Riad Awad v World Best Holdings Limited

JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: MARKS J Wednesday 24 March 2004 Matter No IRC 1865 of 2001 RIAD AWAD v WORLD BEST HOLDINGS LIMITED Application under s 106 of the Industrial Relations Act 1996

INTERLOCUTORY JUDGMENT ON STRIKE-OUT MOTION [2004] NSWIRComm 56

1 The applicant Riad Awad commenced proceedings against the respondent World Best Holdings Limited claiming relief under s 106 of the Industrial Relations Act 1996 ("the Act") by summons filed in this court on 9 March 2001. The proceedings were the subject of the mandatory conciliation process which appears to have commenced on 28 November 2001 and to have concluded on 12 February 2002.

2 Thereafter the proceedings came to be dealt with and have continued to be dealt with as part of the directions list established by this court. On 19 March 2002 the respondent's then solicitors, Piper Alderman, filed short minutes of order which contained a number of steps leading to the preparation of the proceedings for hearing. Orders were made by me on that day reflecting the short minutes of order. On 15 May 2002 Messrs. Tzovaras Legal filed a notice of change of solicitor on behalf of the applicant.

3 I should interpolate at this stage that the proceedings relate to the circumstances of entry into a lease and the lease of premises at shop 1, Minto Mall Shopping Centre in Minto, a suburb of Sydney. The lease was made 1 August 1998 between the applicant as lessee and the respondent as lessor. The summons alleged that the lease was or became unfair in a number of ways and the applicant claimed compensation in the sum of $400,000. On 9 October 2000, prior to the filing of the summons in this court the respondent had filed an application in the Administrative Decisions Tribunal seeking an order against the applicant that he pay arrears in rent and interest which were of the order of $200,000. The applicant filed his own application in the Administrative Decisions Tribunal on 11 December 2000 seeking orders to the effect that the rent previously paid should be refunded, and seeking damages of the order of $475,000. The proceedings before the Administrative Decisions Tribunal have been stayed until and pending the determination of the proceedings in this court.

4 Since about November 2002 the respondent's current solicitor, Mr Biber, has sought to have the preparation of these proceedings for hearing carried out in an expeditious manner. For example by letter dated 8 November 2002, addressed to the applicant's solicitors, Mr Biber sought inter alia particulars of the amount claimed by the applicant as set out in the summons. He asked that these be provided prior to 28 November 2002.

5 At a directions hearing held on 28 November 2002 consent orders were made including an order that the applicant provide further and better particulars of his loss as contained in the summons by 13 December 2002. The applicant was also ordered to file and serve any further affidavits upon which he wished to rely by the same date.

6 The applicant failed to file and serve any further affidavits and failed to provide the further and better particulars of loss required and on 14 January 2003 Mr Biber wrote to the applicant solicitors pointing this out, seeking inter alia that the particulars be supplied within 14 days. A number of replies were received to this correspondence including a letter from the respondent's solicitors dated 5 February 2003 indicating that the inability to respond had been caused due to the absence of Mr Tzovaras "who was unavoidably detained overseas" as well as the unavailability of the applicant and "other deponents". It was said that the client and the other deponents would be attending the office of the solicitors on 6 February 2003 and that the affidavits should be filed and served "before the end of the week or early next week". It was said that the particulars of loss would also be provided within the same time frame.

7 The matter again came before the court for directions and consent directions were made on 14 February 2003.

8 At the directions hearing on 14 February 2003 it was established that all of the affidavit material had been filed other than an affidavit in reply by the applicant. It was pointed out to the applicant's solicitor that the consent orders then currently in force required that evidence in reply be filed by 7 February and that the applicant was in default. After noting that previous orders had not been complied with by the applicant I said to his solicitor: "I think the applicant is now really at a stage where he is in jeopardy of having his case allowed to proceed".

9 By letter dated 24 February 2003 the applicant's solicitors provided details of the manner in which the monetary compensation claimed in the summons was calculated and the letter enclosed a number of schedules to taxation returns in each of three financial years. That letter elicited an initial response from Mr Biber some weeks later namely on 5 May 2003 and a further letter dated 27 May 2003 in which it was asserted that the quantification of the loss contained in the letter of 24 February 2003 was "inadequate for the respondent to know the damages case it is required to meet at the eventual hearing". That letter further referred to an asserted agreement for mutual informal discovery and inspection and to the fact that documents which had been discovered to date did not assist in understanding the nature or extent of the claim for monetary compensation and as to how it was calculated. Finally, that letter enclosed a list of categories of documents for further discovery and sought consent within seven days as to whether the additional discovery would be agreed to.

