Plaintiffs v Defendants

2 In support of their application, the Plaintiffs rely on the following:

(a) Affidavit of George Muchnicki (also known as Jerzy Muchnicki), the First Plaintiff, sworn 20 July 2020 ('Muchnicki Affidavit');

(b) Affidavit of Thomas Daniel Gray, the Second Plaintiff, sworn 20 July 2020 ('Gray Affidavit');

(c) Affidavit of Francis Higgins Hill sworn 27 July 2020 ('Hill Affidavit'). Mr Hill is a solicitor with LFS Legal, solicitors for the Plaintiffs; and

(d) written outline of submissions filed 19 August 2020 ('Plaintiffs' Outline').

3 The Defendants oppose the Plaintiffs' application. The Defendants rely on the following:

(a) Affidavit of Shane William Short dated 14 August 2020 ('Short Affidavit'). Mr Short is a director of each of the Defendants; and

(b) written outline of submissions filed 19 August 2020 ('Defendants' Outline').

4 Oral submissions were made by the parties at the hearing on 21 August 2020.

5 The summons does not specify what further discovery is sought by the Plaintiffs. Rather, that is discernible from the Hill Affidavit, the correspondence between the parties and from their written outlines. There are 9 categories of documents in respect of which the Plaintiffs seek particular discovery. These will be explained below.

6 For the reasons set out below, the application for particular discovery will be dismissed.

7 It is necessary to briefly explain what this proceeding is about and what issues are in dispute between the parties, based on the pleadings.

8 This proceeding has had a somewhat tortured history. The Plaintiffs originally commenced the proceeding in the Magistrates Court of Victoria as an application for preliminary discovery. That proceeding was transferred to this Court. By the time it came before me, it was apparent that the criteria for orders for preliminary discovery were not able to be met but there were claims which the Plaintiffs wished to pursue against the Defendants. I made orders that the proceeding continue as if commenced by writ and for the filing of pleadings, along with other interlocutory matters such as discovery.

9 The Plaintiffs filed a statement of claim dated 7 February 2020 ('SOC') and the Defendants filed a defence to the SOC on 4 March 2020 ('Defence').

10 By lease dated 25 January 1984, the Crown leased the land situate at and known as site 48 in the Mount Buller Alpine Reserve ('the Property') to Alpine Retreat Pty Ltd ('Alpine Retreat') for a lengthy term ('Head Lease').[1] On 1 January 1996, Alpine Retreat appointed Matern Nominees Pty Ltd ('Matern') as manager of the Property, pursuant to a management agreement.[2] The Property was divided into 25 managed apartments.[3]

11 By sub-lease dated 12 July 2002, Alpine Retreat leased Unit 22 ('Premises') to the Plaintiffs ('Sub-Lease').[4]

12 On or about 28 December 2009, the Second Defendant became the lessee of the Property under the Head Lease.[5] On or about 15 December 2010, Matern assigned its rights to the Second Defendant under the management agreement and the Second Defendant became the manager of the Property.

13 On or about 25 or 26 March 2014, one or other of the Defendants sent a notice to the Plaintiffs demanding payment of $8,490.87 in respect of what the Defendants allege to be unpaid management fees, expenses and charges. [6]

14 On 28 April 2014, via its solicitors, the Second Defendant served on the Plaintiffs a notice of default ('Notice of Default') under s 146 of the Property Law Act 1958 (Vic) ('PLA') requiring payment of $8,491.52 ('Amount Demanded') within 14 days.[7] The Notice of Default alleged that the Plaintiffs had breached the Sub-Lease by failing to pay the Amount Demanded and required the default to be remedied within 14 days.[8]

15 On 14 May 2014, the Plaintiffs paid $4,000 to the First or Second Defendant.[9]

16 On or about 20 May 2014, the Second Defendant re-entered the Premises.[10] By letter dated 26 May 2014 from their solicitors, the Defendants gave notice to the Plaintiffs that the Sub-Lease had been determined by a re-entry.[11]

17 On 10 June 2014, the Plaintiffs paid an additional $4,000 to the Defendants.[12]

18 The Plaintiffs allege that the Amount Demanded was miscalculated or not due by reason of which the Second Defendant was not legally entitled to determine the Sub-Lease.[13] Alternatively, they say that if the Second Defendant was legally entitled to determine the Sub-Lease, they are ready willing and able to pay the sum of $491.52 or any other sum found to be due by the Court.[14]

(a) all necessary accounts and inquiries under Order 52 or otherwise to determine the amount payable if any by the Plaintiffs to the Second Defendant at 28 April 2014;[15]

(b) a declaration that the Second Defendant was not legally entitled to determine the Sub-Lease;[16] and

(c) alternatively, relief against forfeiture of the Sub-Lease pursuant to s 146(2) of the PLA.[17]

20 The Defendants deny that the forfeiture of the Sub-Lease was unlawful, and deny the relief sought. They further say that:[18]

(a) The Plaintiffs did not occupy the Premises after the re-entry;

(b) By an email dated 4 March 2015 the Second Plaintiff threatened legal proceedings to enforce the Sub-Lease;

(c) By letter dated 10 August 2016 the then solicitor for the Plaintiffs threatened legal proceedings to enforce the Sub-Lease;

(d) The Plaintiffs did not take any step to enforce the Sub-Lease at any time until the commencement of this proceeding;

(e) The Plaintiffs have not offered to pay any liabilities in respect of the Premises for the period since the re-entry;

(f) If the Sub-Lease was not forfeited or rescinded by the re-entry to the Premises, then the Plaintiffs abandoned the Premises and repudiated the Sub-Lease, which repudiation was accepted by the Second Defendant and it rescinded the Sub-Lease.

