On 23 February 2021, I granted leave to the defendants to file an interlocutory process dated 18 February 2021 which seeks orders amending discovery categories ordered in these proceedings on 23 September 2019 and 25 October 2019. The proposed amendments would require the plaintiffs to discover the following additional categories of documents:
1. customer lists, including any electronic records or databases containing the names of first plaintiff's customers and "any details relating to those customers" for the period from 1 July 2010 to 30 August 2019;
2. all invoices issued to the first plaintiff's customers and all consignment notes and/or delivery notes of the first plaintiff for the period from 1 July 2010 to 30 June 2017;
3. in respect of the period from 1 July 2010 to 30 June 2017, a "detailed asset register" of the first plaintiff as at 30 June of each year, supplier invoices for all motor vehicle expenses incurred by the first plaintiff, and motor vehicle log books in relation to any motor vehicle operated by the first plaintiff;
4. payslips, timesheets and annual PAYG summaries for all employees of the first plaintiff for the period from 1 July 2010 to 30 June 2017; and
5. trial balances as at 30 June of each year from 2010 to 2017 and detailed general ledgers for the same period for the first plaintiff.
These are the reasons for my decision to grant leave to file the interlocutory process and the decision that I have now made to order the plaintiffs to discover some, but not all, of the further categories of documents in the defendants' interlocutory process.
Leave to file the interlocutory process was required by reason of an order made by Black J on 15 December 2020 and subsequently amended by me to the effect that no party may file an interlocutory process in this proceeding without first contacting my Associate to have the matter relisted. In light of the history of the lengthy delays and serial interlocutory contests in these proceedings, the order was made with a view to mitigating the risk of either party being further diverted from their preparation for final hearing in this matter, which has now being listed for May 2021.
The question whether leave should be granted was determined in accordance with ss 56 to 58 of the Civil Procedure Act 2005 (NSW) and having regard to the history of disputes about discovery in these proceedings. Much of that history is recorded in reasons for judgment delivered by Black J on 8 May 2020: In the matter of Beverage Freight Services Pty Ltd [2020] NSWSC 509 (the May 2020 judgment).
On 23 September 2019, Black J made orders by consent for the plaintiffs to discover certain categories of documents by 11 November 2019.
His Honour dealt with further issues relating to discovery on 25 October 2019, which resulted in an amendment to the previous orders to require the plaintiffs to discover further categories of documents, including category 3: see May 2020 judgment at [4]. Category 3 covers a wide range of documents of the first plaintiff dealing with financial matters for the period from 1 July 2013 to 30 August 2019. Category 2 covers a similarly wide range of documents for the period from 1 July 2007 to 30 June 2013. Both categories 2 and 3 include bank statements, company tax returns, BAS returns, profit and loss statements, accounts and ledgers, general ledgers, debit ledgers, electronic accounting data including MYOB files or other propriety accounting software, contracts with customers for the supply of goods and services and customer lists.
In the course of the hearing on 25 October 2019, Black J made the following observation:
"… it seems to me absolutely clear that this is a matter which now needs a hearing date and the time to be spent in preparing it will have to accommodate itself to the hearing date that is allocated. I won't allocate that hearing date today, but I should indicate to you that I expect to do so when you are next before me on the 11th of November [2019]." [T29]
That observation no doubt reflects his Honour's justified sense of disbelief that the parties were continuing to argue about discovery some four years after these proceedings were commenced. As will become apparent, ongoing discovery disputes and the plaintiffs' failure to comply with a costs order in relation to those disputes meant that it was not until December 2020 that the proceedings were fixed for hearing commencing in May 2021.
It emerged at a directions hearing on 23 March 2020 that the plaintiffs had not complied with the discovery orders made on 23 September and 25 October 2019. Black J listed the matter on 25 March 2020 for the purpose of hearing from the parties as to whether the proceedings should be dismissed by reason of that non-compliance.
As his Honour recorded in the May 2020 judgment at [10], that hearing was adjourned on numerous occasions during the period 25 March to 4 May 2020, principally due to late service by the plaintiffs of evidence on which they sought to rely in resisting an order dismissing the proceedings. During that period, the plaintiffs addressed the outstanding discovery issues to the point that, by 4 May 2020, his Honour was satisfied that the plaintiffs had substantially complied with the discovery orders, albeit after an inordinate delay. His Honour recorded that (May 2020 judgment at [53]-[55]):
1. the plaintiffs had made available electronic financial records for the period from 2007 to 2011;
2. the plaintiffs had made available financial records in electronic form for the period up to 2015, although the defendants had made some criticisms concerning the usability of some of that data; and
3. the plaintiffs had provided remote access to a range of financial information for the period from 2015 held on the Freight2020 software, although that access did not extend to the entire functionality of that system.
