This is the Court's third judgment in these proceedings brought by the plaintiff, a former Capital Partner of HWL Ebsworth Lawyers, against his former partners in that firm. In the Court's first judgment, given on 21 October 2021, the Court determined issues in relation to pleadings: Lewis v Martinez as representative of the partners t/as HWL Ebsworth Lawyers [2021] NSWSC 1303 ("the 2021 judgment"). The Court's second judgment dealt with consequential issues of costs: Lewis v Martinez as representative of the partners t/as HWL Ebsworth Lawyers (No. 2) [2022] NSWSC 133.
This judgment does not set out again the background to the dispute between these parties. It is sufficiently described in the 2021 judgment (at [2] to [10]), paragraphs which for convenience are reproduced below.
"2. Mr Lewis is a former Capital Partner of HWL Ebsworth Lawyers. He is a party to the HWL Ebsworth Lawyers' partnership deed dated 20 May 2016 ("the Deed") which constitutes the partnership. Some of the partners are required to make capital contributions to the partnership and are described in the Deed as "Capital Partners", and the others are described as "Fixed Draw Partners". The partnership is governed by resolutions passed by the Capital Partners, which at the times relevant to these proceedings comprised 182 partners, including Mr Lewis.
3. Strictly, under the Deed the Capital Partners are a series of practice trusts, each of which nominates an individual legal practitioner to exercise rights under the Deed on behalf of that Capital Partner. For convenience, in these reasons no distinction will be made between these nominated legal practitioners and their related Practice Trusts. Mr Lewis executed the Deed in his capacity as the trustee of the Lewis HWL Practice Trust ("the Lewis trust"). The Deed is governed by the laws of Victoria.
4. Mr Lewis alleges in his Statement of Claim ("the Pleading") that the Capital Partners of HWL Ebsworth Lawyers breached both the Deed and the Partnership Act 1958 (Vic) by passing resolutions that he claims are null and void and of no legal effect.
5. The Deed provides in clause 20 for the expulsion of a Capital Partner by an Extraordinary Resolution (of 80%) of Capital Partners. In Clause 20 the Capital Partners acknowledge that "no reason need be given for expulsion of a Capital Partner by extraordinary resolution" and the intention of the Deed "is to afford flexibility for the capital partners to expel any Capital Partner…for any reason they deem appropriate".
6. Mr Lewis alleges in the Pleading that an Extraordinary Resolution of the Capital Partners on 11 August 2020 (modified by further resolution on 16 October 2020), which he describes as constituting the First Purported Expulsion, as a matter of substance had the purported effect of expelling him from the partnership and denying him the opportunity to participate in a proposed Initial Public Offering ("IPO") of the partnership on the Australian Stock Exchange. Mr Lewis alleges that the 11 August 2020 resolution had this effect because it reduced from 16 to zero his units (called Calibration Points in the Deed) in the partnership, that entitled him to a share of partnership profits.
7. Mr Lewis alleges that the11 August 2020 resolution was null and void and of no legal effect. He alleges it was attended by procedural irregularities, because it denied procedural fairness to Mr Lewis and failed to include relevant information to Capital Partners. He also alleges it was vitiated by substantive defects, because it was preceded by the supply of untrue information to Capital Partners, and because it purported to exercise the power of expulsion for inappropriate reasons and for ulterior purposes, namely to exclude Mr Lewis from the IPO in which he would otherwise be entitled to participate.
8. Mr Lewis also alleges in the Pleading that on 8 November 2020 Mr Martinez proposed to the Capital Partners and the Capital Partners passed another resolution purportedly in accordance with Clause 20 of the Deed, described in the Pleading as the "Second Purported Expulsion". Mr Lewis alleges the 8 November 2020 resolution is also null and void. He alleges that clause 20 did not authorise an expulsion for reasons that would be contrary to law and that the 8 November 2020 resolution: denied Mr Lewis procedural fairness, purported to exercise the power of expulsion beyond the terms of the Deed for improper purposes and in a fraud on the power of expulsion, because it purported to exercise the power for an ulterior purpose (namely the ulterior purpose alleged to affect the 11 August 2020 resolution).
9. Finally, Mr Lewis alleges that, in conduct consequent upon the Second Purported Expulsion and in further breach of his duty of good faith and fiduciary obligations, Mr Martinez, as agent for the Capital Partners, excluded Mr Lewis from his HWL Ebsworth Lawyers email account, document management system and intranet, reallocated his practice to other partners, reassigned his legal staff and denied him further receipt of a profit share including through fortnightly drawings.
