Plaintiff v Defendants [2018] VSC 164 | Case summary

Supreme Court of Victoria|2018-04-12|Before: DERHAM AsJ

PRACTICE AND PROCEDURE - Application to strike out defences under r 24.02 of the Supreme Court (General Civil Procedure) Rules 2015 and the inherent jurisdiction of the Court - Applicable principles - Whether grounds for striking out - Whether prejudice to the plaintiff - Not an appropriate case for striking out defences - British American Tobacco Ltd v Cowell [2002] VSCA 197; (2002) 7 VR 524; Hodgson v Amcor [2011] VSC 63; (2011) 32 VR 495; Lenijamar Pty Ltd v AGC (Advances) Ltd [1990] FCA 520; referred to and followed.

1 The plaintiff applies to strike out the defence of the first defendant ('Lee') and the second defendant ('Fair Financial').[1] The application is made pursuant to rr 24.02 and 24.05 of the Supreme Court (General Civil Procedure) Rules 2015 ('Rules') or in the alternative to strike out parts of those defences pursuant to s 56 of the Civil Procedure Act 2010 (Vic) ('CPA') based on a failure to comply with the obligation to give proper discovery.

2 The application is not the first made by the plaintiff. The history of the proceeding has made the consideration of the application somewhat detailed and, frankly, tedious. The lengthy submissions and affidavits by which the legal practitioners for the plaintiff have advanced the application has made the writing of these reasons longer than is desirable and has delayed their delivery.

3 I have concluded that this is not an appropriate case for the striking out of the defences of Lee and Fair Financial.

4 According to the second further amended statement of claim ('SFASOC')[2] the plaintiff claims damages against the defendants arising out of investments she made. Broadly speaking the factual allegations are as follows:

(a) Lee held himself out as a financial planner and the provider of financial advice, including managing investments on behalf of clients. He was an authorised representative of the fifth defendant, Sentry Financial Services Pty Ltd ('Sentry'). Sentry is the holder of an Australian Financial Services Licence. Lee had two companies that are presently relevant, Fair Financial and the third defendant ('Fair Group'). Fair Financial was an authorised representative of Sentry, Fair Group was not. Fair Group held all the shares in Fair Financial;

(b) in mid-2013 the plaintiff retained Lee or alternatively Fair Financial to provide financial planning, investment and other related advice. Lee recommended to the plaintiff two main types of investments. The first, where the client chooses the particular financial product to invest in and, the second, where the client put money into a company owned by Lee which then in turn invested in different products of its choosing. The second option returned a fixed 10 per cent per annum. This advice, it is alleged, was the provision of financial services to the plaintiff by Lee as an authorised representative of Sentry (pursuant to s 916A of the Corporations Act 2001 (Cth) ('Corporations Act');

(c) Lee advised the plaintiff to invest in Fair Group. This advice is said to be financial product advice pursuant to s 766B of the Corporations Act and/or dealing in a financial product pursuant to s 766C and the provision of financial services pursuant to s 766A of the Corporations Act;

(d) in reliance on the advice of Lee and Fair Financial, on or about 24 September 2013 the plaintiff was induced to enter into a contract to invest the sum of $500,000.00 with Fair Group ('the first investment');

(e) the first investment was to be repaid by Fair Group on 24 September 2014 and interest at the rate of 10 per cent per annum was payable by 12 equal monthly instalments of $3,987.07. Fair Group failed to repay the investment on 24 September 2014;

(f) On or about 11 December 2014 the plaintiff entered into a further investment contract ('the second investment'). This contract was entered into on the advice of Lee to roll over and renew the investment for a further year on the same terms and was repayable on 24 December 2015;

(g) on or about 9 February 2015 the plaintiff gave notice to Fair Group that she wished to terminate the second investment and required a return of the whole of the investment within 60 days;

(h) Fair Group failed to repay the monies in consequence of which the plaintiff has lost her entire investment.

5 The claims arising out of these facts are made against Lee and Fair Financial in contract, tortious negligence, breach of statutory duty (including failing to provide a product disclosure statement and misleading or deceptive conduct) and for breaches of duties as a fiduciary.

6 The plaintiff also alleges that in order to induce her to make the first investment and the second investment, Lee, on his own behalf and on behalf of Fair Financial and Fair Group, made a range of representations to the plaintiff which were false or misleading. The representations were, without stating them verbatim, to the effect that:

(a) Lee was an experienced and qualified financial and investment advisor;

(b) Lee could not become an authorised representative of Sentry unless he was a trustworthy and reliable financial advisor;

(c) Lee was able to obtain higher than normal rates of interest because he operated 'an elaborate network of interrelated financial and other services that gave unique advantages not available to others operating in the investment field';

(d) investment in the Fair Group was secure and personally guaranteed by Lee;

(e) Lee recommended investment with Fair Group because it was under his direct control and ownership and he could thereby ensure that the investment would always generate a higher return;

(f) investment with Fair Group was the best option for the plaintiff because this company was linked to a network of other businesses Lee owned and controlled and through dealings carried out within this network he could ensure high return for the plaintiff's investment;

(g) Lee had regular dealings involving much larger investments with Sentry through their operations based in Perth;

(h) Lee would ensure any investment of the plaintiff's monies was deployed only in high quality investments;

(i) Lee had numerous business and property assets of considerable value and these were readily available if needed as security;

(j) investment with Lee and/or his companies was utterly secure because he was an authorised representative of Sentry, which was a large and highly reputable company offering a diverse range of financial products that he was able to take advantage of;

(k) the investment was personally guaranteed by the ANZ Bank and that Lee was a qualified tax accountant and member of CPA Australia.

7 Claims are also made against the sixth defendant ('Choo') who was alleged to have been an accountant providing accounting services on behalf of clients at the same business address as Lee, Fair Financial and Fair Group. Although it is not pleaded, it appears that she was employed by AKHL Accounting Pty Ltd ('AKHL'), of which Lee was a director, possibly the sole director. The SFASOC alleges that the plaintiff relied on representations made by Choo, which were made in order to induce the plaintiff to enter into the first investment.[3] These representations supported the soundness and security of the investment, the substantial assets of Lee's businesses and the appropriateness of the draft contract presented to the plaintiff for execution. Choo's representations were made, it is alleged, in trade and commerce and were misleading or deceptive in contravention of various provisions of the Corporations Act, the Australian and Investments Commission Act 2001 (Cth) and the Competition and Consumer Act 2010 (Cth). Claims are also made based on tortious negligence on the part of Choo.

8 Further claims are made against the seventh defendant ('Zhang'), a solicitor who the plaintiff alleges she retained to provide legal advice in relation to the proposed second investment and for which she paid Zhang the sum of $800.00. Zhang allegedly worked for Balance Legal Group Pty Ltd ('Balance Legal Group'), another company in the Lee stable, with Lee as a director.[4] Claims are made against Zhang for breach of retainer, tortious negligence, misleading or deceptive conduct and for breaches of duties as a fiduciary. The plaintiff sought Zhang's advice as to whether or not the second investment was sound and secure and he represented that it was.

History of the proceeding and previous applications

9 In order to understand the complaints made by the plaintiff in relation to discovery by Lee it is necessary to have some history of the proceeding.

