Plaintiff v Defendants

3 The plaintiffs allege that they incurred legal and advisory costs as a result of the first defendant's negligence and breach of its retainer. As part of their loss and damage, each claim their costs of obtaining legal advice and other legal and accounting fees in connection with the audit and their separate disputes with the Commissioner. The plaintiffs say that these costs were incurred whilst taking steps to mitigate their alleged loss.

4 The plaintiffs have already discovered detailed invoices in respect of the fees claimed. They also discovered correspondence with the Australian Taxation Office, submissions made to the Commissioner as well as the Commission's decision, the application, witness statements and submissions in the AAT, and the settlement agreement reached with the Commissioner. The plaintiffs considered that, given they had discovered the 'final work product' of their respective legal and accounting advisors (being applications and contentions, submissions, statements of evidence and orders), no further discovery was required.

5 Upon the defendant's application for orders that each plaintiff provide discovery of any documents within his possession, custody or power which 'record or evidence the work' described in a defined range of invoices issued by lawyers and accountants, the associate judge made orders as set out below. The defendant's summonses also sought particulars of various invoices and a declaration that privilege over any of the documents to be discovered has been waived.

6 On 26 May 2015, Associate Judge Ierodiaconou heard and determined the application for discovery but adjourned the further hearing of the summons in respect of the applications for particulars and the waiver of privilege.

7 In her orders of 26 May 2015, her Honour ordered in both matters that:

1. By 27 July 2015, pursuant to r 29.08 of the Rules, the plaintiff shall make, file and serve on the first defendant to this proceeding a supplementary affidavit stating whether any document or class of document, and if so what, of the classes mentioned below is or has been in the plaintiff's possession, custody or power and if it has been (but is no longer) in the plaintiff's possession, custody or power, when it was parted with and the plaintiff's belief as to what has come of it. The document or classes of documents are documents which record or evidence the work by the providers named in the following invoices: [her Honour set out the various invoices of the lawyers and accountants].

8 In the 'other matters' of the orders, her Honour briefly set out her reasons for decision:

(a) The First Defendant applies by summons filed 13 May 2015 for discovery under r 29.01.01 and 29.08 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) ('the Rules') requiring the Plaintiff to discover any documents within his possession, custody or power which record or evidence the work described in: [her Honour set out the various invoices of the lawyers and accountants] ('the Discovery Application').

(b) The Plaintiff objects to the Discovery Application on the grounds set out in his counsel's written submissions dated 26 May 2015. In particular, the Plaintiff contends that the Discovery Application is, in effect, fishing and beyond the scope of s 55 of the Civil Procedure Act 2010 (Vic).

(c) The documents the subject of the Discovery Application are relevant and should be discovered...It is the documents which record or evidence the work by these providers that is the subject of the Discovery Application. These documents are relevant to the question of whether the fees were properly and reasonable incurred...Accordingly, these documents fall within the scope of r 29.01.01 of the Rules....There are grounds for belief that the documents of the kind referred to in paragraph (a) above may be or may have been in the possession, custody or power of the Plaintiff.

...

9 Her Honour made the order pursuant to r 29.08 and also referred to r 29.01.1 of the Rules in her brief reasons. These rules relevantly provide:

29.01.1 Scope of discovery

(1) Unless the Court otherwise orders, discovery of documents pursuant to this Order is limited to the documents referred to in paragraph (3).

(2) Paragraph (1) applies despite any other rule of law to the contrary.

(3) Without limiting Rules 29.05 and 29.07, for the purposes of this Order, the documents required to be discovered are any of the following documents of which the party giving discovery is, after a reasonable search, aware at the time discovery is given -

(a) documents on which the party relies;

(b) documents that adversely affect the party's own case;

(c) documents that adversely affect another party's case;

(d) documents that support another party's case.

...

29.08 Order for particular discovery

(1) This Rule applies to any proceeding in the Court.

(2) Where, at any stage of a proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any question in the proceeding may be or may have been in the possession of a party, the Court may order that party to make and serve on any other party an affidavit stating -

(a) whether that document or any, and if so what, document or documents of that class is or has been in that party's possession; and

(b) if it has been but is no longer in that party's possession, when the party parted with it and that party's belief as to what has become of it.