Black J acknowledged the defendants remaining concerns about:
1. whether the remote access to the Freight2020 software allowed the defendants to access an appropriate range of functionality of that software; and
2. other deficiencies that the defendants contended remained in the discovery provided by the plaintiffs.
Black J did not consider that those concerns and alleged deficiencies rose to the level of non-compliance with the existing orders. His Honour was satisfied that the plaintiffs had substantially complied with the discovery orders. However, his Honour did not rule out that those alleged deficiencies may be the subject of an application by the defendants for further and better discovery in specific categories. His Honour emphasised that there was no such application before the Court and the question for determination was whether the proceedings should be dismissed for non-compliance with orders.
For the reasons explained at [55]-[75] of the May 2020 judgment, Black J declined to dismiss the proceedings but required the plaintiffs to make good the detriment occasioned to the defendants by their noncompliance with the discovery orders by payment forthwith on an indemnity basis of the defendants' wasted costs of the discovery process. On 3 July 2020, his Honour ordered the plaintiffs to pay those costs in the gross sum of $94,864.
On 27 July 2020, Black J made an order staying the proceedings until 14 December 2020 as a result of the plaintiffs' non-compliance with that costs order: In the matter of Beverage Freight Services Pty Ltd [2020] NSWSC 973. The stay operated subject to an exception for an application by the plaintiffs for a stay of that costs order, pending determination of the plaintiffs' application for leave to appeal from that costs order. The plaintiff's application for a stay of the costs order was dismissed by Rees J on 17 September 2020: In the matter of Beverage Freight Services Pty Ltd [2020] NSWSC 1265. The plaintiffs' application for leave to appeal from the costs order was dismissed on 16 October 2020: J & E Vella Pty Ltd v Hobson (No. 2) [2020] NSWCA 256.
The defendants enforced payment of the gross sum costs order on 16 November 2020 by a garnishee order. The purpose of the stay ordered on 27 July 2020 was then spent. Neither party took steps to have the stay discharged before the proceedings were next listed before the Court on 15 December 2020. However, it is clear from the orders made by consent on that occasion that the parties discussed the next steps to be taken in the proceeding, including in relation to discovery, in the period between enforcement of the costs order and the hearing on 15 December 2020.
The stay was discharged at the hearing on 15 December 2020 and the proceedings were listed for final hearing in May 2021. Orders were made by consent for the defendants to discover certain categories of documents and for the plaintiffs to continue to provide daily remote access to the Freight2020 software to the defendants' legal representatives and expert witness.
There remained a dispute about further categories in respect of which the plaintiffs sought discovery by the defendants. Black J determined that dispute on an urgent basis on 16 December 2020, emphasising the importance of discovery disputes not extending into 2021, which would prejudice the parties' preparation for final hearing in May 2021.
It is relevant at this point to note that, despite the alleged deficiencies in the plaintiffs' discovery raised by the defendants during the hearings before Black J in the period from 25 March to 4 May 2020, and despite his Honour's indication in the May 2020 judgment that those matters should be the subject of an application for further and better discovery if the defendants wished to purse them, the defendants made no such application at any time between the delivery of the May 2020 judgment and the order made on 27 July 2020 staying the proceedings.
Nor did the defendants make any such application on 15 or 16 December 2020 when his Honour made time available in the midst of a very busy Corporations List in the last week of term to deal with outstanding discovery issues so as to ensure that those issues did not preclude the matter being finally ready for hearing in May 2021.
Another order made by Black J on 15 December 2020 required the plaintiffs to serve their affidavits in reply by 1 February 2021 but required the plaintiffs to obtain leave before filing those affidavits. The purpose of the requirement for leave was explained in his Honour's ex tempore reasons for judgment delivered on that date as being to ensure that the evidence served in reply was truly in reply.