10. The Pleading seeks relief declaring that the First Purported Expulsion and the Second Purported Expulsion were a repudiation of the Deed and it seeks relief requiring the Capital Partners to buy out his interest in HWL Ebsworth Lawyers which he claims at $4.4 million and various alternative amounts."
This judgment should be read with the Court's previous judgments in these proceedings. Events, matters and persons are generally referred to in both judgments in the same way.
This judgment resolves issues relating to the discovery of documents by the defendants, who for convenience are referred to collectively in these reasons as HWLE. On 10 February 2023 the Court made consent orders for discovery ("the discovery orders"). HWLE, gave discovery pursuant to those orders. By his notice of motion filed 26 April 2023, Mr Lewis challenges the adequacy of that discovery and seeks further orders for discovery.
Mr F. Douglas KC leading Mr J.K. Carter, and Mr J.B. Douglas instructed by Bridges Lawyers appear for Mr Lewis on the motion. Mr P Braham SC leading Mr B Hancock instructed by Gilchrist Connell appeared for HWLE.
These reasons outline the background to the issues, state the applicable legal principles, then determine the issues in accordance with those principles.
[2]
Background to the Issues
The Court made the discovery orders against the defendants on 10 February 2023. Order 3 of those orders provided as follows:
"Discovery
1. The time for the Defendants to comply with order 2 of 12 December 2022 be extended to 10 March 2023.
2. The Defendants produce to the Plaintiff the documents referred to in table marked "Plaintiff's Undisputed Discovery" at Tab 6, pages 104-105 of exhibit ABH-1 to the affidavit of Alexander Boyd Haslam sworn 23 September 2022 by 17 February 2023.
3. Pursuant to rule 21.2 of the Uniform Civil Procedure Rules, by 10 March 2023, the Defendants give discovery of the following categories of documents:
a. all documents recording or evidencing the state of mind, motive and/or purpose of the management team, namely, Mr Martinez, Mr Hopkins, Mr Mailler, Mr Artus and Mr Hummel, in doing any of the following:
i. seeking to exclude the plaintiff from participation in the proposed IPO;
ii. voting on the August Resolutions insofar as they refer or relate to the plaintiff;
iii. voting on the October Resolutions (insofar as they relate to the plaintiff); and
iv. seeking to expel the plaintiff from the Partnership;
b. the following documents:
i. the Pathfinder Prospectus issued in November 2020;
ii. the Investor Education Reports issued by Macquarie Capital and/or Bell Potter; and
iii. the Deal Summary issued by Macquarie Capital and/or Bell Potter.
4. Pursuant to rule 21.2 of the Uniform Civil Procedure Rules, by 10 March 2023, the Plaintiff give discovery of the following categories of documents:
a. financial documents, being tax returns, assessments, business activity statements and bank statements of the plaintiff or The Lewis HWL Practice Trust or any other entity controlled by the plaintiff, to the extent to which such documents show income derived from personal exertion from November 2020 to date; and
b. copies of documents recording or evidencing an intention by the plaintiff to challenge the validity of the August, October or November resolutions created in the period from 5 August 2020 to 7 November 2020."
These orders named and defined the "management team" of HWLE to confine the scope of discovery to be given to the group of people that it might reasonably be expected would be the decision-makers in relation to the profile of the HWLE IPO. The 10 February 2023 orders included other orders splitting the hearing into a separate trial of liability and damages, a confidentiality regime for the handling of documents and a referral to mediation.
On 3 April 2023 HWLE gave Mr Lewis a list of documents and on 11 April 2023 the documents were made available for inspection. After a mediation conducted by the Hon. Kevin Lindgren, AM KC on 19 April 2023, that terminated without resolution of the dispute, HWLE filed and served a verified list of documents on 9 May 2023. This differed from the unverified list by including one document and by excluding another.
Mr Lewis was dissatisfied with the unverified list and filed his motion on 26 April 2023 ("the motion") seeking the following orders:
"1. Within 7 days of the date of this order, the defendants give further and better discovery of the categories in Order 3 made on 10 February 2023.
