SHORT & ANOR. V CRAWLEY & ORS [2000] NSWSC 1059

New South Wales Supreme Court

CITATION : SHORT & ANOR. V CRAWLEY & ORS [2000] NSWSC 1059 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 2824/98 HEARING DATE(S) : 15/11/00 JUDGMENT DATE : 15 November 2000

Warwick Short - 1sr plaintiff Nabutu Pty. Limited - 2nd plaintiff Christopher Crawley - 1st defendant PARTIES : Marisco Holdings Pty. Ltd. - 2nd defendant J & J O'Brien Holdings Pty. Ltd. - 3rd defendant Vensel Pty. Limited - 4th defendant Trudale Pty. Limited - 5th defendant Judith Kiralyhidi Crawley - 6th defendant JUDGMENT OF : Hodgson CJinEq at 1

COUNSEL : Mr. M. Cashion SC for plaintiffs Mr. A. Sullivan QC with Mr. Dodson for defendants SOLICITORS : Kemp Strang, Sydney for plaintiffs Blake Dawson Waldron, Sydney for defendants CATCHWORDS : COSTS - PROCEDURE - Discovery and inspection - Documents returned to discovering party in form and order requiring significant restoration - Order for costs thrown away. DECISION : See end of judgment

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

CORAM: HODGSON, CJ in Eq.

Wednesday 15th November 2000

NO. 2824 OF 1998 SHORT & ANOR. V. CRAWLEY & ORS.