10 After prompting from Mr Biber the applicant's solicitors agreed to the additional discovery by letter dated 10 June 2003 indicating that the applicant required 14 days to prepare the documentation. A list of documents was in fact forwarded to Mr Biber by letter dated 12 June 2003.

11 Mr Biber responded in a series of correspondence in June 2003 asserting that the list of documents was inadequate.

12 By letter dated 2 July 2003, the applicant's solicitors said that they had located a number of documents. These included two notebooks containing a daily cash flow statement which were in Arabic and which were to be translated by the applicant within 14 days, and copies of tax returns for five financial years which did not apparently segregate or identify financial matters relating to the leased shop. The letter also stated that other records were held by solicitors who had previously acted for the applicant, but that the records were in storage. There was an expressed intention to provide documentation relating to the quantification of the losses "early next week".

13 On 11 July 2003 the respondent filed a notice of motion seeking orders for the production of a supplemental list of financial documents and seeking the dismissal of the applicant's summons. These proceedings came before Justice Kavanagh on 24 July 2003. The applicant was ordered to produce certain documentation and the proceedings were stood over until 13 August 2003. On that date both parties were granted leave to inspect documents produced by the applicant and the notice of motion was stood over for further hearing before me on 4 September 2003. On that occasion Mr Biber complained that such documents as had been produced to the court did not include relevant financial documents. The solicitor who then appeared for the applicant was unable to assist in identifying the location of those documents due to the sudden inability of the solicitor with carriage of the matter from attending the hearing. Mr Biber complained about the utility of the documentation produced and about the delay in the prosecution of the proceedings bearing in mind that his client's claim for outstanding rent was stayed pending the determination of these proceedings.

14 Orders were ultimately made by consent providing, inter alia, that the applicant provide a further supplemental list of documents on or before 18 September 2003 and that he file and serve an expert's report quantifying his loss and damage on or before 9 October 2003. The applicant was ordered to pay the respondent's costs of the notice of motion and the proceedings were listed for directions on 11 December 2003.

15 The applicant failed to comply with these orders and the matter came on for further hearing before me on 25 November 2003 pursuant to a notice of motion filed on 10 October 2003. For the purpose of the hearing the applicant's solicitor had filed an affidavit asserting that the applicant had difficulty in "understanding technical terms especially in relation to preparation of legal matters", that Messrs. William Buck Accountants had been engaged to prepare an expert accounting report, details had been sought from the applicant's accountants but were not forthcoming, and asserting that the applicant had endeavoured to comply with the previous orders of the court. The affidavit annexed a letter from the proposed forensic accountant dated 29 October 2003 which sought a range of financial information and documents.

16 On 21 November 2003 the applicant's solicitor filed an affidavit in which she deposed that she had made inquiries of a number of persons in order to locate the financial information and documentation required by the forensic accountants and that she had forwarded correspondence to ensure that that material was provided to them. She also deposed to the preparation of a "further supplementary list of documents" which on her instructions comprised all of the documents in the possession of the solicitor.

17 The further supplementary list of documents referred to a balance book ("daily balance book") for the period 3 January 2000 to 30 July 2000 transcribed in Arabic, a summary of the daily balance book, a bundle of bank statements from 7 July 1999 to 5 January 2001, and bundles of receipts for expenditure and rent paid in relation to the Minto Mall lease.

18 This resulted in the filing of competing notices of motion seeking the continuance of the proceedings on the one hand and the striking out of the proceedings on the other. Those proceedings were heard on 25 November 2003. In the course of an extempore judgment delivered that day I referred to the fact that the applicant had consistently breached orders of the court and that the applicant had in particular failed to produce documentation to enable the respondent to understand and test the quantification of the applicant's claim.

19 I made orders requiring the applicant to give discovery of specified documents by 31 January 2004 and denying the applicant entitlement to rely on any documentation not discovered within that period. I also made an order for payment of costs which, for present purposes, is irrelevant because those costs have not yet been assessed and are therefore not payable.

20 Shortly thereafter the applicant's then solicitors, Tzovaras Legal, ceased to act for him and he retained his present solicitors, Levitt Robinson.

21 The time limit of 31 January 2004 passed without compliance. However on 2 February 2004 the applicant's new solicitors served a supplementary list of documents.