10 The proceeding was begun by writ on 10 June 2015. On the same day a summons was returnable in the Practice Court seeking a freezing order under r 37A.02 of the Rules. On 11 June 2015 such a freezing order was made, for the purpose of preserving the defendants' assets, against Lee, Fair Financial and Fair Group restraining them from disposing of or diminishing their assets up to an unencumbered value of $520,000.00. Orders were also made for disclosure of assets and discovery of documents of a general kind and, as well, a particular discovery order in relation to the deposit, transfer, investment or use of the plaintiff's loan in the sum of $500,000.00 that was paid to Fair Group ('loan funds'). Separate orders were also made restraining the then fourth defendant, Lina Okada, from disposing of the property at 112 Broughton Road, Surrey Hills, Victoria or diminishing its value. Discovery orders were made against the fourth defendant, Lina Okada.

11 Lina Okada made her affidavit of documents promptly.[5] She also swore an affidavit as to her relationship with Lee, giving evidence that they were separated as domestic partners and that she alone had any interest in the property at 112 Broughton Road, Surrey Hills. She brought an application by summons to strike out various paragraphs of the claim made against her.[6]

12 On 19 June 2015 the Court ordered that several paragraphs of the statement of claim endorsed on the writ (where allegations were made against the fourth defendant in respect of receipt of the loan funds) were struck out, but the fourth defendant was not removed as a party.

13 Lee, Fair Financial and Fair Group did not comply with the orders made on 11 June 2015. The plaintiff made application for them to be dealt with for contempt and for orders that Lee be required to provide further information and discovery of documents ('the 30 July 2015 summons').[7] This provoked Lee to make an affidavit disclosing his assets and the assets of Fair Financial and Fair Group and giving some details as to what had happened to the monies lent by the plaintiff to Fair Group.[8] This affidavit discovered documents relating to loans made by Fair Group with the plaintiff's funds and discovered bank statements of Fair Group with the Australia and New Zealand Banking Group Ltd in account no. 2676-65626 ('ANZ Account') and loan agreements pursuant to which the plaintiff's monies were on lent by Fair Group.

14 The plaintiff was not content with the purported compliance by Lee with the freezing order discovery requirements and there were communications between the plaintiff's solicitors and Lee directly, his solicitor, Mr Steart, having suffered a heart attack. During these discussions Lee told the plaintiff's solicitors that he had been ejected from his business premises at 57 Rouse Street, Port Melbourne by the landlord ('Port Melbourne premises').

15 This resulted in an affidavit of Lee made 26 August 2015 in which he explained the difficulties he was facing, disclosed the companies in which he had an interest, the assets of those companies, and bank statements for the ANZ Account additional to those previously discovered (for the 2014 and 2015 years), which were provided in electronic form, on a USB stick.[9]

16 In relation to the Port Melbourne premises, Lee explained that the landlord had re-entered on 17 August 2015 at 9.30pm.[10] Lee regained possession on 19 August 2015 at 2pm.[11] The landlord filed a VCAT application seeking a declaration that the re-entry on 17 August 2015 was valid.[12]

17 Meanwhile, by order of 30 July 2015, Sentry, Choo and Zhang were added as defendants and the plaintiff was required to file and serve an amended writ and further amended statement of claim ('FASOC') by 24 August 2015.[13] The plaintiff duly filed an amended writ and FASOC on 24 August 2015.

18 On 28 August 2015 the plaintiff withdrew her application to deal with Lee for contempt (made in the 30 July 2015 summons) and the Court adjourned that summons after ordering Lee to make a further affidavit:[14]

(a) setting out in detail the assets he held as at 12 June 2015 in accordance with order 8(a) of the freezing order; and

(b) providing all records in relation to withdrawal of the Loan Funds that were subsequently paid to Bell and Barnett Pty Ltd in particular the withdrawal of the sum of $200,000.00 withdrawn from the ANZ Account on 26 September 2013 in accordance with paragraph 8(a)(ii) of the freezing order;

(c) providing all records in relation to the further deployment of the Loan Funds, in particular to the claimed investment of $301,000.00 on 26 September 2013 and $500,000.00 on 14 November 2013 each to Bell and Barnett Pty Ltd and a loan of $444,652.85 in March 2014 to Quan 1 Springvale Pty Ltd;

(d) providing records in relation to the action of Pump Action Investments v Duy Lam, the director of Quan 1 Springvale Pty Ltd in the County Court Victoria case no. CI-14-05977 limited to the pleadings of all parties and any non-confidential settlement documents.

19 Application was then made by the fourth defendant (Lina Okada) to have various paragraphs of the FASOC, where allegations were made against her, struck out or for the claims against her to be summarily dismissed.[15] As a part of the application, the fourth defendants' solicitor provided to the fourth defendant copies of the bank statements for the ANZ Account and the fourth defendant analysed those statements to determine, if she could, whether any of the monies that were lent by the plaintiff to Fair Group were paid to her. She swore an affidavit on 21 July 2015 and concluded that it could not be said that any withdrawals in her favour were made from the deposit by the plaintiff of $500,000.00 into that account (which took place on 24 September 2013).[16]

20 On 16 September 2015, Lee swore a further affidavit in compliance with the orders of the Court made on 28 August 2015. He produced various bank statements and gave an answer to each of the matters required by that order. In substance he provided evidence and supporting documentation tracing various payments from funds provided by the plaintiff.

21 On 19 October 2015, on the fourth defendant's application, I struck out paragraphs 70 to 77 of the FASOC, but refused the application for summary dismissal of the plaintiff's claims against the fourth defendant. I gave the plaintiff leave to re-plead such claims and made directions for the further hearing of the fourth defendant's application for summary judgment.[17] The plaintiff did not seek to re-plead the claims against the fourth defendant and, by order made on 1 February 2016, the plaintiff was granted leave to discontinue her proceeding as against the fourth defendant.

22 The plaintiff's 30 July 2015 summons for Lee to be dealt with for contempt of the freezing order was finally dismissed by consent on 29 October 2015.[18]

23 The first order for the parties to make discovery of documents (apart from pursuant to the Freezing Order) was made on 6 June 2016, such affidavits to be filed by 5 September 2016.[19] Sentry and Zhang complied with the order. None of the other parties did so.[20] On 20 December 2016, further orders were made for discovery of documents by each party. Lee, Fair Financial and Fair Group did not comply with the order. On 6 March 2017, a further order for discovery was made requiring Lee, Fair Financial and Fair Group to make discovery of documents, to be complied with by 20 March 2017. The proceeding was also referred into the Professional Liability List in the Court and preliminary trial directions were made.

24 On 23 March 2017, the solicitors for Fair Financial filed an affidavit of documents made by Lee on 22 March 2017.

25 On 21 April 2017 the proceeding came on for directions before Macaulay J. Amongst other things, he ordered Lee and Fair Group to file their affidavits of discovery by 4pm that day. It turned out that Mr Steart, the solicitor for Lee and Fair Group, had an affidavit of documents made by Lee on 22 March 2017 (at the same time that Lee swore an affidavit of documents for Fair Financial). He told Macaulay J that he had thought the affidavit had been filed and served.[21] He served it on the plaintiff's counsel during the hearing. That provoked the response from the plaintiff that the affidavit was hopelessly inadequate. That led to an order ('order 3') that the plaintiff make a request for further and better discovery and that Lee and Fair Group respond, by certain dates. Later attempts by the solicitor for Lee and Fair Group to file the affidavit electronically were unsuccessful.

