Katwell v National Australia Bank

Judgment (ex tempore - revised 11 october 2012) 1HIS HONOUR: The plaintiff (Katwell) sues the defendant (the bank) to recover the proceeds of cheques said to have been paid by the bank against Katwell's account without authority. It appears to be common ground that, for a time, the authority given by the company to the bank required cheques to be signed by the company secretary Mr John Katerinis; and, by reason of a change made later, both Mr Katerinis and the sole director of the company Mr Scott Kitas. The suggestion is that the cheques in question had been signed by Mr Kitas alone. 2The bank pleads among other things by way of defence that it had authority to pay the cheques signed by Mr Kitas alone. That authority is apparently said to flow from his position as sole director. 3The bank has sought discovery of a number of documents in aid of this aspect of its defence. Katwell has provided what it says is discovery of all records that it presently has; and its officers including Mr Katerinis and his wife Ms Yota Coudinaris have said that they do not know whether there are any other documents and, if so, where they might be. 4It is apparent that control of the company was for a time exercised by Mr Katerinis, with Mr Kitas in effect taking little part; and for a time, after those two gentlemen fell out, by Mr Kitas. 5The documents sought include a copy of Katwell's constitution, documents relating to the appointments and resignations of Messrs Kitas and Katerinis, minutes relating to their respective authorities, and correspondence relating to the disputed transactions including records and receipts in respect of them. 6Mr Katerinis and Ms Coudinaris say, as I have indicated, that whatever they have has been given and that they simply do not know whether there is anything else. That explanation is said to be so incredible that the court should not accept it and should, instead, permit cross-examination on the affidavits of and relating to discovery. That is the substance of the orders now sought by the bank by its Amended Notice of Motion filed on 28 October 2011. 7Mr Reynolds of counsel, for the bank, relied on the decision of Garling J in Con Ange v Fairfax Media Publications Pty Ltd [2010] NSWSC 1200. In that case, Garling J accepted that, at least since s 56 of the Civil Procedure Act 2005 (NSW) came into force, it was appropriate for the courts to revisit their traditional reluctance to permit cross-examination on affidavits of discovery. See his Honour's reasons at [36] to [43]. 8Bergin CJ in Eq referred to the decision in Con Ange in Barescape Pty Ltd v Bacchus Holdings Pty Ltd [2011] NSWSC 437. Her Honour noted at [7] that the overriding duty imposed by s 56 of the Civil Procedure Act required the court, in mandatory terms, to do what it could to facilitate the just, quick and cheap resolution of the real issues in dispute. 9It followed, her Honour said at [8], that the court was now able to approach the question of cross-examination, on affidavits of discovery, "slightly differently to the way in which it may have been approached in the past". Her Honour then said: There will be circumstances where "conclusiveness" of affidavits of discovery must yield to the overriding purpose of the act and rules [Uniform Civil Procedure Rules 2005]. 10In that case, there had been five attempts at discovery, and the relevant defendant conceded that there were further documents that were in existence that should be discovered. The real question was whether the relevant defendant should be given the opportunity to make that further discovery, or whether cross-examination should be permitted before that was done. Her Honour took the view, on balance, that there should be cross-examination. 11Likewise, in Con Ange, Garling J accepted at [57] that it was improbable in the extreme (my words, not his Honour's): "that Mr Ange has been able to operate [his] businesses for a number of years, without there being one piece of paper retained by him, or else in his power and control". 12His Honour regarded that, and other matters to which he referred, "as being quite exceptional" and as something "which without proper direct evidence I would [not] be prepared to accept". 13I have referred to those decisions at some length because in my view they illustrate what is in any event obvious: namely, that any application of the present kind is to be considered having regard to its particular facts and not by reference to some broad statement of principle such as that, by reason of s 56 of the Civil Procedure Act, the court should be inclined to permit cross-examination on affidavits of discovery as a matter of general practice. 14In the present case, it is to be noted that Katwell has been required to put on more than just the affidavit verifying the lists of documents. Orders have been made, and on the face of things complied with, requiring Mr Katerinis and Ms Coudounaris to swear affidavits setting out in more detail the searches and inquiries that they have made. When deficiencies were pointed out in those affidavits, Mr Katerinis swore a further affidavit. Further, his solicitor Mr Michos undertook his own inquiries and swore an affidavit. 