Stapledon & Anor v Woods Bagot Pty Ltd & Ors
[2005] SADC 104
•11 August 2005
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Appeal Against a Master's Decision)
STAPLEDON & ANOR v WOODS BAGOT PTY LTD & ORS
Judgment of Her Honour Judge Simpson
11 August 2005
PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS
Appeal against decision of a Master declining to strike out paragraphs of Amended Defence, or Further Amended Defence – Master granted leave to defendants to provide further draft defence – not provided - no particulars are to be provided - paragraphs conceded by defendants to be deficient - defence to be amended in any event – held not appropriate to strike out paragraphs of either Amended Defence or Further Amended Defence at this stage – Held further consideration of pleadings required.
PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - DISCOVERY OF DOCUMENTS - ORDERS FOR FURTHER AND BETTER DISCOVERY
Appeal against decision of Master refusing plaintiffs’ application for an order for further and better discovery of defendants’ documents – whether documents directly, or only indirectly relevant to any issue arising on the pleadings - Held documents are directly relevant, or, if not, are indirectly relevant to an issue arising on the pleadings and it is in the interests of justice for the Court to order discovery – appeal allowed - order for further and better discovery made
Cross-Appeal by defendants - consideration of scope of duty of discovery raised for first time on appeal– discovery ordered by Master said to extend beyond issues raised on pleadings - Held scope of discovery justified on issues raised on pleadings – Cross-Appeal dismissed.
District Court Rules 1991 rr 58A.04, referred to.
Channel Seven Adelaide Pty Ltd v Lane and Hurley [2004] SASC 177, Full Court unreported 17 June 2004; Quenchy Crusta Sales Pty Ltd v Logi-Tech Pty Ltd (2002) 223 LSJS 266; Rehn v Australian Football League and Ors (2003) 225 LSJS 378; Southern Equities Corporation Ltd (in liq) v Arthur Andersen & Co (No 5) [2001] SASC 335 Bleby J unreported; Mulley v Manifold; Marney v Manifold (1959) 103 CLR 341, applied.
Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87; Water Authority of WA v AJL Holdings Pty Ltd (No 2) (1992) 10 WAR 233; Nilsen Electric (SA) Pty Ltd v Mancorp Pty Ltd SASC Full Court, Judgment No 2641 14 December 1990, unreported; Wigan v Edwards (1973) 1 ALR 497; 47 ALJR 586, considered.
STAPLEDON & ANOR v WOODS BAGOT PTY LTD & ORS
[2005] SADC 104
This is an appeal from the decision of a Master, posted to the parties on 1 June 2005, on the plaintiffs’ application for further and better discovery filed on 20 May 2004, and on the plaintiffs’ application in relation to the pleadings, filed on 19 August 2004.
By Notice for Specific Directions filed on 11 July 2005, the plaintiffs have also applied for an order referring the action to mediation, pursuant to section 32 of the District Court Act 1991.
The defendants have cross-appealed against the scope of the orders made by the learned Master for discovery.
The appeal is brought pursuant to section 43(2)(a) of the District Court Act 1991 and Rule 97.01 of the District Court Rules, which provides that the appeal is to be by way of rehearing and, in matters involving the exercise of a discretion, the Judge may exercise his or her own discretion without regard to the manner in which it was exercised in the decision, order or direction appealed against.
The application of the plaintiffs dated 20 May 2004 (FDN 11) sought further and better discovery as follows:
1. That the Third to Tenth Defendants (inclusive) make further and better discovery of all:
1.1 personal tax returns for the financial year commencing 1 July 1999 to the present time;
1.2 personal bank statements and any other documents evidencing or recording the receipt of payments under the Shareholders’ Alliance – Version 3 since the retirement of the First Plaintiff (on or about 4 October 2001) and the Second Plaintiff (on or about 1 March 2000) to the present time, including but not limited to those of:
(a)David Anthony Tregoning (Third Defendant);
(b)Andrew James Ford (Fourth Defendant);
(c)Timothy John Beaumont (Fifth Defendant); and
(d)Leone Celia Lorrimer (Sixth Defendant).
1.3 In relation to any Trust or other entities of the Third to Tenth Defendants (inclusive) that hold(s) shares in any member of the Woods Bagot Group of Companies (as defined in the Shareholders’ Alliance – Version 3 which includes the First and Second Defendants):
(a)tax returns and annual financial statements for the financial year commencing 1 July 1999 to the present time; and
(b)bank statements and any other documents evidencing or recording the receipt of payments under the Shareholders’ Alliance – Version 3 since the retirement of the First Plaintiff (on or about 4 October 2001) and the Second Plaintiff (on or about 1 March 2000) to the present time;
(c)including but not limited to trust arrangements of:
(1) David Anthony Tregoning (Third Defendant);
(2) Andrew James Ford (Fourth Defendant);
(3) Timothy John Beaumont (Fifth Defendant); and
(4) Leone Celia Lorrimer (Sixth Defendant).