The plaintiffs served three lay affidavits in reply. On 10 February 2021, I heard and determined the plaintiffs' application for leave to file those affidavits. There were a limited number of paragraphs of those affidavits that the defendants contented were not truly evidence in reply, including part of paragraph 92(b) of the affidavit of Michael Vella sworn on 3 February 2021. In that paragraph, Mr Vella gave evidence that was described as being in reply to paragraph 8 of an affidavit of Bill Kinane filed and served by the defendants. Mr Kinane deposed that:
1. the first plaintiff had four or five trucks in 2006;
2. when the first plaintiff stopped doing work for the fifth defendant (BFS) in about September 2012, the first plaintiff's trucks that had been allocated to BFS work returned to the first plaintiff's yard at Minto and the first plaintiff had sufficient work that those trucks were allocated work each day; and
3. by about 2013, the first plaintiff had expanded to about 22 trucks and had moved to a warehouse in Minto which was approximately 8,000 square metres.
In these proceedings, the plaintiffs claim that BFS was incorporated to carry on a partnership or joint venture between the plaintiffs and the other defendants. The relief claimed by the plaintiffs includes equitable compensation for alleged breach of the partnership or joint venture agreement by the other defendants in diverting freight haulage work for Schweppes away from BFS, with the consequence that the plaintiffs no longer performed Schweppes work that would or should otherwise have been allocated to them by BFS in accordance with the partnership or joint venture agreement.
In that context, Mr Kinane's evidence might ultimately be directed to a submission proposed to be made by the defendants that the plaintiffs business was operating at full capacity by 2013 and that the plaintiffs would not have had the capacity to perform the work that they had in fact performed in 2013 if they had also continued to perform certain work for the fifth defendant in these proceedings at that time. Any such submission would be relevant to the plaintiffs' claim for equitable compensation.
As I have noted above, paragraph 92(b) of Michael Vella's affidavit was said to be in reply to paragraph 8 of Mr Kinane's affidavit. The portion of paragraph 92(b) that the defendants contended was not evidence in reply reads:
"…
If BFS had continued to carry out work for Schweppes from September 2012 onwards then we would have been able to carry out both the BFS / Schweppes work and the work for our other customers. The Schweppes work was substantial, but we would have been able to perform that work and continue to service our non-Schweppes customers by expanding our employee numbers, trucks, trailers, sub-contractors and warehouse space as and when required. Our business could adapt to change in a similar way to how we expanded in the period prior to and following the loss of Schweppes business by BFS."
The plaintiffs pressed the evidence, not on the basis that it was in reply, but on the basis that it was relevant to the plaintiff's claim for equitable compensation to establish the counterfactual and the premises upon which the plaintiffs' expert witness gives evidence for the loss suffered by the plaintiffs. The plaintiffs submitted that leave to file Michael Vella's affidavit should extend to that part of paragraph 92(b) and that "if necessary", leave should be granted to the defendants to led further evidence confined to the matters in paragraphs 92(b).
I adopted the course proposed by the plaintiffs in the orders that I made on 10 February 2021. I did so after counsel for the defendants disclosed that any evidence of the defendants replying to paragraph 92(b) of Michael Vella's affidavit was likely to be included in the expert report that is to be served by the defendants by 15 April 2021 and that the defendants may seek a "slight variation" to the discovery orders in order to obtain "a level of granularity" of financial information not available from the plaintiffs' discovery so that the defendants' expert witness can address the substance of paragraph 92(b).
I stood the matter over to 15 February 2021 to hear argument about any such variation proposed by the defendants if not agreed by the plaintiffs. The defendants were not ready to proceed on that occasion and the matter was adjourned to 23 February 2021.
The defendants then served the interlocutory process that I referred to at the outset of these reasons on 18 February 2021, together with an affidavit of the defendants' solicitor, Raphael Grossman affirmed on that date. Written submissions followed on 19 February 2021.
Mr Grossman's affidavit, which was read at the hearing on 23 February 2021, and the defendants' written submissions are replete with complaints about what was or was not included in the plaintiffs' discovery provided up to May 2020, or the form in which records have been discovered by the plaintiffs.
In the context of the history of this matter that I have recounted at length above, I did not consider that it would be consistent with the overriding purpose in s 56 of the Civil Procedure Act, the objects of case management in s 57 or the dictates of justice to permit the defendants to now seek further and better discovery to address alleged deficiencies in the plaintiffs' discovery that the defendants identified as long ago as May 2020.
