FEDERAL COURT OF AUSTRALIA MG Corrosion Consultants Pty Ltd v Gilmour [2012] FCA 461 Citation: MG Corrosion Consultants Pty Ltd v Gilmour [2012] FCA 461 Parties: MG CORROSION CONSULTANTS PTY LTD ACN 084 715 177 v MALCOLM STEWART GILMOUR and MAGIL NOMINEES PTY LTD ACN 009 059 607; MALCOLM STEWART GILMOUR and MAGIL NOMINEES PTY LTD ACN 009 059 607; MG CORROSION CONSULTANTS PTY LTD ACN 084 715 177 and ALBERTO CESARIO VINCIGUERRA File number: WAD 256 of 2010 Judge: BARKER J Date of judgment: 4 May 2012 Catchwords: CORPORATIONS – cross-claim be struck out – reasonable prospects of success – restitutionary claim – benefit – unjust enrichment – derivative proceedings – leave to defend a cross-claim – cross-claim wholly defensive Legislation: Corporations Act 2001 (Cth) s 236, s 237, s 237(2), Pt 2F.1A Federal Court of Australia Act 1976 (Cth) s 31A Cases cited: Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534 Jeans v Deangrove Pty Ltd [2001] NSWSC 84 Kazar, in the matter of Frontier Architects Pty Limited (in liq) [2010] FCA 1381 Lumbers v W Cook Builders Pty Ltd (in liquidation) [2008] HCA 27; (2008) 232 CLR 635 Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 RTP Holdings Pty Ltd v Roberts (2000) 36 ACSR 170 Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 Date of hearing: 30 May 2011 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 55 Counsel for the Plaintiff: Mr D Solomon Solicitor for the Plaintiff: Solomon Brothers Counsel for the Defendants: Mr P Poliwka Solicitor for the Defendants: Q Legal IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 256 of 2010 BETWEEN: MG CORROSION CONSULTANTS PTY LTD ACN 084 715 177 Plaintiff MALCOLM STEWART GILMOUR First Cross-Claimant MAGIL NOMINEES PTY LTD ACN 009 059 607 Second Cross-Claimant AND: MALCOLM STEWART GILMOUR First Defendant MAGIL NOMINEES PTY LTD ACN 009 059 607 Second Defendant MG CORROSION CONSULTANTS PTY LTD ACN 084 715 177 First Cross-Respondent ALBERTO CESARIO VINCIGUERRA Second Cross-Respondent JUDGE: BARKER J DATE OF ORDER: 4 MAY 2012 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. As to the plaintiff and cross-respondents' notice of motion filed 6 May 2011 the Court orders that: (a) The cross-claim against the second cross-respondent be struck out. (b) It is declared that the orders made by the Honourable Justice Gilmour on 1 September 2010 in Vinciguerra v MG Corrosion Consultants Pty Ltd WAD 90 of 2008 granted Mr Alberto Cesario Vinciguerra leave to defend a cross-claim in the nature of the cross-claim filed in this proceeding in the name of MG Corrosion Consultants Pty Ltd. (c) The defendants/cross-claimants pay the costs of the application limited to those matters the subject of these orders, to be taxed if not agreed, but not otherwise. 2. As to the defendants and cross-claimants' notice of motion filed 30 May 2011 the Court orders that: (a) The application for orders in terms of para 3 be dismissed. (b) The application for orders in terms of para 4 be dismissed. (c) The plaintiff provide supplementary discovery within 21 days of all documents supplied to Mr Trevor Gorey in connection with the preparation of his report into the affairs of the plaintiff dated 10 September 2007, including all forms of communication therewith. (d) The plaintiff pay the defendants/cross-claimants costs of the application limited to the subject of these orders, to be taxed if not agreed, but not otherwise. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 256 of 2010 BETWEEN: MG CORROSION CONSULTANTS PTY LTD ACN 084 715 177 Plaintiff MALCOLM STEWART GILMOUR First Cross-Claimant MAGIL NOMINEES PTY LTD ACN 009 059 607 Second Cross-Claimant AND: MALCOLM STEWART GILMOUR First Defendant MAGIL NOMINEES PTY LTD ACN 009 059 607 Second Defendant MG CORROSION CONSULTANTS PTY LTD ACN 084 715 177 First Cross-Respondent ALBERTO CESARIO VINCIGUERRA Second Cross-Respondent JUDGE: BARKER J DATE: 4 MAY 2012 PLACE: PERTH REASONS FOR JUDGMENT iNTERLOCUTORY APPLICATIONS FOR VARIOUS ORDERS 1 On 30 May 2011, I heard two interlocutory applications: (1) By their notice of motion filed 6 May 2011 the plaintiff and cross-respondents sought orders concerning further and better particulars of defence, the striking out of the cross-claim (or summary judgment), and the continuance of the defence of the cross-claim by the second cross-respondent (Mr Vinciguerra) in the name of the plaintiff. (2) By their notice of motion filed 30 May 2011 the defendants and cross-claimants sought various orders concerning the amendment of the defence and cross-claim, the entitlement of Solomon Bros the solicitors for the plaintiff and Mr Vinciguerra to continue acting, and supplementary discovery. 