British American Tobacco Australia Services Ltd v Cowell [2020] NSWSC 672 | Case summary

British American Tobacco Australia Services Ltd v Cowell [2020] NSWSC 672 | Case summary | Zoe

Background facts and affidavit evidence

The origin of these issues is set out in two earlier judgments which I delivered on 4 June 2019 and 4 July 2019. The delay in hearing this application results from further inquiries that have been made by the Plaintiff, Ms Roberts, after that time, to seek to resolve the relevant issues as to documentary access. Even today, the Defendants maintained that they were not ready for a hearing and sought a further adjournment which was not granted.
By way of background, Ms Roberts seeks a range of relief by way of oppression and associated remedies in respect of the shares of Fresh Venues Pty Ltd ("Company"). It became apparent when the matter was listed before me on 27 May 2019, and has since been confirmed by voluminous evidence, that Mr Wilkinson's emails relevant to that claim are no longer available, likely by reason of steps taken by Ms Roberts when the proceedings were contemplated. It appears that these emails were lost after Ms Roberts took steps, in early February 2019, to change the password on the Company's email account and to transfer files from a shared Dropbox to her personal desktop computer. There is no suggestion that Ms Roberts had the Company's authority to take those steps, by resolution of directors, or had Mr Wilkinson's agreement to them.
Mr Wilkinson has raised concerns, since at least June 2019, that those steps have had the consequence that, although he has been provided with a new password to his email address, all of his email correspondence held in his email files prior to 17 January 2019 is no longer available. The expert evidence that is now led by Ms Roberts confirms that that is correct, and that those emails cannot now be restored, although the Plaintiff has taken steps to seek to mitigate that issue, by providing emails obtained from Ms Roberts' email account which will likely overlap with the emails that have been lost from Mr Wilkinson's email account.
The parties have led voluminous evidence in respect of this application, and I will refer to that evidence, although it is not necessary to deal with it in detail. The facts that are critical, for this application, are few in number, and are ultimately now not particularly contentious. It is not necessary to distinguish between who read which affidavit, and Mr and Mrs Wilkinson, who represent themselves, took the somewhat unusual course of reading some of the evidence on which Ms Roberts would otherwise have relied in respect of the application. An affidavit of Ms Roberts dated 4 March 2019 was read, which explained something of the circumstances of the commencement of the proceedings and the steps which she had taken to change the password on the email account and download documents as noted above. A further affidavit of Ms Roberts dated 25 June 2019 again dealt with the circumstances of her arranging for a change in the password on the email account, and to steps which were subsequently taken to provide copies of emails to Mr Wilkinson, by seeking to extract those emails from Ms Roberts' email account. That process cannot, of course, restore access to those of Mr Wilkinson's emails that were also not found on Ms Roberts' email account. An affidavit of Mr Simon Kerry dated 26 June 2019 in turn referred to the process which he had adopted in order to provide copies of emails to Mr Wilkinson. It later emerged, and is now common ground, that that process did not identify all relevant emails.
By a further affidavit of Ms Roberts dated 3 July 2019, she referred to a further search for emails, which had identified further emails not previously identified, which have now been provided to Mr Wilkinson. Ms Roberts' evidence was there that she had "done [her] best" to locate all of the business related emails in her email account and to export those emails so that they could be provided to Mr Wilkinson. I pause there to note the difficulty, so far as Mr Wilkinson and the integrity of the conduct of these proceedings is concerned, that Mr Wilkinson has been deprived of the opportunity to determine, for himself, which emails held in his email account may be relevant to the proceedings, because the process which has now been adopted depends on Ms Roberts doing "her best" in that search process, which would not have been necessary had the access to his emails on his email address not been compromised. A further affidavit of Ms O'Keeffe dated 3 July 2019 was read. The affidavits to which I have referred above were available to the Court, at the time I delivered my judgment dated 4 July 2019.
