First Plaintiff v First Defendant

1 The defendants have challenged the adequacy of the plaintiffs' discovery of documents. They have applied to the Court, in various ways, to compel the plaintiffs to discover properly, or, to give particular discovery of a type or class of documents as described by them in 24 categories. Secondly, apart from an attack on adequacy, the defendants also seek orders under s 55 of the Civil Procedure Act (which gives the Court power to give directions on discovery as it considers necessary or appropriate) and s 55B of the Act (which empowers the Court to direct a party to give an affidavit of document management). They assert the plaintiffs have failed to undertake appropriate and sufficient searches for potentially discoverable documents.

2 As pleaded, the case involves allegations of serious deceptive conduct and breach of fiduciary obligations. The plaintiffs' case is that first defendant Victor Roger Makin was a director of the first plaintiff and the general manager of the second plaintiff. The line of business was the manufacture and sale of corporate marquee and structures for major events. In 2005, the first plaintiff made an exclusive distributorship agreement with the second defendant ('Roder') to distribute such products in Australia. That agreement was later terminated by Roder in January 2007. Makin then resigned his association with the plaintiffs, and in May 2007 became Roder's general manager. The case seems to be that Makin allowed the distributorship agreement obtained in favour of his employer to be terminated so that he could personally benefit by then resigning and joining the other party to that agreement. He did that, it is alleged, by intentionally misrepresenting to the plaintiffs that Roder truly had the legal right to terminate.

3 Compendiously speaking, the statement of claim pleads breaches of Makin's statutory, fiduciary and contractual obligations as an employee and director to exercise care and diligence, to not make improper use of his position at the company's expense, to not use his position to gain an advantage for himself or someone else, and to carry out his duties as employee faithfully and in the interests of his employer. As against Roder, the cause of action is that it obtained the advantage previously enjoyed by the plaintiffs under the distributorship agreement '...knowing that it [the advantage] had been procured by Makin in breach of his fiduciary obligations as a director of the first plaintiff and an employee of the second plaintiff'.[1] That case can be taken as being based on the rule in Barnes v Addy[2] which, loosely speaking, makes a third party liable where it has received trust funds (the so called first limb of the rule) or assisted a trustee of fiduciary in the breach (the so called second limb). The allegations of detriment from lost sales or lost sales opportunities are not yet particularised, but the statement of claim cites lost opportunities of $10 million.

4 For such a case and its circumstantial ingredients, the defendants complain there has been exiguous discovery by the plaintiff to date and an inadequate explanation for missing or unavailable documents. The application is resisted with equal force. It has been trying for the Court because a prominent feature the plaintiffs' case is that as part of Makin's alleged dishonest or disloyal wrongdoing, he was effectively or solely in control of the business and, after his resignation, took documents in his filing cabinet with him and also "cleaned" out his work laptop computer by comprehensively overwriting the data and making it impossible to retrieve. This is denied. And what adds to the problems is that the events go back to 2006; the writ was not filed until 2013 and the discovery fight is looking largely to find documents cotemporaneous with the events in 2006 and 2007.

5 The opposition to this application and the extent of the Court's intervention as sought, calls necessarily for an analysis of the pleadings as the reference point of any discovery dispute. The Court is unavoidably drawn into the detail of the matter. But I will avoid a copious account because in the end, I think it is important to stand back from the detail to enable an overview of the case to better see the justification or utility for any coercive discovery orders.

6 The plaintiffs have gone to a third amended statement of claim dated 21 November 2014. I shall recite the allegations in narrative, and in segments, and blend in elements of the defence.

7 The first plaintiff ('Austructures') carries on business principally in Victoria as a purchaser and seller throughout Australia of large corporate marquees, structures and associated equipment. It is alleged to be part of the Pages Group of companies doing business in the corporate events and hiring industry. The second plaintiff ('Pages Hire Centre') is within the Pages Group of companies. It does business in the same industry in New South Wales trading with its product brand 'Hurricane Structures'.

8 From about July 1987 to June 2004, Makin was the managing director of Hocker Structures Australian Pty Ltd. It is alleged that Hocker is a German manufacturer and worldwide seller of large corporate marquees, structures and associated equipment and that he, Makin, had been the manager of Hocker's operations in Australia prior to its 'worldwide liquidation' in 2004.

9 In about 2004, Pages Hire Centre alleges that it had secured a number of purchase orders for the manufacture and supply of structures for projects in Australia, and was looking to take advantage of its substantial customer base. To that end, the plaintiffs allege that Makin commenced employment in about November 2004 as general manager with Hurricane Structures Pty Ltd, a company in their corporate Group. But in early 2006, they say, he had his employment as a general manger transferred to Pages Hire Centre. Before then, Makin had become a director of Austructures in 2005 when it was incorporated. However, the plaintiffs alleges that Makin's role was to pursue the growth in the manufacturing business of Pages Hire Centre and to take advantage of, and be of better service to their substantial customer base.

10 Roder is a German company trading in Australia. It was registered as a foreign company in March 2008. It operated a sales and distribution centre in Bayswater, until 2012. Makin resigned as a director of Austructures in March 2007 to take up employment as Roder's general manager of Australia and New Zealand as from May 2007.

11 On the employment issue, the defence puts a different case. Makin denies he was offered employment as the general manager of the Pages Group. He says on about 22 December 2004 he signed an employment contract with Hurricane Structures Pty Ltd (not a defendant), stated to be effective from 22 November 2004, for the position of managing director of that company. He pleads he has an unsigned copy of that contract. He says he became a director of Austructures in March 2005, and that he resigned in June 2006. He admits he became a manager for Roder in May 2007.

12 Thus there is an issue on the pleadings about the true identity of Makin's employer, the duration of his directorship with Austructures, and for which entity or 'Group' he was the General Manager.

13 The next body of pleaded allegations concerns the making of a distributorship agreement with Roder. The managing director of both plaintiffs was one Atilla Boros. The plaintiffs allege that in about January 2005 (that is, before Austructures was incorporated), Makin as general manager recommended to him that the Pages Group should discontinue manufacturing their 'Hurricane' brand of structures, and instead become a distributor for Roder manufactured products. It is alleged he told Boros that purchasing and re‑selling Roder structures would reduce the manufacturing risk, generate substantial sales and maximise profitability for the Pages Group. Makin does not admit that.

