Plaintiff v Defendant

Supreme Court of Victoria|2014-10-24|Before: VICKERY J

PRACTICE AND PROCEDURE - Self-executing order in relation to discovery - Affidavits of documents filed within time - Affidavits deficient - Whether self-executing order should be triggered - Legal principles in relation to inadequate steps taken in purported compliance with a self-executing order - Substantial deficiencies found - No bona fide attempt to provide the required information - Self-executing order set aside - Orders as to discovery enforcement made pursuant to s 56 of the Civil Procedure Act 2010.

(a) The Defendants file and serve their Affidavit of Documents prepared in accordance with the categories identified in the letter from the Plaintiffs' solicitors dated 16 December 2013 by 4:00 pm on 14 March 2014.

(b) If any Defendant fails to comply with Order 1, then:

(a) Judgment be entered for the Plaintiffs against the Defendant; and

(b) That the Defendants' counterclaims [be] struck out.

2 The Defendants complied with the stipulation as to time in the Order by filing and serving affidavits of documents on 14 March 2014. On that day the defendants served affidavits of documents (the 'Affidavits of Documents') sworn as follows:

(a) by Matthew James Suckling on behalf of the First Defendants sworn 14 March 2014;

(b) by Barry David Suckling on behalf of the Second Defendant sworn 14 March 2014.

3 However, the Plaintiffs maintain that the affidavits of documents do not comply with the requirements of the Supreme Court (General Civil Procedure) Rules 2005 (the 'Rules'), with the consequence that judgment should be entered for the Plaintiffs, and the counterclaims of the Defendants should be struck out in accordance with the Order.

4 The First Plaintiff ('NBG') was a large commercial home builder until it was wound up in 2012 and the Second Plaintiff (the 'Liquidator') was appointed liquidator. The Second Defendant ('Suckling') was a director of NBG.

5 The first defendant ('Holdings') claims in this proceeding that from 2009:

(a) Holdings owned the intellectual property in the generic designs used by NBG to design and construct homes; and

(b) Holdings licensed NBG to use the intellectual property in its business. It is the ownership of that intellectual property is a central question in this proceeding.

6 There would appear to be a conflict between a line of authority developed and followed in the Federal Court of Australia and that adopted in this Court.

7 In Smith v Barron,[1] a case dealing with the adequacy of a defence filed in purported compliance with a self-executing order, French J reasoned as follows:

It cannot be said that there was no defence filed at all in the present case. However the liquidators submit that the defence which was filed was so deficient as to constitute a failure to comply with the order of the Court. This requires a consideration of the circumstances in which superficial compliance with the condition of a springing order requiring filing of a document in court will not amount to actual compliance with that condition.

In an unreported decision of the Full Court of the Supreme Court of Western Australia, Burkett v Miller (unrep, Sup Court, 6/9/77), Burt CJ considered a 'self-operating' order conditioned upon filing an affidavit of discovery. The affidavit was said to be deficient. His Honour said:

We have had a great deal of discussion today as to whether that order was self-operating but I think upon the filing of the affidavit it could not thereafter be said to be self-operating. If no affidavit had been filed at all, then perhaps it could have operated itself.

The decision appealed from in that case was a decision of a single judge on appeal from a Master. It appears from the brief reasons of the Full Court that an affidavit having been filed the decision of the Master on whether to give effect to the default order was properly to be regarded as discretionary and based upon an assessment of the sufficiency of the affidavit.

In Magenta Nominees Pty Ltd v Bonini [1999] WASC 88, Wheeler J took from the Burkett decision the proposition 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 Order 26 rule 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.

Her Honour referred to other authority for the proposition that a document which is not made in good faith or could be regarded as an illusory attempt to comply with a springing order will not prevent the order from being self-executing notwithstanding that, in its form, the document appears to be an appropriate affidavit - Reiss v Wolf [1952] 2 QB 557; Republic of Liberia v Roye [1876] 1 App Cas 139 but cf Freeman v Rabinov [1981] VicRp 52; [1981] VR 539 and Southern Cross Oil v Fire and All Risks Insurance Co Ltd (1986) 7 NSWLR 319. Her Honour concluded from the authorities 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.

