Federal Court of Australia

Fuji Xerox Australia Pty Ltd v Whittaker (No 2) [2021] FCA 696

ORDERS

THE COURT ORDERS THAT:

1.    The parties do confer as soon as reasonably possible to agree the terms of orders to give effect to their agreement as to categories of discovery and these reasons.

2.    On or before 30 June 2021, the applicants do file a minute of agreed orders.

3.    There be liberty to apply in the event that the parties are unable to agree.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

COLVIN J:

1    The applicants (referred to as FXA and FXF) bring claims against their former directors and auditors based upon alleged irregularities in the applicants' accounts for the 2015 and 2016 financial years. Broadly speaking, the claims made are to the effect that revenue was overstated in the accounts with the consequence that increased bonuses were paid. These matters are alleged to have occurred with the knowledge of Mr Whittaker and Mr Bell, two former directors of the applicants who are alleged to have had senior executive responsibility for the financial affairs of the applicants at the relevant time.

2    The applicants also allege that considerable accounting costs were incurred in investigating the financial position of the applicants and in publishing revised accounts that are said to have been necessary to accurately reflect the financial position of the applicants.

3    Damages are claimed against both Mr Whittaker and Mr Bell and also the applicants' former auditors (EY) and the partner of EY alleged to have been responsible for the audits, Mr Lang.

4    The proceedings have reached the stage where discovery is to be given. The parties have been unable to agree orders as to the scope of discovery.

General principles

5    In this Court, discovery is not ordered as a matter of course and will only be ordered if it is demonstrated that the making of the order will facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible: r 20.11 of the Federal Court Rules 2011 (Cth) and s 37M of the Federal Court of Australia Act 1976 (Cth). An application for discovery must specify whether the party is seeking 'standard discovery' or otherwise 'the proposed scope of discovery': r 20.13.

6    The nature of standard discovery was summarised by Besanko J in Adelaide Brighton Cement Limited, in the matter of Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 3) [2018] FCA 1058 at [4]-[11]. Of particular relevance in the present instance are the following propositions:

(1)    Only documents that are directly relevant to the issues raised by the pleadings are within the scope of standard discovery.

(2)    For documents to be directly relevant they must meet at least one of the following criteria: (a) the documents are those on which the party intends to rely; (b) the documents adversely affect the party's own case; (c) the documents support another party's case; and (d) the documents adversely affect another party's case.

(3)    The criterion that 'the documents support another party's case' means the strengthening of a position, contributing to success, preventing failure or corroborating or substantiating a claim.

(4)    The notion of direct relevance requires that the documents in question be directly on point, in that they tend to prove or disprove the allegation in issue.

(5)    The 'Peruvian Guano train of inquiry test' is no longer applied in determining whether the documents in question should be discovered.

7    As Besanko J also observed at [12]:

If a party seeks an order for other than standard discovery … then the party must … identify the criteria that applies in standard discovery that should not apply on the application before the Court … The party must also identify the criteria that should apply in lieu of the criteria identified …

8    Further, as was explained by Middleton J in Babscay Pty Ltd v Pitcher Partners (a firm) [2019] FCA 480 at [94]-[95], the application of these principles involves the exercise of a broad discretion in which the Court 'will balance the costs, time and possible oppression to the producing party against the importance and likely benefits to the applying party'.

9    To these matters may be added (a) the need, in commercial litigation, for the cost involved in providing discovery to be kept in proportion to the commercial subject matter, taking account of any broader significance that may be attached to the litigation; and (b) the need to avoid any undue delay, being delay beyond that which is reasonably necessary to ensure that each party has a fair and reasonable opportunity to present its case by reference to available documents of forensic significance.

Discovery by categories

10    It has become relatively common for parties to proceedings in commercial matters to seek orders for discovery by reference to categories rather standard discovery. That is the approach adopted by the parties in the present case. Wherever possible, it is not to be encouraged. It tends to lead to disputation about the definition of categories rather than focus upon providing discovery. It can result in parties taking inappropriately technical views as to the scope of the categories leading, as a matter of precaution, to their Byzantine expression.