2. Further or in the alternative, within 7 days of the date of this order, the defendants give discovery of the following categories of Documents:
a. any Documents that evidence, refer to or relate to any consideration by any of Mr Martinez, Mr Hopkins, Mr Mailler, Mr Artus and Mr Hummel (collectively, the Management Team) or to any discussion between any of them of the any of the matters raised in the email sent by Gregory Lewis to Juan Martinez dated 2 August 2020 at 10:29 am;
b. any Documents that evidence, refer to or relate to any consideration by or discussion between any of the Management Team concerning whether Gregory Lewis (or the Lewis HWL Practice Trust) might be excluded from participation in the proposed lPO or of the matters raised in the email sent by Juan Martinez to Gregory Lewis dated 5 August 2020 at 12:36 pm;
c. any Documents that evidence, refer to or relate to any consideration by or discussion between any of the Management Team concerning whether Gregory Lewis (or the Lewis HWL Practice Trust) should be asked to consider becoming a Fixed Draw Partner on terms to be agreed;
d. any Documents that evidence, refer to or relate to any consideration by or discussion between any of the Management Team of the matters raised in the email sent by Gregory Lewis dated 6 August 2020 at 9:42 pm;
e. any Documents that evidence, refer to or relate to any consideration by or discussion between any of the Management Team of the matters raised in the email sent by Juan Martinez to Gregory Lewis dated 8 August 2020 at 12:34 pm;
f. any Documents that evidence, refer to or relate to any drafts (or the preparation of any drafts) of the email sent by Mitch Artus to the Capital Partners dated 10 August 2020 at 9:34 pm and/or of the attachments to that email, including but not limited to the "FDP" designation for Gregory Lewis (or the Lewis HWL Practice Trust) in Attachment A and/or the reduction to zero of the Calibration Points of Gregory Lewis (or the Lewis HWL Practice Trust);
g. any Documents that evidence, refer to or relate to any consideration by or discussion between any of the Management Team of whether Gregory Lewis (or the Lewis HWL Practice Trust) should be designated "FDP" in Attachment A;
h. any Documents that evidence, refer to or relate to consideration by or discussion between any of the Management Team of the reduction to zero of the Calibration Points of Gregory Lewis (or the Lewis HWL Practice Trust).
3. Within 7 days of the date of this order, the defendants file and serve an affidavit (sworn or affirmed by a person having authority of the defendants) as to the nature and extent of the inquiries and searches made to identify the Documents within the ambit of their discovery obligations under these Orders."
The contest between the parties in relation to prayer for relief (1) of the motion is reducible to the following four main contests and some other incidental matters. Mr Lewis principally contends that HWLE failed to comply with the discovery orders by reason of the following:
1. HWLE has not discovered documents from the period before 13 August 2020;
2. No document as described in Order 3(b)(iii) of the 10 February Orders has been discovered by HWLE, despite evidence that such a document exists and is called the "Deal Summary");
3. Documents discovered pursuant to Order 3(b)(i)-(ii) (being Items 291 and 292 in the HWLE Verified List) appear not to be the only documents falling within that description, because the Deal Summary document refers to earlier, different documents that fall within the description in Order 3(b)(i)-(ii); and
4. There is said to be a disconformity between the terms of Mr Juan Martinez' affidavit with respect to HWLE's Verified List and the solicitor's certificate in relation to the Verified List.
HWLE say that they have no further emails or documents to discover in relation to Order 3(a) of the Discovery Orders. Prayer for relief (2) of the motion seeks further categories of documents to remedy the failures to give discovery that lie behind prayer for relief (1). The Court will deal with each of these issues in turn after examining the applicable legal principles and giving a more detailed chronology of events relevant to HWLE's 2020 IPO proposal.
[3]
Applicable Legal Principles
In this State there are now no specific rules dealing with circumstances in which one party asserts that discovery by another party is inadequate. But the Court has ample jurisdiction to order the filing of another verified list of documents or grant leave to cross-examine the deponent on the affidavit that verifies the list of documents if discovery appears to be insufficient: see Con Ange v Fairfax Media Publications [2010] NSWSC 1200 at [34] (Garling J).
As a general principle, courts in all jurisdictions are reluctant to allow the cross-examination of deponents of discovery affidavits. This stems from the principle that an affidavit verifying discovery is conclusive: Mulley v Manifold (1959) 103 CLR 341; 33 ALJR 168 at 343 per Menzies J. As Giles J said in Fruehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359 at 363 to allow cross-examination 'would be to open up the prohibited areas of investigation, and nullify the restrictions upon contesting both the amplitude of discovery and any claim for protection from inspection'. However, the position has somewhat shifted to allowing cross-examination in very limited cases.
