Supreme Court of WA|1999-07-02|Before: Wheeler J, The J

Magenta Nominees Pty Ltd v Bonini & Ors [1999] WASC 88 (2 July 1999)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : MAGENTA NOMINEES PTY LTD -v- BONINI & ORS [1999] WASC 88

CALLAO PTY LTD AS TRUSTEE FOR THE S J CHESSON FAMILY TRUST (ACN 008 867 552)

MILONE PTY LTD AS TRUSTEE FOR THE J M KELLY FAMILY TRUST (ACN 009 142 974)

BENRONE PTY LTD AS TRUSTEE FOR THE B L & J DENBOER FAMILY TRUST

CHARTER WAY PTY LTD AS TRUSTEE FOR THE BENRONE SUPERANNUATION FUND (ACN 065 172 116)

MILONE PTY LTD AS TRUSTEE FOR THE MILONE SUPERANNUATION FUND (ACN 009 142 974)

AUSTASIA REAL ESTATE PTY LTD AS TRUSTEE FOR THE DUTCO SUPERANNUATION FUND (ACN 008 954 283)

WESTERN AUSTRALIAN REAL ESTATE CUSTODIAN LTD (ACN 069 896 966)

Practice and procedure - Discovery - Springing order for discovery - "Failure" to give discovery - Particulars (failure to supply) - Expert report - Striking out claim for failure to comply with court orders

Plaintiff's action dismissed and defendants by counterclaim defence to counterclaim struck out pursuant to O 26 r 15

Second Defendants : Mr S Owen-Conway QC & Mr T Galic with the exception of Mr S J Chesson, who appeared in person

Third Defendants : Mr S Owen-Conway QC & Mr T Galic

Fourth Defendant : Mr S Owen-Conway QC & Mr T Galic

Second Defendants : Galic & Co with the exception of Mr S J Chesson, who appeared in person

Beecham Group Ltd v Bristol-Myers Co [1979] VicRp 27; [1979] VR 273

Hamersley Iron Pty Ltd v Metal and Engineering Workers' Union - Western Australia & Ors, unreported; SCt of WA; Library No 970184; 24 April 1997

Hughes v Gales (1995) 14 WAR 434

Ken Gray & Co (A Firm) v J & J Products (A Firm), unreported; SCt of WA (Master Adams); Library No 950106; 17 March 1995

Re Jokai Tea Holdings Ltd (1992) 1 WLR 1196

1 WHEELER J: This matter began its life as a number of matters issued out of the District Court and Local Court by the plaintiff in December 1992. It has, over time, assumed much greater complexity than could have been foreseen from a reading of the original relatively simple statements of claim. Despite the protestations of all parties that they are anxious to proceed to trial and have the matter resolved, it is one of those matters that mysteriously has not progressed to trial and appears unlikely to be ready for trial in the near future. Matters currently in dispute between the parties include issues of discovery, particulars and expert reports.

2 The defendants, all of whom are represented by one firm of solicitors, have taken out a chamber summons entitled "Chamber Summons for Orders Striking Out the Plaintiff's Claim and the Defence to Counterclaim and for Judgment Pursuant to Order 26 Rule 15". Before I deal with that summons, it is probably convenient to outline very broadly, the nature of the claim and counterclaim.

3 The plaintiff claims against the defendants in respect of alleged loan agreements. The plaintiff is the trustee of the Kelmscott Village (1988) Unit Trust and the defendants are holders of units in the trust. It appears that there are other unit holders, and it is convenient to describe the defendants, as they describe themselves, as "small unit holders".

4 It is alleged that a Mr Chesson, on behalf of the plaintiff, agreed with the defendants that: the plaintiff would lend them certain sums of money; interest would be paid, plus certain other charges; the trust would have first priority in respect of the defendants' entitlement as unit holders to income from the trust to meet outstanding interest; and where the monthly income received by the trust was not sufficient to meet the interest payable by the defendants, the defendants would make up the shortfall on demand. A notice of demand, shortfall, and refusal by the defendants to pay is pleaded.

5 Certain of those allegations are denied by the defendants. The defendants claim that Mr Chesson, who is the first named second defendant by counterclaim, was director of the plaintiff and exercised real and effective control of it. They plead certain representations made by Mr Chesson on behalf of the plaintiff in respect of the Kelmscott Village Shopping Centre, broadly dealing with its value and likely increase in value and its rentals, which representations are alleged to have been misleading and deceptive conduct in trade or commerce. It is further asserted that the plaintiff was in breach of trust in purchasing the shopping centre, in that appropriate advice was not taken, and that the plaintiff has failed to keep a complete and accurate record of all receipts and expenditures on account of the trust funds. It is asserted as a result of all of this that the defendants, (the plaintiffs by counterclaim), have suffered loss and damage.

6 The defence and counterclaim further make allegations in relation to the management of the shopping centre by Austasia (a third defendant). It is asserted by the defendants that Austasia Real Estate Pty Ltd, the manager of the shopping centre, is an alter ego of Mr Chesson, that excessive fees have been paid by the plaintiff to Austasia and that the trust has in reality been operated in effect for the benefit of Austasia.

7 The plaintiffs and defendants by counterclaim are represented by one firm of solicitors, with the exception of Mr Chesson, who represents himself. All parties have changed solicitors at some time during the course of this action.

8 Because of the identity of interest between the parties on each side and because of the dominant role of Mr Chesson in respect of the defendants by counterclaim, it is convenient to refer to the plaintiffs and defendants by counterclaim as "the Magenta parties" and to the defendants/plaintiffs by counterclaim as "Bonini and others", except where the context requires otherwise.

9 Bonini and others complain of a number of matters. First, they allege that there has been consistently late and inadequate discovery. Second, they complain of late and inadequate particulars. They have a complaint in relation to the provision of expert reports. Generally, they submit that the interlocutory history of the last 18 months, approximately, demonstrates that the Magenta parties comply with court orders only if threatened with sanctions, or if a summons is listed for hearing, and that their conduct amounts to contumelious disregard for the court's orders, a waste of judicial time, resources and public resources, and amounts to a "war of financial attrition" run by the Magenta parties from trust funds.

