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[2011] NSWSC 265
Supreme Court of NSW
2011-04-08
Garling J, Menzies J, Mason P, Priestley JA, Hulme J
Original judgment source is linked above.
Judgment 1Mr Gillies was the chief executive officer of Downer EDI Limited from 1 June 1997 until August or September 2007. 2Mr Gillies has brought proceedings against Downer EDI which relate to the circumstances of his removal as chief executive officer, and to whether there are any outstanding monies owed to him by Downer EDI. 3Downer EDI cross-claims against Mr Gillies for repayment of monies which it claims are outstanding to it, and for other relief.
Procedural History 4Mr Gillies commenced the proceedings in this Court by a statement of claim filed on 1 November 2007. 5The proceedings are fixed for hearing for a two week period commencing on 9 May 2011. 6In the course of case management, an issue about discovery of documents was identified between the parties. The parties have resolved some of that issue, but remain in dispute about the balance of it. 7In accordance with my practice in the case management of matters, rather than requiring the parties to go to the cost and expense of a full hearing on a discovery issue, I will deal with the issue on the basis of written submissions and the written evidence filed with the Court and relied upon by the parties.
Principles of Discovery 8Under the Uniform Civil Procedure Rules 2005, the Court has power to order a party to give discovery in accordance with r 21.2. 9In exercising that power, the Court is obliged to give effect to the overriding purpose of the Civil Procedure Act 2005 and the UCPR, namely: " ...to facilitate the just, quick and cheap resolution of the real issues in the proceedings ": s 56, Civil Procedure Act . 10Importantly, r 21.2(4) of the UCPR limits an order for discovery to only those documents which are "... relevant to a fact in issue ". Rule 21.1(2) defines that term in the following way: "(2) For the purpose of this Division, a document or matter is to be taken to be relevant to a fact in issue if it could, or contains material that could, rationally affect the assessment of the probability of the existence of that fact (otherwise than by relating solely to the credibility of a witness), regardless of whether the document or matter would be admissible in evidence." 11This definition is in identical form to the 1996 amendments to the Supreme Court Rules 1970 . 12Historically, it was thought that discovery ought be wider than the present rules provide for. 13In Mulley v Manifold (1959) 103 CLR 341, Menzies J said (at 345): "I now turn to the pleadings to determine what are the matters at issue between the parties, because discovery is a procedure directed towards obtaining a proper examination and determination of these issues - not towards assisting a party upon a fishing expedition. Only a document which relates in some way to a matter in issue is discoverable, but it is sufficient if it would, or would lead to, a train of inquiry which would, either advance a party's own case or damage that of his adversary." 14The restriction in r 21.2(4) which requires documents to be relevant to a fact in issue has eliminated, from available discovery under the UCPR, documents which fall within the "train of enquiry" category: See National Australia Bank v Idoport Pty Limited [2000] NSWCA 8 at [7] per Mason P and Priestley JA; Adelaide Bank Ltd v Property Builders Pty Ltd [2009] NSWSC 1147 at [32] per R.A. Hulme J. 15Mr Gillies' application for further discovery comes at a very late stage in the proceedings. It is therefore necessary, in exercising my powers under the rules to order discovery, for me to rule upon the appropriateness of each of the categories sought, even though the parties have agreed the scope of some of them.
