Singh v Friedman [No 3]
[2016] WASC 308
•23 SEPTEMBER 2016
SINGH -v- FRIEDMAN [No 3] [2016] WASC 308
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 308 | |
| Case No: | CIV:2183/2011 | ON THE PAPERS | |
| Coram: | ALLANSON J | 23/09/16 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application granted in part Orders for further and better discovery made | ||
| B | |||
| PDF Version |
| Parties: | SUKHWANT SINGH NEVILLE FRIEDMAN JEFFREY SOMAH LURIE |
Catchwords: | Practice and procedure Discovery by categories Further and better discovery Turns on own facts |
Legislation: | Nil |
Case References: | Singh v Friedman [2013] WASC 78 Singh v Friedman [No 2] [2016] WASC 39 Stanley v Layne Christensen Company [2004] WASCA 50 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Consolidated by Orders dated 24 May 2012
- Plaintiff
AND
NEVILLE FRIEDMAN
First Defendant
JEFFREY SOMAH LURIE
Second Defendant
- Plaintiff
AND
NEVILLE FRIEDMAN
First Defendant
JEFFREY SOMAH LURIE
Second Defendant
Catchwords:
Practice and procedure - Discovery by categories - Further and better discovery - Turns on own facts
Legislation:
Nil
Result:
Application granted in part
Orders for further and better discovery made
Category: B
Representation:
CIV 2183 of 2011
Consolidated by Orders dated 24 May 2012
Counsel:
Plaintiff : No appearance
First Defendant : No appearance
Second Defendant : No appearance
Solicitors:
Plaintiff : Bennett + Co
First Defendant : Douglas Cheveralls Lawyers
Second Defendant : Douglas Cheveralls Lawyers
CIV 1476 of 2012
Counsel:
Plaintiff : No appearance
First Defendant : No appearance
Second Defendant : No appearance
Solicitors:
Plaintiff : Bennett + Co
First Defendant : Hotchkin Hanly Lawyers
Second Defendant : Hotchkin Hanly Lawyers
Case(s) referred to in judgment(s):
Singh v Friedman [2013] WASC 78
Singh v Friedman [No 2] [2016] WASC 39
Stanley v Layne Christensen Company [2004] WASCA 50
1 ALLANSON J: In a postscript to a judgment delivered on 24 April 2012, McKechnie J said of this action:
Mr Singh, Mr Friedman and Mr Lurie should know better than most, the cost and perils of litigation. Stripped of its legal intricacies and possibilities for relief, the substantive action is simply about a sum of money. The parties would be wise to negotiate a solution which will leave all of them free to resume concentration on their practice and their clients.
2 The action will not go to trial until 2017, six years after it was commenced. In this application, the parties are still disputing discovery.
3 Discovery in the action was by categories. Mr Singh proposed that the defendants give discovery of 57 specified categories of documents. About half of those categories were disputed. Following a hearing in 2013, I ordered discovery of some only of the disputed categories, stood five over for further argument if the parties wished to pursue them, and otherwise dismissed the plaintiffs' application.
4 The current application is for discovery of two classes of documents:
1. partnership financial documents; and
2. financial documents and property investment documents for entities referred to as the 'new entities'.
5 The 'new entities' are part of the plaintiff's plea that the defendants, his former partners, breached a contractual term of the partnership by attending to personal investments and business during ordinary business hours, and using the services of a partnership employee for those purposes. The plaintiff originally pleaded 25 entities, listed in par 27 of the statement of claim, by which the defendants conducted their business and investments. In an amendment to the statement of claim in May 2016 the plaintiff added 13 further entities to that list.
Partnership financial documents
6 First the plaintiff seeks discovery of 'financial statements recording annual profits made by the partnership and tax returns for the years ended 30 June 2010 to 30 June 2016'. The plaintiff supports discovery of these documents on two bases:
(1) The documents will contain information which could affect the manner in which the plaintiff conducts the proceedings; specifically, whether he will elect the share of profits attributable to the use of his share of the partnership assets after the dissolution of the partnership, or interest on the amount of his share of the partnership assets: Partnership Act 1895 (WA) s 55(1).
(2) The financial statements and tax returns are relevant to whether certain monthly payments made to him since the dissolution of the partnership ought to be treated as a reduction of his share of the partnership or as his share of the profits after dissolution.
7 I do not accept the plaintiff's second argument. Whether the amounts are attributed to the share of the partnership or a share of the profits after dissolution will be determined on the construction of any agreements under which they have been made. The defendants' treatment of the payments in its financial statements does not determine their character. How the defendants treat those payments for the purposes of taxation is unlikely to assist the court.
8 The first argument calls for a judgment about whether documents relevant to the plaintiff's statutory election under s 55 relate to matters in question in the proceedings. The defendants submit that, because the plaintiff's right to either a share of profits or interest on his share of the partnership assets is not in question, documents relating to these matters are not discoverable as documents relating to a matter in issue. But the proper valuation of the share is in issue and a matter for determination. It may not arise if the plaintiff is successful on alternative relief. That does not deny its relevance. In my opinion, the documents sought in par 1.1 of the proposed orders are relevant and discoverable.
9 The plaintiff also seeks, in par 1.2 of the proposed orders, either a report in respect of work in progress outstanding at 30 June 2010, showing the recovery of the work in progress after that date, or the source documents necessary to produce such a report. The request follows a letter from the solicitors for the defendants, dated 15 January 2016, which said that the defendants were able to supply such a report. The intention of the plaintiff is to establish the value of the partnership at 30 June 2010, using actual recovery figures to July 2016 to determine the value of work in progress at that date.
