G H Varley Pty Ltd v GCG Distribution Pty Ltd [2022] NSWSC 514

Supreme Court New South Wales

Medium Neutral Citation: G H Varley Pty Ltd v GCG Distribution Pty Ltd [2022] NSWSC 514 Hearing dates: 26 April 2022 Decision date: 29 April 2022 Jurisdiction: Equity Before: Robb J Decision: Parties to agree appropriate short minutes of order to give effect to these reasons. Catchwords: CIVIL PROCEDURE — notices to produce — before hearing — notice to produce served by defendants on plaintiffs — application by plaintiffs to set aside notice to produce — where plaintiffs earlier ordered to give discovery to defendants — plaintiffs ordered to comply with some items of notice to produce and not others Legislation Cited: Civil Procedure Act 2005 (NSW), s 56 Uniform Civil Procedure Rules 2005 (NSW), rr 21.2, 34.2 Cases Cited: Azzi v Volvo [2006] NSWSC 283 Category: Procedural rulings Parties: G H Varley Pty Ltd (First Plaintiff) Varley Electric Vehicles Pty Ltd (Second Plaintiff) GCG Distribution Pty Ltd (First Defendant) John Bristow (Second Defendant) Representation: Counsel: J Steele SC & R Thrift (Plaintiffs) S Lawrance SC & D Ward (Defendants)

Solicitors: Kennedys (Australasia) (Plaintiffs) Clyde & Co (Defendants) File Number(s): 2017/164947 Publication restriction: Nil

Judgment 1. These proceedings have been set down for a hearing before me commencing on 9 May 2022. 2. In substance, the plaintiffs' claim is for damages as against the first and second defendants (the defendants) in respect of alleged misleading and deceptive conduct that caused the second plaintiff to acquire a business from the first defendant in 2015. 3. On 22 December 2021, the defendants served on the plaintiffs a notice to produce for inspection. After correspondence between the parties' solicitors, on 31 March 2022 the defendants served a replacement notice to produce on the plaintiffs. The documents required to be produced were described as follows: 1. The Board papers and minutes for the Board meeting(s) of the Varley Group (or any company in it) held on or around 3 February 2015. 2. Documents recording the proposed response to GCG Distribution Pty Ltd that was submitted by Mr O'Brien for Board approval on or around 30 January 2015. 3. Documents recording Mr O'Brien's recommendation or advice or commentary in connection with the proposed response referred to in the previous paragraph. 4. Documents recording Mr Phillips' approval of the Non-binding Indicative Offer submitted by Varley on 3 February 2015. 5. Emails sent to or from or copied to either Mr Phillips or Mr O'Brien in the period from 27 January 2015 to 3 February 2015 referring to GCG Distribution Pty Ltd, the EMC business or Varley's potential acquisition of it (other than emails sent to or from or copied to Mr Bristow, Mr Whitworth or Mr Dunshire). 6. The Board papers and minutes for the Board meeting of the Varley Group (or any company in it) held on almost recently before 13 March 2015. 7. All emails attaching a draft of the revised Non-binding Indicative Offer submitted by Varley on 13 March 2015. 8. All emails sent to or from or copied to either Mr Phillips or Mr O'Brien in the period from 9 to 13 March 2015 referring to GCG Distribution Pty Ltd, the EMC business or Varley's potential acquisition of it (other than emails sent to or from or copied to Mr Bristow, Mr Whitworth or Mr Dunshire). 9. The Board papers and minutes for the Board meeting(s) of the Varley Group (or any company in it) at which entry into the Agreement between Varley Electric Vehicles Pty Ltd and GCG Distribution Pty Ltd was discussed or approved. 10. Documents that were submitted to the Board of the Varley Group (or any company in it) concerning the proposed entry, by Varley Electric Vehicles Pty Ltd, into the Agreement referred to in the previous paragraph. 11. Documents recording the authorisation of Mr Phillips and Mr O'Brien to execute the Agreement referred to in paragraph 9. 1. On 14 April 2022, the plaintiffs filed a notice of motion seeking an order pursuant to rule 34.2 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that the notice to produce be set aside. The plaintiffs also sought an order that the defendants pay their costs of the notice of motion. On 12 April 2022, the defendants filed their own notice of motion in which they, relevantly, sought an order that the plaintiffs produce to the Court the documents identified in the notice to produce. 2. The parties' notices of motion were heard on 26 April 2022. Given the imminence of the hearing, it is necessary for the Court to determine the notices of motion quickly. This brief judgment explains the reasons for that determination. 3. On 17 December 2019, Registrar Walton made orders by consent that the plaintiffs give discovery to the defendants of certain agreed categories of documents, including relevantly: 3. The plaintiff's to disclose (subject to a confidentiality undertaking, but only in respect of sub-paragraphs 3(d), (g) and (i)) by producing to the first defendant and the second defendant, the Documents within the following categories of documents on or before 14 February 2020: … (i) any Document which records or constitutes: (i) a report provided to, or prepared by, the management and/or directors of the first plaintiff and/or the second plaintiff in relation to the EMC Business; or (ii) the meeting minutes of the management and/or directors of the first plaintiff and/or the second plaintiff in relation to the EMC Business; … 1. In purported compliance with the orders made by Registrar Walton, the plaintiffs served on the defendants a verified list of documents duly certified by the solicitor for the plaintiffs. 2. The plaintiffs' position is that the notice to produce should be set aside as an abuse of process. 