Carlisle v Filaria & Ors [2003] ACTSC 25 (29 April 2003)

Last Updated: 1 May 2003

GRACE CARLISLE v FILARIA PTY LIMITED, INDEPENDENT GROUP PTY LIMITED, JOHN CHRISTOPHER RUNKO, and TERENCE JOHN CHAMBERLAIN, PETER LAWRENCE CROWLEY, JOHN DAVID BRADLEY, PHILIP RAYMOND SMITH, CHRISTOPHER JOHN CROWLEY, WILLIAM BRIAN LOFTUS, THOMAS FRANCIS MEAGHER, NICHOLAS JOHN SYMONS, KEITH ARTHUR BRADLEY, ALFONSO DEL RIO, ANNE MARIE PROCTOR, JOHN SNELL, ROSEMARY ELIZABETH TOWNSEND, SALLY JOAN SHEPPARD [2003] ACTSC 25 (29 April 2003)

PRACTICE AND PROCEDURE - appeal against interlocutory decision of Master - discoverability of tax returns and other financial records - whether records go to the measure of damages as a measure of plaintiff's loss.

Supreme Court Act 1933 (ACT), s 9

Corporations Law

Evidence Act 1995 (Cth), s 55

Chamberlain & Ors v Carlisle (unreported) [2003] ACTCA 10,

Potts v Miller [1940] HCA 43; (1940) 64 CLR 282

Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341

The Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55

No. SC 885 of 1999

Judge: Gray J

Supreme Court of the ACT

Date: 29 April 2003

IN THE SUPREME COURT OF THE )

) No. SC 885 of 1999

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: Grace Carlisle

Plaintiff (Respondent)

AND: Filaria Pty Limited

ACN 056 933 843

First Defendant (Appellant)

AND: Independent Group Pty Limited

ACN 008 659 792

Second Defendant

AND: John Christopher Runko

Third Defendant

AND: Terence John Chamberlain

Peter Lawrence Crowley

John David Bradley

Philip Raymond Smith

Christopher John Crowley

William Brian Loftus

Thomas Francis Meagher

Nicholas John Symons

Keith Arthur Bradley

Alfonso Del Rio

Anne Marie Proctor

John Snell

Rosemary Elizabeth Townsend

Sally Joan Sheppard

Fourth Defendants

ORDER

Judge: Gray J

Date: 29 April 2003

Place: Canberra

THE COURT ORDERS THAT:

1. The appeal be dismissed.

1. 1. This matter is one of eleven appeals under s 9 of the Supreme Court Act 1933 (ACT) from an interlocutory decision of the Master dated 30 November 2001 ordering that the first defendant to eleven related matters give further discovery. The first defendant, Filaria Pty Ltd, appeals in this matter as well as the related matters.

The proceedings

2. The proceedings concern 11 of 59 cases commenced by various plaintiffs in relation to the purchase of units in the Canberra International Hotel. The plaintiffs generally allege misrepresentations and omissions made to them by the first defendant (Filaria Pty Ltd), which had been the vendor, and/or by the second defendant (Independent Group Pty Ltd), which had acted as the first defendant's agent, induced them to purchase property and that the plaintiffs suffered loss and damage as a result.

3. In some cases, individuals who had been employed by the second defendant and allegedly made representations on its behalf have also been joined as parties to the proceedings. Furthermore, in some cases, solicitors who had acted for the plaintiffs have also been joined as defendants and causes of action based upon allegations of breach of retainer and negligence have been pleaded against them.

The Parties

4. The only relevant parties to this appeal are the first defendant as appellant and the plaintiff as respondent. Counsel for the respondent in this matter also represented the respondents to the related matters.