There is no express provision of the Federal Court Rules which confers upon the Court the power to enter judgment on a discretionary basis where formal compliance with a condition of a springing order, sufficient to defeat the operation of the order, has occurred. In my opinion, the questions the Court is asked to consider in determining whether there has been compliance with an order that a pleading be filed. are:

1. Has any document be filed at all, and if so

Does the document filed as a matter of form and substance comply with the order made?

If the answer to the second question is no, then the self-executing default order will operate. If it is yes, then the self-executing default order will not operate. The answer to the question may involve an assessment and evaluation of the substance of the document filed and whether, as a matter of substance, it obeys the order of the Court. That is not a question of discretion. If there be compliance then, in my opinion, no question of discretion arises in relation to the operation of the default order.

If a pleading is filed it may comply with the requirements of the order and yet be amenable to strike out under the provisions of the rules relating to pleadings which fail to disclose a reasonable cause of action or defence or on one of the other prescribed grounds. That it is struck out does not mean that its filing was nugatory and that it did not satisfy the requirements of the self-executing default order. Such an order is a serious measure which, if it takes effect, deprives a party of its entitlement to have its case heard and determined on the merits. It does so on the basis of a serious failure to comply with an order of the Court. It is not to be construed broadly or vaguely.[2]

8 In Flashback Holdings Pty Ltd v Showtime DVD Holdings Pty Ltd (No 4),[3] the adequacy of an affidavit of documents filed in response to a self- executing order was in issue. The affidavit failed to disclose as large number of documents which subsequently came to light when exhibited to an affidavit by the party subject of the order. After approving the analysis by French J in Smith at paragraphs [31]-[32], Perram J stated:

Attention is to be focussed, therefore, on the question of whether the list of documents in form and substance complied with the discovery order. A minor failure to comply would not mean that the order was not substantially obeyed. A more difficult question is whether a finding of substantial non-compliance with such an order can be averted by demonstrating that the non-compliance was blameless or beyond the control of the party in breach. However, to embrace the view that a party does not breach an order of a court because of innocent mistake or supervening interference would result in court orders being, in effect, defeasible depending upon the individual circumstances faced by those who found themselves confronted with them. Such a view is likely to promote uncertainty and to detract from the need for parties to understand their responsibility to ensure that orders are obeyed.

This is not to deny the role that innocent mistake or supervening impossibility may have in an application to vary interlocutory orders, even retrospectively. It is instead merely to confine debate about the capacity of parties to obey orders to proceedings and applications in which the formation of those orders, rather than their interpretation, is at play. There may be cases - the present is not one - where the form of an order uses language which expressly incorporates the capacity of a party to obey it. In such cases, of course, innocence will have its part to play in an assessment of whether an order has been complied with.[4]

9 In Ridge Lane v Gadzhis,[5] Hargrave J put a different interpretation on the English authorities cited in Smith, relying on a passage from the judgment of Lush J in Freeman v Rabinov[6] where the same authorities were considered.[7] Justice Hargrave summarises the principles as follows:

In summary, the cases establish the following propositions. First, the terms of a self-executing order should state with precision the act to be done in order to comply with the order. Second, where the act specified in the self-executing order involves the provision of information within a specified time, a document filed within that time and which constitutes a good faith attempt to provide that information will comply with the order. Third, where the self-executing order has been complied with but the information supplied is in fact deficient in some way, the Court retains the power to make further orders for the supply of the information. Fourth, where a self-executing order has not been complied with, the Court will vary or set aside the self-executing order where, in all the circumstances, it would be unjust to deprive the party adversely affected of the right to a trial on the merits of the proceeding.[8]

10 Thus the conflict between the line of authority following Smith and the rules as stated by Hargrave J in Ridge Lane becomes apparent. As to the approach to be taken to determine whether there has been compliance with a self-executing order where a document has been filed in purported compliance with the order, the following essential differences become plain:

(a) Applying Smith, the question is 'does the document filed as a matter of form and substance comply with the order made?' If it does not, the order will not have been complied with and the terms of the order must be given full effect.

