Cairns v Unicomb & Ors [2005] NSWSC 1279

New South Wales Supreme Court

CITATION : Cairns v Unicomb & Ors [2005] NSWSC 1279

HEARING DATE(S) : 1 December 2005

JUDGMENT DATE : 1 December 2005

JURISDICTION : Equity Division

JUDGMENT OF : Palmer J

DECISION : Preliminary discovery ordered of categories of documents to be defined.

CATCHWORDS : PRELIMINARY DISCOVERY – Circumstances in which ordered.

Suzanne Rose Cairns – Plaintiff Michael Charles Unicomb – First Defendant Butterwick Management Pty Ltd – Second Defendant PARTIES : Warren Donald Turner – Third Defendant Glenn Arthur Freeman – Fourth Defendant Australasian Landbank Holdings Pty Ltd – Fifth Defendant Sunset Cove Developments Pty Ltd – Sixth Defendant

FILE NUMBER(S) : SC 5791/05

G. Curtin – Plaintiff COUNSEL : M.D. Foley (Sol) – First Defendant D. Neggo – Fourth Defendant

Mullane & Lindsay – Plaintiff SOLICITORS : Foleys, Solicitors – First Defendant Koffels Solicitors & Barristers – Fourth Defendant

LOWER COURT JURISDICTION :