3. The first submission made by the plaintiffs in support of this claim was that the defendants have been provided with verified discovery by categories. The categories discovered were broad and cover precisely the types of documents sought to be captured by the notice to produce. They specifically submitted that items 1 to 4, 6 and 8 to 11 of the notice to produce fell within one of the sub- categories of category 3(i) of the discovery orders. Item 5 was the subject of a notice to produce dated 22 December 2021, which the plaintiffs responded to on 31 January 2022. As I understand the plaintiffs' position, they say that item 7 of the notice to produce fell within item 33 of the list of documents dated 14 February 2020 and has since been produced to the defendants. 4. Secondly, the plaintiffs submitted that it would not be quick, just or cheap to require the plaintiffs to carry out the defendants' forensic exercise of reviewing the plaintiffs' own discovery. Given the imminence of the hearing, the plaintiffs' position is that they have given proper discovery, and if any of the documents the subject of the notice to produce existed at the time of discovery, then those documents would have been discovered. The effect of the notice to produce will be, if it is not set aside, to require the plaintiffs close to the hearing to review the discovery that they have already given to make judgments about whether any discovered documents fall within the categories of the notice to produce, so that those documents can separately be produced in answer to the notice to produce. The plaintiffs say that it would be oppressive to impose this forensic obligation upon them at this stage of the proceedings, not just because of the imminence of the hearing, but also because of the long delay on the part of the defendants since discovery was given. The position of the plaintiffs is not that they will be required to expend substantial resources on reviewing new sources of documents; rather, they will be required to review their existing discovery to determine what, if any, documents fall within the categories in the notice to produce. That, say the plaintiffs, is a forensic exercise that the defendants should be required to carry out for themselves. 5. Finally, the plaintiffs submitted that, if the defendants were able to persuade the Court that some of the categories in the notice to produce fell outside the agreed categories in the order for discovery, it was now too late for the defendants to seek further discovery from the plaintiffs, as that would require the plaintiffs to reengage in the discovery exercise too close to the commencement of the hearing. The plaintiffs submitted that the service by the defendants of the notice of motion would, if it is not set aside, completely defeat the purpose of the rules in limiting discovery to specified classes. It would amount to using a notice to produce to obtain discovery: see Azzi v Volvo [2006] NSWSC 283 at [11] (Brereton J, as his Honour then was). 6. I will accept that Brereton J has sufficiently discussed the relevant principles and I will not repeat what his Honour has said. 7. It is appropriate to note two features of the present application which appear to differ in some substance from the circumstances considered by Brereton J. First, the affidavit evidence in support of the plaintiffs' notice of motion was somewhat formal in character, in that it put into evidence the documents and orders necessary to prove the making of the order for discovery and the provision of the verified list of documents, together with the notices to produce and the correspondence between the parties' solicitors. The evidence did not extend to explain to the Court the nature of the effort that would be required by the plaintiffs to respond to the notice to produce, the time it would take, or the number of persons that would be involved in the exercise. In the present case, there is no evidence of actual oppression, although it remains the case that the plaintiffs will be diverted from the task of preparing their own case for hearing by the need that I have explained above for them to review the documents already discovered to make judgments about whether any documents fall within the notice to produce. 8. Secondly, as the defendants correctly submitted, the categories of documents in the notice to produce are tightly defined and fall within very narrow time periods. 9. In their submissions, the defendants acknowledged that the orthodox way for a party to seek the production of additional documents after the other party has given discovery in accordance with agreed categories is for the party complaining of the inadequacy of the discovery to seek an order for further and better discovery. That will sometimes be a difficult application to make good and may require the applicant to demonstrate that discovery has been given on a false principle or that documents discovered identify other documents falling within the categories that have not themselves been discovered. The defendants acknowledged that by serving the notice to produce, they have not made an application for further and better discovery, and furthermore, they were not in a position at the hearing to establish that the existing discovery was inadequate in accordance with the rules. 