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[2009] FCA 1517
Federal Court of Australia
2009-12-17
Timothy J, Besanko J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 This is a proceeding between Eva Lynne Procter and Brenda Maureen Procter, applicants, and Evangelo Kalivis, ACN 088 370 966 Pty Ltd, Patricia Anne Dabrowski, Timothy John Dabrowski and Berri Developments Pty Ltd, respondents. The proceeding was commenced on 19 December 2008. Before they had filed defences, the respondents brought an application seeking an order that the Statement of Claim, or, in the alternative, certain paragraphs in it be struck out, or, in the further alternative, that the applicants provide particulars of a number of allegations in the Statement of Claim. The applicants brought an application seeking orders that the respondents provide discovery before particulars. On 12 August 2009, I made the following orders, relevantly: "1. On or before Wednesday 2 September 2009, the Respondents are to make discovery in terms of paragraph 1 of the Applicants' Amended Notice of Motion dated 1 April 2009. 2. The Applicants are granted leave to file an Amended Statement of Claim on or before Wednesday 30 September 2009. 3. The Respondents are to file a Defence to the Applicants' Amended Statement of Claim, together with any Cross Claim, on or before Wednesday 28 October 2009." 2 My reasons for making those orders are set out in Procter v Kalivis [2009] FCA 795. Those reasons for judgment also contain a description of the various allegations made by the applicants against the respondents (see [6]-[35]). 3 As a result of the first order, the respondents were required to make discovery in the following terms: "1. All documents in the possession, power or control of the Respondents recording or evidencing: 1.1 instructions from each or any of the Respondents to the relevant financial institutions regarding any withdrawal of funds; 1.2 the date on which the funds were withdrawn; 1.3 the amount of funds withdrawn; 1.4 the manner in which the funds were withdrawn (ie. by cash, cheque, telegraphic transfer and/or any other method); and 1.5 how the funds withdrawn were applied and for what purpose(s), in relation to the following Bank facilities: 1.6 Westpac Bank account number 43-4102 held in the name of Miss Eve Lynne Procter (defined as 'Lynne Procter's Westpac loan facility' in sub-paragraph 41.2.1 of the Statement of Claim); 1.7 Westpac Bank account number 43-3353 held in the name of Ms Brenda Maureen Procter (defined as 'Maureen Procter's Westpac loan facility' in sub-paragraph 41.2.2 of the Statement of Claim; 1.8 Bank SA account number 101966740 held in the names of Patricia A Dabrowski, Timothy J Dabrowski, Eve L Procter and Brenda M Procter (defined as 'the Bank SA Primary Facility' in sub-paragraph 60.1 of the Statement of Claim). 1.9 Bank SA account number 102147340 held in the names of Patricia A Dabrowski, Timothy J Dabrowski, Eve L Procter and Brenda M Procter (defined as 'the Bank SA Secondary Facility' in sub-paragraph 74.1 of the Statement of Claim); 1.10 Challenger Bank 'Loan Code' 5835 held in the names of Ms Eve Lynne Procter and Ms Patricia Anne Dabrowski (defined as the 'Challenger Bank Loan Facility' in paragraph 105 of the Statement of Claim); and 1.11 All bank facilities established by the First Respondent, Evenagelo [sic] Kalivis, on behalf of the investors in the Middleton Shores Project (as defined in the Statement of Claim) including, but not limited to, the Bank SA loan facility(ies) established by the First Respondent at the commencement of the Middleton Shores Project, along with the Adelaide Bank loan facility(ies) established by the First Respondent in or about July 2005. I will refer to this as the existing discovery order. 4 The respondents filed and served a List of Documents on 2 September 2009. That list of documents was replaced by an Amended List of Documents ("List of Documents") filed and served on 14 October 2009. In that List of Documents, the first, third and fourth respondents each depose to the accuracy of the List of Documents, and the first respondent also does that on behalf of the second respondent. The first respondent is the sole director of the second respondent. 5 On 28 October 2009, the respondents filed a defence and on the same day, they filed a cross-claim. 6 On 12 November 2009, the applicants issued a notice of motion in which they sought the following orders, relevantly: "1. Pursuant to Order 14 rule 9 and Order 15 rule 2 of the Federal Court Rules, the first, third and fourth respondents attend the Court for cross-examination on their respective affidavits sworn on 14 October 2009. 