STIPINOVIC v Goodall
[2020] WASC 37
•12 FEBRUARY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: STIPINOVIC -v- GOODALL [2020] WASC 37
CORAM: ALLANSON J
HEARD: 5 FEBRUARY 2020
DELIVERED : 12 FEBRUARY 2020
FILE NO/S: CIV 2837 of 2017
BETWEEN: ANDRICA STIPINOVIC
Plaintiff
AND
BRIAN GOODALL
First Defendant
GOODALL FINANCIAL SERVICES PTY LTD
Second Defendant
MARY SANDRA PALLOTTA
Third Defendant
Catchwords:
Practice and procedure - Further discovery - Categories of documents - Relevance - Turns on own facts
Practice and procedure - Discovery - Where third defendant swears affidavit as to error in affidavit of discovery - Whether affidavit admissible - Whether inspection should be given of document discovered in error
Legislation:
Nil
Result:
Application granted in part
Category: B
Representation:
Counsel:
| Plaintiff | : | B Wheatley |
| First Defendant | : | C P K Russell |
| Second Defendant | : | C P K Russell |
| Third Defendant | : | P A Nevin |
Solicitors:
| Plaintiff | : | Brian Wheatley |
| First Defendant | : | Wotton + Kearney Lawyers (Perth) |
| Second Defendant | : | Wotton + Kearney Lawyers (Perth) |
| Third Defendant | : | Taylor Smart |
Case(s) referred to in decision(s):
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303
Singh v Friedman [2013] WASC 78
ALLANSON J:
The application
The plaintiff applies for orders that the defendants give discovery on affidavit of documents or classes of documents described in a schedule to the application.
The schedule originally listed 17 items or classes of documents. Following conferral and informal provision of documents by the defendants, the plaintiff confined the application to the following categories (retaining the original numbering):[1]
[1] Submissions filed 28 November 2019.
3.Register of shares transferred of the Company.
4.Application for shares in the Company and share certificates in the Company other than Frank Jakovcevic, the Plaintiff and those already discovered (limited to third defendant only).
5.Consent to act as director of the Company other than Frank Jakovcevic (limited to third defendant only).
6.Minute books of Company and the Trust for the financial years ('FY') 2015, 2016 and 2017.
7.Journals of Company and Trust for FY 2015, 2016 and 2017.
8.Bank statements for Company and Trust for FY 2015, 2016 and 2017.
9.Cheque butts for Company and Trust for FY 2015, 2016 and 2017.
10.First and Second Defendants client files held by the Defendants and financial records explaining how the financial statements are made up, correspondence, records of meetings and advice (including advice regarding the assignment/transfer of loans to Frank Jakovcevic and Plaintiff from the Trust to the Company) and memorandum of costs for the Company, Trust, Frank Jakovcevic and Plaintiff for FY 2015, 2016 (excluding Plaintiff) and 2017 (for Company only).
12.Income tax returns and amended returns for Company for FY 2017 including the signed lodgement declarations and signed and dated Goodall & Co declaration other than those already discovered.
14.Income tax returns of Pallotta signed by her for FY 2015, 2016 and 2017.
16.ATO Income Tax Activity Statement of tax agent for Company, Trust and Pallotta for FY 2015, 2016 and 2017 (limited to third defendant only).
17.Bank statements showing payments to the Trust or related entities by the Plaintiff on or about
(a)27 April 2004 of about $274,708.96
(b)10 November 2010 of about $31,620.40
(c)16 November 2011 of about $150,008.54.[2]
[2] References in the schedule, and otherwise in these reasons, to the Company are to Been Touched Pty Ltd; references to the Trust are to the F Jakovcevic Family Trust; and references to the trustee are to Dorset Nominees Pty Ltd.
In their submissions filed on 24 December 2019, the first and second defendants stated that on 6 November 2019, 26 November 2019 and 23 December 2019, they had provided further informal discovery of documents in categories 3, 4, 5, 6, 7 and 10. They say that, without conceding relevance, they have provided all of the documents on their client files save for those relating to the 2017 financial year.
