FEDERAL COURT OF AUSTRALIA Lamond (No 4) [2017] FCA 820 File number: SAD 333 of 2016 Judge: BESANKO J Date of judgment: 5 July 2017 Date of publication of reasons: 24 July 2017 Catchwords: PRACTICE AND PROCEDURE – consideration of an application seeking orders for production of documents pursuant to prior search orders, r 7.01 of the Federal Court Rules 2011 (Cth) and discovery and non-party discovery rules – where certain documents now sought to be produced were not in existence at the time the search was carried out – where the true nature of the orders sought is one for discovery and inspection – where there are only sufficient grounds to support orders for non-party discovery as against two respondents – where the Court is otherwise not satisfied that the proposed applicant has established the documents sought are, or are likely to be, directly relevant. PRACTICE AND PROCEDURE – consideration of an application seeking orders for production of documents pursuant to Notices to Produce under r 20.31 – whether affidavits in which the documents are mentioned are "spent" where the applications they respond to were not pursued by the proposed applicant – where affidavits are to be relied upon in another proceeding – where documents are mentioned sufficiently for the purposes of the rule. PRACTICE AND PROCEDURE – consideration of an application seeking orders for additional searches of seized material – where the previous orders for access were made by consent whereas the orders now sought are opposed – consideration of the decision in Metso Minerals (Australia) Ltd v Kalra (No 3) [2008] FCA 1201 – where documents are being sought as substitute for discovery or in tandem with, or as an adjunct to, the discovery process. CORPORATIONS – consideration of an application seeking an order under r 7.01 or s 1324 of the Corporations Act 2001 (Cth) that a director authorise payment of employee wages and entitlements as and when requested – where director proffered undertaking which is fair and reasonable – where application seeks an order under r 7.01 or s 1324 of the Act that the company reimburse the proposed applicant a sum of money – where company is not represented before the Court – where the directors are engaged as bitter protagonists in litigation before the Court – where such an order would involve the Court recognising and enforcing a debt. Legislation: Corporations Act 2001 (Cth) ss 237, 1324 Federal Court Rules 2011 (Cth) rr 7.01, 7.42, 7.43, 20.13, 20.15, 20.23, 20.31 Cases cited: Lamond [2017] FCA 180 Lamond (No 2) [2017] FCA 548 Lamond (No 3) [2017] FCA 610 Metso Minerals (Australia) Ltd v Kalra (No 3) [2008] FCA 1201 Date of hearing: 14 June 2017 Registry: South Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 33 Counsel for the Prospective Applicant: Mr C Munt Solicitor for the Prospective Applicant: Scanlon Carroll Pty Ltd Counsel for the Prospective First, Third, Fourth, Sixth, Eighth and Tenth Respondents: Mr R Ross-Smith Solicitor for the Prospective First, Third, Fourth, Sixth, Eighth and Tenth Respondents: DeGaris Lawyers Counsel for the Prospective Second and Fifth Respondents: Mr T Duggan SC with Mr R Kennett Solicitor for the Prospective Second and Fifth Respondents: Cowell Clark Commercial Lawyers Counsel for the Prospective Seventh and Ninth Respondents: The Prospective Seventh and Ninth Respondents did not appear ORDERS SAD 333 of 2016 BETWEEN: PETER COLIN LAMOND Prospective Applicant AND: GREEN TRIANGLE LIVESTOCK & REAL ESTATE PTY LTD ACN 600 378 489 Prospective First Respondent OWEN ROBERT PETTINGILL Prospective Second Respondent CHRISTOPHER JOHN MANSER (and others named in the Schedule) Prospective Third Respondent JUDGE: BESANKO J DATE OF ORDER: 5 JULY 2017 THE COURT ORDERS THAT: 1. The Prospective Tenth Respondent, Kerry Hill, make discovery to the Prospective Applicant within 7 days, of full copies of all invoices, including usage details relating to her mobile telephone number 0413 148 042 for the period 1 July 2016 to 15 November 2016. 2. Bernadine Joy Manser make discovery to the Prospective Applicant, within 7 days, of full copies of all invoices, including usage details relating to her mobile telephone number 0407 235 345 for the period 1 July 2016 to 15 November 2017. 3. The Green Triangle database referred to in paragraph 114 of the affidavit of the Prospective Third Respondent, Christopher John Manser, sworn 6 January 2017, be produced to the Prospective Applicant within 7 days by the independent computer experts in its native electronic form as at 12 December 2016, or otherwise as at the present time, to the extent it is reasonably possible for them to do so, in connection with the Notice to Produce addressed to the Prospective First and Third Respondents filed on 13 January 2017. For the sole purpose of the production by the independent computer experts of the Green Triangle database in its native electronic form, the Prospective First Respondent is to provide the independent computer experts within two business days the administrator username and password for the Prospective First Respondent's SaleG8 cloud-based software. 