Gorczynski v W & FT Osmo Pty Limited

The plaintiff's version of the legal proceedings

1. The plaintiff has been involved in proceedings in the Land and Environment Court ("the LEC proceedings") and the current proceedings in this Court. This is the plaintiff's version of the events that led to and the proceedings in the Land and Environment Court.
2. The plaintiff asserts that what gave rise to these proceedings was that the local Council ("the Council") declared the plaintiff's neighbour's building works to be illegal and initially issued a demolition order. However, they later informed the neighbour that the orders would be withdrawn if he could provide a report/certification from a properly qualified and insured engineer that the works and structures complied with building codes and were structurally sound and stable.
3. The plaintiff's neighbour engaged Mr Osmo (of Osmo & Associates Pty Ltd), qualified engineer, who claimed to have professional indemnity insurance with QBE Insurance ("QBE"). Mr Osmo was also a private certifier registered with the NSW Government's Building Professionals Board.
4. Mr Osmo provided the Council with several reports and certifications. The plaintiff alleges that each successive report and certificate contained statements which were false. Mr Osmo issued his reports and certifications on the letterhead of "Osmo & Associates Pty Ltd" between May 1999 and July 2000, his last one having been issued in July 2000 after the LEC proceedings were commenced.

The LEC proceedings

1. The LEC proceedings were commenced by the plaintiff in January 2000 against his neighbours after the Council withdrew the demolition orders and instead issued building certificates allowing the structures to stay in place. The building certificates were stated as having been issued in reliance on Mr Osmo's reports and certifications. Mr Osmo was not a party to the proceedings as he was his neighbour's expert.
2. During the LEC proceedings, the Court decided to appoint its own expert engineer, Mr Gleeson, to independently determine the true state of the building works based on a set of five questions (terms of reference) that had been agreed between the parties. The questions were submitted to Mr Gleeson in September 2000. By this time the plaintiff's neighbour had ceased relying on Mr Osmo as its expert in the proceedings and had appointed someone else.
3. In October 2000, when Mr Gleeson released his findings, Osmo & Associates Pty Ltd's name had been changed to "W & FT Osmo Pty Ltd" and Mr and Mrs Osmo and Mr Topolinsky had registered a new company, "TOP Consulting Group Pty Ltd".
4. The plaintiff was ultimately successful in obtaining the relief that he had sought in the LEC, after the subject building works and structures were found by Mr Gleeson to be defective, and non-compliant with building codes. These findings were contrary to Mr Osmo's certifications.
5. As was set out in paragraph [4] in Gorczynski v W & FT Osmo Pty Ltd [2010] NSWCA 163, it is not alleged in the current statement of claim in this Court that on 6 February 2003, the Land and Environment Court (Cowdroy J) ordered the neighbours to pay the plaintiff's costs of the proceedings but made no order for costs as between the plaintiff and the Council.