The third defendant filed a further affidavit of discovery on 28 November 2019. The plaintiff opposed the affidavit being received, largely on procedural grounds.
The defendants agreed that, to avoid unnecessary dispute, they should provide an affidavit updating their earlier affidavits of discovery. The filing of supplementary affidavits by each defendant should resolve the bulk of the dispute. There remains, however, a dispute about whether discovery of documents relating to the Company should include financial documents for the 2017 financial year; whether discovery should be given of a document that is described in a discovered invoice as a 'division 7A loan agreement'; and whether the third defendants income tax returns and ATO Income Tax Activity Statements are discoverable.
The action
The action was commenced on 30 October 2017 by writ with indorsement of claim. A statement of claim was filed on 30 January 2019.
The plaintiff claimed relief for misleading or deceptive conduct, and unconscionable conduct (under both the Australian Securities and Investments Commission Act 2001 (Cth) and the Australian Consumer Law), and also for breach of fiduciary duty. The claim relates to the transfer of the plaintiff's share in the Company to the third defendant in March 2016.
The plaintiff filed a minute of proposed amended statement of claim on 22 January 2020, adding pleas including for breach of fiduciary duty by the third defendant, for breach of the Corporations Act2001 (Cth), and for breach of contract or negligence by the first and second defendants. Other amendments include allegations that the first and second defendants provided services as an Australian Financial Services Licensee; and that the Company was an 'investment company'.
The plaintiff will need to amend her writ to include all of these claims, but leave to amend was not opposed. I proceed in these reasons on the basis of the claim set out in the proposed amended statement of claim.
The defences
The first and second defendants filed a defence on 15 March 2019, and an amended defence on 15 July 2019. The first and second defendants admitted that they were the accountants for the Company and provided accounting and taxation advice to the Trust, but denied providing accounting and financial advice to the plaintiff. They largely deny the factual allegations against them. The first and second defendants have not pleaded as yet to the allegations that they provided services as an Australian Financial Services Licensee, or that the Company was an 'investment company'.
The third defendant also filed an amended defence on 15 July 2019. The third defendant pleaded that the Company was registered on 4 May 2015 for the sole purpose of receiving a distribution from the Trust for taxation purposes; and that the plaintiff was not a member of any class of beneficiaries of the Trust. The third defendant denied acting in trade or commerce. I say more about this plea below.
The evidence
The plaintiff, Andrica Stipinovic, relied on two affidavits, sworn 17 October 2019 and 21 October 2019 (in relation to the bank statements sought as category 17). No objection was taken to the affidavits, but, in my opinion, the manner in which the evidence was presented is unsatisfactory. An affidavit is intended to be the evidence of the deponent. Although sworn by the plaintiff, the affidavits are (as her solicitor conceded at the directions hearing regarding this application) documents prepared for her. The affidavit of 17 October 2019 in particular is argumentative, and more in the nature of a submission.
The third defendant, Mary Sandra Palotta, filed an affidavit sworn 28 November 2019. The third defendant deposed that she does not have and has never had in her possession, custody or power the documents listed in items 1, 2 and 17 of the plaintiff's minute. The third defendant gave discovery of the documents in items 3, 4, 5, 6 and 7 (for the years 2015 and 2016, but not 2017).
The plaintiff objected to the receipt of the affidavit even though it contained supplementary discovery, on oath, in relation to the document categories listed in the plaintiff's minute. The objection (set out in a memorandum of conferral) was to a large extent procedural. I am not presently satisfied that the affidavit should be rejected on procedural grounds, but the filing of a further affidavit of discovery should resolve the procedural issues without the need for a decision on those questions.
