Slater v Smith - [2021] SASC 135

Supreme Court of South Australia

(Civil: Application)

SLATER v SMITH

[2021] SASC 135

Judgment of the Honourable Justice Blue

24 November 2021

PRACTICE AND PROCEDURE - PARTIES - DUX LITIS - LEGAL ONUS

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - DISCOVERY OF DOCUMENTS

Matthew Slater, the applicant in the action and respondent in the cross action in the proceeding, seeks an order that the opposite parties be dux litis. He also seeks discovery orders in relation to documents produced by the second respondent Ecosol Pty Ltd to a shareholder in October 2018 pursuant to a court order, documents relating to negotiations for the sale of Ecosol’s business that was completed in November 2018 and documents relating to potential alternative disposal of that business.
Held:
1    The question who is to be dux litis, particularly when there is a claim and counter claim, involves the exercise of a discretion (at [33] to [34]).
2    Weighing all relevant circumstances, there is not good reason to make the opposite parties dux litis instead of Mr Slater (at [50]).
3    Documents in the custody of Janic Consulting Pty Ltd and its principal Mr Charlton, who were retained by Ecosol to negotiate the sale of the business on its behalf, are within the power of Ecosol for the purposes of discovery (at [83]).
4    An order should be made for specific discovery, verified on oath, of the documents produced pursuant to the court order in October 2018 including documents in the custody of Janic Consulting or Mr Charlton (at [85]).
5    Mr Slater is not entitled to the other orders sought in relation to the documents produced pursuant to the court order in October 2018 (at [87] to [89]).
6    An order should be made for specific discovery, verified on oath, of documents recording or comprising negotiations with the buyer for the sale of Ecosol’s business including documents in the custody of Janic Consulting or Mr Charlton (at [103]).
7    If Ecosol is required to pay Janic Consulting or Mr Charlton to produce documents in their custody for the purpose of compliance with these orders, the reasonable costs paid will be recoverable by Ecosol from Mr Slater if an order is made that Mr Slater pay Ecosol’s costs of action notwithstanding that those costs might otherwise be taxable on the Magistrates Court scale (at [84]).
8    Mr Slater has not established the basis for an order for specific discovery of records of proactive steps by Ecosol from August 2008 onwards to dispose of its business (at [109]).

Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) (NSW) ss 5 and 8, referred to.
Douglas-Hill v Parke Davis Pty Ltd (1990) 54 SASR 346; Fairstar Heavy Transport NV v Adkins [2013] EWCA Civ 886; Taylor v Santos Ltd (1998) 71 SASR 434, considered.

SLATER v SMITH

[2021] SASC 135

BLUE J: Ecosol Pty Ltd (Ecosol), the second respondent, formerly carried on a stormwater treatment business. In August 2018 it contracted to sell, and in November 2018 it sold, that business to Urban Asset Solutions Pty Ltd.
Jeffrey Smith, the first respondent and David Bishop were Ecosol’s directors at the time of the sale. Andrew Macklin was also a director, and the managing director, of Ecosol but he had an obvious conflict of interest in relation to any sale to Urban Asset Solutions Pty Ltd, rendering him ineligible to participate in decisions relating to the sale, and for ease of reference I refer to the directors as Mr Smith and Mr Bishop. Ecosol had various shareholders, including Matthew Slater, the applicant.
In August 2018 the directors called a meeting of shareholders to consider whether to approve the proposed sale of the business to Urban Asset Solutions Pty Ltd. The directors were in favour of the proposed sale. Mr Slater was opposed to it. The directors and Mr Slater each communicated with the shareholders in relation to the merits of the proposed sale and in relation to the other’s communications.
The largest shareholder in Ecosol, Jodie Roy, obtained an order from the Supreme Court of Queensland in October 2018 that Ecosol disclose to her 11 categories of documents relating to the proposed sale and to Ecosol’s business and assets. Ecosol engaged Janic Consulting Pty Ltd (Janic) to compile documents in compliance with the disclosure order.
In the action Mr Slater claims against Ecosol and Mr Smith that he was defamed in the course of communications by the directors to shareholders. In the cross action Mr Smith claims against Mr Slater that he was defamed in the course of communications by Mr Slater to shareholders. The subject matter of the alleged defamatory imputations includes, but is not limited to, the topic of whether Ecosol complied with the disclosure order made by the Supreme Court of Queensland.
Mr Slater seeks an order that Mr Smith and Ecosol be dux litis in the proceeding. Mr Slater also seeks orders in relation to discovery by Ecosol of the documents disclosed pursuant to the disclosure order made by the Supreme Court of Queensland and of two other classes of documents.