21 The Defendants further say that the Plaintiffs are not entitled to relief from forfeiture or relief from rescission of the Sub-Lease in that:[19]

(a) the Plaintiffs had consistently been in default of the Sub-Lease prior to the service of the Notice of Default and the re-entry;

(b) the breaches of the Sub-Lease were wilful;

(c) it is anticipated that the evidence will show that the Plaintiffs do not have the financial resources to promptly meet their obligations if the Sub-Lease is reinstated;

(d) the Plaintiffs are guilty of laches and significant delay in seeking to enforce the Sub-Lease; and

(e) the Defendants have been prejudiced by the delay in that if the Sub-Lease is reinstated they will be required to prepare accounts and account for trading and the liability for the Premises for the period since the re-entry.

22 The nine categories of further discovery sought from the Defendants by the Plaintiffs are as follows:[20]

(a) documents relevant to the calculation of the sums the subject of the Notice of Default, namely the Amount Demanded ('Category A');

(b) tax invoices, statements of account and 'supplier invoices series' relating to the Premises and issued:

(i) in Quarter 2 and April 2014 prior to the Notice of Default; and

(ii) for the 600, 900 and 1000 series.

('Category B').

(c) documents relevant to the allegation that the Plaintiffs were, at the time of the Notice of Default, in breach of the Sub-Lease ('Category C');

(d) documents relevant to the allegation that the Plaintiffs were consistently in default of the Sub-Lease prior to the service of the Notice of Default and the re-entry ('Category D');

(e) documents relevant to the allegation that the Plaintiffs' breaches of the Sub-Lease were wilful ('Category E');

(f) documents relevant to the state of mind of the Plaintiffs with respect to each of the sums claimed to be due under the Sub-Lease which the Plaintiffs consistently failed to pay, or paid late ('Category F');

(g) documents relevant to the monetary obligations of the Plaintiffs under the Sub-Lease if it is reinstated, including the income received from, and the expenses incurred by, the Plaintiffs' use of the Premises since the Sub-Lease was forfeited ('Category G');

(h) in respect of the Premises:

(i) Tax invoices, statements of account and supplier invoices;

(ii) Documents relevant to the charging of interest on overdue accounts;

(iii) Receipts, invoices and quotations of suppliers;

(iv) Bank account and trust account records;

(v) Registers of bookings and tenancies;

(vi) Website promotions and marketing;

(vii) Financial reports;

(viii) Auditors' reports;

(ix) Charges and cash received journals;

(x) Maintenance and inventory reports; and

(xi) Minutes of meetings and records of decisions made.

('Category H').

(i) documents relevant to the allegation that the Plaintiffs do not have the financial resources to promptly meet their obligations under the Sub-Lease if it is reinstated ('Category I').

23 The Plaintiffs submit that all of the sums at any time claimed to have been due under the Sub-Lease are in contention in this proceeding, not just the Amount Demanded. The Plaintiffs submit that the Defendants have put all such sums in issue for the following reasons.

24 First, the Defendants allege that the Plaintiffs "had consistently been in default of the Unit 22 Sub-Lease prior to the service of the notice of default and the re-entry".[21] By this allegation all of the sums at any time claimed to be due under the Sub-Lease with respect to which the Plaintiffs were in default, are said to be in contention. Yet the Defendants resist such discovery. Nor have they seen fit to particularise each sum in default. The Plaintiffs contend that the reference to default is a reference to a late payment or non-payment, though the Defendants do not make this clear. The Plaintiffs submit that they are entitled to particular discovery. In seeking this, the Plaintiffs submit that they cannot be expected to specify a date range because the Defendants do not do so.

25 Secondly, each alleged default will be scrutinised by the Defendants to attempt to make out their allegation that "the plaintiffs' [consistent] breaches were wilful".[22] Such an allegation will require the Defendants to make out that the Plaintiffs knew, over the course of the Sub-Lease, that the sums they "consistently" failed to pay were properly owing, but nonetheless elected not to pay them, or deliberately did so late. The state of mind of the Plaintiffs with respect to each unpaid sum, and therefore the documents relevant to each, is thereby said to be in contention. Again, the Plaintiffs submit that because the Defendants have not seen fit to particularise each such sum in contention, in seeking particular discovery with respect to this allegation the Plaintiffs cannot be expected to specify a date range.

26 Thirdly, the Defendants allege that "the evidence will show that the plaintiffs do not have the financial resources to promptly meet their obligations if the [Sub-Lease] is reinstated".[23] The Plaintiffs submit that this is a profound allegation because it goes to all of the financial resources of the plaintiffs, and positively asserts the plaintiffs cannot afford their obligations. Presumably, the Plaintiffs say, the Defendants are aware of the "evidence [that] will show" this to be the case. The exercise will require scrutiny of profits and expenses between notice and reinstatement, to enable the Court to make an assessment of the likelihood that the Plaintiffs will not be able to afford to pay the difference. Again, the Plaintiffs point out that the Defendants resist discovering "the evidence" about this. The Plaintiffs assume profits have exceeded expenses to date, but the Defendants do not say one way or the other in the Defence. The Plaintiffs submit that the Court will require a proper accounting from the Defendants if it is to make the determination sought of it by the Defendants, and that this will involve an analysis of each such profit and expense.

