Pleash (Liquidator), in the matter of SFG Relocations Pty Ltd v Fourie

Federal Court of Australia|2022-05-13|Before: Plaintiff P, Stewart J

The questions arising from the following prayers in the plaintiff's amended originating application be heard separately and in the following order: (1) first, prayers 1, 2, 4, 5 and 6 (the books questions); and (2) thereafter, prayers 3 and 7-13 (the trademark questions).
The plaintiff's interlocutory process filed on 31 March 2022 be otherwise dismissed.
The parties liaise with the Associate of Stewart J to arrange a date for the listing of the matter for case management hearing within 14 days, such hearing to be for the purpose of listing the books questions for final hearing and setting a pre-hearing timetable.
At least 24 hours before the case management hearing referred to in order 3, the parties provide to the Associate agreed or competing proposed orders and their available dates for the final hearing of the books questions.
Costs reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 The plaintiff is the liquidator of SFG Relocations Pty Ltd, which was formerly known as Wridgeways Australia Pty Ltd. I will refer to it as the company. The liquidator was appointed on 9 July 2021 when the company was put into winding up. 2 The first defendant, Mr Fourie, was the director of the company from 15 May 2018 to 9 July 2021. 3 The second to fourth defendants are companies of which Mr Fourie is said to be the sole director. I will refer to him and those defendants as the Fourie defendants. 4 The fifth and sixth defendants are companies which together, in some form or manner not presently apparent or relevant, trade as a law firm referred to as Hope Earle. 5 By way of an interlocutory process, the plaintiff seeks orders for discovery against the defendants as well as orders that two separately identifiable limbs of the plaintiff's case be heard and determined separately. It is convenient to deal with the separation point first.

Separation of issues 6 The first part of the case is that the plaintiff complains that Mr Fourie and Hope Earle have not complied with their obligations under the Corporations Act 2001 (Cth) to furnish to him the books of the company that he says are in their possession and control. In that regard, by way of final relief in the amended originating process, the plaintiff seeks the following relief in the principal case: (1) by prayer 1, a declaration that Mr Fourie breached his obligations pursuant to s 530A(1) and (3) of the Corporations Act, i.e., his obligations as an officer of the company to deliver to the liquidator all books in his possession that relate to the company as soon as practicable after the court orders that the company be wound up, and to do whatever the liquidator reasonably requires the officer to do to help in the winding up; (2) by prayer 2, a declaration that Mr Fourie and Hope Earle breached s 530B of the Corporations Act, i.e., their obligations to comply with written notices from the liquidator requiring them to deliver to him specified books of the company in their possession; (3) by prayer 4, a mandatory injunction, including pursuant to s 1324 of the Corporations Act, that Mr Fourie and Hope Earle deliver to the plaintiff all of the company's "books and records" in their possession and control; (4) by prayer 5, as an alternative to prayer 4, an order that a warrant be issued pursuant to s 530C of the Corporations Act authorising a person specified by the Court to seize the "books and records" of the company (presumably from Mr Fourie and Hope Earle, although this is not specified) and deliver them to the plaintiff; and (5) by prayer 6, an order that Mr Fourie compensate the plaintiff for the costs of the retrieval of the company's "books and records". 7 The first observation to make with regard to this relief, and the discovery category sought from Hope Earle which is dealt with further below, is that "books and records" and "records" are not defined in the Corporations Act. What the plaintiff is entitled to under ss 530A and 530B is the "books" of the company. Books are defined in s 9. It is not necessary to canvass that definition, save to acknowledge that it incorporates various "records". The short point is that if the plaintiff is entitled to any final relief that entitlement would be restricted to the "books" of the company rather than its "books and records". 8 The part of the case identified in [6] above is conveniently referred to as raising the books questions. 9 In the other part of the case, the plaintiff seeks relief against the Fourie defendants with regard to certain trademarks. That part of the case is conveniently referred to as raising the trademark questions. 10 There is no opposition to a separation of the books questions and the trademark questions, and for the books questions to be heard first. Moreover, such a separation makes eminent sense particularly having regard to the following: (1) Only Mr Fourie is implicated in both parts of the case, Hope Earle having no interest in the trademark questions and the second to fourth defendants having no interest in the books questions. (2) The books questions are relatively discrete, can be dealt with and disposed of relatively quickly and are inherently urgent. Indeed, it is hard to understand why the books questions were not ready for hearing a long time ago in view of this proceeding having been commenced in August 2021. (3) In contrast, the trademark questions are more involved, preparation for the trial of them will take longer, and there is no inherent urgency in their resolution. Also, it may be that any books of the company that are retrieved through resolution of the books questions will be relevant to the trademark questions. (4) No one has suggested that there is a likelihood of any credibility findings being made in determining the books questions that would impact on the same judge then determining the trademark questions. (5) Given how discrete the sets of questions are, considerations with regard to the interest or value in avoiding piecemeal appeals have less force. 11 In the circumstances, I am satisfied that this is an appropriate case to order a separation of questions.