22 Relevantly, the supplementary list of documents referred to a cash book "in relation to Minto Mall", receipts, bank statements and miscellaneous correspondence and documents with respect to those premises from July 1998 to February 2001. The affidavit verifying the list of documents sworn by the applicant said that most of the documents were within the possession of his former solicitors, Tzovaras Legal, and he had not been able to obtain access to them.

23 The respondent's solicitor sought re-listing of the notice of motion to strike out. The applicant's solicitors filed a notice of motion seeking that the order made by me on 25 November 2003 (except in relation to one matter) be extended to 5 April 2004 and that the applicant be given leave to file and serve all further affidavits and expert reports by that date. The respondent's strike out notice of motion and the applicant's motion were heard concurrently on 23 February 2004.

24 In support of the applicant's position, the applicant filed an affidavit sworn 13 February 2004. He asserted that he was unable to obtain his previous file from Tzovaras Legal because that firm had exercised a lien over it and required $25,000 payment of costs. He said that he had "not been happy with the performance of Tzovaras Legal" for a number of reasons. Included was the fact that those solicitors had allegedly not objected to the discovery of correspondence which the applicant had carried on concerning businesses conducted by him in other premises and presumably with other landlords, that they had not objected to the issue of a summons for production of documents addressed to the Commissioner for Police, that they had declined to interview other shop owners at Minto Mall, and on the basis of advice tendered by his current solicitor, Mr Stewart Levitt, he should have disclosed his financial losses in his affidavit evidence.

25 The affidavit stated that the applicant had received a pre-approval loan certificate from National Australia Bank for a loan of $615,000 which, after the payment of current indebtedness, would allow him sufficient monies to pay Tzovaras Legal and fund the litigation. He blamed the failed business at Minto Mall for creating financial difficulties for him. With respect to the outstanding documents he said that he had given a number of them to Tzovaras Legal and sought to explain why he had two sets of tax returns dealing with businesses at various premises, including Minto Mall. He said that he had given a "second cash book" to his new solicitors and instructed them to have it translated. He also annexed correspondence from his then solicitor to the forensic accountants dated 12 February 2004 seeking information as to what documentation was required to enable their report to be prepared.

26 The factual circumstances which I have outlined are indicative of the following: 1. The applicant has been required over a two-year period to furnish particulars with respect to the quantification of his claim and has largely failed to do so. 2. Since June 2003 the applicant has agreed to comply with a requirement for additional discovery concerning the financial basis for his claim and has failed to do so. 3. The respondent is precluded from continuing to seek the payment of alleged outstanding rental due and owing until these proceedings are disposed of. 4. The respondent, through its solicitor, has consistently and persistently endeavoured to obtain particulars and discovery, without success. 5. The applicant's difficulties appear to have been exacerbated by a change of solicitors, a matter which is unrelated to any action or conduct on the part of the respondent. 6. There must be considerable doubt from the affidavit evidence given by the applicant and statements made on his behalf by his current and former solicitors that there are any documents in his possession other than those already produced whether by way of discovery or otherwise. 7. There can be no certainty that the forensic accountants will be able to prepare a report. 8. The applicant has been the subject of an order made by this court precluding reliance on any further documentation not produced after 31 January 2004 and arguably has not produced any reason why that order should be vacated.

27 Ultimately, the choice is between striking out the summons, and allowing the applicant to commence again, or allowing the proceedings to go forward on their current form but restricting the applicant to such evidence as has been produced or discovered to date with respect to the quantification of his claim. A variation would permit the applicant to adduce some evidence with respect to his financial situation.

28 In approaching this matter I am mindful that whilst the applicant has clearly delayed the prosecution of his claim in a number of material respects, the respondent has focussed in connection with these particular interlocutory proceedings on the applicant's failure to particularise his claim for economic loss. Arguably the particulars concerning that matter may impact upon the question of whether the relevant unfairness exists as well as whether any order for monetary compensation should be made. However, whilst the orders sought in the summons are framed in broad terms, the particulars of the alleged unfair contract cover a wide variety of matters. These include pre-lease representations concerning the reason why the previous tenant of the shop had "failed", the number of people who utilised the Mount Druitt Centre each day, the nature and extent of advertising and marketing, the fact that "a new seven cinema building would be built adjacent to the Centre", a promise by the respondent to renovate the Centre and a promise by the respondent to secure additional tenants. It was said by way of example that the failure of the lease to refer to these matters created an unfair contract. There are other allegations contained in the summons but I refer to these by way of example to indicate that the applicant's case is not confined solely to matters concerning the level of rent and his takings, at the least in terms of establishing unfairness.