27 The Plaintiffs further submit that they are seeking discovery of no more than what they would have been entitled to have seen had the Sub-Lease not been terminated because the Sub-Lease entitled them to scrutinise the Defendants' accounts as they were rendered.

28 In this application the Defendants contend that the resolution of the dispute involves merely a consideration of the sums the subject of the Notice of Default and nothing more, but the Plaintiffs submit that this view is plainly at odds with paragraphs 17 and 24 of the Defence as pleaded. The allegations in those paragraphs broaden the dispute to profits derived from the Premises and late-paid or unpaid sums and the Plaintiffs' reasons for each alleged default. The documents sought in the Amended Summons:

(a) are relevant to these matters;

(b) self-evidently exist and are in the Defendants' custody, power or control; and

(c) have not been discovered.

29 The Plaintiffs contend the documents are discoverable because they:

(a) directly relate to a question in dispute between the parties, and satisfy the criteria in r 29.01.1(3)(a)-(d);

(b) are relevant to the Plaintiffs' train of inquiry with respect to the Defendants' allegations in this case; and

(c) are relevant to questions arising in the proceeding, which is a broader concept to discovery generally.

30 In support of these propositions, the Plaintiffs referred to a variety of authorities, which will be referred to as necessary later in these reasons.

31 The Defendants submit that the pleadings raise only two issues:

(a) whether the Amount Demanded was outstanding as at 28 April 2014 (the date of the Notice of Default) (or more properly sums were outstanding as at the date of the re-entry) (the quantum issue).[24] The Defendants say that while the Plaintiffs appear to allege that the sum outstanding was overstated by interest,[25] whether or not interest was overcharged is irrelevant as the Plaintiffs only paid $4000 before the re-entry on 20 May 2013;[26]

(b) whether the Court should exercise its discretion and make an order for relief from forfeiture (the relief issue).[27]

32 Categories A to C prima facie address the quantum issue.

33 The Defendants submit that Categories A and C are broad fishing categories without any factual foundation for a claim for further particular discovery:

(a) in particular Categories A and C are a general claim for any documents "relevant" to the issue;

(b) the Category B claim for invoices and accounts and statements is not supported by any reference to another document which has been discovered or is in the possession of the Plaintiffs which suggests that there are other invoices and accounts and statements which have not been discovered;

(c) the Plaintiffs have not by affidavit established a factual basis for the Court to determine in accordance with rule 29.08 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" the Defendants.[28]

34 In respect of all three categories, Mr Short has deposed that:

(a) the relevant invoices together with eight (8) additional pages of cost centre allocations, account summaries and expiratory [sic] material are exhibits to the First Plaintiff's affidavit sworn 15 February 2019 ('Gray February 2019 Affidavit');[29]

(b) he has not located any documents relevant to the three categories which have not already been provided to the Plaintiffs or are in the possession of the Plaintiffs;[30] and

(c) to the best of his knowledge the Defendants and their servants and agents do not have any documents in their possession or control relevant to the three categories which are not exhibited to the Gray February 2019 Affidavit.[31]

35 Tax invoices and supplier invoices and statements of finances (Category B) relevant to the sum claimed in the Notice of Default have previously been discovered as stipulated in the Defendants' Affidavit of Documents sworn 20 May 2020.[32]

36 Relief from forfeiture pursuant to section 146(2) of the Property Law Act 1958 is discretionary and the lessee has the onus of persuading the Court to exercise its discretion to grant relief.

37 The Defendants submit that the Plaintiffs have not pleaded any material fact or ground for relief from forfeiture and merely pray for relief.[33]

38 Paragraph 24 of the Defence raises various potential grounds for the Court to consider in exercising its discretion to grant or refuse relief.

39 Categories D to I prima facie are derived from Paragraph 24 of the Defence. The Plaintiffs in their Reply did not expressly plead to that paragraph but otherwise joined issue.

40 In respect of Category D (consistently in default), the Defendants submit that invoices and statements relevant to this category are in the possession of the Plaintiffs or have been discovered by the Defendants.

41 In respect of Categories E (wilful breaches) and F (state of mind of the Plaintiffs, wilful breaches), the Defendants submit that:

(a) whether the breaches were wilful and the Plaintiffs' state of mind will be determined as a matter of impression by the Trial Judge at trial after cross-examination;

(b) the only relevant documents are the documents in the Plaintiffs' possession or which have been discovered by the Defendants;[34] and

(c) neither category requires further particular discovery.

42 In respect of Categories G and H (notional income and expenditure re the Premises since the Sub-Lease was forfeited), the Defendants submit that:

(a) categories G and H are not documents relevant to any issue in dispute which will determined at trial;

(b) paragraph 24(e) of the Defence states as a factor for the Court to consider in refusing to grant relief from forfeiture that

the Defendants have been prejudiced by the delay in that if the [Sub-Lease] is reinstated they will be required to prepare accounts and account for trading and the ... liability for the Premises for the nearly six years since the re-entry.