10 The Magenta parties both deny the detail of the allegations and submit that Bonini and others have not accurately enunciated the legal principles against which these allegations must be tested. Further, there is an issue about the nature of Bonini and others' summons with which I am presently dealing, which I will mention later in these reasons.

11 There have been four orders for discovery to which Bonini and others refer. The first is an order of Ipp J dated 12 November 1997. The terms of the order, so far as it deals with discovery are:

"The parties provide discovery on oath by 17 January 1998. The further discovery be limited to documents which are relevant to the issues in the consolidated action, which have not hitherto been the subject of discovery or an order for discovery, or the subject of actual inspection pursuant to an order for inspection in action CIV 1252 of 1996. Inspection be completed by all parties on or before 24 January 1998."

12 A further order in almost identical terms was made by Ipp J on 27 February 1998 but the order provided for discovery by 27 April 1998 and inspection to be completed by 11 May 1998.

13 By order dated 17 December 1998, Ipp J ordered that:

"The second, third and fourth defendants do provide discovery on oath within fourteen days."

14 It seems that what was intended, and what was understood by all parties, was that the second, third and fourth defendants by counterclaim provide discovery. As I understand it, there was no suggestion that any of the defendants had not provided discovery at that time, save in respect of certain tax returns which were the subject of a separate order on the same day (which order refers to certain "plaintiffs" at one point, but is plainly intended to refer to defendants.)

15 Finally, on 3 February 1999, Ipp J ordered that:

"Unless within fourteen days the second, third and fourth defendants do provide discovery on oath then the plaintiff's action be dismissed and the defendants by counterclaims' defence to counterclaim be struck out and judgment be entered for the defendants on the plaintiff's claim [and the defendants' counterclaim.]"

16 Again, that order mistakenly describes the second, third and fourth defendants by counterclaim as the second, third and fourth defendants, but its intention is plain once the order is read in its entirety. While it was not expressed to be made by consent, a perusal of the relevant transcript reveals that the Magenta parties were present, and did not oppose the order.

17 It is convenient to note that no order appears to have specified the person to comply with the order, as required by O 26 r 4(4). No objection was taken to the order on that basis, and nothing appears to turn on it. However, given the central role of Mr Chesson in this litigation, I note that it would perhaps have been desirable to have specified that he swear relevant affidavits.

18 On the last possible day for compliance with the order dated 3 February 1999, Jeanette May Chesson swore an affidavit of discovery in respect of the first, sixth, and seventh named third defendants by counterclaim, they being, Callao Pty Ltd as trustee for the S J Chesson Family Trust, Austasia Real Estate Pty Ltd as trustee for the Dutco Superannuation Fund, and Austasia Real Estate Pty Ltd. Precisely three documents were discovered, two being certificates of incorporation in respect of Callao Pty Ltd and in respect of what is described as "Ducto", but is probably intended to be Dutco, and a certificate of registration on change of name. The only documents which Mrs Chesson deposed Callao and Austasia did have in their possession but do not now have in their possession, custody or power, were originals of letters written by Callao's and Austasia's solicitors to the plaintiffs' solicitors (presumably a reference to the plaintiffs by counterclaim) and the originals of pleadings and other documents filed in court by Callao's and Austasia's solicitors. There are in the affidavit the usual references to instructions; notes and memoranda prepared for solicitors in Pt II in the first Schedule to the list. Otherwise, Mrs Chesson deposed that neither Callao nor Austasia nor any other person on their behalf has now or ever have had in their possession, custody, or power any other document whatever relating to any matter in question in this action. For completeness, I note that Mrs Chesson's affidavit deposes that she is a director of each of the third defendants to which I have referred, and is authorised by them to make the affidavit.

19 Affidavits to similar effect, discovering only certificates of incorporation, were sworn by each of the other third defendants and the fourth defendant by counterclaim. Affidavits containing identical lists of three hundred and thirty documents, or bundles of documents, were sworn by each of the second defendants by counterclaim.

20 Bonini and others say in relation to these matters; first, that the delay in providing affidavits of discovery of any kind lends force to their submissions that the Magenta parties only comply with court orders if threatened with sanctions and are intent on delaying the trial; second, that the affidavits are self evidently so inadequate as to constitute effectively a refusal to comply with the order of 3 February 1999; and alternatively, that the inadequacy of the affidavits, if not so inadequate as to cause the springing order to operate so as to dismiss the claim, further illustrate the Magenta parties' determination not to take proper steps to bring the action to trial, and enliven a discretion in the court under O 26 r 15.

21 In reply to these submissions, the Magenta parties: point to the error in the order; submit that the proper course for Bonini and others is to seek an order for specific discovery; point out that the summons of Bonini and others was not served 7 days before its return date; submit that "the filing of an affidavit of general discovery, however deficient" is a sufficient compliance with a springing order; and assert that in any event the affidavits of discovery are not self evidently inadequate.

22 If one accepts the affidavits of discovery on their face, and assumes that the only discoverable documents are the certificates of incorporation, then the delay in discovering those documents would appear to be extraordinary. The listing of a handful of documents would be the simplest of tasks. It should therefore have been accomplished well before 17 January 1998, the deadline provided for in the first of the orders for discovery to which I have been referred. Self evidently, it could and should have been easily accomplished within 14 days of the order of 17 December 1998, which specifically referred to the second, third and fourth defendants by counterclaim. There is no explanation for the delay. A delay of this order lends considerable force to the submissions that the Magenta parties simply do not feel it necessary to comply within time with court orders.

23 So far as the springing order is concerned, I do not accept the Magenta parties' proposition that the error on the face of the order has the result that it is not necessary to comply with it, in circumstances where it is clear that all parties understood that the second, third and fourth defendants by counterclaim were the parties to which the order intended to refer. Delay in serving the Magenta parties' summons is irrelevant, since the Magenta parties have not sought any adjournment of this application, and since (for reasons that I will develop later) it seems clear that they have had adequate time within which to consider the application.