4. The email correspondence from Garth John Manser to Christopher John Manser referred to in paragraph 56 of the affidavit of the Prospective Fourth Respondent, Garth John Manser, sworn 6 January 2017, be produced to the Prospective Applicant pursuant to the Notice to Produce addressed to the Prospective Fourth Respondent and filed on 13 January 2017. 5. The Prospective Second Respondent, Owen Pettingill, make discovery to the Prospective Applicant within 14 days of full copies of all bank statements for account number 125299640 in his name held with BankSA for the period 1 July 2008 to 20 December 2013. 6. The Prospective Second Respondent, Owen Pettingill, make discovery to the Prospective Applicant within 14 days of full copies of all bank statements for the Maxi Saver account number 128452840 held in his name with BankSA for the period 15 October 2013 to 28 February 2017. 7. Save and except for SLS41, 43, 80, 81, 85, 86 and 87 the annexures to the affidavit of Sharelle Louisa Staff lodged electronically with the Court on 21 March 2017 at 4:12 pm (ACDT) be excluded from the order as to confidentiality comprising order 35 of the Orders made on 19 December 2016. 8. The Interlocutory Application dated 13 April 2017 be otherwise dismissed. 9. As for the Interlocutory Application dated 24 May 2017, the Prospective Second and Fifth Respondents execute the undertaking amended in paragraph 3 to delete "7 days" and substitute "21 days" signed by me and dated today's date, and serve and send a copy of the undertaking to the Court by 4:00 pm on Friday, 7 July 2017. 10. The order sought in paragraph 5 of the Interlocutory Application dated 24 May 2017 be refused. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT BESANKO J: 1 Mr Peter Lamond has issued two interlocutory applications in this proceeding. The first interlocutory application is dated 13 April 2017. The second interlocutory application was amended and the amended interlocutory application is dated 24 May 2017. I heard submissions from the parties on each application and delivered my rulings on 5 July 2017. These are my reasons for those rulings. 2 In previous rulings, I identified the nature of this proceeding (SAD 333 of 2016) and of the related proceeding (SAD 93 of 2017) and I determined interlocutory applications and a number of procedural issues which have arisen in this proceeding: Lamond [2017] FCA 180 (application for an order requiring the transfer of mobile telephone numbers); Lamond (No 2) [2017] FCA 548 (a costs application and a case management issue); and Lamond (No 3) [2017] FCA 610 (orders as to the sequence in which proceedings are to be determined and applications). I will not repeat the matters set out in those reasons. Interlocutory application dated 13 April 2017 3 Mr Lamond seeks 21 substantive orders. Those orders are organised under various headings as follows: (1) Orders for production of telephone invoices: paragraphs 1-5; (2) Production of documents pursuant to Notices to Produce: paragraphs 6-10; (3) Additional searches of seized electronic materials: paragraphs 11-18; and (4) Other orders: paragraphs 19-21. Orders for production of telephone invoices 4 Paragraphs 1-4 inclusive seek an order for production of invoices, including usage details relating to specified mobile telephone numbers of Mr Owen Pettingill, Mr Christopher Manser, Mr Garth John Manser and Ms Kerry Hill respectively. Paragraph 5 seeks an order against Ms Bernadine Joy Manser for production "by way of non-party discovery" of invoices relating to a specified mobile telephone number of Ms Manser. 5 Mr Lamond identifies the following sources of power for the orders he seeks in paragraphs 1-4. First, a search order made against Mr Pettingill (among others) on 9 December 2016 and a search order which was in similar terms made against Mr Christopher Manser, Mr Garth Manser and Ms Hill (among others) on the same date; secondly r 7.01 of the Federal Court Rules 2011 (Cth) (the Rules); and thirdly, the discovery and non-party discovery rules in the Rules in connection with the proceeding to wind up P & L Livestock Pty Ltd (P & L Livestock) and the proceeding brought by Mr Lamond pursuant to s 237 of the Corporations Act 2001 (Cth) for leave to bring a proceeding in the name of the company. The winding up proceeding has been brought by Mr Pettingill and was commenced by an interlocutory process issued in this proceeding. Mr Lamond has filed a Notice of Opposition to the winding up of the company. Mr Lamond's application for leave to bring a proceeding in the name of the company is proceeding SAD 93 of 2017. I have