As Black J has emphasised in many interlocutory judgments in this matter, the just determination of these proceedings requires that the parties have a final hearing without further delay. The defendants themselves complained about the prejudice to them of ongoing delay in the context of the disputes about discovery in March to May 2020. Black J made it clear in the May 2020 judgment that any complaints that the defendants wished to pursue regarding alleged deficiencies in the plaintiff's discovery should be pursued by an application for further and better discovery. The defendants had ample opportunity to make any such application before the proceedings were stayed on 27 July 2020. They had a further opportunity to do so from mid-November 2020. They had the benefit of Black J making himself available to hear outstanding discovery issues on 15 and 16 December 2020 so as to leave the parties free to attend to the substantive preparation for final hearing in 2021. The defendants raised no issue about the alleged deficiencies in the plaintiff's discovery. An order was made by consent on 15 December 2020 continuing the defendants' access to the plaintiffs' Freight2020 system, with the defendants raising no issue with the Court about the scope of the material within the system to which that access extended.
Having to deal with discovery contests this close to trial will inevitably distract from both parties' preparation for final hearing.
Mr Grossman's affidavit and the defendants' submissions also rely on paragraph 92(b) of Michael Vella's affidavit as a basis for the amendments that they now seek to the discovery orders. The plaintiffs relied on an affidavit of David Birch, an administrator employed by the first plaintiff, sworn on 22 February 2021.
I declined to permit the defendants to use the hearing of the interlocutory process as a means to raise the discovery complaints that should have been addressed in 2020 for all of the reasons explained above. I sought submissions directed specifically to relevance of the defendants proposed discovery amendments to the evidence in paragraph 92(b) of Mr Vella's affidavit. The requisite connection between the documents sought and facts in issue is well established and was recently summarised by Ward CJ in Eq by reference to authority in Elanor Operations Pty Ltd v Chief Commissioner of State Revenue [2020] NSWSC 840 at [39]:
"As to the principles applicable in relation to an application for discovery, r 21.2(4) of the UCPR requires that the documents sought must be relevant to a fact in issue (see also r 21.1(2) of the UCPR). In Graphite Energy Pty Ltd v Lloyd Energy Systems Pty Ltd [2014] NSWSC 1326, Brereton J, as his Honour then was, said (at [21]-[22]):
21 Aside from necessity, the touchstone for discovery is relevance to a fact in issue in the proceedings. UCPR r 21.2(2) provides that a class of documents must not be specified in more general terms than the Court considers to be justified in the circumstances, and UCPR r 21.2(4) provides that an order for discovery may not be made in respect of a document unless the document is relevant to a fact in issue.
…
22 Thus, while r 21.2(1) permits classes of documents to be specified, not only by relevance to one or more facts in issue, but alternatively by description of the nature of the documents and the period within which they were brought into existence or in such other manner as the Court considers appropriate in the circumstances, nonetheless discovery cannot be ordered except in respect of documents that are relevant to a fact in issue. This means that it must always be possible to show a connection between the class and a fact in issue, and where a class is specified in some other manner than by relevance to a fact in issue, it must be apparent that the class so described will capture only documents that are relevant to a fact in issue. For this reason, it is highly preferable that classes be specified by relevance to a fact in issue - unless it is self-evident that the class is a sub-class of documents that relate to a fact in issue."
Mr Grossman gave evidence to the effect that he considered that the defendants' expert witness had identified that he would require the documents referred to at [1] above in order to test the counterfactual in paragraph 92(b) of Mr Vella's affidavit. Counsel for the defendants submitted that, if the defendants' expert says that he needs documents "then that is what we seek". In my opinion, however, determination of the interlocutory process calls for an objective assessment of whether the discovery categories sought in the interlocutory process could rationally affect the assessment of the probability that the first plaintiff could have carried out Schweppes work for BFS in the period from 2013, in addition to carrying out work for its other customers, by expanding employee numbers, expanding the number of trucks and trailers, engaging additional sub-contractors and/or expanding warehouse space as and when required, as Mr Vella claims in paragraph 92(b).
The discovery orders made on 23 September 2019 as amended on 25 October 2019 required discovery of "customer lists" of the first plaintiff from 1 July 2007 to 30 June 2013 (category 2(j)) and from 1 July 2013 and 30 August 2019 (category 3(j)). Category 2 covers the time period during which the plaintiffs were allocated Schweppes freight haulage work by BFS and category 3 covers the period after the first plaintiff ceased to be allocated that work.