2. That the First Defendant and Second Defendant make further and better discovery of all:
2.1 documents recording or evidencing all payments made to any Director and/or Shareholder of the First and Second Defendant under the Shareholders’ Alliance – Version 3 since the retirements of:
(a)the Second Plaintiff, Keith Lapthorne, on or about 1 March 2000; and
(b)the First Plaintiff, Tony Stapledon, on or about 4 October 2001.
2.2 documents recording their financing arrangements and associated banking facilities in existence or entered into for the financial year commencing 1 July 1999 to the present time;
2.3 correspondence and other communications (including electronic communications) between any financier (including but not limited to Westpac Banking Corporation) and the First and Second Defendants for the financial year commencing 1 July 1999 to the present time;
2.4 opinions of the Auditors as to the “financial viability” of the Woods Bagot Group of Companies (as defined in the Shareholders’ Alliance – Version 3) for the financial year commencing 1 July 1999 to the present time;
2.5 company tax returns for the financial years ended 30 June 1999 to present and company tax returns (as applicable) of each other entity forming part of the Woods Bagot Group of Companies (as defined in the Shareholders’ Alliance – Version 3);
2.6 minutes of Board meetings, executive meetings and shareholders’ meetings (including circular resolutions) for the financial year commencing 1 July 1999 to the present time;
2.7 the following financial statements of the Woods Bagot Group of Companies:
(a)One Stop Facilities Management Pty Ltd – Directors’ Report and Annual Financial Statements for the years ended 30 June 1999 to the present time;
(b)Program Management Pty Ltd – Directors’ Report and Annual Financial Statements for the years ended 30 June 2000 – 30 June 2003 (inclusive);
(c)Woods Bagot Asia Limited – Directors’ Report and Annual Financial Statements for the years ended 30 June 2002 and 30 June 2003;
(d)Woods Bagot (Thailand) Limited – Directors’ Report and Annual Financial Statements for the year ended 30 June 2003;
(e)Woods Bagot (Malaysia) SDN BHD – Directors’ Report and Annual Financial Statements for the years ended 30 June 2002 and 30 June 2003;
(f)WBT Holding Limited – Directors’ Report and Annual Financial Statements for the year ended 30 June 2003;
(g)Woods Bagot UK Limited – Directors’ Report and Annual Financial Statements for the years ended 31 December 1999, 31 December 2002 and 31 December 2003;
(h)WML Woods Bagot Limited – Directors’ Report and Annual Financial Statements for the years ended 31 December 1999, 31 December 2000 and 31 December 2003;
(i)Woods Bagot Singapore Pty Ltd – Directors’ Report and Annual Financial Statements for the years ended 30 June 2002 and 30 June 2003;
2.8 commentary.xls files subsequent to 2003-01.xls file (being document 167 in the Defendants’ List of Documents);
2.9 Shareholder Alliance Reconciliations subsequent to 9 July 2003 (being document 221 in the Defendants’ List of Documents); and
2.10 documents directly relevant to the allegations made against the Second Plaintiff in paragraphs 32.3 to 32.5 (inclusive) of the Amended Defence of the Defendants including but not limited to:
(a)any Minutes of Board Meetings and other executive meetings at which this matter was discussed and/or action was resolved to be taken;
(b)correspondence between the Defendants and the Second Plaintiff;
(c)handwritten notes of conversations between the Third Defendant (David Anthony Tregoning) and the Second Plaintiff and any file notes of such conversations; and
(d)handwritten notes of conversations between any representative of the First and Second Defendants and Mayne Nickless, any file notes of such conversations and any correspondence between the First and Second Defendants and/or their representatives and Mayne Nickless.
On 5 July 2004, the learned Master made orders on the application of the plaintiffs of 20 May 2004, without opposition from the defendants, in terms of paragraphs 2.4, 2.5, and 2.7. Leave was granted to the defendants to file further pleadings in the action.
The first to ninth defendants filed a Further Amended Defence and Counterclaim on 9 August 2004. In paragraph 28.2 of the Further Amended Defence, the first to ninth defendants said:
save that the Defendants admit there is an agreement between the Woods Bagot directors and shareholders, the Defendants say the agreement was negotiated over a period of 6 to 9 months in 1999, the Defendants deny the document entitled “Woods Bagot Group-Shareholders’ Alliance-Version 3” (“Shareholders’ Alliance-Version 3”) reflects and formed the full agreement between Woods Bagot directors and shareholders and the Defendants deny the allegations in sub-paragraph 28.2.
Paragraph 28.3 maintains the denial that the Agreement is the full agreement, but further or alternatively, states that the Agreement is unenforceable because of uncertainty.
Paragraphs 32.2, 32.3, 32.4, 32.5 and 32.8 maintain the denial raised in paragraph 28.2, but further or alternatively, raise allegations as to the Group’s ability, and to negative any obligation on the part of the Group, to make payments of the kind claimed by the plaintiffs.
The Master heard argument on the plaintiffs’ applications on 20 August 2004. His Reasons disclose that there was again no opposition from the defendants to the orders sought by the plaintiffs in paragraphs 2.4, 2.5 and 2.7, and no opposition from the defendants to orders sought in paragraphs 2.1 and 2.2, of the plaintiffs’ application. The Master confirmed the orders for further and better discovery in terms of paragraphs 2.4, 2.5 and 2.7, and ordered further and better discovery be made by the first and second defendants in terms of paragraphs 2.1 and 2.2 of the plaintiffs’ application.