(b) Applying Ridge Lane, the question is whether the 'document filed ... constitutes a good faith attempt to provide the information' required by the order. Even where a self-executing order has not been complied with, a further determination is to be made before the consequences specified in the order will flow. The Court will vary or set aside the self-executing order where, in all the circumstances, it would be unjust to deprive the party adversely affected of the right to a trial on the merits of the proceeding. The determination of both issues (i.e. whether a good faith attempt has been made to comply and whether it would in the circumstances be unjust to give effect to the self-executing order) may involve judgments as to a variety of factors, including for example, the degree to which the non-compliance may have arisen from circumstances beyond the control of the allegedly defaulting party.

11 Whilst Smith has been followed in the Federal Court[9] and is cited in Williams on Civil Procedure,[10] it would appear that hitherto, no reported decision has followed Ridge Lane on the point.

12 The Plaintiffs submitted that the Court should follow Smith because application of the test there prescribed gives rise to greater certainty and works to promote the proper and timely operation of the Court's processes by discouraging the filing of pro-forma, but otherwise inadequate, affidavits of documents which are non-compliant and compromise the intended operation of the relevant order.

13 However, I have determined that the decision of Hargrave J in Ridge Lane should be followed.

14 In taking this course, I am mindful of the overarching purpose prescribed by s 7(1) Civil Procedure Act 2010 (Vic) which commenced operation in Victoria on 1 January 2011. Section 7 provides:

The overarching purpose of this Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.

15 Section 8 of the Civil Procedure Act requires a court, including the Supreme Court, to seek to give effect to the overarching purpose in the exercise of any of its powers, or in the interpretation of those powers, whether those powers in the case of the Supreme Court are part of the Court's inherent jurisdiction, implied jurisdiction or statutory jurisdiction.

16 Further, pursuant to s 9(1) a court in making any order or giving any direction in a civil proceeding is required to further the overarching purpose having regard to the listed objectives which include '(a) the just determination of the civil proceeding'. This reinforces the reference to the 'just, efficient, timely and cost-effective resolution of the real issues in dispute' contained in the overarching purpose itself.

17 In making any such order or giving any direction for the purposes of s 9(1) the Court may have regard to the matters listed in subsection (2), which include: (a) the extent to which the parties have complied with any mandatory or voluntary pre-litigation processes; and (c) the degree of promptness with which the parties have conducted the proceeding, including the degree to which each party has been timely in undertaking interlocutory steps in relation to the proceeding. These factors emphasise the degree of flexibility which is open to a court in furthering the overarching purpose.

18 To my mind, the approach of Hargrave J in Ridge Lane is more consistent with achieving compliance with the principles of the Civil Procedure Act than the approach taken in Smith. The approach in Smith confers primacy on the effectiveness of the order made, with the consequence that a failure comply with the terms of the order, if self-executing, will result in the party adversely affected being deprived of the right to a trial on the merits to determine the real issues in dispute. Whereas, the rules prescribed in Ridge Lane give rise to a greater level of flexibility, and in the appropriate case, the opportunity to give full effect to the overarching purpose of the Civil Procedure Act having regard to the objects specified in the Act and to the matters which the Act prescribes may be taken into account.

19 In this case, and in any event, the Plaintiffs submitted that the Defendants do not satisfy the tests as provided for either in Smith or in Ridge Lane.

20 The Plaintiffs contended that in relation to the Affidavits of Documents that the deficiencies were substantial, both in terms of the scope of the deficiencies and the fact that there has been a failure to discover documents going to significant issues in the proceeding. Four categories of deficiencies were principally relied upon by the Plaintiffs. A table was produced which identified these matters.

