FEDERAL COURT OF AUSTRALIA Brookfield v Yevad Products Pty Ltd [2002] FCA 1376 PRACTICE – PROCEDURE – discovery – verification of list of documents by person who was not an officer of company – whether failure to verify list of documents in accordance with Federal Court Rules of itself entitles other party to set aside judgment. Federal Court of Australia Act 1976 (Cth) Federal Court Rules, O 11 r 13, O 15, r 9 Corporations Act 2001 (Cth),s 9 Brookfield v Davey Products Pty Ltd [2001] FCA 104 - discussed Brookfield v Davey Products Pty Ltd [2002] FCA 889 - discussed Microsoft Corporation v CX Computer Pty Ltd (2002) 187 ALR 362 - cited Jones v Monte Video Gas Co (1880) 5 QBD 556 – referred to Mulley v Manifold (1959) 103 CLR 341 – referred to Fruehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359 – referred to Auspine Ltd v HS Lawrence & Sons Pty Ltd [1999] FCA 1749 – referred to Finance Sector Union of Australia v Commonwealth Bank of Australia Limited [2000] FCA 1389 – referred to IAN WALTER BROOKFIELD & SEPTIC PRODUCTS AUSTRALIA (IN LIQ) v YEVAD PRODUCTS PTY LTD (FORMERLY KNOWN AS DAVEY PRODUCTS PTY LTD) ACN 004 813 192 SG.112 of 1993 MANSFIELD J 6 NOVEMBER 2002 ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIADISTRICT REGISTRY SG.112 OF 1993 BETWEEN: IAN WALTER BROOKFIELD FIRST APPLICANT SEPTIC PRODUCTS AUSTRALIA (IN LIQUIDATION) SECOND APPLICANT AND: YEVAD PRODUCTS PTY LTD (FORMERLY KNOWN AS DAVEY PRODUCTS PTY LTD) ACN 004 813 192 RESPONDENT JUDGE: MANSFIELD J DATE OF ORDER: 6 NOVEMBER 2002 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. The orders sought on the amended notice of motion of the applicants dated 5 August 2002 are refused. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIADISTRICT REGISTRY SG.112 OF 1993 BETWEEN: IAN WALTER BROOKFIELD FIRST APPLICANT SEPTIC PRODUCTS AUSTRALIA (IN LIQUIDATION) SECOND APPLICANT AND: YEVAD PRODUCTS PTY LTD (FORMERLY KNOWN AS DAVEY PRODUCTS PTY LTD) ACN 004 813 192 RESPONDENT JUDGE: MANSFIELD J DATE: 6 NOVEMBER 2002 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 This matter has a long history. It is detailed in the judgment I delivered on 22 February 2001: Brookfield v Davey Products Pty Ltd [2001] FCA 104 at [2]-[6]. I ordered that proceedings commenced on 27 November 1998 by the applicant to set aside a judgment in favour of the respondent given on 8 February 1996, and the order for costs made on 19 December 1997, be stayed until further order. I will not repeat that history in this judgment. 2 The present application is another set in the applicant's attempts to have the principal decision given on 8 February 1996 set aside, together with the consequential order for costs. On the reasons for judgment delivered on 22 February 2001, I said at [27]: "I anticipate that the stay order will not be lifted unless the applicants seek leave to pursue fresh proceedings, properly and fully pleaded, and supported by cogent affidavit evidence in a form which would be admissible at trial, in terms in which the interests of the public in the administration of justice may lead to the relief then sought. Of course, I cannot and do not determine what factors will be relevant to the exercise of any such discretion if the Court is called upon to exercise it." 3 Subsequently, in the principal proceedings, the respondent secured an order that, from 6 March 1995, the title of the proceedings be amended by substituting for the words "Davey Products Pty Ltd" as the first respondent the words "Yevad Products Pty Ltd". That was because the respondent on 6 March 1995 changed its name to Yevad Products Pty Ltd as part of a transaction by which its parent company sold its business to a third entity Domali Pty Ltd (Domali), and Domali thereafter conducted the business previously conducted by the respondent. Domali also, on 6 March 1995, changed its name to Davey Products Pty Ltd. Despite those changes, the principal proceedings continued to be conducted by the respondent under its previous (and then no longer correct) name. The application by the respondent to make that change in the title of the proceedings was opposed by the applicant, because (he contended) the respondent had deliberately withheld its change of name from the applicant and from the Court for strategic reasons. I did not accept that contention: see Brookfield v Davey Products Pty Ltd [2002] FCA 889. As I then noted, the respondent sought to regularise the principal proceedings in that way because it was confronted with the applicant seeking to set aside a bankruptcy notice based upon the costs order made in the principal proceedings, inter alia, because the bankruptcy notice described Davey Products Pty Ltd as the creditor when that entity (previously Domali) had no costs order in its favour. 4 For the sake of clarity, I shall call the respondent Yevad/Davey and Domali, the owner of the business conducted by Yevad/Davey until 6 March 1995, Domali/Davey. 