(3) An order may be made against a party under paragraph (2) notwithstanding that the party has already made or been required to make an affidavit of documents.

10 It was not in dispute that the appellants needed to establish that the associate judge was in error and that it was not simply sufficient to persuade me that different orders should have been made.

11 Appeals under r 77.06 of the Rules are no longer hearings de novo.[4] Mr De Young, appearing for the first defendant (respondent to the appeals), rightly submitted that there is a strong presumption in favour of the correctness of a decision where that decision involved discretionary judgment. An appellate court will not interfere with the exercise of discretion in the absence of strong reasons, such as where there was an error of principle in the exercise of discretion, or where the associate judge was guided or affected by irrelevant matters or made some other manifest mistake.[5]

12 An appellant court will also exercise particular caution in reviewing decisions concerning practice and procedure as opposed to decisions affecting substantive rights. In such a case, it is a relevant and necessary consideration whether the appealed order gives rise to any injustice.[6]

13 The plaintiffs' notice of appeal has ten grounds. In essence, the plaintiffs' complained that the associate judge erred by:

(a) Failing to apply (or misapplying) r 29.01.1(3) of the Rules (grounds 1 and 5);

(b) Failing to disclose any proper basis or reasons for her conclusion that the documents were relevant to the issues in the proceeding and should be discovered (ground 2, 3 and 4);

(c) Failed to have regard to the appellant's submissions regarding s 55 of the Civil Procedure Act ('the CPA') (Grounds 6, 9 and 10);

(d) Failing to have any or any adequate regard to the evidence adduced on behalf of the appellants that the documents were voluminous and would be costly to discover and disproportionate to their likely evidentiary weight (Ground 8); and

(e) Concluding that there was reasonable grounds for belief that the documents were within the possession, custody or power of the appellants (Ground 7).

14 In addition, at the hearing before me, I gave the plaintiffs leave to amend their notices of appeal introducing a further ground (Ground 4A). By that ground, the plaintiffs complained that the associate judge erred in ordering an affidavit under r 29.08 when the summons did not seek such and order, the application was made under rr 29.11(a) and 29.01.1(3) and, in any event, r 29.08 was not enlivened. That rule was not enlivened, they said, because there was no dispute that the documents were in the plaintiffs' position: rather the dispute was whether the documents were discoverable.

15 In argument, Mr Cawthorn SC who with Ms Douglas appeared for the plaintiffs, expanded on the grounds of appeal, arguing that the associate judge:

(a) did not take into account, when she was bound to take into account, considerations of proportionality, oppressiveness, and cost, all of which were put in submissions below;

(b) confused the tests and purposes of rr 29.01.1(3) and 29.08; that is, the application was not a r 29.08 application yet her Honour treated it as such, thereby confusing the notion of the documents' existence with the documents' relevance;

(c) was wrong to be satisfied that the documents met the criteria for discoverability in r 29.01.1(3): that was so because, in circumstances where 'the final work product'[7] had already been discovered, all other 'intermediate' documents that simply evidenced 'steps along the way' to that final work product were not capable of adversely affecting one party's case or supporting the other's;

(d) failed to explain how she reasoned in favour of discovery in the face of evidence[8] of oppressiveness, cost and the burdensome nature of the exercise, and in view of the submission that the discovery already given was sufficient for the purposes of r 29.01.1(3); and

(e) failed to have regard to the overarching purpose in s 8 of the CPA and the argument under s 55 of the CPA Act that the discovery should be limited to the class of documents already discovered (which would have had the effect of refusing the plaintiffs' application), or at least failed to explain why she rejected that argument.

16 Mr De Young addressed the five arguments outlined in [13] above.

17 First, Mr De Young argued that the associate judge's order was correctly made pursuant to r 29.08, the requirements of which, he said, are not the same as r 29.01.1(3). Mr De Young contrasted language used in the two rules: r 29.08 conditioned discovery by the words 'relating to any question in the proceeding' whereas r 29.01.1(3) defined the obligation of discovery by reference to the discovering party's awareness of their own reliance upon a document or the effect of a document on each party's case.

