Slick v Westpac Banking Corporation (No 2) - [2006] FCA 1712

FEDERAL COURT OF AUSTRALIA
Slick v Westpac Banking Corporation (ACN 007 457 141) (No 2)
[2006] FCA 1712

PRACTICE AND PROCEDURE – Discovery – motion seeking further discovery – relevant principles –whether party failed to take appropriate steps to locate electronic documents – factors relevant to exercise of discretion – appropriate form of orders
Federal Court Rules – O 15 r 8
Allstate Life Insurance Co v ANZ Banking Group (No 15) (unreported, Lindgren J, 22 August 1995) cited
Australian Broadcasting Commission v Parish (1981) 48 FLR 292 cited
BT Australasia Pty Limited v State of New South Wales (unreported, Sackville J, 9 April 1998) referred to
Molnlycke AB v Procter & Gamble Limited (No 3) [1990] RPC 498 followed
NT Power Generation Pty Limited v Power & Water Authority [1999] FCA 1669 followed
EARL SLICK AND LEO MICHAEL SEWARD & VIRGINIA JOY SEWARD v WESTPAC BANKING CORPORATION (ACN 007 457 141) AND WESTPAC PRIVATE EQUITY PTY LTD formerly known as WESTPAC DEVELOPMENT CAPITAL PTY LTD (ACN 071 205 715)
NSD 1291 OF 2003
JACOBSON J
8 DECEMBER 2006
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1291 of 2003

BETWEEN:

EARL SLICK
FIRST APPLICANT

LEO MICHAEL SEWARD
& VIRGINIA JOY SEWARD
SECOND APPLICANT

AND:

WESTPAC BANKING CORPORATION (ACN 007 457 141)
FIRST RESPONDENT

WESTPAC PRIVATE EQUITY PTY LTD
formerly known as WESTPAC DEVELOPMENT CAPITAL PTY LTD (ACN 071 205 715)
SECOND RESPONDENT

JUDGE:

JACOBSON J

DATE OF ORDER:

8 DECEMBER 2006

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.The parties are to bring in short minutes of order by no later than 13 December 2006 reflecting these reasons.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1291 OF 2003

BETWEEN:

EARL SLICK
FIRST APPLICANT

LEO MICHAEL SEWARD
& VIRGINIA JOY SEWARD
SECOND APPLICANT

AND:

WESTPAC BANKING CORPORATION (ACN 007 457 141)
FIRST RESPONDENT

WESTPAC PRIVATE EQUITY PTY LTD
formerly known as WESTPAC DEVELOPMENT CAPITAL PTY LTD (ACN 071 205 715)
SECOND RESPONDENT

JUDGE:

JACOBSON J

DATE:

8 DECEMBER 2006

PLACE:

SYDNEY

REASONS FOR JUDGMENT
INTRODUCTION

On 13 November 2006 the applicants filed a notice of motion seeking production and forensic examination of computers and back up material, including hard drives, in the possession of the respondents.
The application is urgent because the proceedings have been adjourned part heard and are due to resume in February 2007. I heard the motion for a full day on 28 November 2006 but final written submissions were not provided to me by the applicants until 5 December 2006.
The discovery process in these proceedings has been a difficult one. Mr Hetherington’s description of it in his affidavit sworn 24 November 2006 as ‘somewhat tortuous’ is apt. Discovery was initially ordered in February 2004 with discovery to be given by categories of documents. The categories have been expanded principally to meet amendments to the pleadings.
This application does…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2006] FCA 1712
Decision Date: 8 DECEMBER 2006

CaseChat Overview and Summary

In the matter of Slick v Westpac Banking Corporation (No 2), the court was tasked with determining whether the applicants had demonstrated a sufficient likelihood that documents relevant to the proceedings existed but had not been disclosed by the respondents, Westpac and Quadrant. The applicants sought an order compelling the respondents to provide further information regarding the discovery of documents, particularly emails, from their respective systems. The legal issues before the court involved the assessment of the applicants' evidence and the balancing of the potential benefits of further discovery against the costs and burdens to the respondents.

The court considered the evidence provided by the respondents regarding their IT systems and the processes in place for document retention and discovery. Westpac argued that reconstructing their old email system to access potential documents would be prohibitively expensive and time-consuming. Quadrant, on the other hand, stated that their system had been upgraded, and any relevant emails would have been migrated to the new system. The court examined the applicants' position, including the affidavit of Mr Daniel, who believed he could access relevant data at a lower cost and with fewer risks than the respondents had suggested. The court weighed the theoretical possibility of undisclosed documents against the practical difficulties and expenses associated with further discovery efforts.

After careful consideration, the court found that the applicants had not shown a sufficient likelihood that further documents existed that would warrant the significant costs and burdens imposed on the respondents. The theoretical possibility of uncovering relevant documents was outweighed by the impracticalities and expenses involved in either reconstructing Westpac's old email system or conducting a forensic examination by Mr Daniel. The court was not satisfied that the exercise sought by the applicants was necessary in the interests of justice. However, the court noted that the position regarding Quadrant was different, as the applicants had not adequately explored the potential for further discovery from Quadrant's system.

The final orders required the parties to submit minutes of order by a specified date, reflecting the reasons provided by the court. The court did not order further discovery from Westpac but left the door open for further exploration of Quadrant's system.