5. Counsel for the appellant and counsel for the respondent in the present matter have filed submissions. Counsel agree that the issues to be dealt with in relation to this appeal are substantially the same as for each of the other appeals in the related matters and, by agreement, I take the 11 matters to be heard concurrently. I will make similar orders in relation to the other appeals. Counsel for the appellant, Mr Walton SC, however, raised the exception that each action has different dates for the entering into of the contract and the settlement thereon and argued that this may be significant. I do not think that it does in the result, but the point is noted.

The application before the Master

6. By notice of motion dated 12 November 2001, proceedings were initiated before the Master in which the plaintiff sought an order that the defence of the first defendant be struck out for failure to comply with orders of discovery. The Master did not accede to the application to strike out the defence due to failure of discovery. However, the Master did order further discovery and ordered that tax returns and other financial records of the first defendant were properly discoverable and directed the first defendant to discover them. That part of the Master's judgment is the subject of this appeal.

Summary of Argument before the Master

7. What was being sought by the plaintiff in the proceedings before the Master was discovery of financial records of the first defendant which postdate the making of representations regarding the property and the sale of the property, namely the income tax returns post 30 June 1994 until at least 2000 and the financial statements required to be maintained under the Corporations Law. The thrust of the first defendant's submissions before the Master were that those financial records are irrelevant to the issues in the case. It should be said that this issue was raised for the first time in the strikeout proceedings before the Master notwithstanding that the request for discovery of these documents had been before the Master on an earlier occasion.

8. Before the Master, the plaintiff was taken by the first defendant to have relied upon three matters in relation to their claim for the discovery of the financial records sought from 30 June 1994. Firstly, it was put that the records may be said to go to the measure of damages as a measure of the plaintiff's loss. Secondly, it was said the records could go to the issue of liability and the defendant's state of mind at the time it made representations. Finally, it was said that the plaintiff could have based the application on an allegation pleaded as a particular of defence that the plaintiff failed to mitigate loss in that the plaintiff did not seek to dispose of the assets during the five year guaranteed rental return period. The first defendant has since withdrawn that particular of defence and maintains that discovery is not now warranted on that ground. As to the other grounds, the first defendant said that the discovery sought did not go to any relevant issue but, as I understand the plaintiff's written submissions, the ground that the documents might show the first defendant's state of mind at the time of the making of the representations is not now pressed.

9. Canberra International Hotel had been operating for 12 years before it was acquired by the first defendant. The first defendant alleges it never traded in relation to Canberra International Hotel prior to the financial year ending 30 June 1994, and the `new venture' between the plaintiff, the investors and Jaywood did not commence prior to July 1993 to June 1994. The lease back by the plaintiff was not to the vendor, the first defendant, but to a management company, Jaywood Pty Ltd, who managed the hotel for benefit of all the unit holders for a five-year lease with a guaranteed rent for three years.

The submissions as to damages

10. Paragraph 20 (f) of the Second Amended Statement of Claim set out the particulars of damages that were being sought by the plaintiff at the time of the appeal hearing before me. It defined the loss of value in property as being both the difference in price paid for the property at the time of purchase and the actual value at time of purchase; and as the loss of value in the property since its purchase by comparing its present value with its purchase price. The Third Amended Statement of Claim, amended by leave given by Crispin J on 2 May 2002, has amended this to only include a claim for "the loss in value of the property since its purchase by comparing its present value with its purchase price". That significant alteration was made in the context of a strikeout application by parties other than the first defendant on the basis that the proceedings would be statute-barred, were that not the case. The other parties appealed the decision to give leave to amend and it seemed to me that this circumstance was relevant to the submissions put by the first defendant on this aspect and that I should await the resolution of the appeal before determining this matter.