Background

The facts set out below are based on the pleadings and affidavits filed in relation to the interlocutory applications the subject of these reasons for judgment and appear at this stage to be largely uncontentious. Obviously, the facts found after trial may differ from those set out below.
In 2017 Ecosol’s chief executive officer (managing director) was Andrew Macklin and its general manager was Adrian Fair. In 2016 or 2017 discussions commenced between Mr Macklin and Mr Fair on the one hand and Ecosol’s directors on the other hand concerning a potential purchase by Mr Macklin and Mr Fair (or an entity formed by them for that purpose) of Ecosol’s business, which came to be described as a management buyout (or MBO). In due course, Mr Macklin and Mr Fair incorporated Urban Asset Solutions Pty Ltd as the intended vehicle for the purchase. I refer for convenience to Urban Asset Solutions Pty Ltd, Mr Macklin and Mr Fair collectively as UAS and to Urban Asset Solutions Pty Ltd as Urban Asset Solutions.
Ian Charlton was one of the shareholders of Ecosol and a former director. He operated Janic. The directors of Ecosol engaged Janic to undertake negotiations with UAS for the sale of its business and to assist in relation to the sale (the general retainer). I refer for convenience to Janic and Mr Charlton collectively as Mr Charlton.
On 23 August 2018 Ecosol and Urban Asset Solutions executed an agreement for the sale of Ecosol’s business to Urban Asset Solutions. The agreement was subject to approval by the shareholders in a general meeting. On 28 August 2018 the directors called a general meeting for 26 September 2018 and issued an explanatory memorandum for this purpose. The general meeting was ultimately rescheduled for 23 November 2018.
On 21 September 2018 Ms Roy filed an application in the Supreme Court of Queensland for disclosure of documents by Ecosol. I infer that the application was made on the basis that the documents were relevant to the proposal to be put to the general meeting of shareholders. On 2 October 2018 the Supreme Court of Queensland made an order (the Roy disclosure order) that Ecosol by no later than 9 October 2018 permit Ms Roy or her solicitor to inspect its books and records set out in a schedule listing 11 categories of documents.
Ecosol engaged Mr Charlton to compile documents falling within the 11 categories of documents the subject of the Roy disclosure order (the specific retainer).
Ian Charlton swore an affidavit in this proceeding in which he stated that, pursuant to the specific retainer, he inspected the electronic documents that he already held as a result of the general retainer for the purpose of ascertaining what documents fell within eight of the categories the subject of the Roy disclosure order. He did not hold any documents falling within the categories 10 and 11and held only some documents falling within category 8 and he requested that UAS provide him with copies of documents falling within those three categories. He collected documents from their office on 5 October 2018. He printed out hard copies of certain electronic documents that he already held. He then created a bundle of documents comprising approximately 3,000 pages in 6 lever arch folders (the Disclosed Bundle).
Ian Charlton said that he created a document, which he exhibited, describing the documents in the Disclosed Bundle, which comprised the schedule to the Roy disclosure order annotated by Mr Charlton with details of the documents contained in the Disclosed Bundle (the Charlton listing), which in most cases described the documents specifically and in one case described them more generally. On 8 October 2018 Mr Charlton provided the Disclosed Bundle to Ecosol’s then solicitors, Cowell Clarke, who in turn informed Ms Roy’s solicitors that the documents were available for collection. It appears that on 9 October 2018 Ms Roy collected the Disclosed Bundle from Cowell Clarke. Mr Charlton did not make or keep a duplicate copy of the Disclosed Bundle. Nor did he provide a copy to Ecosol’s directors.
On 11 November 2018 Mr Slater sent an email to the directors, copied to the shareholders, attaching a nine page document complaining about the directors’ conduct, calling on them to resign and asking a series of questions in relation to the proposed sale to UAS. This document is the subject of the first set of imputations alleged by Mr Smith to be defamatory of him.
On 12 November 2018 Mr Smith, as chairman of directors of Ecosol, signed a letter to shareholders. Amongst other things, it referred to a recently received letter from Mr Slater and said that much of the letter contained “statements that are defamatory of various company personnel and statements that are factually incorrect and misleading and deceptive”. The 12 November letter is the subject of the first set of imputations alleged by Mr Slater to be defamatory of him.
On 13 November 2018 Mr Smith, as chairman of directors of Ecosol, signed a further letter to shareholders. It referred to “yet more correspondence” from Mr Slater, which I infer was one or both of emails sent by Mr Slater to shareholders on 12 and 13 November 2018. This letter is the subject of the second set of imputations alleged by Mr Slater to be defamatory of him.
On 14 and 20 November 2018 Mr Slater sent further emails to shareholders. These are the subject of the second and third set of imputations respectively alleged by Mr Smith to be defamatory of him.
On 22 November 2018 Mr Smith, as chairman of directors of Ecosol, signed a letter to shareholders. It referred to another email sent by Mr Slater to shareholders on 21 November 2018 and said that the email contained several untrue statements. This letter is the subject of the third set of imputations alleged by Mr Slater to be defamatory of him.
On 23 November 2018 it appears that a general meeting of shareholders approved the sale of Ecosol’s business to Urban Asset Solutions.
On 30 November 2018 it appears that settlement of the sale to Urban Asset Solutions occurred.
On 22 July 2019 Mr Smith, as chairman of directors of Ecosol, signed a letter to shareholders. It referred to a letter recently received from Mr Slater, which I infer was a letter sent by Mr Slater to shareholders dated 26 June 2019. This letter is the subject of the fourth set of imputations alleged by Mr Slater to be defamatory of him.
On 8 August 2019 Mr Smith, as chairman of directors of Ecosol, signed a further letter to shareholders. This letter is the subject of the fifth set of imputations alleged by Mr Slater to be defamatory of him.
On 22 October 2019 Mr Bishop instituted an action for defamation against Mr Slater in the Magistrates Court (the Bishop action). This action was ultimately discontinued.
On 23 October 2019 Mr Smith instituted an action for defamation against Mr Slater in the District Court of New South Wales (the Smith action). This action was ultimately transferred to this Court and is now a counterclaim in Mr Slater’s proceeding.
On 11 November 2019 Mr Slater filed a counterclaim for defamation against Mr Bishop in the Magistrates Court in the Bishop action. This counterclaim was ultimately discontinued.
On 11 November 2019 Mr Slater instituted an action for defamation against Mr Smith and Ecosol in the Magistrates Court (the Slater action).
On 7 December 2020 Mr Slater instituted a proceeding in the Supreme Court of New South Wales seeking orders under sections 5 and 8 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) that the Smith action be transferred to this Court so that it could be heard concurrently with the Slater action. Mr Slater contended in that proceeding that there was a high degree of overlap between the issues the subject of the two actions.
On 1 April 2021 I made an order by consent transferring the Slater action from the Magistrates Court to this Court. I ordered that the costs of the Slater action, and of the Smith action if transferred by the Supreme Court of New South Wales, are to be determined on the scale and in the manner as if both actions had proceeded in the Magistrates Court.
The order as to costs means that prima facie, if Mr Slater is successful in both the Slater action and the Smith action and is awarded costs, and assuming that he becomes represented by a lawyer, the costs awarded in his favour would be on the Magistrates Court Costs Scale (the Magistrates Court Costs Scale) in Part 3 of Schedule 6 to the Uniform Civil Rules 2020 (SA) (the Rules). Similarly, prima facie, if Mr Smith and Ecosol are successful in both the Slater action and the Smith action and are awarded costs, and assuming that Mr Smith becomes represented by a lawyer in the Smith action, the costs awarded in their favour would be on the Magistrates Court Costs Scale. This of course is subject to the overriding costs discretion to make an order for payment of costs on a different scale or a different basis.
On 17 June 2021 the Supreme Court of New South Wales made an order that the Smith action be transferred to this Court.
On 27 August 2021 I made an order consolidating the Slater action and the Smith action such that Mr Smith’s action is to stand as a cross action in the proceeding instituted by Mr Slater. The trial of the proceeding is listed to commence on 7 March 2022.