5 The applicant, by motion filed on 5 August 2002, seeks orders that the stay imposed on 22 February 2001 be lifted and that the judgment of the Court on 8 February 1996 and the consequential order for costs made on 19 December 1997 be set aside. The applicant's ground for seeking those orders is that the discovery given by Yevad/Davey in the principal proceedings was flawed because the persons who provided, and deposed to the accuracy and completeness of, the lists of documents for Yevad/Davey did not have the authority of Yevad/Davey from 6 March 1995 to give that discovery so that Yevad/Davey fraudulently presented those persons as having that authority. It is the status of the persons in whose names the lists of documents were provided which is the thrust of the applicant's attack. He did not seek to argue, on the hearing of the motion, that those persons did not, by reason of the transfer of ownership of the business of Yevad/Davey to Domali/Davey on 6 March 1995, have access to or did not purport to discover documents of Yevad/Davey then in the possession of Domali/Davey by reason of the sale of the business. Although he did not argue that matter on the motion, I did not understand him to have abandoned his claim that the discovery was deficient in significant respects, and deliberately so, on the part of Yevad/Davey. But it was not an issue ventilated on the hearing of the motion. 6 The evidence on the motion comprised the affidavits of the applicant sworn on 5 August 2002 and 16 September 2002, the affidavit of Alan Edward Fahy (Fahy) sworn on 11 September 2002 and the affidavit of Glenn Stuart Davis (Davis) sworn on 30 September 2002. There was no cross-examination to challenge any of that evidence. It is convenient, therefore, to record my findings in narrative form. I shall only refer to the foundation for any finding where it is necessary to do so. 7 Yevad/Davey made discovery by four lists of documents in the principal proceedings. The first list dated 25 March 1994 was verified on oath by Dallas Wilson (sic, it appears his surname is Wilsdon) (Wilsdon), who described himself as the "State Manager of Davey Products Pty Ltd". Wilsdon occupied that office in Yevad/Davey at the time, and did so until 6 March 1995. He then transferred his employment to Domali/Davey, with the transfer of the business. 8 On 23 March 1995, following the sale of its business, Yevad/Davey filed its first supplementary list of documents. It described itself wrongly as "Davey Products Pty Ltd". The list of documents was verified by Wilsdon by affidavit sworn on 18 April 1995, describing himself as "the State Manager of Davey Products Pty Ltd". He was in fact the state manager of Domali/Davey then, but not of Yevad/Davey. Further supplementary lists of documents of Yevad/Davey dated 31 July 1995 and 4 August 1995 were also verified by Wilsdon by affidavits sworn on 2 August 1995 and 4 August 1995 respectively describing himself in the same way. 9 On 10 May 1999 Yevad/Davey provided a fifth list of documents. It was well after the principal proceedings had been completed, and in response to requests by the applicant in relation to his attempts to have the judgment given on 8 February 1996 and the consequential order for costs of 19 December 1997 set aside. It was verified by Fahy, a director of Yevad/Davey from 20 March 1995. He deposed to the change of name of Yevad/Davey on 6 March 1995, following the sale of its business. He said Yevad/Davey has not since traded. He said its business records, upon the sale of its business, became the property of Domali/Davey (except those which Yevad/Davey was required by law to retain), and that Yevad/Davey retained responsibility for the litigation with the applicant. 10 Also, in response to the applicant's attempts to have the principal judgment and the costs order set aside, Yevad/Davey filed an affidavit of Robert Leopold Morrow (Morrow) of 4 March 1998. It was an exhibit to the applicant's first affidavit relied upon. In that affidavit Morrow described himself as "the Credit Manager for Davey Products Pty Ltd", an office he had occupied since October 1985. He makes no mention of the transfer of the business, or any transfer of employment from Yevad/Davey to Domali/Davey. Morrow's affidavit asserts that he retained responsibility on behalf of Yevad/Davey for the defence of the principal proceedings until their completion, and in doing so liaised with Wilsdon who he described as the State Manager of Yevad/Davey. His affidavit seeks to explain how an inaccurate claim was made in the course of Yevad/Davey's discovery that certain relevant documentation had been destroyed by a fire in 1993. 