11    In many instances, the preferred course is for the parties first to exchange the documents to which they expect to refer at trial. Then, once that has occurred, there can be applications for any limited further discovery informed by that disclosure. This process can be aided in its effectiveness by making an order at an appropriate stage that no party will be entitled to refer at the final hearing to a document that has not been disclosed before a specified date unless leave to do so is given. This ensures prompt disclosure of documents, including documents that may be used for the purpose of challenging the evidence of another party.

12    Another approach where discovery issues are more complex is for a registrar of this Court or an experienced independent lawyer to be appointed to supervise the provision by the parties of documents to a common electronic database and to mediate any issues that arise. Orders can be made for the registrar or the independent lawyer to convene a conference in order to make inquiries of relevant employees of the parties to identify appropriate steps that may be taken to locate and produce documents of significance to the conduct of the litigation. This can be undertaken in a consultative manner with the lawyers for the parties. Where techniques such as appropriate search terms are to be deployed to locate documents, then the registrar or independent lawyer can mediate any issues that arise. In the event that issues cannot be resolved by mediation then the registrar or independent lawyer can state the nature of the issue and refer it for resolution by the case managing judge.

13    In other cases, it may be preferable to provide for experts to call for documents of the kind that are required for a report or for the Court to use referees to make inquiries and report as to factual issues rather than require exhaustive documentary surveys.

14    Where, as here, one party holds many of the documents that before the dispute were accessible by all parties then there is good reason for ordering the disclosure of complete records of email accounts and relevant electronic records followed by the process I have described. In some respects that is where the parties seem to have ended up as to some aspects of the disputed discovery in the present case.

15    All of which is not to limit the possibilities but to emphasise that there are different approaches the suitability of which will depend upon the circumstances of each case. The process of supervised case management in this Court encourages the parties to consider practical alternatives crafted to suit the case at hand. Indeed, the lawyers involved have an obligation to ensure that the steps taken are confined to what is reasonably necessary and are undertaken as cost effectively as possible. Disputation about discovery is not only expensive for the parties, it is time consuming for the Court and consumes public resources better applied to the important public task of determining substantive disputes.

16    Nevertheless, if discovery by category is to be pursued, it is to be expected that, in the usual case, the categories will be shown to be narrower than what would be required for standard discovery (and thereby duly confined to that which will facilitate the just resolution of the proceedings) or that there is some particular reason why disclosure of the particular category is appropriate. In other words, the provision in the Rules for an application for discovery with a 'proposed scope' is not intended to undermine the position that (a) discovery should only be ordered where it has been shown to facilitate the just resolution of the proceedings; (b) it is direct relevance that is the guiding principle; and (c) if discovery other than standard discovery is sought then the scope must be specified (and justified).

Concessions as to discoverable categories

17    Various categories of discovery have been agreed. There should be orders for discovery to the extent of those agreed categories.

Disputed discovery sought by the applicants

Notifications to any insurer

18    The applicants seek discovery by each of the respondents of any notification to any insurer in connection with any matters which are the subject of this proceeding.

19    In most instances, the question whether a party is insured is irrelevant to the matters in issue in the proceedings. Therefore, documents which go to that question are not discoverable: Beneficial Finance Corporation Ltd v Price Waterhouse (1996) 68 SASR 19; and Evans v Davantage Group Pty Ltd (No 2) [2020] FCA 473; see also West London Pipeline and Storage Ltd v Total UK Ltd [2008] EWHC 1296 (Comm). In the particular circumstances of the present case, no issue arises as to whether the purpose is to discover whether there is insurance in existence.

20    The discovery sought is not of the insurance policy or documents indicating whether indemnity has been allowed or refused under a policy of insurance. Rather, the category is confined to any notification to any insurer in connection with matters the subject of the present proceeding. The category is sought to be justified by the applicants on the basis that a notification may be expected to contain the details of the facts and circumstances giving rise to the claims made by the applicants and contain comments or admissions that are against interest.