18 Secondly, in answer to grounds 2, 3 and 4, Mr De Young argued it was well open for her Honour to conclude that the documents were relevant, based on the plaintiffs' statements of claim and particulars of loss and damage. The first defendant argued that the making of the claim put in issue the question of whether the fees were properly and reasonably incurred and that an evaluation of that question could not be properly undertaken by a review of the invoices themselves. Only an inspection of the documents themselves would reveal the nature and extent of the work performed. Further, the first defendant pointed to instances where the invoices shed no light on the work performed.[9]

19 In addition, in the case of some of the services provided, Mr De Young said there was also a causation issue: that is, did the first defendant's alleged negligence cause certain legal or accounting work to be done? Again, that required examination of the actual work itself.

20 On these grounds, the first defendant argued that her Honour had provided adequate reasons for concluding the documents were relevant, and, in any event, a failure to provide adequate reasons did not constitute an error vitiating the decision.[10]

21 Thirdly, in relation to grounds 6, 9 and 10, the first defendant argued that her Honour correctly identified the plaintiffs' argument that the discovery sought was beyond the scope of s 55 of the CPA and further submitted that, in any event, s 55 does not restrict the Court's power under the Rules: ss 54 and 59 of the CPA.

22 Fourthly, addressing ground 8, the first defendant pointed to where the transcript below revealed that the plaintiffs' arguments about the voluminous nature of the documents sought, and the cost and burden of discovering them, were made to and acknowledged by the associate judge. It argued that there was no basis for suggesting that her Honour had failed to take such arguments into consideration.

23 Fifthly, addressing ground 7, the first defendant says it was well open to her Honour to find reasonable grounds for believing that the documents were or may have been in the possession, custody or power of the plaintiffs.

24 Finally, the first defendant argued that no injustice or substantial injustice would occur if the order was left to stand. It argued that the only prejudice to the plaintiffs is the cost, estimated by their solicitor at $10,000 to $15,000 for the Braham matter, and $7,500 to $15,000 for the Poon matter. If the plaintiffs are successful at trial, it argued, these costs would follow the event.

25 For the reasons that follow, I am not persuaded that the associate judge made any legal, factual or other discretionary error. Except for the first one, I substantially agree with the arguments put on behalf of the first defendant summarised above.

Distinction between rr 29.08 and 29.01.1(3): Grounds 1, 5 and 4A

26 Whether there is any difference between the tests for discoverability between r 29.08 and r 29.01.1(3) is, in my view, to be doubted. In any event, any such distinction was largely irrelevant for the purposes of the appeal.

27 First, without finding it necessary to decide the question, McGarvie J's comments in Australian Dairy Corporation v Murray Goulburn Co-Operative Co Ltd[11] in relation to particular discovery under r 29.08, although decided before the introduction of r 29.01.1(3), are likely to still apply. His Honour said:

[O]ne starts one starts from the position that an order for discovery of particular documents imposes a duty to give particular discovery which is of the same nature as the duty to give general discovery which is imposed by the rules upon service of a notice of discovery.[12]

28 The scope of the duty to give general discovery is now defined by r 29.01.1(3).[13] Given the direction now given in r 29.01.1(1), for my part I see no reason why the nature of the duty to give particular discovery in r 29.08 would not simply pick up the nature of the general duty as defined in r 29.01.1(3) in the same way that it did previously, albeit that the general duty was then of a different scope. If that is correct, there is no relevant distinction to be made about the test of discoverability between the two provisions: they simply serve different functions.

29 I reject Mr De Young's argument that by her Honour's use of the word 'relevant' at the beginning of paragraph (c) of her reasons she was referring to a notion of relevance, as the parameter for discoverability, that reached beyond what would be permitted by r 29.01.1(3). He sought to justify her Honour's order by reference to a wider criteria. But as the later words in paragraph (c) showed, her Honour expressly linked the concept of relevance to that very sub-rule. I can see no reason to find or suspect that her Honour was applying some wider view of what was discoverable than that which would come within the scope of discovery under r 29.01.1(3). But, nor do I think there was any error in her Honour considering that the documents were relevant by reference to the categories enumerated in that sub-rule.