The amendments to those categories sought in the interlocutory process would expand the reference to "customer lists" in categories 2(j) and 3(j) to read "customer lists, including any electronic records or databases such as those held on Freight2020 that contain the names of customers and details relating to those customers" and require production of such records or databases for the period from July 2010 to 30 August 2019.
Mr Grossman deposed that such records or databases would assist the defendants' expert witness in determining variable expenses and revenue generated by the first plaintiff and allocating variable expenses to different sources of revenue. I am not persuaded by Mr Grossman's evidence or the defendants' submissions that such an analysis of variable expenses and revenue is necessary to test the counterfactual. If I am wrong in that view, then I am not persuaded that every database or other electronic record that contains a name of a customer or any detail relating to a customer is relevant for that purpose.
In oral submissions, counsel for the defendants sought to explain the relevance of the proposed amendments to categories 2(j) and 3(j) on the basis that, while customer lists had been discovered and the identity of customers was recorded within MYOB files already discovered, the objective of the proposed amendments was to capture information about what sort of freight the first plaintiff was hauling for particular customers, from which conclusions might be drawn about what kind of trucks the first plaintiff had in its fleet and whether those trucks would have been suitable for Schweppes freight if the first plaintiff had been offered Schweppes work in the period from 2013.
I accept as a general proposition that documents relevant to identifying what kind of freight the first plaintiff's vehicles had existing capacity to haul in the period from 2013 are in turn relevant to testing the propositions in paragraph 92(b) of Mr Vella's affidavit because they would facilitate an analysis of the extent to which the first plaintiff would have had to expand its fleet and/or engage subcontractor vehicles in order to perform Schweppes and non-Schweppes work.
However, the proposed amendments to categories 2(j) and 3(j) would capture an extremely broad range of documents. The amendments would require production of entire databases, irrespective of what non-customer information may be recorded in those databases and irrespective of the nature of the "details" recorded in relation to customers. Mr Birch deposed that the proposed amendments would potentially cover all electronic records and databases of the first plaintiff. The defendants have made no attempt to confine these proposed amendments in a manner that would suit the objective identified in counsel's submissions. For those reasons, orders amending categories 2(j) and 3(j) of the existing discovery categories will not be made.
The remaining amendments to the discovery categories sought in the interlocutory process are framed as stand-alone additional categories, although many of them plainly overlap with or fall within broader categories ordered on 23 September 2019 and 25 October 2019.
It is convenient to address proposed additional categories 10(c) and (h) next. Those proposed categories would require the first plaintiff to produce all invoices issued to its customers and all consignment notes or delivery notes for the period from 1 July 2010 to 30 June 2017. However, in oral submissions, counsel for the defendants limited category 10(c) to all invoices issued to the first plaintiff's customers during the period from 1 July 2011 to 30 June 2013.
Mr Grossman's affidavit offered the same explanation for these categories as for the proposed amendments to categories 2(j) and 3(j). For the reasons explained at [37] above, I do not accept that explanation. Counsel for the defendants submitted that the invoices sought in proposed category 10(c) would enable them to identify the types of freight being hauled by the first plaintiff on behalf of each customer, and the consignment notes and delivery notes sought in proposed category 10(h) were relevant only as a cross-check against the invoices. In my opinion, an order for discovery of some invoices is appropriate for the reasons already explained at [39] above. However, discovery of delivery and consignment notes for the purpose of cross-checking invoices seems to me to be over-kill. Invoices are important business records and the defendants' evidence and submissions did not identify any rational reason to think that invoices issued by the first plaintiff would not reflect freight in fact hauled for the customers to whom those invoices were issued.
Mr Birch deposed that invoices are archived at the first plaintiff's premises in Ingleburn and comprises thousands of pages of documents for the period 2010 to 2017. Mr Birch also deposed that it would be a very time-consuming task to "go through this material" to check that the correct material is being produced prior to inspection by the defendants. This evidence did not rise above the level of bare assertion. The fact that invoices are archived suggests that they have been stored in some sort of organised way and it is not apparent why it would be necessary for the plaintiffs to "go through" the invoices other than to check that the invoices produced corresponded to the relevant time periods.