21    Generally speaking, documents that recount the facts or circumstances after the event and therefore lack the relevance of a contemporaneous record will not be directly relevant. Exceptions to that general proposition can be contemplated. A document that contained an admission against interest is one. It would be directly relevant because it would adversely affect a party's case. For the applicants it is submitted, in effect, that it is appropriate to require discovery of any notifications to insurers because such documents may contain admissions. The submissions for the respondents did not really contest that proposition. Rather, reliance was placed on cases concerned with disclosure of insurance terms.

22    I accept the proposition advanced for the applicants that the disclosure of insurance notifications is not a disclosure of a kind that falls within the decided cases concerned with disclosure of insurance terms.

23    No issue of oppression would arise from ordering the production of such a specific category.

24    Therefore, I propose to order discovery of the category sought but qualified to include only such documents where they are directly relevant. To be clear, a notification that contained statements that reasonably may be claimed to be admissions against interest as to matters relevant on the case as pleaded against a party would be directly relevant.

25    It was suggested in the course of argument that an order should be made that would confine any discovery of notifications to any insurer to those parts of the document that were directly relevant thereby permitting the masking of other parts of any notification so that disclosure was confined to the unmasked portion. I do not make such an order.

26    Generally speaking, where a document is to be disclosed then the whole of the document should be discovered. Further, masking for relevance is a practice that should not be adopted except by consent or by order of the Court. As to that approach, about which there is some divergence in judicial view, I agree with Wheelahan J who had occasion to consider the practice in Esso Australia Pty Ltd v Australian Workers Union (No 3) [2020] FCA 316 at [12]-[19]. I also agree with the concerns identified by Murphy J in Gall v Domino's Pizza Enterprises Limited [2019] FCA 1799 at [67]. Unilateral masking for relevance tends to undermine the integrity of the disclosure process because it transfers to the producing party the judicial task of assessing relevance to the determination of the ultimate issues (as distinct from sufficient relevance for the purposes of discovery where the parties may be expected, consistently with their disclosure obligations, to err on the side of providing discovery). If it be the case that when the document is to be produced upon any request for inspection, the producing party forms the view that it is appropriate that parts of a document should be masked on the basis that the part to be masked is not directly relevant then, absent agreement between the parties, the producing party should apply for an order allowing for such masking. The basis for doing so may then be identified and, if necessary, scrutinised by the Court. In the ordinary course there would need to be some other aspect beyond mere lack of relevance that would justify allowing masking. Commercial confidentiality may be an example. By requiring an application to be made if there is no agreement the Court can supervise the disclosure process and can inspect documents if necessary to determine whether there is any reason why masking should be permitted.

The use of R&O spreadsheets

27    One of the allegations made by the applicants is that in FY15 and FY16, documents described as 'risk and opportunities spreadsheets' (Spreadsheets) were maintained that recorded and tracked the irregular booking of entries in the accounts. It is alleged that at all material times Mr Bell had the spreadsheets. The applicants sought discovery of all documents recording or evidencing the use of the Spreadsheets.

28    Mr Bell objected to the category to the extent that it would require him to produce documents that evidence the use 'by others' of the Spreadsheets. It was said that the category is overly broad and ambiguous to the extent that it seeks such documents.

29    The objection raised by Mr Bell lacked merit. The case as pleaded against Mr Bell and Mr Whittaker in the amended statement of claim (ASOC) includes allegations that the Spreadsheets were a prominent and significant tool used in the financial management of the applicants. It is said that the use of the Spreadsheets formed part of a culture promoted by Mr Whittaker from the outset of his involvement as chief executive officer of the business conducted by the applicants. It is therefore a culture in which Mr Bell and others are alleged to have participated. The use of the Spreadsheets is a significant part of the case advanced against Mr Bell and Mr Whittaker. It is directly relevant to that case for documents recording or evidencing their use by others at any time during Mr Whittaker's time with the applicants to be disclosed.