24 I do not accept the proposition that Burkett v Miller, unreported; FCt SCt of WA; Library No 2131; 1997 is authority for the proposition that the filing of an affidavit "however deficient" is a sufficient compliance with a springing order to prevent the dismissal of the claim or the striking out of the defence. That case suggests that the filing of an affidavit of discovery has the result that such an order is not thereafter "self operating". However, Burt CJ, with whom Wickham and Brinsden JJ agreed, observed that, an affidavit having been filed, it would then be considered "as a matter of substance, as to whether the affidavit filed was a complete discovery of documents, and if it was not, was it so deficient as to show that the [party] was not attempting to do what was required of him". I take it from this decision that the filing of a wholly inadequate affidavit of general discovery will prevent a springing order from being self executing, but the inadequacy of the affidavit may nevertheless enliven a discretion to strike out the claim pursuant to O 26 r 15, on the basis that an inadequate affidavit represents a failure to give discovery as contemplated by the Rules of the Supreme Court or by the relevant order.

25 There is some authority elsewhere which suggests that a document which the court is satisfied is not made in good faith, or which could be regarded as an "illusory" attempt to comply with a springing order, will not prevent the order from being self executing, notwithstanding that on its face the document appears to be an appropriate affidavit. In Reiss v Woolf [1952] 2 QB 557, the Court of Appeal, considering whether an order for further and better particulars had been complied with, accepted that, while the order is directed to delivery of a document within a specified time and not to the substance of the document, nevertheless the document must be made in good faith and fairly able to be entitled "particulars" not "illusory" before the party could assert that he had complied with the order. In Republic of Liberia v Roye [1876] 1 App Cas 139, the House of Lords considered an appeal which was directed to the decision of the Chief Clerk that an affidavit of discovery was insufficient, so that the appellants were in default under a springing order for discovery. The question that their Lordships considered was whether the affidavit was a "full and sufficient" one. They took the view that it was not, because it was sworn by the Consul General of the Republic in England, who knew nothing about the relevant documents, which were understood to be largely in Liberia. It is not entirely clear from the argument or decision how it was known where the relevant documents would have been located.

26 By contrast, in Freeman v Rabinov [1981] VicRp 52; [1981] VR 539, the Full Court of the Supreme Court of Victoria took the view that all that was required was delivery of an affidavit sworn in proper form, and in Southern Cross Oil v Fire and All Risks Insurance Co Ltd (1986) 7 NSWLR 319, the New South Wales Court of Appeal, in relation to an order for particulars, seems to have taken the view that a document in purported compliance with the order, would be sufficient to prevent it from being self executing provided only the document could not be said to be a "nullity".

27 Those last two cases to which I have referred do not appear to have been concerned with the question of a power to strike out of the type referred to by Burt CJ. My brief review of authority elsewhere suggests that while the filing of a document, which is deficient in some respect, may prevent the operation of a springing order, it is not the case that the court will never look at the substance of the document. However, even if the document is of such apparent adequacy as to prevent the operation of the springing order, Burkett directs attention to a further inquiry, in the exercise of a discretionary decision.

28 Applying Burkett as I understand it, a question arises as to whether the affidavits of discovery were so inadequate in their content as to show that the Magenta parties were not seriously attempting to do what was required of them.

29 So far as insufficiency of discovery is concerned, Bonini and others refer to a number of matters that suggest that discovery by the third and fourth defendants by counterclaim is plainly inadequate. So far as the defendants by counterclaim, (other than Austasia) are concerned, they refer to par 41 and par 46 of the counterclaim, and note that discovery has not been given by any of the third defendants by counterclaim of any documents relating to purchase or transfer of units in the trust at a discount, receipt of dividends from the trust, documents relating to the receipt of loans or purported loans, or minutes of meetings of the directors of those parties bearing on the issues arising in the counterclaim. So far as Austasia is concerned, Bonini and others note that the defence and counterclaim raises a series of allegations as to Austasia's management of the shopping centre. Questions arise as to whether or not substantial sums were paid to Austasia by way of management fees, what the quantum of those fees were, and what work was performed by Austasia in maintaining the shopping centre and in attracting major tenants to it and supervising its redevelopment. No discovery has been given by Austasia of its bank records, cash book, general ledger, or tax returns which would relate to any management fees received, nor has discovery been given by it of documents relating to any work it caused to have done, or attempted to have done relating to maintenance or redevelopment of the shopping centre, or relating to efforts by it to attract tenants.

30 The Magenta parties rely upon the principle that an affidavit of discovery is conclusive as to its contents unless the person challenging it can bring him or herself within one of certain established exceptions. It is clear from the authorities relied upon that the principle contended for is extracted from cases dealing with applications for further discovery.

31 Accepting that the authorities relating to applications for further discovery are relevant, it is necessary for Bonini and others to demonstrate, whether from admissions made in the pleadings of the Magenta parties, or from documents disclosed in the affidavit of discovery, or from the affidavit itself, or from admissions made otherwise by the Magenta parties that there can be drawn a reasonable inference based upon which the court can feel "comfortably satisfied" that the Magenta parties had, or have had, other relevant documents in their possession, custody or power. Such an inference may also arise if it appeared that the Magenta parties had excluded documents from discovery under a misapprehension as to the nature of the obligation. A relatively recent, and useful, discussion of the history and present practice in relation to matters of this kind is to be found in the reasons of Powell J, which I respectfully adopt on this point, in Mercantile Mutual Holdings Ltd v International Reinsurance Pty Ltd (unreported; SCt of NSW 14 August 1989 Butterworth's unreported judgments BC 8901849).

32 There are, in my view, certain comments made by the solicitors for the Magenta parties in correspondence, and certain remarks made by Mr Chesson in oral argument in this case and in his written submissions, which I think can be regarded as "admissions" of a relevant type. There are also in that correspondence and in those submissions other observations that may point to the conclusion that documents in some categories do not exist. In fairness, it is appropriate to take those observations into consideration also, notwithstanding that they are not on oath.