14 That led to the incorporation of Austructures as a separate trading entity within the Pages Group in March 2005 to buy and resell Roder structures to meet existing orders to its customers. It is the fact, as admitted, that Austructures was incorporated; that Makin became a director; and that a written distributorship agreement was made between Austructures and Roder in about April 2005. A distinct component of the claim is that Makin had the sole responsibility to negotiate that agreement. Makin does not admit that, and he denies the allegation that Boros did not have any involvement with negotiation of the agreement. The plaintiffs allege that Boros' only involvement in negotiation was to request that any agreement had to give Austructures an exclusivity for certain Roder products for an indefinite term; but apart from those certain kind of goods, Austructures would be able to manufacture and sell its own manufactured line of products. The defence does not admit those contractual terms, and it denies that Boros asked Makin to negotiate those terms. This dynamic or element of the case is, I detect, part of the forensic side of the case to show, or disprove, whether or not the agreement was entirely of Makin's making which in turn goes to the question of Makin's role in the termination and his alleged misrepresentation to Boros about the contractual rights of termination. The point here is that on the plaintiffs' case the provenance of the agreement, and Boros' involvement in conception of possible terms is an issue.

15 The plaintiffs allege that the management and operation of trade under that agreement was Makin's responsibility. They allege that (presumably through Makin's efforts) sales opportunities for Roder structures and associated equipment were subsequently created under the distributorship agreement enabling Austructures to grow sales from its extensive customer base. They allege substantial potential opportunities for profit based on commissions on purchases from Roder. On the pleadings, the issue will be when those sales opportunities arose, and (even if they were lost opportunities for the plaintiffs) whether there was any entitlement to commission on the value of the sales anyway. The defendants allege there was no commission payable under the agreement, and the incentive for the sale of Roder structures was a discount on the list price of products. The case for the defendants is that the distribution agreement was not profitable for Austructures. That leads to the next event which was the termination of the distribution agreement.

16 The termination by Roder occurred, in effect, on 16 January 2007. There is in evidence an e-mail from Roder to Boros dated 17 January 2007 which says:

Since engaging ourselves with your company, general sales have been slow - we understand the difficulties you may have faced while trying to promote our products with competitors selling a similar product within the same country however we feel we must now intervene.

We are very grateful for your efforts and the sales that you have generated since 1/07/05 - however I am sure you will agree overall sales especially to the core hire market have seen little growth since your appointment as our distributor for the Australian/New Zealand sale territory.

We are therefore issuing you with this letter as our official notice that we are terminating the distribution agreement ... as 16/01/07 putting you on notice.

17 This brings me to the plaintiffs' misrepresentation case against Makin, which is the fulcrum of the alleged wrongdoing. The plaintiffs allege first, that before termination, Makin had represented to Boros (the pleader now brings that pointy legal term into use in conversations between co-directors) that Roder was dissatisfied with Austructures' performance in purchasing and selling enough structures into the market. Secondly, the plaintiffs allege Boros looked into the company's sales performance and thought it not to be unsatisfactory, and told Makin so. It is alleged that Makin represented that he would communicate those facts to Roder. Thirdly, it is alleged that in about late February or early March 2007, Makin represented to Boros that he Makin had received verbal notification from Roder that it was cancelling the distributorship agreement; and that Makin represented to Boros that Roder was entitled to terminate the distributorship agreement immediately and without cause or reason. The fourth alleged representation is that Makin accepted from Boros that Austructures should reactivate its manufacturing business 'to mitigate the damage', and Makin represented that he would re-establish the manufacturing business.

18 The plaintiffs' case then goes along the following lines. Boros relied upon Makin's representation about Roder's legal right to terminate. Paragraph 39A of the statement of claim alleges this as the wrongdoer's intention or ulterior motive −

Makin made the representations with the intention that following the alleged termination of the Distributorship agreement, Makin could resign as Director of the First Plaintiff and as an employee General Manager of the Plaintiffs and then simply substitute himself and Makin's company as the seller of Roder's structures and associated products in place of the First Plaintiff.

PARTICULARS

Makin's intention is to be inferred from the fact that he in fact resigned as a director of the First Plaintiff and as an employee shortly after making the representations. He thereafter registered Makin's company.

19 The reference to 'Makin's company' is Roder HTS Hocker Pty Ltd which was incorporated by the first defendant in 2007.

20 Come 27 March 2007, Makin resigned as an employee. His letter of resignation to Boros is in evidence. It speaks of '...our mutual agreement that I shall cease employment'. Then, it is alleged that by April 2007, Makin joined Roder and personally took over responsibility and management for its sales and distribution business in Australia. Makin admits that he has been employed by Roder as general manager of Australian and New Zealand since 14 May 2007. The plaintiffs' case is that the facts as alleged show Makin, by design, breached his fiduciary and statutory obligations as director and contractual obligations as employee to use his position with the plaintiffs to gain advantage for himself and the second defendant at their expense.

21 The plaintiffs allege a particular sting to the alleged multitude of breaches which comes to cause the difficult predicament with discovery of documents. They allege that:

55. In late 2011, it was discovered by Boros, that Makin, prior to leaving employment with Pages, had erased all data attributable to the Distributorship agreement from Pages' computer records. He had also attempted and almost succeeded (subject to paragraph 57 herein) in taking all hard copy documents from the First Plaintiff's business premises relating to the Distributorship agreement.

56. The First Plaintiff, engaged computer experts to recover the data erased by Makin, who were unable to retrieve the data from the computer system as it had been so extensively overwritten.

22 The reference there to paragraph 57 is an allegation that in late 2011, Boros found an unsigned copy of the distributorship agreement only to then see (presumably for the first time or without enquiry at the time of termination) that clause 1.2 did not allow termination without just cause. The termination clause said:

This agreement can be terminated with justification by either party with six months' notice to be given in writing.

23 Thus, the plaintiff alleges, at no time did Roder give proper notice and it was misleading and deceptive of Makin to represent to Boros that Roder had the legal entitlement to terminate the agreement without notice and without cause or justification. It is alleged that Makin knew and intended the representations in that regard be false as part of his design to divert business from the plaintiffs to the second defendant or to Makin's own company. The rest of the pleading makes the allegations about the lost sales opportunities and the lost commissions and profits, which is part of the discovery application.