ordered that there be an expedited hearing of the winding up application and Mr Lamond's application for leave to bring a proceeding in the name of the company with an estimated hearing time of 10 days. This third ground involves orders for discovery in the winding up proceeding as against Mr Pettingill and orders for non-party discovery as against Mr Christopher Manser, Mr Garth Manser and Ms Hill. 6 This proceeding was commenced by Mr Lamond as an application for urgent relief before the start of a proceeding and the search orders were made in the proceeding. The search orders were executed and the parties agreed to orders for extensive access to the seized materials and I made those orders on 19 December 2016. For reasons which will become clear, it is important to note that those access orders were made by consent. 7 Mr Lamond submits that he is entitled to the orders in paragraphs 1-4 because the documents fall within the definition of listed things in Schedule A of the search orders. In the case of Mr Pettingill, the relevant paragraphs are paragraphs 10 and 12 and in the case of Mr Christopher Manser, Mr Garth Manser and Ms Hill, the relevant paragraphs are paragraphs 8 and 9 of Schedule A. Mr Lamond contends that the respondents were obliged under the terms of the search orders to disclose to the members of the search party the whereabouts of all listed things whether at the premises or otherwise (cl 9(c)) and to inform him of the whereabouts of the listed things in writing at or before the further hearing on the return date (cl 23(a)). 8 A search order is made for the purpose of securing or preserving evidence (rr 7.42 and 7.43). A search order does not necessarily result in the production of the documents to the party who has obtained the orders. The reality is that this is not an application for breach of the order or for further compliance with the order. For example, some of the proposed orders seek the production of documents which would not have been in existence at the time the search was carried out. The reality is that Mr Lamond seeks these documents as part of his case for proceedings already on foot and for his proposed proceeding in the name of the company and himself. 9 Rule 7.01 provides that if a matter is urgent, a person who intends to start a proceeding may apply to the Court without notice as if that person had started the proceeding and the application had been made in the proceeding for one or more of four types of orders. The two types of orders which Mr Lamond relies are an injunction or an order for the inspection of property. Mr Lamond submitted that I should grant a mandatory injunction under r 7.01(a) requiring the production of the invoices. That is not appropriate when it is plain that the true nature of the order sought is one for discovery and inspection. The same may be said of Mr Lamond's application insofar as he relies on r 7.01(b). In addition, it does not seem to me that the matter for the purposes of r 7.01 relates to "property". The "matter" for the purposes of r 7.01(b) consists of the substantive grounds of complaint not the invoices. 10 It seems to me that it is open to the Court to make the order sought against Mr Pettingill as an order for discovery under rr 20.13 and 20.15 and the orders sought against Mr Christopher Manser, Mr Garth Manser and Ms Hill as orders for non-party discovery under r 20.23. Mr Lamond acknowledges in the application that the order sought against Ms Manser (that is, the order in paragraph 5) is an order by way of non-party discovery. 11 Discovery is not ordered as a matter of course. In the case of standard discovery, the documents which must be discovered are those that are directly relevant to the issues, and that is also the test for non-party discovery. In circumstances such as the present, the approach to an order for specific discovery should be similar. 12 The following matters are relevant in terms of the orders sought: (1) the documents will reveal telephone contact, but not the content of any conversation; (2) Mr Pettingill, Mr Christopher Manser and Mr Garth Manser, for example, worked in the same business for a substantial part of the relevant period so the mere fact that there is telephone contact between them is unremarkable; (3) as I understand it, the relevance of telephone contact is said to be as follows: (a) as far as Mr Pettingill and the Mansers are concerned, it is said to lie in the communications between them and possibly other Green Triangle respondents; (b) as far as Ms Hill is concerned, it is said to lie in the communications between Ms Hill and Ms Brooke Stephenson, Ms Hill and Mr Pettingill, Ms Hill and the Mansers; and (c) as far as Ms Manser is concerned, it is said to lie in her extensive involvement in November 2016 in the establishment of the Green Triangle business and communications between Ms Manser on the one hand and Ms Hill and Ms Stephenson on the other. 