Ex tempore

1 This is an application by the Plaintiff for an order for preliminary discovery under UCPR 5.3 against a number of Defendants. The application is also made under the general law relating to preliminary discovery. 2 The Plaintiff, Mrs Cairns, is the executrix and sole beneficiary of the will of the late Peter Cairns and she is his widow. On the Plaintiff's case, Mr Cairns entered into a number of financial transactions in which Mr Unicomb, the First Defendant, was involved. The transactions occurred during 2003 and 2004. Mr Cairns died on 16 March 2005. Mrs Cairns says that there is reason to believe that Mr Unicomb and the other Defendants are answerable to the estate of the late Mr Cairns for a number of wrongful acts which induced Mr Cairns to enter into those transactions. Mrs Cairns says that in order to be able, with her legal advisers, to decide whether to prosecute possible causes of action against the Defendants she requires preliminary discovery of the documents which are set out in a document entitled "Second Further Amended Schedule "A" to the Summons". 3 The possible causes of action which the estate of the late Mr Cairns is said to have against the Defendants are set out in a document which has been prepared by Mr Curtin of Counsel, who appears for the Plaintiff. I will have a copy of that document made an exhibit in the proceedings. 4 Very summarily, the gist of the complaints against Mr Unicomb and the other Defendants is that Mr Unicomb, who was for many years the accountant and friend of the late Mr Cairns, induced Mr Cairns to enter into a number of transactions which involved Mr Cairns borrowing substantial monies on the security of property which he owned and lending those monies to clients of Mr Unicomb and to corporate entities in which Mr Unicomb was involved, when Mr Unicomb knew or ought to have known that the monies were at severe risk of loss. 5 It is material to note that in October 2003 Mr Cairns was diagnosed with cancer and that a number of the transactions the subject of complaint were entered into after that time, some close to his death, when Mr Unicomb knew of Mr Cairns' condition. 6 It is said that the Second Defendant, which was a company controlled by Mr Unicomb, may have received some of the funds procured by Mr Unicomb from Mr Cairns and may have dispersed those funds with knowledge of what are said to be breaches of fiduciary duty by Mr Unicomb towards Mr Cairns. 7 The Third Defendant, Mr Turner, was a borrower of a substantial sum of money from Mr Cairns. Mr Turner and Mr Unicomb apparently are business associates or are in practice together and Mr Turner was a participant with the Fourth Defendant and with Mr Unicomb in an investment in a resort in South Australia. 8 The funds acquired from Mr Cairns are said to have been used, at least in part, in the acquisition of some interest in this South Australian resort by Mr Unicomb, Mr Turner, Mr Freeman and the Fifth and Sixth Defendants. In short, the possible claims against the First, Second, Fifth and Sixth Defendants are said to arise from breach of fiduciary duty or unconscionable conduct on the part of Mr Unicomb in which those other Defendants were knowing participants. It is said that there may be an independent action for debt against the Fourth Defendant, Mr Freeman, and that Mr Freeman may also be a knowing participant in breach of fiduciary duty by Mr Unicomb. 9 The evidence which has been adduced so far in support of this application demonstrates, to a prima facie level at least, that there are arguable causes of action against the Defendants. The question then is whether preliminary discovery is reasonably necessary, within the meaning of r.5.3 and the general law. 10 This is not a case in which a direct participant in a transaction is seeking preliminary discovery from other participants in circumstances where the applicant himself or herself ought to know a great deal about the relevant transactions. Mrs Cairns says that she was told very little by Mr Cairns about the transactions he was entering into with Mr Unicomb. In other words, this is a case in which an executrix is seeking information about transactions of which she has no direct knowledge in order to obtain advice as to whether there are sufficient prospects to pursue causes of action against these Defendants on behalf of the estate. In those circumstances, it seems to me that more latitude must be afforded by the Court to an application for preliminary discovery than would be the case if the applicant were a direct participant in the relevant transaction with direct knowledge. 11 The essential position of the First Defendant, Mr Unicomb, is that he has already provided to the Plaintiff and to her financial advisor an explanation of the various transactions in which Mr Cairns was involved. He says that a great deal of the information which would be necessary for Mrs Cairns to know is already in her possession. He says that had he been asked with sufficient notice and particularity to provide information then he would have provided it. 12 It is certainly true that Mr Unicomb has had a number of conversations with Mrs Cairns and her financial advisor in which he has given explanations about the transactions the subject of Mrs Cairns' enquiries. However, explanations are one thing, the documents supporting the transactions are quite another. The Plaintiff is not, of course, obliged to accept at face value the explanations which have been given by Mr Unicomb and she is entitled to test for herself, by production of the documents in an appropriate case, whether the explanations given by Mr Unicomb are fully exculpatory or, on the contrary, are insufficient and the documents reveal sufficient cause to prosecute causes of action. 13 There is some substance to Mr Foley's assertion that the Schedule to the Summons which has been debated contains requests for information, a great deal of which is already within the possession of the Plaintiff by one means or another. However, because the Plaintiff is really an outside party inquiring into a transaction of which she has no direct knowledge, in my view it is not satisfactory that she be required to accept either at face value the explanation given by Mr Unicomb or else be required to accept the provision of documentary information to her piecemeal in various affidavits, some of which contain argumentative material seeking to exonerate the First Defendant from any wrongdoing. 14 It seems to me that in the circumstances of this case, what the Plaintiff is entitled to in order to afford her the opportunity of making a decision as to whether to prosecute claims is a list of documents relating to the subject transactions, which purports to be, and is in fact, complete and is verified as such. Only by that means will the Plaintiff and her advisors be able to satisfy themselves that they have sufficient information to make a decision. 15 In those circumstances I think that preliminary discovery ought to be ordered against all Defendants. 16 In the course of discussion about the Second Further Amended Schedule to the Summons it has become apparent that some of the categories of information there sought are expressed too widely or would not be permissible categories for discovery. I think that Mr Curtin acknowledges that. It seems to me that, rather than ordering a general preliminary discovery, which may require inquiry which is too wide ranging to be of any utility and which may therefore take an unnecessarily long time to accomplish, it would be better for the Defendants to give discovery at this stage in certain defined areas or categories of documents. 17 It seems to me that there would be a great deal of utility in the Plaintiff revising with some more precision the categories of documents which are set out in the Second Further Amended Schedule and producing a document which more appropriately and closely defines categories of documents for discovery. The Plaintiff will not be limited to the list so described once and for all. Discovery is often an ongoing process and one inquiry may lead to another. However, a start has to be made and it should be a start which is pragmatic and manageable. 18 What I propose is to indicate now that I will make orders for preliminary discovery against each of the Defendants to the Summons, but will stand the matter over for a very short time to enable a more focused list of discoverable categories of documents to be prepared. 19 The application for preliminary discovery will be stood over for the making of orders on 7 December 2005 at 9.30 in the morning. – oOo –