26 Pursuant to order 3, the plaintiff requested discovery of documents by letter dated 28 April 2017. The request concerned discovery of the following classes of documents:

(a) the loan claimed to have been made to Quan 1 Springvale Pty Ltd and the caveat lodged on a property owned by Quan 1 Springvale Pty Ltd;

(e) the appointment of Lee as an authorised representative of Sentry and records of payments made between them;

(f) taxation returns and records relating to Lee, Fair Financial and Fair Group; and

(g) Pump Action Investments, Navbuild and a debt claimed by CreditCorp.

27 Lee and Fair Group failed to make discovery of documents in accordance with the order of Macaulay J and in response to the request for documents just mentioned, so by notice of default dated 1 June 2017, the plaintiff gave notice to Lee and Fair Group that unless they made discovery of the documents within seven days of service of the notice the plaintiff would apply to the Court for an order that the defence served be struck out.[22]

28 By letter dated 4 August 2017, the plaintiff's solicitors wrote to Minter Ellison, the solicitors then acting on behalf of Fair Financial, complaining that an unsworn affidavit of documents provided was wholly inadequate and in breach of Fair Financial's discovery obligations. They sought again discovery of documents as set out in their previous letter of 6 February 2017 being documents, in the period 1 January 2013 to 31 December 2015, of the following descriptions:

(a) all tax returns, balance sheets and profit and loss statements of Fair Financial;

(b) all records of payments to the ATO by Fair Financial;

(c) all records in relation to a claimed retainer by the plaintiff of Fair Financial to obtain investment advice in or about July to September 2013;

(d) all records in relation to a proposed investment by the plaintiff of the sum of $500,000.00 or any other sum with companies owned and/or controlled by Lee in or about July to September 2013;

(e) all records in relation to the payment into Fair Financial's account no. 013 132 2013 94546 of the sum of $101,000.00 on or about 27 September 2013 including but not only records in relation to the purpose of the said transaction;

(f) all records in relation to the payment from Fair Financial's account no. 013 132 2013 9456 of the sum of $111,000.00 by cheque no. 001064 on or about 1 October 2013 including but not only records in relation to the purpose of the said transaction;

(g) all records in relation to the payment to Fair Financial's account no. 013 132 2013 9456 of the sum of $212,891.33 on or about 14 November 2013 including but not only records in relation to purpose of the said transactions;

(h) all records in relation to the payment from Fair Financial's account no. 013 132 2013 9456 of the sum of $331,200.00 by cheque no. 001077 on or about 14 November 2013 including but not only records in relation to the purpose of the said transaction.

29 On 7 August 2017 Fair Financial filed a supplementary affidavit of documents, made by Lee. This discovery included bank statements for Fair Group and Fair Financial. Neither Lee nor Fair Group filed any affidavit of documents in accordance with the order of Macaulay J. By summons filed 29 June 2017 the plaintiff sought an order striking out the defence of Lee and Fair Group and for judgment for the plaintiff against them. The particular rules of Court identified in the summons were not the applicable rules. Shortly after the service of that summons, the solicitor for Lee and Fair Group gave notice of ceasing to act. On the return of the summons on 17 August 2017 the solicitor for Fair Financial and Sentry appeared and notified the Court that if judgment were entered against Lee, then Fair Financial and Sentry may be exposed to a strict liability for some of the conduct of Lee pursuant to the Corporations Act. The solicitor for Fair Financial and Sentry applied for an adjournment to enable those parties to consider what steps they should take to protect their interests. Having regard to those matters and the fact that the wrong rules were identified in the summons, I ordered a short adjournment, and granted leave to the plaintiff to amend the summons.

30 During the adjournment the solicitors acting for Fair Financial and Sentry received instructions to assume the conduct of Lee's defence of the proceeding, and issued a summons on 25 August 2017 (returnable at the adjourned date of the plaintiff's application, 31 August 2017) seeking an extension of the date by which Lee should make discovery in accordance with the orders of Macaulay J made 21 April 2017 and seeking leave to file and serve an amended defence on behalf of Lee. I emphasise that these applications were made only on behalf of Lee and not Fair Group.

31 In an affidavit in support of the applications made on behalf of Lee, Lin Chern Tan ('Mr Tan'), solicitor, swore that Lee did not comply with the orders because he relied on his solicitor (Mr Steart) to do so.[23] As far as Lee was concerned, he had made an affidavit of documents and did not know why it had not been filed with the Court. Since assuming the conduct of Lee's defence, Mr Tan prepared an affidavit of documents on behalf of Lee which he affirmed on 22 August 2017. On instructions from Lee, Mr Tan deposed that:

(a) to the best of Lee's knowledge, information and belief, neither he nor his former solicitors have or have had in his or their possession, custody or power any document required to be discovered in the proceeding other than the documents enumerated in schedules one and two of that affidavit;

(b) the originals and copies of any other correspondence and documents between Lee and the plaintiff beyond those enumerated in that affidavit were, to the best of his knowledge, information and belief, destroyed between around October to December 2015 after he vacated the Port Melbourne premises due to arrears in rental payments and that building was subsequently demolished in about June 2016;

(c) since vacating the Port Melbourne premises in late 2015, to the best of Lee's knowledge, information and belief, he has not held in his possession, custody or power any document required to be discovered in the proceeding;

(d) after vacating the Port Melbourne premises in late 2015, he relocated to a new office premises in Cremorne (Richmond), Victoria ('Cremorne premises');

(e) in late 2016, he vacated the Cremorne premises due to arrears in rental payments, at which time he arranged for his general office records and belongings (held in 10 containers) to be stored at the facility named 'Storage Plus' located at 167-169 Cremorne Street, Richmond, Victoria;

(f) to the best of his knowledge, information and belief, the belongings placed into storage at the Storage Plus facility did not include documents required to be discovered in this proceeding;

(g) on 28 July 2017, he received a letter from Storage Plus advising that storage fees for his space were significantly in arrears and that, pursuant to the storage contract, Storage Plus would force entry into Lee's space and dispose of or sell his goods within two days from the date of the letter, without further notice. Lee believes the amount in arrears is more than $7,500.00; and

(h) the documents proposed to be discovered by Lee were substantially the same as the documents discovered by Fair Financial in the proceeding and these had already been inspected by the plaintiff.

32 Between the hearing on 17 August 2017 and the adjourned date of 31 August 2017, the plaintiff had, pursuant to the leave granted, amended her summons to apply to strike out the defences of Lee and Fair Group in accordance with the relevant Rules (rr 24.02 and 29.12.1). On 31 August 2017, I ruled that having regard to the factors identified in Hodgson v Amcor Ltd[24] and in the decision of the Full Court of the Federal Court in Professional Administration Services Centres Pty Ltd (ACN 109055049) v Commissioner of Taxation[25] it was not appropriate to strike out Lee's defence. However, as there was no response to the notice of default from Fair Group, I ordered that pursuant to r 24.02(1)(b) of the Rules, the defence of Fair Group be struck out. I also determined that it was appropriate to permit Lee to file an affidavit of documents.