10. The thrust of the defendants' submissions was more practical, in the sense that they focused on the imminence of the commencement of the hearing and the desirability of preparatory steps being taken to facilitate the efficient cross-examination of the plaintiffs' witnesses, particularly the two principal witnesses, being Mr Phillips and Mr O'Brien. Broadly, the defendants' submission was that the principal witnesses for the plaintiffs gave evidence whereby they asserted that the plaintiffs relied upon representations made by the defendants by means of the provision of information concerning the financial circumstances of the business to be acquired that was misleading and deceptive, without those witnesses disclosing or explaining the internal documentary processes of the plaintiffs whereby the information was analysed or considered in relation to the plaintiffs' decision to offer to purchase the business for a particular price and terms. Furthermore, the defendants submitted that the categories of documents may inadvertently have been drawn more narrowly than would have been effective insofar as the categories referred to activities of the plaintiffs, when it appeared that a related company to the plaintiffs may have been responsible for the production of some categories of documents sought to be captured by the agreed categories. 11. The substance of the defendants' position was that the notice to produce did not, in reality, represent an unorthodox attempt to obtain further discovery from the plaintiffs, but rather it was served in aid of the efficient conduct of the hearing to obviate the need for some cross-examination and to reduce the likelihood that there would be argument and delay of the hearing as a result of the defendants' legitimate pursuit in cross-examination of the possibility that the plaintiffs had recorded their responses to the information provided by the defendants in documents that had not been discovered. 12. As Brereton J said in Azzi v Volvo at [6]: [6] The exercise of deciding whether a subpoena is or is not oppressive is a multifactorial balancing one. Where the documents called for have a high degree of apparent relevance to issues in the proceedings, the court will not shrink from requiring third parties to undertake considerable burdens to search for and produce such documents. On the other hand, where the documents are of slight or little apparent relevance, the extent of the burden cast on the party called to produce documents will weigh much more heavily against allowing the subpoena to stand [Southern Pacific Hotel Services Inc v Southern Pacific Hotel Corp Ltd [1984] 1 NSWLR 710]. 1. I note that his Honour also said at [13]: [13] If the plaintiff contends that documents falling within one of the classes which it specified and in respect of which an order for discovery was made have not in fact been discovered, the only proper remedy is for it to seek further and better discovery, upon proof that there has been a failure to give proper discovery in that class. The defendant, of course, should be alert that if it transpires that it has not given proper discovery of documents in classes which were identified for discovery, then that will have been a serious default on its part. I do not suggest for a moment that that is in fact the case, but in view of the debate which has taken place and in view of the arguments which have been advanced about the subpoena, it should not be assumed that a conclusion that it was not permissible to subpoena these documents involves any conclusion as to whether or not there has been sufficient compliance with the order for discovery in the first place. 1. It is fair to say that the notice to produce in the present case raises different considerations than what I understand would have been the effect of the notice to produce that was set aside in Azzi v Volvo, as Brereton J's reasons strongly suggest that compliance with that notice to produce during the course of the hearing would have been genuinely oppressive. While it is true that notices to produce should not be permitted to be served by a party to circumvent the need to make an application for further and better discovery, the ultimate question will always be whether, in the circumstances of the particular case, requiring the recipient of the notice to produce to answer it will facilitate the just, quick and cheap conduct of hearings in compliance with s 56 of the Civil Procedure Act 2005 (NSW). While the integrity of the discovery process under UCPR r 21.2, which provides that the Court may order that one party give discovery to the other of documents within a class or classes specified in the order, must not be undermined, it has historically been recognised by the courts that the process of determining categories and the implementation of discovery in response to those categories may not be failsafe. Forensic issues may emerge during the final preparation for hearing and during the hearing that justify the Court in permitting a party to serve on another a notice to produce requiring production of a limited number or class of documents at short notice. 2. The issue for the Court in the present case is to determine a fair balance between the maintenance of the integrity of the discovery process and to facilitate the need for achieving a fair hearing. 3. The particular reasons given by the defendants to justify the items in their notice to produce are to be found in the affidavit of Stephanie Elizabeth Weeks sworn on 20 April 2022, Ms Weeks being a solicitor in the employ of the solicitors for the defendants. 4. I will deal with each item in the notice to produce on its merits in response to my understanding of the submissions made by the defendants in support of that item, and my present very limited understanding of the evidentiary issues in these proceedings. That may create an appearance of some inconsistency of result, particularly in relation to board papers and minutes. As I have said, it is necessary to balance the integrity of the discovery process and the forensic consequences of a party not discovering documents that ought to have been discovered, against the forensic utility of permitting the service of a notice to produce that may clarify narrow issues concerning the existence of documents in advance of the commencement of the hearing.