2 Following consideration of written submissions and oral submissions at the hearing of these interlocutory applications, I reserved my decision, subject to the parties confirming within 21 days that all issues raised by the two interlocutory applications were still outstanding. 3 I made an order in these terms because it appeared that a number, if not all of the issues raised, appeared capable of resolution by the cooperative conduct of the parties and their solicitors. In the event, not all matters were resolved, although by consent order made 22 July 2011 the defendants were given leave to amend their defence and cross-claim in accordance with minutes of those proposed amended documents filed in the Court. 4 The Court has since been advised that the matters raised in the plaintiff/ cross-respondents' interlocutory application, to the extent that they relate to the cross-claim against the second cross-respondent and those in paras 2, 3, 4 and 5 of the defendants/cross-claimants' interlocutory application remain in issue. I will now deal with each of the matters in issue. para 1 of the plaintiff/cross-respondents' interlocutory application 5 By para 1 of their interlocutory application, the plaintiff/cross-respondents seek an order that: 1. The defendants shall provide further and better answers to the plaintiff's request for further and better particulars of the defence filed on 30 March 2011 within seven days of the date of these orders. 6 In light of the advice of the parties, that they have conferred and are in agreement that the matters raised in this interlocutory application, "to the extent that they relate to the cross-claim against the second cross-respondent" remain in issue, this is not a matter requiring any determination. para 2 and para 3 of the plaintiff/cross-respondents' interlocutory application 7 By paras 2 and 3 of their interlocutory application, the plaintiff/cross-respondents seek orders in the alternative that: 2. The cross-claim be and hereby is struck out; or 3. Judgment on the cross-claim be entered in favour of the cross-respondents, pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth). 8 In light of the advice of the parties, the order sought relates only to the cross-claim against the second cross-respondent. The question is whether the relevant cross-claim has reasonable prospects of success at trial: Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118. 9 The following submissions are made on behalf of Mr Vinciguerra: At paras 3(e) and 3(j) of the amended defence (filed as a result of the consent orders referred to above), the first defendant (Mr Gilmour) and the second defendant (now Magil Nominees Pty Ltd but at material times called Sola-Kleen Pty Ltd and referred to here as Sola-Kleen) plead that the expenses paid by Mr Gilmour (respectively being motor vehicle expenses including stamp duty on Mr Vinciguerra's BMW and travel expenses for Mr Vinciguerra) were not for the benefit of the plaintiff and should be reimbursed to the plaintiff by Mr Vinciguerra. At paras 12 and 16 of the amended cross-claim (filed as a result of the consent orders referred to above), Mr Gilmour (as first cross-claimant) and Sola-Kleen (as second cross-claimant) plead that in the event that that defence fails, Mr Vinciguerra should either indemnify Mr Gilmour and Sola-Kleen or disgorge that money to them on the basis that they received no consideration for that or those payments. This restitutionary claim is untenable for two reasons: (1) The mere conferral of a benefit without more is insufficient to ground a claim for restitution: see Lumbers v W Cook Builders Pty Ltd (in Liquidation) [2008] HCA 27; (2008) 232 CLR 635 (Lumbers) at [82]-[86]. (2) Failure of consideration cannot be the basis of the claim because only a management agreement existed between Sola-Kleen and the plaintiff under which Sola-Kleen provided management for the plaintiff and Mr Vinciguerra was employed by and could only have provided consideration to the plaintiff. (3) Accordingly, the cross-claim against Mr Vinciguerra should be struck out as having no reasonable prospect of success. 10 The cross-claimants reject these submissions. 11 The essence of this cross-claim in each case is that Mr Vinciguerra received a benefit which did not benefit the plaintiff and should be refunded to the cross-claimants as they paid it on behalf of the plaintiff. 12 I find it very difficult to see how the cross-claimants in the circumstances pleaded can maintain such a restitutionary or unjust enrichment claim against Mr Vinciguerra. As is submitted on behalf of Mr Vinciguerra, to the extent that the pleaded cause of action alleges a failure of consideration, it cannot be the basis of a failed contract with Mr Vinciguerra, because there was only ever a management agreement between Sola-Kleen and the plaintiff under which Sola-Kleen provided management for the plaintiff, and Mr Vinciguerra was employed by and could only have provided consideration to the plaintiff. There is no privity of contract between Sola-Kleen and Mr Vinciguerra in respect of these payments. To the extent that Sola-Kleen may have been an agent of the plaintiff, it is not in a position to sue as if it were the company in relation to the claimed failure of consideration. Only the company can do that. Any such claim would not entitle the defendants to a set-off in this proceeding or provide any basis for a cross-claim by these cross-claimants. 