Dux litis

The question who is to be dux litis at trial involves the exercise of a discretion that is “ultimately determined by matters of fairness”. The starting point is that, in a proceeding involving a single action, ordinarily the applicant is dux litis. A factor relevant to the exercise of the discretion is the extent to which an applicant may be required to prove a negative if required to adduce evidence on an issue on which the respondent bears the onus of proof before the respondent adduces evidence on the issue. If the onus of proof on all issues lies on the respondent, ordinarily the respondent will be dux litis. If the only issue or issues on which the onus of proof lies on the applicant is or are relatively minor, it may be that the respondent will be ordered to be dux litis.
The position is more complex when there is both an action and a cross action. All other factors being equal, and leaving aside the matters addressed in the previous paragraph, it may be expected that the applicant on the action will be dux litis. Factors relevant to the exercise of the discretion will include an assessment whether either the action or the cross action is predominant in terms of size, importance and complexity; who bears the onus of proof on the principal issues in the action and the cross action; and the degree to which the issues in the action are identical to or interrelated with the issues in the cross action. Overlaid over the question whether the applicant or respondent should be dux litis overall may be the question whether one party should be dux litis in respect of some issues and the other party should be dux litis in respect of other issues.
In the present case, neither party has made an application for an order that one party be dux litis in respect of some issues and the other party be dux litis in respect of other issues. If such an application were made, there would be various permutations as to the issues on which each party would be dux litis. As no such application has been made, I can only decide Mr Slater’s application on the basis that one or other of the parties is to be dux litis on all issues arising in both the action and the cross action.
In the Slater action, Mr Slater pleads various defamatory imputations contained in the five letters sent by Mr Smith on behalf of Ecosol to shareholders between 12 November 2018 and 8 August 2019. In their defence, Ecosol and Mr Smith admit publication of the letters to shareholders and their contents. Ecosol admits that it published the letters. Mr Smith does not admit that he published the letters nor does he deny it. The first potential issue at trial will therefore be whether Mr Smith published the letters but, if this remains an issue at trial, it is unlikely that any significant evidence will be adduced on the issue beyond tender of the letters showing Mr Smith as the signatory.
Ecosol and Mr Smith deny that that the imputations pleaded by Mr Slater arose from the publications.
Ecosol and Mr Smith plead in the alternative the defence of justification that the imputations were true or substantially true. They plead in the further alternative the defence of qualified privilege. The onus of proof (and persuasion) will lie on them in respect of these defences at trial.
Mr Slater pleads by way of reply that the publications were actuated by malice. Malice defeats a defence of qualified privilege. The onus of proof (and persuasion) will lie on Mr Slater in respect of malice at trial.
In the Smith action, Mr Smith pleads various defamatory imputations contained in the three documents sent by Mr Slater to shareholders between 11 and 20 November 2018. In his defence, Mr Slater admits publication of the documents to shareholders and their contents.
Mr Slater denies that that the imputations pleaded by Mr Smith arose from the publications.
Mr Slater pleads in the alternative the defence of justification that the imputations were true or substantially true. He pleads in the further alternative the defence of qualified privilege. The onus of proof (and persuasion) will lie on him in respect of these defences at trial.
Mr Smith pleads by way of reply that the publications were actuated by malice. The onus of proof (and persuasion) will lie on Mr Smith in respect of malice at trial.
There is a clear interrelationship between the issues in the Slater action and the issues in the Smith action insofar as they relate to the respective justification defences of the parties. At the risk of overgeneralisation, Mr Slater was criticising the conduct of the directors in his communications to shareholders the subject of Mr Smith’s defamation claims, and it was those (and related) communications to shareholders by Mr Slater that were the subject of the directors’ communications to shareholders the subject of Mr Slater’s defamation claims. In broad terms, Mr Slater was initiating criticism of the directors and the directors were responding by criticising statements made by Mr Slater in criticising them. Mr Slater pleads by way of his justification defence that his criticism was true (or justified). Mr Smith and Ecosol plead by way of their justification defence that their criticism of Mr Slater was true (or justified). The truth or otherwise of each individual imputation will need to be assessed on an individual basis but there will be overlap in the assessment of the truth of imputations alleged by Mr Slater and the truth of imputations alleged by Mr Smith.