With respect to paragraphs 2.6 and 2.10 of the plaintiffs’ application, the Master found the documents sought were directly relevant and should be discovered. He ordered further and better discovery by the first and second defendants in the terms sought by the plaintiffs. No complaint is made by the defendants of the finding made by the Master that those documents are directly relevant.
Notice for Specific Directions – Further and Better Discovery
The plaintiffs appeal against the decision of the Master to make no order for discovery in respect of documents identified in paragraphs 1.2, 1.3 and 2.3 of their application. The learned Master found the documents sought in paragraphs 1.2 and 1.3 did not tend to prove or disprove an issue on the pleadings and were not directly relevant. The Master found that the documents sought in paragraph 2.3 of the application were directly relevant, but the Master could not conclude that full discovery had not been made by the defendants. The plaintiffs submit that the documents sought in paragraphs 1.2 and 1.3 are directly relevant, or if only indirectly relevant, should be discovered in the interests of justice, and that it has been demonstrated that the defendants have not discovered all relevant documents of the kind sought in paragraph 2.3 of the application. The defendants submit that the Master’s decision was correct.
The plaintiffs’ Statement of Claim was filed on 11 March 2003. The plaintiffs and the third to tenth defendants inclusive were, or are, directors and shareholders of the first and second defendants and were, or are, through the first defendant, Woods Bagot Pty Ltd (‘Woods Bagot’), engaged in the full time profession of architecture, health planning, interior design, landscape and urban design and strategic planning. The second defendant, Woods Bagot Holdings Pty Ltd (‘Woods Bagot Holdings’), is and was at all material times the ultimate holding company of the first defendant.
In support of their application for further and better discovery, the plaintiffs relied on the affidavits of Mr Darren Blight, sworn on 20 May 2004, the 2 July 2004 and 19 August 2004. The defendants filed no affidavits in reply. In his affidavit sworn on 20 May 2004, Mr Blight sets out the background to the plaintiffs’ application.
There are three classes of shareholding in Woods Bagot Holdings:- A class, WB class and X class. The third to tenth defendants inclusive are directors of Woods Bagot and Woods Bagot Holdings. The third to sixth defendants are X class and A class shareholders in Woods Bagot Holdings and the seventh to tenth defendants are A class shareholders only.
The plaintiffs are architects and retired Equity Directors and former A class shareholders of Woods Bagot and Woods Bagot Holdings. The first plaintiff retired as a director of Woods Bagot and Woods Bagot Holdings on or about 4 October 2001. The second plaintiff retired as a director of Woods Bagot and Woods Bagot Holdings on or about 1 March 2000. The plaintiffs both remain holders of X class shares in the capital of Woods Bagot Holdings.
These proceedings arise out of a dispute regarding a Shareholders’ Agreement entitled “Woods Bagot Group – Shareholders’ Alliance – Version 3” (‘the Agreement’). The Agreement was executed in 1999 by the plaintiffs and by the third, fourth, fifth, sixth and seventh defendants.
The introduction to the Agreement set out the intention of the Shareholders’ Alliance:
Specifically, it is contemplated that new shareholders would be introduced contemporaneously with the adoption of this Alliance, and that the practice of introducing shareholders will continue with regularity as both the business expands, and existing shareholders retire themselves and their equity from the group.
The Alliance provides a framework for existing shareholders to progressively withdraw their equity in a structured manner by means of a share buy-back, whilst at the same time providing incentive for them to remain an active participant in the business in the medium term. Specifically, the amount of money to be received by current shareholders, for retiring the equity represented by their X class shares, is directly linked to the profitability of Woods Bagot Pty Ltd until 30 June 2005.
The Agreement states further:
The Equity Directors will use the voting power attaching to their or their trusts’ shares in various companies in the Group to implement the objectives and achieve the intended outcomes of the Alliance.
The Equity Directors will also use their position as a director of any of the companies in the group to implement the objectives and achieve the intended outcomes of the Alliance.
In this regard the Alliance is intended to create legally binding obligations between the Equity Directors and any of the trusts of the equity directors that hold shares in the group.
By clause 4 of the Agreement,
‘Equity Directors’ means directors of Woods Bagot Pty Ltd who personally or through trusts or other entities hold shares in Woods Bagot Pty Ltd and A class shares in Woods Bagot Holdings Pty Ltd.
‘Group’ means the Woods Bagot Group of Companies, named therein.
The Rules of the Alliance, set out in clause 2 of the Agreement, provide, amongst other things, for classes of shareholding and X Class buy-back, obligations of Equity Directors, remuneration and retirement of Equity Directors, transfer of shares, Supplementary Superannuation and Extra Supplementary Superannuation.
While accepting that it will be for the Court to establish the nature of any legal obligations arising from the Agreement, the plaintiffs rely on the terms of the Agreement.