30    The issue between the parties was resolved on the basis that Mr Bell would produce: 'All documents recording or evidencing the use of the R&O Spreadsheets by Mr Bell, or otherwise referring to the R&O Spreadsheets'. In the interests of avoiding future disputation, it should be made clear that the category as agreed does not require that particular terminology be adopted in the document by which the Spreadsheets are referred to. Any document containing content about the use of the Spreadsheets by Mr Bell or anyone else (without naming or describing the Spreadsheets) would fall within the category as agreed because such documents would, by their content, refer to the Spreadsheets.

Disputed discovery sought by Mr Whittaker

31    The extent to which the categories of discovery sought by Mr Whittaker from the applicants are in dispute is relatively confined.

Category 35(b)

32    Category 35 is agreed, save as to para (b). It seeks all correspondence between Mr Whittaker and Mr Bell between 31 March 2015 and 16 May 2016 concerning the financial performance of the applicants. The applicants agree to the category provided the reference to 'financial performance' of the applicants is read as a reference to 'revenue and/or operating income made or to be made or to be made by [the applicants]'. For Mr Whittaker it is submitted that such a limitation would only be appropriate if references in the applicants' pleading to 'financial performance' were similarly confined.

33    The position adopted for Mr Whittaker is misconceived. The term 'financial performance' is used in the pleading at a number of points to describe the nature of the obligation that applied in preparing financial statements. For example, there is a plea in para 11A(b)(i) to the effect that financial statements do not comply with the applicable standards if they contain intentional errors as to the presentation of an entity's financial performance: see also para 17N and the particulars to para 21. However, the breach as alleged relates to the misstatement of revenue and operating income. Just because the nature of the standards is described in those terms does not mean that the proposal by the applicants is inappropriate.

34    The category should be expressed on the limited basis offered by the applicants without any requirement as to the amendment to the pleading.

Category 36

35    Category 36 seeks all emails and other correspondence between Mr Whittaker and certain named individuals said to have worked for the applicants that were created or received during the period 31 March 2015 to 16 May 2016 concerning the financial performance of the applicants.

36    In lieu of the category, the applicants proposed discovery of an electronic copy of the Mr Whittaker's email folder at the time, subject to a confidentiality undertaking and claims for client legal privilege. That position was accepted by counsel for Mr Whittaker during submissions. There should be discovery of that category.

Categories 37 and 38

37    These categories concern the reports provided to and the minutes of the applicants' monthly management meetings and the finance team meetings during FY15 and FY16. It is not said that the category would result in an oppressive number of documents. As the category is confined to documents provided to the meetings, they should be capable of being readily identified. Given the nature of the case alleged by the applicants to the effect that Mr Whittaker knew about the alleged irregularities, it is to be expected that the conduct of the key financial meetings of the business are likely, at least as to some of the meetings, to contain material that is directly relevant. Documents in those categories should be produced save to the extent that it is said that the entire subject matter of the meeting contains no aspect that is directly relevant. For the avoidance of doubt, if there is to be limited disclosure of the documents for a particular meeting then there will need to be agreement between the parties or an order to that effect.

Category 39

38    This category seeks all correspondence sent or received by each member of the board of directors and certain named senior members of each of the applicants during the period 31 March 2015 to 16 May 2016 relating to: (a) the recording, maintenance, and auditing of the financial records of the applicants; and (b) the financial reporting strategy to be adopted by the applicants.

39    This category is said to be vague, unclear and not directly relevant. It is said that it would be oppressively burdensome. Reliance is placed upon an affidavit of a solicitor employed by the lawyers for the applicants in these proceedings. It is said that it would be necessary to extract data from each of 18 named persons (described as 'custodians'). The reference in the affidavit is obscure. It is said that responding to the category would require the use of very general search terms that would produce a large number of documents that would take months to review.

