. fy ' JUDGMENT No. S22 Blow IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION wee ws ww BETWEEN: NOT INTENDED FOR GENERAL DISTRIBUTION No. WAG 26 of 1987 EYRES REED McINTOSH LIMITED First Applicant and MURRAY GORDON McDONALD, PATRICIA IRENE MCDONALD, RAYMOND HARRY WEEKS, RONALD LESLIE PASS, ALICE ANNIE PASS, MAXINE ANN ARDAGH, IAN ARTHUR CARSON, KENNETH JOSEPH HALL, TERESA MARY PONINELLI, ROBERT JOHN BOWDEN, PATRICIA ANNE BOWDEN, WILLIAM DEANE DETEZ, TERRANCE PIGGOTT, PATRICIA CLARE PIGGOTT, TRUCKING NOMINEES PTY LTD, K. BIGGS ENTERPRISES PTY LTD, JOHN DENIS PAUL, HELEN CICELY PAUL, FREDERICK ROBERT SMITH, CATHERINE MARY SMITH Second Applicants and VINTAGE BUILDERS PTY LTD First Respondent and DAVID ROBERT RICHARDS, ROBERT EDWARD STOCKBRIDGE, TERRENCE JOSEPH CASSELLS Second Respondents MINUTE OF ORDER JUDGE MAKING ORDER: DATE OF ORDER: WHERE MADE: PERTH FRENCH J. 2 SEPTEMBER 1987 A RECEIVEN - SEP 1987 FEDERAL GOURT OF AUSTRALIA PRINCIPAL REGISTRY — w wy ETN Tremp omen ercrgsp cet ee ? > A. B. THE COURT ORDERS THAT: On the Applicants' motion to strike out:- l. The motion is dismissed. 2. The costs of the motion will be in the cause. On the Applicants' Motion for Particular Discovery: 1. The third-named second respondent do on or before 9 September 1987 file and deliver an affidavit stating whether any documents of the following classes and if so which are or have been in his custody, possession or power and if not now un his custody, possession or power, when he parted with it and what has become of it:- (a) Minute of Directors' or Members' meetings of Vintage Builders Pty Ltd for the period 1983 to 1986 inclusive; (b) Accounts for the Vintage Builders Unit Trust for the years 1983/84, 1984/85 and 1985/86; {c) The notice of resignation referred to in the letter of 14 August 1986 being the third-named second respondent's discovered document number 32. 2. The costs of the motion will be in the cause. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. er re ee tee Soymctewic wee re IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION BETWEEN: CORAM: FRENCH J. 2 SEPTEMBER 1987 NOT INTENDED FOR GENERAL DISTRIBUTION No. WAG 26 of 1987 EYRES REED McINTOSH LIMITED First Applicant and MURRAY GORDON MCDONALD, PATRICIA IRENE MCDONALD, RAYMOND HARRY WEEKS, RONALD LESLIE PASS, ALICE ANNIE PASS, MAXINE ANN ARDAGH, IAN ARTHUR CARSON, KENNETH JOSEPH HALL, TERESA MARY PONINELLI, ROBERT JOHN BOWDEN, PATRICIA ANNE BOWDEN, WILLIAM DEANE DETEZ, TERRANCE PIGGOTT, PATRICIA CLARE PIGGOTT, TRUCKING NOMINEES PTY LTD, K. BIGGS ENTERPRISES PTY LTD, JOHN DENIS PAUL, HELEN CICELY PAUL, FREDERICK ROBERT SMITH, CATHERINE MARY SMITH Second Applicants and VINTAGE BUILDERS PTY LTD First Respondent and DAVID ROBERT RICHARDS, ROBERT EDWARD STOCKBRIDGE, TERRENCE JOSEPH CASSELLS Second Respondents EX TEMPORE REASONS FOR JUDGMENT Eyres Reed sharebroker. Along with some 20 of its investor clients it has instituted proceedings in this court against a home builder, McIntosh Limited ("Eyres Reed") is oe eee tp ee ee ee crate = 2. Vintage Builders Pty Ltd ("Vintage"), its two directors, Richards and Stockbridge, and a former director, Cassells. Eyres Reed and the investors claim damages against Vintage and its directors for contravention of s.52 of the Trade Practices Act by misleading and deceptive conduct, and for fraud. The action is based upon representations alleged to have been made to Eyres Reed by the directors on behalf of Vintage in November 1985. The representations were said to have arisen in discussions which led to Eyres Reed agreeing to apply on behalf of Vintage for a listing on the second board market of the Perth Stock Exchange. Eyres Reed says that it agreed to prepare a report on Vintage for distribution to its clients in order to interest them in investing in that company. The mode of investment was to be by purchase of units in a unit trust of which a company called Westcap Nominees Pty Ltd was trustee. The trust was designated the Westcap Property Income Trust No. 1 ("the Westcap Trust"). According to the amended statement of claim the sole asset of the Westcap Trust comprised 550,000 units in another trust called the Vintage Builders Unit Trust ("the Vintage Trust"), of which Vintage was trustee. yep rete wees See Sse niga see ae Smarter - | i psy a , ta 3. The representations complained of related to the reputation, copyright stocks, turnover, profitability and work in hand of Vintage. It was also said to have been represented by the directors to Eyres Reed that purchasers of units in the Westcap Trust would acquire a similar number of units in the Vintage Trust and would receive dividends of 12.5 cents per unit in January and March 1986 as distributions from the 1984/85 profits of the Vintage Trust. These and related representations are alleged by Eyres Reed to have been false. As a result, it claims that it expended money and professional time, for which it was not paid, in an attempt to get second board listing for Vintage. The investors, on the strength of information conveyed to them by Eyres Reed in reliance upon the representations, paid a total of $138,500.00 for what turned out to be worthless units in the Westcap Trust. At this stage of the proceedings only the third-named second defendant, Cassells, has entered an appearance. Vintage is in liquidation. The other two directors have not been served. Eyres Reed and the investors now move to strike out two paragraphs in Cassellis' defence and also for an order for specific discovery. y TO or eae eae es mmr t= — a) 4. By para.5 of the amended