29 Accordingly, even if the applicant were precluded from relying on any documentation concerning his trading activities beyond that which had already been the subject of discovery, it is arguable that the applicant might nevertheless succeed in obtaining a finding of unfairness as a necessary ingredient in seeking the avoidance or variation of the lease which in turn might arguably be of benefit to the applicant.

30 For this reason alone I would be disinclined to preclude the applicant from continuing to prosecute these proceedings.

31 In determining these interlocutory proceedings I take into account the various statements of principle contained within the judgment of the High Court of Australia in Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146, the New South Wales Court of Appeal in Micallef v ICI Australia Operations Pty Ltd (2001) NSWCA 274 and in the New South Wales Court of Appeal in Stollznow v Calvert (1980) 2 NSWLR 749. It is not necessary that I refer in any detail to the discussion concerning the relevant principles on a strike out application and on the powers of courts in connection with the case management process other than to observe that each case must be dealt with by reference to its own factual circumstances, and that the court should endeavour to balance the competing needs of an applicant/plaintiff and a respondent/defendant having regard to the necessity to administer justice in an efficient, effective and speedy manner.

32 As I have previously observed, the matter at the heart of these proceedings is the failure of the applicant to have provided primary financial records in a form which will enable any claim for monetary compensation to be evaluated by the respondent. My impression of the evidence which I have described in some detail is that the applicant has produced or offered to discover all of the primary records which are in his possession or over which he might ultimately exercise some control. Whether and to what extent these records will enable the applicant to succeed or will enable the court to fairly determine the applicant's claim is not a matter with which the court is immediately concerned. As I previously observed, it is arguable that the applicant's case may proceed both as to findings of unfairness and as to consequential orders without reference to any underlying financial records, but in stating this I am not to be taken as having reached any conclusion at all. This observation is made on a speculative basis only, and merely to illustrate that the applicant's failure to discover any additional documents should not per se disentitle him from having his claim brought to a hearing.

33 Whilst I acknowledge the respondent's frustration expressed through its solicitor, Mr Biber, it being held out from the opportunity of pursuing the recovery of a substantial amount of rent alleged to be due and owing to it by the applicant, I am not persuaded on balance that the applicant should be disentitled from pursuing his claim, albeit on conditions.

34 I see no reason why the applicant should not be restricted to relying on such financial documentation as has been discovered prior to 31 January 2004, consistent with the order which I made on 25 November 2003. There is no suggestion that the applicant has any additional documentation by way of source materials which are relevant to the financial aspect of his claim.

35 The only other outstanding matter at this stage appears to be the preparation of an expert's report. Whether and to what extent any report can usefully be prepared on the basis of the underlying financial documentation that the applicant holds is a matter with which I am not concerned at this stage of the proceedings. The reasons for delay in the preparation of the report seem to be influenced by the fact that the applicant has chosen to change solicitors and that the applicant did not have the necessary means to fund the preparation of the report. Given the time which has now elapsed from the date of change of legal representation, and the opportunity of the applicant to conclude his borrowings from the bank, the stage must now have been reached whereby the applicant would be in a position to serve a forensic accountant's report within a short period of time. Notwithstanding that on 25 November 2003 I gave the applicant until 31 January 2004 to do so, I am prepared to extend the time yet again by giving the applicant one further month from the date of this judgment in which to do so. The applicant will not be permitted to rely on any report not served within that period without further order of the court. No such extension shall be granted without application being made by filing a notice of motion and affidavit in support and no such extension shall be considered by the court unless the applicant can demonstrate that the failure to comply with this further extension of time has been caused by circumstances unrelated to any matter within his control, or the control of any legal practitioner acting on his behalf, or by reason of the failure of the forensic accountant to attend to the preparation of the report other than in a diligent and expeditious manner.

36 In concluding that these proceedings ought to be dealt with on this basis, I am conscious that there may well be contention with respect to the costs of these further interlocutory proceedings. For this reason I shall reserve costs and grant liberty to apply with respect to them.

ORDERS: 1. The respondent's strike-out motion is dismissed.

2. The applicant is not permitted to rely on any expert accountant's report not filed and served within one (1) month of this day.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.