Two affidavits of Mr Wilkinson dated 5 August 2019 were also read. Mr Wilkinson's first affidavit dated 5 August 2019 refers, in particular, to his claim that the hard drive that he was provided by Ms Roberts' representatives is missing eighteen months of correspondence between Ms Roberts and Mr Wilkinson, which relates to the period in which he claims an agreement between them was negotiated and finalised. It appears to be common ground that such an agreement existed, although there is a dispute as to its contents, which it appears would be highly relevant to the determination of the proceedings. Mr Wilkinson refers to Ms Roberts' evidence as to the terms of that agreement, and submits that the lack of access to emails in the relevant period will impede his ability to address that evidence. It is notable that Mr Wilkinson was not cross-examined to suggest that that evidence was false.
An affidavit of Mr Wilkinson dated 1 October 2019 was read, which advances several criticisms of Ms Roberts' conduct, which I need not address for the purposes of this application, and also advances the proposition that Mr Wilkinson now does not have access to key documents that are central to his receiving a fair hearing in the proceeding. Mr Wilkinson also refers, in a further affidavit dated 1 October 2019, to the extent of documents that are now not retrievable. As I will note below, it is now clear that those documents are lost, so far as they were contained on Mr Wilkinson's email account, other than to the extent to which overlapping documents had been located in Ms Roberts' email account. It is not established by evidence that that overlap is complete or near complete.
A further affidavit dated 24 October 2019 of Ms Roberts was read, which refers to the steps which have now been taken by Ms Roberts and those assisting her to seek to ameliorate the difficulties arising from these matters, including providing copy of emails extracted from her email account, to which I have referred above. She provides a further explanation of the circumstances on which she had logged on, on more than one occasion and for different purposes, to Mr Wilkinson's email account. Ms Roberts' evidence was that she did not move, delete, download, copy or forward any emails, nor did she make any attempt to view their content, when she logged on between 1 and 3 February 2019. Subject to uncertainty as to her evidence as to downloading files, to which I referred above, I accept that evidence where the contrary was not put to her. Ms Roberts also refers to the fact, which has become significant in respect of the loss of emails, that she did not provide Mr Wilkinson with the new password to his account until 15 February 2019, because of matters occurring in the proceedings, although her evidence is that she did not deliberately take that course with the intent that deleted emails could not be recovered. That course does, however, appear to have had the consequence that Mr Wilkinson's emails were deleted when he could not and did not access them within the 14 day period.
An expert report of Mr McKemmish dated 12 March 2020 in turn establishes some matters that are now uncontroversial. The first is that Mr Wilkinson's email account now does not contain any emails dated on or before 17 January 2019 except one email in the notes folder, that is, emails relevant to the period in issue in the proceedings. The second is that it is not possible now to restore those emails. Mr McKemmish also refers to the sending of an email from Mr Wilkinson's phone on 9 February, which he contends is evidence that that phone was using the new password that was set on the email account on 1 or 2 February. The evidence as to that matter is equivocal, since Mr McKemmish does not explain how that occurs, or whether it is dependent upon the settings of the phone at the particular time, and Mr Wilkinson in turn contends, albeit without the assistance of expert evidence, that the phone does not require access to the password for that function. This evidence appears to be intended to establish the hypotheses, both not supported by any other evidence, that either the password had not been changed, contrary to Ms Roberts' evidence, or alternatively someone else, possibly Mr Kerry, had provided the new password to Mr Wilkinson. That leaves unexplained, however, the fact that the emails have now been lost. As Mrs Wilkinson points out in submissions, even in the context of litigation, that is a matter that seems to be more adverse than favourable to Mr and Mrs Wilkinson for the continuing conduct of their business. The only alternative explanation of how that occurred, raised by Mr Notley in submissions but not put in cross-examination, is that Mr Wilkinson has either deliberately deleted all his emails, or alternatively, possibly, that he has made a separate copy of them which he has concealed. Those are extremely serious allegations, and it does not seem to me that the Court could properly draw such an inference, where that matter was not put to Mr Wilkinson in cross-examination and he did not have the opportunity to respond to it.