(c) that paragraph is a pleading as to prejudice which the Defendants would suffer if they are required to go through accounts for more than six years and attempt to establish the state of the Plaintiffs' account;

(d) this is not a pleading of a material fact which puts in issue for trial the state of the Plaintiffs' account for the Premises since 2014 if the Sub-Lease is reinstated; and

(e) Mr Short has deposed to the difficulty in attempting to reconstruct accounts on the hypothetical basis that relief would be granted which underscores the Defendants' prejudice. In particular, Mr Short deposes that:

(i) the vast majority of accounts for goods and/or services and management expenses pertain to are charged against the Property as a whole and not specific to or apportioned to individual units;[35]

(ii) many or most of the physical accounts, invoices and financial records have been disposed of or destroyed or cannot be located;[36]

(iii) since 2016 the Defendants have upgraded and changed accounting software and office computing systems;[37] and

(iv) between 2010 and 2017 the Defendants' bookings were processed through an external booking system 'Eviivo Frontdesk'. They ceased having access to historical booking data on closure of that system. Since then, bookings have been processed through the 'Little Hotelier' system, on which bookings are prepaid and batched before funds are transferred to the Second Defendant's account, and the Defendants do not have access to payment details attaching to individual apartment bookings.[38]

43 In respect of Category I (Plaintiffs do not have financial resources to meet obligations), the Defendants submit:

(a) it is not alleged in the Defendants' Defence that the Plaintiffs do not have the financial resources to promptly meet their obligations pursuant to the sublease if the sublease is reinstated. The Defence alleges that

it is anticipated that the evidence will show that the Plaintiffs do not have the financial resources to promptly meet their obligations if the [Sub-Lease] is reinstated;

(b) whether or not the Plaintiffs have the financial resources to meet their obligations pursuant to the Sub-Lease is entirely within the knowledge of the Plaintiffs;

(c) the Plaintiffs have not made discovery of any documents relevant to their financial resources to meet their obligations should the Sub-Lease be reinstated;[39]

(d) it is self-evident that the Defendants cannot have any documents in their possession and control as to the current financial resources of the Plaintiffs; and

(e) Mr Short has also deposed that he has made further investigations and has not located any documents relevant to this category and to the best of his knowledge the Defendants and their servants and agents do not have any documents in their possession or control relevant to this category.[40]

44 In addition to the above, in respect of Categories D to H, Mr Short has deposed that:[41]

(a) he has made further investigations and has not discovered any further documents; and

(b) to the best of his knowledge the Defendants and their servants and agents do not have any documents in their possession or control relevant to either category which have not been discovered or are in the possession of the Plaintiffs.

45 The Defendants submit that, in general, the Plaintiffs' application is misconceived, as:

(a) the Plaintiffs had all documents relevant to the only real issue in dispute, that is whether the Plaintiffs were in breach as at the date of the re-entry and forfeiture of the sublease, prior to the making of the application or the documents had been discovered by the Defendants;

(b) the Plaintiffs have failed to establish a factual basis for the Court to determine that the Defendants had or may have had the documents claimed in the nine categories sought;

(c) the documents claimed in categories D to I are peripheral at best in that the categories merely go to factors which the Court may consider in an application for relief from forfeiture;

(d) Categories E and F are issues of impression to be determined at trial;

(e) Categories G and H are not documents relevant to any issue in dispute which will be determined at trial;

(f) Category I documents are documents entirely within the knowledge and control of the Plaintiffs;

(g) Mr Short has deposed in each case that he has made further investigations and has not located any documents relevant to the claimed category and to the best of his knowledge the Defendants and their servants and agents do not have any documents in their possession or control relevant to the claimed category.

47 Rule 29.08 of the Rules, which is the Rule under which the Plaintiffs' application is made, provides as follows:

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.

48 Rule 29.01 of the Rules is also relevant to this application. That rule relevantly provides as follows in respect of the scope of discovery under Order 29:

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.

49 In this case, the parties have already made discovery pursuant to r 29.01 of the Rules.

50 Three main issues in respect of the principles concerning discovery emerge from the parties' submissions and the authorities they rely upon. These are:

(a) whether it is sufficient, for the purposes of discovery, for documents to lead to a train of inquiry;

(b) whether the discovery able to be ordered under r 29.08 is broader than the scope of discovery set out in r 29.01.1; and

(c) the criteria for the Court to apply in exercising its discretion under r 29.08.

Whether it is sufficient, for the purposes of discovery, for documents to lead to a train of inquiry

52 The Plaintiffs' primary submission was that the documents sought pursuant to the Categories were directly relevant on the pleadings. Those submissions are set out above.

53 The Plaintiffs' submitted that even if the documents sought were not directly relevant, it was sufficient for them to "lead to a train of enquiry which would either advance a party's own case or damage that of his adversary."[42]

54 This is the approach to discovery as set out in Compagnie Financiere du Pacifique v Peruvian Guano[43] and applied in this Court for many years. The Plaintiffs submitted that it was still followed in Victoria.

55 Amongst other cases, the Plaintiffs rely on Roads Corporation v Love, where Osborn J (as his Honour then was) concluded that the contested documents would be discoverable "if they may advance the respondent's case, even if there is a logical basis for regarding them as irrelevant if conversely the [applicant's] case is accepted".[44]

56 The Defendants submit that most of the documents sought are not directly relevant on the pleadings, as set out above. They also submit that the Peruvian Guano test no longer applies.

57 In Just Group Ltd v Peck (Ruling No 2),[45] Ierodiaconou AsJ said that:

The test for relevance is no longer satisfied by documents that may lead a party on a 'train of inquiry' to corroborate or refute allegations (the 'Peruvian Guano' test).