2. The respondents make further and better discovery in terms of paragraph 1 of the applicants' Amended Notice of Motion dated 1 April 2009." 7 At the hearing of the applicants' notice of motion, the applicants tendered three affidavits of their solicitor, Mr Stephen Dickinson, and those affidavits were sworn by Mr Dickinson on 12 November, 20 November and 4 December 2009 respectively. The respondents objected to certain paragraphs in Mr Dickinson's affidavit sworn on 12 November and his affidavit sworn on 20 November 2009. The grounds of objection were primarily relevance and impermissible conclusion or submission. As the submissions proceeded, the objections became of little if any significance. I am able to decide the applicants' notice of motion without relying on the paragraphs to which objection was taken. 8 The respondents relied on the following affidavits: 1. Affidavit of David Ian Crase, sworn on 7 December 2009; 2. Affidavit of Denis Fitzpatrick, sworn on 8 December 2009; 3. Affidavit of Angelo Kalivis, sworn on 8 December 2009. 9 The applicants' application was refined as the submissions proceeded. The applicants accepted that, at this stage, they could not press for an order for cross-examination of the first, third and fourth respondents. That concession was correctly made and I refer generally to my discussion of the circumstances in which cross-examination may be ordered in Procter v Kalivis [2009] FCA 1518 at [35]-[41]. 10 In terms of their application for further and better discovery, the applicants initially sought an order that there be further and better discovery of 13 categories of documents set out in a schedule dated 4 December 2009. By the conclusion of submissions, they sought orders to the following effect: 1. Paragraph 1 of the existing discovery order be amended to add after "Respondents" and before "recording or evidencing" the words "including email transmissions, tax invoices or other requests for payment". 2. Paragraph 1.11 of the existing discovery order be amended so that it reads as follows: "The following bank facilities established, arranged, procured and/or controlled by the first respondent, Evangelo Kalivis, on behalf of the investors in the Middleton Shores Project (as defined in the Statement of Claim): 1.11.1 the Bank SA loan facility (IES) established, arranged and/or procured by the first respondent at the commencement of the Middleton Shores Project; and 1.11.2 the Adelaide Bank loan facility (IES) established, arranged and/or procured by the first respondent in or about July 2005;" 3. A paragraph be added to the existing discovery order as follows: "2. To the extent that funds were withdrawn from each or any of the bank facilities listed in paragraphs 1.6-1.11 (inclusive) above and subsequently transferred or deposited into each or any of the following bank accounts - 2.1 Bank SA account No 102295040 in the names of Ms Patricia A Dabrowski and Mr Timothy J Dabrowski; 2.2 ANZ Bank Account No 3504-40444 in the name of ACN 088 370 996 Pty Ltd; 2.3 Westpac Bank Account No 14-2239 in the name of ACN 088 370 996 Pty Ltd; all documents in the possession, power or control of the respondents (including tax invoices and other requests for payment) recording or evidencing how any such funds withdrawn or transferred were applied and for what purpose(s)."
Email transmissions, tax invoices or other requests for payment (paragraph 1 of existing discovery order) 11 The applicants submit that tax invoices or other requests for payment are documents recording or evidencing how funds withdrawn were applied and for what purpose they were applied and that they fall within paragraph 1.5 of the existing discovery order. The amendment is only sought out of an abundance of caution. The respondents accept that there are tax invoices in existence, but submit that such documents did not fall within the terms of the existing discovery order. The respondents' counsel submitted that an invoice of itself does not identify the purpose for which funds were applied. It is necessary to have in addition bank statements and cheque butts. I do not think that, to be discoverable within the existing discovery order, the document itself must prove the purpose for which funds were withdrawn. It is sufficient if, together with other documents, the document records or evidences the purpose for which funds were withdrawn. I think email transmissions, tax invoices and other requests for payment fall within the terms of the existing order.
