FEDERAL COURT OF AUSTRALIA

Procter v Kalivis (No 2) [2010] FCA 663

THE COURT ORDERS THAT:

1.                  The application for the order identified in paragraph 1 of the applicants’ notice of motion dated 20 November 2009 be dismissed.

2.                  The applicants pay the respondents’ costs of the application referred to in paragraph 1.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                     On 19 June 2009, the applicants issued an application against the respondents for information discovery under O 15A r 6 of the Federal Court Rules (“the Rules”). On 7 August 2009, the respondents filed and served a List of Documents. One list was filed and served and each of the four respondents swore a short affidavit deposing to its correctness. The List of Documents was filed and served without the need for a Court order. In other words, the respondents agreed to file and serve the List. On 14 October 2009, the respondents filed and served an Amended List of Documents. Again, that was done without the need for a Court order.

2                     In the Amended List of Documents filed and served on 14 October 2009, the respondents identified various categories of documents in Schedule 2. The second, third, fourth and fifth categories are relevant for present purposes. Those categories were described  as follows:

3                     With respect to these categories of documents, the respondents deposed to the following:

“The documents in items 2 and 3 of Schedule 2 were last seen at the Bayview Office (Unit 31) in 2006.

The documents in item 4 were last seen in the Bayview Office in 2005.

The document in item 5 was last seen in the Bayview Office in late 2005 or early 2006.”

4                     The applicants considered that the Amended List of Documents did not comply with the Rules and, on 20 November 2009, they issued a notice of motion seeking the following orders, relevantly:

“1.        The applicants be granted leave to cross-examine each of the first, third and fourth respondents on their respective affidavits sworn 14 October 2009 verifying the discovery of the respondents.

2.         The respondents make further and better discovery in terms of the applicants’ Amended Notice of Motion dated 19 June 2009.”

5                     The notice of motion came on for hearing before me and, on 24 December 2009, I made a number of orders on the notice of motion. The orders relevant for present purposes were as follows:

“1.        Each of the respondents is to file and serve a further affidavit of discovery on or before Monday, 15 February 2010 which affidavit shall:

1.1       Contain statements which comply with Order 15, rule 6(6) of the Federal Court Rules with respect to the documents in Schedule 2 in the Amended List of Documents dated 14 October 2009.

1.2       Make discovery of the following classes of documents:

…

iii.         All documents recording or evidencing the mortgage referred to in Recital A and the dispute referred to in Recital B of the Agreement for Vendor Finance and the vendor finance arrangements between the vendors of the Bayview Apartments Complex on the one hand and the syndicate and/or each of the other Respondents on the other.

…

3.         Paragraph 1 of the applicants’ notice of motion filed on 20 November 2009 be adjourned for further directions on Friday, 19 February 2010 at 9.30 am.”

6                     A Further Amended List of Documents was filed and served by the respondents on 25 February 2010. The second, third, fourth and fifth categories in Schedule 2 were described as follows:

7                     An item described in Schedule 2 of the Further Amended List of Documents as item 8 contained the following:

“8.        Any such documents as described in paragraph 1.2(iii) of the orders made on 24 December 2009.”

8                     With respect to the documents described in items 2, 3, 4 and 5 in Schedule 2 of the Further Amended List of Documents, the first, second and third respondents state that they have had, but do not have in their possession, custody or power those documents and they state that they do not know and cannot say when they parted with possession of those documents.

9                     The first and third respondents state as to the documents described in items 2 and 3, that they last saw one booking book and one receipt book in the Bayview (Unit 31) in about late 2006 and the first respondent states that he last saw the documents described in item 4 in the Bayview Office in 2005. The third respondent states that she “does not know and cannot” [sic] if she ever saw the documents described in item 4. The first and third respondents state that they last saw the document described in item 5 in the Bayview Office in late 2005 or early 2006. The first, second and third respondents state that they do not know what has become of the documents described in items 2, 3, 4 and 5 of Schedule 2 but they then proffer the following explanation:

“They may have been inadvertently thrown out during renovations of certain of the units in the Bayview in about 2006. During this period, Unit 31 was converted from being primarily an office to being primarily a store-room. In order to make more room for storing materials connected with the renovations, much of the contents of Unit 31 were thrown in garbage bins.”