Categories of Documents Sought on Discovery 16The first category sought is described in the following terms: "All payroll records relating to Mr Gillies from 1 July 1998 to 2 August 2007". 17I accept that the definition of a document which is relevant to a fact in issue is a broad one: See ACD Tridon v Tridon Australia Pty Ltd [2004] NSWSC 77 at [26] per Austin J. Nevertheless, a category expressed in a way that covers a period of slightly in excess of nine years runs the risk that it would not comply with rule 21.2(2), which provides that: "A class of documents must not be specified in more general terms than the Court considers to be justified in the circumstances." 18This is a statutory formulation which is capable of, and which does, limit the category of documents which may be the subject of an order for discovery, in order to reduce, but not eliminate, any issue of oppression: See Priest v State of New South Wales [2006] NSWSC 12 at [137] per Johnson J. 19The parties are agreed that this category ought be limited in the following way: "Payroll records which tend to prove or disprove the particular payments analysed in the affidavit of Mr Jeffrey Bruce sworn 2 March 2011." 20Specific payments can be identified by reference to particular paragraphs of that affidavit. I have read that affidavit and considered those payments. 21In my view all the payments are relevant to facts in issue. Accordingly, documents which relate to those payments and which tend to prove or disprove the payment are relevant to a fact in issue and it is appropriate that in accordance with the parties' agreement, a formal order for discovery in respect of this category is made. 22The second category of documents sought is described in these terms: "All documents relating to interest payments made by Mr Gillies on the car loan and all documents relating to payment and disclosure of fringe benefit tax in relation to the car loan." 23The car loan, and the payment of interest and fringe benefits tax in relation to it, are all matters in issue. 24The parties are agreed that Downer EDI should give discovery of documents falling within this category, but to exclude from that discovery any documents which solely concern the mechanism by which any payment of interest was made by the plaintiff, or fringe benefits tax was paid by the defendant. Examples of the documents excluded would be such things as cheque requisition forms and other "process documents". 25So limited, the documents sought in this category are relevant to a fact in issue. Proper discovery of them ought be given. I will fashion an appropriate order. 26The third category of documents sought, which is contentious, is described in this way: "All correspondence that passed between the ATO and Deloitte which responded to or related to, the ATO letter or any matter raised in the ATO letter." 27As a matter of context, the ATO letter described is a letter dated 15 May 2008 from Deloitte Touche Tohmatsu to the Australian Taxation Office, written by Deloitte on the instructions of Downer EDI. It constituted a voluntary disclosure by Downer EDI with respect to certain payments made to Mr Gillies. 28I have referred to this ATO letter at some length in an earlier judgment and do not think it necessary to repeat the matters which are there set out: See Gillies v Downer EDI Ltd [2010] NSWSC 1323. 29As the judgment makes clear, the ATO letter deals with matters which are relevant to the current proceedings: See [27]-[29]. 30The central feature of the ATO letter was the voluntary disclosure by Downer EDI to the Australian Taxation Office that it had not paid an amount of $318,525 by way of taxation deduction which it was obliged to do with respect to the bonus payments made to Mr Gillies. 31It is now conceded by Downer EDI that the sum of $318,525 has not been paid. 32The figure had been taken into account by Downer EDI's expert, Ms Jenny Wheatley, in a table at paragraph 131 of her report, as being a credit in favour of Downer EDI when calculating the balance of the retained bonus account presently held by Downer EDI, which belongs to Mr Gillies. 33In her amended report of 14 February 2011, Ms Wheatley says this: "137. Following a voluntary disclosure made by Deloitte to the ATO on 15 May 2008, PAYG withholding amendments were sought to be made in relation to the year ended 30 June 2003 to take into account additional bonus payments made to Mr Gillies from the 'retained bonus' account. 138. I am instructed that the amendments sought were not made by the ATO." 34In the second further amended defence and cross-claim, Downer EDI makes no reference to either a payment of $318,525 by it to the ATO, or alternatively, any debt which has accrued by which it owes that sum to the ATO, nor to any liability by way of a contingency to represent the fact that it may be called upon by the ATO to pay that sum. 35In light of the changed assertions of fact, Mr Gillies submits that he: " ... is entitled to know why it has not been paid ". 36He says: "23. The question of the amount of tax which should have been deducted and paid to the ATO is clearly of central importance to the plaintiff's claim for the recovery of money representing the amount to which the retained bonus account is in credit. If the defendant has not remitted tax on behalf of the plaintiff, then the plaintiff may be required to remit tax to the ATO out of any amount which is awarded in these proceedings. Accordingly, the question is plainly of importance in relation to the quantum of this part of the plaintiff's claim." 