33 The plaintiff alleged that the discovery in fact made by Lee did not comply with the order made by Macaulay J on 21 April 2017. I found that the evidence before me indicated that, at worst, Lee had been negligent in relation to the retention and production of his business, banking and other documents ('business records'). The plaintiff had complained of deliberate or reckless destruction but in my view that was not made out. I held that what was reasonably open is that the explanation of what had happened to the business records was overly generalised and insufficient. I ordered that Lee file and serve an affidavit concerning the documents described in the plaintiff's lawyer's letter of 28 April 2017 or documents in the classes of documents described in that letter, and what had happened to them.[26] I also ordered that Lee file an affidavit as to the matters the subject of his solicitor's affidavit (as set out above at [31]), including greater detail concerning what had happened to the business records and the efforts he had made to r[27]over them.27

34 In relation to Lee's proposed amended defence, the nub of the change was to adopt the approach advanced by Fair Financial and Sentry, that is, to allege that all dealings between the plaintiff and Lee were in Lee's capacity as director of Fair Group and not in his capacity as financial planner or financial advisor representing Fair Financial or Sentry. In addition, the amendments proposed included the withdrawal of admissions and various other changes that needed to be supported by evidence and argument. I therefore adjourned Lee's summons insofar as it sought leave to file an amended defence and required an affidavit substantiating and explaining the withdrawals of admissions and the other changes proposed.

35 By affidavit made on 18 September 2017, Lee addressed some of the matters that I had ordered on 31 August 2017:

(a) he gave details of the lease of the Port Melbourne premises by another company of which he was the sole director, Fair Finance Group Pty Ltd ('Fair Finance Group'), which was now in liquidation. He exhibited a notice under s 146 of the Property Law Act 1958 (Vic) dated 30 July 2015 given by the landlord, Thyssenkrupp Marine Systems Pty Ltd ('Thyssenkrupp') and a notice upon re-entry dated 17 August 2015. He made an agreement with Thyssenkrupp on 19 August 2015 to move back into the premises temporarily to allow him to finish some business. On 24 August 2015 Thyssenkrupp commenced a proceeding in VCAT seeking, amongst other things, a declaration that upon Thyssenkrupp's re-entry to the Port Melbourne premises on 17 August 2015 the sub-lease was terminated. Thyssenkrupp also sought an injunction requiring Fair Finance Group to vacate the Port Melbourne premises;.

(b) he deposed that he did not have the necessary funds to defend the VCAT proceeding and on a date he cannot recall Fair Finance Group was evicted from the Port Melbourne premises. He and his staff were only able to retrieve personal items as he did not have the funds necessary to engage removalists. All other items were left at the Port Melbourne premises, including about 80 tables and chairs, about 30 computers, a microwave and coffee machine and all documents and files which were kept in storage boxes;

(c) in late November or early December 2015 he was briefly granted about two days access to the Port Melbourne premises to retrieve some of the property that had been left there and to sell what he could. He was concerned to retrieve items that might be saleable in order to raise money. He had a clearance sale at the Port Melbourne premises and some of his neighbours in the surrounding apartment blocks attended and bought bits and pieces;

(d) in relation to electronic records, Lee deposed that he had three meetings with the plaintiff at his offices and otherwise all communications were either by telephone or email. The email address he was using at the time was anthony.lee@fairfinancial.com.au. All data storage in respect of this email account was kept with Google Cloud Storage. From 2009 to 2015 his usual practice was to save documents received electronically in an online storage facility. He used a file sharing and storage online site called 'Dropbox', for which there is an ongoing subscription fee payable to enable access;

(e) in about July 2015 all his bank accounts were frozen. From that time he stopped paying fees for Google Cloud Storage. As a result in about September 2015 his ability to access the data storage (which included emails sent by and received to the email address referred to above) was cut off and he had no access to the data since that time. Since September 2015 he has also been unable to access any documents saved in his Dropbox account as around that time he stopped paying fees to maintain that service. On 15 September 2017 he made enquiries with Google Cloud Storage and received a notification that upon the payment of outstanding fees of about US$600 he would be able to regain access to the data storage within about seven days of the payment. He understood that that would also give him access to his Dropbox;

(f) he deposed that due to his very limited financial means he was not able to pay the outstanding Google Cloud Storage account fees until 4 October 2017 and, as a result, he should be able to regain access to the data by 16 October 2017. He said once he received access he would need some time to review the records and ascertain whether there are any records that are required to be discovered in this proceeding; and

(g) he also dealt with some of the discovery items the subject of the plaintiff's letter of 28 April 2017 (see [26] above). He complained that the requests for further discovery were not sufficiently specific to enable him to identify or understand the precise nature of the documents sought to be discovered.

36 On 27 September 2017, Lee made a further affidavit pursuant to the orders made on 31 August 2017. In that affidavit he gave an update regarding access to his electronic records stored in his Google Cloud storage and Dropbox ('Electronic Records'), having paid the requisite fees he had gained access to them. He also referred to particular requests for discovery of documents, and made further reference to what had happened to his and his companies' business records when he left the Port Melbourne premises. In particular he deposed that his affidavits of 12 and 26 August and 16 September 2015 were prepared from a 'combination of personal recollection, documents I still had access to in Port Melbourne before the lock out and the Electronic Records'.

37 The matter came back before the Court on 28 September 2017. On 27 September 2017, Lee swore another affidavit in purported compliance with the orders made on 31 August 2017. In this affidavit he deposed:

(a) that on 22 September 2017 he arranged for payment of outstanding fees to access his Google Cloud Storage and Dropbox. He was able to access email correspondence with the plaintiff and exhibited a bundle of such emails. He also was able to retrieve other emails and documents from the electronic records that fall or potentially fall within the plaintiff's request for further and better discovery;

(b) he addressed each of the categories of documents referred to in the plaintiff's letter of 28 April 2017 (see above at [26]). In relation to each category of document he set out those documents that he had discovered or which would be the subject of a supplementary affidavit of documents and addressed what had happened to the documents he no longer had;

(c) he stated that the laptops that had been used at the Port Melbourne premises did not contain any files relevant to his dealings with the plaintiff and that in relation to the laptop he used it was reformatted shortly after he arrived at the Cremorne premises in October 2015, so that anything on the laptop was lost. In any event, the email communications were stored in his Google Cloud Storage account and Dropbox account, including any attachments to those emails, and any attachments to emails that were not so saved would have been lost;

(d) any physical files and documents were left in storage boxes at the Port Melbourne premises in late 2015; and

(e) when he relocated his office to the Cremorne premises he was carrying out a business of selling menswear and suits under the business name 'Satch'. He vacated those premises in October 2016. His solicitors, Minter Ellison, made enquiries of Storage Plus who advised that there were approximately 10 containers in storage. He states that these are primarily suits and stock of Satch and it is unlikely that there are any documents in the Storage Plus facility that are required to be discovered in this proceeding.

38 The plaintiff's solicitor, Min Juan Dai also swore an affidavit on 27 September 2017 which purported to oppose leave being granted to Lee to file his proposed amended defence on the grounds that it amounted to an abuse of process 'on such a scale as to seriously prejudice the plaintiff's chance for a fair trial of her claim'. That affidavit rehearsed the history of the proceeding, the non-compliance with the freezing order and the discovery requirements in that order, the contempt application, the various appearances before the Court in 2015, the improbability of Lee's explanations for non-compliance with the various orders and his lack of access to records kept at the Port Melbourne premises. The affidavit, like many of the affidavits sworn by the plaintiff's solicitor, was a mixture of restatements of matters of record in the Court file, purported opinion evidence and submissions, such as:

It is at least conceivable that Lee has deliberately destroyed his business records in the belief that this will make it difficult for the plaintiff to succeed in suing him.[28]

39 In other respects the affidavit presented arguments, such as that Lee's recent production of documents relating to his removal from the Port Melbourne premises, in his affidavit of 18 September 2017, did not sit well with his claim that his and his companies' documents relevant to the proceeding were left behind in the Port Melbourne premises. Ms Dai's affidavit, and the arguments that it included and reflected, and that were raised by counsel for the plaintiff, failed to distinguish between the issue of whether there should be leave to amend Lee's defence and the issue of discovery of documents by Lee, Fair Financial and Fair Group.

