McGoldrick v SportsTG Pty Limited

Supreme Court of NSW|2019-05-03|Before: Ierace J

Solicitors: John McDermott & Associates (Plaintiff) Johnson Winter & Slattery (Defendant) File Number(s): 2018/75928

Judgment

HIS HONOUR: Glen McGoldrick ("the plaintiff"), by way of an amended notice of motion filed on 14 February 2019, seeks an order in the nature of a Sabre order against his former employer, SportsTG Pty Ltd, known as STG ("the defendant").

Principles

The Court's power to order Sabre orders arises from s 61 of the Civil Procedure Act 2005 (NSW) which relevantly provides as follows: "61 Directions as to practice and procedure generally (1) The court may, by order, give such directions as it thinks fit (whether or not inconsistent with rules of court) for the speedy determination of the real issues between the parties to the proceedings. (2) In particular, the court may, by order, do any one or more of the following: (a) it may direct any party to proceedings to take specified steps in relation to the proceedings … …"
The relevant principles in relation to Sabre orders were firstly considered in Sabre Corp Pty Ltd v Russ Kalvin's Hair Care Co (1993) 46 FCR 428, where Lockhart J made orders requiring a party to request various documents from an overseas entity and to subsequently produce them to the Court. His Honour considered, at 423, that the Court's power to make such an order under a similar provision in the Federal Court of Australia Act 1976 (Cth): "… may be exercised where there is a real likelihood that the party to the proceeding against whom the order is made would be given access to the documents by the third party upon request."
Lockhart J went on to say, at 423: "This is a case where there is a real likelihood that the applicant will be provided access to the relevant documents by [the third party] Joico should it request it. Joico manufactures the products in the United States and the applicant is the exclusive Australian distributor of them in Australia and has held that distributorship since 1985. My view is strengthened by certain of the provisions of the current distributorship agreement between them…"
The Court's power to order a Sabre order was considered by Palmer J in Sogelease Australia Limited v Griffin [2003] NSWSC 178 at [37], which was quoted by Ward J (as her Honour then was) with approval in Bova v Avarti [2009] NSWSC 921 at [373]: "This Court has power [pursuant to s 76A of the Supreme Court Act 1970 (NSW)] to give such directions as the Court sees fit, whether or not consistent with the Rules 'for the speedy determination of the real questions between the parties to civil proceedings'. That section has been held to empower the Court to direct a party to take reasonable steps to procure documents from a non-party, even when it was not clear that the party had a presently enforceable legal right to compel production or inspection from the non-party: see eg Palmdale Insurance at 116-117; Burgundy Royale Investments Pty Ltd v Westpac Banking Corp (unrep, Federal Court 21 February 1990 per Foster J; BC9003178); and esp. per Giles J in Aetna Pacific Securities Ltd v Hong Kong Bank of Australia Ltd (unrep., NSWSC 29 April, 1993; BC9301701 at p12)."
As a preliminary matter, a Sabre order should only be considered after inter-parties discovery has taken place: Bova v Avati at [371]. As noted, this has occurred.
The authorities reveal a number of matters which are relevant to the Court's consideration as to whether to make a Sabre order.
Firstly, "there must be a likelihood that the documents sought are in fact in existence in the possession of the third party": SPI Spirits (Cyprus) Ltd v Diageo Australia Ltd (No 2) (2006) 155 FCR 150; [2006] FCA 931 (Edmond J), cited with approval by Ward J in Bova v Avarti at [370]; Gambro Pty Ltd v Fresenius Medical Care Australia Pty Ltd [2002] FCA 58 ("Gambro") at [16].
Secondly, there must be a "real likelihood" that the party to the proceedings "would be given access to the documents upon request": supra; Gambro at [17]-[19]. The difference in wording between "likelihood" and "real likelihood" suggests that this element has a higher threshold.
Thirdly, the order must be restricted to requiring the person against whom it is made to take all reasonable steps to obtain the documents.
Fourthly, the documents must be relevant to the issues in dispute: Gambro at [13].
Fifthly, the Court must consider "whether or not the documents are necessary for disposing fairly of the proceedings": Bova v Avarti at [372]. In Lisec Australia Pty Ltd v Saremach Pty Ltd; Saremach Pty Ltd v Lisec Australia Pty Ltd [2017] NSWSC 1127, McDougall J, at [15], dismissed an application seeking a Sabre order on the basis of an "absence of any demonstrated need" for the documents sought, with his Honour stating, at [8], "it is not at all clear to me that production of the documents would assist in clarifying matters".
A final consideration is the degree of oppression and hardship which would be occasioned to the third party by the making of such an order: Gambro at [20].
In the circumstances of this case, there is an overlap between these considerations, particularly (1) and (4), which are considered together.