24 I trust I do no disservice to the composition of the defence if I summarise it briefly as follows.

25 There is the issue of the identity of the entity by whom Makin was employed. That could be significant when it comes to identifying the entity to whom he owed contractual or fiduciary obligations. The distribution agreement is admitted. It is admitted that a number of sales of Roder structures were made to various third parties by Austructures. There is a dispute whether some of the alleged lost sales opportunities arose before, or after, the termination of the relationship. The defendants allege that any claim for lost commissions is unsustainable as the distribution agreement did not provide for commissions. On the question of lost opportunities for profit, Makin alleges that the lost opportunities would not have been profitable for Austructures or at least did not represent a highly likely and significant profit. The defendants say that, as stated in the termination notice, Roder truly was not satisfied with Austructures' performance, and thus the termination was justified. Makin alleges that Boros did not express any surprise about the termination, nor did he ask Makin to investigate Roder's legal entitlement to terminate the agreement immediately. Then, Makin admits he resigned (as an employee of Austructures) in March 2007.

26 The defendants deny the allegations of any wrongdoing and further or alternatively contend that any claim on equitable foundations is time barred under the equitable defence of laches (delay coupled with prejudice), and the breach of the director's duties are alleged to be statute barred under the Corporations Act or the Limitation of Actions Act. The allegations of statutory misleading and deceptive conduct are met with the defence that the representations were not made in trade or commerce and were not false or misleading or deceptive. In reply the plaintiffs allege that any right of action was concealed by the fraud of the defendants, which under the Limitation of Actions Act operates to postpone the running of time until the fraud was discovered in 2011.

27 Thus, the legal basis of the claim is that Makin brought about the termination of the distributorship agreement for his own benefit, and Roder assisted with knowledge of the design. That confronting allegation has not unexpectedly provoked the defendants to expect substantial discovery from the accusers.

28 On 25 March 2015, Boros swore an affidavit of documents on behalf of the plaintiffs. In the conventional way, Schedule One of that affidavit identified the documents in the plaintiffs' possession. Thirty three documents were discovered. On the face of it, it was natural for the defendants' solicitors to treat with incredulity the adequacy of discovery, for as said in subsequent correspondence, out of those 33 documents:

(a) nine were documents that were filed with ASIC, or ASIC searches;

(b) thirteen were Austructures' profit and loss statements or other financial accounts which were relevant to the application for security for costs made in 2013;

(c) two documents were prepared by financial advisers for the purpose of resisting the security for costs application;

(d) five documents were provided by the defendants to the plaintiffs in this proceeding; and

(e) that leaves only four documents that, judging by the date, are contemporaneous with the events in 2004 to 2007.

29 It is Schedule Two of the affidavit of documents that attracts the greater attention. There are 18 categories of documents which one way or another would seem to fall into the sort of documented communications one might expect to find in the dealings that are the subject of the case. Item 19 states:

The plaintiffs submit that all of the above-mentioned documentation in items 1 to 18 were contained in electronic form on the plaintiffs' servers and/or were stored in locked filing cabinets at the offices of the first plaintiff managed by the first defendant and which documentation was removed by parties unknown on or about 27 March 2007 and/or which were stored on electronic data in files which are now unable to be accessed by any party due to the overwriting of that data by parties unknown.

30 The word 'submit' is strange in that context. However, it is consistent with the substantive allegation in paragraph 55 of the statement of claim that Makin had, prior to leaving his employment erased all data attributable to the agreement and taken all hard copy documents, apart from the distributorship agreement discovered later on. That will be a substantive and prominent forensic issue at trial

31 In support of the plaintiffs' case of the missing material, there are three additional affidavits on this application. The first is an affidavit of Jane Clare McHale sworn 7 July 2015. She is the Pages office manager at its New South Wales office. She swears that in March and April 2015 she had the task of searching all of the plaintiffs' computer records for any documentation passing between the plaintiffs and the defendants from 2005 onwards. As part of that search, she swears she engaged an information technology expert to recover and save all e-mails onto an external hard drive from a laptop computer that had been used by Boros. She swears that the searches of Boros' laptop did not reveal any documentation pre-April 2010 (and anything post-2010 does not concern the matters in this case.) She explains that she made enquiries of the plaintiffs' backup service provider, ASV Computing, for any records they had backed up on the plaintiffs' server. She believes that, according to their service provider, their inbox was only backed up from late 2009. She says the plaintiffs upgraded to an exchange server in July 2013 which backed up all incoming and outgoing e-mails. She says she was instructed by Boros to attempt to locate the hard drive that he told her was kept by the plaintiffs for data records in mid‑2006 to late-2007. She swears that no‑one has been able to locate the hard drive. Jane McHale was not cross examined on her affidavit. Her evidence is uncontradicted.

32 An affidavit has also been sworn for the plaintiffs by Andrew Stavroulakis.[3] He is the managing director of ASV Computing Solutions Pty Ltd which is a business that has been providing IT maintenance to the Pages Group since 1988. Acting on Boros' instructions in mid-2007, he says he searched the data in Makin's laptop personal computer. He swears:

6. I confirm that ASV Computing Solutions was unable to retrieve any data from the said laptop provided to it...as the data on the laptop had been overwritten to an extent that it was impossible to obtain data. The description of the comprehensive overwriting of the data is known as the laptop being 'cleaned'.

7. In April 2015 I was instructed to search the laptop records of the said Mr Boros in respect of his personal laptop.

8. Despite being retained by the Pages Group since 1998 ...I say that there was not in place any systematic backing of data or emails for the plaintiff group of companies until July 2013.

9. I confirm that only some of the inboxes of the Pages Group were backed up since late 2009.

10. I say that it was only when the plaintiffs upgraded to an exchange server in July 2013 that the plaintiffs group of companies back up all sent and received emails.

11. I am advised that the plaintiffs are searching for records for the period from 2005 until late 2007.

12. I say that from my knowledge of the plaintiff's data records as set out in paragraph 8 that I am not aware of any such records having been backed up by this company.

13. Whilst I have been advised by Mr Boros and Ms McHale from the plaintiffs that there is a hard drive in respect of data records for the period from mid‑2006 to late 2007, I am personally not aware of its existence nor its whereabouts.