40 A day or two before the hearing on 28 September 2017, the plaintiff's solicitors also sent to my chambers a long written submission in support of an application under r 23.02(d) of the Rules to strike out the first defendants defence on the grounds that his record of non-compliance with the Court's orders amounted to an abuse of the process of the Court. There was, however, no formal application made pursuant to that rule and the application foreshadowed in the written submission was not pressed at the hearing. There was also a draft summons and the supporting affidavit of Ms Dai, made on 27 September 2017. The draft summons sought further particular discovery from Fair Financial. That affidavit principally concerned alleged deficiencies in the discovery made by Fair Financial. The affidavit restated verbatim, a letter of 7 August 2017 sent by the plaintiff's solicitors to the second defendant's solicitors seeking further discovery and set out, by way of submission, a justification for the several categories so requested. Ultimately, this affidavit was not relied on or filed.

41 In the upshot, after considerable argument, Lee was given leave to amend his defence substantially in accordance with the proposed amended defence exhibited to the affidavit of Mr Tan.[29] In addition, the plaintiff was required to serve on Lee's solicitors a list of any further documents sought to be discovered by him, a requirement for Lee to respond by a certain date and for the plaintiff to file any summons for further discover to be returnable on 31 October 2017.

42 By letter dated 5 October 2017, the plaintiff's solicitors sent a request in accordance with the orders of 28 September 2017 for further discovery of documents ('letter of request'). The list of documents is nearly seven pages long and covers the subject matters of private loans generally, loans and investments of the plaintiff, deployment of the plaintiff's moneys, Lee's assets, company bank accounts, intercompany relations, Lee as authorised representative of Sentry, Balance Legal Group and AKHL.

43 On 13 October 2017 Lee filed a supplementary affidavit of documents, made on 12 October 2017, which expanded substantially the documents that he had discovered. Then, on 30 October 2017, Lee filed a further supplementary affidavit of documents made on 27 October 2017 discovering even more documents. At the same time Lee made a further supplementary affidavit of documents on behalf of Fair Financial.

44 On 19 October 2017, Minter Ellison responded on behalf of Lee to the letter of request and did so category by category in table format and gave a response either stating that further discovery would be provided, or that there was an issue about the relevance of the documents, or that there are no further documents that can be discovered. The treatment of the request is a reasoned and apparently sensible response. In many instances, the response was to query the relevance of the documents to the issues in dispute. As at the date of the hearing, the plaintiff had not responded to the questions regarding the relevance of many documents sought to be discovered. There is also other correspondence between the solicitors relating to the form of discovery by Lee that does not need to be particularised.[30]

45 The proceeding did not come back before me on 31 October 2017 as anticipated. The plaintiff's summons the subject of these reasons was issued on 10 November 2017 and came on for hearing on 24 November 2017. In the meantime, on 14 November 2017 a self-executing order was made against Ms Choo (the sixth defendant) striking out her defences unless she made discovery of documents as required by 15 December 2017.

46 The current application is made under rr 24.02 and 24.05 of the Rules, and also under s 56(1)(a) and (c) of the CPA. The above history of the proceeding shows that there was one earlier application formally made under r 24.02 of the Rules to strike out Lee's defence for non-compliance with orders for discovery.[31] That application was refused on 31 August 2017. In addition, by the written submissions dated 22 September 2017, there was an informal application, based on much the same material, to dismiss Lee's defence on the grounds that his conduct was an abuse of the process of the Court.

47 The current state of the discovery made by Lee is as follows:

(a) affidavit of documents made 22 August 2017 disclosing documents numbered 1 to 11;

(b) supplementary affidavit of documents made 12 October 2017 disclosing documents 12 to 148;

48 The documents referred to in the supplementary affidavit of documents made on 12 October 2017 were subsequently listed again and copies forwarded to the plaintiff's solicitors on a USB stick and grouped under 18 headings that corresponded loosely with some of the topics that had been identified in the plaintiff's letter of request dated 28 April 2017.[32]

49 The current state of discovery by Fair Financial is as follows:

(a) affidavit of documents made 22 March 2017 disclosing documents numbered 1 to 7;

(b) supplementary affidavit of documents made 7 August 2017 disclosing two documents (bank statements for Fair Group and bank statements for Fair Financial);

50 Rule 24.02 of the Rules provides for the striking out of a defence where there has been a failure to comply with an order for the discovery or inspection of documents. A defendant whose defence is struck under the rule is taken to be a defendant who, being required to serve a defence, does not do so within the time limited for that purpose. This enables default judgment to be entered under r 21.02(1) of the Rules.

51 There is also an inherent power which the plaintiff seeks to rely upon. The inherent power of a court to control and supervise proceedings includes the power to take appropriate action to prevent injustice, and is not restricted to defined and closed categories.[33] That power is referred to in, and perhaps preserved by, r 24.05 of the Rules. By that rule it is provided that nothing in Order 24 affects the inherent power of the Court -

(a) to dismiss any proceeding for want of prosecution; or

(b) to order that upon the failure of a party to do any act or take any step which under the Rules the party is required to do or take or to comply with an order that the party do any such act or take any such step, the proceeding shall be dismissed or the defence struck out and that judgment may be entered or that there be judgment accordingly.

52 In Hodgson v Amcor, Vickery J noted that authority[34] supported the proposition that:

It is conceivable that in some cases the inherent power of the Court to take appropriate action to prevent injustice in the management of a proceeding before it, may call for the staying of the proceeding or part of a the proceeding, or even the striking out of a pleading or part of a pleading. However, sanctions involving the striking out of a party's case are generally reserved for only the most serious cases, where no alternative and less severe remedy is available. [35]

53 In Hodgson v Amcor,[36] Vickery J refers to many judicial cautions that support this general statement, as well as decisions in the Federal Court of Australia on the application of the equivalent, but differently worded rule in the Federal Court Rules 2011, and predecessor Rules.[37] Statements in one of those cases, Lenijamar,[38] are apt to the present application. In that case Wilcox and Gummow JJ noted the power given by the rule is conditioned on one circumstance only, the failure of a party to comply with a particular kind of order of the Court, and there was:

no requirement of intentional default or contumelious conduct, although the attitude of the applicant to the default and the Court's judgment as to whether or not the applicant genuinely wishes the matter to go to trial within a reasonable period will usually be important factors in weighing the proper exercise of the discretion conferred by the rule. There is no requirement of "inordinate and inexcusable delay" on the part of the applicant or the applicant's lawyers, although any such delay is likely to be a significant matter. There is no requirement of prejudice to the respondent, although the existence of prejudice is also likely to be significant. And it must be remembered that, in almost every case, delay adversely affects the quality of the trial and is an additional burden on the parties. [39]

The observations which we have just made about the scope of O 10, r 7 are not intended to convey the impression that any failure to comply with a procedural direction will appropriately result in the dismissal of the proceeding. On the contrary, the rules must be administered sensibly and with an appreciation both of the fact that some delays are unavoidable, and unpredictable, by even the most conscientious parties and their lawyers, and of the likely serious consequences to an applicant of staying or dismissing a claim; ...We would not wish our observations to cause respondents to apply for dismissal of proceedings simply because there has been a non-compliance with a direction by the applicant, even though it does not cause or indicate a continuing problem in preparing the matter for an early trial. [40]

55 In Lenijamar,[41] Wilcox and Gummow JJ went on to say that it was undesirable to attempt any exhaustive statement of the circumstances under which the power will appropriately be exercised. But their Honours identified two situations where the use of the power will generally be warranted:[42]

(a) where a history of non-compliance indicates an inability or unwillingness to co-operate with the Court and the other party in having the matter ready for trial within an acceptable period; and

(b) where there is significant continuing default giving rise to undue prejudice and expense to the other party.

