Supreme Court New South Wales Medium Neutral Citation: Lee v Belmore 88 Pty Limited [2025] NSWSC 96 Hearing dates: 20 February 2025 Date of orders: 20 February 2025 Decision date: 20 February 2025 Jurisdiction: Equity Before: Kunc J Decision: General discovery ordered Catchwords: CIVIL PROCEDURE — Discovery — General discovery — Documents relevant to a fact in issue — Preferable to discovery categories in some cases — Overzealous argument over multiple categories and their application inconsistent with achieving overriding purpose — Practice Note SC Eq 11 Legislation Cited: Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Compagnie Financière et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 Gazal v Setiawan [2024] NSWSC 1046 Category: Procedural rulings Parties: Derek Kuo Hsiung Lee (First Plaintiff) MNK Pty Ltd (Second Plaintiff P3 Australasian Properties Pty Ltd Belmore 88 Pty Ltd (First Defendant) Dennis Raymond Bluth (Second Defendant) The Martinez HWL Practice Trust & The East HWL Practice Trust & The Warat HWL Practice Trust & The Marin HWL Practice Trust (Third Defendant) Troy Douglas (Fourth Defendant) Wetbar Pty Ltd (Sixth Defendant) Representation: Counsel: D W Rayment SC/R Hudson (First Plaintiff) P Afshar (First Defendant) A Barnett (Second and Third Defendants) Solicitors: Marcus Connor & Co (First Plaintiff) Baybridge Lawyers (First Defendant) Gilchrist Connell (Second and Third Defendants) File Number(s): 2022/61560 EX TEMPORE JUDGMENT (REVISED) Summary 1. This is a discovery application by the plaintiffs across seven factually related proceedings which I am case managing, with the intention of them being fixed for hearing together before me in the last quarter of this year. They are collectively referred to as the "Belmore 88" proceedings because of the common first defendant, Belmore 88 Pty Ltd. 2. The plaintiffs and some of the defendants (Belmore 88, Schofields 88 Pty Ltd and Mr Andrew Hrsto - the Belmore defendants) who for the purposes of this judgment I shall together refer to as the applicants, agree there should be general discovery (in the sense defined in [9(2)] below). However, two of the defendants, being HWL Ebsworth (HWLE) and a former partner in that firm, Mr Dennis Bluth, disagree. I shall refer to them for the purposes of this judgment as the respondents. 3. In their several proceedings, the plaintiffs allege they have lost money which they paid to HWLE in connection with property developments undertaken by Belmore 88. They contend that HWLE and Mr Bluth were acting for them, but while some of these retainers are admitted, others are partly or wholly denied. Mr Bluth is said to have also been an investor in the developments and later became a director of Belmore 88. 4. The Court will order general discovery. Subject to their amplification where required in what follows, the reasons for that are as follows. 5. First, paragraph 4 of Supreme Court Practice Note SC EQ 11 does not apply in this case (see [11] below). Paragraph 5 of the Practice Note does apply, for the purpose of which there is no dispute between the parties that discovery "is necessary for the resolution of the real issues in dispute" in these proceedings. The issue presented for the Court's determination today is what is the appropriate form of discovery in these cases. 6. Second, the Court's fundamental task is to determine what is required to achieve the overriding purpose under s 56 of the Civil Procedure Act 2005 (NSW) (CPA) by comparing, in the circumstances of these cases, general discovery and category discovery. Section 56 includes: 56 Overriding purpose (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. … 1. Third, general discovery will better achieve the overriding purpose than category discovery in this case because: 1. The issues are well defined by pleadings and the parties' lay evidence filed to date. There should be no unusual or burdensome difficulty in the identification of documents relevant to a fact in issue pursuant to general discovery, especially where the respondents are themselves lawyers. 2. There is a real asymmetry of information in favour of the defendants which gives rise to a real and not fanciful possibility of injustice in trying to ensure categories are adequate in the plaintiffs' interest. That asymmetry is primarily represented by the fact that one of the respondents is the former partner of HWLE who is presumably better placed than anyone to know where relevant material is to be found. 3. There is every chance that there will be a potentially disproportionate amount of time and costs spent arguing about the categories and then parsing and applying those categories in the review of documents. 4. The respondents have not satisfied the Court that general discovery will be more onerous or expensive than category discovery, and given the consideration referred to in the preceding paragraph, there appears to be a realistic prospect that general discovery will not only be no more expensive than categories, but may even be less costly. This last conclusion is a matter of impression. However, that is often a legitimate approach in matters of practice and procedure. The Court would not undertake a precise financial quantification even if it had the necessary evidence, which it does not in this case. 1. The Court has had the advantage of extensive written and oral submissions on behalf of the parties. Mr D Rayment of Senior Counsel appeared with Mr R Hudson of Counsel for the plaintiffs. Mr P Afshar of Counsel represented the Belmore