13 To the extent that the counter-claim made in respect of these expenses is put on a broader unjust enrichment basis, this is an area of law which often seems in a state of constant refinement, owing to the seemingly infinite variety of circumstances in which a party may feel aggrieved by the unwillingness of another party to recognise and pay for a benefit it believes the other party has unjustly gained. In this regard, Mr Vinciguerra refers to the relatively recent decision of the High Court of Australia in Lumbers, a case where (as the headnote states) the owner and a lessee for life (the owners) of an allotment of land entered into a contract with a building contracting company for the construction of a house on the land. During the course of construction, unbeknown to the owners, the contractor entered into an arrangement with an associated company for that company to perform much of the work required by the building contract, which included the engagement of sub-contractors and the supervision of their work. There was no assignment or novation of the building contract. The associated company did what was required of it under the arrangement with the building contractor. The owners paid all amounts claimed by the building contractor but the contractor paid the associated company less than the amount incurred in construction and in the supervision and payment of its sub-contractors. The house was completed to the satisfaction of the owners. The associated company claimed from the owners an amount for payments made to sub-contractors, allowances for defects and a fee for supervision and management, less the amount received from the contractor. The High Court held (as the headnote also states) that the associated company had no claim against the owners for the price of any work and labour performed or for any money it might have paid in relation to the construction. It had no claim because it had no contract with the owners and it had not performed the work or made the payments to the sub-contractors at their request. 14 In Lumbers, the plurality of Gummow, Hayne, Crennan and Kiefel JJ (Gleeson CJ delivering a separate judgment also allowing the appeal) made reference, at [83], to an earlier decision of the Court (by a majority) in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 (Pavey & Matthews) which held that the right to recover on a quantum meruit for building work did not depend on the existence of an implied contract but a claim to restitution or one based on unjust enrichment. Their Honours noted that in Pavey & Matthews, at 256-257, Deane J described the concept of unjust enrichment as constituting: a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognize such an obligation in a new or developing category of case. 15 The plurality, at [84], said it is important to recognise two points about Pavey & Matthews. First, that there was no issue in the case about whether the plaintiff, a builder, had a claim for work and labour done and materials supplied. The issue was whether that claim was defeated by a statutory provision that required that no action it to be brought unless there was a note in writing recording the agreement. Their Honours added that, in particular, the issue was whether the builder's action on a quantum meruit was a direct or indirect enforcement of an oral contract made. In Pavey & Matthews, the majority of the Court had held that because the true foundation of the right to recover on a quantum meruit does not depend on the existence of an implied contract, the contract was not one by which the plaintiff sought to enforce the oral contract. Thus, the statutory limiting provision did not apply. 