10 The plaintiff relies on his affidavit, sworn on 19 August 2016, in which he says that when he left the partnership its accounting system could be used to produce reports showing work in progress recorded against all files by each fee earner, monthly fee earner billings, and work in progress receipts.
11 The defendants have filed two affidavits of Colleen Anne Radich, financial controller, to the effect that:
(1) She carried out calculations to identify the contents of the 'report' referred to in the letter dated 15 June 2016, and it does not produce an accurate assessment of the old work in progress recovered. It is not necessary to set out her reasons for that conclusion.
(2) To calculate the proportion of money received after June 2010 that should be attributed to work in progress before June 2010 would require an expert forensic examination of the whole accounting system for the period, requiring the author to have unfettered access to the accounting system.
(3) The defendants' accounting system would allow production of a report showing the amount billed after 30 June 2010 on each open file on which work in progress was recorded, but not the other information necessary to enable an accurate calculation of the information sought by the plaintiff.
12 On the evidence before me, I am not satisfied that the documents sought in par 1.2 of the proposed orders should now be discovered. The report itself does not exist. The discovery of all source material to enable the creation of a report of the kind suggested by the plaintiff is, on the evidence of Ms Radich, impractical.
Financial documents for the 'new entities'
13 The plaintiff seeks nine categories of documents, all for the period 30 June or 1 July 2000 to 30 June 2010. The plaintiff says that the documents sought 'reflect' documents which it obtained on subpoena in December 2015.
14 When the parties first dealt with categories of discovery in 2013, the plaintiff sought discovery of documents relating to the entities then listed in par 27 of the statement of claim. The categories of documents, then requested as category 32, included many of the documents now sought in relation to the new entities in proposed orders 1.3.1 to 1.3.9. In Singh v Friedman [2013] WASC 78, I held:
… It may be that within the extremely broadly expressed categories in item 32 there are specific categories of documents which are relevant to the proof of the allegations in pars 26 and 27. But the documents which Mr Singh seeks far exceed those which may be relevant. That is particularly so when five of the categories extend beyond the period of Mr Singh's partnership with the defendants.
Further, in this instance, the inference arises from the extent of the discovery (both the categories of documents sought and the period covered) that it would be a considerable burden.
In refusing discovery at this stage I do not preclude the defendant from seeking more specific discovery of documents which can be demonstrated to be sufficiently relevant to the pleaded allegations [69] - [71].
15 In December 2015, the plaintiff issued a series of subpoenas to produce documents, including subpoenas to seven of the companies listed in par 27 of the statement of claim. The subpoena sought early return of six classes of documents:
1. All end of financial year statements for the financial years ending 30 June 2000 to 30 June 2010 (the Period).
2. All accounting ledgers maintained by or on behalf of [the company] for the period, including journal entries and audit trails.
3. All tax returns prepared by or on behalf of [the company] for the Period.
4. All bank statements for the Period for accounts held by [the company].
5. All shares or securities statements for shares or securities traded by [the company] during the Period.
6. All finance applications submitted to any finance provider during the Period by or on behalf of [the company].
16 Those classes are reproduced (in relation to the 13 new entities) in proposed orders 1.3.1 to 1.3.6.
17 On an application by the subpoena recipients to set aside the subpoena, I held that, on the test of relevance set down in Stanley v Layne Christensen Company [2004] WASCA 50 [9], the subpoenas had a legitimate forensic purpose. Specifically, I held that the subpoenaed documents were directly relevant to the plaintiff's plea (denied by the defendants) that the defendants conducted share trading though corporate entities; and also that each category could not be looked at in isolation and 'it is the potential relevance of the picture that may emerge from the analysis of the whole of the financial information that justifies the scope of the subpoenas': Singh v Friedman [No 2] [2016] WASC 39 [28].
18 Perhaps unsurprisingly, the plaintiff relies on my findings regarding relevance in 2016; the defendant refers to my earlier decision on discovery. If it were simply a matter of comparing the categories of information requested in the present application with the categories requested on subpoena, it would be hard to distinguish the present application.
19 But the categories of information are not the only relevant factor.
20 First, the subpoena was confined to seven proprietary companies; at least one of the defendants was a director of each company. The 13 new entities comprise:
(1) five unit trusts;
(2) two other trusts;
(3) four companies (only one of which is a proprietary company);
(4) a partnership; and
(5) the 'Swanbourne Estate Development' (the legal character of which is not apparent).
There is nothing in the material before me to show in what capacity either defendant was connected to the new entities: for example, was he a trustee or a beneficiary; did he hold units in the unit trusts; what was his interest in any of the four 'non-proprietary' companies.
21 Second, the plaintiff seeks fifteen categories of documents (one was not pressed), for each of thirteen entities, over a 10 year period.
22 Third, the categories of documents sought are not limited to trading or other activities carried on by the defendants. For example, the property investment documents that the plaintiff seeks include all documents relating to the income and expenses of any property purchased by the new entities in the 10 year period from 1 July 2000 to 30 June 2010.
23 Fourth, I cannot infer, as I could on the subpoena application, that the information in the documents requested would relate to the defendants' trading activities.
24 I am not satisfied that discovery by categories, used in this blunt way, is compatible with proper management of litigation.
25 I would not order discovery of the documents in proposed orders 1.3.1 to 1.3.16. There will, however, be an order that the defendants give discovery of the financial statements recording annual profits made by the partnership and tax returns of the partnership for the financial years ended 30 June 2010 to 30 June 2016.
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