Gooley & Ors v Breda Pty Ltd & Ors

Plaintiffs: Chris Frawley, M & K Lawyers Group Pty Ltd Defendants: Jodi Walkom, Thomson Geer File Number(s): 2016/199780 Publication restriction: No

Judgment

1. This is the Court's second judgment in these proceedings. The Court's first judgment made orders for preliminary discovery under Uniform Civil Procedure Rules 2005 ("UCPR"), Rule 5.3 against the defendants in several of the categories sought in the Plaintiffs' Summons: Gooley v Breda Pty Limited [2017] NSWSC 817 ("the principal judgment").
2. In this judgment the Court deals with several residual issues that were argued on 30 August 2017: (1) the costs of the application; (2) the costs of providing the preliminary discovery ordered; and (3) the form of the orders to be made. Another incidental issue raised related to the timing of the giving of preliminary discovery; a matter commented on at the conclusion of these reasons. This judgment deals with each of these issues in turn.
3. These reasons should be read with the Court's principal judgment. Events, matters and persons are referred to in this judgment in the same way as they are in the principal judgment.

(1) The Costs of the Application

1. The parties contested three questions in relation to the costs of the application: (1) whether any costs order should be made at all; (2) whether or not the plaintiff was successful in the proceedings on a sufficient number of issues to warrant the making of a costs order in their favour; and, (3) whether a costs order should be made now, or whether the making of any costs order should await the outcome of any litigation commenced as a result of the production of documents on preliminary discovery.
2. (1) Should any costs order be made at all? It is suggested in some of the cases that a defendant is entitled to test the case of an applicant for preliminary discovery and that such proceedings are not truly adversarial and that costs should not necessarily follow the event: Totalise plc v Motley Fool Ltd [2003] 2 All ER 872.
3. But here, as in the situation facing Simpson J in Airways Corp of New Zealand & Anor v The Present Partners of Pricewaterhouse Coopers Legal & Anor [2002] NSWSC 521, the proceedings were hard fought. This matter was never conducted by the defendants as just a case of putting the plaintiffs to proof. The option existed of handing over the documents requested. Instead, every available argument was deployed against the application. The costs incurred were substantially the result of that active opposition. This is a preliminary discovery case where a costs order should be made.
4. (2) Did the plaintiffs have sufficient success? The plaintiffs contend they were substantially successful in the proceedings, with the Court ordering preliminary discovery in six out of the seven transactions that the plaintiffs seek to impugn; and as a result the plaintiffs say they should have the benefit of the usual order that the costs follow the event: UCPR, r 42.1.
5. In contrast, the defendants submit that there should be no order as to the costs of Summons for preliminary discovery. The defendants submit that this is the appropriate result given that: the plaintiff abandoned five of its applications under the Corporations Act 2001 (Cth), s 247A; the plaintiffs abandoned two applications for orders pursuant to UCPR, r 5.2; and the plaintiffs had incomplete success in their applications.
6. But the defendants' analysis takes too parsimonious a view of the plaintiffs' success. As the principal judgment shows, the proceedings were occupied with technical defences that in the end proved unsuccessful. The abandonment of the s 247A applications did not have a great impact on the proceedings, as they were always framed as alternative applications, relying upon substantially the same elements as the UCPR, r 5.3 application that did proceed. The abandoned UCPR, r 5.2 prayers involved some wastage of costs by the defendants but relatively little compared to the resources committed to the issues that were fought out and on which the plaintiffs were successful.
7. There were no clearly severable issues on which the defendants were successful. The assessment of costs should be approached on a global basis reflecting the plaintiffs' predominant success: Leading Edge Events Australia Pty Ltd v Kiri Te Kanawa (No 2) [2007] NSWSC 568 at [25] - [26] and Fexuto Pty Limited v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20, 22-24.
8. The defendants have had some success. But here an order that adequately reflects the plaintiffs' overall success is one in which the defendants pay 85% of the plaintiffs' costs of these proceedings. That order will apply to all the costs of the application for preliminary discovery including the present dispute about costs.
9. (3) A costs order made now or later? The plaintiffs submit that this Court should follow the approach to the timing of costs orders adopted in some cases decided in the Federal Court of Australia. In these cases, Cappuccio v Australia and New Zealand Banking Group Limited [1999] FCA 1188 (Burchett J), SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271 ("SmithKline") (Finkelstein J) and Newcrest Mining Limited v Apache Northwest Pty Limited (No. 2) [2008] FCA 1663 (Tracey J), judges have deferred or considered deferring the making of orders for compliance costs until the initiation and even the outcome of any proceedings commenced based on the documents produced.
10. But the defendants submit: that an order for compliance costs should not be deferred; and, that such costs ought not be treated as part of the costs of proceedings yet to be commenced. They contend, as Gyles J stated in relation to the equivalent Federal Court of Australia Rule, that an application for preliminary discovery "is a discrete application and may never lead anywhere. There is no reason why a party which is out of pocket because of costs should await some indefinite future event": C7 Pty Limited v Foxtel Management Pty Limited [2001] FCA 1864 at [50] ("C7"). McDougall J fully discussed these authorities in Steffen v Australia and New Zealand Banking Group Limited [2009] NSWSC 883 ("Steffen"). Ball J applied the approach of Gyles J in C7 in Andrews Advertising Pty Limited v Andrews [2011] NSWSC 244 at [56] - [57] ("Andrews") and made orders for the payment of costs in the preliminary discovery proceedings.
11. The approach taken by McDougall J in Steffen and Ball J in Andrews recognises the reality that the party gaining preliminary discovery may never commence proceedings and that it is better to deal with costs by making an order having immediate rather than contingent operation. In cases such as SmithKline the disadvantages of costs orders with contingent operation was sought to be addressed by formulating special orders: that if subsequent proceedings are commenced that the costs of the preliminary discovery application shall be at the discretion of the Court that hears that subsequent proceeding; and if no subsequent proceedings are commenced within a limited period of time then the applicant should pay the costs.
12. But slightly more certainty is desirable here than the SmithKline approach allows, especially where a range of documents created over many years is required to be discovered. In my view the appropriate course here is for a costs order to be made now but for it to be acknowledged that if subsequent proceedings are commenced that, depending upon their course and outcome, these costs orders may be varied by the court hearing the subsequent proceedings.