defendants, and Mr A J Barnett of Counsel appeared for the respondents (save in relation to one of the Belmore 88 proceedings in which Mr Bluth is a plaintiff, but which is not presently relevant). What is meant by "general discovery" 1. The parties were agreed that: 1. The Court was not being asked to make an order for "general discovery" of the kind made before the introduction of the Practice Note in 2012. That kind of discovery was based on Compagnie Financière et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55, which included what was often referred to as the "chain of inquiry" test (PG discovery); 2. What was being sought - and what I mean by "general discovery" in these reasons - was the disclosure of documents "relevant to a fact in issue" as defined in UCPR Part 21, r 21.1: Part 21—Discovery, inspection and notice to produce documents Division 1—Discovery and inspection 21.1 Definitions … (2) For the purposes of this Division, a document or matter is to be taken to be relevant to a fact in issue if it could, or contains material that could, rationally affect the assessment of the probability of the existence of that fact (otherwise than by relating solely to the credibility of a witness), regardless of whether the document or matter would be admissible in evidence. This is an important point because this test excludes material solely relating to credit and is more focused than the chain of inquiry test. The latter may expand both the universe of documents to be examined and the degree of consideration and judgment (and therefore time and cost) required to consider each document. 1. Quite apart from whether this was a case where paragraph 4 of the Practice Note applied, discovery was now generally done by reference to agreed categories in accordance with r 21.2: 21.2 Order for discovery (1) The court may order that party B must give discovery to party A of— (a) documents within a class or classes specified in the order, or (b) one or more samples (selected in such manner as the court may specify) of documents within such a class. (2) A class of documents must not be specified in more general terms than the court considers to be justified in the circumstances. (3) Subject to subrule (2), a class of documents may be specified— (a) by relevance to one or more facts in issue, or (b) by description of the nature of the documents and the period within which they were brought into existence, or (c) in such other manner as the court considers appropriate in the circumstances. (4) An order for discovery may not be made in respect of a document unless the document is relevant to a fact in issue. 1. Nevertheless, the Court can still order general discovery in an appropriate case. 1. Against that background, I should say something about the origins of the Practice Note. PG discovery was the default position for many years. In the 1990s and 2000s, especially as electronic document storage became the norm and amidst a spate of increasingly complex litigation, it became apparent that PG discovery had taken on a life of its own. The Court and the profession came to the view that in many cases the cost of PG discovery was disproportionate, often extraordinarily so, to the real issues in dispute. 2. The Court's rules were amended, and the Practice Note introduced to approach the question of disclosure in a much more focused and cost-effective way. The essential provisions of the Practice Note are: Disclosure 4. The Court will not make an order for disclosure of documents (disclosure) until the parties to the proceedings have served their evidence, unless there are exceptional circumstances necessitating disclosure. 5. There will be no order for disclosure in any proceedings in the Equity Division unless it is necessary for the resolution of the real issues in dispute in the proceedings. … 1. Those reforms have achieved their aims. However, as paragraph 5 of the Practice Note necessarily implies, the overriding purpose under the CPA remains the touchstone. In any discovery dispute, including where paragraph 4 is engaged with its requirement for "exceptional circumstances," the Court's task is to fashion an approach which achieves the overriding purpose. Paragraph 4 of the Practice Note does not apply 1. This point may be dealt with shortly. In this case, there are already extensive pleadings and lay evidence-in-chief, defence and reply. Expert evidence has not yet been served. Further lay evidence has been ordered in the light of some amendments to the pleadings. I accept Mr Rayment SC's submission that the ordering of further evidence does not detract from the conclusion that in this case, the parties "have served their evidence" for the purposes of paragraph 4 of the Practice Note. It is therefore not necessary for the applicants to demonstrate "exceptional circumstances". The "Treaty of Versailles problem" 1. Even the most successful reform can produce unforeseen complications. In my experience, which includes regularly hearing disputes in the Applications List about discovery categories, a not infrequent complication in this era of category discovery is what I have sometimes called the "Treaty of Versailles problem". This occurs in some cases, and not necessarily just in large or otherwise complex cases, where parties approach the task of negotiating the categories as though they were drafting an agreement upon which the fate of nations depended, and where every word was existentially consequential. 