21 The first issue relied upon was the circumstances surrounding the drafting and execution of the Deeds of Assignment and Deed of Licence. It was submitted that these documents were alleged to be the means by which the director of NBG transferred the intellectual property of NBG to the Second Defendant. That transfer was alleged to be in breach of the Second Defendant's (Barry Suckling's) duties as a director of NBG, alternatively was submitted to be a voidable transaction. Accordingly they were said to be key documents on the question of liability.

22 Documents which were submitted not to have been discovered regarding this issue included the files of the law firm retained to draft them, or any correspondence involving the defendants in relation to them. The existence of these legal files were said to be inferred from the appearance of the name of the firm, Mills Oakley, on the face of the Deeds and from enquiries made which established their existence.

23 The second issue relied upon was the manner in which the intellectual property was alleged to have been exploited by the defendants. It was submitted that documents which identify the extent of exploitation of the plans are key documents relevant to an assessment of the quantum of loss alleged to have been suffered by the Plaintiffs and the taking of accounts in relation to the exploitation of NBG's intellectual property.

24 It was submitted that virtually no financial records have been discovered. and no documents relating to the exploitation of the intellectual property have been discovered. Such documents would include financial records like profit and loss and balance sheets, general ledger, sales journals, complete records of invoicing, receipts and payments and the like.

25 It was further submitted that documents of this kind fall within the categories of documents which were sought and were the subject of the Order.

26 The third issue related to documents evidencing ownership of the intellectual property, which is in dispute. The Second Defendant (Barry Suckling) claims ownership of the intellectual property and claims that he created it outside the course of his employment. However, the Plaintiffs submit that there are no documents discovered by the Defendants which relate to of evidence the creation of the house plans.

27 Documents of this kind were claimed to fall within the categories of documents which were sought and were the subject of the Order.

28 The fourth issue addressed by the Plaintiffs is whether the Second Defendant (Barry Suckling) was an employee of NBG and on what terms. That issue is relevant to determining who, as a matter of contract, is the owner of the disputed intellectual property.

29 The Plaintiffs say that Barry Suckling has not discovered any documents relating to his employment with NBG. It is further said that such documents fall within a category of documents which was the subject of the Order.

30 On this basis, the Plaintiffs invited the Court to conclude that the Defendants have not, in substance, complied with the Order, and that the discovery provided was so deficient that the Defendants should not be regarded as having complied with the discovery obligations reflected in the Order in good faith.

31 The Defendants on the other hand submitted that if there were any deficiencies in the Affidavits of Documents, those deficiencies were of a relatively minor dimension, and certainly not of such a kind as to warrant a finding that the documents filed in purported compliance with the Order did not constitute a good faith attempt to provide the information ordered to be provided.

32 The Second Defendant, Barry Suckling was called to give evidence and was cross-examined. He was a deponent to one of the Affidavits of Documents in controversy.

33 Mr Barry Suckling's evidence was to the following effect. He swore in paragraph 2 of his affidavit , that he had in his possession custody and power documents referred to relating to the categories of discovery referred to in Paragraph 1 of the Order.

34 He went on to describe the documents as being those: 'Which are identified by category in the letter from the plaintiff's solicitors to the defendant's solicitors dated 16 December 2013'. He said that his lawyer went through the categories with him at the time, and asked him whether he had documents in each category. He said that in completing his affidavit he turned his mind to whether he had documents in his possession in relation to each of the categories in the letter, and he produced his affidavit following this exercise.

35 He was cross-examined about a number of potentially relevant documents which were not referred to in his affidavit.

36 In his affidavit under category 1 he swore that he had 'nil' documents in his custody, power or possession. He re-stated this in the witness box.