Discovery 12 In respect of the books questions, the plaintiff seeks orders for discovery as follows: 1. An order pursuant to rule 20.13 of the Federal Court Rules 2011 (Cth) (Rules) that the defendants give standard discovery by an electronic means to the plaintiff of the categories identified in Annexure 'A' to this interlocutory process. 2. An order pursuant to rules 20.16 and 20.17 of the Rules that the defendants serve on the plaintiff a list of documents by a date convenient to the Court. 3. An order pursuant to rules 20.32(1)-(2) of the Rules that the documents discovered by the defendants under prayer 2 above be produced for inspection by service on the plaintiff by Dropbox or Sharepoint Link by a date convenient to the Court. 13 Annexure 'A' to the interlocutory process, referred to in the orders that are sought, lists the following: (1) Categories sought from the Fourie defendants: 1. Books and records, as those terms are defined in the Corporations Act 2001 (Cth), of the Company SFG Relocations Pty Ltd (formerly known as Wridgways Australia Pty Ltd) (In Liquidation) ACN 079 887 728 (Company). 2. Documents and materials downloaded from the AWS Server between August and September 2021 and now stored on a Google Drive maintained by Lincom Consulting. (2) Categories sought from Hope Earle: 3. Documents (including but not limited to costs agreements, tax invoices, trust account statements and correspondence) comprising the solicitor files held by the fifth and sixth defendants in respect of: (a) all matters listed on the Legal Fees Ledgers (Pleash affidavit 24 August 2021, [37]-[38]) for which the Company has paid the fifth and sixth defendants; and (b) any other matter(s) in which the Hope Earle Lawyers acted for the Company. 14 The first point to observe is that the orders sought by the plaintiff are contradictory. Rule 20.14 provides for standard discovery and r 20.15 provides for non-standard discovery, including discovery by way of categories of documents (r 20.15(2)(a)). It makes little sense to provide for standard discovery by way of categories of documents. I therefore take the plaintiff to seek discovery under r 20.15. 15 By r 20.11, a party must not apply for an order for discovery unless the making of the order sought will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible. That is to say, the overarching purpose of the civil practice and procedure provisions as set out in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) applies to the making of any order for discovery. 16 The Central Practice Note: National Court Framework and Case Management (CPN-1), in paragraph 10, deals with the Court's approach to discovery. Relevantly: 10.6 The Court will not approve expansive or unjustified Requests and will generally only consider approving a Request in one or more of the following circumstances - where: (a) the Request facilitates the just resolution of the proceeding as quickly, inexpensively and efficiently as possible; (b) to do so will effectively facilitate a forthcoming mediation (or other ADR process); (c) the Court and the parties are sufficiently informed of the nature of the case and issues in dispute so that the appropriateness of the Request can be properly considered (eg. possibly only after key evidence has been filed); (d) the Discovery Applicant has adequately justified the need for the Request, including demonstrating: (i) the utility of the Request and the appropriateness of discovery occurring at that time; (ii) the relevance and importance of the documentation or information sought; (iii) the limited and targeted nature of the Request; and (iv) that the documents sought are, or are very likely to be, significantly probative in nature, or the documents materially support, or are materially adverse to, any party's case in the proceeding. 10.7 A Request must be proportionate to the nature, size and complexity of the case - ie. the Request should not amount to an unreasonable economic or administrative burden on the Discovery Respondent. 17 It is accordingly necessary to examine the possible utility in the discovery that is sought, its burden and its proportionality. 18 The plaintiff submits that the documents sought are relevant to the question whether Mr Fourie and Hope Earle hold the company's books in their possession. The plaintiff submits that the fact of possession of books of the company by the defendants is a fact that he is required to prove at trial. He says that the discovery that he seeks is relevant to that issue and necessary for its proof. In that regard, both in the principal proceeding and in the discovery application there are substantial disputes of fact as to whether those parties do indeed hold any of the company's books in their possession. That is to say, the dispute is not about the nature or extent of their obligations under ss 530A and 530B of the Corporations Act, or whether the defendants have received requests from the liquidator; rather, it is about whether they have failed to comply with their obligations by failing to furnish books of the company that are in their possession. 19 The defendants' principal objection to the discovery application is that they do not hold books of the company and that the categories that are sought by the plaintiff will therefore not produce books of the company. That is the same dispute that is at the heart of the relief sought in the principal case. The defendants submit that the discovery orders that are sought on an interlocutory basis are in effect the same as, or at least substantially overlap with, the final orders to be sought at trial. They submit, in effect, although they may not have used this language, that the discovery application is in those circumstances an abuse. 20 It is necessary to consider the position of the Fourie defendants separately from the position of Hope Earle.