The established legal principle is that the conclusiveness of the affidavit as to discovery can be challenged if it can be shown by the documents discovered, the content of the affidavit, or from the pleadings, that the discovery has been insufficient: Proctor & Gamble Australia Pty Ltd v Medical Research Pty Ltd [2001] NSWSC 183 at [64] (Hunter J). The principles were further discussed by Hoeben J in Preston v Star City Pty Limited [2007] NSWSC 293 at [21] and Con Ange v Fairfax Media Publications Pty Ltd & Ors [2010] NSWSC 1200 at [39]:
"Although the basic rule remains that an affidavit of discovery is conclusive, some exceptions to that rule have been recognised by the common law and by the rules of court (Mulley v Manifold (1959) 103 CLR 341, Fruehouf Corporation Pty Limited v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359). Those exceptions are narrow and require that the insufficiency of the affidavit of discovery appear either from the documents themselves or from any other source that constitutes an admission of the existence of a discoverable document. In applying one of those exceptions the court has to "on the face of it or from admissions in other documents … have reasonable grounds for being fairly certain that there were other relevant documents which ought to have been disclosed …" (British Association of Glass Bottle Manufacturers Limited v Nettlefold (1912) AC 709 at 714, Beecham Group Ltd v Bristol Myers Co (1979) VR 273 at 276)."
Cross-examination of the deponent has been allowed under the different rules of the Federal Court of Australia, where it was the only effective means of exposing deficiencies in a party's discovery: IO Group Inc v Prestige Club Australasia Pty Ltd [2008] FCA 1147. But allowing cross-examination is exceptional.
This judgment does not require any discussion of the effect of Civil Procedure Act 2005 on the application of established principle in this field, as Mr Lewis has made out his case based on established principle. The test the Court applies here is that it must "have reasonable grounds for being fairly certain that there were other relevant documents" before taking further steps to secure additional discovery or ordering a fresh affidavit of discovery.
[4]
Mr Lewis and HWLE's 2020 IPO Proposal
HWLE has not discovered any documents prior to 13 August 2020. Mr Lewis contends that this is not plausible, when the documents that have been discovered and are in evidence are examined. He submits that 13 August 2020 is a critical date. It is the date at which Mr Martinez first sent an email on behalf of HWLE to Mr Lewis asking whether Mr Lewis intended "to continue agitation of the IPO decision". Later the same day Mr Martinez emailed Mr Lewis again giving Mr Lewis seven days' notice of intention to move a resolution expelling Mr Lewis as a Partner. Mr Lewis replied the same evening reserving his rights should any steps be taken to expropriate his interest in the HWLE Partnership.
This was clearly a watershed moment in relations between Mr Lewis and HWLE, after which it must have been clear to both sides that they were in contest about Mr Lewis' continuation in the HWLE Partnership. And relevant internal and external communications, particularly involving the HWLE management group were likely to have been discoverable from that time on. Mr Lewis says that the implausibility of HWLE's position on discovery can be inferred from what had occurred before these exchanges of emails.
To understand Mr Lewis's argument about the likelihood of discoverable documents within the relevant categories of discovery existing prior to 13 August 2020 it is necessary briefly to examine the principal communications that had taken place before 13 August 2020 and are available for scrutiny. The relevant narrative commences in late July that year. This narrative is based on Mr Lewis's version, which will be in contest at the trial.
On 26 July 2020 Mr Martinez sent all the Capital Partners of HWLE an email informing them that he was proposing that the firm's practice be transferred to a corporate entity in which the Capital Partners would hold shares and of which the Capital Partners would become employees. Mr Martinez proposed in that email that a substantial proportion of the Capital Partners shares would be offered to external investors through an initial public offering which would result in that corporate entity being listed on the Australian Stock Exchange and the former Capital Partners receiving cash payments for the shares that were sold.
Mr Lewis wrote to Mr Martinez on 2 August 2020 putting forward a case for an increase in his calibration points based on his calculation of the net fees that he had earned as a capital partner of HWLE during FY20. Mr Lewis' lengthy 2 August email appears anticipate the allocation of shares by reference to calibration points in the forthcoming IPO. It discussed Mr Lewis' professional staff, principal clients, anticipated billings, and data problems. Mr Lewis clearly assumes in his 2 August 2020 email that he would be participating in the IPO, at no less than the level of his existing calibration points.
Mr Martinez corrected Mr Lewis's assumption on 5 August 2020. On that day, Mr Mailler, HWLE's National Marketing Manager, sent out to all HWLE Capital Partners an information pack concerning the proposed IPO foreshadowing that prior to a vote then scheduled to take place the following Friday, 7 August 2020 that management would provide to all partners, a schedule of initial equity allocations to each partner as a proportion of the then estimated enterprise value of the firm, based upon market demand through a book deal process. The information pack foreshadowed that the equity allocations would be based on an adjusted weighted average of calibration points over a 10-year period. Mr Lewis calculated on the calibration points already allocated to him that he should be entitled to $3.1 million on the IPO and that if he gained the increase in calibration points that he was seeking, he might be entitled to $4.5 million on the IPO.