2. Putting the problem more prosaically, parties overlook that they must approach the task of agreeing categories in accordance with the overriding purpose. This means approaching the task co-operatively, realistically and proportionately in time and expense having regard to the issues genuinely in dispute. The problem was adverted to by Rothman J in Gazal v Setiawan [2024] NSWSC 1046: "Discovery 25 Initially, the motion for discovery was a prayer for discovery in certain categories. After discussion between the parties, it was agreed that there be mutual general discovery, subject to the approval of the Court. 26 Pursuant to the overriding purpose of the Civil Procedure Act 2005 (NSW), which requires the parties and the Court to facilitate the just, quick and cheap resolution of the real issues between the parties, and, in particular, the requirement to facilitate the proposition that costs in proceedings should not be disproportionate to that which is in issue, it is an exceptional course for the Court to order general discovery. Often, general discovery involves significant additional costs in unnecessary circumstances. 27 In the proceedings before the Court, the parties have an agreement that general discovery should occur. The Court, as presently constituted, is not satisfied that the mere agreement of the parties amounts to exceptional circumstances. 28 Nevertheless, this justiciable controversy has a long history with many interlocutory applications. Given the history of the matter and the attitude of the parties, it is most probable that any discovery by category would invite fine distinctions and arguments as to whether a document was properly categorised and sought. 29 In all of the circumstances, including the consent of the parties, the Court is satisfied that general discovery in these proceedings, given the confined factual controversy between the parties, will expedite the proceedings to a greater extent than discovery by categories and will reduce the burden of costs, rather than increase them." 1. In the event that the Court does not order general discovery, I have been provided with large schedules of categories that are agreed, disagreed, and potentially agreed subject to amendment. I do not criticise the parties for doing so. 2. However, first, I have no doubt that much energy has been, and remains to be, expended on, "fine distinctions and arguments" of the kind referred to by Rothman J. Second, the same degree of intensity will necessarily then be applied in determining whether particular documents fall within any one of the many hard-fought and precisely drawn categories. Neither of those outcomes is consistent in these cases with the overriding purpose, if a course more consistent with the overriding purpose is available. 3. I am satisfied, for the reasons in this judgment, that course is general discovery. I should also add that while category discovery is now the norm by reason of UCPR Pt 21 r 21.2 (see [9(3)] above), I do not consider that "exceptional circumstances" (however understood) must be shown to depart from category discovery in an application to which paragraph 4 of the Practice Note does not apply. As I have said, paragraph 5 must be read in the context of the overriding purpose and applied in its terms that if discovery "is necessary for the resolution of the real issues in dispute in the proceedings", then the Court must determine what type of discovery will contribute to that result. Today that will most often, but not necessarily always, be category discovery. The respondents' objection 1. As Mr Barnett concisely submitted, the essence of the respondents' objection to general discovery rested in the nature and size of HWLE's business as advanced through the affidavits of Ms Rebecca Kort and Mr Alexander Haslam. I intend no disrespect by describing the contents of those affidavits in a very summary way. 2. Ms Kort is a solicitor at HWLE, and has been undertaking work for her employers in relation to the proceedings since they commenced in 2021 and 2022. The burden of her affidavit is that HWLE's potentially discoverable documents are: 1. electronically stored on a platform searchable by keywords; 2. hard copy documents stored at HWLE's offices, including her belief that "most, if not all, hard copy documents relating to the proceedings...are kept at HWLE's Sydney office", and 3. archived documents. 1. She concludes with this paragraph under the heading, "Difficulties locating documents": "16 In my experience with locating and retrieving documents for the purposes of the proceedings it has become apparent that: a. the names under which files relevant to the proceedings have been opened are inconsistent; b. the client codes under which the matters have been opened are also inconsistent; and c. not all relevant documents have been saved on the "iManage" system. The consequence of these matters is that they increase the time required to provide discovery, particularly in the case of general discovery where conceivably more documents will need to be considered and reviewed." 1. The last sentence just quoted exposes a fundamental and, in my respectful view, dispositive difficulty in the respondents' argument. That difficulty is that no basis is given for the suggestion that general discovery will "conceivably" (or in fact) involve considering and reviewing more documents than category discovery. Ms Kort gives no evidence of her understanding of general discovery and what it might involve in these cases over category discovery given her knowledge of HWLE's potentially relevant documents. 