13 I am satisfied that there are sufficient grounds to support orders for non-party discovery in the case of Ms Hill and Ms Manser. I say that because of the suggestion that Ms Hill was encouraged to leave her employment with P & L Livestock and join Green Triangle and because of the central nature of the allegations concerning the creation of Green Triangle's client list. Otherwise, I am not satisfied that orders for discovery or non-party discovery should be made. The request may well be fishing, but, at the least, I am not satisfied that Mr Lamond has established that the documents are, or are likely to be, directly relevant. 14 In those circumstances, I made orders in terms of paragraphs 4 and 5 of the interlocutory application, but the orders were expressed as orders for discovery. I declined to make orders in terms of paragraphs 1-3 of the interlocutory application. Production of documents pursuant to Notices to Produce 15 The relevant rule is r 20.31 and that rule provides that a party may serve on another party a notice to produce for the inspection of any document mentioned in a pleading or affidavit filed by the second party. 16 The main argument advanced in opposition to these orders is that the affidavits were filed in response to applications by Mr Lamond for wide-ranging injunctions which applications were not pursued. It is said that in those circumstances the affidavits are in a sense "spent". That proposition is true in the case of the affidavit of Ms Stephenson sworn on 6 January 2017 because she is not a proposed witness in the winding up proceeding and in the exercise of my discretion I would not make the orders sought in paragraphs 7-9 inclusive. Whether there is some other proceeding for obtaining the documents is a matter for Mr Lamond to consider. 17 The proposition is not correct in the case of the affidavits of Mr Christopher Manser and Mr Garth Manser because those affidavits are to be relied upon in the winding up proceeding. I think that the documents are mentioned in the affidavits sufficiently for the purposes of the rule. In those circumstances, I considered it appropriate to make the orders sought in paragraphs 6 and 10. Additional searches of seized materials 18 The previous orders for access were made by consent whereas the orders now sought are opposed. 19 I was referred to the decision in Metso Minerals (Australia) Ltd v Kalra (No 3) [2008] FCA 1201 (Metso Minerals). In light of that decision, in my opinion the orders sought should be refused. 20 As I said, it seems to me that access to the documents is sought for the purposes of gathering evidence for use in the winding up proceeding or the proposed proceeding. It is not sought for the purposes identified by Flick J in paragraph 28 of Metso Minerals. The documents are being sought as substitute for discovery or in tandem with, or as an adjunct to, the discovery process. As Flick J said in Metso Minerals, this course is not permitted (at [36], [43] and [49]). 21 Even if that is not correct, I would exercise my discretion to refuse the orders sought for the following reasons: (1) by consent, there has already been substantial access to the seized materials; (2) there has been sufficient access to the seized materials by Mr Lamond to enable him to draw a detailed proposed statement of claim in SAD 93 of 2017; (3) should the company be wound up, the proposed proceeding may never be brought, or never brought in the form in which it now appears; and (4) if, as I consider to be the case, the real purpose of the further access orders is to collect evidence in connection with the winding up proceeding and application for leave under s 237 of the Corporations Act, then Mr Lamond should use such discovery and disclosure procedures as are available to him in those proceedings, rather than possibly wider "discovery" or "disclosure" by an order for access to the seized materials. 22 In the circumstances, I refused to make the orders sought in paragraphs 11-18. Other orders (bank statements) 23 The orders sought in paragraphs 19 and 20 relate to bank statements for accounts held in the name of Mr Pettingill. Paragraph 19 has been amended to change the period from 1 July 2008 to 28 February 2017 to 1 July 2008 to 20 December 2013. 24 Having considered the evidence and the allegations made, I considered that an order for discovery should be made in terms of paragraphs 19 (as amended) and 20. I made such orders expressed as orders for discovery. Other orders (confidentiality) 25 In paragraph 21, Mr Lamond seeks an order that annexures to the affidavit of Ms Sharelle Louisa Staff lodged electronically with the Court on 21 March 2017 at 4.12 pm (ACDT) be excluded from the order as to confidentiality comprising paragraph 35 of the orders made on 19 December 2016. 