The current proceedings in this Court

1. In Gorczynski v W& FT Osmo Pty Ltd [2010] NSWCA 163, Tobias JA (with whom Giles and McColl JJA agreed), summarised the pleading in the statement of claim filed in the District Court on 5 May 2006 at [3] as follows. "By Statement of Claim filed in the District Court on 5 May 2006 the plaintiff sued Osmo, a firm of consulting structural and civil engineers, alleging the follows. • That in or about 1999 Osmo was retained by neighbours of the plaintiff (the neighbours) to provide various certificates (the certificates) to the Leichhardt Municipal Council (the Council) with respect to certain construction works relating to a building (the building) located at the rear of the neighbours' property which was attached and/or adjacent to a building on the plaintiff's property. • Between 4 May 1999 and 9 October 1999 and pursuant to s 149D of the Environmental Planning and Assessment Act 1979 (the EP&A Act) Osmo issued the certificates to the Council. In reliance upon the certificates, on 25 October 1999 the Council granted Building Certificates retrospectively authorising the construction of the building. • Osmo owed a duty of care to the plaintiff with respect to the issuing of the certificates which it breached as a consequence whereof the plaintiff suffered damage. • That damage was constituted by the costs incurred by the plaintiff in commencing (on 24 January 2000) and prosecuting proceedings (the proceedings) in the Land and Environment Court against the neighbours and the Council for the purpose of obtaining an order that the building work, the subject of the certificates, be demolished. • As a consequence of the institution of the proceedings, the Council issued an order on 8 March 2001 pursuant to s 121B of the EP&A Act for the demolition of part of the building. • On 27 June 2002 the Land and Environment Court ordered the demolition of those parts of the building which had not been demolished pursuant to the Council's order of 8 March 2001."
2. Tobias JA also stated at [5] and [6]: "5 Osmo elected not to defend the proceedings in the District Court as a consequence whereof on 7 July 2006 default judgment was entered against it in favour of the plaintiff, the question of damages being stood over for later assessment; the amount of damages claimed by the plaintiff was $316,816.77. 6 On 17 November 2008 the matter was transferred to the Supreme Court upon the basis that the damages then claimed by the plaintiff exceeded the amount of $750,000 being the jurisdictional limit of the District Court (the principal proceedings)."
3. By letter dated 4 July 2006, Mr Robert Ebner, solicitor, advised that he was acting for the company and that "our client has never acted for your client and denies liability to your client; that the company was insolvent; was about to be wound up and it did not intend to file a defence and your client proceeds at his own risk."
4. On 7 July 2006, in the absence of a defence and appearance by the defendant, the District Court entered default judgment and ordered that damages were to be assessed.
5. In 2009, these proceedings were transferred from the District Court to this Court after the plaintiff filed his affidavit evidence as to quantum that re-estimated damages at over $1 million.
6. Sometime in 2009, the plaintiff filed a notice of motion seeking to join the defendant's company's insurer, QBE. Simpson J dismissed the notice of motion. In Gorczynski v W & FT Osmo Pty Limited [2010] NSWCA 163, the Court of Appeal dismissed the appeal.
7. The plaintiff is now seeking, some 12 years after filing the statement of claim, preliminary discovery in order to investigate whether he has causes of action against third parties named in the amended notice of motion. If he decides that he does have causes of action against third parties, he will seek leave of the Court to amend his statement of claim.
8. While there is an order that damages are to be assessed, it is difficult to ascertain how it is that the plaintiff is owed a duty of care arising out of the neighbours' expert's report prepared by W & FT Osmo Pty Ltd in circumstances where the Land and Environment Court did not accept that evidence. However, as the plaintiff's counsel emphasised, the test that is applicable on preliminary discovery (the subject of this judgment) is an undemanding one.

The plaintiff's general submissions

1. On 26 May 2017, the plaintiff says that he informed the Court of his intention to seek leave to amend his statement of claim joining the defendant's directors personally (Mr and Mr Osmo) as further defendants and to make claims against Mr and Mrs Osmo (and now their estates and their personal representatives the second and third respondents), arising from their conduct.
2. Counsel for the plaintiff submitted that such claims may include fraud, insolvent trading, phoenix activity and various other breaches of the Corporations Act that may likely result in a company director (or his/her estate) being held personally liable for any damages and loss incurred by the company and also caused to other persons such as the plaintiff and referred to ss 1.5.5, 528 and 588J of the Corporations Act.
3. The plaintiff has summarised the result of his inquiries to date in his affidavits, drawn from the information that he has been able to obtain from other sources. However, he says that this information is insufficient to allow him to decide whether to proceed with an application to amend the statement of claim.
4. On 21 February 2018, the solicitors acting for the second and third respondents wrote to this Court stating that "...our clients have received various letters from the plaintiff insinuating that the plaintiff has, or will join the estate as defendants in these proceedings yet we have not been served with any court documents".
5. The plaintiff asserts that he was, and is, unable to proceed with properly formulating any proposed amended statement of claim due to the refusal by the respondents to answer his requests for information and produce documents that they have or have had possession of or which were under their control. The plaintiff considers that he may also have grounds to join the fifth respondent for similar causes of action as those against Mr and Mrs Osmo.