Bank facilities established by the first respondent (paragraph 1.11 of existing discovery order) 12 The evidence establishes that, subject to the question of whether the first respondent established a relevant bank account, there are documents within paragraph 1.11 of the existing discovery order, but none of these documents have been discovered by the respondents. The respondents claim that the applicants are unable to prove that the first respondent established any bank accounts, and in particular, the Bank SA loan facility or Adelaide Bank loan facility. 13 Mr Dickinson's affidavit sworn on 4 December 2009 is directed to establishing the first respondent's involvement in the Bank SA loan facility and the Adelaide Bank loan facility. 14 Paragraph 1.11 of the existing discovery order is based on a fact or assumption that the first respondent established the Bank SA loan facility, or the Adelaide Bank loan facility. The evidence strongly suggests that, as between the applicants and the first respondent, the latter had control and supervision of the two loan facilities. 15 Subject to the respondents' second argument, I would amend paragraph 1.11 in the manner sought by the applicants. 16 The respondents contend that I should not amend paragraph 1.11 of the existing discovery order because the applicants are able to obtain access to the documents in the absence of an order. The three affidavits upon which the respondents relied were directed to establishing this fact. 17 Mr Crase is a chartered accountant with extensive experience in forensic accounting and over 25 years' business experience. He was engaged "to prepare the income tax returns and business activity statements of the Middleton Shore Joint Venture, which included 97 allotments and which traded over several years". His professional accounting costs were to be borne by the partners in the Middleton Shores Joint Venture. On 31 July 2009, he provided a summary of the income tax returns and business activity statements for the Middleton Shores Joint Venture including underlying assumptions. He is prepared to make available to the applicants' solicitors the documents provided to him by the first respondent in respect of the Middleton Shores Joint Venture, including documents in his possession in relation to Bank SA and Adelaide Bank. 18 The first respondent is the sole director of the second respondent and the fifth respondent. He is also the partner of the third respondent. In late 2006 or early 2007, he supplied a large number of documents to Mr Crase, including all tax invoices relating to the Middleton Shores Project. The first respondent expresses the opinion that the documents represent all of the documents which would be discoverable pursuant to paragraph 1.11 of the existing discovery order, if the records relating to the bank accounts referred to in the said paragraph 1.11 are required to be discovered by the respondents. The first respondent has retained some copies of the documents but does not know which documents, additional to those he has retained, were forwarded to Mr Crase. He has no way of ascertaining that information from the documents which he has retained. The documents he has retained are in no order and are spread over two sites without any index or record management system. The first respondent estimates that the quantity of documents which he forwarded to Mr Crase but of which he retained copies, is less than 50 per cent. The only ordered set of documents are those in the possession of Mr Crase. To isolate the documents which the first respondent has retained and to prepare a list of documents would take, in the opinion of the first respondent, three full weeks working full time. The first respondent provides details of the Bank SA loan facility and the Adelaide Bank loan facility. The affidavit of Mr Fitzpatrick provides the same information as the affidavit of the first respondent. 19 I am not persuaded by this evidence that the proposed amendment to paragraph 1.11 should not be made. The evidence to this point establishes that the first respondent had a close involvement in the day to day operation of the joint ventures and other transactions. He acted as the applicants' agent, at least for certain purposes. Although it is neither possible nor appropriate to make firm findings at this stage, the first respondent must have had some obligations as to the keeping of records. The consequences of the records not being ordered should not be visited on the applicants. I will amend paragraph 1.11 of the discovery order in the terms sought by the applicants.
The other bank accounts (proposed paragraph 2) 20 The respondents submit that they should not be required to discover the documents referred to in the proposed paragraph 2 because the critical question at this stage is whether there was an unauthorised use of funds. They submit that the existing discovery order was made in the context of discovery before particulars and whether the transfer of funds was authorised is the critical consideration. As I understood it, they accept that at a later point in the proceeding, it may be necessary to investigate the purpose for which the funds were applied after they were withdrawn from the bank accounts identified in proposed paragraph 2. This seems to me to be an unduly technical approach in the circumstances of this case. The applicants are entitled to discovery at this stage of such documents as will indicate what has become of the relevant funds, not simply to documents which show that they have been paid into other bank accounts. Proposed paragraph 2 should be added to the existing discovery order.
Conclusion 21 In my opinion, the documents described in the applicants' proposed amendments to the existing discovery order should be discovered. I will hear the parties as to the appropriate orders. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.
Solicitor for the Applicants: Iles Selley Lawyers
Solicitor for the Respondents: Fitzpatrick Solicitors Pty Ltd
Procter
Kalivis