30 I also reject Mr Cawthorn's argument that her Honour was wrong to make the order under r 29.08 on the footing that the order sought was not of that nature. Rule 29.08 is engaged when a party claims that the discovering party has failed to discover a document or class of documents which relate to a question in the proceeding (that is, is discoverable) in respect of which there is a reason to believe that it or they exist.[14] It enables a party to 'go behind' the affidavit and move the court to make a further order for particular discovery. That is precisely what was argued before her Honour and it is what her Honour was persuaded to do. I disagree with the proposition that her Honour's analysis confused or merged notions of 'existence' with 'relevance'.

The relevance of the documents: Grounds 2, 3 and 4

31 I do not accept Mr Cawthorn's argument that her Honour failed to make findings as to how the documents came within r 29.01.1(3). Not only did Mr Cawthorn argue that her Honour did not make findings or explain how the documents were relevant (which I reject) but he also argued that such findings as she did make (as to reasonableness and causation) were wrong and the documents could not be relevant on such grounds.

32 In my opinion, it is sufficiently evident from her Honour's brief reasons, in the context of the debate that occurred before her and the written submissions that had been provided, that she determined that the documents were relevant because they could bear upon questions:

(a) whether the costs claimed were reasonable in amount; and

(b) whether the work done for which the costs were being claimed was work that was caused by the negligent conduct of the defendants.

33 When a plaintiff claims, as the plaintiffs do here, that they suffered loss and damage in the form of costs incurred to salvage a situation allegedly created by a defendants' negligence, that plaintiff is only entitled to 'reasonable costs'. The burden is upon the plaintiff to prove the reasonableness of those costs if it is not admitted - here it is denied.

34 I also accept that a causation question arises in respect of certain, lump sum invoices. That question is put in issue by the pleading. To illustrate that the point has substance, Mr De Young pointed out[15] that the total sum charged in some of the invoices relating to the legal and accountancy work the subject of the plaintiffs' claims is greater than the sum that the plaintiffs actually claim by way of damages. As he showed from a number of the documents, the lawyers and accountants appear to have charged for doing other work which is not attributed (by the plaintiffs) to the defendants' alleged negligence. In other words, the plaintiffs have exercised a judgment about which work was caused by the alleged negligence and which was not.

35 Given that damages are claimed for these costs, there is no error in considering that, as a matter of fairness, the defendant should be permitted to test whether the plaintiffs might still have claimed some amounts which do not have a causal nexus to the alleged negligence.

36 In short, I see no error in her Honour taking the view that the documents sought could adversely affect or support the cases advanced by one or other party to the proceeding. Nor, frankly, do I consider that such a view requires very much explanation: it is relatively self-evident from the nature of the issues in the case.

Section 55 of the CPA and discovery costs' disproportionate: Grounds 6, 8, 9 and 10

37 In the end, on this point, the plaintiffs' argument seemed to boil down to a complaint that her Honour did not accept their submissions that having to discover all of these documents would be oppressive and too costly relative to the value of any evidence derived from them. Such an argument on appeal is inherently difficult: a view taken by a judicial officer on such an issue is quintessentially one of judgment on which reasonable minds could differ. Being able to arrive at a different opinion would not ordinarily denote legal error.

38 It is plainly not the case that her Honour did not have any regard to those arguments. The transcript records[16] that the learned associate judge said this:

So, Mr Cawthorn, if I understand your submissions, and let me know if there is anything further to be made because I'm just conscious of the time ticking, your clients are saying they [i.e. the documents] are not relevant. In effect it's a fishing expedition. Given the obligations under the Civil Procedure Act it's - and it's not a word you use - but it's oppressive in a sense, particularly with Dr Poon. Is that the nub of it?

39 Mr Cawthorn answered, 'Yes, your Honour'. He then added that the documents were 'not relevant or necessary' and her Honour said, 'I understand'.

