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. Item 1 – Board papers and minutes on or around 3 February 2015 1. The defendants rely upon a statement by Mr O'Brien in an email dated 3 February 2015 that the Non-binding Indicative Offer would be discussed at Board level that afternoon. The only discovered document was a final non-binding expression of interest contained in an email sent by Mr O'Brien on 3 February 2015. There are no minutes or board papers for that discussion in either the plaintiffs' evidence or the plaintiffs' discovery. 2. If that is so, the defendants already have the benefit, if it be a benefit, of the forensic position that it is implied by the discovery given by the plaintiffs that documents of those categories were not created. Item 1 of the notice to produce is really based upon an inference or assumption that such documents must have been created in order to enable the relevant board to formulate the Non-binding Indicative Offer. 3. On the basis of the evidence now before the Court it is impossible for the Court to make a judgment that documents within item 1 must have been created and have not been discovered. That is, at this stage, a speculative question. It is not warranted that the defendants be permitted to serve a notice to produce simply for the purpose of making even more clear the effect of such documents not having been formally discovered in the list of documents. 4. Of course, it is possible that when Mr O'Brien or other of the plaintiffs' witnesses are cross-examined, evidence will be given that discloses that documents within item 1 were in fact brought into existence. If that happens, the Court will be required to make appropriate orders, and to deal with the consequences of any disruption to the hearing. Items 2 and 3 – proposed response and recommendation or advice or commentary in connection with the proposed response submitted for board approval on or around 30 January 2015 1. The defendants have justified these items on the basis of a statement by Mr O'Brien that he "is submitting a response for Board approval today" and that "We are finalising our non-binding indicative offer for board approval today." The plaintiff's discovery and evidence do not include any recommendation, advice or commentary. 2. I consider that the position is the same for these items as for item 1. It is understandable why the defendants think that a submission to the board would be in writing and that the finalisation of the non-binding indicative offer would be supported by a written recommendation, advice or commentary. The plaintiffs' discovery and evidence would require an inference that no such documents were produced. However, the Court should not in these circumstances require the production of a category of documents on the basis of the speculation that ordinarily such documents would be produced, when the inference to be drawn from the existing discovery and evidence is that they were not produced. Item 4 – documents recording Mr Phillips' approval of the Non-binding Indicative Offer on 3 February 2015 1. The defendants rely upon a statement in Mr Phillips' affidavit that he approved the making of the offer, but there is no document recording that approval in the plaintiffs' evidence or discovery. 2. Whether or not it would have been good practice for the plaintiffs to have required Mr Phillips to record his approval in writing, there is no basis for the Court to find at this stage that there was a written approval, rather than an oral one. Item 5 – Emails involving Mr Phillips or Mr O'Brien concerning the potential acquisition of the business 1. In essence, the defendants' position is that the plaintiffs have not discovered or given evidence of any emails between Mr Phillips and Mr O'Brien discussing the offer that was made on 3 February 2015, notwithstanding that Mr O'Brien says in his evidence that the offer was sent "after consulting with Mr Phillips." Neither Mr Phillips nor Mr O'Brien gives any evidence about those consultations. 2. The defendants submitted that the request to produce emails may be in a different category to some of the other categories, in that the request for emails may not have been encompassed by the agreed categories for discovery (as, they said, also may be the case for items 7 and 8). 3. Although the practice of communicating by email is now ubiquitous, it has not entirely overtaken oral communication. 4. I accept the defendants' argument that emails between Mr O'Brien and Mr Phillips concerning consultations about the 3 February 2015 offer may not fall within the ambit of the expressions "report" and "meeting minutes" in category 3(i) of the agreed categories for discovery. It is possible, of course, that the plaintiffs may have interpreted the requirements of category 3(i) widely, and the absence of any discovered emails is consistent with no such emails having been produced. 5. However, the category of documents sought by item 5 is narrow and it is in the interests of the efficient conduct of the hearing that the existence or otherwise of such emails be determined before the commencement of the cross-examinations of Mr O'Brien and Mr Phillips. 