The plaintiffs claim certain entitlements payable under the Agreement:
(1)Supplementary Superannuation (clause 2.11 of the Agreement and paragraphs 32 to 34 of the Statement of Claim);
(2)Extra Supplementary Superannuation (clause 2.20 of the Agreement and paragraphs 35 to 38 of the Statement of Claim); and
(3)Payments in respect of the plaintiffs’ X class shares in the second defendant (Appendix 1 to the Agreement and paragraphs 39 to 41 of the Statement of Claim).
The plaintiffs seek the following relief:
1. In respect of Supplementary Superannuation:
1.1 Judgment in favour of each of the plaintiffs against the first and second defendants in the sum of $71,430.00; and
1.2 A declaration that the first and second defendants are obliged to pay each of the plaintiffs the sum of $7,143.00 on the first of each quarter commencing 1 April 2003 with the last payment on 1 July 2006.
2. In respect of Extra Supplementary Superannuation:
2.1 Judgment against the first and second defendants:
(a) in favour of the first plaintiff in the sum of $58,450.00; and
(b) in favour of the second plaintiff in the sum of $52,500.00.
2.2 A declaration that the first and second defendants are obliged to pay, on the first of each quarter commencing on 1 April 2003 with the last payment on 1 July 2005;
(a) to the first plaintiff in the sum of $4,175.00 per quarter; and
(b) to the second plaintiff in the sum of $3,750.00 per quarter.
3. In respect of the X class share buy-back:
3.1 Judgment against the second defendant in favour of each of the plaintiffs in the sum of $71,409.57.
The plaintiffs say that the third to tenth defendants were obliged under the Agreement to use “the voting power attaching to their or their Trusts’ shares in the various companies in the group to implement the objectives and achieve the intended outcomes of the Alliance, and also to “use their position as a director of any of the companies in the Group to implement the objectives and achieve the intended outcomes of the Alliance”.
Orders are sought against the third to tenth defendants requiring them to take such steps as are necessary to procure the compliance of the first and second defendants with their obligations arising under the Agreement in terms of the relief sought.
In his affidavit sworn on 20 May 2004, Mr Blight, in paragraph 34, said the documents discovered to date by the defendants indicate that the Group has made payments under the Agreement since the retirement of the first and second plaintiffs, to the third, fourth, fifth and sixth defendants, to the exclusion of the plaintiffs.
The plaintiffs seek further and better discovery of the documents referred to in paragraphs 1.2, 1.3(b) and 2.3 of the Notice for Specific Directions filed on 20 May 2004, with minor amendment, as follows:
1.2Personal bank statements of the third to ninth defendants and any other documents evidencing or recording the receipt of all payments under the Shareholders’ Alliance – Version 3 since the retirement of the first plaintiff (on or about 4 October 2001) and the second plaintiff (on or about 1 March 2000) to the present time.
1.3In relation to any Trust or other entities of the third to ninth defendants that hold shares in any member of the Woods Bagot Group of Companies (as defined in the Shareholders’ Alliance - Version 3, which includes the first and second defendants):
(a) … (not pressed)
(b)bank statements and any other documents evidencing or recording the receipt of all payments under the Shareholders’ Alliance – Version 3 since the retirement of the first plaintiff (on or about 4 October 2001) and the second plaintiff (on or about 1 March 2000) to the present time.
2.3Correspondence and other communications (including electronic communications) between any financier (including but not limited to Westpac Banking Corporation) and the first and second defendants for the financial year commencing 1 July 1999 to the present time, and in particular, regarding the Group’s ability to make payment of Supplementary Superannuation, Extra Supplementary Superannuation and X class share buy-back amounts.
The plaintiffs say that the documents discovered by the defendants indicate that payments under the Agreement were made to the third, fourth, fifth and sixth defendants (or their related entities) by way of Supplementary Superannuation, Extra Supplementary Superannuation or X class share buy-back payments, between 5 December 2002 and 24 January 2003.
If it were proved that those payments were made, that would be relevant to the defendants’ assertion that the Group was unable to make payments under the Agreement. It would also be relevant to the present pleadings, and amendments the plaintiffs contemplate, regarding breach of obligations of the personal defendants, or some of them.
The defendants say that subsequently, on 3 November 2003, after the issue of these proceedings, the “four current directors who were parties to the Alliance Agreement have agreed to repay and set aside a significant portion of the potential amounts owing to them under that Agreement.” (Letters from the first defendant to the third, fourth, fifth and sixth defendants dated 4 December 2003).
In light of payments having been made, the plaintiffs wish to amend their Statement of Claim to respond to the allegation raised in the Further Amended Defence that the Group was unable to make payments under the Agreement and to allege further breach of the obligations of the personal defendants, or some of them, under the Agreement, or otherwise.
Rule 58A.02 of the District Court Rules makes general provision for discovery in the action. Rule 58A.03 provides:
The parties must discover in their lists of documents, but discover only, the documents which are or have been in their possession, custody or power which are directly relevant to any issue arising on the pleadings.
Rule 58A.04(1) provides:
Parties are not to include in their lists of documents any documents which are only directly relevant to any issue arising on the pleadings unless it is ordered by the Court where it is in the interests of justice to do so.