(1) the likelihood that the documents sought are in the possession of Spay

(4) the potential relevance of the documents to the issues in dispute

As noted above, the defence and cross-claim are to the effect that the defendant is not liable for the sign-on bonus and other aspects of the plaintiff's claim, because of the plaintiff's negligence and misconduct. The defendant alleges that the plaintiff failed to advise the defendant of the serious concerns of its customers, the difficulties with the rolling-out of the TG Platform project and the state of the defendant's revenue, so that the defendant was unaware of these serious problems until about 22 September 2017.
The plaintiff notes that this explanation still leaves the issue of why the defendant, if ignorant of these aspects of the company's affairs, did not pay the sign-on bonus on 3 July 2017 as the parties agreed, or thereafter until it learned on about 22 September 2017 of those concerns.
The plaintiff relies on certain aspects of discovery and the defendant's pleadings to establish both relevance and the likelihood of the existence of documents in the possession of Spay.
The defendant produced on discovery an email chain from Mr Lodge including emails in July 2017, referencing Mr Lodge having "multiple conversations" with a number of persons or entities in relation to securing the payment of the sign-on bonus. No documents relating to those discussions have been produced.
The plaintiff points to a document produced by the defendant prepared by Mr Lodge on or about 11 October 2017 on Spay's letterhead, recommending consideration by the Spay board of a range of options available to it, including the termination of the plaintiff's employment. No other documentation explaining why the item was on the agenda for Spay's consideration has been produced on discovery.
In its defence to the amended statement of claim, the defendant pleads that a meeting of the board of directors of Blue Star Sports, which the defendant formerly did business as, reviewed STG's July 2016/17 financial year results and instructed Mr Lodge to withhold payment of the sign-on bonus on 30 August 2017.
Having access to documentation of the role of Spay over that period has obvious relevance, in order to ascertain what factors, prior to the realisation of the company's situation in September 2017, prompted the defendant to not comply with its obligation to pay the sign-on bonus pursuant to the ESA. Further, this material in combination with the responses by the defendant's solicitors to the plaintiff explaining the extent of its discovery, underscore the likelihood that such documentation exists.
I am satisfied that the documents sought are relevant and likely to be in the possession of the defendant.

(2) the real likelihood of the success of the request

The question of whether there is a real likelihood of success turns, at least in part, on the relationship and dealings between the party to the proceedings and the third party. In Gambro, Tamberlin J considered the interrelationship between the party to the proceedings and the third party at [12], and later went on to say: "[17] If a request were made for the provision of such documents to the overseas entities I consider that it is likely that they would be provided. The evidence indicates that the Frensenius group is closely integrated and that Fresenius Australia is controlled by its parent company and its subsidiaries. There are common ownerships. There is evidence of information exchanges and of the interest and involvement of the parent company in following these Court proceedings. The documents of the Fresenius entities indicate that they hold themselves out as a group operation and Fresenius Australia is the exclusive Australian distributor for the products which are manufactured abroad. It is obvious from the corporate structure set out earlier in these reasons that the group entities have a significant financial interest in the successful operation of Fresenius Australia. There is also evidence of the sharing of information by the overseas entities with Fresenius Australia. … [19] It cannot be said that if a request were made it would be futile because there is no effective sanctions which could be taken to enforce compliance."
The extent of overlap between Spay and the defendant, in terms of its share ownership, the directorships and some of its officeholders, suggests that it is well within the capacity of both the defendant and Spay to work cooperatively and efficiently to comply with a Sabre order. The letter from Mr Weiss to the plaintiff dated 27 February 2019, denying discovery of documents that would come within the motion, expresses reliance on the absence of a legal obligation to do so.
The fact of Spay's assistance to the defendant in these proceedings is another relevant factor. The defendant's solicitor, in his affidavit, deposes to his awareness of Spay voluntarily providing the defendant's solicitors with certain documents for the purpose of seeking legal advice, as well as for the purpose of preparing its defence and its statement of cross-claim. In Lisec Australia Pty Ltd v Saremach Pty Ltd, McDougall J noted, at [14]: "It is open to infer, on the evidence, that [the third party] Lisec Austria has given assistance to Lisec Australia in connection with this litigation. Indeed, it would be strange if this were not the case, given the potential for reputational damage that Lisec worldwide might suffer if court findings are made as to the alleged defects in the machines."
Although McDougall J ultimately dismissed the application on the basis that the documents sought were not necessary to resolve the proceedings, the above comments suggest that a third party's assistance to a party to the proceedings can be a relevant consideration in applications for Sabre orders.