40    The proposed category would require the production of every communication with 18 people in relation to the financial affairs of the applicants.

41    The applicants' proposal as to this category is a similar response to that proposed for category 36. It is to be expected that Mr Whittaker as the chief executive officer at the time would be copied in to any communication of a kind that might justify the category, including communications which are addressed to all board members as to matters concerning audit and financial reporting strategy. It has not been demonstrated that documents beyond those provided to directors generally would have sufficient direct relevance. The proposal by the applicants should be adopted. Without necessarily encouraging such a course, if after disclosure of that category is provided it is considered that there is some more specific category of documents that should be discovered then there could be a further request. As matters stand the category as formulated should not be required to be discovered.

Category 40

42    The applicants propose the same limit as for category 35. For reasons already given, that limit should be accepted.

Category 41

43    Category 41 seeks all documents sent or received by Mr Robert Bonotto during the period 31 March 2015 to 16 May 2016 concerning a contract with the Department of Foreign Affairs and Trade (Contract) and its termination.

44    The applicants object to the category on the basis that it is not directly relevant, alternatively is too wide.

45    Mr Whittaker says that there is a specific pleaded issue to which the category is relevant. The contention is based upon particulars provided by Mr Whittaker in the following context. The ASOC alleges (para 22) that Mr Whittaker and Mr Bell did not take reasonable steps to prevent or correct irregularities in the management and statutory accounts for FY15 and FY16, such steps being alleged to be (a) mandating that the practice of using the Spreadsheets to cease immediately; (b) instituting an internal investigation; and (c) ceasing to promote or acquiesce in a culture which placed undue emphasis on recording revenue and profit. The allegation is denied by Mr Whittaker. The applicants alleged that the denial was evasive. Under cover of an objection, Mr Whittaker provided particulars that included an allegation that in around October 2015 it was brought to Mr Whittaker's attention that the Contract was at risk of being cancelled in circumstances where expenditure on the Contract remained recorded in the management accounts as capital and that he then took steps the steps to maintain the Contract. The particulars note that despite those efforts the Contract was cancelled.

46    The applicants submit that the allegations in the ASOC place no reliance upon any allegation of improper treatment of the costs of the Contract, particularly that there was no contention of improper treatment of costs of undertaking work on the Contract by capitalising the costs even though the Contract was at risk of being cancelled. Therefore, the particulars are not a response to any particular allegation raised by the applicants.

47    In those circumstances, the matters pleaded in the particulars do not invite a detailed forensic investigation of matters relating to the Contract. At best the particulars appear to be advanced as an example of conduct outside that which is in dispute where Mr Whittaker is alleged to have acted appropriately. Importantly, the particulars do not even concern any steps that were taken by Mr Whittaker to deal with the manner in which the accounts were maintained. Rather, they concern a claim that he tried to save the Contract. Conduct of that kind has nothing to do with the case advanced by the applicants. He is not said to have been in breach of his duties because of a failure to take steps to keep the Contract on foot. The issue in the case is about accounting treatment, a matter not addressed by the particulars.

48    For those reasons, it has not been demonstrated that the particulars given by Mr Whittaker give rise to an issue that justifies the proposed category.

Disputed categories sought by Mr Bell

49    At the time of filing written submissions on the discovery application, many of the categories sought by Mr Bell were in dispute and properly so. On the eve of the hearing, the applicants filed a further response to the categories proposed by Mr Bell. Mr Bell then filed a response. By this belated conferral process some of the outstanding disputes were resolved or narrowed.

50    To a significant extent the dispute between the applicants and Mr Bell as to the scope of discovery categories arises because those acting for Mr Bell seek many categories of documents for a period which commences on 17 December 2013 and concludes on 31 March 2017. The justification for doing so appears to be that Mr Bell's employment arrangements extended for that duration. However, the claims as pleaded do not make allegations by reference to any such period. They concern the manner in which matters were recorded in the accounts for FY15 and FY16. On that basis the applicants maintained that many of the categories should be confined to that period. Generally speaking, the applicants' approach is justified.