40 Following that exchange there was a good deal more argument touching upon issues of the relevance of the documents after which the associate judge said she was inclined towards ordering a supplementary affidavit of documents. There was still further argument, recorded over several pages of transcript. At the end of it all her Honour acknowledged that the plaintiff objected to discovery on the grounds set out in written submissions, in particular contending the discovery application was fishing and 'beyond the scope' of s 55 of the CPA. She then said:

The documents the subject of the discovery application are relevant and should be discovered. Paragraph [3] of the plaintiff's particulars of loss and damages and paragraph [73] of the plaintiff's amended statement of claim are relevant. The particulars of loss and damage referred to invoices for work referred to in the discovery application. The documents the subject of the discovery application are relevant to the question of whether the fees were properly and reasonably incurred. Further, some of the documents are relevant to the question of whether the fees were incurred by reason of the alleged negligence.[17]

41 Her Honour was plainly not compelled to accept the plaintiffs' submission that in view of a low degree of relevance, if any (as the plaintiffs would have it), and the amount of discovery already given, the burden of giving discovery should so outweigh considerations in favour of further discovery that such an order should be refused. Her Honour might have accepted that submission. If she had, s 55 of the CPA provided a flexible range of discretionary orders that her Honour might have made in the alternative to making the order she did. What the plaintiffs sought was that the associate judge 'limit' the discovery under s 55(2)(c) of the CPA to what had already been discovered: that is, in effect, refuse the first defendant's application for further discovery.

42 But, it is apparent that notwithstanding the arguments made by the plaintiffs in this respect, which her Honour acknowledged, the associate judge considered that the further documents 'should be discovered'. Against the background of the submissions that had been made, it is obvious that her Honour thought that the relevance of the documents was such that neither the character of the discovery given to date nor the burden of giving further discovery persuaded her to reach a different conclusion. Having reached that conclusion, it was unnecessary for her to explain why alternative orders 'limiting' discovery should not be made.

43 Although her Honour expressed the argument as being that the documents were 'beyond the scope' of s 55 of the CPA, I do not accept that the use of that expression meant that her Honour did not understand and therefore did not consider the plaintiffs' submission. It was a somewhat shorthand way of characterising the submission that, in the circumstances of this case, the documents were beyond (or surplus to) what was required by a proper exercise of the Court's discretion, which was essentially what the plaintiffs had argued.

Reasonable grounds for concluding documents in plaintiffs' possession: Ground 7

45 Her Honour concluded there were grounds for a belief that documents of the kind referred to 'may be or have been in the possession, custody or power or the plaintiff'. To merely say, as the plaintiffs did, that the evidence did not establish that the documents were ever in the plaintiffs' possession clearly does not address the whole of the criteria. In any event, if they have never had the documents within their possession custody or power, the task is easily met.

47 In my view the question of substance on this appeal was whether her Honour was in error in not explaining why she made the order. The plaintiffs' grounds alleged that the reasoning was absent in respect of:

(a) why the documents fell within any category in r 29.01.1(3) (ground 1)

(b) why they were 'relevant' or 'should be discovered', or why certain documents were relevant to a causation issue (grounds 2 and 4).

48 I have largely addressed this argument in expressing my views on the grounds above. I endorse and apply the observations made by Ferguson J in Oswal v Carson[18], where Westfarmers, seeking an order that set aside a subpoena, argued that the associate judge below was in error in not giving reasons for the conclusion that the subpoena should not be side aside as an abuse of process. Her Honour relevantly said:

[48] It is trite law that judges must provide reasons for the decisions that they make. But that does not mean that lengthy reasons are required...However, when, as here, the application at first instance is one concerning a matter of practice and procedure, more often than not the reasoning need not be in-depth. In some such instances, the judge's reasoning may be apparent from the exchange with counsel during submissions and a review of the transcript will disclose the reasoning. In summary, all that is required is reasoning which explains in short compass how and why one party succeeded and the other lost.

