//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2012] NSWSC 1144
Supreme Court of NSW
2012-09-13
Schmidt J
Original judgment source is linked above.
Judgment 1These proceedings rest on the plaintiff's claim that it lost its securities licence, on which its business depended, as the result of actions wrongly taken by the defendant, in circumstances where it later succeeded in having its license restored to it, but was unable to re-establish its business, given what had transpired during the time that it was unable to operate. 2This judgment deals with questions of discovery, about which the parties were not able to reach complete agreement, as well as an oral application for leave to amend the second further amended statement of claim, which was made during the course of the hearing of the dispute over discovery. Leave to amend was opposed by the defendant. 3Governing the questions which arose to be determined were the requirements of s 56 of the Civil Procedure Act 2005, which requires the Court to facilitate the just, quick and cheap resolution of the real issues in the proceedings. Consideration must also be given to the requirements of s 57, as to the just determination of the proceedings, the efficient disposal of the business of the court, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings; the requirements of s 58, which requires the Court to act in accordance with the dictates of justice; the elimination of delay dealt with in s 59 and s 60, as to proportionality of cost.
Financial Wisdom 4The matter has a protracted procedural history. Various discovery has already been ordered and given. Earlier this year, the plaintiff was given leave to amend its claim. In June 2012 in Chapel Road Pty Limited v Australian Securities Investments Commission (No 3) [2012] NSWSC 584, I concluded that amendments sought to be made to the further amended statement of claim were necessary to ensure that the real issues lying between the parties were properly raised in the proceedings; that the delay was properly explained; and that it had not resulted from any lack of diligence on the plaintiff's part. Earlier, in a judgment given in May 2011 (Chapel Road Pty Limited v Australian Securities Investments Commission [2011] NSWSC 419), I had ordered discovery, having concluded in relation to the alleged practice that: 31I accept that, albeit not very clearly, failure to apply the practice identified in [13] is alleged in the further amended statement of claim. That was not a claim made in the earlier pleadings considered by Registrar Bradford. It has been explained that the third party documents in issue are sought to establish that the defendant had that practice, the existence of which is in issue. That, it seems to me, must be accepted, given the defence to the further amended statement of claim. Application of such a practice to other companies with which the defendant dealt at the relevant time, is capable of establishing the existence of the claimed practice. That providing the documents sought may also establish that the plaintiff has a basis on which to advance the other claim it wishes to advance against the defendant, inconsistent treatment, is not a reason for concluding that the discovery sought ought not to be given. 5I then made orders that discovery be given as to documents referable to the defendant's investigations to the consideration of training, supervision and compliance issues during the period of 30 June 1998 to 30 June 2002 in respect of a number of entities, including Financial Wisdom Ltd. 6Discussion about the discovery ordered then ensued between the parties, understandably, given its cost. One outcome of those discussions was that in December 2011, this order was revisited, with the result that there was no discovery given in relation to Financial Wisdom, it having been agreed that: The plaintiff to notify the defendant of any further discovery sought including in relation to Financial Wisdom by 13 January 2012 noting that discovery in respect of that entity will await that advice 7Discovery in relation to Financial Wisdom was one of the matters later raised by the motion which the plaintiff filed in March 2012. There were further discussions about that motion, but finally no agreement reached in relation to the discovery sought in respect of Financial Wisdom. In part this reflected the terms of the second further amended statement of claim, which the plaintiff was given leave to pursue, for reasons given in the June judgment. There it was claimed at 41(d) that the defendant had displayed bad faith in the performance of its functions and duties by treating the plaintiff differently to four other named companies. Those companies are also referred to in other parts of the pleadings, clause 11(b)-(c) for example. No such claims were advanced in relation to Financial Wisdom. 8What was claimed in relation to Financial Wisdom appeared in clause 9, which provides: In or about August/September 1999 the Defendant carried out initial surveillance of the plaintiff's company following complaints relating to Stephen Cochrane who was a proper authority holder of the Plaintiff and Robyn Cochrane who was not connected with the plaintiff company but had been a representative of Financial Wisdom Limited. 9This was put in issue by the defence filed. 10The plaintiff's case was that the discovery it now sought in relation to Financial Wisdom was relevant to the claims it advanced in relation to its differential treatment, by comparison with others. The defendant's case was that the discovery sought in relation to Financial Wisdom was not relevant to any fact in issue in the proceedings, because there was no claim of differential treatment advanced in relation to Financial Wisdom. 11At the hearing that was initially disputed by the plaintiff, which relied on the orders made in May 2011 as to discovery and the parties' dealings with each other subsequently, which on its case made it clear that it had always sought to pursue the discovery initially ordered in respect of Financial Wisdom. It was explained at one point that Financial Wisdom was not referred to in the second amended statement of claim at [41], because, without discovery being given, a certificate could not be given by the plaintiff's solicitors that a claim of differential treatment was available to be advanced. An application to further amend the second further amended statement of claim, after discovery was foreshadowed. It was also submitted that the orders sought to reinstate the original order as to discovery made in May 2011 and later, that it expanded on the original order. After an adjournment the oral application to amend the second further amended statement of claim to refer to Financial Wisdom at clause 41 was made. 12While leave to make the application orally and without notice was not opposed, leave to further amend the pleadings was. 13Having heard the parties I am satisfied that leave to amend the pleadings must be refused. Without the amendment the discovery sought in relation to Financial Wisdom is plainly not relevant to any fact in issue. The question of amendment and discovery must be resolved in light of the circumstances which exist now, having in mind the parties' respective conduct to this point, not the circumstances as they existed in May 2011, when as I observed, the pleadings were inadequate. They have since been amended as the result of the leave then given. This alteration in course, to advance a claim of differential treatment by comparison to Financial Wisdom, may not be justly permitted, given what has transpired in the meantime and what would result, if the leave sought were granted. 