51    In the reasons that follow, the descriptions of the categories of discovery sought by Mr Bell are taken from the summaries of the categories provided by Mr Bell. Where relevant, I will refer to respects in which the precise language of the category sought gave rise to concerns. As has been noted, references to the 'Relevant Period' are to the period from 17 December 2013 to 31 March 2017.

Category 12

52    Category 12 was described as:

An electronic copy of all email communications sent to or from the Fuji Xerox email address of any of the individuals named in the particulars to paragraph 5(d) of Mr Bell's Defence, or Mr Yaz Kuroha, in the Relevant Period, relating to:

a)    matters of accounting;

b)    the Books and Records of FXA or FXF;

c)    the financial performance of FXA or FXF; or

d)    marketing strategy, terms of trade, or pricing.

53    The applicants had initially opposed providing a copy of Mr Bell's email folder for the period 1 June 2013 to 31 March 2017. However, their revised position was to agree to discovery of that category subject to any necessary confidentiality undertaking and claims for client legal privilege. It is to be noted that the production of Mr Bell's folder would mean that any email communication to him by way of direction or instruction as to the manner in which matters were to be reported in the accounts would be produced. Despite the adoption of this position, Mr Bell maintained his claim to category 12.

54    The terms of category 12 reflect certain aspects of Mr Bell's pleaded defence. In response to the allegation that he was employed as chief financial officer and executive general manager - business services, Mr Bell alleges that at all material times he was 'subordinate to, and was obliged to comply with the lawful directions and instructions issued by Mr Whittaker, his predecessor, his successors, other senior executives in the corporate hierarchy of the Fuji Xerox corporate group and the board of directors … in respect of the discharge of his employment obligations (which he did)'. Particulars are given which refer to ten named persons. These are the individuals referred to in the description of category 12 (together with Mr Yaz Kuroha). Later in the defence, Mr Bell says in response to the allegations concerning the accounts that he was subject to oversight and direction and did not have the authority to institute formal investigations and, in effect, all he could do was identify and track items and draw them to the attention of Mr Whittaker.

55    Mr Bell identified no aspect of his pleading in which any specific case was articulated as to particular respects in which he was directed or controlled or the manner in which the alleged oversight and direction caused him to act in a particular manner referable to the matters the subject of the claim. The case as articulated is at a very high level of generality. It relies upon the claims about the structure of responsibility and no more. Therefore, it is not evident from the pleading how any of the matters the subject of category 12 might be directly relevant to the nature of the defence advanced by Mr Bell.

56    Against that, the category is extremely broad. There has been no evident attempt to confine the category to matters that would be directly relevant to the nature of the defence advanced and upon which reliance was placed to justify the category. It would require every document sent to or from the email addresses of more than 10 people relating, amongst other things, to 'matters of accounting' or 'financial performance' or 'marketing strategy' or 'pricing'. Expressed in such general terms it would provide no real guidance as to the types of documents to be produced.

57    In oral submissions, reference was made to the fact that there had been an internal investigation in relation to matters that included the subject matter of the proceedings. For that purpose it was said that the report of the internal investigation (which was in evidence on the application) showed that a substantial database of documents had been compiled. However, the existence of documents and the fact that they may be in a database that may be searched is not a justification for a category of documents that has not been meaningfully confined in a manner that will produce documents of relevance to issues as joined on the pleadings.

58    The category is far too broad. It is formulated in a manner that fails to engage with modern practice and the matters addressed at the outset of these reasons. The case to which it is said to relate does not give rise to any issue concerning particular communications. It relies upon overall structure rather than any particular way in which that structure operated in a manner that was significant for the present case.

59    For those reasons, discovery of the category should not be ordered. As has been indicated in dealing with a similar request by Mr Whittaker, the issue of further discovery can be addressed if considered necessary after the email account has been disclosed.