15Mr Reynolds submitted that there were inconsistencies between what Mr Katerinis said in his affidavit relating to discovery (or, more accurately, by inferences that were said to be available from what was there said) and what he said in his affidavits in the substantive proceedings. Again, Mr Reynolds submitted, there were inconsistencies between what Mr Katerinis had said, as to incorporation of the company, and what his wife Ms Coudounaris said. 16I am not sure that the inconsistencies, at least of the former kind, are as significant as Mr Reynolds submits. But even accepting that there may be some inconsistency, and accepting certainly that Mr Katerinis and Ms Coudounaris seem to have a different view as to who it was that gave instructions for the incorporation of Katwell, that does not suggest that there are circumstances which indicate that the evidence given in support of discovery is so manifestly implausible that the Court should be required to permit cross-examination on it. 17Mr Katerinis says, in substance, that although he was the secretary of the company, he did not keep full and complete records, and he does not know where all the records might be. He says, for example, that he does not know whether the company ever had a constitution. (It may be noted that the evidence on which Mr Reynolds relied would appear to suggest, when, the company was incorporated back in 2001, did have a constitution; and certainly, that the bank now has available to it that constitution.) 18This is not a case like Con Ange. Katwell does not say that it has not one skerrick of paper, nor one byte of electronic information, relevant to its business activities. 19On the contrary, Katwell accepts that it has some records. It has given discovery of those records. 20Equally, this is not a case like Barescape. Katwell has not had five goes at providing discovery, and does not concede that there are yet further documents available to be discovered (something which on the facts of that case, was self-evident in any event). 21In Con Ange, it was the sheer and manifest implausibility of the proposition that there was not one record, paper or electronic, that persuaded Garling J to permit cross-examination. 22In Barescape, it was the whole history of the matter (manifestly, suggestive of entirely insufficient attention to discovery obligations) that persuaded Bergin CJ in Eq to make the like order. 23The facts of those cases are widely removed from the present facts. Accepting, as I do, that each of those cases provides authority for the proposition that the Court should take a more liberal approach to permitting cross-examination on affidavits of discovery than it did in the past, it simply does not follow that the Court should do so in this. 24That is why I said, earlier in these reasons, that the discretion to permit discovery is one which is heavily fact-dependent. 25The Court is required to bear in mind the overriding objective set out in s 56 of the Civil Procedure Act. That overriding objective is one which requires the Court to consider both the interests of each party in the litigation and the Court's own interest in maintaining efficient control over its procedures and over the availability of judicial time. 26I start with the proposition that the discovery is said to be relevant to the defence propounded by the bank, namely that the very form of the cheques, being signed by Mr Kitas the company's sole director, authorised it to pay. 27If that proposition be correct, then it is not one which requires discovery to make it good. 28In this case, it seems to me, what the bank is seeking to do is to obtain discovery to see whether, through the company's own records, there may be documents which do not so much support the inference which the bank seeks to draw from the very form of the cheques, but which in fact provide alternative evidence of direct, rather than inferential, authority. Thus, it seems to me, although I accept that the general area of discovery is one within the general issues on the pleadings, it cannot be said that any of the documents in question goes to the primary way in which the bank puts this aspect of its case. 29I take into account also that the hearing of this Notice of Motion has been delayed for almost a year, because of other interlocutory skirmishes. 30Finally, I take into account that this is a case where, for better or worse, Katwell through its officers says that it has given what discovery it says it can give, and has explained, in several affidavits, why it can give no more. 31To the extent that there are inconsistencies between that explanation and the substantive evidence on which Katwell will rely, that is a matter of which advantage can be taken in cross-examination if and when this proceeding comes on for hearing. 32I do not conclude, in this case, that there is such implausibility in the explanations given, or such likelihood of documents being in existence but concealed, or such likelihood of inadequate searches having been made, that there is anything of sufficient advantage to be gained by permitting the cross-examination sought. On the contrary, I think, to permit the expense of further time and money on that exercise would be entirely inconsistent with the requirements of s 56 of the Civil Procedure Act. In my view, subject to the outstanding application for leave to amend that has been foreshadowed, it is appropriate to get this matter ready for hearing and to have the real issues heard and determined. 33For those reasons I dismiss so much of the Amended Notice of Motion filed on 28 October 2011 as has not already been the subject of adjudication. As I understand it, that means that, one way or the other, the whole of the Amended Notice of Motion has now been dealt with. I will hear the parties on the precise form of orders to be made in that regard and on the question of costs.