But early in the afternoon of 5 August 2020 Mr Martinez sent an email to Mr Lewis that he says caused him great shock and distress. The email said to Mr Lewis that given his "contribution, performance and overdrawing you are not proposed to be a participant in the IPO sell down process". But the email sought to soften the blow by pointing out that Mr Lewis would still be eligible for short and long-term incentives, which would not be available to the other participating IPO partners during their two-year escrow period.
Later on 5 August 2020 Mr Martinez, Mr Mailler and Mr Hopkins, the National Finance Manager of HWLE, gave a presentation on behalf of all those working on the proposed IPO in a Zoom meeting to all the Capital Partners of HWLE, including Mr Lewis. Mr Lewis says that there was no indication during this presentation that Mr Martinez was seeking to exclude any Capital Partners from the IPO.
Mr Lewis protested. On 6 August 2020, he emailed Mr Martinez putting the case for both his retention as a Capital Partner and an increase in his calibration points regardless of whether the IPO proceeded.
Mr Martinez replied on 8 August, stating in his email, "you are not participating in the IPO and sell down" and informing Mr Lewis that his "position moving forward" and the structure of his future remuneration "will be negotiated and discussed."
The first Capital Partners vote on the IPO was reorganised for Tuesday, 11 August 2020. On the evening prior to the vote, at about 9:30 PM on 10 August 2020, Mr Mitch Artus, HWLE's Chairman of Partners, sent out to all Capital Partners an email proposing several resolutions authorising the IPO and attaching the proposed calibration points which were to apply from 1 September 2020. Upon opening the attachment to the email Mr Lewis saw that he was one of the four partners who were being designated as "FDP", an acronym for Fixed Draw Partner. Mr Lewis says that he was surprised by that designation, because he had not agreed to becoming a Fixed Draw Partner and was unaware of any mechanism in the Partnership Deed allowing a Capital Partner to be made a Fixed Draw Partner without consent.
Mr Artus informed the Capital Partners on the evening of 11 August 2020 that the IPO Resolutions had been passed. Mr Lewis says that the following day, 12 August, he telephoned a senior partner of the firm. Mr Lewis says the senior partner admitted to him that he had voted for the IPO in the belief that Mr Martinez and Mr Lewis had agreed upon Mr Lewis becoming a Fixed Draw Partner and not participating in the IPO. It might reasonably be inferred that news of conversations such as those that Mr Lewis was initiating within HWLE had reached Mr Martinez's ears by the following morning, leading to the watershed exchange of correspondence on that date.
The correspondence from Mr Martinez of 13 August changes gear from the prior diplomatic correspondence to something frostier. Mr Martinez said to Mr Lewis late morning that day the following:
"Greg,
Please advise if it's your intention to continue agitation of the IPO decision. If it is I will need to take a different approach to that which I intended, which was to engage in a sensible discussion around a path forward.
Regards,
Juan.
Mr Lewis says he took this as "a veiled threat by Mr Martinez to invoke the expulsion mechanism in the Partnership Deed" unless Mr Lewis agreed to forgo participation in the IPO.
Mr Lewis then continued what Mr Martinez had described as "agitation", telephoning another senior partner seeking admissions that he too had voted for the IPO without appreciating that Mr Lewis had been designated a Fixed Draw Partner without his consent.
According to Mr Lewis' case, this conduct seems to have provoked Mr Martinez to give the seven-day notice of intention to move a motion expelling Mr Lewis from the practice as a Capital Partner. But the email was only copied to Mr Artus and no other Capital Partner. Mr Martinez emailed Mr Lewis and suggested that he call Mr Martinez the following day.
HWLE discovered several emails exchanged within the management team on 13 August. Mr Braham SC sought to deploy these emails to further the inference that HWLE had given adequate discovery. They are dealt with below.
Discussions took place the next day between Mr Martinez and Mr Lewis. But they failed to reach a resolution. Further exchanges took place between the parties that led to a modified IPO proposal being distributed to Capital Partners on 18 October 2020, and which was passed on 19 October 2020.
And then a formal motion for Mr Lewis' expulsion from the partnership was put to Capital Partners, except Mr Lewis on 7 November 2020 and passed. Mr Lewis challenges both the 11 August 2020 and 7 November 2020 in these proceedings.
This short chronology is sufficient to examine the issue for present determination.
[5]
Consideration
Mr Lewis argues that HWLE holds documents relevant to these proceedings which it is likely to have concealed, or at the very least that it is implausible that there are no such documents. Mr Lewis grounds this argument in several matters. First, he relies upon HWLE's failure to discover the Deal Summary document and the Pathfinder Prospectus, which are discussed below. Secondly, he submits the Court can be satisfied there is a likelihood of inadequate searches having been made arising from the terms of the UCPR r24.1 affidavit and the UCPR r24.1 certificate. Thirdly, he submits there has been a complete failure by HWLE to give discovery of any documents prior to 13 August 2020. The first two of these arguments are not persuasive.