There is likely to be a lesser degree of overlap between the parties’ respective qualified privilege defences or between their respective allegations of malice. However, considered holistically, the overlap between issues arising on the action and those arising on the cross action, and between issues on which Mr Slater bears the onus of proof and issues on which Mr Smith, or Mr Smith and Ecosol, bear the onus of proof, is likely to be such that it would be difficult for one party to be dux litis on certain issues and the other party to be dux litis on other issues. In any event, as observed above, neither party has applied for an order to that effect.
Mr Slater points to the fact that the Smith action was instituted in October 2019 some three weeks before the Slater action was instituted in November 2019. This is not a significant factor in determining who should be dux litis.
Mr Slater also points to the fact that the first publication alleged in either action to be defamatory is his publication of 11 November 2018 the subject of the Smith action, which predates the first publication the subject of the Slater action (which was on 12 November 2018). This is not a significant factor in itself in determining who should be dux litis.
In assessing the relative size, importance and complexity of the action and cross action, the two actions have equal importance to the parties and are more or less equally complex. However, the Slater action involves a more extensive time period than the Smith action.
It is relevant to take into account that Mr Slater will at trial bear the onus of proof of the truth of the alleged imputations the subject of the Smith action and that, in broad terms, Mr Slater was initiating criticism of the directors and the directors were responding by criticising statements made by Mr Slater in criticising them. It is also relevant to take into account that it was the interrelationship between the issues in the two actions that formed the basis of Mr Slater’s successful application that the Smith action be transferred to this Court. It is also relevant to take into account that the Smith action was transferred to this Court over Mr Smith’s opposition on the basis that it would join the Slater action and not on the basis that Mr Smith would become dux litis.
Weighing all of the relevant considerations, Mr Slater should be dux litis at trial.

Discovery in respect of documents produced to Ms Roy

In his 11 November 2018 letter to shareholders, Mr Slater said that he had examined the documentation that Ecosol provided to Ms Roy under the Roy disclosure order. He stated that it was his opinion that Ecosol had not complied with the Supreme Court order in a substantial way, that the directors had provided no justification as to why they thought they could flout Supreme Court orders and he asked the directors to explain to shareholders why they had not obeyed court orders. In their defence in the Slater action, Ecosol and Mr Smith plead, as part of their justification defence in respect of any imputation that Mr Slater was a liar, that Mr Slater’s statement that Ecosol had not complied with the Roy disclosure order in a substantial way was false.
In the Smith action, Mr Smith pleads that Mr Slater’s statement that Ecosol had not complied with the Roy disclosure order in a substantial way gave rise to imputations amongst others that Ecosol had not materially complied with the Roy disclosure order. Mr Smith pleads similar imputations in respect of Mr Slater’s 14 and 20 November 2018 communications to shareholders. In his defence in the Smith action, Mr Slater pleads the defence of justification in respect of any imputation that Ecosol had not materially and substantially complied with the Roy disclosure order.
It is clear that the identity of the documents produced by Ecosol to Ms Roy pursuant to the Roy disclosure order is a material issue in both actions and those documents are directly relevant and thereby discoverable. This is common ground.
Mr Slater’s original interlocutory application dated 26 August 2021 sought an order pursuant to rule 73.15(2)(b) of the Rules. This rule provides that, if there is reason to doubt whether a person has fully complied with a disclosure or production obligation under Part 13 of Chapter 7 of the Rules, the Court may order that a person make specific discovery of specified documents or categories of documents in their possession, custody or power. He expressed the order sought in terms of an order that Mr Smith and Ecosol provide a duplicate verifiable copy of the documents produced by Ecosol to Ms Roy pursuant to the Roy disclosure order.
At the hearing on 2 September 2021, counsel for Mr Smith and Ecosol accepted that they had not made discovery of all of the documents contained in the Disclosed Bundle either as documents presently in their possession, custody or power or as documents formerly in their possession, custody or power. Counsel explained that some of the documents in the Disclosed Bundle had never been in the direct possession of Ecosol but had been in the possession of Mr Charlton and said that none of the documents are now in the direct possession of Ecosol either because they were handed over to Urban Asset Solutions upon settlement in November 2018 or because they had only ever been in the possession of Mr Charlton and not in the possession of Ecosol.
On 16 September 2021 Ecosol and Mr Smith filed an affidavit by Ian Charlton sworn on that date. He said that Janic was engaged by Ecosol to identify all documents that fell within the Roy disclosure order. He identified this engagement as being on 11 September 2018 but this appears to be incorrect because the Roy disclosure order was not made until 2 October 2018. He said that he did not hold any documents falling within category 10 or 11 of the schedule to the order and only some documents falling within category 8. He said that he asked Urban Asset Solutions to provide him with copies of documents falling within those three categories and he attended at their office on 5 October 2018 to collect those copies (the 3 categories). It appears to be incorrect that Mr Charlton asked Urban Asset Solutions for the documents or attended at the offices of Urban Asset Solutions to collect documents in October 2018 because this predated settlement of the sale (which occurred on 30 November 2018) and Urban Asset Solutions would have had no basis to have had possession of Ecosol’s documents before settlement. I proceed on the basis that Mr Charlton asked Mr Macklin or Mr Fair, who were then officers of Ecosol as well as of Urban Asset Solutions, for the documents and attended at the offices of Ecosol to collect the documents.
Ian Charlton said that, in respect of the other eight categories of documents (the 8 categories), he inspected the electronic records that he held in respect of the sale to identify the documents that fell within the scope of the order. He printed out his selection of those records and combined them with the documents obtained on 5 October 2018 to create the Disclosed Bundle and he also created the Charlton listng. In respect of most categories, the Charlton listing refers to specific documents, but category 1 includes the description “[e]mail and any other correspondence between the parties”.
Ian Charlton said that, if he were to attempt to re-create the Document Bundle in response to a non-party discovery order, he would need to replicate his selection process in respect of the 8 categories and he would need to ask UAS to provide him with the documents in respect of the 3 categories. He could not confirm that the re-creation would be perfect because some items in the Charlton listing were described in generic terms, referring specifically to “email and any other correspondence between the parties”. He estimated that it would take approximately 45 hours to undertake the re-creation and said that his reasonable costs of doing so would be approximately $5,000.
On 16 September 2021 Ecosol and Mr Smith filed an affidavit by Mr Smith sworn on that date. Mr Smith described Ecosol’s engagement of Mr Charlton in similar terms to that described by Mr Charlton. Mr Smith said that he and Ecosol have made discovery of some of the documents described in the Charlton listing, which he identified by reference to discovery number, but said that otherwise neither he nor Ecosol is in possession of any of the documents identified in the Charlton listing.
On 21 September 2021 Mr Slater filed a further interlocutory application seeking further or alternative discovery orders in respect of the Document Bundle (and in respect of two other classes of documents addressed below).
At the hearing on 23 September 2021 I expressed the provisional view that Ecosol was obliged to make discovery at least of such documents as were contained in the Disclosed Bundle as had previously been in the possession, custody or power of Ecosol.
On 12 October 2021 Ecosol and Mr Smith filed an Amended Sixth List of Documents. They disclosed nine documents or classes of document passing between UAS and Mr Charlton and Cowell Clarke or in one case merely involving Mr Charlton (being documents described in the Charlton listing) as being documents that had never been in their possession (items 202 to 210). They disclosed 11 documents (also being documents described in the Charlton listing) as being documents last in their possession on 30 November 2018, having been included in the sale of assets to Urban Asset Solutions and now believed to be in the possession of Urban Asset Solutions or Mr Charlton (items 211 to 221).

