Bridging Capital Holdings Pty Ltd v Self Directed Super Funds Pty Ltd

1. The interlocutory application for discovery filed by the respondents on 15 August 2024 be dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

STEWART J: 1 Before me is an interlocutory application by the respondents for discovery in circumstances where the final hearing of the matter is scheduled to start a week from today. The application was filed on 15 August 2024 without forewarning to the applicants. In order to deal with the application, it is necessary to identify some of the background. 2 By a share sale agreement concluded in March 2021, the first applicant agreed to purchase the shares of Exelsuper Pty Ltd from the first respondent. The second applicant, Mr Moses, is the controlling interest behind the first applicant, and the second respondent, Mr Harris, is the controlling interest behind the first respondent. 3 The purchase and sale was to be in two stages. After the completion of the first stage and before the second stage, the parties fell into dispute. That led to an oppression suit by the first applicant against the first respondent which was ultimately determined by the first respondent repurchasing the shares that had been transferred during the first stage and paying market value for them (detailed further in Bridging Capital Holdings Pty Ltd v Self Directed Super Funds Pty Ltd [2021] FCA 1625; 396 ALR 415). The applicants then brought the current proceeding, which was commenced on 2 November 2022. 4 The applicants rely on four representations said to have been made during the negotiations that led to the share sale agreement which are alleged to be false, inaccurate or misleading. The applicants allege that by their conduct the respondents contravened statutory provisions prohibiting misleading and deceptive and unconscionable conduct in the circumstances of the transaction in question. They also allege breaches of the share sale agreement and warranties, and seek relief in the form of damages under the relevant statutory provisions, or for breach of contract, in the amount of approximately $2 million. 5 The respondents assert a cross-claim for damages arising from the alleged repudiation by the first applicant of its obligation under the share sale agreement, and in particular its obligation "to use all reasonable endeavours to ensure" a particular refinancing obligation was obtained - noting that that is the characterisation of the cross-claim as put in the respondents' opening submissions for trial. There may be a dispute about whether that characterisation is open on the pleadings. 6 Of crucial significance to the discovery application is how late it has been brought. That necessitates having regard to the history of the matter. As mentioned, the proceeding was commenced on 2 November 2022. That was by way of originating application and statement of claim. The respondents filed a defence, notice of cross-claim and statement of cross-claim on 22 February 2023. An amended statement of cross-claim and amended defence were filed by the respondents on 24 April 2023, and a reply and defence to the cross-claim by the applicants on 5 May 2023. The respondents filed a reply to the defence to the cross-claim on 19 May 2023. 7 On 4 August 2023, the matter was listed for final hearing commencing on 2 September 2024 in Adelaide on an estimate of six days. On the same day, orders were made for the filing of evidence by way of affidavit, the preparation of court books and other pre-trial programming matters. 8 At the case management hearing on 4 August 2023, the respondents foreshadowed an application for discovery. It was said to be limited to one category of documents with reference to the cross-claim. I was not persuaded that there should be discovery at that stage and made it clear that any discovery and other documentary issues should be dealt with after the evidence had been filed. 9 The applicants filed their affidavit evidence-in-chief on various dates between 7 November 2023 and 5 February 2024. The respondents filed an affidavit of evidence-in-chief on 16 May 2024. The applicants filed a reply affidavit on 4 June 2024 and an expert report in reply on 7 June 2024. As expected, the affidavits include lengthy exhibits of contemporaneous documents. The court book is already more than 5,000 pages. 10 It is to be noted that the parties agreed extensions to the dates for the filing of evidence on a number of occasions, which ultimately led to the last evidence being filed, as I have said, on 7 June 2024. The respondents raised no issue in relation to discovery when agreeing to or seeking such extensions, although issues in relation to discovery could have been raised before the reply evidence was filed, particularly insofar as they arise from the applicants' evidence-in-chief. They certainly could have been raised from shortly after 7 June 2024. 11 There is no explanation in the evidence given on the interlocutory application as to why the respondents waited until 15 August 2024 before seeking discovery. As indicated, that was more than two months after the last affidavit had been filed and only two or so weeks before the trial. 12 The Central Practice Note: National Court Framework and Case Management (CPN-1) sets out some important principles with regard to the Court's approach to discovery. They include that no party has a right to discovery, and that no request for discovery should be made unless it will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible (at [10.2]; see also Federal Court Rules 2011 (Cth), rr 20.11 and 20.12). Discovery can be extremely burdensome. Where discovery is necessary, the Court expects the parties and their representatives to take all steps to minimise its burden, and the discovery applicant must justify the need for the request for discovery, including demonstrating its utility and the appropriateness of discovery occurring at the time requested (at [10.3] and [10.6]). 13 It is necessary to examine the possible utility in the discovery that is sought, its burden, its proportionality and its timing. See Pleash (Liquidator), in the Matter of SFG Relocations Pty Limited v Fourie [2022] FCA 552 at [15]-[17]. 