16 At [85], the plurality added that the second point to be noted is that unjust enrichment was identified as a legal "concept" unifying "a variety of distinct categories of case". Their Honours said it was not identified as a principle which can be taken as a sufficient premise for direct application in particular cases. Rather, it is necessary to proceed by the ordinary processes of legal reasoning and by reference to existing categories of cases in which an obligation to pay compensation has been imposed. Their Honours thus adopted the view that, to identify the basis of such actions as restitution and not genuine agreement is not to assert a judicial discretion to do whatever idiosyncratic notions of what is fair and just might dictate. On the contrary, what the recognition of the unifying concept does is to "assist" in the determination, by the ordinary processes of legal reasoning of the question whether the law should, in justice, recognise an obligation in a new or developing category of case. 17 In the factual circumstances of Lumbers, the plurality, at [86], thus found that the submission made on behalf of the respondent that acceptance of a benefit, without a request, suffices to found an action for work and labour done or money paid, finds no direct support in Pavey & Matthews, and that the issue did not arise and was not decided in that case. Their Honours added that the question to which Pavey & Matthews directs attention was whether the long-established and well-recognised category of cases constituted by claims for work and labour done or money paid at the request of another should be extended or developed in the manner in which the builders there contended. To that question it in effect said no, on the facts of that case. 18 In this proceeding, the restitutionary or unjust enrichment claim is pleaded by the cross-claimants on the basis that while Mr Vinciguerra obtained a benefit from the plaintiff, it was a benefit gained at the defendants' expense because they are out of pocket for the expense. In para 3 of their defence, the defendants deny that the plaintiff incurred any excessive expenses at their hands. They plead that the motor vehicle expenses they paid for the plaintiff included stamp duty on Mr Vinciguerra's BMW, which it is said was "not for the benefit of the Plaintiff and which should be reimbursed to the Plaintiff by Mr Vinciguerra". They also plead travel expenses they paid for the plaintiff which it is said were incurred for living away from home expenses for Mr Vinciguerra and were "excessive and should be reimbursed to the Plaintiff by Mr Vinciguerra". 19 In Lumbers, at [82], the majority of the Court rejected the submission that the acceptance of a benefit, without a request, would be sufficient, at least in that case, to found an action by the subcontractors against the owner for the building work they had done. They said, "That is not so". 20 There is a real difficulty, in my view, in this case, is that, as pleaded, if any party suffered a disadvantage as a result of the "unjust enrichment" alleged against Mr Vinciguerra, it was the plaintiff. Mr Vinciguerra did not receive any benefits under any contractual arrangements he had with the defendants. Nor is there a plea that he in any formal sense requested the defendants personally to make the payments alleged. In this, the case as pleaded is not like that of Kazar, in the matter of Frontier Architects Pty Limited (in liq) [2010] FCA 1381, where Flick J at [167]-[168] on the facts found a request was made and that an unjust enrichment had occurred. While there may be some slim argument open, in my view, on the pleaded case there are no "reasonable prospects" of such a claim succeeding. 21 In all of the circumstances it seems to me it is simply not open to the cross-claimants, in effect, to run a case on behalf of the plaintiff, but not in the plaintiff's name, of a restitutionary or unjust enrichment nature against Mr Vinciguerra by way of a separate cause of action in the cross-claim or when the real complaint, if there is one, should come from the plaintiff. 22 I am not satisfied that the claims made in the cross-claim against Mr Vinciguerra have reasonable prospects of success and would therefore strike out the amended cross-claim against the second cross-respondent. para 4 and para 5 of the plaintiff/cross-respondents' interlocutory application 23 By their interlocutory application, the plaintiff/cross-respondents seek: 4. A declaration that the orders made by the Honourable Justice Gilmour on 1 September 2010 in Vinciguerra v MG Corrosion Consultants Pty Ltd WAD 90 of 2008 granted to Alberto Cesario Vinciguerra leave to defend the cross-claim in the name of MG Corrosion Consultants Pty Ltd. 24 Alternatively, an order is sought that: 5. Mr Vinciguerra be granted leave to defend the cross-claim in the name of MG Corrosion Consultants Pty Ltd on the same conditions that leave was granted to Mr Vinciguerra to pursue proceedings in the name of the company by the orders made on 1 September 2010 in WAD 90 of 2008. 25 The plaintiff/cross-respondents contend that the order made by Gilmour J granting leave to Mr Vinciguerra under s 236 and s 237 of the Corporations Act 2001 (Cth) (Corporations Act) extends to leave to defend a "defensive cross-claim" such as that made in these proceedings, without any further order being necessary. 