Documents in possession, custody or power

Mr Slater contends that the electronic documents held by Mr Charlton are, or at least in October 2018 were, in the “power” of Ecosol because he created or received the documents in the course of his engagement by Ecosol and he was and is subject to the direction of Ecosol concerning those documents. Ecosol and Mr Smith take issue with this contention.
Discovery in this proceeding is by way of general discovery under rule 73.7 of the Rules. Rule 73.7(2) provides:
Each applicant and respondent in a proceeding must make discovery of discoverable documents that are or were in their possession, custody or power in accordance with this Division.
Rule 2.1(1) defines “power” in this context as follows:
power, when used in the context of a reference to possession, custody and power, means that it lies within the person’s power to obtain immediate possession of the document or thing in question or to control their disposition, whether or not the power is one that would be recognised at law or equity;
In Taylor v Santos Ltd the Full Court considered the meaning of “power” in the context of rule 58.04(e) of the Supreme Court Rules 1987 (SA). Doyle CJ (with whom Prior J agreed) said:
In my opinion the court should be cautious in extending the concept of power beyond the concept of a presently enforceable legal right, even though it may be appropriate to do so. Reading r 58 as a whole, my view is that the obligation to discover a document is limited to a document that the person in question has the legal power or (I can think of no better expression) actual and immediate ability to inspect, even though the document is the property of or is held by another person. That power or ability might exist in relation to a document that a person is not able to produce for inspection to a third person, for example a document in which a person has joint property with another person. But, in my opinion, the obligation to discover hinges upon having a right or actual and immediate ability to examine the document. A person does not have that right or actual immediate ability if the person is able to inspect the document only if a third person, who has control of the document, agrees to permit inspection, or agrees to refrain from so exercising that person’s control as to prevent inspection. I add, at the risk of speaking too generally, that in considering these issues the court is not concerned with issues of practicality. For example, a document might be in the power of a person in the sense just explained, but be thousands of kilometres away and difficult to get to, or it might be close at hand but stored in a warehouse and very difficult to locate.
The point I wish to emphasise is that to the extent that the concept of power extends beyond a presently enforceable legal right, it should be held to so extend only when the court can say that the person in question does have the actual immediate ability to inspect the document.
In Taylor the Full Court held that the subject documents were not within the power of Santos merely because they were in the possession of a subsidiary of a subsidiary of Santos because Santos had no enforceable legal right to inspect the documents, nor did it have an actual immediate ability to do so. In Douglas-Hill v Parke Davis Pty Ltd Duggan J had earlier held that the subject documents were not within the power of Parke Davis merely because they were in the possession of its holding company in the United States of America.
In Bowstead & Reynolds On Agency, it is stated that:
It is the duty of an agent –
…
(3) to produce to the principle upon request … correspondence and documents (including emails and other electronic material) under his control relating to the principal’s affairs.
…
The principal is prima facie entitled to have delivered up to him upon request, and at the termination of the agency, all documents and electronic records and correspondence (together “records”) concerning his affairs which have been prepared by the agent in the course of the agency and are retained. It is not necessary for the principal to prove that he owns the records, although where he does not own particular records it seems likely that only a copy need be furnished.
In Fairstar Heavy Transport NV v Adkins, Mummery LJ (with whom Patten and Black LLJ agreed) said:
In brief, Fairstar is entitled to the relief claimed by it against Mr Adkins for the following reasons:
First, their former relationship had been that of principal and agent.
Secondly, as a general rule, it is a legal incident of that relationship that a principal is entitled to require production by the agent of documents relating to the affairs of the principal.
Thirdly, as Black LJ observed in the course of argument, "documents" may, depending on context, include information recorded, held or stored by other means than paper…
Fourthly, materials held and stored on a computer, which may be displayed in readable form on a screen or printed out on paper, are in principle covered by the same incidents of agency as apply to paper documents. The form of recording or storage does not detract from the substantive right of the principal as against the agent to have access to their content.
In Law of Agency, Dal Pont states that:
An agent must return to the principal all documents delivered to the agent for the purposes of the agency or that have been prepared by the agent for those purposes… The general rule here is that documents brought into existence by an agent while in the employment of a principal are the principal’s documents, which the principal can require be delivered up.
The agent’s obligation in this regard continues after termination of the agency.
In the present case, the documents contained in the Disclosed Bundle can be divided into three classes:
1 documents created by Mr Charlton on behalf of Ecosol pursuant to the general retainer or received by Mr Charlton on behalf of Ecosol from UAS in the course of negotiations, or which comprise communications between Mr Charlton on behalf of Ecosol and UAS, relating to the (potential) sale of Ecosol’s business (for example draft agreements exchanged between Mr Charlton, UAS and Cowell Clarke);
2 documents belonging to Ecosol provided to Mr Charlton pursuant to and for the purposes of the general retainer (for example Ecosol’s share and fixed asset registers and some documents in category 8);
3 documents provided to Mr Charlton on 5 October 2018, namely category 8 (list of assets being sold to UAS); category 10 (Ecosol’s current contracts with its clients); and category 11 (results of Stormwater Quality Improvement Devices Evaluation Protocol tests).
The documents in the first class that are identified in the Charlton list are:
•           emails and other correspondence between UAS and Mr Macklin, of which Ecosol has discovered a handful of emails (items 83, 87 and 90 to 96) but are otherwise in the custody of Mr Charlton (part of category 1);
•           drafts and marked up versions of the Business Sale Agreement and six other transaction documents and the final version of one of those transaction documents relating to Malaysia (part of categories 1 and 4);
•           email enclosing Managed Buyout Term Sheet (category 2) (the Term Sheet itself being in the possession of Ecosol and having been discovered by Ecosol and Mr Smith); and
•           UAS ASIC company search dated 16 August 2018 (part of category 7).
The documents in this class were either created or obtained by Mr Charlton for the purpose of acting for Ecosol in negotiations with UAS or were received from UAS by him in that capacity. Ecosol has a legal right as against Mr Charlton to inspect those documents under the doctrine referred to at [68] to [71] above. They were within the “power” of Ecosol when they were created or received in 2018 and, as it appears that they have been retained by Mr Charlton, they are still within the “power” of Ecosol for the purpose of discovery.
The documents in the second class that are identified in the Charlton list are:
•           Ecosol share register (category 3) which is in the possession of Ecosol and has been discovered by Ecosol and Mr Smith;
•           signed transaction documents (categories 4 and 5) which are in the possession of Ecosol and have been discovered by Ecosol and Mr Smith;
•           Gardiner Hall & Co report dated 5 June 2018 (category 9) which is in the possession of Ecosol and has been discovered by Ecosol and Mr Smith.
It appears that there are no documents in the second class that are in the custody of Mr Charlton but not also in the possession of Ecosol. However, if there are any such documents (for example in category 8), they belong to Ecosol under the doctrine referred to at [68] to [71] above, having been provided by Ecosol to Mr Charlton pursuant to the general retainer for the purpose of his engagement to act on behalf of Ecosol in negotiations with UAS. Any such documents were and are in the “power” of Ecosol for the purpose of discovery.
The documents in the third class are Ecosol documents provided to Mr Charlton for the purpose of the special retainer. Two of them are in the possession of Ecosol and have been discovered by Ecosol and Mr Smith. The remaining documents were formerly in Ecosol’s possession up to 30 November 2018 and have been discovered as such by Ecosol and Mr Smith. They are no longer in the custody of either Ecosol or Mr Charlton and hence are no longer in the possession, custody or power of Ecosol and Mr Smith.
Ecosol and Mr Smith draw attention to the reference to “power to obtain immediate possession” of a document or to control its disposition in the definition of “power” in rule 2.1(1) and contend that they do not have power to obtain immediate possession of the documents in the custody of Mr Charlton. I reject that contention. This definition effectively picks up the concepts identified by the Full Court in Taylor v Santos Ltd. Ecosol had and has a legal right as against Mr Charlton to obtain immediate possession of the documents in the first and second classes referred to above.
Mr Charlton in his affidavit said that, if he were to attempt to re-create the Document Bundle in response to a non-party discovery order, he estimated that it would take approximately 45 hours to undertake the re-creation and his reasonable costs of doing so would be approximately $5,000. Mr Charlton did not say that, if he were requested by Ecosol to undertake this task so that it could discharge its own discovery obligations, he would charge for the task. He might take a different view in this context given that Ecosol is entitled to the documents under the doctrine referred to at [68] to [71] above.