I raised with counsel for the defendants whether it would be sufficient for the plaintiffs to discover invoices in sample periods. Counsel did not embrace that proposition other than by limiting the period to 1 July 2011 to 30 June 2013 as I have already mentioned above. In my opinion, invoices issued during sample periods within this two year time frame would be likely to reveal sufficient information about the type of freight being hauled for different customers during that period for the purpose of the defendants testing the proposition in paragraph 92(b) of Mr Vella's affidavit. Subject to one caveat, there will be an order requiring the plaintiffs to discover scanned copies of invoices issued by the first plaintiff to its customers in July and October 2011, January, April, July and October 2012, and January, April and June 2013.
The caveat is that counsel for the defendants helpfully drew my attention to the fact that confidentiality regimes had previously been agreed between the parties in relation to the plaintiffs' customer information and that the plaintiffs were likely to require a similar regime in relation to invoices. The parties will be invited to bring in short minutes of order giving effect to paragraph [45] above, including the time frame for discovery (which the parties did not address in submissions) and any agreed confidentiality undertakings or orders. Given that the defendants are obliged to serve their expert evidence by 15 April 2021 at the same time as reviewing expert evidence yet to be served by the plaintiffs and preparing for hearing generally, I expect that the orders will provide for discovery of the invoices to be completed by no later than 15 March 2021.
I now turn to proposed additional categories 10(g), (i) and (j) which would require the plaintiffs to discover, in respect of the period from 1 July 2010 to 30 June 2017, a "detailed asset register" of the first plaintiff as at 30 June of each year, supplier invoices for motor vehicle expenses incurred by the first plaintiff, and motor vehicle log books in relation to any motor vehicle operated by the first plaintiff.
Mr Grossman deposed that these categories of documents would assist the defendants' expert witness in determining the costs associated with acquiring, maintain and upgrading vehicles. Counsel for the defendants submitted that a detailed asset register would identify what trucks were owned by the plaintiffs, whether they were financed by borrowing and whether they were capable of performing Schweppes work. It was submitted that this information was relevant to the defendants' expert witness assessing whether any additional trucks would have been required to continue Schweppes work from 2013 and the extent to which the plaintiffs would have needed to borrow in order to acquire those trucks. Although this reasoning appears to overlook the subcontracting option referred to in paragraph 92(b) of Mr Vella's affidavit, I accept that any asset register maintained by the plaintiffs that discloses this information about its vehicle fleet in the period from 1 July 2010 to 30 July 2017 would have a bearing on the defendants' response to paragraph 92(b).
Subject to one caveat, I consider that proposed categories 10(i) (supplier invoices for motor vehicle expenses) and 10(j) (motor vehicle log books) are over-kill because the existing discovery categories 2 and 3 referred to at [5] above would cover financial information concerning the costs of operating and maintaining the first plaintiff's vehicle fleet in each year during the period from 1 July 2007 to 30 August 2019. Categories 2(f) and 3(e) require the plaintiffs to discover "all electronic accounting data including MYOB files or files held on other proprietary accounting software containing accounts and ledgers" in respect of the periods 1 July 2007 to 30 August 2019.
The caveat is that, in his affidavit affirmed on 18 February 2021, Mr Grossman complained that the defendants' access to the plaintiffs' proprietary Freight2020 software is restricted and that there are "Fleet Profitability" and "Fleet Costing" modules within Freight2020 to which the defendants had not been provided access. Counsel for the plaintiffs objected to this evidence on the basis that it was a bare assertion. I allowed the evidence, subject to relevance and on the basis that it would most likely to have limited weight given its form.
If the Freight2020 software does have "Fleet Profitability" and "Fleet Costing" modules (and I make no positive finding that it does), then any information contained in those modules for the period from 1 July 2010 to the date of commencement of the proceedings will be relevant to the assessment of the proposition in paragraph 92(b) of Mr Vella's affidavit, in my opinion. There will therefore be an order requiring the plaintiffs to take such steps as are necessary to include in the scope of material in the Freight2020 system to which the defendants have access pursuant to order 12 made on 15 December 2020 any "Fleet Profitability" and/or "Fleet Costing" modules of the Freight2020 system in respect of the period from 1 July 2010 to the date of commencement of these proceedings.
There will also be an order for the plaintiffs to discover any asset register maintained as at 30 June in any year during the period 1 July 2010 to 30 July 2017 recording any or all of the following information:
1. the model, make, year of manufacture or registration number of any vehicle or trailer used or available for use by the first plaintiff for the purpose of hauling freight of any kind;
2. the value of any such vehicle or trailer; and
3. the amount of any borrowings that financed the acquisition or lease of any such vehicle or trailer.