The meaning of the term ‘directly relevant’ was considered by the Full Court in Channel Seven Adelaide Pty Ltd v Lane and Hurley [2004] SASC 177, unreported 17 June 2004, at [22]-[25]:
In Southern Equities Corporation Ltd (In Liquidation) v Arthur Andersen & Co (No 5) [2001] SASC 335 Bleby J expressed the view that the new test required a greater focus on the pleadings and the issues which arose thereon. He said that the test of relevance is the same as that which is applied to admissibility, but that it is not a test which includes only those documents which are strictly admissible in that documents, although relevant, may not be admissible under the common law or various statutory provisions.
Referring to the use of the word "directly" his Honour said at [10]:
However, there is a further qualification, in that the documents must be ‘directly’ relevant. I doubt whether that qualification effectively narrows, for the purposes of discovery, ordinary concepts of relevance for the purpose of admissibility into evidence. In my opinion, it cannot mean, if the document is not itself proof of a fact in issue but is merely a piece of circumstantial evidence tending, along with other evidence, to prove the fact in issue, that it is not discoverable. Many a case is provable and in fact proved by circumstantial evidence, including documents. I note that a similar view was expressed by Demack J in Robson v REB Engineering Pty Ltd (1997) 2 Qd R 102 at 104 - 105 in respect of a similar rule in Queensland. The Rule cannot be allowed to govern in practice the admission of documents into evidence merely because they have not been revealed in the discovery process.
What the qualification does reinforce is the notion of relevance to proof or disproof of a fact in issue, and the unquestionable abolition of the rule which required discovery of a document which might directly or indirectly lead to a train of inquiry or which might, in some other way, otherwise advance the party’s case or damage that of the adversary. For example, it would seem that documents going solely to the credit of a witness, unless that witness’s credit is an issue raised on the pleadings, would not be discoverable. However, it is inappropriate to attempt to define exhaustively what will and what will not be discoverable under this Rule.
Doyle CJ agreed with these observations in Quenchy Crusta Sales Pty Ltd v Logi-Tech Pty Ltd (2002) 223 LSJS 266. He added [11]:
It is not wise to attempt to state in comprehensive terms the effect of the requirement that the document be ‘directly relevant’. The adverb ‘directly’ is probably intended to emphasise the requirement of relevance, and to be used in the sense of requiring that the document be directly in point, excluding as sufficient indirect relevance which might be established through another linking circumstance. That is not to say, as I have already said, that a document is not directly relevant if it is merely a piece of circumstantial evidence. The point is that a document will not be directly relevant if, rather than tending to prove an issue on the pleadings, it merely tends to prove something that may be relevant to an issue.
In Rehn v Australian Football League and Ors (2003) 225 LSJS 378 Doyle CJ again considered the rule. He said at [24]:
However, as I commented in Quenchy Crusta, it is not possible to state precisely the effect of the adverb "directly" in r58A.03. Indirect relevance to an issue is not enough for the purposes of r58A.03, but distinguishing between direct and indirect relevance is not easy.
It is consistent with the intent of r58A.03 to apply the requirement of direct relevance firmly, and to give it a relatively narrow meaning. To hold that a document is not directly relevant to an issue arising on the pleadings is not to deprive a party of access to the document. The effect of such a holding is merely that the requirement to discover the document is not imposed by r58A.03, and that the court will decide, on application to it, whether the document must be discovered. In other words, r58A.03 draws the line between an obligation to make discovery as a matter of course, and an obligation to make discovery upon application to the court and after the court has considered whether the interests of justice requires that discovery should be made.
Another point relevant to the meaning of r58A.03 is that the rule assumes that a party is able to decide, from the pleadings, what documents must be discovered. This also suggests a narrow meaning for "directly relevant". It would be counter-productive if a party was expected to discover documents because they might be relevant, depending on how the other party’s case was put at trial. R58A.03 assumes that a party can determine that party’s obligation to make discovery by reference to the pleadings.
(See also Mercantile Mutual Custodians Pty Ltd v Village/Nine Network Restaurants & Bars Pty Ltd [2001] 1 Qd. R 276 at 282).
The Full Court agreed with the observations made in those cases.
Payments made to, and received by, and for whatever reason yet to be established, repaid to the first defendant by the third to tenth defendants or some of them, are in my opinion, directly relevant to the proof or otherwise of the Group’s ability to make the payments sought by the plaintiffs.
I am satisfied that the documents sought, relating to payments to and receipt by the third, fourth, fifth and sixth defendants, apparently under the Agreement, and to the circumstances and fact of repayment of any monies, are directly relevant to proof of the issues currently raised on the pleadings regarding the ability of the Group to make payments and to the obligations of the personal defendants under the Agreement.
If I am wrong about that, I am satisfied that it is in the interests of justice at this stage of the proceedings to order further and better discovery of the documents now sought by the plaintiffs in paragraphs 1.2 and 1.3(b) above. The circumstances of any payments made, the actual receipt of payments by the defendants or some of them, and the circumstances in which repayment to the first defendant came to be effected, and was effected, are all relevant to the defence raised on the pleadings regarding the ability of the Group to make the payments claimed by the plaintiffs, or otherwise, and relevant to the obligations of the personal defendants under the Agreement, as already alleged in the Statement of Claim.
