Warrington Management Pty Ltd v Kingslane Property Investments Pty Ltd
[2015] WASC 427
•9 NOVEMBER 2015
WARRINGTON MANAGEMENT PTY LTD -v- KINGSLANE PROPERTY INVESTMENTS PTY LTD [2015] WASC 427
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 427 | |
| Case No: | CIV:2908/2013 | 3 NOVEMBER 2015 | |
| Coram: | CHANEY J | 9/11/15 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Further discovery and inspection ordered | ||
| B | |||
| PDF Version |
| Parties: | WARRINGTON MANAGEMENT PTY LTD KINGSLANE PROPERTY INVESTMENTS PTY LTD |
Catchwords: | Practice and procedure Discovery Inspection Own case privilege |
Legislation: | Rules of the Supreme Court 1971 (WA), O 1 r 4B |
Case References: | Alba Nominees Pty Ltd v Cecil Bros Pty Ltd (Unreported, WASC, Library No 970698, 12 December 1997) William Buck (WA) Pty Ltd v Faulkner [No 3] [2013] WASC 40 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
KINGSLANE PROPERTY INVESTMENTS PTY LTD
Defendant
Catchwords:
Practice and procedure - Discovery - Inspection - Own case privilege
Legislation:
Rules of the Supreme Court 1971 (WA), O 1 r 4B
Result:
Further discovery and inspection ordered
Category: B
Representation:
Counsel:
Plaintiff : Mr D H Solomon
Defendant : Mr P B Dobson
Solicitors:
Plaintiff : Solomon Brothers
Defendant : Hotchkin Hanly Lawyers
Case(s) referred to in judgment(s):
Alba Nominees Pty Ltd v Cecil Bros Pty Ltd (Unreported, WASC, Library No 970698, 12 December 1997)
William Buck (WA) Pty Ltd v Faulkner [No 3] [2013] WASC 40
1 CHANEY J: On 24 July 2015, Christopher William Weaver made an affidavit of discovery on behalf of the plaintiff (Warrington). The list of documents contained in part 1A of the attachment to that affidavit included items 157 and 158. Item 157 described the following documents:
Documents regarding payments by or to the plaintiff from or to unrelated third parties, for the provision of services of a similar kind to those requested by the defendant and provided by the plaintiff the subject of these proceedings
2 Item 158 described the following documents:
E-mails, letters and telephone notes from the first defendant by Counterclaim and other representatives of the plaintiff to Grant Thornton, containing instructions as to how to prepare accounts of the plaintiff
3 By part 1B of the attachment, Warrington objected to producing the documents described in items 157 and 158 on the ground that:
Documents relate solely to the plaintiff and first defendant by counterclaim's case, and do not in any way tend to support or prove the defendant's case or impeach the plaintiff and first defendant by counterclaim's case.
4 The objection to production is therefore based on what is referred to as 'own case' privilege.
5 By this application, the defendant (Kingslane) seeks:
(i) further discovery of certain financial documents relating to Warrington (Warrington financial documents); and
(ii) production for the purposes of inspection of documents comprising items 157 and 158 of the plaintiffs' affidavit of discovery of 24 July 2015. Warrington resists the application on the basis that:
(i) the Warrington financial documents:
(a) are not relevant to any matter in issue,
(b) in any event, do not need be produced on the basis of 'own case privilege', and
(c) comprise a broad class of documents, many of which would be of no relevance to any matter in issue so that discovery of them would be onerous and oppressive;
(ii) the documents described in item 157, to the extent that they are relevant, are only relevant to the quantification of any order for restitution. The basis upon which the amount of restitution is to be calculated is not presently apparent on the pleadings, but it is likely to be the subject of expert evidence. The facts upon which the experts on either side might form their views are as yet unknown. Also unknown is whether the experts (or the parties) might ultimately agree quantum in the event that restitution is ordered. Accordingly, the relevance to any matter in issue of documents evidencing payments to Warrington from third parties for similar services can only be assessed after the basis of the quantification of the claim for restitution is revealed by the expert evidence and issues between experts, if there are any, become apparent. For that reason, Warrington argues that, given the sensitive commercial nature of the documents, and the potentially onerous burden involved in their production, discovery of them should not be ordered, at least until it becomes apparent whether, on the case as it develops, they are in fact relevant to a matter in issue; and
(iii) the documents described in items 158, which are also expressed as a class of documents, are:
(a) not relevant to any matter in issue,
(b) the subject of own case privilege and, for that reason, are not required to be produced for inspection, and
(c) comprise a potentially very large number of documents which are commercially sensitive and confidential, and in respect of which a requirement to produce them would be disproportionate.