37 In Schedule 2 of his affidavit, which sets out the documents that he had in his possession that might have been within Category 1 but which he no longer had, he did not refer to any documents in relation to Category 1, saying that: 'No, he didn't have any of those documents'.

38 When pressed on the issue, he said that he did have the documents in the past but 'didn't have them now'.

39 He said further that to the best of his knowledge, he prepared his affidavit with the information that he had, and he didn't have any other information, saying that: 'If I had it, it would be here'.

40 Barry Suckling took a similar position in relation to numbers of other documents which were put to him in cross-examination, being documents within the categories in the letter but were missing from schedule 2 of his affidavit which he had in his possession but no longer had, asserting that he could only provide the documents that he had and that a lot of the documents were taken by the receiver and manager. He said further that when he prepared his affidavit he didn't turn his mind to such documents.

41 On the assumption that the Order required an affidavit of documents which complied with r 29.04, there were other examples of a significant failures on the part of Barry Suckling in his affidavit of documents, insofar as those documents related to documents which he had in his possession but no longer had.

42 Barry Suckling conceded that at the time that he swore his affidavit, he had in his possession some 150 house plans. These are likely to have fallen within Category 3 of the Letter. However, Category 3 was answered 'nil documents'. Although it was contended on his behalf that, because the evidence was not specific as to the contents of these plans the Court was not in a position to make a positive finding that there was a failure to comply with the Order insofar as it failed to refer to the plans described in Category 3, I am satisfied that it is likely, on the balance of probabilities, that the plans ought to have been listed in this category.

43 Further, I am satisfied that overall the discovery provided by Matthew Suckling was significantly deficient by reference to the categories of documents referred to in the Letter of 16 December 2013.

44 Matthew Suckling also gave evidence and was cross-examined. He was a director of the First Defendant and swore his affidavit of documents dated 14 March 2014 on behalf of that party. Matthew Suckling is the Second Defendant's (Barry Suckling's) son.

45 In essence he said that he was instructed by his solicitor as to the documents that he needed to provide relevant to this case and that he did so, saying: 'My solicitor instructed me which documents to provide and I provided those documents'.

46 When he prepared his affidavit, Matthew Suckling said he was not given a copy of the Letter of 16 December 2013 and, although his evidence was inconsistent on the issue, he said at one point that was not told by his solicitor what categories of documents he had to give to him.

47 I am satisfied that the discovery provided by Matthew Suckling was significantly deficient by reference to the categories of documents referred to in the Letter of 16 December 2013. For example, he did not discover the company's accounts.

48 Although he said that he provided the documents that he had in his possession, this was not synonymous with providing all of the documents that were in the company's possession or power, or that of its bankers, employees and agents, or that of consultants and professional persons engaged by the company, such as accountants. There was no evidence of any enquiries made by Matthew Suckling as to the existence of any such documents.

49 I am also satisfied that Matthew Suckling had a limited and inadequate knowledge of his discovery obligations in conducting litigation on behalf of the First Defendant company. He was dependent on his solicitor to advise him of the requirements.

50 The precise chain of events leading to the production of Matthew Suckling's affidavit of documents was not clearly spelled out in the evidence. Nevertheless, I am satisfied that the product was deficient.

51 A first question then is whether, in the light of the findings made, the Affidavits of Documents filed in purported compliance with the Order constitute a good faith attempt to provide the information required by the Order.

52 In my opinion, the deficiencies were of such a magnitude that, in both cases, the Affidavits of Documents failed to meet this standard.

53 On this basis, the self-executing Order has not been complied with.

54 Rule 29.04 of the Rules provides in relation to the requirements for an affidavit of documents as follows:

(1) An affidavit of documents for the purpose of making discovery of documents shall be in Form 29B and shall -

(a) identify the documents which are or have been in the possession of the party making the affidavit;

(b) enumerate the documents in convenient order and shall describe each document or, in the case of a group of documents of the same nature, shall describe the group, sufficiently to enable the document or group to be identified;

(c) distinguish those documents which are in the possession of the party making the affidavit from those that have been but are no longer in that party's possession, and shall as to any document which has been but is no longer in the possession of the party -

(i) state when the party parted with the document; and

(ii) the party's belief as to what has become of it;

(d) where the party making the affidavit claims that any document in that party's possession is privileged from production, state sufficiently the grounds of the privilege.