The Fourie defendants 21 As mentioned, the first category of documents sought from the Fourie defendants is the "books and records, as those terms are defined in the Corporations Act" of the company. I have already observed that there is no definition of "books and records" or "records" in the Corporations Act, so that reference is redundant. 22 The justification given by the plaintiff for this category is simply a reference to prayers 4 and 5 in the amended originating process, i.e., production or seizure of the books of the company (see 6 and (4)] above). As the plaintiff has apparently already exercised his statutory power to call for the books of the company from the relevant defendants, and it is in dispute whether they have adequately responded, no purpose will be served by requiring discovery of this category from them. 23 Insofar as the second category is concerned, the plaintiff references paragraphs [51]-[52] of his affidavit of 17 November 2021 in justification. Those paragraphs refer to letters apparently written by the plaintiff's solicitors and sent to the defendants seeking consent for the plaintiff to access documents that he paid to be rescued from "the AWS servers". The letters in question were not tendered on the interlocutory application and were in any event not included in the court book prepared by the plaintiffs. Indeed, it is hard to make proper sense of what the plaintiff says in the many preceding paragraphs in that affidavit about the AWS servers without exhibit BP4 to which extensive reference is made. That exhibit is not before me. In short, I cannot make sense of the plaintiff's justification for this category. 24 The plaintiff's application in respect of the Fourie defendants must therefore be refused. 25 It is perhaps worth mentioning at this point that in advance of the hearing, I was informed by the solicitor for the plaintiff that one hour would be required for the hearing, and no other party disagreed. I listed it accordingly. With some difficulty, I managed to get the parties to end the hearing after 90 minutes, which intruded significantly on the next matter in the list. To make matters more difficult, the plaintiff's written submissions failed to identify relevant evidence and the Fourie defendants failed to file written submissions at all, despite having been directed to do so. 26 On the interlocutory application I was burdened with a 343 page court book. It was supplemented by the Fourie defendants tendering exhibit BP1 to the plaintiff's affidavit of 11 August 2021 (299 pages) and reading an affidavit by Mr Fourie (66 pages) which the plaintiff had unreasonably refused to include in the court book - unreasonable because the refusal was on the basis that because of prior orders the affidavit could not be relied on save with leave, yet including a document in a court book says nothing about whether it can be relied on or its admissibility. A court book is merely a common repository of material on which parties may seek to rely. In any event, it is almost inconceivable that an application for separation of issues and discovery should require some 700 pages of material. That was amply demonstrated in this case by the fact that only about 20 of those pages were actually referred to in the written or oral submissions. Simply put, the application was conducted, at least by the plaintiff and possibly also by some of the defendants, other than in accordance with the parties' obligations under the overarching purpose referred to earlier.

Hope Earle 27 The background to the category of documents sought from Hope Earle is that Hope Earle acted as solicitors in a number of different matters in which the company was not Hope Earle's client but the company paid Hope Earle fees or other charges. Hope Earle has said that the documents in the files in those matters are not the books of the company, and moreover the clients in those matters would have claims of confidence and/or legal professional privilege over at least some of the documents in the files and the clients may wish to claim that privilege. Hope Earle explains that it is not in a position to either claim or waive the confidence or privilege on behalf of those clients without instructions. It says that it is required by r 9 of the Legal Profession Uniform Law Act Solicitors' Conduct Rules 2015 (Vic) to not disclose any information which is confidential to a client except in certain specified circumstances. Thus, if discovery were to be ordered, there would need to be a process to notify the clients and deal with any claims to privilege that they may wish to assert. That said, Hope Earle resists producing the files in the first instance on the basis that they are not books of the company. 28 In the light of the explanations by Hope Earle, I consider that there is insufficient benefit to the ultimate task of resolving the books questions to justify burdening Hope Earle and its clients with the discovery order that is sought. That is in part because the discovery order essentially overlaps with final orders sought in the case. Thus, if at the final hearing the plaintiff establishes that there are books of the company in the third-party matter files in the possession of Hope Earle, or that there are likely to be books of the company in those files, subject to other possible defences, he will likely get his relief and get access to the books. To order discovery would have the effect of pre-judging the entitlement to final relief. 29 One of the problems with the category as it is presented is that it will doubtless catch swathes of documents which are not, on any view, the books of the company. The fact that the company paid (some) fees or charges in the matters is a very thin basis to assert that all the documents on the relevant files are books of the company. I foresee that that fact may be the subject of some investigation at trial. Depending on the outcome of that, an entitlement to access to those files may be established, but I do not see how it can be regarded as being established at this stage on the interlocutory application. 30 The application must therefore also be refused in relation to Hope Earle.

Moving forward 31 Dismissal of the discovery application does not mean that appropriately narrow and targeted notices to produce directed to the defendants or subpoenas directed to third parties will not be justified. Those are questions to be addressed if and when they arise. 32 It is important that the final hearing of the books questions be listed as soon as reasonably practical. I will make directions to facilitate that. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.

Associate: Dated: 13 May 2022 SCHEDULE OF PARTIES NSD 817 of 2021 Defendants: Second Defendant WW WAREHOUSE SERVICES PTY LTD ACN 640 073 169 Third Defendant WATCHMAN HOLDINGS PTY LTD ACN 632 703 336 Fourth Defendant EW1892 PTY LTD ACN 650 887 942 Fifth Defendant ENS LEGIS PTY LTD ACN 085 875 592 Sixth Defendant GILKAT PTY LTD ACN 060 565 451

Solicitors' Conduct Rules 2015(Vic)

Corporations Act 2001(Cth)ss 9, 530A, 530B, 530C, 1324

Federal Court Rules 2011(Cth)rr 20.11, 20.13, 20.14, 20.15, 20.16, 20.17, 20.32

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