58 In Volunteer Fire Brigades Victoria v Country Fire Authority (Discovery Ruling),[46] J Forrest J stated that:

The approach to discovery has changed markedly in the past half-decade or so. The Peruvian Guano test has been consigned to the dustbin. The CPA now requires a court to cut through the layers of interminable argument and nit picking which had traditionally accompanied discovery contests.

59 I do not accept the Plaintiffs' submissions in this regard. The authorities relied on by the Plaintiffs all pre-date the advent of the CPA and relevant changes to the Rules. It is clear that the landscape in respect of discovery has changed markedly since then, such that the Peruvian Guano test no longer applies, as was so compellingly expressed by J Forrest J as set out in paragraph 58above. His Honour went further, [47]ying that:47

The overriding consideration of the CPA is to ensure that the parties receive a fair trial i.e. 'a just resolution' to use the words of the CPA. However, a fair trial is not a perfect trial. It is, rather, the best trial that a court can provide to the parties within reason and in proportion to the issues in dispute and the court's resources. Accordingly, demands for discovery of documents which are peripheral to the central issues cannot be entertained.

60 In Cargill Australia Ltd v Viterra Malt Pty Ltd (No 9),[48] Elliott J stated that:

The relevance of documents to the proceeding is a threshold factor to be considered. If documents sought to be discovered are not relevant to the proceeding then there is no basis for ordering their production.

61 Accordingly, documents are not discoverable if they are peripheral to the central issues in dispute or because they may lead to a train of inquiry. Rather, they must be relevant to the issues in dispute in the proceeding.

Whether discovery under r 29.08 is broader than under r 29.01.1

62 In addition, or perhaps alternatively, the Plaintiffs submitted that the scope of discovery able to be ordered under r 29.08 is broader than that available under r 29.01.1.

63 In this regard, the Plaintiffs relied on the statement of Elliott J in Opti-pharm Pty Ltd v Nature One Dairy (No 2)[49] that:

Orders made under r 29.08 are discretionary (and are not to be made lightly). Orders under r 29.08 may be made in respect of documents relating to issues raised on the pleadings or connected to any question arising in the proceeding. Accordingly, subject to the overarching obligations, the kinds of documents that may be ordered to be discovered pursuant to r 29.08 are broader than those that may be required to be discovered at the commencement of the proceeding. (Emphasis added.)

64 In considering this question, Elliott J referenced Murex Diagnostics Australia Pty Limited v Chiron Corporation (No 2).[50] In that case, Burchett J stated that:[51]

[L]ike the rule 18, ... rule 8 of Order 15 of the Rules of this Court should not be limited to a case of defective compliance with an earlier order. Its rationale is not merely to plug a gap in the general discovery to which a party is entitled. It does do that, and in that aspect its function is described in Mulley v Manifold and Richardson Pacific Limited. But the rule also provides a right different in kind from the right to general discovery: a right to particular discovery of a document or class of document. It is appropriate that a narrower right of this kind should not necessarily be restricted to the case where the document or class of document is relevant to an issue arising between the party seeking discovery and the party against whom discovery is sought. It is appropriate that this narrower right should involve a discretion in the Court to require discovery where the document or class of document relates, as rule 8 expresses it, "to any matter in question in the proceeding". Like Yeldham J, I think the contrast between that expression in rule 8 and the expression used in rule 2, limiting general discovery to documents "relating to any matter in question between him (i.e. the person giving discovery) and the party giving the notice of discovery" evinces a deliberate policy differentiating the scope of the one rule from that of the other.

65 On the other hand, the Defendants submitted that the Court has stated that the test in rule 29.08(2), that is "relating to any question in the proceeding", imposes a duty of the same nature as stipulated in rule 29.01.1(3).

66 The Defendants rely on Braham v ACN 101 482 580 (No 2),[52] where Macaulay J stated that:

The scope of the duty to give general discovery is now defined by r 29.01.1(3). 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.

67 The Defendants also rely on Kestenberg v Kestenberg,[53] where Mukhtar AsJ stated that:

The stipulations for the scope of discovery in rule 29.01 are there to deal with the dissatisfaction and abuses in litigation that arose with the largesse of the well-known Peruvian Guano test which allowed discovery of documents indirectly relevant or which might lead to a train of enquiry. The phrase 'relating to' as it appears in rule 29.08 is abundant in legislation and legal drafting and its meaning is highly contextual. For my part, I think rule 29.08 is subordinate to rule 29.01 and the test of relevance on the pleadings must prevail in general as well as particular discovery.

68 Therefore, the Defendants say that the obligation in rule 29.08 (and rule 29.01.1(3)) is to discover the critical documents within each category in rule 29.08 (and rule 29.01.1(3)) within the possession of the party which are relevant as determined by the central issues raised in the pleadings.

69 It is important here to consider what r 29.08 covers. It concerns particular discovery of a document or class of documents "relating to any question in the proceeding". How does one discern the questions in the proceeding? By reference to the pleadings.

70 Other than to point out that the decision in Opti-pharm was subsequent to the decision in Braham, the parties' submissions did not wrestle with an attempt to reconcile these two decisions. It is unclear whether the parties in Opti-pharm referred Elliott J to the earlier decision in Braham, but it is clear that the earlier case is not referred to in his Honour's judgment.

71 To the extent there is a difference between the approaches in Braham and in Opti-pharm, the scope of that difference has not been elucidated in the judgments. It is clear from Opti-pharm, however, that while the types of documents may be broader under r 29.08 than under r 29.01.1, orders under r 29.08 are not to be made lightly and the overarching obligations in the CPA remain paramount. Moreover, what is even clearer, is that when applying r 29.08 to the particular categories of documents sought in Opti-pharm, his Honour considered whether those categories were relevant on the pleadings.