33 There is one additional comment contained in an expert report served by the Magenta parties upon Bonini and others and, presumably, ultimately intended to be relied upon at trial, which should be noted also. In that draft report from Carlton & Partners, reference is made to "those persons at Austasia Real Estate Pty Ltd who are keeping the records ...". It appears that the expert engaged by the Magenta parties is intended by them to rely upon inter alia records "kept" by Austasia. This comment is best understood in the light of other observations made by or on behalf of the Magenta parties.

34 The correspondence which deals principally with this issue from the point of view of the Magenta parties' solicitors, is a letter of 23 February 1999. It begins with the observation that each of the third defendants by counterclaim are separate corporate entities, as is the first defendant by counterclaim and plaintiff, and continues with the following two curious sentences:

"Discovery and inspection of all documents in the exclusive possession, custody or power of Magenta has already taken place.

You fail to make reference to any documents which have not previously been discovered by the plaintiff and the first defendant by counterclaim [Magenta] all of which have been inspected."

35 There seems to be implicit in these remarks an assumption either that documents which are in the Magenta plaintiffs' possession, custody or power cannot also be within the possession, custody or power of the third defendants, or, alternatively, that the third defendants by counterclaim are relieved of the obligation of giving discovery if Magenta has done so. Such a view may have been arguable if it referred to the orders of 12 November and 17 December 1997, but not in respect of the later orders.

36 So far as units are concerned, the solicitors "inform" Bonini and others that:

"Magenta repurchased units from some unit holders at discounted prices;

Magenta sold the same number of units that it repurchased at the same price for which of those units were repurchased;

all documentation evidencing the creation and issuing of new units are in Magenta's exclusive possession, custody and power."

37 It is not clear what purpose this information serves. There is no assertion as to whether there is or is not any documentation relating to repurchase of units or sale of repurchased units. So far as "new" units are concerned, there is a clear assertion, but one that must be understood in the context of what is said later about Magenta.

38 So far as the receipt of dividends from the trust is concerned, it is essentially asserted that dividends paid by means of book entry were entered in the books of Magenta. As for dividend cheques, which were presented for payment and cashed, the solicitors say:

"These are no longer in the possession, custody or power of the third defendant by counterclaim."

39 It necessarily follows from that assertion that the documents were once in the possession, custody or power of the third defendants by counterclaim, and it is to be noted that no reference to such documents appears in the discovery of the third defendants by counterclaim. The affidavits filed on their behalf are plainly inadequate and inaccurate in that respect.

40 So far as loans are concerned, it is asserted that all loans were made by book entry and that "discovery and inspection of those documents has taken place" (presumably when discovery and inspection of Magenta's documents took place).

41 Minutes of directors' meetings are said not to be discoverable, relying upon two authorities that are cited in the letter, they being In Re Londonderry's Settlement [1965] 1 Ch 918, and Hartizen Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405. Both of those cases deal only with a trustee's duty to account to beneficiaries; they have nothing to say in respect of the obligation to give discovery, where a trustee is a party to litigation. To this extent, the approach taken by the Magenta parties is misconceived and, as it appears to be accepted by them that such minutes exist, the discovery given is inadequate.

42 So far as Austasia is concerned, it is said that all payments made to Austasia were made by cheque and that details of the cheques have been discovered by Magenta. Again, it is said that "obviously cheques that have since been presented ... are no longer in Austasia's possession, custody or power". There is no reference in the relevant discovery to such cheques and the discovery is to that extent inadequate.

43 So far as all other Austasia related documents are concerned, the solicitors assert only that:

"The files are held and maintained by Austasia on Magenta's behalf but in our opinion those documents can only be said to be in Magenta's possession, custody and power and discovery and inspection of those documents has taken place. Austasia is of course entitled to rely on those documents."

44 There are a number of flaws in this line of reasoning. The first is that it is difficult to see how documents of a corporate entity relating to its management role in a shopping centre, and its receipt and banking of moneys, can be said to be held "on behalf" of another corporate entity, however closely the two are related. Even if that assertion could be taken at face value, there is the further problem that it appears to be implicit in that assertion that the relevant files are in the physical possession of Austasia and the principle is that even if a party has custody of documents as agent or servant or a third party, they are discoverable if they are physically in the possession of the party: Turner v Davies [1981] 2 NSWLR 324. These documents should have been, and were not, discovered by Austasia.

45 Finally, it is implicit in the assertion that "the files" are held and maintained on behalf of Magenta that there are files falling into the relevant categories. However, it does not appear that Magenta's discovery contains documents relating to a number of matters; for example, documents relating to attempts to ensure proper maintenance of the shopping centre; documents related to work performed in supervising the shopping centre redevelopment and to charges made in respect of that work; and banking records or other financial records of Austasia. It would appear to follow that Magenta has, quite properly, given discovery only of documents which relate to it and not of documents which relate to allegations against Austasia. Those latter documents then remain to be discovered.

46 In his outline of written submissions, Mr Chesson takes a somewhat different tack. He asserts that solicitors for Bonini and others have examined the records of "the trust" on many occasions. My understanding of that expression is that it refers back to earlier paragraphs of the submission, which deal with the position of the plaintiff, Magenta. He further says that in relation to the family companies, being apparently the third defendants by counterclaim generally, "the trustees are not obliged to discover all of the records of the family trusts. There are no documents in the possession of the family companies that support [the defendants] case in any way." This strongly suggests that there are documents in the possession of the third defendants by counterclaim, but that Mr Chesson takes the view that they do not need to be discovered. The basis upon which he takes that view suggests a fundamental misconception of the nature of discovery.

"There is no documentary evidence of any matter in respect of the pleadings contained in paragraphs 26, 29, 41 or 46 of the Counterclaim, particularly

6.2.1 The family companies do not have papers relating to units allotted to them in breach of trust;

6.2.2 The family companies do not have papers relating to loans made to them in breach of trust;

6.2.3 The family companies do not have papers relating to the payment of monies to them in breach of trust;

6.2.4 The family companies do not have papers relating to representations made as to their conduct in breach of trust or at all."