14The plaintiff had the opportunity, if it wished, to advance a claim that the disputed practice was applied to Financial Wisdom, when it amended its pleading as the result of the leave it was earlier given. Discovery in relation to the third parties to whom it is alleged the defendant applied the disputed practice has proceeded at considerable cost. 15It is apparent that establishing the existence of the disputed practice does not depend on the discovery of the documents now sought from Financial Wisdom. If the plaintiff is not able to establish that the disputed practice existed from the documents it has discovered in respect of the other third parties to whom it alleges the plaintiff applied the practice, it will not be established by documents discovered in respect of Financial Wisdom. 16Given all that the parties have done to this point and the costs which have been involved, when considered with the further considerable time and extensive cost which would follow if the discovery sought in relation to Financial Wisdom is required, and with what it might add to the plaintiff's pursuit of its claims, that what the plaintiff sought could not justly be permitted, is apparent. The effort and cost involved was outlined in the unchallenged affidavit of Ms Goodman, the defendant's solicitor 17I am well satisfied that such additional burdens may not justly be imposed in relation to the discovery pursued in relation to Financial Wisdom and that in the circumstances, the orders sought must be refused. .
18In issue is whether there should be further discovery in relation to what the parties have called the 'Chapel Road discovery'. The parties agreed on those categories of discovery. There has been extensive documentary and electronic verified discovery given by the defendant in relation to these categories. There is also agreement as to certain further electronic discovery yet to be given. 19Annexed to the motion was a schedule, by which further discovery in relation to documents concerning Chapel Road was sought by the plaintiff. It is apparent that were the orders sought to be made, much of the work already undertaken in the discovery which has been given would have to be revisited, at very considerable cost. 20In an explanatory schedule attached to the defendant's written outline of submissions, what was sought was further explained in a table. In the written submission it was said that in the main, what was sought related to a period between February and March 2000, when the defendant had formed the intent and made the decision to broaden and extend its investigation into the plaintiff, despite the recommendation of the defendant's compliance team as to the appropriate regulatory response. 21It is apparent from a comparison between the agreed categories and what is now sought, that in reality what the plaintiff seeks is another opportunity to pursue extensive, and expensive discovery already given. That is pursued in circumstances where there was no challenge to the verification of the discovery already given. As discussed in Proctor & Gamble v Medical Research [2001] NSWSC 183 that: 64 I think the true rule in resolving a question of sufficiency of discovery is as follows: The affidavit verifying discovery is conclusive of the question unless it can be shown (i) by recourse to the documents discovered; (ii) from the content of the affidavit verifying discovery; (iii) from the pleadings, or "from any other source that constituted an admission of the existence of a discoverable document" that the discovery has been insufficient. Further, where the discovering party has misconceived the nature of the obligation of discovery it is not necessary to infer the existence of relevant documents other than those discovered (see Mulley v Manifold(1959) 103 CLR 341 at 343 and Falk v Finlay, Supreme Court of New South Wales, Austin J, 24 December 1999, unreported). 65 The rationale for Chancery's approach to contests over discovery was expressed by Bowen LJ in Lyell v Kennedy No 3 (1884) 27 Ch D 1 at 30 as follows: "The true canon to be always borne in mind, is this: that you are appealing to the oath or conscience of the other side, and that you cease to appeal to his oath the moment you begin to contest his accuracy." 66 It is on this basis that the Courts have been averse to cross examination on affidavits verifying discovery. See Fruehauf Finance v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359 at 360 et seq. in which Giles J, as his Honour then was, extensively reviewed the authorities. No such cross-examination was here attempted. The only attempt made to establish that the discovery already given had not been adequate, was by reference to an email of 14 March 2000 in which reference was made to a meeting to be held 'on Wednesday'. It was complained that no document had been discovered, as to the outcome of that meeting. 22A comparison of the agreed categories with the plaintiff's schedules and the explanation given as to what was sought, made it quite clear that to permit the course envisaged would be contrary to the approach discussed in Proctor & Gamble and contrary to the requirements of the Civil Procedure Act. It is apparent that the defendant can not justly be required to embark on such another time consuming and expensive exercise. 23In the categories agreed by the parties for the Chapel Road discovery, there was no reference to the meeting in question, but it was common ground that if a document of the kind the plaintiff sought existed, it should have already been discovered, because it would have fallen into one or more of the agreed categories. 24It is quite apparent that a view that there should have been a record kept of a particular planned meeting, does not establish either that the meeting occurred, or if it did, that any such record was kept. 25I do not propose to engage in a comparison between the agreed Chapel Road categories and the further discovery now sought to be pursued by the plaintiff's schedules. It is clear that in a case where verified discovery has been given, which is not successfully challenged in the way discussed in Proctor & Gamble, the course proposed may not justly be permitted. That conclusion is only reinforced when considerations of the time and cost involved are factored in.