72 The authorities cited by the Plaintiff in support of the contention that r 29.08 offers a wider scope for discovery, including Opti-Pharm and Murex, do so only in a very limited way. They certainly do not support the view that r 29.08 retains the very wide scope of discovery as was applicable under the Peruvian Guano test.

73 In Murex, the question before Burchett J was whether an order for particular discovery under r 15.8 Federal Court Rules 1979, a cognate provision to r 29.08 of the Rules, could be made against a party, in respect of documents which were relevant to an issue pleaded between two other parties (but not the party ordered to give discovery). His Honour held that the relevant rule empowered the Federal Court to require particular discovery of a document or class of document relating to any matter in question in the proceeding, notwithstanding that it did not relate to any matter in question between the party requiring discovery and the party from whom the discovery was sought. That is the context in which his Honour stated that the rule relating to an order for particular discovery 'provides a right different in kind from the right of general discovery'.[54]

74 Similarly, in Opti-Pharm, Elliott J indicated that particular discovery under r 29.08 may be broader than general discovery under r 29.01.01 on the basis that particular discovery may deal with 'documents relating to issues raised on the pleadings or connected to any question arising in the proceeding', which may be a wider category than those 'required to be discovered at the commencement of the proceeding'.[55] His Honour also referred to circumstances 'where the evidence discloses an admission as to the existence of the document or documents sought' as appropriate for orders for particular discovery.[56] In my view, this does not necessarily mean that r 29.08 has a wider scope than r 29.01.01 in terms of subject matter. Instead, Elliott J's statements are more confined to the kind of circumstances his Honour mentions in which particular discovery is required in respect of documents which were not discovered at the commencement of the proceeding - either because new questions or issues have arisen, or because evidence reveals discoverable documents, or in some other similar circumstance.

75 Neither Murex nor Opti-Pharm support the Plaintiff's contention that r 29.08 offers a necessarily broader scope of discovery than r 29.01.01. When the passages cited by the Plaintiffs are read in their context, they do not reveal any conflict with the decisions of this Court in Braham or Kestenberg. They reveal only that an order under r 29.08 may be made in certain circumstances, or perform a certain function. In respect of the relevant connection between a document sought to be discovered under r 29.08 and a question in the proceeding, the general test of relevance as set out in r 29.01.01(3) applies.

76 If the Plaintiffs' emphasis on the difference between r 29.08 and r 29.01.1 is an attempt to have the Peruvian Guano test applicable to r 29.08, then I reject that approach. For the reasons already stated, that test is no longer applicable. In any event, the Court has extensive powers pursuant to s 55 of the CPA to limit the scope of discovery.

Criteria to apply in exercising the Court's discretion under r 29.08

77 As I noted in UDP Holdings Pty Ltd v Esposito Holdings Pty Ltd (No 3),[57]

an order for particular discovery is in the discretion of the Court. In exercising that discretion, a threshold issue is whether the documents are relevant to the proceeding. The Court may make an order for particular discovery if the pleadings or prior discovery indicate inadequate discovery in the proceeding, or where the evidence discloses an admission as to the existence of the documents sought.

78 I accept the Defendants' submission that an applicant pursuant to rule 29.08 must identify the relevant documents and explain how and in what way they are relevant. In Austructures Pty Ltd v Makin, [58] Mukhtar AsJ stated that:

It is not enough for there to be vehement assertions that 'relevant documents exist which have not been discovered' without an identification of those documents and an explanation of how and in what way they are relevant to an issue in the case.

79 The power to make an order for particular discovery is discretionary and as a general proposition will not be made if the party has deposed that there are no further documents in the specific category. As Derham AsJ said in Indtex Pty Ltd v Knight Homes Pty Ltd:[59]

The power to require an affidavit to be made under the rule is discretionary. Where, as here, the defendants have sworn that there are no other documents of the particular class in the party's possession, etc, other than those disclosed in the previous three affidavits of documents, then the making of an order under the rule is pointless. It is therefore not necessary to consider the submissions regarding whether the documents do or do not relate to any question in the proceeding.

80 I will say something briefly about the evidence relied upon by the Plaintiffs and why it does not establish the factual foundation for the Court exercising its powers under r 29.08, in that there is insufficient evidence to satisfy me that there are grounds for a belief that a document or class of documents may be in the Defendants' possession or control which is relevant and has not been discovered.

81 Paragraphs 2 to 10 and 16 to 17 of the Gray Affidavit describe the Plaintiffs' grievances against the Defendants in respect of the Sub-Lease and its determination. Paragraphs 11 and 12 of the Gray Affidavit very briefly explain the Plaintiffs' attempts prior to the proceeding being transferred to this Court to obtain documents they say they deserve under clause 4.13 of the management agreement. Paragraphs 13 to 15 concern the documents obtained on discovery or from the Defendants as part of this proceeding. These are brief, stating that:[60]

The documents do not stack up to proper accounts you would expect from a ski resort. Mr Short has said he's got a lot of experience in ski businesses. But his discovery is not much at all.