26 The applicant seeks a release from the confidentiality order so that the documents can be shown to him and he can adequately instruct his solicitors. 27 The Green Triangle parties have identified a number of the annexures as being commercially sensitive, being Annexures SLS 41, SLS 43, SLS 80, SLS 81, SLS 85, SLS 86 and SLS 87. I made an order in terms of paragraph 21 excluding the documents identified by the Green Triangle parties as commercially sensitive. I made it clear to the parties that I had not ruled that the documents identified by the Green Triangle parties are, in fact, commercially sensitive. The parties are to discuss the matter between themselves and I have asked them to do so recognising that there is a balance to be struck between the interests of Mr Lamond in being able to give proper instructions in the proceeding and the interests of preserving commercially sensitive documents from a rival operating in the same area of business. If the parties cannot resolve the matter then the Court will rule on each of the documents excluded from the order. AMENDED INTERLOCUTORY APPLICATION DATED 24 MAY 2017 28 For a time there were three outstanding paragraphs: paragraphs 3, 4 and 5. The matter raised in paragraph 3 has been resolved. 29 In paragraph 4, Mr Lamond seeks an order by way of injunction under r 7.01 or under s 1324 of the Corporations Act that until further order, Mr Pettingill promptly authorise as and when requested, the payment by P & L Livestock of wages and other employee entitlements properly payable by P & L Livestock to its employees, Ms Ellen Pettingill, Mr Ricky Grimes, Mr Alistair Lamond, Ms Abby Hepburn, Mr Tim Bowering and Ms Lorraine Pratt as and when such wages and employee entitlements are due for payment. 30 Before the hearing, Mr Pettingill and Ms Pettingill, proffered the following undertaking: 1. The Second Respondent [Mr Owen Pettingill] hereby undertakes to direct the Fifth Respondent to authorise payments for employee wages and entitlements from the date of this undertaking until the last day of the hearing of the Second Respondent's Interlocutory Application dated 31 January 2017 or 31 August 2017, whichever date shall occur first. 2. The Fifth Respondent [Ms Ellen Pettingill] hereby undertakes to authorise payments for employee wages and entitlements from the date of this undertaking until the last day of the hearing of the Second Respondent's Interlocutory Application dated 31 January 2017 or 31 August 2017, whichever date shall occur first. 3. The Second Respondent reserves to himself the ability to withdraw the undertaking set out in paragraph 1 on providing 7 days' written notice to the Applicant in the event that the monthly management accounts for P & L Livestock Pty Ltd indicate that the company has traded at a loss in the immediately preceding month. 31 Before the parties made their submissions, I had the opportunity of considering the undertaking and suggested that the relevant period should be 21 days not seven days. The undertaking was proffered with that amendment. The undertaking was not accepted in its terms by Mr Lamond and the matter proceeded to argument. I considered that the undertaking was fair and reasonable and should be accepted. It avoids the Court having to determine issues of fact and making orders as to the day to day operations of the company. 32 In paragraph 5, Mr Lamond seeks an order by way of injunction under r 7.01 or under s 1324 of the Corporations Act that P & L Livestock forthwith pay him the sum of $6,582.75, in reimbursement of the monies in that amount that were paid by Mr Lamond to P & L Livestock's employees, Mr Grimes, Mr Alistair Lamond, Ms Hepburn and Mr Bowering on account of their wages on 19 May 2017. At the hearing, Mr Lamond sought to amend this paragraph to include an additional amount. 33 Mr Lamond claims that he paid the wages of the employees of the company during a period when Mr Pettingill wrongfully withheld his authorisation. That may well be so, but I did not think it appropriate to make the order on an application of this nature. The company is not represented before me. I have the two directors before me but they are the bitter protagonists in the litigation before me. The orders sought would not only involve the Court in recognising a debt, but ordering the payment of the debt and I do not think that that is appropriate. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. Associate: Dated: 24 July 2017 SCHEDULE OF PARTIES SAD 333 of 2016 Prospective Respondents Prospective Fourth Respondent: GARTH JOHN MANSER Prospective Fifth Respondent: ELLEN PETTINGILL Prospective Sixth Respondent: BROOKE ANNA STEPHENSON Prospective Seventh Respondent: ROBERT WILLIAM CRUISE Prospective Eighth Respondent: KEVIN NORMAN Prospective Ninth Respondent: P & L LIVESTOCK PTY LTD ACN 074 280 327 Prospective Tenth Respondent: KERRY HILL