(2) If a party required to give discovery in accordance with Rule 29.01.1 does not, in making a reasonable search as required by Rule 29.01.1, search for a category or class of document, the party must include in the affidavit of documents a statement of -

(a) the category or class of document not searched for; and

(b) the reason why.

55 However, what the parties consented to by the Order of 3 March 2014, was discovery by the provision of affidavits of documents which were not specifically required to comply with r 29.04. By paragraph 1 of the Order the defendants were ordered to 'file and serve their affidavit of documents prepared in accordance with the categories identified in the letter from the plaintiff's solicitors dated 16 December 2013 by 4 pm on 14 March 2014'.

56 The letter of 16 December 2013 (the 'Letter') referred to in the Order says in its introductory sentence: 'We refer to the orders made on 15 November 2013 by the Honourable Justice Vickery and note that discovery by agreed categories is to take place by 20 December 2013. We propose that discovery proceed by way of the following categories'. Then are enumerated the categories which are stated in paragraph 1 the consent Order of 3 March 2014.

57 Reference is then made to the earlier order that's referred to in the Letter of 16 December 2013, being the orders made by this Court on 15 November 2013. By paragraph 3 of the orders of 15 November 2013, what is provided for is as follows: 'The plaintiffs and the defendants make discovery on the basis of agreed categories by 4 pm on 20 December 2013'.

58 What is notable about the regime for discovery in this case is that, in all of the orders for discovery made, nowhere is discovery referred to as being required to be conducted by the provision of affidavits of documents which complied with Order 29.04 of the Rules.

59 In particular, no reference is made to r 29.04 in the Order of 3 March 2014. Rather there's a requirement that affidavits of documents are to be prepared in accordance with the categories identified in the Letter of 16 December 2013. The Letter of 16 December in turn simply refers to the categories described and set out. However, the categories do not include documents which, for example, may have been in the possession of the party making the affidavit and which are no longer in that party's possession.

60 In this case, although the Defendants sought (but failed) to file Affidavits of Documents in purported compliance with r 29.04 of the Rules, the consent self-executing Order that was made did not compel this to be done. It omitted to make clear that the Affidavits of Documents were required to comply with r 29.04 of the Rules.

61 Accordingly, in my view, in this case it would be unjust to deprive the Defendants of the right to a trial on the merits of the proceeding, adjudged by reference to an obligation that was not clearly spelled out in the Order.

62 In this case I will set aside the self-executing Order, and make the following order in its place:

The Defendants file and serve their Affidavit of Documents prepared in accordance with r 29.04 of the Supreme Court (General Civil Procedure) Rules 2005 by reference to the categories identified in the letter from the Plaintiffs' solicitors dated 16 December 2013 and must do so by 4:00 pm on .................. 2014.
If any Defendant fails to comply with Order 1, then either or both of the Plaintiffs may apply to the Court on notice to the relevant Defendant for appropriate further orders pursuant to s 56 of the Civil Procedure Act 2010 as to discovery and costs, including but not limited to orders made pursuant to s 56(2) (c), (d), and (j) of the Act.

63 I will hear the parties as to an appropriate date for compliance with the substituted order and the costs of the present application.

[5] [2007] VSC 212 ('Ridge Lane').

[9] See Flashback Holdings Pty Ltd v Showtime DVD Holdings Pty Ltd (No 4) [2009] FCA 461; Deppro Pty Ltd v Daly [2006] FCA 1727.

[10] Williams Civil Procedure (LexisNexis) [I 24.02.37].

Court (General Civil Procedure) Rules 2005

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Legislation Cited (16)

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