11. The first defendant's major argument was predicated on the fact that damages could only be the purchase price less value at time of purchase. As a consequence of the amendment that has now been made and that amendment surviving the decision of the ACT Court of Appeal in Chamberlain & Ors v Carlisle (unreported) [2003] ACTCA 10, the issue must now be dealt with on the basis of the loss arguably occurring at the time of some subsequent event following the expiry of the Jaywood management agreement. That change removes the foundational premise of the first defendant's argument based upon Potts v Miller [1940] HCA 43; (1940) 64 CLR 282 namely that the damages in a case analogous to the present are confined to the real value of the property at the time it was acquired. If the issue as to the value of the plaintiff's unit is at large in the way that the amendment now allows, then values assigned by the first defendant to comparable units still held by it over the period where the loss might be sustained would seem to me to relate to a matter in issue.

The test for ordering discovery

12. Counsel for the appellant put that the material sought to be discovered should not be admitted because it would not be relevant to an issue. Whilst conceding that the test for discovery is "a little different", he said that there must be a relevant connection to the litigation and that this could not be shown.

13. As far as discovery is concerned, the question is not one of admissibility or indeed of relevance in the Evidence Act 1995 (Cth) sense where the test of relevance is that of rationally affecting (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceedings (see s 55 Evidence Act 1995 (Cth)). There must be a relationship to matters in issue but it does not have to satisfy the relevance test that the Evidence Act requires. As Menzies J said in Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341 at 345 -

Only a document which relates in some way to a matter in issue is discoverable, but it is sufficient if it would, or would lead to a train of enquiry which would, either advance a party's own case or damage that of his adversary.

Similarly, it was said in The Compagnie Financiere du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 at 63 per Brett LJ that, for the purposes of discovery, a document is relevant if it may, not must, either advance a party's own case or damage the opponent's case, or alternatively would lead to a course of inquiry which would do so. Those tests are wider than the test of relevance that I suspect was being urged on me by counsel for the appellant and, in any event, seem to me to make the documents sought by the plaintiff discoverable in light of the amendment now made to the statement of claim.

An additional matter

14. Mr I Gillespie-Jones filed an affidavit dated 18 December 2001 before the hearing of the appeal. No application was made to read it, but it provided a basis for some aspects of Mr Gillespie-Jones' written submissions. The appellant, in answer to the plaintiff's written submissions, takes no objection to the affidavit and I treat it accordingly as having been received and read. Relying upon material in that affidavit, the plaintiff's written submissions took up a point raised before the Master but not really pursued concerning monies that the first defendant may have paid to Jaywood Pty Ltd in order to ensure that the guaranteed income was paid to unit holders. I am satisfied on the material provided to me that may be a matter in issue and the documents in respect of which discovery is sought may bear upon that issue. That seems to me to provide an additional ground for the discovery sought.

Possible unavailability of documents

15. I do not need to traverse the arguments put based upon the foreshadowing by the first defendant of the possibility that a number of files containing documents which may have been discoverable were destroyed. That is an issue that can be dealt with if it arises and that circumstance, even if established, it seems to me, is irrelevant to the discovery issue before me.

Conclusion

16. The ground has shifted somewhat since the Master gave his decision and although the decision may not have been justified in so far as it may be said that the Master did not fully appreciate the effect of Potts v Miller (supra) in respect of it, the statement of claim has been amended on that issue. There is also the issue possibly arising as to monies paid by the first defendant to Jaywood Pty Ltd that could now justify the order for further discovery made by the Master.

17. I dismiss the appeal. I will hear the parties as to costs.

I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Gray.

Associate:

Date: 29 April 2003

Counsel for the plaintiff/respondent: Mr I Gillespie-Jones

Solicitor for the plaintiff/respondent: Gillespie Jones & Co

Counsel for the first defendant/appellant: Mr M Walton SC with Mr D Mossop

Solicitor for the first defendant/appellant: Meyer Clapham

Counsel for the second defendant: -

Solicitor for the second defendant: Sparke Helmore

Counsel for the third defendant: -

Solicitor for the third defendant: Sparke Helmore

Counsel for the fourth defendants: -

Solicitor for the fourth defendants: Minter Ellison

Date of hearing: 21 December 2001

Date of judgment: 29 April 2003