6 By [7] of the statement of claim, Warrington pleads oral agreements made in November 2010 and July 2011 between Mr Weaver, on behalf of Warrington, and Mr John Cranston, on behalf of Kingslane, that Kingslane would lend money to Warrington on terms that the loans would only be repayable once a remuneration agreement between Warrington and Kingslane had been finalised, and would be set off against, or extinguished by, remuneration agreed to be paid to Warrington by Kingslane. The loan in July 2011 was said to be $350,000. Other loans are said to have been made by Kingslane to Warrington in November 2010 ($45,000), and $70,000 per annum by way of monthly instalments throughout 2011/12 and 2012/13.
7 In its defence, Kingslane denies [7] of the statement of claim. Kingslane has also counterclaimed, in which Mr Weaver is the first defendant by counterclaim and Warrington is the second defendant by counterclaim. By [15] of the counterclaim, Kingslane pleads that it lent $350,000 to Mr Weaver in July 2011. That agreement is denied by [4] of the defence to counterclaim.
8 By [16] of the counterclaim, Kingslane pleads, in the alternative to [15], that Warrington and Kingslane were parties to the loan agreement.
9 It follows that the issue on the pleadings in relation to the loan of $350,000 is as to the terms of the loan, and as to the identity of the borrower; that is, whether the funds were borrowed by Mr Weaver or Warrington. As to the other loans totalling $185,000, there is simply a denial of [7] of the statement of claim. The pleading does not reveal whether the defendant's position is that no funds were in fact transferred, or whether the denial is as to the identity of the entity to whom the funds were transferred, or whether it is as to the pleaded terms of the loans.
Plaintiff's financial documents
10 Discovery is sought from Warrington of:
(a) final and draft: financial reports/accounts, profit and loss statements, balance sheets and tax returns, for the financial years ending 30 June 2011, 30 June 2012 and 30 June 2013; and
(b) correspondence (not including 'instructions') from or to Warrington (including any agents) in relation to the 'loan amounts' particularised at [7] of the statement of claim.
11 Kingslane originally sought discovery of correspondence in relation to the preparation of financial reports, profit and loss statements, balance sheets and tax returns, including drafts, for the financial years ending 30 June 2012 and 30 June 2013, but that aspect of the application was abandoned during the course of oral argument on the basis that Kingslane accepted that that class of documents was excessively broad and would encompass much irrelevant material.
12 Kingslane notes that item 158 of the plaintiffs list discovers 'e-mails, letters and telephone notes from the first defendant by Counterclaim and other representatives of Warrington to Grant Thornton, containing instructions as to how to prepare accounts of the plaintiff'. It contends that discovery of those documents that demonstrates recognition by Warrington that those documents are relevant. It contends that if those documents are relevant, then the actual accounts of Warrington prepared as a result of those instructions must themselves be relevant and should be discovered. Kingslane contends that the documents bear directly on one of the central issues in the proceedings.
Plaintiff's response
13 Warrington's primary position was that the documents described are the subject of own case privilege. That is a privilege against production of documents for inspection where the documents relate solely to the party's own case and does not in any way support or prove, or tend to support, the other party's case or to impeach the case of the party claiming the privilege. It was not in issue between the parties to this matter that own case privilege remains a basis to refuse inspection of documents in this state - see Alba Nominees Pty Ltd v Cecil Bros Pty Ltd (Unreported, WASC, Library No 970698, 12 December 1997) 12 (Parker J); William Buck (WA) Pty Ltd v Faulkner [No 3] [2013] WASC 40 [49] (Kenneth Martin J).
14 It is contended by Warrington that a letter from Grant Thornton, the accountants for Warrington, dated 19 June 2015, and included in Warrington's discovery, demonstrates that Warrington's accounts show that monies advanced by Kingslane were treated as a loan from Kingslane to Warrington. Thus, it is contended that the accounts of Warrington in no way advance Kingslane's case that the loans were made to Mr Weaver, or damage Warrington's case that the loans were made to it.
15 Having made the submission, counsel for Warrington accepted that, if what is sought are extracts of documents which show how the advances by Kingslane were dealt with in each year referred to in the request, then suitably redacted copies of accounts would be provided.
Ruling
16 In my view, the letter from Grant Thornton which reflects the treatment of funds from Kingslane in Warrington's books of account for the year ended 30 June 2013 do not demonstrate how those funds were treated in the year of receipt. The journal entries referred to in Grant Thornton's letter do no more than reflect entries apparently made after all of the funds, which had been advanced over a two-year period ending the 2012/13 year, had been received. Although it might be expected that journal entries made at or around the time of receipt would be consistent with those made in 2012/13, that is no more than an inference. I am satisfied that the accounting treatment of the funds in the years in which they were advanced is relevant to the issue as to the identity of the borrower. I am not able to say, on the basis of the materials before me, that those documents support Warrington's case and do not in any way support Kingslane's case or impeach Warrington's case. Kingslane's case as to the identity of the borrower is put in the alternative. Documents going to identify the borrower must necessarily support one of Kingslane's alternative cases.