10                  With respect to the documents described in item 8 in Schedule 2 of the Further Amended List of Documents, the respondents state that they presume the original of the mortgage referred to in Recital A of the Agreement for Vendor Finance was retained by the vendors. They state that they do not have a copy. They state that they are not aware of any documents concerning the dispute referred to in Recital B of the said agreement and they are not aware of any such dispute apart from some delay in completion of the purchase but have no documents concerning the delayed completion.

11                  The respondents state, with respect to the documents described in item 8, that the mortgage was last seen in about December 2001, and as to the other alleged documents, they cannot say when they were last seen as they do not know if such documents exist.

12                  The applicants allege that the Further Amended List of Documents, in so far as it deals with items 2, 3, 4 and 5 and item 8 of Schedule 2 do not comply with the Rules and the authorities and they seek the order set out in paragraph 1 of their notice of motion dated 20 November 2009 (see [4] above). This application is brought against the first, second and third respondents. The first respondent is the sole director of the second respondent and, if the application is granted, it is the first and third respondents who will be cross-examined.

13                  In my previous decision in this proceeding, I set out the relevant principles as to the circumstances in which an affidavit of a discovery may be challenged and the circumstances in which a party may be granted leave to cross-examine on an affidavit of discovery: Procter v Kalivis (2009) 263 ALR 461 at 467-469 [29]-[40]. I will not repeat what I said about those principles. In the ordinary case, the affidavit of discovery is conclusive: Mulley v Manifold (1959) 103 CLR 341 at 343 per Menzies J. Cross-examination will be allowed only in very limited circumstances. In my opinion, this is not a case in which cross-examination on the affidavits of discovery should be allowed.

14                  The principal submission of the applicants is that, in a case where a party is unable to say what has become of documents, that party is obliged to carry out reasonable inquiries and to state in his or her affidavit of discovery the inquiries which have been conducted. The applicants told me that they were unable to find any case directly on point. They referred to the decision of von Doussa J in Re McGorm, Ex parte Co Operative Building Society of South Australia (1989) 86 ALR 275 (“Re McGorm”), although acknowledging that that case was a case under the Bankruptcy Rules.

15                  In Re McGorm, a debtor was ordered to give discovery under the Bankruptcy Rules. The issue in the case was whether the affidavit filed by the debtor had adequately specified documents. Von Doussa J referred to the obligation on a party giving discovery to make proper inquiries and efforts to identify and disclose all relevant documents that are not in his or her possession. His Honour held that the affidavit of discovery in that case did not indicate that proper inquiries had been made and he made an order that the debtor file and serve an affidavit making further discovery.

16                  Under O 15 of the Rules, a party giving discovery is required to conduct reasonable searches: O 15 r 2(3). If a party does not search for a category or class of document, then he or she must include in the list of documents a statement of the category or class of document not searched for and the reason why a search was not carried out (see O 15 r 2(6)). Importantly, there is no express obligation in the Rules on a party to state in his or her affidavit of discovery the searches and inquiries which have been carried out. That is not to say that a Court might not make an appropriate order where there is evidence of a failure to conduct searches and inquiries. However, that is not this case.

17                  The nature of the applicants’ claims is summarised in my reasons in Procter v Kalivis  at 465-466 [17]-[21]. The documents described in items 2, 3, 4 and 5 if available would no doubt be important to the applicants in terms of their decision to institute a claim against the respondents and the quantum of any such claim. However, to put the matter in context, the applicants’ possible claim relates to the period from the end of 2001 to the end of 2006. The respondents have discovered a large number of documents including Booking Slips for the applicants and respondents from March 2005 to November 2006 and Booking Summaries for various periods for the applicants and the respondents (Schedule 1 Part 1 Items 65-70, 79, 80-87, 95-96). I make this point not to suggest any lessening of the impact on the applicants of the respondents’ inability to produce the documents and whether, should the applicants institute substantive proceedings against the respondents, the respondents’ inability to produce the documents has consequences in those proceedings is a point to be determined. I make the point because the discovery by the respondents negates the existence of a powerful reason to allow close examination. In other words, there is no reason to think that the respondents have not conducted reasonable searches. On the assumption that they have done that, they do not have the documents and do not know what has become of them. I do not think that they are required to go any further than they have.

18                  With respect to the documents described in item 8, the respondents have stated that they are not aware of any documents concerning a dispute. Whether that be right or not, that is their answer and again I do not think that they are required to go any further than they have.

19                  In my opinion, the application for the order identified in paragraph 1 of the applicants’ Notice of Motion dated 20 November 2009 should be dismissed and the applicants must pay the respondents’ costs of the application.

Associate:      

Dated:         25 June 2010