48 In similar vein, he says in relation to the third defendants by counterclaim that "the defence of the third defendants by counterclaim is that there are no breaches of trust by the trustee and no participation in breaches of trust by the third defendants. In those circumstances, it is obvious that there are no documents to support allegations".

49 The contrast between the terminology in par 6.2.1 through to par 6.2.3 which refer to papers concerning certain matters "in breach of trust" and par 6.2.4 which asserts that there are no papers relating to conduct "in breach of trust or at all" strongly suggests that Mr Chesson takes the view that it is necessary only to discover those documents which, in his assessment, are evidence of breach of trust. Plainly, that is not the relevant test.

50 I raised this possible understanding of the written submissions with Mr Chesson during the course of his oral argument and asked him as clearly as I was able whether the submission was that the family companies did not have any papers at all relating to allotted units or loans made to them, or moneys paid to them. The only reply he was prepared to make to this was, "I can't speak for the other parties. I can speak for myself" which, it is to be noted, is in contrast with the very sweeping nature of the submissions in which Mr Chesson does purport to speak for all of the Magenta parties. Indeed, it is in contrast with passages of his oral submission in which it appears to me that he purports to speak for all of the third defendants by counterclaim.

51 He did then go on to say in oral argument that "What I'm saying is that as far our own companies are concerned, all of those documents are contained in the Magenta files ...". Again, unfortunately, this does not clarify the question of whether Magenta has discovered those documents that relate apparently to allegations against corporate entities distinct from Magenta.

52 In relation to the question of custody or possession of the relevant documents, Mr Chesson in his oral argument said:

"The files which contain all of Magenta's affairs are in Austasia's office in filing cabinets and are used by both Magenta and Austasia and the directors, who are all directors of these companies - any information is accessed from those files."

53 This suggests that documents held in the relevant files are in the possession of Austasia and of each of the relevant companies to which the documents relate. They have not been discovered by those companies.

54 I noted during the course of the oral submissions that Mr Chesson felt himself able to speak with confidence on behalf of all of the defendants by counterclaim. Affidavits of Mr Chesson, to which I was referred during the course of argument, were to like effect. To the extent that there is inconsistency, it appears to me that information coming directly from Mr Chesson is to be preferred to assertions in the correspondence of the solicitors, based on instructions which may either have come from those less knowledgeable about the Magenta parties' affairs than Mr Chesson, or which may not have been accurately noted by the solicitors.

55 It appears, then, from the correspondence and from the argument before me, that some of the Magenta parties have failed to refer in their discovery to documents which were, but are no longer, within their possession, custody or power; that Austasia has failed to discover documents which are within its possession; and that discovery has, to an extent, proceeded on the basis of a fundamental misconception about the nature of the obligation. It is difficult to see how such a misconception can have arisen and persisted, in action which has been on foot for as long as this one, and in which there has been discovery, and disputes concerning discovery, so far as Magenta is concerned, in which Mr Chesson has been closely involved. It is even more difficult to understand when one peruses Magenta's discovery, and finds that that company has been involved in a substantial quantity of other litigation, in which no doubt the obligation to give discovery at times arose.

56 It seems that the view has been taken on behalf of the third and fourth defendants by counterclaim, that it is unnecessary for them to give discovery because discovery has already been given by Magenta. The problem with this view is that it ignores the orders made by the court in relation to discovery, and particularly the last two orders, which were directed specifically to the third and fourth defendants by counterclaim. It is also a view that is inappropriate. While I do not wish to be understood as saying that a consolidated discovery will never be appropriate on behalf of related entities (as such discovery may clearly be a practical way to save costs in some cases) it is not appropriate in the present case where there has been no consent to such a method of discovery, there have been no orders permitting such a method of discovery, and, while all of the matters pleaded by the plaintiffs by counterclaim arise out of the same general set of circumstances, the allegations against each of the parties are not entirely the same.

57 It does not seem to have been the case in any event that discovery given on behalf of Magenta did discover certain documents relevant to Austasia which, on my reading of the correspondence between the parties and the submissions of Mr Chesson, appear likely to exist.

58 Notwithstanding the deficiencies in the discovery, the affidavits filed in response to the springing order are in proper form. I would not regard the discovery given as a "nullity". I would therefore take the view that the springing order is not self-executing, and any striking out of the claim and defence to counterclaim would be as a matter of discretion. In my view, the history of the discovery, which I have recounted, does show that the Magenta parties have been persistently dilatory, and have adopted what could most generously be described as a cavalier attitude to their obligations in respect of discovery. It is convenient to consider other complaints about the conduct of this litigation before returning to the present summons.

59 The chronology of the particulars question, so far as requests by Bonini and others of the Magenta parties are concerned, is as follows. On 27 February 1998 it was ordered by consent that the parties deliver any request for particulars of any consolidated pleading by 30 March 1998, and that answers or objections to any request for further and better particulars be filed and served by 13 April 1998. The plaintiff/first defendant by counterclaim delivered its request for further particulars, not by 30 March, but on 1 May 1998 and that was answered by Bonini and others on 25 May 1998. Bonini and others filed and served their request for further and better particulars of the amended reply and defence to counterclaim on 16 March 1998. Further written requests followed, with no apparent effect. On 17 December 1998, Ipp J ordered that the plaintiff and defendants by counterclaim (save for Mr Chesson) answer the request dated 16 March 1998 within seven days. That was not done. The matter was relisted before Ipp J for the purpose of seeking a springing order in respect of particulars. That application was to be heard on 3 February 1999. On 2 February 1999 at 5.15pm, answers were provided. On 3 February 1999, Bonini and others submitted to Ipp J that the particulars provided were inadequate. Ipp J ordered that they file any application for further and better answers to the request by 8 February 1999. His Honour also made certain observations concerning the desirability of interlocutory issues being sorted out between the parties, rather than by means of persistent applications to the court.