HWLE's failure to discover the Deal Summary document and the Pathfinder Prospectus, is not a strong argument in favour of further discovery. When Mr Lewis' legal representatives pointed out their omission from discovery, HWLE responded and disclosed them. This did indicate a lack of initial search thoroughness, but it also indicated a willingness to give disclosure when error was detected. This is a relatively neutral factor on this application.
Order 3(b) of the discovery orders raised different questions, which have now been resolved. In Order 3(b) Mr Lewis sought discovery of precisely identified documents. HWLE initially indicated that it had nothing to disclose with respect to the document described in Order 3(b)(iii), the Deal Summary document. But Mr Lewis had obtained a copy of the document in PDF format from a third-party stockbroker. Its metadata indicated it had been dated and last modified on 18 November 2020. Mr Lewis continued to press for the Deal Summary document but was rebuffed by HWLE. Shortly before the hearing of the motion HWLE gave notice it was amending its list to include the Deal Summary document and provided it to Mr Lewis.
Other than to admit that it should have been provided and that its omission was an error HWLE did not give a detailed account of how the Deal Summary document came to be overlooked. HWLE contended that there was a basis to infer deliberate concealment on its part. The Court does not infer deliberate concealment on the part of HWLE. But the course of the correspondence asking for this document and the late discovery allows the Court to infer that HWLE may be taking a conservative approach to discovery.
The Pathfinder Prospectus the subject of Order 3(b)(i) of the discovery orders is referred to within the Deal Summary document in several places. The discovery of the Deal Summary document through the third-party stockbroker led to requests for the Pathfinder Prospectus. HWLE foreshadowed adding the Pathfinder Prospectus to its discovery list at the same time as the Deal Summary document in similar circumstances.
The terms of the UCPR, r 24.1 affidavit and the UCPR, r 24.1 certificate do not provide Mr Lewis with a persuasive argument for further discovery. Mr Lewis submits that the discovery orders required "the defendants to give discovery of the following categories of documents". The UCPR, r 24.1 affidavit is sworn by Mr Martinez who deposes that he has "made reasonable enquiries" and believes that "there are no documents (other than excluded documents) …. in my possession".
Mr Lewis submits that the affidavit is insufficient because the obligation imposed by Order 3 of the discovery orders was directed to all the defendants, but the affidavit only deposes to Mr Martinez's possession. Mr Lewis submits that the UCPR, r 24.1 certificate is also deficient, indicating that the certifying solicitor has "advised the first defendant as to the obligations arising under an order for discovery" and does not refer to wider advice to all the defendants. The contention is that on the face of the affidavit it appears that there may have been insufficient enquiries made.
Counsel for HWLE, Mr Braham SC, made clear in his submissions in relation to the affidavit of discovery that searches, and enquiries had been conducted with respect to all the defendants. The Court would have expected this to occur and accepts that this is what has occurred. But it is nevertheless desirable for the affidavit of discovery to express this clearly. When the affidavit is re-sworn that can be clarified.
Moreover, the nature of the issue raised by Order 3(a) of the discovery orders suggests that the most rigorous enquiries will need to take place with the HWLE management team, who were charged with forming and advancing the IPO proposal. The evidence above also suggests that specific enquiries may need to be made with other partners with or in relation to communications with any other partners who were involved in dealings with Mr Lewis and may have conveyed them to Mr Martinez about the IPO between 2 and 13 August 2020.
Finally, the failure of HWLE to discover documents prior to 13 August 2020 is puzzling. It seems objectively likely that some documents of the kind Mr Lewis describe came into existence within HWLE during this period. The Court has reasonable grounds for being fairly certain that there are other relevant documents prior to 13 August 2020 that have not been discovered.
HWLE rejects the contention that there has been any failure to discover documents prior to 13 August 2020, let alone any active concealment of such documents. HWLE submits the following in response to the contentions of Mr Lewis on this subject:
"18. The Plaintiff asserts that it is implausible that there are no documents from before 13 August 2020 that are responsive to the discovery categories, and that there is evidence of concealment (Plaintiff's Submissions, [27]-[28], [49]-[50]). The only material that is suggestive of documents predating 13 August 2020 is [13] of Mr Martinez's affidavit dated 28 July 2022, in which he says he was involved in the preparation of an email of 10 August 2020.
19. But there is nothing in that evidence that is inconsistent with there being no documentary record of that involvement. For example, it is entirely plausible that Mr Martinez's involvement consisted of conversations that were not reduced to writing. The proposition that Mr Martinez's involvement was not recorded in documents is not manifestly implausible. Mr Martinez's evidence does not come close to establishing a deliberate concealment of such documents: contra Plaintiff's Submissions at [49].