(2) The Costs of Compliance

1. The plaintiffs submit that no order for the payment of compliance costs should be made now. The defendants submit that the costs of compliance should be provided for by order immediately. For the reasons that follow the defendants' submissions are the more persuasive on this issue.
2. The Court has broad power to order the plaintiffs to compensate the defendants for the costs of complying with an order for preliminary discovery: Uniform Civil Procedure Rules (UCPR), r 5.8. The power extends to the making of orders "for the costs of…the person against whom the order is made": UCPR, r 5.8(1). And the costs in respect of which such an order may be made include "any expense or loss in relation to the proceedings" and "the costs of producing any document for inspection": UCPR r 5.8(2)(b) and(d).
3. The plaintiffs argue that making an order for compliance costs is premature and should be deferred until compliance has actually taken place. They argue: (1) that the defendants have not complied with any discovery as yet and therefore are not entitled to an order for compliance costs; (2) analogously with the operation of UCPR rr 21.13, 33.11, 34.3 and 42.33, compliance costs should not be ordered in any event until the parties have made a genuine attempt to seek agreement in respect of the amount of those costs, as was done in another preliminary discovery case, Yes Family Pty Limited v Sphere Healthcare Pty Ltd [2016] NSWSC 917 at [48] (White J); and (3) in other preliminary discovery cases orders for compliance costs have been deferred until the commencement of other proceedings based on the discovered materials.
4. But both analysis and the defendants' responses fully answer these various arguments. As to the plaintiffs' first and second arguments, the production of the documents ordered under preliminary discovery does not logically have to precede the making of an order for the recovery of reasonable compliance costs. Those costs cannot of course be quantified until production has taken place. But that does not mean that a general order for costs cannot be made before actual production. Recovery under such an order will be subject to the fulfillment of a number of conditions subsequent: that production takes place; proof that the costs the defendants incurred are actual costs of production; and proof that the costs incurred are reasonable.
5. The recovery of compliance costs for preliminary discovery has been said to be analogous to the recovery of costs of production by the recipient of a subpoena to produce documents: Airways Corp of New Zealand & Anor v The Present Partners of Pricewaterhouse Coopers Legal & Anor [2002] NSWSC 521 at [12]. This analogy founds the plaintiffs' argument that orders for the costs of production should not be made now: the plaintiffs say the Court should apply UCPR r 42.33 by analogy. UCPR r 42.33 states that before making orders for costs in favour of recipients of subpoenas and notices to produce (under UCPR rr 21.13, 33.11 and 34.3) the Court must be satisfied that "the parties concerned have attempted, but failed, to agree on the amount of costs to be paid".
6. Recipients of subpoenas will commonly be third parties who have not engaged lawyers. The object of UCPR r 42.33 is to restrain parties from unreasonable conduct and require them to negotiate about the burden of the costs of compliance with subpoenas and notices to produce, before escalating issues and troubling the Court with contested costs applications. The issuing party must be reasonable and negotiate. A third party producing documents must not simply engage lawyers and make an application for full costs including legal costs without attempting to minimise the overall burden of the costs of production. The Courts discourage unreasonable conduct in the issuing of subpoenas, such as the issuing party making no attempt to estimate the expenses of the producing party, or demanding compliance with the subpoena and requiring the producing party to engage a lawyer to recover costs: Foyster v Foyster Holdings Pty Ltd (in liq) [2003] NSWSC 881.
7. But after a contested application for discovery of documents under UCPR r 5.3 the situation will often be very different from the usual subpoena case to which UCPR r 42.33 applies, just as it is different here. The defendant will commonly already have engaged lawyers and will prefer the efficient course of dealing with costs at the same time as the principal orders for production are made; and, the defendant will already have a reasonable idea of the probable burden of the costs of production. It makes practical sense in this situation for the parties to deal with the costs of production, if they are not agreed in advance, at the same time as orders for production are finalized. Then the quantification of the costs of production can occur in the framework of an existing costs order. That is the course the Court will take here.
8. As to deferring the ordering of compliance costs, there is even less basis to defer the making of an order for the recovery of compliance costs than there is in relation to the recovery of the costs of the application. The Court will make an order now for the plaintiffs to pay the defendants' reasonable costs of complying with these orders for preliminary discovery.