Mr Charlton’s estimate of 45 hours included time spent in relation to the third class of documents referred to above, which will not be required if an order is made that Ecosol make specific discovery of documents in Mr Charlton’s custody. In addition, the documents falling within the second class appear to have been discovered by Ecosol and Mr Smith as being in their possession and Mr Charlton would only be required to check that he does not have any other documents falling within that class. Of the documents falling within the first class, some have been discovered by Ecosol and, leaving aside the emails and other correspondence in category 1, the balance comprise a small number of specifically identified documents that it may be expected would be quickly and easily found by Mr Charlton. This leaves the task of collating the email and other communications between Mr Charlton and UAS which does not appear to be a burdensome task. I therefore consider that Mr Charlton’s estimate of the cost that would be involved is a substantial overestimate.
In any event, assuming that Ecosol would be required to pay Mr Charlton to undertake the task of providing any documents in his custody falling within the first and second classes that have not been discovered by Ecosol as in its possession, that does not entail that those documents are not within the power of Ecosol. A client who is entitled to obtain documents from their solicitor might be required to pay the solicitor for their time in locating and providing the documents but this does not entail that the documents are not within the power of the client. The same applies in respect of Mr Charlton.
The Amended Sixth List of Documents filed by Ecosol and Mr Smith describes items 203 to 209 as draft and marked up or unsigned versions of seven transaction documents authored by Mr Charlton or UAS and sent amongst others to Cowell Clarke. Cowell Clarke were the solicitors for Ecosol in relation to the (proposed) transaction with UAS. A client of a solicitor has similar rights in respect of documents created or received by the solicitor on behalf of the client as a client has in respect of documents created or received by an agent. If Cowell Clarke have retained items 203 to 209 (or received and have retained any other documents contained in the Disclosed Bundle), those documents are within the power of Ecosol for the same reasons as in respect of such documents retained by Mr Charlton.
In conclusion, documents falling within the Charlton Listing that have been retained by Mr Charlton or Cowell Clarke are within the power of Ecosol and, to the extent that it has not already discovered those documents as being in its possession, it is required to take reasonable steps to obtain them and discover them.