26 They say the cross-claim is wholly defensive in nature and by defending a defensive cross-claim, the plaintiff, as cross-respondent is in substance performing the same task as pleading a reply. As the plaintiff would not require leave to reply it does not require leave to defend the cross-claim. 27 It is further contended that s 236 is directed to bringing or "intervening" in proceedings, and as MG Corrosion Consultants Pty Ltd is the plaintiff it cannot be given leave to intervene in the same proceedings. 28 It is thereby argued that the obvious purpose of s 236 and s 237 is to enable a person to bring or intervene in proceedings which a company would not otherwise pursue. If the grant of leave did not authorise the company to defend a defensive cross-claim, it would be prevented from fully pursuing the derivative action and the purpose of those provisions would be defeated. Thus, in order to give effect to the purpose of those sections, the plaintiff must be able to defend the cross-claim without a further grant of leave being required. 29 If leave is required, then the plaintiff submits it should be granted leave to defend the cross-claim. In this regard, it is contended that s 237(2) of the Corporations Act provides that the Court "must" grant leave where the stated criteria are satisfied but does not provide that leave cannot be granted unless they are satisfied. Thus, it is within the discretion of the Court to grant leave where the criteria are not satisfied but leave is otherwise appropriate and necessary in special circumstances. It is then submitted that the circumstances here are special as it is proposed to file a defence to a defensive cross-claim. 30 As to the alternative proposition, that the Court has a general discretion to grant leave under s 237 even where the s 237 criteria are not satisfied, for example, in special circumstances, the submission made is not supported by authority. Indeed, authority is to the contrary. In Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534 at [27], Barrett J observed that, while Pt 2F.1A does not say, in so many words, that the Court must not grant leave if any of the prescribed conditions is not satisfied, "that must be its meaning". His Honour there explained that it cannot be intended that there should be a judicial carte blanche permitting the grant of leave to proceed on a company's behalf where a competent applicant makes out a case on grounds foreign to those enumerated in s 237(2) or fails to bring himself or herself wholly within the parameters which, if they are found to exist, compel the grant of leave. His Honour considered that the Court will grant leave where it finds that all stated prerequisites are satisfied but will otherwise refuse leave. His Honour considered such a course was consistent with the approaches taken in RTP Holdings Pty Ltd v Roberts (2000) 36 ACSR 170 (Lander J) and Jeans v Deangrove Pty Ltd [2001] NSWSC 84 (Santow J). I respectfully agree with what Barrett J there said. 31 I accept that on its face, s 237(2) simply says that the Court "must grant the application if it is satisfied" that the subsequent criteria are met. But the subsection must be read in the context of what precedes it in Pt 2F.1A. First, s 236(1) enables a person to bring proceedings on behalf of a company or intervene in any proceedings in which the company is a party if the person is, generally speaking, a member or former member or officer or former officer of the company and "is acting with leave granted under section 237". Section 236(3) abolishes the general law right to bring or intervene in proceeding on behalf of the company. Section 237(1) then provides that a person referred to in s 236(1)(a) "may apply to the Court for leave to bring, or to intervene in, proceedings". It is in all of these circumstances that the s 237(2) words must be construed. The subsection does not commence, for example, by empowering the Court in general terms to grant leave in certain circumstances. Rather it commands the Court in a peremptory fashion to grant leave if the stated criteria are met: "The Court must grant the application if it is satisfied that…". 32 In all of these circumstances, as the abovementioned authorities suggest, the Parliament has made it quite plain that derivative proceedings can only be conducted under the Corporations Act, not under the general law, and only where leave has been granted. That leave can only be granted if the stated criteria are met. There is no general or "special circumstances" discretion in the Court to grant leave if the stated criteria or some of them are not met. If the position were otherwise, the stated criteria would count for nothing and the obvious intention of Parliament to enable a derivative action only in exceptional circumstances would be frustrated. In these circumstances, the submission made to the contrary on behalf of the plaintiff is rejected. 