33 This brings into play some computer or technological matters which, for all but user‑common or elementary matters, the Court would require evidence that it did not have. The plaintiffs' expert evidence is that the laptop previously used by Makin had been 'cleaned' and there is no back up. Paragraph 19 of the plaintiffs affidavit of documents sworn by Boros states that the documents in Schedule 2 were contained in electronic form on the plaintiffs' servers or stored in hard form. Thus, the complaint of the defendants is that as Makin did not have access to the plaintiffs' servers, then documents stored on the servers could not have been deleted by his alleged conduct in overwriting or cleaning the data on his personal laptop. Therefore the defendants say they require discovery of all documents in Schedule 2 which are or were stored on the plaintiffs' servers or a credible explanation why the documents no longer exist.

34 The defendants have not cross examined Mr Stavroulakis or adduced their own evidence to establish that, despite what Mr Stavroulakis has ascertained, there is some other source such as a server from which to find the information. The oddity on this technical pursuit is that one would think the ability to find the erased information would be very much in the plaintiffs' interests to pursue to see what Makin was doing at the relevant time to find evidence in support of their deception case. That is, it is not in the plaintiffs' interests to be not diligent in sleuthing what Makin was doing with his computer at the relevant time.

35 Thirdly, there is an affidavit of Nicholas Baldock, the solicitor acting for the plaintiffs.[4] He presumably was responsible for preparing the affidavit and advising the plaintiffs about their discovery obligations. That affidavit, based on instructions from Boros, states that the 'vast majority of documentation relevant to this matter were personally created by the first defendant...up until the time he resigned.' According to instructions from Boros said to be based on personal experience, the documents identified in Schedule Two were generated by Makin in running the Austructures business from his offices in Melbourne prior to his resignation. Baldock says his clients have exhausted the searches.

36 Another part of the discovery dispute concerns internal communications. An affidavit sworn by Makin on 1 September 2015 looks to make good the contention that there were many relevant documents created by others within the plaintiffs' organisation, mainly by e-mail, which have not been discovered. He identifies these documents by description -

(a) emails from Roder employees which were also sent to Boros;

(b) faxes sent by Roder in Germany to the Austructures office in Melbourne;

(c) emails and faxes from Boros to Roder (typically copied to Makin);

(d) emails sent to Boros by Stephen Thatcher, a director of the second plaintiff with whom Makin says he had regular communication in relation to issues under the distribution agreement, and who was aware of the termination of the distribution agreement and of matters concerning Makin's resignation;

(e) financial documents created in the second plaintiff's head office in Sydney; and

(f) documents created by Boros, Thatcher and others concerning the potential sale of the Pages companies to ISS in around 2006 which included a due diligence exercise conducted by accountants.

37 Elsewhere in the materials reference is also made to another individual, Derek Shaw.

38 The affidavit sworn by Nicholas Baldock looks to neutralise the relevance or utility of internal communications or their documentation by saying in essence -

(a) Thatcher was not directly involved in Austructures' day to day business as he had a separate role in arranging corporate and boutique events for Pages on the Australian eastern seaboard;

(b) Derek Shaw was a warehouse manager for Austructures and was unconcerned with documents presently in dispute, but any documents to which he had access were held in Austructures' Victorian offices and those did not remain after Makin's resignation;

(c) the possibility of one Jenny Williams (former office manager) being party to communications is fruitless because she ceased employment with the plaintiffs shortly after Makin's representation, but before then, was asked to locate any documents in Austructures' offices in Melbourne, but could not locate any documentation at all.

39 It is not feasible for me to go into the details within the materials of assertions and counter‑assertions about what particular individuals might have had discussions with Makin or might have somehow been involved in affairs concerning the distribution agreement or his resignation. Overall I think it is being pursued to dispel some suggestion integral to the covert deception case that it was Makin and Makin alone who was involved in the Austructures affairs concerning the distribution agreement, the business, and his resignation. But there is a contest on the affidavits, and no cross examination of the plaintiffs' deponents.

40 Thus, to stand back from the tension of this dispute, to see where the procedural justice of the situation lies, I see it in this way.

41 First, I think I can characterise the approach of the defendants as something not uncommonly seen in commercial litigation; that is, it strains incredulity for there to be so few documents discovered by a party alleging such a case of wrongdoing. They seek the Court's intervention to make orders requiring, as I understand it, third degree enquiries into the forms in which electronic data may be stored elsewhere on servers and to compel the plaintiffs to explain themselves or give 'credible explanations' in order to enable the defendants and the Court to be satisfied that the discovery obligation has been properly observed and all diligent searches have been conducted. The restraint on reaching any adverse view about the plaintiffs' diligence is that the plaintiffs have just as much an interest as the defendants in investigating the whereabouts of documents within their organisation, whether in computers or in hard form, to see Makin's dealings and communications, especially with Roder, at the relevant time. They say they have examined the computer, and done other document searches. They may, but are not required without court order, to describe precisely what searches and enquiries were conducted. The Court needs a solid basis before concluding that the discovery exercise has been misunderstood or not conscientiously carried out.

42 Secondly, it is not enough for there to be vehement assertions that 'relevant documents exist which have not been discovered' without an identification of those documents and an explanation of how and in what way they are relevant to an issue in the case. That is particularly so in the case of e-mails. The defendants' evidence is saying no more than e-mail communications occurred. That is highly likely, but e-mails about what relevant issue? Further, e-mails and faxes sent from Roder employees to Boros or Makin; or e-mails sent to Roder by Boros and Makin can surely be obtained from Roder for there is no evidence that they cannot.

43 Thirdly, the plaintiffs say it was Makin who was solely if not largely responsible for the creation of documentation for this business with Roder. The plaintiffs and their lawyers have sworn affidavits explaining that the limited discovery they have given is explicable by the wrongful conduct of Makin removing documents in hard form or electronic form which is part of the evidence in their principal case. Finally, they have uncontradicted evidence that Makin's computer has been cleaned.

44 Fourthly, there are insufficient grounds for the Court to compel further explanations about computer servers and the like. It is not enough for there to be assertions by the defendants' lawyers that the information is on the servers. The defendants have not adduced evidence about that, or about the measures or facilities available for greater technological searches, nor challenged the expert material already filed. If they wish to conduct their own investigations on Makin's laptop computer or any other device, then that is a matter for application, on evidence, under order 37 of the Rules or the Civil Procedure Act.