The law on preliminary discovery

1. UCPR 5.3. and 5.4 read: "5.3 Discovery of documents from prospective defendant (cf Federal Court Rules, Order 15A, rules 6, 7 and 9) (1) If it appears to the court that: (a) the applicant may be entitled to make a claim for relief from the court against a person (the prospective defendant) but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and (b the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and (c) inspection of such a document would assist the applicant to make the decision concerned, the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person's possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief. (2) An order under this rule with respect to any document held by a corporation may be addressed to any officer or former officer of the corporation. (3) Unless the court orders otherwise, an application for an order under this rule: (a) must be supported by an affidavit stating the facts on which the applicant relies and specifying the kinds of documents in respect of which the order is sought, and (b) must, together with a copy of the supporting affidavit, be served personally on the person to whom it is addressed. (4) This rule applies, with any necessary modification, where the applicant, being a party to proceedings, wishes to decide whether or not to claim or cross-claim against a person who is not a party to the proceedings. 5.4 Discovery of documents from other persons (cf Federal Court Rules, Order 15A, rule 8) (1) The court may order that a person who is not a party to proceedings, but in respect of whom it appears to the court that the person may have or have had possession of a document that relates to any question in the proceedings, must give discovery to the applicant of all documents that are or have been in the person's possession and that relate to that question. (2) Unless the court orders otherwise, an application for an order under this rule: (a) must be supported by an affidavit stating the facts on which the applicant relies and specifying the kinds of documents in respect of which the order is sought, and (b) must, together with a copy of the supporting affidavit, be served personally on the person to whom it is addressed."
2. In addition, the plaintiff relies upon the inherent jurisdiction of this court and upon s 86 of the Civil Procedure Act 2005 (NSW). It reads: "86 Orders (cf Act No 52 1970, section 21; Act No 9 1973, section 6; SCR Part 1, rule 11A) (1) The power of the court to make orders in relation to proceedings, whether under this or any other Act or otherwise, includes the power: (a) to make orders by way of leave or direction, and (b) to make all or any orders on terms. (2) The power of the court to make orders on terms is taken to be a power to make orders on such terms and conditions as the court thinks fit. (3) Subject to this Act and to rules of court, the court may make any order that it has power to make either of its own motion or on the application of a party or any other person entitled to make such an application. …"
3. The parties relied upon Wright Medical Australia Pty Limited v Johnston [2017] NSWSC 761 ("Wright Medical") and Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2008] FCAFC 133 ("Optiver"). Counsel for the plaintiff stressed that the tests under UCPR 5.3 and 5.4 are undemanding. I accept that UCPR 5.3 and UCPR 5.4 refer to documents that a person may have or had "possession" of and therefore includes identification of documents that they may have had in the past. Section 3 of the Civil Procedure Act defines "possession" as including "custody" and "power".
4. In Wright Medical, the short facts are that Mr Johnston and Mr Ryan had been employed by Wright Medical. They signed contracts of employment. Each contract contained non solicitation, a non competition and a confidential information clause. Wright Medical is the Australian arm of Wright Medical Group, a global medical device company specialising in the design, manufacture and marketing of orthopaedic surgical devices for extremities and biologics.
5. While employed by Wright Medical, Mr Ryan and Mr Johnston registered a company CAB, to import medical devices and distribute them in Australia. They resigned from their employment with Wright Medical in March 2016 and became employees of CAB shortly after. Wright Medical sought preliminary discovery of documents concerning their new business and details, their customers for the period from 30 September 2015 to dates in June 2016. The defendants agreed to provide narrower categories of documents for a shorter period of time.
6. In Wright Medical, Hallen J referred to Optiver. At [59] to [63] his honour stated: "59. In Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2008] FCAFC 133, which concerned the [then] relevantly identical Federal Court Rule, the full Federal Court stated at [36]: "… The policy behind the rule is that even where there is a reasonable cause to believe that a person may have a right to relief, nevertheless that person may need information to know whether the cost and risk of litigation is worthwhile. As Hely J pointed out in St George Bank Ltd v Rabo Australia Ltd (2004) 211 ALR 147 at [26], the question does not concern the right to relief but rather 'whether to commence proceedings'. Inspection of documents in the possession of the proposed defendant may enable a properly informed decision to be made whether to commence a proceeding to obtain the relief. The 'bare pleadable case' approach diverts attention from the true purpose of the rule. A person may have a pleadable case, but still not sufficient information upon which to decide whether to embark upon litigation …" 60. Another object is "….to avoid the commencement of 'speculative suits' and, instead, 'to advance the administration of justice [by enabling] a prospective plaintiff ... to make an informed decision whether to proceed or not upon proper material before issuing his proceeding": BJ Bearings Pty Ltd v Whitehead [2016] VSC 44 at [19]. 61. There was no dispute that the Plaintiff's application was supported by an affidavit stating the facts on which the Plaintiff relied, and that it specified the kinds of documents in respect of which the order is sought, and that the application, together with a copy of the supporting affidavits, had been served personally on the person to whom it is addressed. 62. Thus, it is necessary to consider, before the Court will order preliminary discovery, whether the application satisfies the three threshold requirements of UCPR rule 5.3(1), namely, (a) the applicant may be entitled to make a claim for relief from the court against a person (the prospective defendants) but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against them; (b) the prospective defendants may have, or have had, possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief; and (c) inspection of such a document would assist the applicant to make the decision concerned. 63. Each of the prerequisites set out in rule 5.3(1) must be satisfied before the discretion is enlivened. Even then, the scope of preliminary discovery which may be ordered in the exercise of discretion with respect to any of the potential claims cannot exceed those documents that relate to the question whether or not the applicant is entitled to make a claim for relief."
7. His Honour continued at [65]: "65. In RinRim Pty Limited v Deutsche Australia Limited [2013] NSWSC 1762, I wrote, at [38] - [49]: "The evident purpose of the rule is to enable a prospective litigant (the applicant) to obtain documents, or things, that may assist in making a decision whether to commence proceedings. That purpose would be defeated if the applicant were required to demonstrate, at the time of the application, the existence of a claim for relief as a condition to the exercise of the Court's jurisdiction. The possible existence of a claim, not the probability of the claim being established at trial, is the relevant consideration."
8. Hallen J stated at [108]: "108 …, preliminary discovery should only be given by each of the Defendants in respect of the extent of any breach of the type referred to by the Plaintiff. It should also go to the question of the quantum of any damages to which the Plaintiff may be entitled. Any discovery of documents should be limited to these issues, remembering that no more than that which is necessary, to overcome the insufficiency of information already possessed by the Plaintiff to enable a decision to be made whether to commence a proceeding, should be ordered."
9. The result in Wright Medical was that the plaintiff had to revise its categories with more precision. The parties were then to provide either agreed or competing draft orders as to the terms of preliminary discovery.