82 The Muchnicki Affidavit simply concurs with the contents of the Gray Affidavit.[61]

83 Much of the Hill Affidavit describes the matters in dispute in this proceeding, states why the Plaintiffs consider the documents sought to be relevant (most of which is repeated in the Plaintiffs' Outline) and sets out the Categories sought. The final section of the Affidavit concerns why the Plaintiffs say that the requested documents must be presumed to exist. These are that:[62]

(a) clause 4.13 of the management agreement provides for regular reporting and the Plaintiffs appear to be entitled to quarterly statements and accounts;

(b) the documents received by the Plaintiffs do not cover each quarter and were sometimes provided only annually. It therefore must be concluded that the documentation given to the Plaintiffs is incomplete;

(c) the management agreement contains other reporting requirements in clause 4.13 which should be readily available;

(d) clause 12 of the management agreement provides that upon payment of an appropriate fee by the unit holder, the manager is to provide to requested information to a unit holder (being copies and details of all records, books of account, minutes of meetings, insurance policies, bank statements, contracts and correspondence relating to the head lessee). The Plaintiffs requested such documentation but the Defendants never provided it, and they now renew their request and their willingness to pay any appropriate fee;

84 Also in the Hill Affidavit, Mr Hill says that he submits that the Defendants should have more relevant documents than they have already discovered, as they:[63]

(a) are a ski business and management company who managed the Premises prior to the determination of the Sub-Lease and after re-entry;

(b) presumably have had tax and business and fiscal obligations over the last seven years;

(c) they have used the Premises from the re-entry to now, presumably earning income and incurring expenses as they lease it to the public, presumably documenting such on an ongoing basis.

85 Leaving aside the fact that most of the Hill Affidavit amounts to submission rather than evidence, I do not consider that it lays a sufficient foundation to establish that the documents sought in the Categories exist but have not been discovered. Just because the management agreement may require certain types of documents or reporting does not mean that they do actually exist. That the Plaintiffs' have requested documentation pursuant to clause 12 of the management agreement, via the Gray February 2019 Affidavit and repeated in the Hill Affidavit, does not amount to evidence of the existence of the documents.

86 This final point was developed and expanded upon in the Plaintiffs' Outline and in oral submissions. They submitted that they are entitled to discovery in accordance with the Categories as the documents sought are ones which they would have been entitled to see pursuant to the Sub-Lease had the Sub-Lease not been terminated. I reject this submission - it is not a basis for the documents being discoverable. The submission is not to the point: the Sub-Lease has been terminated and a general contractual right which came to an end some years ago is not a basis for requiring discovery.

Consideration of the categories of documents sought by the Plaintiffs

87 I accept that Categories A and C are directly relevant on the pleadings. So much seems uncontroversial in any event. I do not accept the Defendants' submission that these are 'broad fishing categories', but I do accept their submission that there is no factual foundation for a claim for particular discovery. It is clear from the Short Affidavit that documents in these categories have already been discovered or are otherwise in the possession of the Plaintiffs.

88 It was difficult for me to assess the relevance of Category B, as it contained terms that were not familiar to me or explained to me. Nonetheless, I do not consider it necessary for any order to be made in respect of Category B as I accept the Defendants' submission that the tax invoices and supplier invoices and statements of finances relevant to the sum claimed in the Notice of Default have previously been discovered. Even if that is too narrow, as other late paid sums are relevant to paragraph 24(a) of the Defence, Mr Short has deposed that no other documents sought by Category B are in the possession or control of the Defendants.

89 In relation to Categories D to I, I accept the Defendants' submission that paragraph 24 of the Defence raises various potential grounds for the Court to consider in exercising its discretion to grant or refuse relief against forfeiture. That does not mean that documents said to be relevant by reason of Categories D to I are not necessarily discoverable.

90 In my view, if the Defendants have documents which are relevant by reason of paragraphs 24(a) to (c) of the Defence, in other words, Categories D to F, then they ought to be discovered. However, the evidence before the Court is that to the extent such documents exist, they have been discovered or are already in the Plaintiffs' possession. I accept Mr Short's evidence in this regard. I do not accept the Plaintiffs' submission that such documents must exist because that must be how the Defendants intend to prove their case. Such a proposition is fallacious and does not provide the necessary factual foundation that the documents (a) exist and (b) have not already been discovered.

91 I do not accept that Category G is relevant. The Plaintiffs say that because the Defendants allege that the evidence will show that the Plaintiffs do not have the financial resources to promptly meet their obligations if the Sub-Lease is reinstated, those documents should be discovered. But this is not precisely what the Defence is. Rather, the Defence says, at paragraph 24(c), that "it is anticipated that the evidence will show ...". It will be a matter for the Plaintiffs to establish that they have the requisite financial resources.

92 Even if Category G was relevant, I would not order discovery of that category. It is akin to taking an account of income and expenditure in respect of the Premises for over a 6 year period, in that Category G effectively requires all of the source documents which would be used in taking such an account. This is one of the matters relied upon as a prejudice to the Defendants if relief against forfeiture was to be ordered.[64] An account would not be required unless relief against forfeiture is ordered. To require discovery of documents only relevant if an account is required, which discovery could (if the documents exist in the relevant format) be quite extensive, is not proportionate to the issues in dispute here and would be inimical to the overarching obligations in the CPA. In other words, if I had formed the view that the documents in Category G were relevant, I would rely on s 55 of the CPA to limit discovery by not requiring discovery of this category.

93 Further, I accept Mr Short's evidence as to such documents either not being available, due to the changes in accounting and hotel booking programs, or to the income not being recorded as against particular apartments. The challenges made to this evidence were without evidentiary foundation and in any event I do not regard them as impugning Mr Short's evidence in this regard.