20. No sensible comparison can be drawn between these circumstances and those faced by Garling J in Con Ange: contra Plaintiff's Submissions at [27].
21. In considering the matter, the Court should bear in mind that the 10 February 2013 Orders did not require discovery of all documents with respect to the August Resolution (for example). Rather, they required discovery of documents "recording or evidencing the state of mind, motive and/or purpose" of five people in doing certain things. It is entirely plausible that those five people did not record their state of mind, motive, or purpose in writing.
22. The terms of the verifying affidavit and solicitor's certificate do not permit the Court to conclude that there have been inadequate searches: contra Plaintiff's Submissions at [53]-[60]. The language of those documents does not suggest that only Mr Martinez has conducted inquiries to ascertain the existence of documents. Such a reading is a strained and unnatural one.
23. The Court does not here have material from which it could be "fairly certain" that there are documents pre-dating 13 August 2020 that fall within the 10 February Orders. No order for further discovery should be made."
Mr Braham SC, also referred to emails sent within the management team on 13 August 2020 to contend that HWLE had not taken a limited view of discovery obligations and was discovering documents that evidence "state of mind, motive or purpose" even though those matters were not expressly identified and that someone had clearly been back to HWLE's email server to look for management team communications. He also pointed to these emails to show that they did not suggest that there had been discoverable correspondence within the management team prior to 13 August 2020.
These emails may be briefly described. At 11:13 AM on 13 August Mr Mailler emailed Mr Martinez and other members of the management team, saying the following
"Just a thought - should we be going through the "administrative process" of seeking CP approval for the expulsion of Greg [and certain other partners]" as CP is a sooner rather than later? There are rumours in the Sydney lift team that Greg is going to go out kicking and screaming in a quest for his equity entitlement, but you may already be across this."
Later in the evening of 13 August Mr Mailler emailed an administrative assistant, "would you please check Greg's emails over the last week and see anything look suspicious?". Shortly afterwards Mr Martinez replies "Good idea. He hasn't responded to my earlier email." Mr Mailler explains in a further email that his first email was prompted by a voicemail from another Capital Partner who relayed to Mr Mailler the contents of conversation that he had held that day with Mr Lewis, from which Mr Mailler concluded, "we can assume that Greg has loitered up and was trying to gather information to invalidate the vote. I reckon we commence the expulsion voting process asap." Mr Martinez response to this email about 10 minutes later, "I will issue an expulsion notice". Mr Hopkins then sends an email asking, "Putting Greg aside do we have to expel?" And then he suggests a management team discussion the following day.
HWLE's contentions are not persuasive. In ordinary business and professional practice, it would be surprising if other documents were not created between 26 July 2020 and 13 August 2020. The uncontested facts and already discovered documents raise many questions to the reasonable observer about documents that it would reasonably be expected to have been generated between Mr Martinez and the management team prior to 13 August 2020. Mr Lewis was treated differently to almost all other Capital Partners in the IPO proposal. It stands to reason that the grounds for treating him differently must have been the subject of some decision-making process and resulted in the giving of instructions to give effect to the decision-making process. And the complexity of the relevant considerations for the management team to treating Mr Lewis differently imply that members of the HWLE management team probably generated some documents, individually or collectively, reflecting the way they worked through those considerations.
The circumstances prompt at least the following questions based upon the decision-making that it may be inferred must have occurred among Mr Martinez and the HWLE management team prior to 13 August 2020. For example, how did Mr Martinez and others on the HWLE management team,
1. conclude by 5 August 2020 that Mr Lewis, as distinct from any other Capital Partner, was not going to be a participant in the IPO sell down process and by what criteria,
2. decide to propose an IPO on 10 August 2020, which reduced Mr Lewis's calibration points to zero, rather than diminish or otherwise alter his existing calibration points,
3. decide to reallocate Mr Lewis's calibration points to other partners after reducing them to zero,
4. conclude that the IPO proposal circulated to Capital Partners on 10 August should not clearly flag, if that be the case as is alleged, that Mr Lewis had not given his consent to being designated as FDP,
5. conclude that Mr Lewis should be proposed to become a Fixed Draw Partner rather than, for example, to be expelled from the partnership, or have his calibration points further diminished, or be left as a capital partner with calibration points subject to further negotiation, and
6. Decide to move from the position on 8 August of offering to negotiate and discuss Mr Lewis' position to deciding on 13 August to take "a different approach"?