33 In these circumstances, and it not being argued that the s 237 criteria are or can be established here, the question is whether the current derivative proceedings in respect of which Gilmour J initially gave leave comprehends the defence by Mr Vinciguerra, in the plaintiff's name of the cross-claim filed by the cross-claimants. 34 So far as the cross-claim against the company is concerned, the cross-claim relies on and repeats paras 7, 8, 9, 10 and 11 of the defence and para 2(h) of the defence. It is, as the plaintiff/cross-respondents submit, wholly defensive. While a cross-claim is a separate and distinct proceeding in its own right, this cross-claim does not raise truly separate or distinct issues from those raised in the defence. 35 In my view, in these circumstances, it is appropriate to infer that the leave given to Mr Vinciguerra to commence the primary proceeding on behalf of the company and in its name against the defendants extends to the maintenance of a defence to any cross-claim which is wholly dependant on a defence filed by those defendants in the primary proceeding. Any other view would be artificial and disruptive of the complete and proper resolution of the matters in respect of which leave to institute the proceeding was given. 36 I am therefore prepared to make the declaration sought in para 4 of the interlocutory application. Para 2 of defendants/cross-claimaints interlocutory application 37 By para 2 of their interlocutory application, the defendants/cross-claimants sought leave to amend the cross-claim in accordance with the minute of proposed amended cross-claim dated 27 May 2011 dealing with the proposed restitutionary claim against Mr Vinciguerra. 38 The parties subsequently consented to an order being made that the cross-claim be amended in accordance with a minute filed 22 July 2011 attached to a minute of consent order filed in Court. The parties by agreement left open the plaintiff's challenge to the cross-claim pleaded against the second cross-respondent. 39 In light of my rulings above concerning the striking out of that claim, no further order seems necessary. Para 3 of the interlocutory application of the defendants/cross-claimants 40 By para 3 of their interlocutory application, the defendants/cross-claimants seek an order that: 3. Solomon Brothers cease to act for MG Corrosion Consultants Pty Ltd on the cross-claim. 41 The apparent basis of this application is tied to the question of whether leave is required under s 236 and s 237 of the Corporations Act for the company to defend those proceedings or whether Mr Vinciguerra, in light of the leave previously granted to him to maintain the derivative action, any such leave is necessary. 42 In light of my ruling above that the grant of leave by Gilmour J to commence the derivative action comprehends maintenance of a defence in any cross-claim that is wholly dependent on the defence in the derivative action, there is no difficulty with the plaintiff's solicitors acting for the company in the cross proceeding. 43 I would therefore dismiss the application for an order in the above terms. para 4 of the interlocutory application of defendant/scross-claimants 44 By para 4 of their interlocutory application, the defendants/cross-claimants seek an order that: 4. Solomon Brothers cease to act for Mr Alberto Cesario Vinciguerra on the cross-claim. 45 An order in these terms is sought on the apparent basis that the solicitors acting for the plaintiff pursuant to instructions received from Mr Vinciguerra as the recipient of the leave of Gilmour J to maintain the derivative action against the defendants, would be in a position of conflict if they were also to act for Mr Vinciguerra in relation to the cross-claim brought against him by the defendant/cross-claimants in relation to matters to do with the administration of the company. 46 In light of the order that the cross-claim against Mr Vinciguerra be struck out, this ceases to be an issue and the application for such an order should formally be dismissed. Para 5 of the interlocutory application of the defendants/cross-claimants 47 By para 5 of their interlocutory application, the defendants/cross-claimants seek an order in the following terms: 5. The plaintiff provide supplementary discovery of: (a) all documents relied upon by Mr Trevor Gorey in the preparation of his report into the affairs of the plaintiff dated 10 September 2007; and (b) all notes (including handwritten and electronic) made by Mr Trevor Gorey in the preparation of his report into the affairs of the plaintiff dated 10 September 2007. 