I acknowledge that Mr Birch deposed that the first plaintiff does not maintain a detailed asset register as at 30 June each year. If that bare assertion is correct, then there will be no detailed asset register to discover in answer to this category.
I now turn to proposed additional categories 10(d)-(f), which would require the plaintiffs to discover payslips, timesheets and annual PAYG summaries for all employees of the first plaintiff for the period from 1 July 2010 to 30 June 2017.
Mr Grossman deposed that discovery of these categories of documents would assist the defendants' expert witness in determining variable expenses and revenue generated by the first plaintiff and allocating variable expenses to different sources of revenue and in determining employee turnover. I am not persuaded by Mr Grossman's evidence, which was really only a submission, that analysis of variable expenses and revenue or employee turnover is necessary to test the proposition that the first plaintiff could have continued performing Schweppes work in addition to the work it was doing for non-Schweppes customers in the period from 2013.
In any event, counsel for the defendants made a different submission at the hearing of the interlocutory process. Counsel submitted that these categories of documents were relevant because they would indicate whether the first plaintiff's existing employees were part-time and therefore had additional capacity to work, or whether they were already at full-time capacity. Counsel candidly accepted that this was not rationally relevant to the first plaintiff's ability to engage additional employees if required to undertake additional work and did not advance any further submissions in support of these categories.
For those reasons, there will be no order requiring the plaintiffs to discover documents in proposed categories 10(d), (e) and (f).
Finally, I turn to proposed additional categories 10(a) and 10(b), which would require the plaintiffs to discover trial balances as at 30 June of each year from 2010 to 2017 and "detailed general ledgers" for the same period for the first plaintiff.
In his affidavit affirmed on 18 February 2021, Mr Grossman acknowledged that these documents are within the scope of the following existing discovery categories that, between them, cover the period from 1 July 2007 to 30 August 2019:
1. categories 2(e) and 3(h) - "General ledgers";
2. categories 2(f) and 3(e) - "all electronic accounting data including MYOB files or files held on other proprietary accounting software containing accounts and ledgers"; and
3. categories 2(i) and 3(i) - "Debit ledgers".
Mr Grossman acknowledged that the plaintiffs have produced documents within these categories, although he asserted that this was "partial production". In the absence of evidence supporting this assertion, I disregard it for present purposes.
According to Mr Grossman, the defendants now seek discovery of proposed additional categories 10(a) and 10(b) because "there is a significant issue with the documents produced for the period from 1 July 2012 to 30 June 2015" in that the plaintiffs have produced 352 zip files containing MYOB files. Mr Grossman says that it takes 2 minutes to open each file and there is no way of distinguishing which of the 352 files are the final versions used to construct the first plaintiff's financial statements for any given year as opposed to drafts.
Documents annexed to Mr Grossman's affidavit show that the 352 files have been discovered in a manner which discloses the date on which they were last modified. It is not apparent to me why this date, or any other metadata that may be included in the MYOB files, would not enable the final versions to be distinguished from drafts with a reasonable level of confidence.
In any event, it is clear from Mr Grossman's evidence that this is not an issue that has arisen as a result of the plaintiffs being granted leave to file Mr Vella's affidavit including paragraph 92(b). Moreover, the issue is of the defendants' own making because it flows directly from the extremely broad terms in which the existing discovery categories 2 and 3 are framed. A party cannot seek discovery of such wide categories of documents, and then prevail upon the producing party to point it in the direction of those discovered documents that are likely to be of most relevance. Contrary to the defendants' submissions, that is not what r 21.5 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) requires. It would have been open to the defendants to frame discovery categories in narrower terms more apt to capture the most relevant documents and exclude draft accounting records. They chose not to do so. They have not sought to do so even now. Proposed categories 10(a) and (b) are not restricted to final versions of the documents there referred to.
In my opinion, the costs of the defendants' interlocutory process filed pursuant to leave granted on 24 February 2021 should be reserved to abide the outcome of the proceedings in accordance with r 42.7 of the UCPR.
The parties are to bring in short minutes of order giving effect to these reasons. To that end, I make the following direction:
1. Direct the parties to send to my Associate by 4pm on 1 March 2021:
1. one document setting out the terms of the orders that the parties agree give effect to these reasons for judgment; or
2. in the absence of agreement, one document identifying the scope of disagreement between the parties as to the terms of the orders that should be made to give effect to these reasons.
[2]
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: 26 February 2021