Stephen Cochrane 26It is apparent on the pleadings that there are various issues lying between the parties in relation to Stephen Cochrane. The plaintiff's case was that the documents sought were relevant to the defendant's decision to commence the first period of surveillance and to embark on the second. Some further discovery has been agreed. What is not agreed is the discovery of alleged complaints made to the defendant about Stephen Cochrane mid 1998 and referred to in an August 1999 report. The defendant's position is again that the documents are not relevant to a fact in issue. This depends on the pleadings. 27In the second amended statement of claim, it is pleaded at clause 9: In or about August/September 1999 the Defendant carried out initial surveillance of the plaintiff's company following complaints relating to Stephen Cochrane who was a proper authority holder of the Plaintiff and Robyn Cochrane who was not connected with the plaintiff company but had been a representative of Financial Wisdom Limited. 28The defence pleads that: [T]he defendant: (a)admits that in about August or September 1999, the defendant carried out initial surveillance of the plaintiff following: (i)complaints relating to Stephen Cochrane who was a proper authority holder of the plaintiff and complaints relating to Robyn Cochrane; and (ii)the defendant becoming aware that Robyn Cochrane had given investment advice to clients of Stephen Cochrane; (b)admits that Robyn Cochrane was not a Proper Authority Holder of the Plaintiff; (c)admits that Robyn Cochrane had been a Proper Authority Holder of Financial Wisdom; and otherwise does not admit paragraph 9 of the Second Further Amended Statement of Claim 29It follows that what is in issue includes whether Robyn Cochrane gave advice to clients of Stephen Cochrane. That there were complaints in relation to Stephen Cochrane is not in issue, but the defendant's submission that the only matter in issue is whether Robyn Cochrane was connected to the plaintiff is not correct. Complaints relating to Stephen Cochrane which shed light on whether Robyn Cochrane gave advice to his clients or her connection with the plaintiff will be relevant to a fact in issue. 30It is difficult to see that the discovery of the complaints which the defendant received about Stephen Cochrane, on which it acted and later referred to in an identified report can give rise to injustice, so far as the further time and cost involved in giving this discovery is concerned. 31In my view in the circumstances, this discovery should be given.
Howard Owen 32Discovery is sought in relation to the defendant's investigation of Mr Howard before he became involved with the plaintiff, discovered documents revealing that the defendants embarked on its investigation of the plaintiff, in part because of concerns about him. 33The discovery sought was opposed because the existing agreed Chapel Road categories included all documents evidencing the reasons for the defendant's decision to carry out and extend its investigation, in respect of which discovery had been given. There was no issue raised by the pleadings in relation to Mr Owen and what was now sought to be pursued amounted to impermissible fishing. Documents could not be pursued merely in order to establish whether they were relevant and might be of assistance to the case. 34There is no reference to Mr Owen in the pleadings. On what is there pleaded, I cannot see that there is any fact in issue in relation to him, or any investigation of him, prior to his involvement with the plaintiff. It is conceivable that such documents might be relevant to what is in issue, but that is not a sufficient basis upon which such further discovery may justly be ordered, at this stage of the proceedings.
Costs order 35It was common ground between the parties that there was an error in the costs order made in the judgment given on 11 July 2012. Having revisited the orders there made I agree with that position and accordingly order that: Order 2 made on 11 July 2012 be amended to provide: 2. The costs of the amendment motion to be the plaintiff's costs in the proceedings and the costs thrown away as a result of the amendment to be the defendant's costs in the proceedings.
36The defendant has prepared draft short minutes to reflect what has been agreed already and to which is to be added the matters resolved by this judgment. The parties have liberty to approach when the short minutes are settled and I will deal with them in chambers. 37They should also confer and approach as to an appropriate date for the matter to come back into the list for further directions.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 November 2013
Chapel Road Pty Ltd
Australian Securities & Investments Commission