Evidence on this application for preliminary discovery for second, third and fourth respondents

1. Ms Meyer the third respondent and Mr Ebner the fourth respondent have provided affidavits. Ms Myer's affidavit refers to information concerning her sister Michelle Hale. Both affidavits provide information as to the companies named (in addition to the current defendant) and the possible whereabouts of some of the documents. Their affidavit evidence is similar.

The affidavit of Robert Ebner

1. Mr Robert Ebner relied upon his affidavit dated 13 April 2018. He was not required for cross examination. Mr Ebner deposes that he is a solicitor and senior consultant to the firm & Legal, who are also the solicitors for Ms Hale and Ms Meyer in their capacity as executor of the estate of the late Toni Osmo.
2. Mr Ebner deposes that & Legal does not act for the estate of the late Toni Osmo. Mr Ebner's former firm, Denes Ebner, initially acted for the defendant in relation to these proceedings. The defendant ceased to instruct him in about 2006, which was before he joined & Legal in 2013. & Legal has never been the solicitors on record for W & FT Osmo Pty Ltd in these current proceedings.
3. Neither Mr Ebner nor & Legal have received any books and records of W & FT Osmo Pty Ltd from Rosen Partners nor are there any books and records of W & FT Osmo Pty Ltd in Mr Ebner's custody, possession or control. So far as Mr Ebner is aware, any of its books and records are most likely to be located at the offices of Rosen Partners, Accountants and Registered Tax Agents at XX Bronte Road, Bondi Junction, being the registered address of the company.

Top Consulting Group Pty Ltd (in liquidation)

1. TOP Consulting Group Pty Ltd (ACN 094 569 923) was deregistered on 14 January 2015. Mr Ebner does not have access to or control over the books and records of TOP Consulting Group Pty Ltd and does not know what has become of them. These records have been disposed of as revealed by Mr Topolinsky later in this judgment.

Top Consulting Group (NSW) Pty Ltd

1. Top Consulting Group (NSW) Pty Ltd (ACN 156 071 706) has its registered office at Level 1, Suite 6, XX Norton Street, Leichardt NSW 2040. Mr Vadim Topolinsky is its director and secretary. Mr Ebner is not in possession, custody or control of the books and records of TOP Consulting Group (NSW) Pty Ltd and does not know their whereabouts. Mr Topolinsky explains that he has them.

Top Consulting OSMO Group Pty Ltd

1. Neither Mr Ebner nor & Legal have ever acted for TOP Consulting OSMO Group Pty Ltd or for Vadim Topolinsky. Nor have they acted for Mr Morelli in his capacity as liquidator of TOP Consulting OSMO Group Pty Ltd or otherwise. Mr Ebner does not have any books or records of TOP Consulting OSMO Group Pty Ltd in his possession, custody or control. So far as he is aware, Mr Morelli is the most likely person to have possession, custody and control of the books and records of TOP Consulting OSMO Group Pty Ltd as he has control of its affairs in his capacity as its liquidator.
2. Mr Ebner denies that he has "deliberately frustrated" the conduct of the proceedings. He is not a party to the proceedings and does not believe that the plaintiff is entitled to the information he has sought nor do does Mr Ebner have control, possession or access to the records sought.