60 On 3 February 1999, solicitors for Bonini and others wrote to the solicitors for the Magenta parties pointing out what they perceived to be deficiencies in the further and better particulars provided. On 8 February 1999, they received the following reply, which I consider it is desirable to set out in full:

"The answers to your request for further and better particulars of the reply and defence to counterclaim are to be redrafted in a form that we think conforms with the requirements for answering particulars.

To be precise, the answers to particulars were not seen by his Honour Ipp J and any comments from the bench were prompted by an introduction from the bar table from your Mr Kilpatrick as to the nature to some of the answers given, in particular 7, 14.2, 14.3 and 16.2. This falls short of suggesting that the Judge could possibly without having seen the answers adjudge their entire adequacy.

You have allowed us until the close of business on Wednesday 17 February 1999 to redraft the answers.

Any attempts to bring this matter back before Justice Ipp in the meantime will be viewed as a wasted costs exercise and we will look to your clients to recoup those costs.

Be mindful of his Honour's comments that these appearances are becoming a waste of time, an expensive waste of time and that the parties should confer.

61 Despite the ambiguity of the second paragraph, which seems to be suggesting that not all of the criticisms of the particulars are accepted, viewed in its entirety the matter is clearly to be read as promising that re-drafted particulars of some kind will be provided by 17 February. The reference to that date arises because Bonini and others' letter of 3 February asked whether the Magenta parties would "consent to the redrafting of the above answers within 14 days".

62 On 18 February, the solicitors for Bonini and others wrote to the Magenta parties' solicitors pointing out that answers had not been received, and they received the following reply, which I again set out in full:

"We refer to your letters of yesterday's and today's date.

With respect to our clients' answers to your clients' request for particulars, answers 7, 14.2, 14.3 and 16.2 are being re-drawn.

As for answers 8, 9, 10, 11.11.1, 13.2, 14.1, 17, 18, 19, answers are being re-drawn in an acceptable form.

Unfortunately our Mr Galic has been under extreme pressure with other pressing work commitments and regrets that the particulars are not likely to be available until Monday of next week (at the very latest).

Commenting on the answers to particulars requested, it seems to us that the majority of answers provide more information than is reasonably required to understand the case put by our clients, whereas in other cases you have challenged answers to requests which we think are impermissible and go beyond reasonable inquiry or necessary to understand our clients' case. Be that as it may, to eliminate unnecessary delays and to 'keep the peace', reasonable attempts are being made to address those particulars.

Could you please take no steps to bring this matter back before the court until Tuesday 23rd February 1999 by which time you will have heard from us and have had an opportunity to consider the re-drawn particulars.

However whichever way you choose to react to the writer's request for more time, please be mindful of;

(b) His Honour's comments that appearances before him were becoming a waste of time, an expensive waste of time and that the parties were urged to confer."

63 A further letter to broadly similar effect was written by the Magenta parties' solicitors on 24 February 1999 in response to correspondence pointing that no further particulars had been received by 23 February.

64 The present summons was originally listed for 18 March 1999, and on 16 March 1999 the Magenta parties delivered further answers to the request for particulars. Bonini and others assert that those answers are not adequate. That assertion may well be accepted, since a further version was apparently sent to the solicitors for Bonini and others on 9 April, and then apparently substituted answers were filed on 23 April and served on 27 April, the day before the hearing of this summons before me.

65 The Magenta parties' submissions in respect of these issues raise a number of points. First, the inadequacy of the original answers is, I think, disputed. That seems to me irrelevant at this stage, since by their correspondence the Magenta parties had promised further particulars and had plainly led Bonini and others to believe that it would not be necessary to take proceedings challenging the adequacy of those original particulars. Second, it was said in argument that there is now no outstanding issue as to answers to particulars. I am not entirely certain that this is correct, since Bonini and others have had but limited opportunity to examine the substituted answers now provided. In any event, the submission overlooks the gross delay in providing particulars.

66 The solicitors for the Magenta parties assert that they went on the court record in October 1998 and are therefore not responsible for delays prior to that date. That may be so, but no reason has been advanced for not holding the Magenta parties responsible for such delay. Finally, the Magenta parties note that Bonini and others were ordered to file any application for further and better answers to the request for particulars by 8 February, and did not do so. This contention cannot be seriously advanced, in the light of the correspondence which effectively promised Bonini and others that it would be unnecessary to make such an application and threatened them with costs consequences if they did so.

67 The delay in providing the original particulars is gross and unexplained. It strongly suggests that the Magenta parties are prepared to ignore orders of the court until threatened with sanctions. The subsequent delay is explained to a degree. While it seems to me that the correspondence from solicitors for Bonini and others, pointing out the alleged deficiencies in the original particulars, indicated with reasonable clarity what was required, and while it seems to me that the drafting of further answers was not a task of substantial difficulty, I do appreciate Mr Galic's explanation that as a relatively new solicitor on the record, some difficulty may have been experienced in drafting them. However, it appears from the affidavit of Mr Galic dated 23 February 1999 that recent delays were effectively caused by Mr Chesson's delay in providing relevant facts. In Mr Galic's affidavit he deposes to his information from Mr Chesson and, consequently his belief, that Mr Chesson had been under "an excessive work load and pressures" and that the lack of provision of material was "despite his very best endeavours carried out in good faith".

68 Mr Chesson's explanation in his outline of written submissions is at odds with the information he appears to have provided to Mr Galic. He says that, "All of the answers to the request for particulars are contained in the documents taken and photocopied by Mr Kilpatrick [a solicitor for Bonini and others]", which of course misunderstands the purpose of particulars. Further, however, he observes, "People have other lives and other matters to attend to". This falls a long way short of asserting that Mr Chesson has made strenuous efforts in good faith, which have been thwarted by the pressure of other matters, either business or personal. No doubt, litigants cannot permit their lives to be entirely consumed by litigation, but it is the duty of all litigants to ensure that litigation is conducted with reasonable expedition, and the conduct of the Magenta parties does not approach that standard.