6. In principle, I would rule that the plaintiffs should be required to comply with item 5 of the notice to produce. However, I am not sure of the significance of the plaintiffs' claim (see [9] above) that item 5 was the subject of a notice to produce dated 22 December 2021, which the plaintiffs responded to on 31 January 2022. Plainly, if the plaintiffs have already responded to a notice to produce that captured the documents in item 5, they should not be required to do so again. It is not clear how I can resolve this uncertainty on the evidence that is before the Court. It should be possible for the parties to resolve this issue. Item 6 – Board papers and minutes on or most recently before 13 March 2015 1. The basis of this item is that the plaintiffs made a Non-binding Indicative Offer dated 13 March 2015, but there are no minutes or board papers relating to the decision to make the offer in the plaintiffs' evidence or the plaintiffs' discovery. 2. I note that the document at Court Book 175 is the minutes of a meeting of the board of Varley Holdings Pty Ltd held on 27 January 2015. Counsel for the plaintiffs explained in submissions that even though that company is not one of the plaintiffs, the plaintiffs took the view that documents falling within category 3(i) of the agreed categories for documents should be discovered, if produced by or for Varley Holdings Pty Ltd even though it is not specifically mentioned in the category. 3. The review of those board minutes showed that, at least for that company, discussion was recorded in the minutes concerning proposed acquisitions (see the reference to Marand Precision Engineering at Court Book 177). 4. I consider that it is sufficiently improbable that the Non-binding Indicative Offer dated 13 March 2015 was made without any board approval being recorded in board minutes that the Court ought to permit item 6 of the notice to produce to stand, so that the issue of whether the offer was made with board approval and the basis of any such approval as may have been recorded in minutes will be determined before the commencement of the hearing. Item 7 – emails attaching a draft of the revised Non-binding Indicative Offer of 13 March 2015 1. In respect of item 7, I would in principle make the same ruling as for item 5. It may be that the Non-binding Indicative Offer made on 13 March 2015 was created on a single computer, and any amendments that were made were overwritten. 2. However, the defendants have a legitimate forensic purpose in investigating whether drafts of the offer were circulated by the plaintiffs' officers, and it is in the interests of the efficient conduct of the hearing that the defendants be able to clarify the matter before the hearing commences. 3. As was the case for item 5, I am not sure of the present significance of the plaintiffs' submission (see [9] above) that the documents within this category have already been produced to the defendants as they fell within item 33 of the list of documents. Again, it should be possible for the parties to resolve this issue. Item 8 – emails sent to or from or copied to Mr Phillips or Mr O'Brien referring to the potential acquisition of the business 1. I will make the same ruling on item 8 as for items 5 and 7. Item 9 – board papers and minutes at which the entry into the purchase agreement was discussed or approved 1. I make the same ruling on item 9 as for item 6. I am prepared to treat board papers and minutes in a different way to potential electronic or paper communications between officers of the plaintiffs, that may or may not have come into existence, at least in those cases where I have been given some reason to understand that a board may have made a relevant decision or considered a proposal. Item 10 – documents submitted to the board concerning the proposed entry into of the purchase agreement 1. I would have treated item 10, insofar as it seeks production of documents that were submitted to the board, in the same way as I have treated items that seek the production of documents, where it is presently a matter of speculation as to whether or not documents of that category were brought into existence. That is, I would have required the defendants to rely upon the content of the plaintiffs' discovery. I consider that in principle such documents are of a different category to board papers and minutes. 2. However, I note pars 23 to 25 of Ms Weeks' affidavit, where she says that a report referred to as having been presented at a board meeting and tabled as read in a context that includes reference to the acquisition of the business has not been included in the plaintiffs' evidence or discovery. That report may or may not have dealt with the proposed acquisition of the business. That should not be left to speculation. I would therefore allow item 10 of the notice to produce to stand limited to the report referred to the minutes of the 28 April 2015 board meeting, provided that the report only needs to be produced if it refers to the proposed acquisition of the business. Item 11 – documents recording the authorisation of Mr Phillips and Mr O'Brien to execute the agreement 1. I do not understand that there is any issue about the authority of Mr Phillips and Mr O'Brien to execute the agreement. The defendants should be required to rely upon the plaintiffs' discovery as to this item. 2. I will leave it to the parties to agree appropriate short minutes of order to give effect to these reasons. 3. I will not deal with the issue of the costs of the notices of motion until the hearing. It may or may not happen at the hearing that evidence is given that demonstrates that the plaintiffs ought to have been ordered to produce documents in respect of items in the notice to produce that I have declined to order be produced at this stage. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 April 2022