statement of claim it is alleged that Cassells was a director of Vintage until he resigned on 9 March 1986. Further, he was at all material times a builder by profession and registered as such. One of the representations attributed to the directors was that Cassells played a substantial role in the running and management of Vintage and would continue to play such a role (para. 6(c)). The representation was said to have been false in that Cassells was not at any material time actively involved in the operations of Vintage, and that he proposed to and did resign as a director on 9 March 1986 (para.10(c)). In his defence Cassells pleads in answer to para. 5 of the amended statement of claim:- "5S. Save that he admits that upon the sale of business of the First Respondent on or about the 28th June 1985, he resigned as a director thereof and gave further notice in writing of such resignation on the 9th March 1986 and save further that he was and is a Builder by profession and registered as such under the provisions of the Builders Registration Act (1939) as amended, he denies each and every allegation contained in paragraph 5 thereof." As to the allegation in para.10(c), he says in para. 13 of his defence:- "13. 5. Save that he admits that he resigned his directorship of the First Respondent on or about the 28th June 1985 and gave notice in writing of such resignation on or about the 9th March 1986, he denies each and every allegation contained in paragraph 10(c)(ii) and (iii) thereof." The applicants sought further and better particulars of the defence as follows:- "As to paragraph 5 of the Defence state all acts, facts, matters, circumstances or things the Third Named Second Respondent relies upon for the allegation that he resigned as Director of the First Respondent on or about 28th June 1985." In answer to that request Cassells supplied following particulars:- (ii) Conversations between Cassells and David Robert Richards and Robert Edward Stockbridge which took place in Perth in about the last week of June 1985 the substance whereof was to the effect that Cassells would resign as a director of Vintage Builders Pty Ltd. By approximately 19 letters dated the Ist July 1985 Cassells wrote to various trade creditors of vintage Builders Pty Ltd advising each of them that he had resigned as a director of that company. Copies of these letters may be inspected by prior appointment during normal business hours at the offices of the solicitors for the Third named Second Respondent. (iii)Further notice of Cassells' resignation as a paras. 5 and 13 of the defence that Cassells resigned as a director of Vintage Builders Pty Ltd was given in writing on the 9th March 1986." The applicants move to strike out the allegation in director of Vintage on or about 20 June 1985. the Wye ere yt we ~pewe @ 6. The motion is brought under 0.11 r.16 on the basis that the allegation discloses no reasonable defence or that it has a tendency to cause prejudice, embarrassment or delay in the proceedings in that the particulars cannot sustain it. The substance of the argument put in support of this motion is that the particulars provided by Cassells indicate, at best, a prospective statement of intention to resign and do not show any particulars asserting his actual resignation. There is some difficulty in relating the particulars as framed to the pleadings in paras. 5 and 13 of the defence. Counsel for the respondent suggests that the particulars in (i) are capable of encompassing both a prospective statement - "I will resign" - or a definitive statement - "I do resign". ff that is so, then the particulars require amendment to make clear the case advanced. I accept, however, that it 1S open to argue on the assumption that (i) sets up a prospective statement only and that, I think, is the only reasonable interpretation of it. The particulars taken together disclosed facts which might support an inference that Cassells resigned on or about the date alleged. It might be, for example, that a prospective statement together with subsequent conduct consistent with resignation could arguably constitute the fact of resignation. I make no judgment on that Yee 2 reer sere se ee seers en, 7. question, simply leaving it on the basis that it may be open. If 1t may be open, then I think it quite inappropriate that I should move to strike out the portions of the defence complained of. I say that whether the application is properly regarded as being brought under 0.1] r.16 or under 0.20 r.2. For those reasons, the motion to strike out parts of the defence will be dismissed. I make the point, however, that if Cassells should wish to adduce evidence that he told his fellow directors in or about the last week of June 1985 that he was resigning, or that at any point he did communicate to them that he was resigning, or that he did resign, that would be evidence not supported by the present particulars and it would be necessary for Cassells to seek leave to amend his particulars to encompass that assertion. The applicants also move for an order for particular discovery by Cassells for the following classes of documents:- (a) Minutes of Directors' or Members' meetings of Vintage Builders Pty Ltd and any other documents concerning the affairs of that company in any way reflecting on or any of the matters in issue; (b) Accounts for the Vintage Builders Unit Trust; (c) All documents (including bank records) in respect of the settlement of the alleged sale of shares and units by the third-named Second Respondent pursuant to the third~named Second