45 As a corollary, and fifthly, I see no basis for invoking s 55B of the Civil Procedure Act. That empowers the Court to order or direct that a party provide to the Court 'an affidavit of document management'. Under the section, that is done 'for the purpose of assisting a court to make any appropriate orders or directions in relation to discovery.' Some insight into what is meant by this section is given under sub‑s (2) which states:

(2) An affidavit of document management may include the following -

(a) the volume, manner of arrangement or storage, type or location of discoverable documents;

(b) the party's process of document management.

There are no authorities on this section but to my mind 'document management' naturally connotes a construction that the section was intended for use in complex cases where a variety of document management systems or complex information technology systems are used, which call for an explanation. That is confirmed in the explanation given by the Attorney General in his Second Reading Speech to the Legislative Assembly on the bill on 6 February 2014:

The bill recognises that companies use a range of different business systems and databases to store and manage their business records, with records often stored in different electronic formats and subject to different retention policies. The complexity can sometimes frustrate the efficient identification of discoverable documents and increase costs for parties where discovery orders do not take into account the systems being used. To assist a court to make appropriate discovery orders, the bill encourages the courts to order or direct a party to provide an affidavit which sets out the volume, manner of arrangement or storage, type or location of discoverable documents, or information about a party's document management processes more generally. ... If the courts and other parties have a better understanding of the document management systems, relevant documents can be more easily identified and discovery disputes minimises. This process will be particularly useful for large organisations with complex IT systems, as it will allow the court to ensure that a complete discovery process is conducted at a reasonable cost, for example, by specifying the methods to be used when searching for relevant documents.

46 Sixthly, I think r 29.08 provides the efficacious means for a legal solution to this dispute. The defendants are really saying they have 'grounds for a belief' that documents relating to a question in the proceeding may be or may have been in the possession of a party. Under the rule, the grounds for a belief may appear '... from evidence or from the nature or circumstances of the case or from any document filed in the proceeding...'

47 In my experience, r 29.08 has utility to quell a controversy about the adequacy of discovery. That is, 'grounds for a belief' can be best established in the paradigm case best by pointing to existing documents that suggest the existence of other documents, or, more pertinently here, can be established to the satisfaction of the Court by an objective assessment of the facts and circumstances informed by ordinary or expectable behaviour in dealings or affairs in modern conditions, or commercial conduct of affairs according to the nature of the case. The task for the Court is to examine each of the 24 categories in the annexure to the summons and see if there are grounds for a belief according to the issues in the case as I have exposed them. I have concluded there are.

48 Seventhly, given the level of the disputation and the desirability of minimising the prospect of more discovery grievances out of this application, I think it appropriate, and not unjust in the circumstances, to deploy s 55(1) of the Civil Procedure Act and require the plaintiffs by a knowledgeable and informed officer (possibly Boros as he holds a position of responsibility has already sworn the affidavit of documents) to swear and file an affidavit accompanying a r 29.08 affidavit that states and where necessary explains: the searches done for those documents; where the searches were done and in which office in which city or State; the personnel involved in the search; the means of search used; the time taken; and whether he is satisfied that all searches have been exhausted.

49 I will follow the categories as tabulated in the annexure to the summons. I am content to adopt the term "Describe" which is defined to mean constitute, record, refer to or evidence. I think the definition of "Documents" goes too far. Documents within the meaning of the dictionary provisions of the Evidence Act including (a) electronic records and (b) hard copy documents are legitimate. But I think paragraphs (c) and (d) are overly prescriptive. Documents given to or kept by the plaintiffs' advisors JAG Business Advisory (about which I have no evidence), and documents of communications with others in the organisation fall anyway within a litigant's obligation, aided by their legal practitioners, to discover documents within its possession custody or power.

50 This seeks documents describing Makin's alleged employment by the second plaintiff from early 2006 to 29 March 2007. There is no doubt the identity of the employer is an issue. It is the properly identified employer to whom obligations will be owed. Makin denies he was employed by the second plaintiff. Documents 1 and 5 of the plaintiffs' affidavit of documents are employment documents but they are dated 2010 and 2013.

51 I think there are grounds for a belief that there must have been other documented records or indicia of employment with the second plaintiff, if that is the plaintiffs' case. It is true that Makin's own affidavit of documents sworn on 23 March 2015 refers variously to documents in 2005 and 2006 concerning his employment, such as 'limited payroll advice' from the first plaintiff and in one case (document 27) it refers to the second plaintiff. Despite that, I think it is reasonable to believe that other or more complete documents concerning the allegation that the second plaintiff was his employer came into existence, or might have done so. Thus, I think an order ought to be made for this category under r 29.08.

52 The plaintiff alleges that in 2004 the Pages Group had secured a number of purchase orders for the manufacture and supply of structures from its substantial customer base. The plaintiffs submit here, and in many other cases, that the Court should not countenance the approach of a litigant going through each allegation in a statement of claim and asking for every document by which that allegation is constituted or evidenced or sought to be sustained. As a general proposition, that is correct as a controlling mechanism. But the question of the purchase orders in 2004 in my mind is, by timing, the same year in which Makin commenced his employment contract (he says with Hurricane Structures Pty Ltd) and the question of the purchase orders is forensically relevant to the downstream allegation concerning the diversion of business opportunities and detriment to the plaintiffs' business. I would order r 29.08 discovery for this category.

53 This concerns documents relating to the transfer of Makin's employment between different entities within the Pages Group of companies. This is a real issue as it goes back to the question of identity to whom obligations were allegedly owed by Makin. It is true that Makin admits he was a director of the first plaintiff until his resignation in June 2006. But the plaintiffs' case goes further. They alleged a transfer of employment by two steps to the second plaintiff. This is 'not admitted'. In a case of this nature, I think this category also falls into the important question of properly identifying the employer as the entity to whom legal obligations were owed. I would order r 29.08 discovery for this category.

54 This seeks documents describing the 'negotiation and entry into the distributorship agreement'. The plaintiffs submit there is no issue about the existence of the distribution agreement, but only the circumstances of its termination and what matters is not the negotiation of the distribution agreement but its terms, express or implied, particularly concerning termination.

55 I think there is more to it, as pleaded. The statement of claim explicitly alleges that the negotiation was the responsibility of Makin, and limits Boros' involvement to telling him about certain provisions. The question of the negotiations and who was involved goes I think to the misrepresentation case that Boros seeks to make about his reliance on Makin about the termination provisions of the agreement.