Category 13

60    Category 13 was described as:

An electronic copy of all email communications sent to or from the Fuji Xerox email address of Mr Robert Bonotto, in the period from 1 January 2016 to 31 July 2016, in relation to a contract with the Department of Foreign Affairs and Trade and its termination.

61    In oral submissions for Mr Bell this category was described as a mirror to category 41 sought by Mr Whittaker. The contract to which reference is made in the category is the Contract (described in dealing with category 41 of the documents sought by Mr Whittaker). The submission advanced for Mr Bell to justify the category perhaps was slightly different to that advanced by Mr Whittaker. Mr Bell submitted that as the Contract was cancelled the capitalised costs should have been written off. He said that despite this other executives required the Contract to be accounted for an ongoing contract so that its costs would continue to be listed as an asset. This is said to be an 'example' of the culture within the applicants emanating from others who knew of and directed the accounting practice complained of by the applicants.

62    As has been noted, the allegations in Mr Bell's defence about the culture emanating from others are expressed in the most general of terms. The Contract itself is not said to be pleaded. Further, as has already been noted, the applicants make no specific claim about the capitalised costs and their treatment. Therefore, a proper basis for the category which would see the applicants having to produce every document relating to the Contract has not been demonstrated.

Category 17

63    Category 17 was described as:

All Documents recording or evidencing FXA's and FXF's provision for bad and doubtful debt from 1 June 2013 to date and the debts that FXA and FXF allege in paragraphs 17J and 20K of the ASOC were inadequately provided for in that provision or the subject of correction.

64    The issue in relation to this category concerns the Relevant Period. Mr Bell says that even though the allegation made by the applicants concerns the treatment of bad and doubtful debts in FY15 and FY16 the applicants should produce all documents relating to bad and doubtful debts from 1 June 2013 to 31 December 2017. The submission advanced is that it was relevant to see the manner in which provisions were treated before and after the financial years in issue. The submission to that effect was insufficient to demonstrate direct relevance.

65    There is another category of documents which the applicants have agreed to produce. It is expressed as follows:

All records of FXA and/or FXF maintained on the Oracle and Aurora platforms relating to the Alleged Discrepancies (being an error, substantial accounting irregularity or significant financial and accounting irregularity referred to in any of paragraphs 17, 17C-17M, 20, 20B, 20E-20F, 20M, 21, 21A, 36-39A of the ASOC) and, to the extent that they are directly relevant to the Alleged Discrepancies, the documents relating to the transactions underlying the said entries.

66    This category includes the paragraphs that make the allegations as to bad and doubtful debts. Mr Bell has not demonstrated why the production of those documents is not sufficient given the proper approach to discovery outlined at the outset of these reasons.

Category 21

67    Category 21 was described as:

All Documents comprising the monthly R&O Spreadsheets (as defined in particular (a) of paragraph 21 of the ASOC) created during the period of 17 December 2013 to date.

68    It is a category that is related to that which was sought from Mr Bell by the applicants (which was belatedly agreed to be provided). It has not been demonstrated why it is necessary to produce documents beyond FY15 and FY16. The applicants agreed to the category if it was so limited. The applicants' position should be accepted. If, once the Spreadsheets have been produced, there is a basis upon which it can be demonstrated that Spreadsheets outside that period would be directly relevant to a particular in the case, then there can be a further application.

Category 22

69    Category 22 was described as:

All Documents created in the Relevant Period comprising a record or minute of the monthly management meetings referred to in particular (b) of paragraph 21 of the ASOC.

70    The category is expressed in similar terms to category 37 sought by Mr Whittaker. I would adopt the same approach and confine the category to FY15 and FY16. Documents for meetings in that period should be produced save to the extent that it is said that the entire subject matter of the meeting contains no aspect that is directly relevant. For the avoidance of doubt, if there is to be limited disclosure of the documents for a particular meeting then there will need to be agreement between the parties or an order to that effect.