17 On the other hand, I do not consider that Warrington should be required to discover unredacted copies of its financial accounts and books. The requirement to further discovery should be limited to entries in final and draft financial accounts, profit and loss statements, balance sheets and tax returns for the financial years ending 30 June 2011, 30 June 2012 and 30 June 2013 which relate to the treatment of the advances referred to in [7] of the statement of claim. In the event that documents of that description do not deal with or contain entries related to those advances, discovery need not be given. To the extent that there is some point to be made of the absence of entries related to the advances in books or records of Warrington, the non-discovery of such entries on the basis that they do not exist in the relevant books and accounts enables such points to be made equally as well as if an otherwise irrelevant document were produced.
18 I also consider that discovery of correspondence from or to Warrington in relation to the loan amounts particularised in [7] of the statement of claim is relevant to the issue as to the identity of the borrower, and potentially to questions as to the terms of the loan agreements. That correspondence should be discovered. There is no reason to consider that that requirement would place an unreasonable or disproportionate burden on the plaintiff.
Item 157 - documents regarding payments for the provision of services of a similar kind to those requested by Kingslane and provided by Warrington
19 The defendant contends that these documents are relevant to both parties' case as to the quantum of restitution claimed. I have outlined above Warrington's response to this aspect of the application. In my view there is merit in Warrington's position.
20 The basis upon which restitution should be calculated is not presently apparent. Nor is it clear that there will ultimately be any issue as to the appropriate rate of remuneration which should be adopted for the purposes of quantifying restitution if Warrington is ultimately successful in establishing that it is entitled to restitution. The documents to which access is sought are said to be extensive and contain material which might reasonably be thought to be commercially sensitive or confidential, regardless of whether Kingslane might be a commercial competitor of Warrington.
21 At the hearing, I canvassed with the parties the proposition that the appropriate way forward in the action is for Warrington to serve its expert evidence in relation to quantification of its claim for restitution. When that is done, Kingslane will be in a position to assess whether it wishes to engage its own expert on that issue, and if so will become aware of the basis upon which that expert might form his or her opinion. At that point, the relevance or otherwise of documents relating to amounts paid to Warrington by third parties for similar services to those which it provided to Kingslane will become apparent. In my view, that is the appropriate way forward.
22 Having regard to the principles of case management embodied in O 1 r 4B of the Rules of the Supreme Court 1971 (WA), I am disinclined to require production of the documents referred to in item 157. The matter can be revisited, if necessary, when the basis of quantification of restitution is clarified.
Item 158 - instructions to accountants
23 Kingslane contends that these documents are relevant because of an inconsistency in the letter from Grant Thornton stating that the loans have been treated as income and distributed to shareholders as dividends and Warrington's pleaded case that the loans were repayable once a remuneration agreement had been finalised.
24 For the same reason that I have concluded that correspondence in relation to the loan amounts referred to in [7] of the statement of claim should be discovered, the documents referred to in item 158 should, to the extent that they deal with instructions as to the treatment of those loan amounts, be produced to inspection. They are relevant to questions of identification of the borrower and potentially to questions as to the terms of the loan agreements. I am not satisfied that it can be said that the documents do not impeach Warrington's case or do not provide some support for Kingsland's case as to identity of the borrower or as to the terms of the loan agreements.
25 The description of the documents contained in item 158 goes beyond documents related only to the treatment of the loan amounts, and to the extent that the description includes such documents, I would not order their production for inspection. That limitation has the effect of greatly reducing the likely burden on Warrington to identify and produce the documents.
Conclusion
26 For the foregoing reasons, there will be an order that within 14 days, or such further time as the parties may agree or as the court orders, the plaintiff is to give discovery of:
(a) those portions of final and draft financial accounts, profit and loss statements, balance sheets and tax returns for the financial years ending 30 June 2011, 30 June 2012 and 30 June 2013 which relate to the treatment of the advances referred to in [7] of the statement of claim; and
(b) correspondence (not including instructions) from or to Warrington (including any agents) in relation to the loan amounts particularised in [7] of the statement of claim
27 There will also be an order that the plaintiff produce for inspection the documents identified in item 158 of the affidavit of further discovery of Christopher William Weaver sworn 24 July 2015 to the extent that they contain instructions as to the treatment for accounting purposes of the loan amounts referred to in [7] of the statement of claim.
28 The defendant's application for further orders in relation to discovery is otherwise dismissed.
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