Tammy Meyer

1. Ms Meyer relied upon her affidavit dated 13 April 2018. She was not required for cross examination. She is an executor of the estate of the late William Osmo. Her evidence is as follows. An ASIC Current Organisation Extract obtained on 11 April 2018 for the defendant shows the director and secretary as William Osmo and the shareholders as William Osmo and Toni Osmo. William Osmo died on 17 July 2017. Toni Osmo died on 15 April 2014.
2. On 3 October 2017, probate of the estate of the late William Osmo was granted to Ms Hale and herself. Probate has not been granted with respect to the estate of the late Toni Osmo.
3. She denies that she, Ms Hale or Mr Ebner have "deliberately frustrated" the conduct of the proceedings. She does not believe that the plaintiff is entitled to the information he has sought. She says that she has not dissipated the assets of the defendant or the estate nor destroyed any records of the defendant or the estate.
4. So far as TOP Consulting OSMO Group Pty Ltd, she says that the most likely person to have control of the records is the liquidator.

W & FT Osmo Pty Ltd

1. Ms Meyer's evidence is similar to Mr Ebner's (with the exception of TOP Consulting OSMO Group Pty Ltd). She does not have access to or control of the book and records of any of them. So far as she and Ms Hale are aware, no person is willing to assume the role of director or secretary of W & FT Osmo. W & FT Osmo is not trading.
2. Ms Meyer, Ms Hale and Mr Ebner all say that they do not have access to or control over the books and records of W & FT Osmo Pty Ltd. Ms Meyer and Ms Hale do not know what has become of them. So far as Ms Meyer is aware, any of its books and records are most likely to be located at the offices of Rosen Partners, Accountants and Registered Tax Agents at XX Bronte Road, Bondi Junction, being the registered address of the company. Mr Ebner's evidence on this topic is the same.
3. While Mr Ebner and Ms Hale say that the books and records of W & FT Osmo Pty Ltd are most likely to be located at the accountants, the plaintiff has provided evidence to the contrary.
4. The plaintiff in his affidavit dated 27 March 2018, deposes to a conversation he had with Mr Lisica, a partner at the accountants' office in Bondi Junction, at 4.15 pm on 23 March 2018. At [14] and [15] of his affidavit he says: "14. … Lisica I'm one of the partners here. How can I help you? Me I'm enquiring about a company called W & FT Osmo Pty Ltd that was owned by Mr William Osmo and his wife. I have some court papers out in my car that I need to serve at the company's registered address. Lisica This is the right address but we sent all the files to the company's solicitor after Mr Osmo died. You can leave the papers here and we'll send them on to the solicitor, Bob Ebner. Me Would that be Robert Ebner, whose office is in Double Bay? Lisica Yes, that's him. Me If you're going to send the papers to him anyway, I might as well deliver them myself. Thanks for your help. Good-bye. 15. I then returned to my car (which was parked directly across the street) and, after further thought, I decided to leave the papers at the company's registered address. I then went back into the premises and had a brief conversation with Ronnie to the following effect:- Me I've decided that it's probably best if I leave the papers here. Ronnie That's OK. We'll send them to the solicitor. Me Thanks. Here you are. 15.1 I then handed Ronnie the bundle of documents, being my covering letter addressed to the Defendant together with the sealed copy of the Amended Notice of Motion, the sealed copy of my Affidavit dated 20 March 2018."
5. As stated earlier, there is a factual dispute between the plaintiff and the second to fourth defendants. The plaintiff's evidence is that he was told by a partner of the accountants that the documents of W & FT Osmo Pty Ltd were sent to Mr Ebner after Mr Osmo died, i.e. after 17 July 2017. However, Mr Ebner's evidence is that as at 13 April 2018 (the date of swearing his affidavit) he has not received them. I am not in a position to resolve this factual dispute. Even though the plaintiff submitted that I should make a Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 inference against the respondents, in this application for preliminary discovery they were not under any obligation to call Mr Rosen to give evidence. In these circumstances it is not appropriate to make such an inference.

Preliminary discovery as sought in the amended notice of motion

1. I shall deal with each paragraph or paragraphs of the amended notice of motion in turn.

Paragraphs 3 and 4 of the amended notice of motion

1. Paragraph 3 of the amended motion seeks an order that the second and third respondents provide the plaintiff with details of the whereabouts of the books and records relating to the "examinable affairs' of W & FT Osmo Pty Ltd as defined in s 9 of the Corporations Act.
2. Paragraph 4 of the amended motion seeks an order that the second and third respondents produce the company's records to the plaintiff.