69 The history of the orders for expert reports is as follows. On 12 November 1997, Ipp J ordered that the plaintiffs and defendants by counterclaim provide their expert report or a substance of their expert evidence by 2 April 1998. On 17 December 1998, Ipp J ordered that the plaintiffs and defendants by counterclaim provide the defendants with any expert reports within 40 days "after discovery of the tax returns referred to in paragraph 1". Paragraph 1 of the order required the defendants to file an affidavit within seven days explaining why they had not made discovery of the tax returns for 1990 and 1991 financial years in respect of certain plaintiffs. Unsworn copies of those affidavits were served on 24 December 1998 and, some difficulty apparently having been experienced in serving them while the plaintiffs' solicitors office was closed over the vacation, sworn copies appear to have been served on 11 January 1999.

70 On 3 February 1999, Ipp J ordered that the plaintiffs and defendants by counterclaim provide the defendants with an expert report or the substance of an expert report by 2 March 1999. A document described as an expert report was provided by the plaintiffs on 17 March 1999. What are described as "appendices" to that report were provided on 27 April 1999. The report is self-evidently defective, and does not on its face even purport to be all of the substance of the evidence, which will be given by the expert. The report is described as "preliminary" by its author. The author says that he is not able to provide a complete report until, inter alia, he sees copies of taxation returns of the defendants.

71 I do not think it is necessary that I deal in detail with the taxation return issue. Objection is taken by the plaintiff to the defendants' affidavits describing what had become of their taxation returns. It now appears that copies of some taxation returns at least may be available from the Australian Taxation Office, and it appears from the correspondence that efforts are being made to obtain those returns. However, it should be noted that some copies of taxation returns, disclosing the manner in which the defendants have treated in their accounts the loans alleged to have been made to them by the plaintiff, have been available for a considerable time. The expert report makes no comment even upon those taxation returns that are available. Further, it is not only in respect of taxation return issues that the report is defective.

72 There are at least three matters, aside from the taxation returns, with which the report expressly refrains from dealing. The reference to the first of those matters appears under the heading "Supplementary Accounts Prepared for Court Proceedings". The paragraph reads:

"I have reviewed the supplementary accounts you have prepared on the basis of the Australian Accounting Standards that were issued in July 1995 and were applicable as at 30 June 1996. I confirm that those reports comply with the accounting standards then applicable and accord with the accounting records and reports made to unit holders in each of the years 1989, 1990, 1991, 1992, 1992 (sic), 1993, 1994 and 1995. I will attach those reports as appendices to my full report."

73 Those are the reports, which were delivered on 27 April 1999. It is obvious from the text of the report that they had been prepared and were available at the time at which the report was made. No explanation is advanced for the delay of approximately six weeks in making them available.

74 Under the heading "General Observations on Mr Lingard's Report", (Mr Lingard apparently being the defendants' expert) certain broad generalisations are made, eg, that Mr Lingard's report is "argumentative and nit-picking" and the treatment of this heading concludes with the sentence "An itemised report and treatment of the so-called discrepancies will be dealt with as an annexure to my full report". No such document has been delivered, nor is there any explanation for its absence.

75 Finally, the report concludes with the following sentences:

"There are a number of matters I have not covered here that I will attend to in my full report. I will complete my full report within a few days of the date when I receive the balance of the information I need."

76 It is not clear whether the information is information to be supplied by the Magenta parties, or information of some other kind. There is no attempt to explain what the "number of matters" may include. The report which has been provided, then, is one which manifestly fails to meet the Magenta parties' obligations in respect of the substance of expert evidence.

77 When one has regard to the date of the latest of Ipp J's orders in respect of expert evidence (3 February 1999), it may be thought that the delivering of a defective report with a promise that it will be supplemented by further information is not, at the present time, a particularly serious matter. However, again there is no explanation for failure to comply with the order of November 1997. I put aside the order of December 1998, because of the dispute concerning the adequacy of the defendants' affidavit dealing with tax returns.

78 It is also of considerable concern that it appears that the Magenta parties seriously contend that the report which they have provided is an adequate expert report and that the only outstanding issue of expert evidence is that relating to the tax return issue. The assertion was made both in oral argument and in Mr Chesson's written submissions. It also appears in the affidavit of Mr Galic, the Magenta parties' solicitor, sworn 23 April 1999 which in par 5B(b) deposes: "the [expert] report has been qualified as incomplete until full consideration has been given to [Bonini and others] (as yet undiscovered) taxation returns. The clients have blamed their delay in provision of the expert's report on [Bonini and others'] failure to discover various taxation returns." This explanation does not recognise, let alone seek to explain, the other defects that are manifest on the face of the report. It is another matter that indicates the Magenta parties' cavalier approach to the obligations imposed on them by the orders of the court.

79 The Magenta parties object that the chamber summons by its title is clearly seeking an order only pursuant to O 26 r 15. Order 26 r 15 relevantly reads as follows:

"15(1) If any party who is required by any of the Rules of this Order or by any order made thereunder, to give discovery of documents ... fails to comply with any provisions of that Rule or with that order ... then ... the Court may make such order as it thinks just including in particular, an order that the action be dismissed or ... an order that the defence be struck out and judgment entered accordingly."

80 The Magenta parties object that an order pursuant to 0 26 r 15 cannot be made relying upon the matters put forward by the defendants. In particular, they assert that matters relating to particulars and the expert report are plainly irrelevant to such an application. They note that the summons on its face does not purport to seek an order pursuant to the court's inherent jurisdiction, or to refer to delay or conduct other than an alleged failure to give discovery.

81 Bonini and others submit, however, that it is open to the court to make an order based upon O 26 r 15 applying the principles enunciated in Burkett's case, and that delay and conduct apart from that involved in failure to give discovery will plainly be relevant to the exercise of such a discretion. Alternatively, they seek leave to amend the summons to refer to the court's inherent jurisdiction, should such leave be necessary.