56 The third member of the Court in Lenijamar,[43] Pincus J, agreed with Wilcox and Gummow JJ that attempts by the Court to prescribe exhaustive criteria and indicate their weight in relation to the exercise of the power are not likely to be helpful. However, his Honour said:

In some circumstances, the Court may, in my opinion, take into account such matters as whether the claim or defence of the party in default appears to have substance, whether the case is one in which delay in hearing is likely to be particularly damaging to prospects of correctly deciding the dispute, whether the party applying for dismissal has itself transgressed, whether the party in default has gained some advantage by delay (for example, where it has had the benefit of an interlocutory injunction), whether credible assurances (supported, perhaps, by arrangements to commit the conduct of the matter to another firm or other counsel) have been given as to the prompt carrying out of future steps and whether the delay has been such as to induce the party not in default to think that the matter has probably gone to sleep.[44]

57 In Professional Administration Service Centres Pty Limited v Commissioner of Taxation[45] The Full Court of the Federal court summarised the factors arising from Lenijamar,[46] and other decisions, in the appellate context, as including the nature of the default, the duration of the default and whether it is continuing, the circumstances in which the relevant orders were made, the circumstances which occurred between the time of making the orders and the order for the dismissal of the proceeding, and whether the continuing default is occasioning unnecessary delay, expense or other prejudice or unacceptable burden on the respondent.[47]

58 In Hodgson v Amcor,[48] Vickery J noted that all matters relevant to the exercise of the power should be weighed, and that in different cases, the factors may assume greater or lesser significance. He identified a list of factors to be taken into account derived from the case law examined:[49]

(a) the effect of the contravening conduct on the just resolution of the real issues in the proceeding in an efficient, timely and cost-effective manner;

(b) the extent of any delay caused by the contravening conduct and the prejudice associated with it, and whether the delay was inordinate and inexcusable;

(c) whether the history of non-compliance by a party is such as to indicate an unwillingness or inability to co-operate with the Court and the other party or parties in having the matter ready for trial within an acceptable period. In determining whether the defaulting party is either subjectively unwilling to cooperate or, for some reason, is unable to do so, the cumulative effect of the party's defaults may be taken into account;

(d) whether the non-compliance is continuing and is continuing to occasion unnecessary delay, expense or other prejudice to the other party (ie. a significant continuing default which continues to impose an unacceptable burden on another party);

(e) the prejudice which might reasonably be assumed to follow for the other party arising from the contravening conduct, and that which is shown to have arisen;

(f) the extent to which the achievement of efficiency in the conduct of proceedings by other parties in other cases before the Court have been compromised;

(g) the veracity and reasonableness of any explanation given for the contravening conduct;

(h) whether the default was intentional or the product of contumelious conduct;

(i) whether any alternative remedy by way of a lesser, but equally efficient, sanction is available;

(j) whether the contravening conduct has rendered it impossible to conduct a fair trial, or would make any judgment in favour of the offending party unsafe, or which would render any further proceedings unsatisfactory and prevent the Court from doing justice, or there is a real risk of any of these things happening; and

(k) whether the object of the order which has been contravened is ultimately secured (eg. the late production of a document which has been withheld on discovery).

Given the gravity and effect of a striking out order, it should only be made in a clear case where the exercise of the discretion properly calls for this to occur and when the sanction ordered is the least that is necessary to achieve the ends of appropriate case management. Further, as observed in Lenijamar the power conferred on the Court must be "administered sensibly and with an appreciation both of the fact that some delays are unavoidable, and unpredictable ... and of the likely serious consequences to [the party in default]".[50]

60 It follows that an order striking out the defences of Lee and Fair Financial is an extreme remedy which should be reserved for the most egregious offences, where no alternative and less severe remedy is available.[51]

61 Indeed in BAT v Cowell, [52] the Court of Appeal gave examples of the approach taken in English decisions involving the destruction of documents that ought earlier to have been discovered (Coleman v Dunlop Ltd (No 2)),[53] the alleged suppression of a discoverable document (Logicrose Ltd v Southend United Football Company Ltd),[54] the destruction of documents after the commencement of proceedings in consequence of which a fair trial of the proceeding was impossible (Landauer Ltd v Comins & Co)[55] or the production of a forged document (Arrow Nominees Inc v Blackledge).[56] The Court of Appeal repeated a quotation by Chadwick LJ in the latter case adapted from observations of Millet J in Logicrose Ltd v Southend United Football Company Ltd:[57]

... that the object of the rules as to discovery is to secure the fair trial of the action in accordance with the due process of the Court; and that, accordingly, a party is not to be deprived of his right to a proper trial as a penalty for disobedience of those rules - even if such disobedience amounts to contempt for or defiance of the court - if that object if ultimately secured, by (for example) the late production of a document which has been withheld.[58]

But where a litigant's conduct puts the fairness of the trial in jeopardy, where it is such that any judgment in favour of the litigant would have to be regarded as unsafe, or where it amounts to such an abuse of the process of the court as to render further proceedings unsatisfactory and to prevent the court from doing justice, the court is entitled - indeed I would hold bound - to refuse to allow that litigant to take further part in the proceedings and (where appropriate) to determine the proceedings against him. The reason, as it seems to me, is that it is no part of the court's function to proceed to trial if to do so would give rise to a substantial risk of injustice. The function of the court is to do justice between the parties; not to allow its process to be used as a means of achieving injustice. A litigant who has demonstrated that he is determined to pursue proceedings with the object of preventing a fair trial has forfeited his right to take part in a trial. His object is inimical to the process which he purports to invoke.[59]

63 The major point arising from BAT v Cowell[60] was expressed in the reasons of the Court as follows:

Of course, non-compliance with an order for discovery is the very thing which enlivens the court's power under Rule 24.05 to strike out the defendant's pleading:[61] see also the alternative procedure to like effect in Rule 29.12.1. But whichever route be followed, the granting of the relief prescribed by rule obviously depends upon the nature and extent of the prejudice suffered by the plaintiff in consequence of the defendant's default. As Millett, J. observed in Logicrose, supra, the rules do not exist to punish. Yet in this instance, submitted the defendant, the judge found no prejudice - or no significant prejudice - arising from the defendant's defaults, as found, in complying with the order of 6 December 2001.[62]

64 Section 56(1) of the CPA requires the plaintiff to show that there has been a failure to comply with discovery obligations or that there has been conduct intended to delay, frustrate or avoid discovery of relevant documents. It is headed 'Court may order sanctions' and provides:

A court may make any order or give any direction it considers appropriate if the court finds that there has been -

(a) a failure to comply with discovery obligations; or

(b) a failure to comply with any order or direction of the court in relation to discovery; or

(c) conduct intended to delay, frustrate or avoid discovery of discoverable documents.