The second and third respondents' submissions

1. The Corporations Act does not confer jurisdiction on the Court to make an order in the terms sought in paragraphs 3 or 4 of the motion. The plaintiff in his written submissions in reply clarified that he is not seeking relief under Division 5.9 of the Corporations Act and the reference to s 9 was done as a convenient means of making it clear as to the nature and categories of documents that are being sought for discovery.
2. Counsel submitted that an order that the second and third respondents provide an affidavit in relation to the location of W & FT Osmo Pty Ltd documents or requiring them to produce the company's documents would be otiose. This is because the second and third respondents have already stated on oath that so far as they are aware, any such books and records are not in their possession. They have deposed to their belief as to their likely whereabouts (Aff, Meyer 13 April 2018 at [6]; Aff, Ebner 13 April 2018 at [4]).

Conclusion

1. As I set out earlier, there is a factual dispute as to the location of the documents of W & FT Osmo Pty Ltd, a dispute I am unable to resolve.
2. It is my view, that unlike the situation in Wright Medical, the plaintiff has not sought to confine the orders for disclosure, discovery and production of documents to a defined period of time, nor identified the particular types of documents he requires. He requires books, financial records and the examinable affairs of the companies as defined in s 9 of the Corporations Act. These definitions are wide. No attempt has been made to specify categories of documents. The second, third and fourth respondents have provided information as to the likely whereabouts of the documents. As they do not have or have had them in their possession, they cannot produce them.
3. It is noted that the defendant in these current proceedings is W & FT Osmo Pty Limited, so the plaintiff could issue a properly drafted subpoena to both the solicitor and the accountants.
4. The second, third and fourth respondents do not have to provide preliminary discovery as set out in paragraph 3 and 4 of the amended notice of motion.

Paragraph 5 - preliminary discovery

1. Paragraph 5 of the amended motion seeks an order pursuant to UCPR 5.3 and 5.4 that the second and third respondents or the executors' solicitor Mr Ebner, the fourth respondent, give discovery to the plaintiff in relation to the "business affairs" (as defined by s 9 of the Corporations Act) of William Osmo and Toni Osmo and of any company of which they were directors and/or members. I have already referred to the factual dispute between the plaintiff and Mr Ebner and Ms Meyer as to the whereabouts of the company's documents.

Second, third and fourth respondents' submissions

1. Counsel submitted that an order for the discovery of documents of any companies of which the late William Osmo and the late Toni Osmo were directors and/or members would be otiose. Both the second and third respondents have already given evidence on oath in this regard to the effect that they have no such records in their possession and they have deposed to their belief as to the likely whereabouts of such records. (Aff, Meyer 13 April 2018 at [6] to [9]; Aff, Ebner 13 April 2018 at [4] to [7]).
2. Counsel for the second, third and fourth respondents submitted that TOP Consulting Group Pty Ltd (ACN 094 569 923) was deregistered on 14 January 2015. (Aff, Meyer 13 April 2018 at [7]. Vadim Topolinsky was the director and secretary of TOP Consulting Group. (Aff, Meyer 13 April 2018 at [8]; and Mr Bradd William Morelli was appointed as liquidator of TOP Consulting OSMO Group Pty Ltd (ACN 156 642 554) on or about 26 September 2017. (Aff, Meyer 13 April 2018 at [9]).
3. The Court's discretion to order preliminary discovery under UCPR 5.3(1) or 5.4(1) is not enlivened against the respondents because the requirements of UCPR 5.3(1)(b) and 5.4(1) are not met in that the second, third and fourth respondents do not have or have had possession of a document or thing that can assist in determining whether or not the plaintiff is entitled to make a claim for relief. Even if the respondents had documents in their possession that might enliven the Court's discretion to order preliminary discovery, no such order should be made because the plaintiff has not identified any cause of action he may have against the prospective defendants pursuant to UCPR 5.3. This submission is incorrect as the plaintiff has identified fraud and insolvent trading as possible causes of action.
4. According to counsel for the respondents no order for preliminary discovery should be made pursuant to UCPR 5.4 because there is no current question in the proceedings to which the documents may relate. Further, the plaintiff says that that in relation to fraud no particulars of the alleged fraud are provided, although such particulars are required by UCPR 15.3 as the plaintiff needs these documents to be in a position to make this serious allegation. However, this submission misses the point. Before an allegation of fraud can be made, particulars have to be given.
5. So far as insolvent trading is concerned, the plaintiff contends that the respondents, by incurring a debt upon the entry of default judgment in these proceedings when they were before the District Court, have engaged in insolvent trading. Under s 588G of the Corporations Act, a director of a company may be liable for debts a corporation incurs if it was insolvent at the time it incurred the debt or becomes insolvent as result of the transaction. However, the incurring of a judgment debt for damages owing to the plaintiff on the entry of default judgment does not fall within the definition of s 588G(1A) of "incurs a debt", in that the corporation was not thereby paying a dividend, reducing its share capital, buying back shares, redeeming redeemable preference shares, issuing redeemable preference shares, financially assisting a person to acquire shares, or entering into an "uncommercial" transaction.
6. The respondents submitted that phoenix activity is not a recognisable cause of action as no such act appears to have been enacted in New South Wales or by the Commonwealth.
7. Counsel for the plaintiff further says that the information he has is insufficient to enable him to make a decision in relation to the likely quantum of damages. As such, it is difficult to see how the ordering of preliminary discovery will assist the plaintiff to quantify his damages when they are alleged to arise out of the negligence of the defendant with respect to the provision of certain building certificates. (S/C, Annexure "A", plaintiff's submissions at [10] - [14]).
8. The second, third and fourth respondents submitted that making the orders sought for preliminary discovery would be oppressive because they are not confined by references to the issues in the proceedings or any prospective proceedings and are not confined to any specific categories of documents for discovery.