The other area of contention on the third defendant's affidavit was her evidence that, where she had previously discovered cheque butts relating to the Trust within the date range 31 July 2003 to 29 November 2017,[3] she now says on oath that the dates given in item 41 of her discovery 'mark the earliest and latest dates of butts in the books'; the majority of the cheque butts have no relevance to the proceedings; and to the extent the earlier affidavit suggested otherwise, it was an error.[4] The third defendant advised the plaintiff's solicitor on 6 November 2019, at the time of providing copies for inspection, that all of the cheque butts discovered in item 41 had not been produced and had been unintentionally included in the list of discoverable documents in error.
[3] Affidavit of third defendant, sworn 29 August 2019, Annexure A, item 41.
[4] Affidavit of third defendant, 28 November 2019 [2] - [4].
The plaintiff sought inspection of all cheque butts, including those which the third defendant says were discovered in error. The plaintiff submitted that discovery of documents and the certification of their availability for inspection are obligations to be taken seriously by the parties and by their advisors.
The third defendant had said on oath that item 41, as set out in her earlier affidavit, was a mistake. The court has power to permit a mistake in discovery to be corrected.[5] In my opinion, the court should permit it to be corrected. The plaintiff is undoubtedly right that discovery obligations are to be taken seriously. But experience tells us that people make mistakes. I see no reason to require the third defendant to provide 14 years of cheque butts from the Trust for inspection, when she has provided those which she has said, on oath, are the only ones relevant.
[5] Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46; (2013) 250 CLR 303 [7].
Given the way in which the matter proceeded, it is now necessary to deal only with the application for discovery of documents for the 2017 financial year, the loan agreement, and the third defendant's income tax returns and activity statements.
General principles
It is unnecessary to discuss in detail the principles relating to an application for further discovery. The plaintiff relies on the summary of principles in the authorities set out in Singh v Friedman.[6] The first and second defendants submit, and I agree, that in an application for discovery of particular documents the plaintiff must displace the conclusiveness of the affidavit of discovery, so that the court has reasonable grounds for being fairly certain that there are other relevant documents which ought to have been discovered.
[6] Singh v Friedman [2013] WASC 78 [3] - [4].
The disputed discovery
On the submissions made by the plaintiff, the documents which are in dispute do not relate to what the defendants did, but to the allegation that the third defendant's conduct was in trade or commerce.
The conduct alleged against the third defendant relates to the period between about 28 February 2016 (when the Deceased died) and 28 April 2016:
(1)On 10 March 2016, she resolved (with others) that she be appointed a director of the Company and that the share held by the plaintiff be transferred to her in accordance with the transfer documents.[7]
(2)On 21 March 2016, she signed a change to company details prepared by the second defendant giving notice of the cessation of the Deceased as a director, secretary and shareholder and her appointment as director, secretary and shareholder of Dorset Nominees Pty Ltd.[8]
(3)On or about 7 April 2016, she gave the plaintiff a Trust cheque for $22,000.00.[9]
(4)On 8 April 2016, she signed a change to company details for the Company recording the effect of the transfer and the cessation of the Deceased as director and secretary, and her appointment as director and secretary of the Company.[10]
(5)On 28 April 2016, she signed a change to the Company's details giving notice of the change in share structure and members of the Company.[11]
(6)She adopted the conduct of the first and second defendants with regard to obtaining the transfer of the share.[12]
[7] Statement of claim [19A].
[8] Statement of claim [20].
[9] Statement of claim [21].
[10] Statement of claim [22].
[11] Statement of claim [23].
[12] Statement of claim [24].
The plaintiff also makes the general allegation that the third defendant 'engaged in conduct in trade and commerce in procuring and maintaining the commercial or trading entities of the Deceased including the Trust and the Company and the shares of the Company, for the purpose of acquiring capital, generating income and reducing taxation'.[13] The third defendant denied she engaged in trade or commerce 'in the specific circumstances pleaded or any of them or at all' and 'for the purposes pleaded …or any of them or at all'.[14]
[13] Statement of claim [12].
[14] Defence of third defendant [7].