65 Section 56(2) exemplifies the generality of the power given by s 56(1) and sets out various types of orders that may be made, including making an order or giving directions -

(a) in respect of costs in the civil proceeding, including indemnity cost orders against any party or a legal practitioner who is responsible for, or who aids and abets, any conduct referred to in subsection (1) (s 56(2)(c));

(b) preventing a party from taking any step in the civil proceeding (s 56(2)(d));

(d) in respect of any adverse inference arising from any conduct referred to in subsection (1) (s 56(2)(h));

(e) dismissing any part of the claim or defence of a party who is responsible for any conduct referred to in subsection (1) (s 56(2)(j));

66 The plaintiff maintains that Lee and Fair Financial have engaged in serious breaches of orders and have engaged in other conduct in relation to their discovery obligations throughout the course of the proceeding such that the Court should exercise its discretion to strike out their defences, or at least dismiss certain parts of their defences.

67 The essential basis of the plaintiff's application is that the destruction of the documents of Lee and Fair Financial has led to the plaintiff suffering sufficient prejudice as to prevent a fair trial of her claims. The plaintiff submits that the striking out of the defence of Lee, in particular, but also Fair Financial, is the only appropriate sanction that might be applied to prevent grave prejudice to the plaintiff in the prosecution of her case.

68 The plaintiff relied upon the observations of Eames J in McCabe v British American Tobacco Australia Services Limited.[63] In that case, his Honour referred to the power of the Court being enlivened by reason of the destruction of the documents in question, and the application the inherent jurisdiction of the Court to control the conduct of the parties before it and 'to ensure full and frank compliance with its rules'.[64]

69 In McCabe[65] it was clear that one of the bases upon which the power was enlivened, at first instance, was the failure on the part of the defendant to frankly explain what had happened to the documents and the conclusion that their destruction was a deliberate strategy designed to avoid exposure of the significant level of destruction of documents and, to avoid in turn, exposure of the broader strategy which had been put in place to deny a fair trial to the plaintiff. It was also the case in McCabe[66] that the affidavit of documents was deceptive or misleading in a number of ways. Documents had been omitted from discovery by virtue of what was an unreasonable interpretation of the terms of the order requiring discovery.[67]

70 Despite the fact that the appeal from the decision in McCabe[68] overturned the decision, the plaintiff submitted that the appeal decision did not question the statement of principle as to the power of the Court to strike out a pleading on the grounds of a gross failure in the discovery process.[69] The plaintiff submitted that the key question always comes back to the prejudice to the other party and whether the Court can ensure a fair trial by some means short of a complete or partial strike out of the defendant's pleading. He also submitted that the question arose whether the plaintiff must show that the destruction of the documents was so egregious as to constitute an attempt to pervert the course of justice. In this connection, the plaintiff referred to the Evidence (Miscellaneous Provisions) Act 1958 (Vic), as explained in Little v Shell Refining Australia Pty Ltd.[70]

71 The plaintiff submitted that there was no dispute that the business and financial records of Lee and his companies were at some stage held at the Port Melbourne premises and that none of the documents now discovered by Lee and Fair Financial purport to be records that were held at those premises. Lee has been consistent in his affidavits that the documents held at those premises have been destroyed or are no longer retrievable, with the exception of emails that are stored in the Cloud. Hence, the plaintiff submits, the conclusion is inescapable that virtually all the documents that Lee once held in relation to his business activities in late 2015 have been destroyed.

72 The plaintiff submits that whether the documents were deliberately destroyed, or not, is not crucial to the determination of the application to strike out the defences. That is because the law focuses on the prejudice flowing from the destruction of the documents and not whether the destruction was intentional. Nevertheless, the Court may take into account the motives of the defendant, insofar as he may seem to be responsible for the destruction, in determining the appropriate course of action to be taken.

73 The plaintiff submits that by the time Lee was evicted from the Port Melbourne premises he must have had full knowledge of the nature of the plaintiff's proceedings against him. Her writ was issued on 10 June 2015 and on 11 June 2015 a freezing order was made. Lee had the assistance of a solicitor from the outset, Mr Steart and at some stage the firm of solicitors named RRR Lawyers, so Lee could not maintain he was unaware of his responsibilities in regard to document retention. Thus, the loss of the bulk of Lee's business records was something he did nothing to prevent or in respect of which he was indifferent or which he believed would give him an advantage in the litigation in which he and his companies were involved. The plaintiff does not go so far as to say that this is a deliberate and intentional destruction of documents but suggests it is recklessly indifferent to whether or not the documents were retained or destroyed and should be the subject of a 'negative characterisation of some kind'.[71]

74 Lee and Fair Financial submitted that there were three questions for determination. Their classification of the questions, slightly modified, is a convenient starting point to consider the material in a structured way. The questions, slightly modified, are:

(a) has the plaintiff established an existing breach of an obligation to give discovery on the part of Lee or Fair Financial;

(b) if not, can the plaintiff rely on a past breach or the inadequacy of the existing discovery; and

(c) is the striking out of the defence of Mr Lee or Fair Financial a proportionate response in the circumstances of this case?

(a) the plaintiff's reliance on r 24.05 is misplaced. That rule simply preserves the court's inherent jurisdiction. That jurisdiction has not been invoked by the plaintiff's summons;

(b) the plaintiff does not seek to establish an abuse of process and does not rely on ss 89A - 89C of the Evidence (Miscellaneous Provisions) Act 1958 (Vic) ('Evidence Act provisions'), despite its written submissions addressing that subject.

76 In relation to the plaintiff's reliance on r 24.05 of the Rules and the Evidence Act provisions, Counsel for Lee and Fair Financial submitted that in an application to strike out a defence and to terminate the proceeding on behalf of two defendants which has consequences for Sentry, then a strict approach should be applied to the determination of the issues raised by the summons. The summons does not pick up an abuse of process ground, or otherwise rely on the inherent jurisdiction, nor does it rely on the Evidence Act provisions. No application was made to amend the summons and Lee and Fair Financial had approached the application on the basis of the claims made by the summons.

77 The proposition that the plaintiff does not rely on the inherent jurisdiction is entirely too technical. It is clear enough by the reference to r 24.05 of the Rules that it is the inherent jurisdiction that is sought to be relied on. On the other hand, the Evidence Act provisions are altogether another matter. If they are applicable to the current circumstances, and I say nothing as to this, they have not been squarely raised as a part of the application. They are only referred to in the plaintiff's written submissions delivered shortly before the hearing, and have not been responded to by Lee or Fair Financial.