(3) The Form of Orders

1. The parties disagree about the form of the orders to give effect to the reasoning of the principal judgment. To the extent that reasons are necessary, those disagreements are resolved briefly in this section, explaining the final form of orders at the end of this judgment.
2. As to the Schedule "A" documents, the financial statements of Breda for the years 2011 to 2014 will be ordered. The intent of the principal judgment expressed in [41] to [52] was that documents relation to the property transactions should be produced as they had been described in Schedule A. The dispute now about whether financial statements should be produced is simply answered by the plaintiffs' submission that such statements might disclose in relation to the subject property transactions the sale price, the disposal price, the recipient of any sale proceeds or the payment back of any sale proceeds.
3. The defendants dispute that a copy of the trust deed for the Dama Unit Trust should be provided as part of the Schedule B documents. The plaintiffs were given an opportunity during the hearing to ask in writing for this trust deed which request then went into evidence. The defendants now complain that the plaintiffs did not seek an adjournment to their Summons to formally seek relief in conformity with this written request. But the defendants can point to no prejudice were such an amendment now to be allowed. It would be surprising if there were any prejudice, given that the request for the trust deed was made during the hearing and the purposes of the request was unmistakeably to claim relief. The orders requested will be made without the need to amend the Summons further. Moreover, production of this document is within the meaning of [82] of the principal judgment.
4. In Schedule D the defendants seek to impose a temporal limitation of 10 years on the production of Bill's wills. This was based on the observations in [93] in the principal judgment. But the Court is persuaded that because it is uncertain when Bill may have lost testamentary capacity the period should be much longer but not unlimited. The time limit will be January 1992.
5. The balance of the settling of these orders does not require additional reasons.