56 I would order r 29.08 discovery for this category.

57 This seeks documents describing the sales of structures made within 18 months of commencing the distributorship agreement. The plaintiffs allege that within that time the first plaintiff had sold $4.5 million of Roder structure. That allegation is at the very least part of the forensic fabric of the plaintiffs' case to show that the distributorship agreement brought valuable business opportunities, which they say have been diverted wrongfully. The plaintiffs submit that this only goes to the question of damages and if there are no documents to sustain that allegation, then it will only mean the proof of their case is hindered. I think this is no answer. The defendants are entitled to, in a case of this nature, see and make pre-trial judgments about the merits of the financial side of the plaintiffs' case. I would order r 29.08 discovery for this category.

58 The plaintiff alleges, in paragraphs 32 and 33 of its statement of claim, a conversation in late 2006 in which Makin said there was the prospect of three purchase orders for the first plaintiff which could reap a commission in excess of $10 million. This allegation, it can be seen, fits into the plaintiffs' case of the wrongful diversion for it was soon after this conversation in January 2007 that Roder cancelled the distribution agreement. The defendants seek file notes of this conversation or any e-mail sent concerning these discussions.

59 Makin denies the conversation. He says the sales opportunities in question arose in 2007 and in May 2009. Thus there is an issue about the content of the conversation as well as the timing of the business opportunity. At trial this will be an issue of the calibre of the witnesses. Whilst it may be doubted that conversations like this are recorded in 'file notes' (of the sort for example that solicitors use) my judgment is that in the aggregate, the content of conversations of business opportunities leading up to the cancellation of the distribution agreement will have forensic or circumstantial significance. I would order r 29.08 discovery for this category.

60 The plaintiffs allege that Makin advised Boros that the 'value of commission' would exceed $10 million for the potential purchase order. This category seeks documents describing the first plaintiff's 'alleged entitlement to commission'. This category is not a matter for discovery but is testing the allegation. The allegation in paragraph 33 is that Makin told Boros about the value of commission. It is an allegation about the content of a conversation. The question of the entitlement to commission is entirely another matter based upon the content and legal operation of the distribution agreement. In my view, there are no grounds for an order for particular discovery under this category.

61 This also concerns the contents of a conversation. For the same reasons as given in paragraph 7, there are no grounds for particular discovery.

62 Paragraphs 36 and 37 concern the reaction to Makin's representation that Roder was dissatisfied with the first plaintiff's sale performance. Paragraph 36 is an unsatisfactory allegation, as a matter of pleading. It is not so much the material fact going to liability, but more a matter going to the justification of Roder's complaint about unsatisfactory performance. The plaintiffs would wish to say, as against Roder, that contrary to Roder's dissatisfaction, the Pages sales had exceeded previous sales.

63 In my judgment, this appears to be part of the forensic case to be made about Makin's alleged deception. The documents sought in this category seem to me to be going to a hypothetical case against Roder for unjustified termination. In my view, they are not relevant to the question whether the plaintiffs were deceived by Makin into thinking that Roder was entitled to terminate without just cause.

64 Pausing there, I think whilst I can understand the defendants taking a meticulous approach to litigation of this nature, broadly speaking, it will only be productive of discovery fights if an approach is adopted where for every allegation in a statement of claim, an attack is made which requires a document to be discovered that goes to sustain or verify the allegation made. It would be in the plaintiffs' interest, if there is to be a competition about the contents of a conversation, to discover and rely upon any file note or memo of a conversation. An apprehensive defendant may well say that if there was an adverse file note then the plaintiffs may see fit not to discover it. But such an assertion cannot be made. The plaintiffs have their obligations as do their solicitors for proper discovery. The Court cannot act on a mere supposition that notes exist for every allegation of an action taken.

65 Paragraph 38 of the statement of claim alleges that in late February or early March 2007, Makin told Boros that Roder was cancelling the distribution agreement. The plaintiffs' case is that Makin represented to Boros 'that Roder could terminate the distributorship agreement forthwith and without cause or reason'. That is said to have been a misleading and deceptive representation on which Boros relied. This category seeks documents describing the alleged termination of the agreement.

66 In its defence, Makin says that Roder did terminate the distribution agreement in an e-mail sent on 16 January 2007, which gave reasons for the termination. Makin says he was not asked by Boros to take any steps to investigate Roder's ability to terminate the agreement. I have already referred to an e-mail from Roder to Boros dated 17 January 2007 which, in substance, states that sales by the first plaintiff 'have seen little growth since your appointment as our distributor for the Australian/New Zealand sales territory. We are therefore issuing you with this letter as our official notice that we are terminating the distribution agreement...'[5] This document has been exhibited by the defendants.

67 The allegation is that Makin had received 'verbal notification' from Roder. In this context, verbal means, contrary to its literal meaning, unwritten. I do not see the point of any further discovery here. The written notification is in the hands of the defendants. On my examination of the plaintiffs' affidavit of documents, that e-mail terminating the agreement is document No 31 described as 'copy e-mail trail re distribution (2 pages) ... 19 January 2007'.

68 I think too much is being made of this category. It does not warrant any further discovery order.

69 In paragraph 39 of their statement of claim, the plaintiffs allege in substance that after the notification of the termination, Boros accepted Makin's 'advice' that Roder could terminate the distributorship agreement without cause, and, told Makin that the first plaintiff should reactivate its manufacturing business to be run by Makin, and Makin said he would. This is alleged to be the fourth representation on which the plaintiffs allege there was misleading and deceptive conduct. Category 11 seeks documents describing that discussion.

70 This is another example of, in effect, the defendants asking 'was any of that in writing?' It is not pleaded to be in writing. As I read it, it is an account of what Boros 'told' Makin by way of verbal, or unwritten communication. This might have been something capable of easy clarification by a request of particulars enquiring whether that which was 'told' was oral, in writing or to be implied. As it stands, the Court would need a basis for a reason to believe that that which was said in paragraph 39 was in writing. The most that might be imagined is that for something as significant as the reactivation of a manufacturing business, one would expect there to have been some form of corporate record.

71 I think this request is not properly expressed. Yet, I see the significance of the allegation as it comes to lead into the residual part of the plaintiffs' case that it has been deprived of a business opportunity. Indeed, paragraph 41 of the statement of claim alleges that, acting on the faith of Makin's statement that he would re‑establish the manufacturing business, the plaintiff did not question Roder's legal ability to terminate the agreement without just cause.