JUDGMENT

1 I have now heard evidence and argument in relation to the second order sought in the Notice of Motion of the defendants filed on 24th October 2000. The defendants seek an order that the plaintiffs pay the defendants' costs of restoring the defendants' documents to the form and order in which they were made available, on an indemnity basis 2 It does seem clear that the defendants' documents were returned to the defendants in a form and order which will require some significant time to deal with. It is accepted on behalf of the plaintiffs that discovered documents should be returned after inspection substantially in the form and order in which they were provided, and that if there is any significant departure from that which causes significant expense to the other party, then the party responsible for that disruption should bear the costs of restoration. 3 However, it seems to me that some of the work done in restoring the files will not be entirely wasted. It will, in all probability, advance the preparation of the case. For that reason, it seems to me that the appropriate order to make is that the plaintiffs pay the defendants' costs thrown away by reason of the defendants' discovered documents being returned in a form and order different from that in which they were made available. It should be possible for the trial judge to give some further directions in relation to how those costs are to be assessed, because it should be possible by then to make a more accurate assessment of the extent of costs actually thrown away, and not usefully incurred in the preparation of the case. 4 Mr. Sullivan QC seeks an order that the costs be on an indemnity basis. He submitted that the defendants should not be disadvantaged because of abuse of the process of discovery by the plaintiffs, and should not be disadvantaged because the plaintiffs had the work of inspection and photocopying done by relatively inexperienced para-legals. There is force in that submission, but on the whole, I think the fair result is the order that I have indicated, not extending to costs on an indemnity basis. One matter that influences me in this direction is what, it seems to me, would be the inappropriateness of in effect throwing an onus on the plaintiffs of establishing what were reasonable costs of restoring the files to order, and identifying costs that would, in any event, have been incurred in the proceedings. 5 The plaintiffs seek an opportunity to inspect the files before the defendants set about putting them in order. I think the plaintiffs should have that opportunity if they wish it, but the defendants would wish, in that event, to have an employed solicitor supervising that inspection. In my opinion, the costs of that supervision by an employed solicitor would plainly be costs thrown away by reason of the files not being returned in the form and order in which they were supplied, and I would make it clear that those costs would have to be borne by the plaintiffs in any event. 6 Finally, there was some discussion of the possibility that the costs thrown away might be minimised if the plaintiffs made available to the defendants copies of all the documents which they photocopied. That would involve the waiver of some legal professional privilege, but as I understand it, that waiver would not involve waiver of any other legal professional privilege. It may in fact assist in the preparation of the case generally if that can be done, and as I have said, could well minimise costs thrown away. 7 I am now dealing with the first order sought in the Notice of Motion of 24th October 2000. The order actually provides for the striking out of certain paragraphs of the Statement of Claim, but it has been debated on the basis that realistically what is sought is an order that the further particulars of those paragraphs be provided. The Notice of Motion refers to a number of paragraphs in the Statement of Claim, but it has become clear that the relevant paragraphs are not exactly those stated in the Notice of Motion, but rather paragraphs 66, 71, 75, 79, 83, 87, 91 and 97. 8 The Statement of Claim seeks relief for oppression of the plaintiffs, and in particular the second plaintiff, in relation to the affairs of the second and third defendants, which are companies of which the second plaintiff is a shareholder, and the first plaintiff was, at earlier times, a director. One order sought in the Statement of Claim is an order for purchase of the second plaintiff's shares in the third and fourth defendants, and it may be that if an order along those lines is made, the other relief in the Statement of Claim will not be relevant. 9 However, the paragraphs to which I have referred allege loss, or exposure to loss, by reason of the second plaintiff's shareholding in the second and third defendants, and loss to the first plaintiff in turn through his shareholding in the second plaintiff. The Statement of Claim as presently formulated claims damages or equitable compensation. A proposed Amended Statement of Claim seeks an enquiry as to damages or equitable compensation, and an order that the defendants pay the plaintiffs the amount found to be due as a result of such an enquiry. 10 The defendants have sought particulars of those paragraphs, and the response of the plaintiffs has been to say that share valuations are necessary to determine the extent of the loss, and that in turn would require the assets and liabilities of the two companies to be known, and that in turn would not be known until the issues in these proceedings have been determined. 11 In my opinion, those considerations do not justify a failure to give any particulars of the allegations in question. It seems to me that the plaintiffs should specify in relation to each of the paragraphs firstly whether the loss or damage alleged is purely a derivative loss through loss or damage caused to the second and third defendants, and if not, what other loss to the plaintiffs is alleged and precisely how it is that loss arose. 12 Secondly, in relation to loss alleged to have been caused to the two companies, whether that loss is due to some payment or loss of assets of those companies, and if so, what payment or loss of assets; and whether it is due to some liability undertaken by those companies that has not resulted in payment or loss of assets; and if so, how is that liability alleged to give rise to loss or damage, and in what amount. 13 Furthermore, the paragraphs all claim loss or damage resulting from different kinds of breaches alleged against the defendants. The plaintiff should make it clear whether precisely the same damage is alleged in relation to each of the breaches, and if not, what is the difference in the damage or loss alleged in the different kinds of breaches, and on what basis is that different loss or damage alleged. 14 I do not think the plaintiffs, at this stage, need to give particulars of the detailed calculations of the loss or damage involved. I think it is clear that this matter will have to proceed to a hearing first essentially on liability, because the nature of the enquiry either as to damages or share valuations that would result, if the plaintiffs are successful, could only be ascertained at the hearing on liability. 15 However, at the hearing on liability it will be necessary, if the plaintiffs are to have an enquiry as to damages, that the plaintiffs do prove that they have suffered substantial damage of the kind alleged, and the particulars I have indicated are appropriate to clarify the issues for that hearing. 16 The orders that I make are these. 17 I order that within 28 days, the plaintiffs provided the following particulars in relation to paragraphs 66, 71, 75, 79, 83, 87, 91 and 97 of the Statement of Claim. 18 Firstly, whether all the loss or damage claimed is derivative through the second plaintiff's shareholding in the second and third defendants, and the first shareholding in the the second plaintiff, and if not, precisely what other loss or damage is alleged to have been suffered by the first and second plaintiff respectively, and how that loss or damage arises. 19 Secondly, whether the loss or damage to the second and third defendants is due to payments made and/or loss or damage to assets, and/or some liability or liabilities incurred, giving particulars of payments made, loss or damage to assets, and the best estimation the plaintiffs can give of the loss or damage involved in the liabilities incurred. 20 Thirdly, in respect of any payment or charge or liability to the first defendant for legal fees or loss, what the plaintiffs allege the position would have been but for the transactions complained about. 21 Fourthly, whether in each case the loss or damage alleged is the same in relation to each cause of action, and if it is not the same, what is the difference and how does the difference arise. 22 I give leave to the plaintiffs to amend the Statement of Claim to make the alterations to the relief sought foreshadowed in the letter of 7th September 2000, and also to make any amendments appropriate by reasons of amendments to the Corporations Law, such Amended Statement of Claim to be filed and served within 28 days. 23 Any additional affidavit evidence from the plaintiffs by reason of the necessity to show damage of the type alleged is to be filed and served within 28 days. 24 I direct that unless the amendment really requires it, there is no need to file an Amended Defence. 25 I order that the plaintiffs pay the defendants' costs thrown away by reason of the defendants' discovered documents being returned not in the form and order in which they were made available. 26 I order that if the plaintiffs require access to those documents before the defendants set about restoring them to an appropriate form and order, the plaintiffs pay the costs involved in the defendants having an employed solicitor supervise the plaintiffs' access to those documents. 27 I order that the plaintiffs pay the defendants' costs of the defendants' Notice of Motion filed 24th October 2000. 28 I direct that if the plaintiffs wish to have such access to the discovered documents, it be sought and exercised within 28 days. 29 I direct that the defendants file and serve their affidavits on or before 15th March 2001. 30 I stand the matter over for further mention before me on 20th March 2001 at 9.30am. *********