I would, however, limit the order to documents of the third to sixth defendants inclusive. There is no suggestion at this stage that the seventh, eighth, ninth or tenth defendants have received any payments under the Agreement. If it is otherwise, in my opinion, discovery of the same documents by those defendants should follow.
There is no dispute that the documents sought in paragraph 2.3 above, now limited to documents regarding the Group’s ability to make payment of Supplementary Superannuation, Extra Supplementary Superannuation and X class share buy-back amounts, are directly relevant to an issue arising on the pleadings.
The defendant says that the documents are directly relevant, but says that there is no evidence that the defendants have misunderstood the obligation to make discovery and therefore the Master was right to find that the plaintiffs are bound by the conclusiveness of the defendants’ list of documents.
The plaintiffs say the letter to the plaintiffs’ solicitors dated 3 August 2004 from the then solicitors for the defendants, Middletons Lawyers, itself discloses that the solicitors for the defendants have made a selection of documents in this category. They assert in the letter that documents sought by the plaintiff in paragraph 2.3 are “not directly relevant and will not be provided”. The Master said:
I make no order but simply restate for the avoidance of doubt that if there are further documents within the category of 2.3, the defendants’ obligation is to make discovery of this class of documents.
Part of the sealed exhibit “DJB 10” to the affidavit of Mr Blight sworn on 20 May 2004 apparently contains copy letters from Westpac Banking Corporation (‘Westpac’) dated 15 July 2003 and 21 August 2003 respectively. I have not seen them. The plaintiffs say those letters contain references to other correspondence and suggest other relevant documents are in existence, in particular, a letter from the first defendant to Westpac dated 23 June 2003 and notes of or communications in respect of a meeting between Westpac and the first defendant of 30 July 2003.
The defendants have not disputed that those documents exist. The defendants have not filed any answering affidavit. Counsel for the defendants submitted that the court was “to assume that those documents have been considered and that the defendants conclude that they are not directly relevant to matters in issue in the action and so do not discover them.”
In my opinion, the plaintiffs have established that there are documents, sought in paragraph 2.3 of the Notice for Specific Directions of 20 May 2004, and confined in the terms of the order sought on the plaintiffs’ Outline of Submissions on appeal, which are directly relevant, and which have not been discovered. The documents specifically referred to, and the response of the defendants through their lawyers, in my opinion justify an order for further and better discovery in the terms sought by the plaintiffs. (Mulley v Manifold; Marney v Manifold (1959) 103 CLR 341 at 343)
If they are not considered to be directly relevant, and for that reason have not been discovered by the defendants, then it is, in my opinion, in the interests of justice that an order for further and better discovery be made in the terms sought by the plaintiffs.
Cross-Appeal
The defendants raise for the first time, on the cross-appeal, an issue in relation to the scope of the orders, including orders made in terms sought by the plaintiffs in paragraphs 2.1, 2.2, 2.4, 2.5, 2.6, 2.7 and 2.10.
With respect to the orders made in terms of paragraphs 2.1, 2.2, 2.4, 2.5, and 2.7, there was no opposition at all at any time to those orders being made in the terms sought. With respect to the orders made in terms of paragraphs 2.6 and 2.10, no submission was made to the Master that the terms of the orders sought by the plaintiffs extended beyond the scope of the action.
The defendants, who have not raised it in the Further Amended Defence, or at all, submit for the first time on appeal from the Master’s decision, that the plaintiffs cannot obtain any relief (a money judgment or declaration) on a claim after the institution of proceedings on 11 March 2003, or for any entitlement which had not arisen when the action was commenced.
The defendants rely on District Court Rule 46A.12, which applies to actions commenced on or after 3 June 2000, and provides:
With the leave of the Court a party may incorporate into a pleading facts giving rise to a cause of action or any matter which may have arisen after the institution of the proceedings where that is not unjust to any other party.
Rule 46.08 applies to the pleadings, in so far as it is not inconsistent with Rule 46A. Rule 46.08 provides that, subject to Rule 46.09, which proscribes the pleading of a fact or matter which is inconsistent with a previous pleading, a party may plead a matter which has arisen since the commencement of the proceeding.
The defendants also rely for their submission on the authorities for the proposition that there must be a completed cause of action at the time proceedings are instituted (Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87; Water Authority of WA v AJL Holdings Pty Ltd (No 2) (1992) 10 WAR 233) and authority relating to amendment raising a new cause of action which had accrued after the institution of the proceedings. (Nilsen Electric (SA) Pty Ltd v Mancorp Pty Ltd SASC Full Court, Judgment No 2641, 14 December 1990, unreported; Wigan v Edwards (1973) 1 ALR 497; 47 ALJR 586)
There is no question of the standing of the plaintiffs to bring the claim and the plaintiffs are not seeking to amend the claim. The defendants appear to be submitting that the cause of action in respect of payments due to the plaintiffs after 11 March 2003 was not complete at the time proceedings were issued, at least in respect of some aspects of the claim.