Respondent's discovered document number 6 dated 28 June 1985; 8. (d) The resignation referred to in the letter of 14 August 1986 being the third-named Second Respondent's discovered document number 32. This application is brought pursuant to 0.15 r.8 of the Federal Court Rules, which provides:- "Where, at any stage of the proceeding, 1t 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 matter in question in the proceeding may be or may have been in the possession, custody or power of a party, the Court may order that party - (a) to file any affidavit stating whether that document or any document of that class is or has been in his possession, custody or power and, if it has been but is not then in his possession, custody or power, when he parted with it and what has become of it; and (b) to serve the affidavit on any other party." The motion is supported by an affidavit sworn by the solicitor for the applicant, in which he refers to Casselis' defence, where 1t is admitted that Cassells had been a director of Vintage. The only issue arising from this, it is contended, is whether he resigned in or about 28 June 1985. The solicitor deposes to a belief that Cassells would have received minutes of directors' or members' meetings of Vintage, and that some of these minutes would have reflected on matters in dispute. 9. No minutes of any directors' or members' meetings have been discovered by Cassells, nor have any other documents concerning the affairs of the company which are in any way relevant to the matters in issue. The request for specific discovery in this regard is expressed in broad terms which, on the face of it, encompass minutes of directors' or members' meetings of Vintage, which would fall outside the period relevant to the issues raised in the proceedings. It seems to me, however, that within the relevant period there would be grounds for a belief that minutes of directors' or members' meetings may be, or may have been, in the possession, custody or power of Cassells, he having been, for a period, a director and shareholder in the company. Cassells' counsel, Mr Nielsen, informs me, from the bar table, that his instructions are that his client has not had in his possession, and does not have in his possession, any such document. While I do not in any way reflect upon or doubt the fact of his instructions in that regard, I think the basis is made Out for a limited order in relation to para. (a). I would not make it in terms as wide as those contemplated by para.(a) and I will hear the parties as to the appropriate form of order. The same comment is true for the class of documents mentioned in para. (b) of the motion, that is, accounts for the Vintage Builders Unit Trust. te ae ee gr ep ree me Sele eee meade tence Eh re ad 10. It may not be that all accounts to the Vintage Builders Unit Trust are relevant to the issues in this action, but subject to some appropriate limitation as to the periods covered by them, it seems to me that it is again appropriate to make a direction in accordance with 0.15 r.8. It may be that that direction will have the effect of simply producing an affidavit on the part of Cassells that he has not had any such documents in his possession at any time, and does not now have any such documents. That is not a reason for withholding the order that is sought. As to para. (c), this relates to a sale of shares held by Cassellis under a contract of sale which was discovered. The specific discovery which is sought in this regard relating to the settlement of that sale, seeks discovery of documents which go well beyond anything but the remotest relevance to the issues in the proceedings and I am not prepared to make an order in accordance with the request under para. (c). As to para. (d), there is annexed to Mr Solomon's affidavit a copy letter from the solicitors for Cassells, to one of his co-directors, D.R. Richards, which in its body refers to a notice of resignation of directors signed and dated 9 March 1986. It does appear that at least the original of that document was at some time in the possession of Cassells and that a ll. direction for particulars of discovery in relation to it would be appropriate under 0.15 r.8. So the motion in relation to particular discovery will be acceded to, to the extent that I have indicated. On the question of costs, in my opinion, the motion for particular discovery has been brought on at very short notice and it appears from correspondence that only very short notice of it was given to the solicitors for Cassells. I am of the view that in the end, justice would best be served if the costs on the motion rest in the cause. In relation to the motion to strike out parts of the defence, I have declined to strike them out for the reasons indicated. Nevertheless, I think that, in the circumstances, the motion was not entirely unjustified and I would order in relation to that motion as well, that costs be in the cause. I certify that this and the preceding eleven (11) pages are a true copy of the Reasons for Judgment of his Honour Justice French. Associate: Devos Lytake Date: Aspkernrtoee \98°. en ee + qm senipeey sy erry ew ee eee we Ae A - -} ak ale conn ne et Sorta ee ot ae re we a carn Pe ee rr 12. Counsel for the First and Second Applicants: Mr D. Solomon Solicitors for the First and Second Applicants: Phillips Fox Counsel for the third named Second Respondent: Mr E.W. Neilsen Solicitors for the third named Second Respondent: Co. Date of Hearing: Date of Judgment: 2 September 1987 2 September 1987 E.W. Neilsen & a at so tes a nee eae eee