72 Recognising that, and to avoid further controversies, I will take the exceptional course here of making an order for particular discovery not for the documents as described in this category, but as follows: 'Documents evidencing or concerning any proposal or decision or consideration given by the plaintiffs to reactivate the manufacturing side of the Pages business that had previously been carried on under the Hurricane brand as a result of the termination of the distributorship agreement.'

73 For this category, the starting point is paragraph 39A of the statement of claim. There it is alleged in substance that Makin represented to Boros that he, Makin, would re‑establish the manufacturing business, yet harboured the (hidden) intention that he would leave the plaintiffs and 'then simply substitute himself' as the seller of Roder's structures in place of the first plaintiff. Paragraph 42 alleges that after that representation, Makin resigned as an employee and then left his employment on 29 March 2007. From there, in early April 2007 it is alleged that Makin took over responsibility personally for the management of the Roder and Hocker/Roder Sales Distribution Business in Australia.

74 This category asks for documents describing Makin's resignation as employee and then as director of the first plaintiff. But, the resignation by Makin is not in dispute. It is the fact. I do not see the relevance of any discovery concerning his resignation.

75 In my view there are no grounds for an order under this category.

76 This seeks documents describing the conduct of the first plaintiff's operations in Melbourne after Mr Makin's resignation. This request is said to be based upon the allegations in paragraphs 42 to 43 of the statement of claim. But those paragraphs concern his resignation. As I construe this category, it is seeking documents to see whether the first plaintiff did conduct 'operations' after Makin's resignation faithful to the decision to reactivate the manufacturing side of the Pages business after the termination of the distributorship agreement. This may, I suppose, be part of the case to be put, or being contemplated, that the question of loss and damage has to be assessed by reference to the anterior question whether the plaintiff in truth was going to reactivate its business or had done so.

77 The problem here is the unsatisfactory expression of this category. Documents describing the conduct of the first plaintiff's 'operations' is too wide. Nor was there any evidence by which it may be said there is a belief that such documents concerning 'operations' exist. As I have done with category 12, I shall take the exceptional course of refashioning this category so that it pursues that which appears to me to be relevant, namely: 'documents which evidence or concern any steps or actions or business plans by the plaintiffs to reactivate the manufacturing side of the Pages business that had previously been carried on under the Hurricane brand, after the termination of the distributorship agreement'.

78 This category seeks documents describing the engagement of ASV Computing Pty Ltd. This category appears to be based upon the affidavit of the technician, Mr Stavroulakis, to which I have already referred concerning the retention of e-mails and the absence of a backup.

79 In my view, this is not a proper request for further discovery. It seems to look to want to test the evidence that he has given by affidavit. Presumably he will be a witness, an expert witness, concerning the 'cleaning' of the computerised information.

80 Paragraph 55 of the statement of claim alleges that in late 2011 Boros discovered that Makin had erased all data attributable to the distributorship agreement from Pages' computer records, and he had done this prior to leaving employment with Pages. That date may be erroneous. Paragraph 6 of Mr Stavroulakis' affidavit sworn on 13 July 2015 swears that he was contacted by Boros to retrieve the data in mid‑2007.

81 The request here asks for documents describing that alleged discovery of 'cleaning'. Yet, the evidence before me is that the discovery was electronic; that is, a computer technician has discovered that the computer had been 'cleaned' and that there are no backups. That is the evidence and presumably Stavroulakis will be giving evidence on that question. As things stand therefore, the defendants already have sworn evidence from the plaintiffs, to be tested or contradicted, about the basis upon which the allegation of 'cleaning' of the computer was made. I see no utility in an order for particular discovery.

82 This category is not based upon anything alleged in the statement of claim. Rather, it is based upon an affidavit sworn by the plaintiffs' solicitor, Nicholas Baldock, on 7 August 2014 in which he says:

In 2013 the plaintiffs became aware of the establishment of a company by the first defendant which carried on business immediately after the first defendant's cessation of employment with the second plaintiff as pleaded in the Claim.

83 This concerns the incorporation in 2011 of Roder HTS Hocker Pty Ltd. In his defence, Mr Makin admits he was a director and shareholder of that company between 13 April 2007 and 30 July 2007. He says he incorporated the company on 2 April 2007, but that between that date and 30 July 2007 the company did not carry on business. Further, he says that on 30 July 2007 he transferred his shares in that company to one Daniel Smith and the company, on the following day, changed its name to Basmine Pty Ltd.

84 It is not clear to me what documents are being sought in this category. Makin denies that he carried on business through this company. Thus in effect, he is seeking discovery of documents by which the plaintiffs have seen fit to allege that he was carrying on business after he ceased employment with the first plaintiff. This is not a matter on which discovery of documents matters. Nor is there any basis put forward why he has reason to believe that the plaintiffs have documents showing such things, if on his case, it is contrary to fact. In truth, it amounts to asking the plaintiffs 'on what basis do you allege I was carrying on business?' That is not a basis for seeking particular, or, I do not see its utility.

85 This and the categories to number 23 concern the nature and magnitude of damages. In paragraph 74 of the statement of claim, the first plaintiff alleges that it '...was earning a net profit from the distributorship agreement of approximately $600,000 per annum. It also had significant sales of structures pending or in advanced stages of negotiation.' The plaintiff seeks documents describing the first plaintiff's alleged net profit. This subject matter naturally attracts attention to profit and loss statements. The relevant time would go from late 2006 to the establishment of the alleged competing business after the resignation in March 2007.

86 The plaintiffs' affidavit of documents sworn 25 March 2015 discovers copy balance sheets and profit and loss statements of the first plaintiff as items 15 to 25. That includes the profit and loss statement from July 2006 to June 2007. The latest of the profit and loss statements is for the period July 2012 to March 2013. What is missing in the discovery is the profit and loss statement for the period July 2009 to June 2010; July 2010 to June 2011; and July 2011 to June 2012. Those missing statements will have to be discovered.

87 All I would add is that the allegation is confined to a net profit from the distributorship agreement. I do not know if there are additional sources of the net profit. The profit and loss statements will reveal that. In the interests of precision and avoiding future controversies, I would also take the exceptional course of enlarging this category so that it includes any other documents (that is, apart from profit and loss statements) showing how the net profit from the distributorship agreement of $600,000 per annum is calculated or derived.