Orders

As observed above, if Ecosol is successful in the Slater action, prima facie it will only recover its costs on the Magistrates Court Costs Scale. That scale is based on a percentage of “quantum” (as defined) for various stages of an action, and hence the actual costs of making discovery are irrelevant. If and to the extent that Ecosol is required to incur the reasonable cost of paying Mr Charlton to provide to it documents falling within the Charlton Listing, that is a cost over and above that contemplated by the Magistrates Court Costs Scale and is a cost that should be recoverable by Ecosol from Mr Slater if Ecosol is successful in the Slater action.
I will make an order for specific discovery by Ecosol and Mr Smith of documents in the Charlton Listing that have been retained by Ecosol, Mr Smith, Mr Charlton or Cowell Clarke. I will make an order requiring that specific discovery to be verified on oath.

Related orders sought by Mr Slater

Mr Slater seeks various other orders in relation to the Disclosed Bundle.
Mr Slater seeks orders under rule 73.14(2)(k) of the Rules that Ecosol and Mr Smith and Mr Charlton verify under oath that Ecosol fully complied with the Roy disclosure order and under rule 73.15(2)(b) of the Rules that Mr Bishop verify under oath that Ecosol fully complied with the Roy disclosure order. Rule 73.14(2)(k) provides that the Court may order that a person’s list of documents be verified on oath. It does not empower the orders sought by Mr Slater against Ecosol and Mr Smith and Mr Charlton. Rule 73.15(2)(b) provides that the Court may order a person to make specific discovery of specified documents or categories of documents in their possession, custody or power. It does not empower the order sought by Mr Slater against Mr Bishop.
Mr Slater seeks an order under rule 73.15(2)(c) of the Rules that Mr Bishop produce an affidavit explaining on what basis he formed the opinion that Ecosol had fully complied with the Roy disclosure order. 73.15(2)(c) provides that the Court may order that a person file an affidavit deposing as to whether they have specified documents or categories of documents in their possession, custody or power. It does not empower the order sought by Mr Slater against Mr Bishop.
Mr Slater seeks an order under rule 73.15(2)(b) of the Rules that Ecosol and Mr Smith be required to request Cowell Clarke to produce an affidavit giving full details of their knowledge of the documents contained in the Disclosed Bundle, including whether the documents were returned to them and if so what they did with them. Rule 73.15(2)(b) provides that the Court may order a person to make specific discovery of specified documents or categories of documents in their possession, custody or power. It does not empower the order sought by Mr Slater. I observe that, as part of their general discovery obligations, Ecosol and Mr Smith are obliged to make an enquiry of Cowell Clarke whether the documents were returned to them after they were provided to Ms Roy. There is no reason to think that they have not made this enquiry.

Discovery in respect of sale of Ecosol’s business

Mr Slater seeks orders that Ecosol and Mr Smith make specific discovery of:
• records of all communications with UAS in relation to UAS’ interest in acquiring Ecosol’s stormwater business; and
• records of their proactive steps from August 2008 onwards to dispose of Ecosol’s stormwater business.

Communications with UAS concerning sale of business

The first class of documents of which specific discovery is sought is records of all communications with UAS in relation to UAS’ interest in acquiring Ecosol’s stormwater business.
The first issue is whether this class of documents is directly relevant to an issue raised in the proceeding assessed by reference to the pleadings.
In the Slater action, in respect of the Ecosol letter dated 12 November 2018, Mr Slater refers to a passage in which it was said that much of Mr Slater’s letter contained statements that were factually incorrect and misleading and deceptive and defamatory. Mr Slater pleads that this conveyed defamatory imputations including that he deliberately made misleading, deceptive and defamatory statements and was a liar.
In their defence, Ecosol and Mr Smith plead that, if these imputations arose (which they deny), they were substantially true. They refer amongst other things to statements by Mr Slater in his 11 November 2018 letter that Mr Smith chose to ignore sections of the Corporations Act that make it illegal for directors to profit at the expense of shareholders and plead that this was false because Mr Smith did not ignore those requirements. They refer to statements by Mr Slater in that letter that Mr Smith and Mr Bishop were not acting in the best interests of all shareholders, were engaged in an egregious campaign to force the MBO on shareholders and refused to even countenance a higher offer to the MBO and plead that the statements gave rise to defamatory imputations that the directors were not acting in the best interests of shareholders, were forcing shareholders to accept an option that was not in their best interests and did not review or consider an offer by Flow Defence Pty Ltd for the purchase of the business. They refer amongst other things to statements by Mr Slater in his 6 November 2018 email that it appeared that his refusal to accept the $2.42 MBO offer resulted in Mr Macklin returning with a higher offer of $3.43 and plead that this was false.
In the Slater action, in respect of the Ecosol letter dated 13 November 2018, Mr Slater refers to a passage in which it was said that Mr Slater appears to have a strong desire to prevent completion of the sale of company assets to UAS, his involvement was contributing nothing of value to shareholders and he was forcing the company to incur additional costs in addressing his defamatory and vitriolic comments. Mr Slater pleads that this conveyed defamatory imputations including that he was improperly seeking to interfere with the sale to UAS; was motivated by improper and unlawful purposes, hatred of and vindictiveness, malice and animus towards the directors; lacked any commercial morality; and was acting in a destructive and reprehensible manner.
In their defence, Ecosol and Mr Smith plead that, if these imputations arose (which they deny), they were substantially true.
In the Smith action, in respect of Mr Slater’s letter dated 11 November 2018, Mr Smith pleads that it conveyed defamatory imputations including that he supported the sale to illegally gain a personal financial advantage at the expense of other shareholders, he refused to even countenance a higher offer to the MBO in breach of his fiduciary duties, he would not consider alternative offers even if they were higher and he was biased towards the MBO.
In his defence, Mr Slater pleads that, if these imputations arose (which he denies), they were substantially true. He refers amongst other things to offers or expressions of interest by other parties, including Flow Defence Pty Ltd, Stormwater 360 Pty Ltd, Spel Environmental Pty Ltd and another unnamed interested company that expressed interest some years earlier.
During submissions, Mr Slater identified that, although his application is expressed in different terms, in substance he is seeking an order for specific discovery of the same class of documents as is the subject of category 1 of the Roy disclosure order, namely documents recording or comprising negotiations between UAS and Ecosol for the sale of Ecosol’s business. Given the allegations made by Mr Slater the subject of the Slater action and the Smith action and the issues that arise on the justification defences of the parties concerning the conduct of the directors in negotiations with UAS, documents recording or comprising those negotiations are directly relevant to the issues in the proceeding.
The second issue is whether there is reason to doubt that Ecosol and Mr Smith have fully complied with their disclosure obligations, that is whether there is reason to believe that there are documents in their possession, custody or power recording or containing negotiations with UAS that have not been discovered. During submissions, I was informed by counsel for Ecosol and Mr Smith that, although they denied that this class of documents was directly relevant, they nevertheless discovered all documents in their possession in their Fourth List of Documents.
It is clear that Ecosol and Mr Smith have not, subject to a few exceptions, discovered documents in the custody of Mr Charlton comprising category 1 of the schedule to the Roy disclosure order, which is this class of documents. I have concluded above that these documents are within the power of Ecosol and should be discovered by Ecosol. Accordingly there is reason to believe that there are documents in the power of Ecosol recording or containing negotiations with UAS that have not been discovered.
Ecosol and Mr Smith contend that Mr Slater’s application for an order for specific discovery of this class of documents is an abuse of process because he previously made an application for the same order in the Magistrates Court and that application was dismissed. It may be an abuse of process to make successive interlocutory applications for the same orders on the same material and on the same basis. However, much has changed since Mr Slater’s previous application. The pleadings have changed substantially. Ecosol and Mr Smith have made substantial further discovery. Most importantly, in the present application, Mr Slater has now established that there are documents in the power of Ecosol falling within this class that have not been discovered, namely documents in the custody of Mr Charlton. This application is therefore not an abuse of process.
Although in a practical sense it may be otiose because it duplicates the order made in respect of the disclosed bundle, it is appropriate to make an order for specific discovery of documents in the possession, custody or power of Ecosol or Mr Smith (including in the custody of Mr Charlton or Cowell Clarke) recording or comprising negotiations with UAS for the sale of Ecosol’s business. That discovery should be verified on oath by Mr Smith.