Orders

Orders of the court

1. The parties are to bring in short minutes of order by no later than 13 December 2006 reflecting these reasons.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Moreover, the diary printouts for the week of 24 September to 30 September are compressed in a way that is not explained. There is a reference to a scheduled telephone call with Mr Quinton on 11 October 2000 in Mr Hadley’s diary. There is no reference to a meeting with Ms Addison on or around 13 October 2000 in Mr Penklis’ diary but there is a note in Mr Hadley’s diary for 9 October 2000 which refers to the Slicks; this may be a reference to the meeting of 13 October 2000.The respondents’ evidence in opposition to the motion Mr Gilman’s evidence establishes that Quadrant’s IT infrastructure was upgraded in October 2003 and that the email platform was upgraded in October 2003 and January 2006. Mr Gilman is the Financial Controller and Company Secretary of Quadrant. He has been responsible for Quadrant’s IT infrastructure since July 1996. Electronic material which was on Quadrant’s system when it was upgraded was migrated across to the new system. This evidence did not appear in Mr Gilman’s affidavit but it was elicited in his evidence in chief after the applicants’ forensic expert, Mr Daniel, pointed to this gap in Mr Gilman’s evidence. Thus, as Mr Gilman conceded in cross-examination, emails which related to the Barrington transaction which were migrated to the new system in October 2003, and which were not deleted or written over between that time and January 2006, would be on the current Quadrant system. The effect of [4] of Mr Gilman’s affidavit is that Quadrant’s back-up tapes are rotated weekly and overwritten. Therefore, on Mr Gilman’s evidence, there are no back-up tapes which contain information that is more than seven days old. This procedure has been in place since 1996. Mr Gilman affirmed in [5] of his affidavit that the only emails relating to the Barrington transaction that are available prior to the October 2003 and January 2006 upgrades are those that were printed out and placed on the hard copy file. He said in cross-examination that he had not personally conducted a search to confirm this conclusion but he believes that one of his colleagues would have done so at the time. He conceded it was possible that there are other emails on the system but the effect of his concession is that it is unlikely that those emails exist. Mr Backley, the Chief Information Officer, Enterprise Services, of Westpac, gave evidence that Westpac’s IT infrastructure is outsourced to IBM. He gave evidence on information and belief from officers of IBM. His evidence dealt with Westpac’s email system and its document servers. The email system in use as at 2002 was known as the legacy mail application. That system was decommissioned and replaced in about 2002-2003. At the time when the legacy system was decommissioned, a “snapshot” back-up was taken for the sole purpose of disaster recovery. According to Mr Backley’s evidence, obtained from IBM, in order to access the back-up tapes, it would be necessary to rebuild the legacy mail environment. A number of risks and hurdles are said to exist. The rebuilding process is said to be time consuming and expensive. The time estimate is at least three months and the costs may be upwards of $600,000.

Decision

Reasons for decision

JACOBSON J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: JACOBSON J

Mr Daniel does not believe that many of the difficulties referred to by Mr Backley are likely to confront Forensic Data Services. He is of course prepared to sign an appropriate confidentiality undertaking. Mr Daniel was not cross-examined.CONSIDERATION The respective positions of Westpac and Quadrant must be considered separately.Westpac I am not satisfied that the applicants have proved that there is anything more than a mere possibility that Westpac has failed to give discovery within the categories relied upon. It is true that the evidence discloses that Westpac used emails in the relevant period and that few have been discovered. I think it is likely that Mr Daniel would be able to access any emails that have not been deleted or written over but the evidence as to whether that could be done more quickly and at less expense than the method proposed by IBM is equivocal. I accept that if the exercise is carried out by Mr Daniel the cost would be borne, at least in the first instance, by the applicants. But it is plain that there would need to be substantial involvement of Westpac executive time and that the lawyers would be heavily involved in vetting the process, including considering any claims for privilege. I accept Mr Gilman’s evidence that there is no link between the Quadrant computer system and Westpac’s computer system. I also accept his evidence that there is no ability to access documents between Quadrant’s system and Westpac’s system. The balancing exercise in relation to Westpac is therefore quite straightforward. What I have to weigh is the theoretical possibility that documents might exist against the cost and burden of either rebuilding the former electronic environment (and the risks and burdens apparently associated with this) or alternatively the cost and burden to Westpac of involvement with any forensic examination undertaken by Mr Daniel/Forensic Data Services. It is unnecessary to consider questions of delay on the applicants’ part in relation to the Westpac material because, in my opinion, the answer to the balancing exercise is straightforward. Whether or not Westpac, through IBM, were to undertake the task, or whether the forensic exercise is undertaken by Mr Daniel, the theoretical possibility that something might turn up is well and truly outweighed by the cost and burden to Westpac. In short, I am not satisfied that the exercise sought by the applicants is necessary in the interests of justice. I make this finding notwithstanding that the applicants seek to limit their relief to an order that Westpac merely hand over the back-up tapes to Forensic Data Services with a view to that company retrieving any relevant data from them.Quadrant The position with respect to Quadrant is different. Mr Hadley swore the affidavit of documents. However, he made no enquiries of Mr Gilman at any time since 2002, other than to retrieve hard copy records from archives. Moreover, Mr Gilman stated in cross-examination that Mr Hadley has not asked him to do a search of Quadrant’s computer system relating to the Barrington transaction. And he said that Mr Hadley has not asked him to conduct an electronic search of the computer system of Quadrant for the purpose of discovery in the proceedings.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1291 of 2003

BETWEEN:	EARL SLICK FIRST APPLICANT LEO MICHAEL SEWARD & VIRGINIA JOY SEWARD SECOND APPLICANT
AND:	WESTPAC BANKING CORPORATION (ACN 007 457 141) FIRST RESPONDENT WESTPAC PRIVATE EQUITY PTY LTD formerly known as WESTPAC DEVELOPMENT CAPITAL PTY LTD (ACN 071 205 715) SECOND RESPONDENT
JUDGE:	JACOBSON J
DATE OF ORDER:	8 DECEMBER 2006
WHERE MADE:	SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1291 OF 2003

JUDGE:	JACOBSON J
DATE:	8 DECEMBER 2006
PLACE:	SYDNEY