Conclusion

1. As before, it is my view that unlike the situation in Wright Medical, the plaintiff has not sought to confine the orders for disclosure, discovery and production to a defined period of time, nor has he attempted to define the particular types of documents he requires. The definitions of books, financial records and examinable affairs as set out in s 9 of the Corporations Act are very wide. No attempt has been made by the plaintiff to the specific categories of documents that are required. The second, third and fourth respondents have provided information as to the whereabouts of the documents. They do not have the documents in their possession. The second, third and fourth respondents are not required to provide preliminary discovery as sought in paragraph 5 of the amended notice of motion.

Paragraph 6 of the amended notice of motion

1. Paragraph 6 of the amended notice of motion seeks an order that the fifth respondent Vadim Topolinsky give preliminary discovery or produce certain documents in relation to the "business affairs" and "examinable affairs" of TOP Consulting Group Pty Ltd and TOP Consulting Group (NSW) Pty Ltd as defined in s 9 of the Corporations Act.

The evidence of Mr Topolinsky

1. Mr Topolinsky relied upon his affidavit filed 7 May 2018. He was not required for cross examination. Mr Topolinsky deposed at [3] to [8] and [11] and [12] of his affidavit as follows: "3 I knew William Osmo, co-director of the defendant company, personally for some 35 years. Will is now deceased. I worked as an employee at the defendant company (also known as Osmo & Associates Pty Ltd) from 1984 until 1989. 4 From 1989 until 2000 I operated a company known as T & V Topolinsky and Partners Pty Ltd (T&V). 5 In or around September 2000 T.O.P. Consulting Group Pty Ltd (ACN 094 569 623) ("T.O.P Consulting Group") was formed. The directors and shareholders of T.O.P Consulting Group were Mr Osmo, his wife Fortunee Osmo and me. I held the majority shareholding. 6 There is not and never has been any commercial relationship between T.O.P Consulting Group and any companies owned by Mr and Mrs Osmo. This includes the defendant company. 7 In or around March 2012 I caused to be registered T.O.P Consulting Group (NSW) Pty Ltd (ACN 156 071706) ("T.O.P. Consulting NSW"). I am the sole director and secretary of T.O.P. Consulting NSW. 8 I ensured that T.O.P. Consulting Group continued to be registered until December 2014 so that all outstanding matters could be closed off and resolved so that the company did not need to be liquidated. … 11 T.O.P Consulting NSW is a company of 4 staff members, being two engineers, a part-time administrative clerk and me. The only administrative capacity of T.O.P Consulting NSW is on a part-time basis and we simply do not have the resources to be able to properly comply with an order as broad as that sought by the Plaintiff. 12 If I am to be required to comply with an order as onerous as the one sought in the motion the financial viability of T.O.P Consulting NSW would be put at risk and I am not sure that we would survive."
2. Counsel for the fifth respondent submitted that TOP Consulting Group Pty Ltd was deregistered on 14 January 2015 and some six months later both the hard copy and digital records of that organisation were disposed of. Thus, any order purporting to order preliminary discovery pursuant to UCPR 5.3 or 5.4 of the business records of that organisation would be otiose and of no effect as that the fifth respondent, does not have in his possession nor is he able to obtain "a document that relates to any question in the proceedings".
3. Also as previously stated, counsel for the fifth respondent adopts the second, third and fourth respondents' submission. Mr Topolinsky has deposed that TOP Consulting Group Pty Ltd was deregistered on 14 January 2015 and the documents and hard copy and digital record were deleted. Therefore, there are no documents in existence so none can be produced.