14 The respondents' interlocutory application for discovery sought several categories of documents. After the applicants had informally provided a substantial number of documents in a pre-emptive attempt to respond to the discovery application, the respondents very substantially narrowed the categories that they sought by way of providing draft short minutes of order. 15 While that approach is to be welcomed, inasmuch as it helps to confine what is now sought and is more readily justifiable as a burden on the applicants at this late stage before trial, the applicants are understandably frustrated by it. That is because they have put in time and effort in responding to one set of categories only to thereafter be faced with a different set of categories. It goes without saying that the narrower and more targeted set of categories should have been presented at the outset. 16 The applicants have set out in evidence the burdens that they will face in having to discover at this late stage. Particularly relevant is the fact that Mr Moses has been abroad on business and is only returning to Sydney early this week, which I take to be today or tomorrow. The applicants' solicitors have scheduled pre-trial preparation meetings with Mr Moses and with counsel during the week. In any event, solicitors and counsel are doubtless expected to be fully engaged in trial preparation this week. It will be a heavy burden on the applicants to have to shift attention to discovery matters at this late stage. To do so will inevitably distract from their proper preparation for trial. 17 I am not persuaded that the particular categories of documents that are sought are such as to not involve significant time and effort. In my assessment, the categories that are now sought are not such as to be easily produced. For the reasons given by the applicants in evidence, it will be necessary to undertake significant searches and for those searches to be overseen by the applicants' solicitors. That is, in part, because the categories involve matters of judgement, in particular, as to relevance. By way of example, the categories use language such as "evidencing" and "relating to". The documents that are turned up in relevant searches will have to be closely reviewed. 18 One of the pre-trial steps that was programmed back in August last year was the exchange of schedules of objections to evidence. Notably, almost every one of the respondents' numerous objections to the applicants' evidence was said to be on the basis of "no disclosure" of documents underlying or relevant to statements made on affidavit. That is no proper basis to object to oral (or affidavit) evidence. That is all the more so when no discovery of documents has ever been sought or ordered. 19 When the applicants made those points in response, the respondents brought their discovery application, explaining in their reply to the applicants' response to their objections that the need for many of the objections would fall away when the discovery was given. The inference is that what occurred here is that it was only upon counsel preparing evidence objections that there was a realisation on the respondents' side of the case that discovery should be sought. That is no proper way to prepare for trial. 20 The applicants' affidavits should have been carefully considered at the time that the respondents prepared their evidence, and at that time any need for discovery should have been identified and all other appropriate and narrow ways of obtaining genuinely relevant or important documents should have been considered. That obviously includes notices to produce. Of course, had that been done, there could have been proper and productive exchanges between the parties as envisaged by the Practice Note to ensure appropriate discovery. 21 Apparently, it is not uncommon for late applications for discovery to be dismissed, at least in part, on account of their lateness. I refer to Harcourts WA Pty Ltd v Roy Weston Nominees Pty Ltd (No 2) [2014] FCA 107 and Park, in the matter of Queensland Nickel Pty Ltd (in liq) (No 2) [2022] FCA 705. I am simply not satisfied that the discovery that is sought is justified at this late stage. There is no explanation on affidavit for why it has come so late. 22 Any discovery at this stage will unduly and unfairly burden the applicants and distract them from trial preparation. The application itself has doubtless already had those consequences. Indeed, it has burdened the Court having to deal with this application at short notice at the expense of other pre-scheduled work. In the exercise of my discretion, the interlocutory application should be dismissed with costs. In short, it seeks too much too late. 23 On behalf of the applicants, Mr Karam has tendered a letter dated 20 August 2024 from the applicants' solicitors to the respondents' solicitors, in which the respondents were invited to withdraw their discovery application with there being no order as to costs. Various reasons were set out as to why the applicants took the view that the discovery application would fail, including, in particular, its lateness, although mention was also made of the "extensive and largely irrelevant" categories. The letter stated that if the offer was not accepted before it lapsed at a stated time, then indemnity costs would be sought in reliance on, amongst other things, Calderbank v Calderbank [1976] Fam 93. 24 The Court has a wide discretion in relation to costs when it comes to indemnity costs in the circumstance such as this. I would have to be persuaded that the Court's displeasure should be expressed in some way, or at least that there was a basis for such expression. It is not suggested that indemnity costs flow automatically from the Rules. There is still a question of discretion. It is also questionable how much of a compromise was made by the offer. Taking all those matters into consideration, I am not satisfied that indemnity costs should be ordered. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.