11 The applicant's affidavit of 5 August 2002 maintains his claim that Yevad/Davey did not give proper discovery in the principal proceedings, and acted deliberately and consciously in failing to do so. However, as noted earlier in these reasons, the applicant's present motion is argued on the limited basis of the lack of authority of Wilsdon and Morrow to have given instructions on behalf of Yevad/Davey to give discovery on its behalf, and that Yevad/Davey was deliberately complicit in that process so as to subvert the proper administration of justice in the principal proceedings. 12 The applicant puts his claim on two bases. The first is that Yevad/Davey did not comply with O 15 of the Federal Court Rules because the affidavits verifying each of the four lists of documents filed during the conduct of the principal proceedings were not sworn by persons authorised or entitled to do so. The second is that Yevad/Davey should be taken to have admitted all the claims made in his affidavit of 5 August 2002 because those claims have not been specifically traversed. The second contention relies upon O 11 r 13 of the Rules. 13 I reject the second contention. Order 11 concerns pleadings. Order 11 r 13 provides that, in certain circumstances, an allegation of fact in a pleading is deemed to be admitted by the opposite party unless that party has traversed the allegation in the responding pleading. The notice of motion was not directed to proceed on pleadings. The affidavits which have been exchanged, in the context of the applicant having made it clear at the directions hearing on 20 August 2002 that he was seeking to argue only a confined issue on the motion, do not constitute pleadings. The Yevad/Davey affidavits were therefore confined to that issue. Accordingly, the contention based upon O 11 r 13 must fail. 14 Order 15 r 9 of the Rules provides relevantly: "(1) Subject to subrule (2), an affidavit verifying a list of documents of a party or an affidavit to be filed by a party pursuant to an order under rule 8 may be made as follows – (a) by the party; (b) … (c) where the party is a corporation or organisation, by a member or officer of the corporation or organisation; (d) … (e) … (2) Where the party is a person to whom any of paragraphs (1)(c), (d) and (e) applies and the affidavit is to be filed and served pursuant to an order, the Court may – (a) specify by name or otherwise the person to make the affidavit; or (b) specify by description or otherwise the persons from whom the party may choose the person to make the affidavit. (3) Subject to subrule (2), where a party is a person to whom any of paragraphs (1)(c), (d) and (e) applies, the party shall choose a person to make the affidavit who is qualified under the relevant paragraph and has knowledge of the facts. 15 In fact, apart from the first list of documents of 25 March 1994, the supplementary lists of documents provided during the course of the principal proceedings were not verified by a member or officer of Yevad/Davey, unless it can be said in the circumstances that Wilsdon despite his change of employer from 6 March 1995 remained an officer of Yevad/Davey for limited purposes. 16 Fahy was between March 1995 and February 2000 the Chief Financial Officer of McPherson's Ltd (McPhersons). It was the sole shareholder of Yevad/Davey at all material times. He became a director of Yevad/Davey on 20 March 1995. He was ultimately responsible for the conduct of the principal proceedings, but had no first hand knowledge of the issues. That knowledge lay with Wilsdon. 17 Under the agreement between McPhersons, Yevad/Davey, Domali/Davey and its parent company for the sale of the business, Yevad/Davey disclosed the existence of the principal proceedings and remained responsible for any liability arising in respect of them. Because Wilsdon had the detailed knowledge of the principal proceedings, although the sale and purchase agreement does not explicitly deal with the topic, Wilsdon continued to give instructions to Yevad/Davey's solicitors generally in the matter. He did so with the knowledge and approval of Domali/Davey. Where necessary, Wilsdon also consulted with Morrow. I infer Morrow also transferred his employment to Domali/Davey on 6 March 1995. He is now deceased. No documentation has been disclosed indicating any formal arrangement between Yevad/Davey and Domali/Davey for Wilsdon and Morrow to continue to provide that service to Yevad/Davey after 6 March 1995. The solicitors on the record for Yevad/Davey during the conduct of the principal proceedings were informed of the sale of the business of Yevad/Davey but did not act in that sale. They were authorised by Fahy to continue to seek instructions on matters of fact including discovery from Wilsdon and Morrow, and they continued to do so. The solicitor handling the matter believed that Wilsdon had the authority of Yevad/Davey to verify the lists of documents on its behalf. 