Communications with other parties concerning sale of business

Mr Slater seeks an order that Ecosol and Mr Smith make specific discovery of records of their proactive steps from August 2008 onwards to dispose of Ecosol’s stormwater business.
The first issue is whether this class of documents is directly relevant to an issue raised in the proceeding assessed by reference to the pleadings.
The order sought by Mr Slater is expressed in terms extracted from Ecosol’s 28 August 2018 explanatory memorandum from the Board to shareholders in which it was stated “over the past 10 years or so [the Board] has been proactive in seeking a viable shareholder exit strategy but always without success, largely because our industry is not particularly attractive to investors”. I accept the submission by Ecosol and Mr Smith that the mere fact that this statement was made in the explanatory memorandum does not render directly relevant documents in relation to steps by the Board to dispose of Ecosol’s business over the previous 10 years.
Nevertheless, the imputations pleaded by the parties referred to under the previous heading relate to the adequacy or inadequacy of steps taken by the directors to explore alternative options to sale of the business to UAS. This renders directly relevant communications between Ecosol and other interested parties in relation to the potential sale of Ecosol’s business to parties other than UAS. However, it does not extend back to 2008 but only covers the period since UAS first expressed interest in acquiring Ecosol’s business.
The second issue is whether there is reason to doubt that Ecosol and Mr Smith have fully complied with their disclosure obligations, that is whether there is reason to believe that there are documents in their possession, custody or power recording or comprising communications between Ecosol and other interested parties in relation to the potential sale of Ecosol’s business to parties other than UAS since UAS first expressed interest in acquiring Ecosol’s business that have not been discovered.
During submissions, I was informed by counsel for Ecosol and Mr Smith that, although they denied that this class of documents was directly relevant, they nevertheless discovered all such documents in their possession, custody or power in their Fourth List of Documents. This is of course not evidence but the onus lies on Mr Slater to establish reason to doubt full compliance in this respect. Mr Slater has not adduced evidence that there is reason to believe that there are documents not discovered by Ecosol and Mr Smith that fall within this class. He has therefore failed to establish a basis for making a specific discovery order.

Conclusion

I propose to make the following orders:
1 Ecosol and Mr Smith make specific discovery, by a date to be fixed, of all documents in their possession, custody or power (including any documents in the custody of Janic Consulting Pty Ltd, Ian Charlton or Cowell Clarke):
(a) copies of which were contained in the Disclosed Documents and that have been retained by Ecosol, Mr Smith, Mr Charlton or Cowell Clarke; and
(b) recording or comprising negotiations with UAS for the sale of Ecosol’s business.
2 The discovery the subject of order 1 be verified on oath by Mr Smith.
3 If Ecosol is required to pay Mr Charlton to produce documents in his custody for the purpose of compliance with order 1, the reasonable costs paid to Mr Charlton will be recoverable by Ecosol from Mr Slater if an order is made that Mr Slater pay Ecosol’s costs of action notwithstanding that those costs might otherwise be taxable on the Magistrates Court scale.
4 Mr Slater’s interlocutory applications dated 26 August 2021 (FDN 82), 21 September 2021 (FDN 93) and 7 October 2021 (FDN 101) are otherwise dismissed.
I will hear the parties concerning the precise form of these orders and any consequential orders sought.