Some Other Issues

1. The Assessment of Costs. This application was strongly contested. The events underlying the application are in some cases of considerable age. It is desirable for the parties now to avoid unnecessary arguments. There is potential for argument about the assessment of costs: both with respect to the costs of the application and with respect to the costs of compliance. Those arguments can be reduced by granting the parties liberty to apply for the making of a specified gross sum costs order under Civil Procedure Act 2005 s98(4)(c).
2. The principles for the making of specified gross sum costs orders instead of assessed costs are now well settled. Civil Procedure Act, s 98(4) (c) is expressed in general terms and is not limited to cases of a particular class or type: Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006 (Burchett J). The power to award a Civil Procedure Act s 98(4)(c) specified gross sum instead of assessed costs is exercised whenever circumstances warrant its exercise; the purpose of the rule is to avoid the expense, delay and aggravation arising out of taxation: Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119 (von Doussa J).
3. Such orders are not uncommonly made in situations, where the person or the entity against which costs orders have been made is not of financial substance and substantial further costs would be expended in assessing the costs orders so made: Hamod v New South Wales [2011] NSWCA 375 at [816] - [818].
4. This is not such a case. But jurisdiction is potentially apt here for other reasons. As a result of these reasons, there will be multiple costs orders between these parties. The resolution of costs issues has the potential to further aggravate what has already been strongly contested litigation, leading in turn to further delay in the making of decisions whether or not to commence substantive proceedings, based on the material produced on preliminary discovery.
5. Therefore the Court will grant the parties liberty to apply for the making of a gross sum costs order under Civil Procedure Act 2005 s98(4)(c). The Court has not decided it will make such an order, as that has not been argued. But the potential for such an order exists and either side may wish to apply to take advantage of the jurisdiction.
6. The Timing of Preliminary Discovery. It was of some concern to the plaintiffs that action upon some of the alleged transactions may become statute-barred whilst preliminary discovery was being given and the product of preliminary discovery being considered. But when the underlying transactions took place and whether any actionable transactions took place, is still essentially speculative until the documents are discovered. Preliminary discovery of the documents has been firmly contested; and actively contested on the basis that the plaintiffs have not demonstrated any actionable claim for relief and even after judgment on the basis that the plaintiffs should not have the documents as quickly as they requested.
7. If it were to emerge that any claims for relief that the plaintiffs may have been able to maintain, either against the defendants or through the defendants, have become statue barred whilst the defendants were actively opposing the production of documents in their possession that establish the existence of such claims for relief, the plaintiffs may well have a compelling argument for extension of any otherwise applicable limitation period on the grounds of active concealment of the cause of action: see Limitation Act 1969 s55, JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed 2014, LexisNexis Butterworths), Chapter 36, [36-100], [36-105], [36-110] and [36-115].
8. The orders made with these reasons provide for relatively short timeframes for the giving of discovery, given the defendants have been on notice as to the general nature of the orders that will be made, ever since the Court delivered the principal judgment on 22 June 2017.
9. Liberty to Apply. It is desirable for the parties to move to the next stage - with the plaintiffs deciding either to commence or not to commence proceedings of the kinds foreshadowed - sooner rather than later. Any incidental issues arising out of the giving of discovery should be resolved by a convenient mechanism to which both sides have ready access. Liberty to apply on three days' notice to my Associate will be granted. The parties need to be able to come back to the same judge who determined the principal issues to resolve any consequential issues: as to whether adequate preliminary discovery has been given and as to the costs of the preliminary discovery.

Conclusions and Orders

1. For the reasons given the Court makes the following orders and directions: 1. The first (Breda), sixth (Melville), seventh (Melinda) and eighth (Aleta) defendants provide preliminary discovery to the plaintiffs of the documents identified in Schedule "A" to these orders by 5.00pm on 15 November, 2017. 2. The third (Dama) and eighth (Aleta) defendants provide preliminary discovery to the plaintiffs of the documents identified in Schedule "B" to these orders by 5.00pm on 15 November, 2017. 3. The fourth (Barton Press) and sixth (Melville) defendants provide preliminary discovery to the plaintiffs of the documents identified in Schedule "C" to these orders by 5.00pm on 15 November, 2017. 4. The fifth (Goold) and seventh (Melinda) defendants provide preliminary discovery to the plaintiffs of the documents identified in Schedule "D" to these orders by 5.00pm on 15 November, 2017. 5. Grant liberty to apply on three days' notice in relation to the implementation of these orders and in relation to any incidental issues arising out of the giving, and the cost of giving, the preliminary discovery ordered; 6. The liberty to apply granted in (5) and (10) may be exercised by notifying the other party and my Associate. 7. Order the defendants to pay 85% of the plaintiffs' costs of these proceedings including the costs of the argument on 30 August 2017. 8. Order the plaintiffs to pay the defendants' reasonable costs of compliance with these orders for preliminary discovery. 9. Note these costs orders are final enforceable orders but that if proceedings are commenced as a result of the production of the documents the subject of orders (1) to (4) that, upon the outcome of those proceedings, any party to those proceedings may seek relief in the form of compensation or indemnity or costs orders, to reverse or change the effect of the costs orders made here. 10. Grant liberty to apply until 8 December 2017 in relation to the form of these orders.