18 In Microsoft Corporation v CX Computer Pty Ltd (2002) 187 ALR 362, Lindgren J noted that the expression 'officer' is not defined in the Federal Court Rules or in the Federal Court of Australia Act 1976 (Cth). He decided that application by reference to the definition of the term provided by the Corporations Act 2001 (Cth). Section 9 of the Corporations Act defines 'officer of a corporation' to mean: (a) a director or secretary of the corporation; or (b) a person: (i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or (ii) who has the capacity to affect significantly the corporation's financial standing; or (iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation); or (c) a receiver, or receiver and manager, of the property of the corporation; or (d) an administrator of the corporation; or (e) an administrator of a deed of company arrangement executed by the corporation; or (f) a liquidator of the corporation; or (g) a trustee or other person administering a compromise or arrangement made between the corporation and someone else." 19 It is clear from that definition that an "officer" of a corporation is not necessarily a director or employee of the corporation. Thus, O 15 r 9 of the Federal Court Rules may represent a departure from the ordinary position that a company will generally exercise its legal capacity through its directors or employees acting within the scope of their authority, or through its members at general meeting. However, I am not satisfied that Mr Wilsdon in fact met any of the alternate criteria in the definition of officer in s 9 of the Corporations Act, and so by extension in O 15 r 9 of the Rules. The respondent has not adduced any evidence to establish against those criteria that Mr Wilsdon was at the relevant times an officer of Yevad/Davey. 20 It does not necessarily follow that the applicant is entitled to the orders sought. The consequence that might follow from a finding that a list of documents has not been verified in accordance with the O 15 r 9 of the Rules should, in my view, be considered in the context of the Rule and its purpose. 21 The purpose of verification of a list of documents by affidavit is to ensure that the Court receives from the discovery party a reliable list of the documents in its possession custody or power. The verified list of documents is provided as if in answer to an imaginary interrogatory, and developed in the Courts of Chancery as a means of securing disclosure of potentially relevant documents without the physical intervention of the Court or of a third party to search for them. The responsibility of providing a reliable list of documents is a heavy one. The corollary of the Court's acceptance of a verified list of documents is its willingness to accept the parties' own statement as to the documents in its possession custody or power. Thus, a verified list of documents is generally conclusive of its contents. The Court is concerned to prevent a contest between two competing oaths that only a trial could resolve. See generally Bray, The Principles and Practice of Discovery, 1885, pp 127, 155, 220-223; Cairns, Australian Civil Procedure, Law Book Co., 5ed 2002, p 289. Although that position has been relaxed to some extent, the principle that a verified list of documents is generally conclusive of its contents has not been abolished. The Court will only order a further affidavit or permit cross-examination of a deponent of an affidavit verifying a list of documents in limited circumstances. An early expression of those exceptions can be found in Jones v Monte Video Gas Co (1880) 5 QBD 556 at 558 per Brett LJ: "either party to an action has a right to take out a summons that the opposite party shall make an affidavit of documents: when the affidavit has been sworn, if from the affidavit itself, or from the documents therein referred to, or from an admission in the pleadings of the party from whom discovery is sought, the master or judge is of opinion that the affidavit is insufficient, he ought to make an order for a further affidavit; but except in cases of this description no right to a further affidavit exists in favour of the party seeking production. It cannot be shown by a contentious affidavit that the affidavit of documents is insufficient." See also Mulley v Manifold (1959) 103 CLR 341; Fruehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359 per Giles J; Auspine Ltd v HS Lawrence & Sons Pty Ltd [1999] FCA 1749 per O'Loughlin J; Finance Sector Union of Australia v Commonwealth Bank of Australia Limited [2000] FCA 1389. 22 The applicant submitted that it was a necessary consequence of non-compliance with O 15 r 9 of the Rules that the discovery given was in fact inadequate or otherwise flawed, that is Yevad/Davey did not discover all the documents that it should have discovered. He was unable to point to any authority to support such a conclusion, and the respondent submitted that there are no such authorities. In my view, the only proven consequence of the respondent's failure to comply with the O 15 r 9 was that the various supplementary lists of documents did not have the force of an oath of the party required to make discovery. However, I do not consider that that conclusion alone brings this application within the exceptions recognised in the cases referred to in [20] or in any sense leads to a further conclusion that the discovery by Yevad/Davey was fraudulent or incomplete. 