(3) the order must be restricted to requiring the person against whom it is made to take all reasonable steps to obtain the documents

This is satisfied by the terms of the orders sought.

(5) the necessity of discovery of the documents for disposing fairly of the proceedings

In light of the relationship between Spay and the defendant, and Spay's apparent role in the decision to terminate the plaintiff's employment, the documents are necessary for disposing fairly of the proceedings.

(6) the degree of hardship or oppression occasioned to the third party

The defendant submitted that the likely cost and time of locating the documents sought and producing them to the defendant would be an onerous burden, particularly in light of the definition of "other parties, related companies and officers and directors of related companies and employees". The plaintiff submitted that, although he concedes there will inevitably be a cost involved, there is no evidence from which the Court could draw the inference that these costs would be significant. The defendant conceded that it would be within the Court's power to fashion an order requiring the plaintiff to bear Spay's reasonable costs in relation to fulfilling the request.
The plaintiff submits that an order could be framed in such a way as to set out appropriate steps to be taken by Spay to address any oppression or hardship to the defendant.

The form of the orders

The defendant objects to the order sought that would require Mr Alt, the CEO of Spay, to file and serve an affidavit deposing to the efforts made by the defendant to obtain the documents or copies of documents, including details of its requests to any other parties and responses.
It submits that the Court does not have the power to make an order over a person who is not a party to the proceedings. However, I was informed from the Bar table that, if the Court was minded to make such an order, rewording it to "an affidavit to be provided by a responsible officer of the defendant with knowledge of the relevant facts" would not be opposed.
The defendant also takes issue with the wording of order 1(a), namely, that the defendant do what is "reasonably necessary", on the basis that one cannot necessarily know what is reasonably required and in circumstances where a failure to comply would put the defendant at risk of contempt. It submits that, if the Court is minded to make the order, the words "as may be reasonably necessary" should be removed. The plaintiff submits that the orders sought are in the same form as the orders made by Lockhart J in Corp Pty Ltd v Russ Kalvin's Hair Care Co. I have decided to include those words, so as to make it clear that the obligation on the defendant extends to matters incidental to the purpose of the order.

Orders

I make the following orders. (1) If and to the extent that the defendant identifies that any documents or categories of documents sought for discovery by the plaintiff and ordered by the Court to be discovered on 9 November 2018 and 12 February 2019 are not within the possession of the defendant but which the defendant reasonably believes are or may be within the possession of Spay Inc (or any other related body corporate of the defendant or Spay Inc) or in the possession of any respective directors, officers or employees of such entities (collectively "Other Parties"): (a) the defendant must request such documents from the Other Parties and thereafter discover all additional documents produced to it by the Other Parties; (b) on or before 5pm on 4 October 2019, the defendant must file and serve an affidavit by a responsible officer of the defendant with knowledge of what steps the defendant has taken to obtain the documents from the Other Parties, deposing to the efforts made by the defendant to obtain the documents or copies of the documents, including details of each of its requests to any of the Other Parties and the responses thereto; and (c) The plaintiff pay the reasonable costs of the Other Parties incurred in searching for and producing the said documents to the defendant.
The defendant pay the costs of the plaintiff in respect of this notice of motion.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 September 2019

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