Category 25

71    Category 25 was described as:

All Documents comprising the minutes of all meetings of the board of directors of FXA and FXF held in the Relevant Period.

72    It was submitted for Mr Bell that he was entitled to the minutes of meetings of directors for the Relevant Period because the commencement of the proceedings provided sufficient justification for Mr Bell to have access to the copies of minutes of directors' meetings for the period when he was a director. Strictly speaking, the access to which Mr Bell might be entitled as a former director is a separate question to the extent to which there should be discovery. For reasons that have been given, the discovery of the category should be provided for FY15 and FY16 save to the extent that it is said that the entire subject matter of the meeting contains no aspect that is directly relevant.

73    Should Mr Bell wish to pursue his application as a director then, as indicated in the course of the hearing, if the issue is not resolved between the parties he may do so by interlocutory application in these proceedings.

Category 28

74    Category 28 was described as:

All Documents created in the Relevant Period comprising an accounting paper, guideline, presentation or review relating to:

a)    matters of accounting;

b)    the Books and Records of FXA and FXF;

c)    the financial performance of FXA and FXF; or

d)    marketing strategy, terms of trade, or pricing.

75    A revised category was proposed by Mr Bell shortly prior to the hearing in the following terms:

All Documents comprising an accounting paper, guideline, presentation or review concerning the accounting policies or strategies to be applied, or how they should be applied, in respect of the Statutory Financial Reports and the Management Accounts of FXA or FXF for FY15, FY16 or FY17.

76    The revised category was accepted by the applicants.

Category 29

77    Category 29 was described as:

All Documents created in the Relevant Period comprising or communicating a decision, approval, guidance, direction or instruction relating to:

a)    the Alleged Discrepancies;

b)    the financial performance of FXA and FXF; or

c)    marketing strategy, terms of trade, or pricing.

78    A revised category to the following effect was accepted by the applicants in the course of oral argument:

All Documents created in the Relevant Period comprising or communicating a decision, approval, guidance, direction or instruction concerning the accounting policies or strategies to be applied, or how they should be applied, in respect of the Statutory Financial Reports and the Management Accounts of FXA or FXF for FY15, FY16 or FY17.

Category 30

79    Category 30 was described as:

All Documents created in the period of 1 June 2013 to the date these proceedings were commenced comprising a version of the document known as the COMMS Matrix, referred to in particular (v)(4) of paragraph 15A(k) of Mr Bell's Defence.

80    The reference to the COMMS Matrix appears to be to a document giving direction as to the approach to take to accounting entries. It appears that it may have existed in a form both prior to and after FY15 and FY16. Mr Bell says that it is relevant to know the form before and after the period the subject of the proceedings. He says that the document contained directives that came from Singapore which is a matter relevant to his defence to the effect that accounting matters were directed by others. As to the period after FY16, it was also submitted that the claim refers to the restatement of the accounts of the applicants for FY15 and FY16 which occurred on 21 December 2017 after an investigation was undertaken. It was submitted that it was relevant to know whether there had been a change in the COMMS Matrix by that time.

81    It was not suggested that there was any prejudice in requiring the document to be produced for the earlier period. It is a very confined request. I allow the category.

Category 31

82    Category 31 was described as:

All Documents comprising a copy of the fixed asset registers of FXA and FXF for the period from 1 June 2013 to date.

83    The applicants proposed that the category should be confined to FY15 and FY16. The fixed asset register is an accounting record that, in the ordinary course, would be reviewed each year. It is not suggested that there was some particular aspect of the defence that required consideration of the state of the register in the period outside the financial years the subject of the complaints made by the applicants. The category should be confined in the manner proposed by the applicants.

Orders

84    In order to ensure that the position in relation to the required categories of disclosure is made clear, the parties should confer to agree orders to record the full extent of the discovery categories as agreed and as determined by these reasons.

Associate:

Dated:    25 June 2021