23 Even if the verification of the supplementary affidavits of discovery during the course of the principal proceedings did not comply with O 15 r 9 of the Rules, I do not consider in the circumstances that the orders sought on the motion should be granted. 24 On the evidence, I am satisfied that Yevad/Davey through Fahy sought to comply with its obligation to give discovery, at least in the sense of seeking to comply with O 15 of the Rules. Both it and its solicitors approached the performance of that obligation on the understanding that Wilsdon was an appropriate person to give instructions about the existence of discoverable documents, and to verify the lists of documents. Yevad/Davey could not hide behind the fact that Wilsdon was not, or may not have been, its officer in giving the discovery. It has not sought to do so in the past. It has accepted that it is accountable for any deficiencies in the discovery it provided, but has to date successfully resisted the claims of the applicant that the principal judgment and the costs order should be set aside due to any deficiencies in its discovery. Fahy's affidavit clearly indicates that it will maintain that stance. Hence, the purpose of verification in that regard has been fulfilled. Moreover, on the evidence, Wilsdon was the appropriate officer of Yevad/Davey until 6 March 1995 to give instructions about the existence of discoverable documents and to cause inquiries to be made about discoverable documents. Despite his change of employment after 6 March 1995, he continued to have that authority for Yevad/Davey under the aegis of Fahy. Yevad/Davey had ceased to trade. Its records were in the custody of Domali/Davey. Wilsdon as its State Manager had access to them, and to persons who had detailed knowledge of them and whether they touched upon issues in the principal proceedings. In effect, Wilsdon continued to manage the same business with the same records, including past records, as he managed prior to 6 March 1995, but under another corporate master. The purpose of O 15 r 9 of imposing upon a responsible person the duty of ensuring compliance with the discovery obligations of Yevad/Davey was in that way also in substance fulfilled in the circumstances. Whether that responsibility was ultimately in fact properly fulfilled is, of course, a matter which the applicant disputes but that issue does not arise on the motion due to the confined issue the applicant argued. If the applicant had shown that it was not in fact properly fulfilled to an extent that, and in circumstances that, warrant the principal judgment being set aside, Yevad/Davey could not and does not seek to avoid that consequence because Wilsdon provided the instructions about discovery on its behalf. The history of these proceedings to which I have referred shows the applicant has not made out such a case to date, and presently his claim to do so is stayed until further order. 25 In addition, I am not persuaded that the form of the supplementary affidavits of discovery during the conduct of the principal proceedings were deliberately misleading by Wilsdon stating that he was the State Manager of Yevad/Davey when he was the State Manager of Domali/Davey. It is regrettable that the transfer of the business of Yevad/Davey, and its change of name, did not prompt its solicitors to change its name in the proceedings, and to accurately describe Wilsdon's status in those affidavits. But I do not think the material to which I have referred leads to the inference that both Yevad/Davey and the solicitors failed to reflect those matters through any attempt to mislead the Court or the applicant. There was no cross-examination of Fahy or Davis to suggest to them a sinister purpose of that kind. It is open to conclude, as I do, that the failure was through oversight. I think that is a much more likely explanation, having regard to the fact that the solicitors knew of the sale of the business but were not instructed on the transaction, and that Wilsdon with whom they had been dealing continued to deal with them about matters such as discovery, and he was in fact still in the position through Domali/Davey to have access to the past business records of Yevad/Davey. 26 For those reasons, I consider that the orders sought on the motion should be refused. I will hear the parties as to costs. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. Associate: Dated: 5 November 2002 Counsel for the first Applicant: The first applicant appeared in person Counsel for the Respondent: Mr J White Solicitor for the Respondent: Thomson Playford Date of Hearing: 16 October 2002 Date of Judgment: 6 November 2002