Schedule A

1. In this schedule: "document" has the meaning given to it in the Dictionary to the Evidence Act 1995 (NSW). "Breda" means Breda Pty Ltd. "Finbob" means Finbob Pty Ltd as trustee of the KB Trust. "Goold" means Goold Enterprises Pty Ltd. "Naladon" means Naladon Pty Ltd. "Melinda" means Melinda Louise Foley. "Janine" means Janine Ruth Gooley. "Aleta" means Aleta Joy Gooley, also known as Aleta Joy Kinsella. "Dr Gooley" means Dr Brett Raymond Gooley. "Melville" means Melville William Gooley. "Breda Share Issue" means the issue of 45,599 shares to Goold, 800 shares to Naladon, 800 shares to Melinda, 800 shares to Janine Ruth Gooley and 800 shares to Aleta in Breda.
2. Categories of documents: 1. The share register of Breda. 2. All financial statements of Breda in respect of the financial years 2011 to 2014. 3. All sale contracts and transfers recording the acquisition or disposal of any real property in respect of which Breda is or was the registered proprietor during the period from 2011 to 2014. 4. All documents recording or referring to the cancellation of the 48,799 shares held by Finbob. 5. All documents recording or referring to the Breda Share Issue. 6. All documents recording or referring to the payment, or agreement to pay, by the recipients the shares issued pursuant to the Breda Share Issue. 7. All documents recording the payment of any principal, whether as alleged to be in the amount of $860,396.26 or otherwise, by Breda to the Gooley Family Trust No. 4 or its trustee for the period 1 January 2011 to date. 8. All documents recording the payment of any principal, whether as alleged to be in the amount of $860,396.26 or otherwise (and any interest) by the Gooley Family Trust No. 4 or its trustee to Breda for the period 1 January 2011 to date. 9. A copy of the trust deed for to the Gooley Family Trust No. 4. 10. A copy of any loan agreement between Breda and to the Gooley Family Trust No. 4 for the period 1 January 2011 to date.

Schedule B

1. In this schedule: "document" has the meaning given to it in the Dictionary to the Evidence Act 1995 (NSW). "Aleta" means Aleta Joy Gooley, also known as Aleta Joy Gooley Kinsella. "Breda" means Breda Pty Ltd. "Dama" means Dama Enterprises Pty Ltd. "Dama Share Issue" means the issue of 9900 shares in Dama to Aleta. "Dama Share Transfer" means the transfer of 98 shares in Dama from Breda to Aleta Gooley.
2. Categories of documents: 1. The constitution of Dama. 2. The share register of Dama. 3. All documents, including share transfers, recording or referring to the Dama Share Transfer. 4. All documents recording or referring to the payment, or agreement to pay, by Aleta to Breda for the Dama Share Transfer. 5. All documents recording or referring to the issue of 9900 shares in Dama to Aleta. 6. All documents recording or referring to the payment, or agreement to pay, by Aleta to Dama for or in respect of the Dama Share Issue. 7. A copy of the trust deed for to the Dama Unit Trust.

Schedule C

1. In this schedule: "document" has the meaning given to it in the Dictionary to the Evidence Act 1995 (NSW). "Barton Press" means Barton Press Pty Ltd. "Connell House" means the property located at 347-357 Port Hacking Road, Caringbah NSW 2229.
2. Categories of documents: 1. The constitution of Barton Press. 2. All documents, in the period 1 January 2014 to date, recording or referring to the payment of the proceeds from the sale of Connell House to any person or entity. 3. All documents, in the period 1 January 2014 to date, recording or referring to payments to Barton Press from the recipient of the proceeds from the sale of Connell House. 4. Any loan agreement between Barton Press and the recipient of the proceeds from the sale of Connell House.

Schedule D

1. In this schedule: "document" has the meaning given to it in the Dictionary to the Evidence Act 1995 (NSW). "Goold" means Goold Enterprises Pty Ltd. "Melinda" means Melinda Louise Foley, also known as Melinda Louise Gooley. "Melville" means Melville William Gooley.
2. Categories of documents: 1. The constitution of Goold. 2. The share register of Goold. 3. All documents, including share transfers, recording or referring to the transfer of 990 shares in Goold from Melville to Melinda. 4. All documents recording or referring to the payment, or agreement to pay, by Melinda to Melville Gooley for the 990 shares in Goold. 5. All documents recording or referring to the transfer of 10 shares in Goold from Melville to Melinda. 6. All documents recording or referring to the payment, or agreement to pay, by Melinda to Melville for the 10 shares in Goold. 7. Melville's current will, as well as any superseded wills created on or after, or bearing a date on or after, 1 January 1992. 8. All documents recording the payment of any principal, whether as alleged to be in the amount of $860,396.26 or otherwise by Breda to Goold for the period 1 January 2011 to date. 9. All documents recording the payment of any principal, whether as alleged to be in the amount of $860,396.26 or otherwise (and any interest) by Goold to Breda for the period 1 January 2011 to date. 10. A copy of any loan agreement between Breda and Goold for the period 1 January 2011 to date.

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: 06 November 2017