2. Mr Haslam is a partner of the firm representing HWLE and Mr Bluth in these proceedings. He has been a commercial litigator since 1998, with experience in New Zealand, the United Kingdom and Sydney since 2004. Unsurprisingly for a commercial litigator, he deposes that he has been "involved in a large number of matters in which discovery exercises have been carried out". The Court has no doubt that he is an experienced litigation solicitor. It is expressly on the basis of what he describes as that "experience" that he concludes: "26. In my experience, general discovery is substantially more expensive and time consuming than discovery by appropriately targeted categories, particularly in the context of seeking discovery from a large organisation." 1. As to the size of the organisation, he gives evidence to the effect that HWLE is the largest legal partnership by number of partners in Australia, according to the partnership surveys published by the Australian Financial Review in 2024, and comprises1,696 staff including 278 partners across nine offices nationally. While all that may be true, he does not suggest (and it could not sensibly be suggested) that under either discovery regime full searches and enquiries would have to be made of all those staff, all of those partners, and across all of those offices. 2. It is also on the basis of the experience to which I have just referred that Mr Haslam concludes at paragraph 61 of his affidavit that he estimates the total approximate costs of discovery to his clients to be $659,610 in the case of general discovery, and $287,270 in the case of category. With every respect to Mr Haslam, I accept the applicants' submissions that his conclusions cannot be persuasive for two basic reasons. 3. First, nowhere does he say his experience includes a case (of any size) in which he has been involved in giving general discovery of the kind being sought in this case. In the absence of express evidence about this, Mr Barnett (correctly, in my respectful view) accepted that the Court has no basis to infer one way or the other whether Mr Haslam may have actual experience of such general discovery. 4. Second, and even more fundamentally, Mr Haslam gives no reasons for why he concludes that what appear to be identical tasks will be so much more expensive for general discovery than category discovery. While he says that when he refers to "general discovery" he is referring to Order 1 in the plaintiffs' notice of motion (which refers to "general discovery" with a list and affidavit in accordance with UCPR Pt 21 rr 21.3 and 21.4), nowhere does he set out his understanding of what this means or what assumptions he has made about the tasks to be performed in general discovery versus category discovery other than, for the former, a review of the pleadings to ascertain the types of documents to be discovered. 5. This point may be made by reference to the schedule to his affidavit in which he sets out the various tasks he considers will be required, how long they will take and, therefore, how much they will cost. For example, one of the tasks is described as "Retrieve the electronic mailboxes of Dennis Bluth and other partners and employees of HWLE". In the case of category discovery, Mr Haslam estimates the various levels of lawyers and paralegals would together spend 67 hours on this task (partner - 7 hours; senior associate - 10 hours; associate - 20 hours; paralegal - 30 hours) at a total cost of $19,150. For the same task and the same people in the case of general discovery, Mr Haslam's figures become a total of 147 hours (partner - 7 hours; senior associate - 20 hours; associate - 50 hours; paralegal - 70 hours) at a total cost of $40,350. 6. This pattern repeats itself through the other tasks identified by Mr Haslam. However, fatally for the utility of his evidence for present purposes, nowhere does Mr Haslam give his reasons for why general discovery would require any more time searching and then considering documents than category discovery. 7. To put it very simply, and without intending to detract from the sophistication of the arguments advanced on both sides, if the universe of documents to be searched was in a cupboard, the whole cupboard will have to be searched irrespective of which discovery approach is used. Mr Haslam gives no reason or evidence as to why that universe would be any larger if general discovery is ordered instead of category discovery, or any other reason why the tasks in general discovery would be so much more time consuming than category discovery. Similarly, to the extent that word searches may be used on electronic documents, no basis is disclosed in Mr Haslam's affidavit or anywhere else in the respondents' case for why there would be fewer search terms for category discovery over general discovery. Conclusion 1. For these reasons, general discovery will better achieve the overriding purpose than category discovery. I do not accept the evidence or arguments advanced by the respondents that in this case general discovery will be more burdensome (practically or financially) than category discovery. At the point of reviewing documents, my impression is that the task may well be much simpler because the reviewer will not have to consider each document against a large number of finely drawn categories. The Court will next discuss with the parties what specific directions are required to implement the overall conclusion that the parties are to give general discovery. ********** 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: 24 February 2025