82 It is clear from Bonini and others' outline of submissions, which I understand to have been served on the Magenta parties on 17 March 1999, that conduct in relation to the requests for particulars and the provision of expert evidence would be relied upon by them. The question of prejudice, if any, to the Magenta parties, appears to me to be dealt with in Mr Galic's affidavit of 23 April 1999, par 3 of which reads as follows:

"The stated basis for the chamber summons was understood by me (until late in the afternoon on Wednesday 17 March 1999) to be based on alleged non-compliance with orders for discovery because the application is expressed to be made under Order 26 Rule 15. In an outline of submissions in support of the application which were faxed to my office at 2:38PM on 17 March 1999 the grounds for the application to strike out are expressed to be on a much wider basis, that is based on alleged contumelious conduct and delay involving conduct alleged as being calculated to frustrate the action being brought to trial. If Justice Ipp did not adjourn the chamber summons on 18 March 1999 my clients would have been in a position to deal with the application at such short notice."

83 It appears to follow from that affidavit that the Magenta parties have been on notice since 17 March, of the particular conduct upon which this application is based. For the reasons given under the heading "discovery", I am of the view that there has been a want of compliance with orders for discovery which gives rise to jurisdiction pursuant to O 26 r 15. In determining whether the discretion so enlivened should be exercised, it is in my view necessary to see the failure to comply in the broader context of the litigation generally, and all of the conduct complained of is relevant to that issue.

84 Although only the discovery of the third defendants by counterclaim was complained of, the argument before me proceeded, on both sides, on the basis that the Magenta parties stood or fell together. In my view, all the Magenta parties have been guilty of gross disregard of court orders. To the extent that it may be necessary to invoke the court's inherent jurisdiction to deal with all the Magenta parties together, I would permit amendment of the summons to allow that jurisdiction to be invoked.

85 There was some discussion before me of the principles enunciated in Birkett v James [1978] AC 297. I do not think that that case is capable of direct application in a matter like this one. That case was concerned with dismissal for want of prosecution where an action had simply "gone to sleep" for a substantial period, and the focus of the inquiry in that case was therefore upon the risk of prejudice to a fair trial which may be caused by the passage of time. It arose in a context in which there was not in existence a system of court controlled case management techniques: cf Department of Transport v Chris Smaller (Transport) Ltd [1989] 1 AC 1197, Arbuthnot Bank v Trafalgar Holdings [1898] 2 All ER 181.

86 By contrast, this case is one which has been case managed by a judge, and in which many programming orders have been made. The parties have had the opportunity to be heard on the making of the programming orders, and on most occasions orders have been proposed by one side and largely accepted by the other. Where necessary, a judge has enquired concerning any difficulties a party may have with an order.

87 A very important consideration, although not the only consideration, in a case such as the present, is the need to ensure that orders of the type made here are not habitually disregarded. There are a number of reasons why this is so, aside from the obvious need to maintain the authority of any orders of the court. The orders are made in order to advance the objectives set out in O 1 r 4A and r 4B of the Rules of the Supreme Court.

88 Underlying those objectives are a number of factors. Those factors include a recognition of the prejudice to a fair trial which may ultimately be caused by delay, a recognition of the enormous stress and anxiety which is usually caused to litigants (particularly individual litigants, such as the Boninis), and a recognition of the fact that undue delay and inefficient use of the court's resources by some litigants has the potential to impair access to the court by others. Finally, in a case such as the present, it must be remembered that unnecessary expense is incurred whenever it is necessary to write letters or make applications to the court prompting a party to do that which it is already obliged, by the Rules or by an order, to do.

89 It appears to me that the principles governing an application of this kind are to be found in J & J Products (a firm) v Ken Gray & Co (a firm), unreported; FCt SCt of WA; Library No 960219; 24 April 1996. Such an order may be appropriate in the case of contumacy, but it may also be appropriate in a case in which a party has "been persistently dilatory in taking steps in the action, or where it can be inferred, for instance, from non-appearance on interlocutory proceedings, that the party will not or is unlikely to take the necessary steps." The power of the court to strike out for failure to comply with an order for discovery is to be exercised in such manner as seems to the court best calculated to do justice in the particular case. It is a power that a court will exercise only with some reluctance, because of its serious consequences. However, the orders of the court must be obeyed. A point is reached at which a litigant, who deliberately and without proper excuse disobeys an order, will not be allowed to proceed.

90 In the end, it appears to me that it is a matter of balancing the hardship to the Magenta parties of the orders sought on the one hand, against, on the other hand, the hardship to Bonini and others in being required to continue with litigation in circumstances where the other parties persistently disregard their obligations, and the need to ensure that the court's orders in respect of the conduct of litigation are respected.

91 In this case, the third defendants by counterclaim have been guilty of unreasonable and unexplained delay in the provision of very simple discovery. I am satisfied that the discovery, which they have now given, in purported compliance with a springing order, is incomplete and inadequate.

92 The plaintiffs have been guilty of gross and unexplained delay in the provision of answers to requests for further and better particulars. The expert report, which they have provided, was provided late and is yet incomplete. No explanation is advanced for its lack of completeness, save for a partial and inadequate explanation, which refers to a dispute concerning provision of taxation returns. The Magenta parties' reply to Bonini and others' complaints is effectively that they have now, however belatedly, complied with the orders that were made against them and that if Bonini and others are concerned with the adequacy of their compliance, then it is open to the defendants to incur the expense of further interlocutory proceedings.

93 In my view, the words of Kennedy J from J & J Products (at p 26) may appropriately be adapted to the circumstances of this case. The plaintiffs and defendants by counterclaim have demonstrated "at best a reckless disregard for their obligations in the conduct of the litigation and, at worst, a calculated attempt" not only to avoid disclosure of documents, but also to avoid putting the defendants in a position in which they will be able to prepare adequately for trial.

94 I consider it would be appropriate to make orders in terms of the defendants' chamber summons.

Magenta Nominees Pty Ltd v Bonini & Ors [1999] WASC 88

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (147 paragraphs)

Magenta Nominees Pty Ltd v Bonini & Ors [1999] WASC 88 (2 July 1999)

Parties

Cases Cited (3)