[4]

Determination

With this background, I now turn to the case law and the parties' submissions. I had noted in my earlier judgments, when this issue first arose, the difficulties here are of the kind that were considered by Millet J in Logicrose Ltd v Southend United Football Club Ltd (unreported, Chancery Division 5 February 1988) which was in turn quoted by the Court of Appeal of the Supreme Court of Victoria in British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524 and subsequently in National Builders Group IP Holdings Pty Ltd v ACN 092 675 164 Pty Ltd (in liq) [2015] VSCA 260. His Honour there noted, in the case of a failure to comply with orders for discovery that fell short of contempt, that there may be a case where it becomes necessary to stay a trial because it is impossible to conduct a fair trial or developments would make any judgment unsafe. Mr and Mrs Wilkinson invoke that principle, in contending that they would be disadvantaged in their defence of the proceedings, by reason of the loss of Mr Wilkinson's emails generally, or the loss of his emails specifically for that period in which the agreement with Ms Roberts (which both parties accept exist, while contesting its content), was negotiated.
Mr Notley, in detailed and careful submissions, in turn refers to the summary of that case law by Johnson J in Clark v State of New South Wales [2006] NSWSC 673; 66 NSWLR 640 at [100]-[104], where his Honour was dealing with the position of destruction by a party of evidence that occurred before the commencement of proceedings. His Honour noted that there are cases in which dismissal of proceedings had been ordered and other cases in which proceedings had been allowed to proceed. His Honour noted the possibility of alternatives to staying the proceedings, including drawing inferences adverse to the party who had destroyed the material prior to trial and, also noted that, if the conduct may be characterised as an abuse of process, then the power of the Court to stay or dismiss the proceedings may be utilised in an appropriate case, but is to be exercised sparingly. His Honour pointed, importantly, to a party's entitlement to initiate and continue proceedings without the Court determining their proceedings on their merits, but also pointed to the issues relevant to a stay or dismissal, in respect of at least intentional destruction of documents, observing that: "The Court will have in mind the interests of the individual parties to the civil proceedings, but also the protection of the administration of justice and the integrity of the courts and the system of justice generally. Resolution of an application for a stay or dismissal of the proceedings will consider the question whether a fair trial may take place in the absence of the destroyed material even where an appropriate inference may be drawn adverse to the destroying party."
It is important to note that that case, as in many cases, appears to be directed to the situation where a party has taken steps which bring about the destruction or non-retention of documents which it would have been required to discover, which are potentially adverse to its own case. The position here is different because, albeit unintentionally, Ms Roberts' actions, taken without the Company's or Mr Wilkinson's authority, have not led to the destruction of documents which she would have produced, but instead to the destruction of documents on which Mr and Mrs Wilkinson may have relied for their defence of the proceedings. That makes the position of drawing an inference adverse to Ms Roberts more difficult, because the drawing of that adverse inference cannot adjust, in any proportionate way, to the fact that Mr and Mrs Wilkinson have been deprived of evidence on which they would potentially rely, and have indeed, been deprived even of the opportunity to identify what particular documents were in the evidence of which they have been deprived that may have assisted them.
Mr Notley also fairly draws to the observations of Beazley JA (with whom Tobias AJA agreed) in Palavi v Queensland Newspapers Pty Ltd [2012] NSWCA 182; 84 NSWLR 523 at [29], where her Honour referred to the "truism that fairness of proceedings is an essential integer of the administration of justice" and that the operation of fairness in a given case depends on all the circumstances. Mr Notley also referred to the decision of the Victorian Court of Appeal in British American Tobacco Australia Services Ltd v Cowell above, again involving the destruction of documents before the commencement of proceedings, in circumstances that it was possible that the documents that were not retained by the defendant were adverse to its case and advantageous to the plaintiff's case. The Court of Appeal there noted the availability of alternatives, falling short of the dismissal of the proceedings in the particular case.
I have noted above that this case is one of great difficulty. It seems to me that here, the position is much more difficult than that would exist if Ms Roberts had, for example, not retained documents which may be adverse to her case, which the Court could address by simply drawing inferences which were adverse to her, or taking that into account in the determination of the proceedings. The position here seems to be worse, so far as the fairness of the proceedings are concerned, because the steps which Ms Roberts brought about, albeit unintentionally, a result by which it appears to be common ground that a significant number of Mr Wilkinson's emails were lost. That position is only partially mitigated, to an extent that is unknowable and unknown, by the steps which have been taken to copy emails from Ms Roberts' email records.
Substantial difficulties, so far as fairness of the proceedings are concerned, appear to me to arise from that position. First, the Defendants are left to defend the proceedings, in circumstances that they will always be placed in a position of disadvantage, to which they made no contribution, because access was taken without the Company's or Mr Wilkinson's authority to his email account, and a password was changed, and the new password was not provided to Mr Wilkinson, with the consequence that a very substantial number of emails were lost. Second, the Defendants are in the position now that they cannot identify previously what was lost, or how what was lost would impact on their defence of the proceedings, because they cannot now identify what was once there but is no longer there. Third, and importantly, it seems to me that the confidence of a party to the proceedings in the fairness of the outcome must be substantially compromised if the other party can reach into the available evidence, and extinguish part of the evidence on which the first party would have relied for the defence of the proceeding. That does not infer any wrongful intention upon Ms Roberts' part, and I make no finding in that respect.
While recognising that this is a hard case, it seems to me that it is a different case from those which have been permitted to proceed, because this is not a case where Ms Roberts has, in effect, improved her prospects of prosecuting the proceedings, by destruction or non-retention of her own documents, but instead has taken steps which have impeded the other party's access to documents, in respect of documents that were at least not her property, and to which the other party had a proper expectation of retaining access. I am not persuaded that, in this case, the Court can ever adjust for these matters by making assumptions against Ms Roberts, because it cannot identify what has been lost to Mr and Mrs Wilkinson so as to calibrate those assumptions, unless it assumes that what is lost may have been a complete defence to Ms Roberts' claim and that claim is therefore bound to fail.
I am not persuaded that the proceedings should at this point be dismissed, although it seems to me that that result may follow with the passage of time. I am satisfied that the proceedings should be stayed, on the basis that they cannot go forward in a way that is fair to Mr and Mrs Wilkinson in these circumstances, because no adjustment that the Court can now make can adjust for the consequences of the steps that have been taken, albeit those consequences were unintentional. I recognise that that is a significant and disadvantageous result so far as Ms Roberts is concerned, and I have borne that in mind. I also recognise that it is also an extremely disadvantageous result for Mr and Mrs Wilkinson if, without fault on their part, they are left to go forward in the defence of proceedings without access to the documents which were once available to them to defend the proceedings, where Ms Roberts and not they have brought about that result. For these reasons, I will order that the proceedings be stayed until further order. I will list the proceedings for directions later in this Court year, when they may well be dismissed if, as seems likely, no further step that is available to the parties has been able to remedy the position which has arisen.
Accordingly, I make the following orders:
The proceedings be stayed until further order.
List the matter in the Corporations Motions List on 7 December 2020, with a view to dismissal of the proceedings if there has been no change in the position in respect of access to documents.

British American Tobacco Australia Services Ltd v Cowell

At a glance

Court

Decision date

Before

Source

Judgment (5 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (4)