Despite the generality and lack of clarity of both the plea and the answer to it, neither party has challenged the other's pleading.
The plaintiff did not plead that the Company was engaged in trade or commerce. Her pleaded case was that the Company was set up in about May 2015, with its equity as at 28 February 2016 constituted by an unpaid present entitlement from the Trust.[15] In the recent amendment to the statement of claim, the plaintiff added a plea that the first and second defendants assisted the Deceased to set up the Company 'as an investment company'. She did not, however, plead that the Company engaged in any trading or commercial activities either before or after the death of the Deceased.
[15] Statement of claim [8].
Although the plaintiff pleaded that the Trust engaged in the business of rental, subdivision and sale of land, there is no claim pleaded in relation to the operation of the Trust, and the only conduct pleaded against the third defendant in relation to the operation of the Trust is the payment made to the plaintiff on 7 April 2016.[16]
[16] Statement of claim [5], [21].
The question raised on the original pleadings is whether the third defendant's conduct in relation to the transfer of the plaintiff's share, by which the third defendant became a member of the Company, was conduct in trade and commerce. The case now pleaded in statement of claim [19A] extends the claim against the third defendant to other conduct at the meeting of the Company on 10 March 2016. But it is not conduct in relation to the activities of the Company which is in issue. No claim is made against either the Company or the Trust. The plaintiff's case is directed to the personal conduct of the third defendant.
Documents from 2017 financial year - categories 6 ‑ 12
In arguing for discovery of Company documents for the 2017 financial year, the plaintiff relied on the issue joined between the plaintiff and the third defendant ‑ whether the conduct of the third defendant was in trade or commerce. The plaintiff submitted that in determining whether conduct occurs in trade or commerce it is relevant whether there is a 'continuity' of activities and whether commercial operations are 'pursued systematically'. On that basis, she submitted that the minute books of the Company for the 2017 financial year are relevant to whether the Company was acting in trade or commerce. But continuity of activities of the Company in later years does not arise as an issue on the pleaded case. The plaintiff's case is that the third defendant's personal conduct in 2016 was in trade or commerce.
Having regard to the specific allegation regarding the third defendant's conduct, I am not satisfied that the plaintiff has shown that the general allegation in statement of claim [12] is a sufficient basis for ordering discovery of documents relating to business activity by the Company in the financial year following the transfer of her share.
To the extent the plaintiff seeks documents of the Trust in 2017, the same reasoning applies.
The div 7A loan agreement
The plaintiff seeks discovery of a document that is described in an invoice from the second defendant as a 'division 7A loan agreement' ‑ I assume the reference is to an agreement for a loan from the Company which complies with the requirements of div 7A of the Income Tax Assessment Act 1936 (Cth), and is excluded from being deemed to be a dividend.
On the information now before the court, it is not possible to say when the agreement was prepared; whether the loan was made or only proposed; or whether the loan (proposed or actual) was between the Company and the third defendant, the Company and the Deceased, or some other parties.
The loan agreement is, however, referred to in a discovered document. Although the invoice was discovered without conceding its relevance, generally, the fact that a document is referred to in a discovered document is sufficient to demonstrate relevance.
The circumstances of the Company, as disclosed in the pleadings, are uncertain. The existence of a loan agreement would, in my opinion, be relevant at least to the valuation of a share in the Company.
Income Tax Returns and ATO Income Tax Activity Statement of third defendant - categories 14 and 16
The plaintiff seeks discovery of the personal income tax returns and tax activity statements of the third defendant on the same basis ‑ that they are relevant to whether the third defendant engaged in conduct in trade and commerce in relation to the specific transaction which is the subject of this action.
I am not satisfied that such documents are directly relevant to the plaintiff's pleaded case and I would not make an order for their discovery.
I will hear the parties further regarding orders when the matter is again before me, after the defendants have filed further affidavits of discovery.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CG
Associate to the Honourable Justice Allanson12 FEBRUARY 2020
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