[49] The associate judges in this court are required to deal with a heavy workload. In part, their role involves determination of procedural applications of the type in question here. It is very important for the efficient operation of the court in the administration of justice that they deal with such applications in a timely and efficient manner. There is no need for them to be burdened with an expectation that they must produce word perfect, lengthy and impeccable reasons in respect of every application that they hear. It is simply unnecessary. The additional time that would be required to produce flawless reasons is not available if the associate judges are to perform their important role efficiently.[19]

49 Mr Cawthorn argued[20] that her Honour's reasoning was circular, effectively holding that 'the documents are relevant because they are relevant'. I disagree. The combination of the exchanges with counsel during submissions and her Honour's brief reasons disclose that she took the view that the documents could either support or adversely affect the parties' respective cases on the reasonableness of the costs and, in certain limited categories of charges as identified by Mr De Young, on the question of causation. It could fairly be said that her Honour's reasons, discerned from the sources I mentioned, were at the short end of the 'short compass' referred to by Ferguson J. But, in my view they were adequate in the circumstances.

50 I need not consider Mr De Young's argument that inadequate reasons cannot constitute an error of the kind that permits me to set aside her Honour's order. But, this being a matter of practice and procedure, even if I was persuaded that her Honour was in error in failing to articulate her reasons in a more transparent way, before overturning her order I would need to be satisfied that some injustice resulted from the making of it.[21] I am not so persuaded.

51 For the various reasons given above, it seems to me that the issues raised by the pleadings provide a proper basis for an order that the further documents be discovered. And it is by no means certain that the discovery given to date is sufficient for the legitimate forensic purposes of the case. The risk that it is not, and that the first defendant will be deprived of an available means of confining the damages it might otherwise have to pay, is not so outweighed by the cost and burden imposed on the plaintiffs of having to give that discovery that an obvious injustice arises. Further, if the plaintiffs succeed in establishing their damages undiminished by evidence unearthed by that further discovery they will be substantially compensated by an award of costs.

52 Accordingly, the plaintiffs' appeals fail. The summonses in both matters are to be referred back to Associate Justice Ierodiaconou for the determination of the application for further particulars[22] and the question whether any privilege over any of the documents has been waived.[23]

[1] Braham v A.C.N. 101 482 580 Pty Ltd (S CI 2012 03622) ('the Braham matter') and Poon v A.C.N. 101 482 580 Pty Ltd (S CI 2012 03622) ('the Poon matter')

[2] In relation to the second to fourth defendants (accountants or financial advisors) these parties were added as defendants to the proceeding pursuant to r 9.12 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) ('the Rules'), relating to the consolidation of proceedings, and s 24 AL of the Wrongs Act 1958 (Vic), to allow the first defendant to plead concurrent wrongdoing against them: See Braham and Anor v ACN 101 482 580 Pty Ltd [2014] VSC 171 (Lansdowne AsJ)

[3] For further background detail, see Braham and Anor v ACN 101 482 580 Pty Ltd [2014] VSC 171 [1]-[7] (Lansdowne AsJ).

[4] Oswal v Carson [2013] VSC 355 [11].

[5] House v R [1936] HCA 40; (1936) 55 CLR 499, 504-5; Australian Coal and Shale Employees' Federation v Commonwealth [1953] HCA 25; (1953) 94 CLR 621,627;; Wightman v Johnston [1995] VicRp 81; [1995] 2 VR 637, 639; Oswal v Carson [2013] VSC 355 [11] (appeal as to scope of subpoena); Glass (a pseudonym) v Chief Examiner [2015] VSC 29 [2] (and cases cited therein).

[6] Glezer v Deals.com.au [2014] VSC 202 [13], citing Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 176, 176; Oswal v Carson [2013] VSC 355 [11].

[7] See paragraph 4 above.

[8] See affidavits of Damian Walton sworn 26 May 2015.

[10] Citing Perkins v County Court of Vic [2000] VSCA 171; (2000) 2 VR 246, 270-1 [56] (Buchanan JA).

[11] [1990] VicRp 33; [1990] VR 355.

[14] See LexisNexis, Williams' Civil Procedure Victoria, Vol 1 (at Service 291), [I 29.01.775].

[16] Transcript of proceedings before Ierodiaconou AsJ, 9 June 2015, p.54.

[18] [2013] VSC 355.

[19] Ibid [48]-[49](citations omitted).

[21] See [10 ]-[12] above.

[22] See paragraph 3 of summons filed 13 May 2015 in Braham matter.

[23] See paragraph 5 of the summonses filed 13 May 2015 in both matters.