Conclusion

1. So far as TOP Consulting Group (NSW) Pty Ltd is concerned, Mr Topolinsky explains that it has four staff members, himself, two engineers and one part time administrative employee. As the orders sought are so broad, it would be onerous for Mr Topolinsky to produce the documents sought. TOP Consulting Group (NSW) was registered in 2012. It would appear that the affairs of that company conducted after 2012 would have no relevance to the events that took place in the LEC proceedings which were finalised in 2003. I do not make an order that TOP Consulting Group (NSW) Pty Ltd or Mr Topolinsky provide preliminary discovery as required in paragraph 6 of the amended notice of motion.

Paragraphs 7 and 8 - preliminary discovery - production of documents and discovery against the liquidator

1. Paragraphs 7 and 8 of the amended motion seek an order that the sixth respondent, Brad Morelli as liquidator of TOP Consulting OSMO Group Pty Ltd (in liq), give preliminary discovery and produce certain documents of that company to the plaintiff. On 26 September 2017, Bradd William Morelli, was appointed as liquidator of the company.
2. Counsel for the plaintiff drew this Court's attention to several purported discrepancies, one being in the minutes of the meeting of TOP Consulting dated 26 September 2017, where it is recorded that the executors appear for each of the estates of Toni Osmo and William Osmo, and there were handwritten signatures at the foot of the minutes signed by the executors of Toni Osmo and William Osmo.
3. On 20 March 2018, Mr Bradd Morelli as liquidator of TOP Consulting OSMO Group Pty Ltd wrote to the Court (Ex A). This correspondence reads: "… I am aware that proceedings have been commenced against the company prior to the appointment. In accordance with Section 471B of the Corporations Act 2001, while a company is being wound up, a creditor cannot begin or proceed with any proceedings in Court against the company. Please be advised that, there will be no representation on behalf of the company present at any schedule Court appearances nor do I consent as Liquidator, to the proceedings against the company continuing. …"
4. Section 471B of the Corporations Act reads: "CORPORATIONS ACT 2001 - SECT 471B Stay of proceedings and suspension of enforcement process While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with: (a) a proceeding in a court against the company or in relation to property of the company; or (b) enforcement process in relation to such property; except with the leave of the Court and in accordance with such terms (if any) as the Court imposes."
5. The plaintiff submitted that s 471B of the Corporations Act does not apply because preliminary discovery is not a "proceeding" and even if it is, this court can give leave pursuant to s 471B of the Corporations Act.

Conclusion

1. The proceedings on foot are against W & FT Osmo Pty Ltd not TOP Consulting OSMO Group Pty Ltd.
2. In a report to the creditors of TOP Consulting OSMO Group Pty Ltd dated 19 December 2017, Mr Morelli summarised the assets and liabilities being assets of $60,000, cash at bank and total liabilities being the expenses of winding up of $55,000. The plaintiff pointed to what he asserts as another discrepancy, namely under the heading "further investigations required", Mr Morelli reported that the Roads and Maritime Services search identified two company vehicles, a 2013 Ford Kuga and a 2016 Mazda CX3. The Ford Kuga had been sold at auction and the director advised Mr Morelli that the Mazda CX3 had been "gifted" to his daughter by the former company director prior to Mr Morelli's appointment as liquidator. Mr Morelli reported that he would further review the transaction. The liquidation was expected to be completed by June 2018 and a dividend of 100 cents in the dollar would be paid to all unsecured creditors. It is pure speculation that this entry could have anything to do with the plaintiff seeking this document to amend his statement of claim.
3. The plaintiff has not sought to confine the orders for disclosure, discovery and production to a defined period of time, nor has he attempted to define the particular types of documents he requires. The definition of books, financial records and examinable affairs as set out in s 9 of the Corporations Act are very wide and no attempt has been made to provide categories of documents.
4. In my view, it is unreasonable for this Court to order a liquidator to expend funds (depriving other creditors). There are no proceedings against TOP Consulting OSMO Group Pty Ltd. The liquidator is not obliged to provide preliminary discovery and produce documents as referred to in paragraphs 7 and 8 of the amended notice of motion.

Result

1. In these circumstances, it is my view that the respondents are not required to provide preliminary discovery.
2. The plaintiff's application for preliminary discovery is dismissed. The plaintiff's amended notice of motion dated 19 March 2018 is dismissed.
3. Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the respondents' costs on an ordinary basis. The Court orders that: (1) The plaintiff's amended notice of motion dated 19 March 2018 is dismissed. (2) The plaintiff is to pay the respondents' costs on an ordinary basis.

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: 20 July 2018