48 The report of Mr Gorey was adduced in evidence in the proceeding for leave under s 236 and s 237 of the Corporations Act before Gilmour J. Obviously the defendants now wish to have discovery of the documents led by the plaintiff upon which Mr Gorey relied in making his report. Mr Gorey of course is not a party to this proceeding, but the relevant documents belong to the plaintiff. 49 In its written submissions, the plaintiff says that the company resists giving discovery at this point on the basis that it is premature to provide discovery before the pleadings are finalised and all matters in dispute are identified. Further or alternatively, the report is subject to legal professional privilege which the company waived for the purpose of those proceedings. Waiver of the privilege attaching to the report, however, did not waive privilege over the documents supplied by the company to Mr Gorey for the purposes of preparing the report. 50 Further or alternatively to that submission, the plaintiff says that the documents were relevant to the matters in dispute in WAD 90 of 2008, for the purposes of grant of leave to bring the proceeding, but are irrelevant to these proceedings. The statement of claim is based on the events themselves and not on Mr Gorey's analysis for the purpose of establishing an arguable case to obtain a grant of leave. The source documents reviewed by Mr Gorey and his working papers are, therefore, not relevant to any matter in dispute in this proceeding. 51 In my view, the basis or bases upon which the plaintiff resists discovery is or are insufficient. Proceedings of this nature which are hotly contested and have already been through the procedure whereby leave to commence a derivative action has been granted, and there is now a statement of claim and amended defence filed in the proceeding, discovery of all relevant documents should be given. The materials underlying Mr Gorey's report are of obvious relevance. He could, for example, be cross-examined by reference to them. There is no legal professional privilege question in circumstances where, for the purpose of maintaining these proceedings, the report of Mr Gorey has been produced in the earlier legal proceedings. The particular documents that were used by Mr Gorey for the purpose of making his analysis have no particular obvious status as privileged documents. Given that they helped to explain that report and no doubt could become relevant in the course of any cross-examination of Mr Gorey at the trial in this proceeding, it is appropriate that they be discovered now rather than later. I do not accept that they are not relevant to any matter in dispute in the proceeding, given that they underpin the report Mr Gorey gave that was relied upon by Gilmour J for the purpose of giving leave to commence the derivative proceeding. 52 The scope of the discovery required by the defendants/cross-claimants is however too broad, requiring in effect separate disclosure by Mr Gorey, a non-party, of his own materials created for the purpose of preparing the report. There is nothing to indicate such documents belong to the plaintiff. Discovery should therefore be limited to the documents supplied by the plaintiff to Mr Gorey for the purposes of preparing his report. 53 There should therefore be an order in terms of para 5 of the interlocutory application of the defendants/cross-claimants. costs 54 I would allow each party costs on their application to the extent I have made orders that favour them, but not otherwise. orders 55 I would therefore make orders in the following terms: 1. As to the plaintiff and cross-respondents' notice of motion filed 6 May 2011 the Court orders that: (a) The cross-claim against the second cross-respondent be struck out. (b) It is declared that the orders made by the Honourable Justice Gilmour on 1 September 2010 in Vinciguerra v MG Corrosion Consultants Pty Ltd WAD 90 of 2008 granted Mr Alberto Cesario Vinciguerra leave to defend a cross-claim in the nature of the cross-claim filed in this proceeding in the name of MG Corrosion Consultants Pty Ltd. (c) The defendants/cross-claimants pay the costs of the application limited to those matters the subject of these orders, to be taxed if not agreed, but not otherwise. 2. As to the defendants and cross-claimants' notice of motion filed 30 May 2011 the Court orders that: (a) The application for orders in terms of para 3 be dismissed. (b) The application for orders in terms of para 4 be dismissed. (c) The plaintiff provide supplementary discovery within 21 days of all documents supplied to Mr Trevor Gorey in connection with the preparation of his report into the affairs of the plaintiff dated 10 September 2007, including all forms of communication therewith. (d) The plaintiff pay the defendants/cross-claimants costs of the application limited to the subject of these orders, to be taxed if not agreed, but not otherwise. I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. Associate: Dated: 4 May 2012