process.
I will allow the appeal and make the orders sought, with the exception of those in respect of the financial year to 30 June 2001.
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