88 In paragraph 75 of the statement of claim, the first plaintiff alleges that by reason of Makin's misleading and deceptive conduct concerning the termination of the distributorship agreement, it 'did not obtain the benefits of the proposed structure sales nor did it have the opportunity to build and develop its existing structure sales business arising from the Distributorship agreement.' That paragraph is linked to paragraph 32 of the statement of claim. This amounts to a basis for claiming expectation loss. That paragraph goes on to allege some substantial figures, including under paragraph 75.4 a lost opportunity to earn commissions under clause 3 of the distributorship agreement of an amount exceeding $10 million.

89 In my view, discovery has an important function to fulfil on the question of liability as, obviously, it aids a litigant's comprehension of the amount at stake and enables an assessment of the exposure in the litigation. Paragraph 75 of the pleading identifies sales prices and the customers. It may be that documentation concerning these sales came to disappear in the alleged computer 'cleaning'. If the plaintiffs' case is to be accepted, if the documents were in hard form, they were taken by Makin on his departure. According to the affidavit of documents, Boros states that documents locked in filing cabinets in Makin's offices were removed on about 27 March 2007, which is denied by Makin.

90 Putting aside that dispute, it is apparent that the plaintiffs are in a position to allege the customers and the figures in paragraph 75 of the statement of claim. Accordingly, there is reason to believe, objectively, that documents by which those proposed sales were made or being negotiated exist or might exist. For those reasons, I would order particular discovery of those documents.

91 Paragraph 77 of the statement of claim alleges that the first plaintiff 'struggled and was unsuccessful in resurrecting its structure manufacturing business in order to adequately service its clients, as a result of the purported termination of the distributorship agreement and Makin ... commencing in a directly competitive business.' Faithful to my earlier comments, I think documents concerning the nature or magnitude of the expectation loss or other business detriment suffered by the plaintiffs ought be discovered. The nature of the allegation makes it reasonable to believe that some documents, be they business plans or marketing or internal budgeting, would reveal facts on the question of the failed attempts to resurrect the manufacturing business.

92 Paragraphs 79 to 80 of the statement of claim allege that but for the loss of the distributorship agreement, the first plaintiff would have been able to supply structures for major events such as the Supercar event and the A1 Grand Prix. Moreover, it alleges that its failure to be able to supply the Grand Prix, the major events project manager, IMG (International Management Group) refused the Pages Group any access for tendering for IMG contracts. As for other categories, the 'reason to believe' test in r 29.08 does not necessarily require someone to formulaically assert that. It is often the case that the nature of the allegation, or the nature of the subject matter, permits the Court to accede to the view that, in the circumstances, there would be reason to believe that an allegation made by a corporation that it 'would have been able to supply' carries with it reason to think that on this scale of business there are documents in existence or might be in existence that go to show what the prospect of the actual supply agreements were. Accordingly, I would allow particular discovery under this category.

93 Paragraph 81 concerns the plaintiffs' alleged loss of commissions and profits from the distributorship agreement. The allegation is that had the commissions and profits been obtained as expected, the plaintiffs 'could have retired debt and thereby reduced its commercial interest payments on its financing facilities'. The reach of this claim will create its own issues. This is a loss of use of money claim. A claim of this nature is, innately, a matter of expert accounting, often on a complex scale. In my view, this is one ingredient of the damages claim which by its nature will have to await the preparation of expert assessment and opinion. To order discovery of the plaintiffs' financing facilities and its commercial interest payments and its financial affairs goes beyond the function of discovery. Of themselves, those documents will not aid pre‑trial fact finding on an issue. The documents and the calculations based on those documents are a matter for examination and application of information within them. Accordingly, I would refuse any further discovery under this category.

94 This seeks documents describing the proposed sale of one or more of the Pages Group of companies to ISS in around 2006. There is no reference to this in the statement of claim or elsewhere, as far as I can see. Nor do I see reference to ISS in the statement of claim. As I cannot see its relevance on the pleadings, I see no justification for an order for discovery under this category.

95 This seeks balance sheets and profit and loss statements for the first plaintiff for the periods July 2009 through June 2012. I have already dealt with those financial statements for categories 24 and 25 so no further order is required here.

96 This is a curious category. It seeks, pursuant to r 29.12(1)(b) production of a company laptop used by Makin and provided to ASV Computing in March 2007. This is the laptop which Mr Stavroulakis says has been 'cleaned'.

97 Rule 29.12(1)(b) states that where a party is entitled to inspect a document which consists of 'information which has been processed by or is stored in a computer, the Court may give directions for making the information available.' I think the attempt under this rule is misconceived. In my view, that rule is concerned with inspection of a document which cannot be produced in the normal physical way but which can only be inspected within a computer. In that situation, the party entitled to inspect may need a court order for access to a computer. The evidence is that the laptop computer has been cleaned of information. Thus I see no point in inspecting the computer on which there is no information. If the purpose of the attempt is for the defendants to satisfy themselves that the computer has been cleaned or to conduct some other form of technical interrogation of the computer or examination to see how and when it was cleaned or look for some other clues about the emptying of information, then that calls for an entirely different application, most likely under r 37. On this question, I am in no position to make orders.

98 If the pre‑trial investigations of this case are going to involve computer technicians and experts sleuthing computer facilities to investigate whether or not computers were cleansed and when, then that would in my view require first of all evidence from any experts proposed to be used by the defendants informing the Court about the investigative exercise and what it would require from the plaintiffs to enable such an investigation. Likewise it would require any responding evidence from the plaintiffs concerning the computers and what role they are to play in the exercise. It is not a matter for an orthodox discovery application.

99 I ask the defendants in consultation with the plaintiffs to prepare a r 29.08 order to give effect to these reasons, and an ancillary order of searches as I have described it.

100 If those orders and any costs orders are consensual, I would be willing to settle orders without the necessity for an appearance. Otherwise, I propose convening Court on 3 June 2016 to consider and make orders on the application and costs.

[1] Paragraph 49L of the statement of claim.

[2] [1874] UKLawRpCh 20; (1874) LR 9 Ch App 244.

[5] See exhibit 'JLK-1' to the affidavit of J.L Kelp sworn 18 August 2014.