94 In respect of Category H, subcategories (i) to (x) appear to be a sub-set of the documents sought under Category G. In that regard, I make the same comments as set out in paragraphs 91 to 93 above. Indeed, the enumeration of the documents sought in Category H demonstrate how oppressive and disproportionate such discovery could be, if the documents existed in a form where they could be broken down into particular units. Insofar as Category H(xi) is concerned, I do not see how such documents could be relevant to this case.

95 It is unclear to me how Category I is intended to differ from Category G, if it relates to the liabilities the Plaintiffs would be expected to meet if the Sub-Lease was reinstated. If the focus is on the Plaintiffs' own financial resources, then there is no factual foundation at all for the proposition that such documents as to the Plaintiffs' current financial resources are in the Defendants' possession or control. Indeed it would be remarkable if they were: after all, the Sub-Lease was determined in May 2014, and quite how or why the Defendants would have documents about the Plaintiffs' current financial resources was not explained. Presumably, the Plaintiffs know if they have provided documents to the Defendants about their own current financial resources. If so, then one could expect that they would have been able to give evidence of that in order to satisfy the requirements of r 29.08. For the same reasons as expressed above, I reject the submission that the documents must exist because the Defendants have pleaded it.

96 In general and not related to particular categories, I do not accept the Plaintiffs' submissions that:

(a) they are entitled to know what the Defendants have been doing with the Premises since the forfeiture of the Sub-Lease. Such a general proposition cannot be accepted. As I indicated in the course of oral argument, this proceeding does not amount to a royal commission or general inquiry into the Premises or the Property, or the Defendants' conduct of the relevant business; and

(b) Mr Short's evidence is that the documents sought which have not been discovered do exist. In my view, this is not a correct characterisation of the Short Affidavit, particularly paragraphs 24 to 29 of that affidavit.

97 For the reasons set out above, the summons will be dismissed.

98 The Plaintiffs have not established that there are further documents to be discovered in the categories which I have held to be discoverable, namely Categories A to F. The Plaintiffs have not satisfied me that the documents in the remaining categories are discoverable and, even if they were, the Defendants' evidence, which I have accepted, is that there are no such documents in their possession, custody or power. In this regard, I take the same view as that expressed in Indtex.[65]

99 Further, even if documents in those categories were otherwise discoverable, I would decline to order discovery of them for the reasons set out.

100 The proceeding will be listed for directions on 6 November 2020, where I will hear from the parties on the form of orders and as to costs, as well as for the making of pre-trial directions.

[1] The SOC alleges that the Head Lease has a 50 year term from 1 January 1982, whereas the Defence says that it is a 40 year term. Nothing turns on this distinction for the purposes of this application: SOC, [2]; Defence, [2].

[6] The SOC at [14] alleges that it was the First Defendant who issued the demand; the Defence at [14] says that it was the Second Defendant.

[15] SOC, Paragraph A of the Prayer for Relief.

[16] SOC, Paragraph B of the Prayer for Relief.

[17] SOC, Paragraph C of the Prayer for Relief.

[21] Defence, [24(a)] (emphasis added).

[22] Defence, [24(b)] (emphasis added).

[23] Defence, [24(c)] (emphasis added).

[24] SOC, [21]; A and B in the Prayer for Relief.

[26] Defence [17(b) - (c)], [21(a)]

[27] SOC, Paragraph C in the Prayer for Relief; Defence [24].

[28] Austructures Pty Ltd v Makin [2016] VSC 289 at [42].

[32] Affidavit of Documents of Shane William Short sworn 20 May 2020, Schedule 1.

[33] SOC, Paragraph C in the Prayer for Relief.

[41] Short Affidavit, [16 - 17], [19 - 20], [22 - 23], [29 - 30].

[42] Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341, 345 [7], cited in Roads Corporation v Love (No 5) [2005] VSC 406, [12]. See also Australian Dairy Corp v Murray Goulburn Co-op [1990] VicRp 33; [1990] VR 355, 369.

[43] [1883] UKLawRpKQB 95; (1882) 11 QBD 55 ('Peruvian Guano').

[44] Roads Corporation v Love (No 5) [2005] VSC 406, [15] (Emphasis added).

[45] [2016] VSC 432, [26]. See also Liesfield v SPI Electricity Pty Ltd (Ruling No 1) [2013] VSC 634, [29]; Matthews v SPI Electricity Pty Ltd [2011] VSC 401, [19].

[46] [2016] VSC 573, [33].

[47] [2016] VSC 573, [34].

[48] [2018] VSC 433, [40] ('Cargill').

[49] [2018] VSC 688, [20] (emphasis added) ('Opti-pharm').

[51] (1995) 62 FCR 424; [1995] FCA 1692, [11] (emphasis added) ('Murex'), dealing with an equivalent rule in the Federal Court Rules 1979 (Cth), being rule 15.8.

[52] [2015] VSC 492, [28] ('Braham').

[53] [2020] VSC 84, [30] ('Kestenberg') (emphasis in original).

[57] [2020] VSC 260, [25], citing Cargill, [40] Opti-pharm, [20]. See also Braham, [30].

[58] [2016] VSC 289, [42].

[59] [2020] VSC 427, [41] ('Indtex').

[62] Hill Affidavit, [22]-[24], [26].

[65] See paragraph 79 above.