There may be other questions. These questions are relevant to the identified subject in Order (3)(a)(i) "seeking to exclude the plaintiff from participation in the proposed IPO". The 13 August 2020 emails do not answer the Courts concerns. If there are no documents passing between Mr Martinez and other HWLE partners on these topics, the inference may be available that Mr Martinez decided all these questions himself, without consultation with others. That seems to be an improbable way to conduct the affairs of a substantial Australian law firm. But if that is what happened Mr Martinez himself is likely to have generated some documents to aid his reasoning processes on these issues.
An adequate response here is for the Court to require HWLE to swear a further affidavit within 21 days either confirming the accuracy of the present list of documents, or to use that time thoroughly to check and revise the present list. Though the absence of pre-13 August 2020 material is puzzling, an order for a further affidavit is an adequate response to the situation. A new affidavit must be sworn in any event to deal with the additional documents that have recently been disclosed. Requiring a representative of HWLE to attend to be cross-examined for requiring a detailed affidavit explaining the search is undertaken is excessive. Requiring the swearing of a further affidavit confirming the scope of HWLE's discovery will allow HWLE an opportunity to further investigate its documents and consider the scope of discovery it is to give.
While preparing these reasons the Court has reflected upon the scope of order (3) of the discovery orders. It may perhaps be the case that despite Mr Braham SC's submissions that too narrow a view has been taken within HWLE of the words in the discovery orders due to a misunderstanding of their terms. In order (3) the words, "all documents recording or evidencing the state of mind, motive and/or purpose of the management team, Mr Martinez, Mr Hopkins, Mr Mailler, Mr Artus and Mr Hummel, in doing any of the following" are wide enough to cover all the HWLE management team's individual views and collective decision-making processes leading to the IPO to the extent they relate to the various subjects about Mr Lewis. They should not be interpreted as referring only to HWLE's collective decision-making, but rather should include consideration, planning or execution documents of individuals comprising the management team on the topic of "seeking to exclude the plaintiff from participation in the proposed IPO". The words are wide enough to encompass personal notes, diary entries, text messages and the other digital trails generated by modern business and professional life.
Moreover, subparagraphs (3)(i) to (iv) are wide enough to encompass documents evidencing the rejecting of courses of action other than those taken, and wide enough to encompass the drafting or formulating of reasons for the courses of action that were taken.
The Court will give HWLE 21 days to swear such an affidavit with the benefit of these additional observations, which should help to clarify the scope of the discovery which is expected under order (3).
HWLE is undoubtedly conscious of its legal and ethical obligations to give proper discovery in these proceedings. If the discovery it now provides turns out during the trial to be inadequate, after Mr Lewis has brought this motion and the Court has made these observations clarifying the scope of order (3), it would face the risk of an appropriate order to meet any costs thrown away due to late supplementary disclosure.
[6]
Conclusions and Orders
Mr Lewis has obtained the main relief he sought on the motion. An appropriate order for costs would be that HWLE pay his costs of the motion. But HWLE may wish to contest this. In that event HWLE will be granted liberty to approach the chambers of Slattery J for the purposes of putting argument in support of a different outcome on costs. And Mr Lewis may wish to contend for a special costs order. The Court will enter a costs order in chambers in favour of Mr Lewis after 21 days if neither side applies for a different order. If advantage is taken of the liberty to apply, the Court expects the parties to agree upon a timetable for very brief written submissions in relation to costs and will endeavour to deal with the issue of costs in chambers.
The parties indicated to the Court that they were ready to take a hearing date once this discovery issue was resolved. The matter has therefore been adjourned into the Registrar's list for that purpose at a date in approximately three weeks' time.
For these reasons the Court makes the following orders and directions:
1. Order that within 21 days, that is by Thursday, 20 July 2023 the defendants should give further and better discovery of the categories of documents that the Court ordered the defendants to discover pursuant to Order 3(a) of the Court's orders of 10 February 2023, and to verify that discovery on affidavit in conformity with Uniform Civil Procedure Rules 2005, r 21.4.
2. Note that the Court will make in chambers an order for costs of the plaintiff's motion dated 26 April 2023 in favour of the plaintiff on the ordinary basis, subject to the parties having liberty to apply to the chambers of Slattery J before Thursday, 20 July 2023 for a different cost order and in that event the parties should agree upon a timetable for short written submissions in relation to costs which the Court will endeavour to deal with in chambers.
3. Adjourn these proceedings into the Registrar's list on 25 July 2023 at 9.30am for further directions and with a view to the fixing of a final hearing date.
[7]
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: 29 June 2023
Parties
Applicant/Plaintiff:
Lewis
Respondent/Defendant:
Martinez as representative of the partners t/as HWL Ebsworth Lawyers