The defendants submit, although they have not pleaded it, that the plaintiffs’ claim cannot extend beyond superannuation entitlements which had accrued at three monthly intervals, up to the last three monthly interval before the action was commenced. What follows, the defendants submit, is that the discovery obligation is restricted to the same period, and if the orders made by the Master go beyond that, then the orders are wrongly made.
In my opinion, there is no support in the authorities cited by the defendants for the submission they make regarding the scope of orders for discovery. The relief sought by the plaintiffs includes a declaration in respect of their rights to payments falling due under the Agreement after the institution of the proceedings. The Court has the power under section 37 of the District Court Act 1991 to make binding declarations of right, whether or not any consequential relief is or could be claimed.
Orders are also sought against the third to tenth defendants requiring them to take such steps as are necessary to procure the compliance of the first and second defendants with their obligations arising under the Agreement in terms of the relief sought. The obligations are alleged by the plaintiffs to be ongoing, and the defendants allege an ongoing inability in the Group to make payments.
The first to ninth defendants rely in their Further Amended Defence on clause 2.6 and clause 2.8.5 of the Agreement, making payments subject to the Group’s ability to pay, and in particular the defendants assert in paragraph 33:
The Defendants were under no obligation to pay the first and second plaintiffs any sum at all as all payments to Equity Directors and Shareholders were subject to the Group’s ability to pay and the Group does not and did not have the ability to pay. (my emphasis)
No objection was raised before the Master regarding the scope of the orders for discovery. More importantly, no issue is taken by the defendants on the pleadings to the relief sought by the plaintiffs and it therefore cannot be known precisely on what basis the defendants now seek to limit the plaintiffs’ claim. It is not appropriate in my opinion for the Court on this appeal to make any further analysis of, or comment on, the submission seeking to limit the scope of orders for discovery to a period up to and including 11 March 2003.
The defendants have established no basis for allowing the cross-appeal.
Notice for Specific Directions - Pleadings
The plaintiffs’ application dated 18 August 2004, filed on 19 August 2004, (FDN 21) sought orders in relation to the pleadings as follows:
….
2. That paragraph 28.2 of the Amended Defence dated 14 April 2004 be struck out.
3. That the defendants’ pleading, namely, “…if the Shareholders’ Alliance – Version 3 was the full agreement concluded between the parties, which is denied” contained in paragraphs 32.2 and 32.3 of the Amended Defence dated 14 April 2004, be struck out.
(my emphasis)
4. Further and in the alternative, that within 7 days, the first to ninth defendants (inclusive) provide further and better particulars of the alleged “agreement” pleaded in paragraphs 28.2, 32.2 and 32.3 of the Amended Defence, including but not limited to the following particulars:
4.1to the extent that the alleged agreement was in writing or partly in writing, identify the document or documents evidencing or constituting the agreement;
4.2to the extent that the alleged agreement was oral or partly oral:
(a)identify who is alleged to have made the alleged agreement;
(b)identify the time and place of the alleged agreement;
(c)identify the substance of all of the terms of the alleged agreement; and
(d)to the extent that any of the terms are said to be implied, identify those terms, and the facts, matters and circumstances said to give rise to the implication.
4.3to the extent that the alleged agreement was constituted by conduct:
(1)identify the time, place and nature of each part of the conduct relied upon;
(2)identify the person or person engaged in each such part of the conduct relied upon;
(3)identify the substance of the terms of the alleged agreement which are said to be constituted by such conduct;
(4)to the extent that any of the terms are said to be implied, identify those terms, and identify the conduct, facts, matters and circumstances said to give rise to the implication.
Following submissions on the application, the Master said that he had noted the submissions and come to the conclusions re paragraphs 28.2, 32.2, 32.3, 32.6 and 32.8 referred to in his Reasons. The Master said:
However I was requested not to make any specific orders as the defendants would provide a draft further amended defence and counterclaim within 14 days. No draft defence was produced.
The Master extended the time for the draft defence to be provided for a further 14 days.
I have not found it necessary on appeal to consider the conclusions the Master made in his Reasons regarding those paragraphs of the pleadings. The plaintiffs’ application referred to paragraphs in the defendants’ Amended Defence filed on 16 April 2004 (FDN 10). There is no paragraph 32.6 or 32.8 in that document. The Further Amended Defence filed on 9 August 2004 (FDN 18) made a significant amendment to the defence. In particular, the numbering of the paragraphs has changed, and additional paragraphs, including new paragraphs 32.6 and 32.8, have been added.
Submissions appear to have been made to the Master regarding whether the defendants were relying, or could rely, on the Further Amended Defence.
It seems that the Master came to the conclusion that certain of the pleadings, in particular paragraphs 28.2, 32.2, 32.3, 32.6 and 32.8 in the Further Amended Defence were inadequate and could not be maintained in their present form. It was conceded before the Master by counsel for the defendants that further amendment to the defence was required. Leave was sought by the defendants to file further amendments to the defence.
For that reason, the Master gave the defendants another opportunity to provide a draft second further amended defence and counterclaim within 14 days of the hearing on 20 August 2004. No draft defence was produced.