78 In relation to the first question, whether the plaintiff established an existing breach of an obligation to give discovery on the part of Mr Lee or Fair Financial, Lee and Fair Financial submitted that the affidavit in support does not establish an existing default in complying with an order for discovery,[72] so that the conditions for the exercise of power under r 24.02 of the Rules or s 56(1)(a) of the CPA have not been established, because:

(a) on 28 September 2017, the Court ordered the plaintiff to serve a further discovery request and ordered Lee to file and serve a further affidavit of documents by 12 October 2017. Lee has complied with the order. He has filed and served two affidavits of documents made on 12 October and 27 October 2017;

(b) the last order requiring Fair Financial to make discovery of documents was made on 6 March 2017. Fair Financial has also complied with the order. It has made three affidavits of documents on 22 March, 7 August and 27 October 2017;

(c) the plaintiff has not made any application to challenge the adequacy of the discovery given by the most recent affidavits of Lee and Fair Financial;

(d) the only documents which have not been discovered by Lee and Fair Financial are the attachments to some emails. This issue was initially raised by the plaintiff on 23 October 2017.[73] Minter Ellison confirmed that discovery of the attachments could occur but would be substantial and time-consuming.[74] Minter Ellison sought confirmation that the plaintiff required all the attachments to be discovered. Ms Dai has not responded to that request.[75] Further, the present application is not based on a failure to discover these documents;

(e) the application proceeds on the assumption that the destruction of documents equates to a failure to make discovery.[76] That assumption is wrong. Lee and Fair Financial have both given discovery of documents which are no longer in their possession because they have been destroyed.[77] The obligation to make discovery has been satisfied;

(f) the destruction of documents does not inevitably lead to an order striking out a defence.[78] The circumstances in which the documents were destroyed and the prejudice resulting from the destruction of documents are always relevant. Typically, it is necessary to show that the destruction of documents constituted an abuse of process before a stay or dismissal of proceedings is ordered.[79]

79 In response, the plaintiff submitted that the orders for discovery have not been complied with 'adequately'.[80] Counsel for the plaintiff put this point as follows:

The issue of whether or not there has been a breach of the orders is still on foot, effectively, because even though there have been attempts to address it by providing further affidavits, those responses are not adequate and therefore can't be deemed to be an answer to have effectively resolved that issue and obliged the plaintiff to take further steps, to make a further application for further discovery, when the process of dealing with this matter has been a continuous one, an ongoing one, when these matters were before the court on several occasions and in which ... the defendants have been given ample opportunity to deal with these matters and it's reached a point where they have basically conceded they cannot provide any of the documents of the kind we are seeking other than more emails which, as I've pointed out already, are largely irrelevant and are not going to assist us in the critical issues that we are concerned about.[81]

80 This submission conflates two matters. Whether there has been compliance with orders for the discovery of documents and the sufficiency of that discovery. The orders made on 28 September 2017 required a further affidavit of documents (by 12 October 2017), a request by the plaintiff for further discovery of documents by Lee to be responded to by 19 October 2017, and gave leave to the plaintiff to make application for further discovery of documents, to be by summons returnable on 31 October 2017.

81 The letter of request (see [42] above) requested a huge range of further discovery. By letter dated 19 October 2017, Minter Ellison responded on behalf of Lee to the letter of request and did so category by category in table format. As I have said (see [44] above) the letter is a reasoned and apparently sensible response to the very wide ranging request and the relevance of many documents sought to be discovered has not been argued.

82 As I have related (see [43] above), on 13 October 2017 Lee filed a supplementary affidavit of documents, made on 12 October 2017, which expanded substantially the documents that he had discovered. This was substantial compliance with the order of 28 September 2017. Then, on 30 October 2017, Lee filed a further supplementary affidavit of documents made on 27 October 2017 discovering even more documents. At the same time Lee made a further supplementary affidavit of documents on behalf of Fair Financial.

83 In relation to the documents that were left behind at the Port Melbourne premises and that are now lost or destroyed, the affidavits disclose what has happened to them and when they were last in the possession of Lee or Fair Financial. So too, in relation to documents given to the liquidator of Quan 1 Springvale Pty Ltd, the contents of Lee's laptop computer and the communications by 'WeChat', a mobile phone application.[82]

84 The plaintiff has not made application in accordance with the order of 28 September 2017 for further or better discovery, nor have the relevance of the very wide range of categories of document set out in the letter of request been debated. There is therefore no existing breach of an order for discovery.

85 The result is that there has been compliance by both Lee and Fair Financial with the orders for discovery. That means that the plaintiff has not invoked the power under either the CPA or the Rules and that is the end of the application to strike out the defences. If, however, I am wrong in that conclusion, I turn to the particular aspects of the alleged inadequacy of discovery to see if there is a basis for irreparable prejudice flowing from that alleged inadequate discovery to warrant the extreme measure of the defences being struck out.

86 On the basis that there are no existing breaches of discovery orders, can the plaintiff rely on past breaches or the inadequacy of the existing discovery? The plaintiff supported its application with the Dai affidavit 10 November 2017 which identified that the discovery given by Lee and Fair Financial is deficient in four respects:[83]

(a) documents relating to Lee holding himself out as a person providing financial advice and managing investments ('the holding out allegation');

(b) documents relating to Lee's wealth, asset position, business success, investment performance, 'and so on' ('Lee's wealth');

(d) documents relating to Lee's dealings with Sentry ('Sentry documents').

87 In written and oral submissions, the plaintiff went further and identified other respects in which it was submitted the inadequacy of discovery rendered a fair trial impossible. I will deal with the four categories identified in the Dai affidavit 10 November 2017 first.

88 The Dai affidavit 10 November 2017 asserts that the discovery of all records relating to the business activities of Mr Lee and Fair Financial in around 2013 is required. The affidavit expresses the opinion that unless Lee and Fair Financial discover records of their business activities in and around 2013, the plaintiff cannot establish the holding out allegation and 'her case will be irreparably damaged'.[84]

89 There are serious difficulties with the admissibility of, or weight to be given to, the opinion expressed by Ms Dai to the effect that the plaintiff's case is irreparably damaged. In particular, the affidavit does not identify the basis on which this opinion was formed, does not adequately take into account the plaintiff's own discovered documents or the evidence the plaintiff may give at trial as to her dealings with Lee, and does not consider whether any documents may be available to the plaintiff through sources other than Lee and Fair Financial. If admissible, it is accordingly of little or no weight.

90 Lee and Fair Financial maintain that the plaintiff has herself discovered documents relevant to this allegation. These include Lee's business card, the ASIC record of Mr Lee's status as an authorised representative and extracts from the Fair Financial website.[85] The Tan affidavit also identifies that the discovery of Lee and Fair Financial includes documents relevant to this allegation.[86]

91 The Dai affidavit 10 November 2017 does not identify any categories of documents which have not been discovered and which would impact on the holding out allegation. The mere reference to 'records ... of business activities in around 2013' is so broad as to be meaningless.[87]

92 There is no proper basis to strike out the defences of Lee or Fair Financial on this ground.

93 The Dai affidavit 10 November 2017 asserts that these documents are relevant to the misleading conduct claim. Ms Dai again expresses the opinion that without discovery of records of 'business activities in around 2013', the plaintiff cannot establish this claim and 'her case will be irreparably damaged'.[88] This opinion is again attacked by Lee and Fair Financial on the basis that there is no identified basis for it, it does not take into account the plaintiff's own discovered documents nor evidence and does not consider what other sources might be available from which documents could be obtained. If admissible, it is accordingly of little or no weight.

94 The misleading conduct claim relies on the representations pleaded at [45] of the SFASOC which are alleged to be untrue, false or misleading ([48] of the SFASOC). The absence of documents does not impact on the plaintiff's ability to establish the representations. This is because the pleaded representations are oral. Moreover, the representations only concern matters of Lee's wealth, asset position, business success and investment performance in part.

Plaintiff v Defendants

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Judgment (357 paragraphs)

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