37As it seems to me, the principal issue to which the sum of $318,525 relates, and therefore the principal issue to which the requested documents in this discovery category go, is the balance of the retained bonus account. It is clear from the affidavit of Ms Wheatley of 14 February 2011 and the report which she attaches to it, that her reconciliation of the sum in the retained bonus account does not include the subject amount. Nowhere in her report is it suggested that Downer EDI is entitled to a credit, in whatever form, in its favour in respect of that sum. 38In light of the fact that Downer EDI no longer makes a claim in its favour for a credit of that sum, I do not think that it can be successfully argued, as Mr Gillies attempts to, that issues surrounding that sum remain relevant to facts in issue. 39I would not uphold the claim for discovery on this ground. 40As well as the submission to which I have just referred, Mr Gillies puts his claim for discovery of documents in this category on a second basis, namely, that he is entitled to know: "What response was made by the ATO to the ATO letter because the defendant has pleaded in its second further amended defence and cross-claim (see the defence at paragraphs 49(ii) and the cross-claim at paragraphs 9 and 10) that the defendant was exposed to fringe benefits tax liabilities in relation to unpaid interest payments, which matters were also the subject of the ATO letter." Downer EDI disputes the availability of this ground for discovery on the basis of relevance, but makes no specific submission about it. 41The second further amended cross-claim includes this pleading: "10. By reason of the matters pleaded in paragraphs 5 to 9 inclusive of this cross-claim, the plaintiff/defendant to the cross-claim has caused the defendant/cross-claimant to suffer loss and damage. Particulars (i) The defendant/cross-claimant has incurred or been exposed to: (a) $83,048 in respect of fringe benefits tax liability in relation to unpaid interest on the loan amount for the period 1 April 2004 to 31 March 2010; and (b) $26,072 in respect of general interest charges imposed by the Australian Tax Office on the late payment of fringe benefits tax liabilities for the years ended 31 March 2005 to 31 March 2010 in relation to the Loan Amount." 42Documents which relate to this issue are, notwithstanding the assertion of lack of relevance to the contrary in the submissions of Downer EDI, relevant to a fact in issue. I do not regard a request for discovery of documents relating to this pleaded cross-claim as being a fishing expedition. 43It is appropriate that Downer EDI give discovery of documents in this category limited in relevance to the issue which I have just identified. 44The fourth category of documents which Mr Gillies seeks by way of discovery is this: "All documents relating to the withholding and remittance of PAYB withholding tax from bonus payments made to Mr Gillies for the period 1 January 1998 to date." 45At the directions hearing on 1 April 2011, I was informed by senior counsel for Mr Gillies that he anticipated that a full and proper production of the documents in respect of the first category should cover documents in the fourth category. In those circumstances, he indicated that there was no reason to give any separate ruling on this particular category. 46I refrain from so doing. 47In summary, I have determined that it is appropriate for Downer EDI to give further discovery. 48Given the proximity of the hearing date to this order, it will be necessary for that discovery to occur promptly.
Orders (1) I order that pursuant to rule 21.2 of the Uniform Civil Procedure Rules 2005, on or before 4pm Friday 15 April 2011, Downer EDI is to give discovery to Mr Gillies of documents which fall within the following categories: (a) All payroll records which refer to, or which tend to prove or disprove, the following payments referred to in the affidavit of Mr Jeffrey Bruce sworn 2 March 2011: (i) $525,000 at paragraphs [10] and [16]; (ii) $77,670 at paragraph [14]; (iii) $61,538 at paragraphs [9] and [15]; (iv) $296,912 at paragraphs [11] and [17]; and (v) $821,000 at paragraph [19]. (b) All documents which refer to, or record, or which tend to prove or disprove, interest payments made by Mr Gillies to Downer EDI for, or in respect of, a car loan provided by Downer EDI to Mr Gillies, but excluding any documents which solely concern the mechanism by which any payment of interest was made by Mr Gillies. (c) All documents which refer to, or record, payments by and disclosures by Downer EDI of fringe benefits tax in relation to the said car loan, which were provided to, or else relied upon by, Ms Jenny Wheatley in the course of the preparation of any of her reports and affidavits in these proceedings, but excluding any documents which solely concern the mechanism by which any fringe benefits tax was paid by Downer EDI; (d) All documents, including correspondence, from and to the Australian Tax Office by Downer EDI or its agents, Deloitte Touche Tohmatsu, which refer to, or else tend to prove or disprove, that Downer EDI has incurred an expense of, or been exposed to the payment of, the monies pleaded by Downer EDI in paragraph 10(i)(A) and (B) of the second further amended cross-claim filed on 23 March 2011. (2) Costs in the cause. (3) Liberty to apply on 24 hours' notice.
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: 11 April 2011
Gillies
Downer EDI Limited