It was common ground before the Master and on appeal that the if defendants do not provide particulars in relation to their pleading alleging that the Agreement was not the full agreement between the parties the consequence is that the allegations to that effect should be struck out.
On appeal, counsel for the defendants said that the defendants are not intending to maintain the allegation in those paragraphs denying that the Shareholders’ Alliance – Version 3 (‘the Agreement’) was the full agreement concluded between the parties, and there is no intention on the part of the defendants to provide the particulars requested by the plaintiffs.
Counsel for the defendants said that the defendants do intend to pursue the allegation, presently contained in paragraphs 32.2 and 32.3 of the Further Amended Defence, that payments under the Agreement to Equity Directors are subject to the ability of the Group to pay them, and “the opinion of the auditors will show that the Group was unable to pay the amount claimed without jeopardising the financial viability of the Group”. No particular submissions were made in respect of paragraph 28.3, regarding the allegation of uncertainty, nor on paragraph 32.8, which alleges a subsequent termination of the Agreement with the effect of terminating the plaintiffs’ entitlement to the payments claimed thereafter. It seems from the Master’s Reasons there may be a remaining dispute regarding the defendants’ ability to maintain the allegations in paragraphs 32.2 and 32.8 of the Further Amended Defence.
The defendants conceded, in their Outline of Submissions, that paragraphs 32.2, 32.3 and 32.8 should be struck out. In the face of submissions made by counsel for the defendants, I have had difficulty understanding their concession that the paragraphs 32.2, 32.3 and 32.8 should be entirely struck out. Rather, it appears likely that an amendment to those and possibly other paragraphs, deleting the reference to the denial that the Agreement is the full Agreement, is contemplated by the first to ninth defendants.
There is force in the plaintiffs’ submission that as the defendants concede that no particulars of the allegation in paragraphs 28.2 are to be brought in to the Further Amended Defence, and as the defendants concede paragraphs 32.2, 32.3 and 32.8 should be struck out, the three paragraphs should be struck out on this appeal. However, the defendants’ concession appears to me to be more properly applicable to paragraph 28.2, with consequential amendments to paragraphs 32.2 and 32.3, in accordance with the orders originally sought in paragraphs 2 and 3 of the plaintiffs’ application filed on 19 August 2004.
If the first to ninth defendants do not provide particulars and they abandon the assertion that the Agreement is not the full agreement between the parties, the same consequential amendment logically would be made to paragraphs 28.3, 32.4, 32.5 and 32.8 of the Further Amended Defence.
On what I was told, in my opinion, the appropriate order would be that paragraph 28.2 of the Further Amended Defence be struck out, together with the words “further or alternatively if the Shareholders’ Alliance-Version 3 was the full agreement concluded between the parties, which is denied,” appearing in paragraphs 28.3, 32.2, 32.3, 32.4, 32.5 and 32.8.
While it is generally in the interests of the parties to save unnecessary applications and attendance at court, there remains so much uncertainty presently about the first to ninth defendants’ pleadings, it is inappropriate in my opinion to strike out paragraphs 32.2, 32.3 and 32.8 in their entirety on this appeal.
The plaintiffs are nevertheless, in my opinion, entitled to be concerned that no draft amendment to the Further Amended Defence has been provided, since the opportunity was given to the defendants to do so within 14 days of 20 August 2004, and again within 14 days of 1 June 2005. I will hear the parties further on whether an order should be made giving the first to ninth defendants another opportunity to amend the Further Amended Defence, or whether orders should be made striking out the pleadings in the Further Amended Defence which the defendants concede are not to be pursued.
Mediation
The plaintiffs’ application for an order referring the action to mediation pursuant to section 32 of the District Court Act 1991 is not opposed by the defendants. I will also hear the parties further as to the terms of the order for referral to mediation.
Orders
1.The defendants are to make further and better discovery of the following documents within 21 days:
2.1Personal bank statements of the third, fourth, fifth and sixth defendants and any other documents evidencing or recording the receipt of all payments to them under the Shareholders’ Alliance – Version 3 since the retirement of the first plaintiff (on or about 4 October 2001) and the second plaintiff (on or about 1 March 2000) to the present time.
2.2In relation to any Trust or other entities of the third, fourth, fifth and sixth defendants that hold shares in any member of the Woods Bagot Group of Companies (as defined in the Shareholders’ Alliance - Version 3, which includes the first and second defendants):
bank statements and any other documents evidencing or recording the receipt of all payments to them under the Shareholders’ Alliance – Version 3 since the retirement of the first plaintiff (on or about 4 October 2001) and the second plaintiff (on or about 1 March 2000) to the present time.
2.3Correspondence and other communications (including electronic communications) between any financier (including but not limited to Westpac Banking Corporation) and the first and second defendants for the financial year commencing 1 July 1999 to the present time, in particular regarding the Group’s ability to make payment of Supplementary Superannuation, Extra Supplementary Superannuation and X class share buy-back amounts.
2.The cross-appeal is dismissed.
3.I will hear the parties further on the question of orders:
(a)on the plaintiffs’ application to strike out certain paragraphs in the defence;
(b) referring the action to mediation; and
(c) as to the costs of the appeal.
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