Bowenbrae Pty Ltd & Anor v Flying Fighters Maintenance and Restoration [2010] QDC 347

DISTRICT COURT OF QUEENSLAND CITATION: Bowenbrae Pty Ltd & Anor v Flying Fighters Maintenance and Restoration [2010] QDC 347 PARTIES: BOWENBRAE PTY LTD & Anor (Applicant) AND FLYING FIGHTERS MAINTENANCE AND RESTORATION (Respondent) FILE NO: 1528/08 PROCEEDING: Applications ORIGINATING COURT: District Court DELIVERED ON: 10 September 2010 DELIVERED AT: Brisbane HEARING DATES: 30 August 2010 JUDGE: Reid DCJ ORDER: 1) Dismiss the defendant’s application 2) Order that the first and second plaintiffs make application to CASA to obtain copies of all registration documents lodged by them or the vendor of the aircraft relating to the registration of the aircraft in the name of the first Plaintiff and/or Second Plaintiff. 3) Order that the defendant pay the plaintiff’s costs of and incidental to this application to be fixed after hearing argument LEGISLATION: Uniform Civil Procedure Rules 1999(Qld) – r. 211 (1) (b), r. 223(1), r. 367 CASES: Erskine v McDowell [2001] QDC 192 - followed Theodore v Australian Postal Commission [1988] VR 272 – considered Taylor v Santos Limited [1998] 71 SASR 434 – considered CATCHWORDS: APPLICATION FOR FURTHER DISCLOSURE – where Defendant seeks documents with Government Departments – whether documents are under the ‘control’ of Plaintiffs – where document is accessible under Commonwealth Freedom of Information Act -- 1 of 9 -- 2 COUNSEL: S. Given for the Respondent SOLICITORS: Applicant represented by S. I. Hart, with leave Gall Standfield & Smith for the Respondent [1] In this action the plaintiffs seek delivery up of an aircraft and damages. The application before me was made by the defendant and relates to discovery of certain documents the defendant says the plaintiffs have in their possession or control, but have not disclosed. [2] It is alleged in the Statement of Claim that the first and second plaintiffs are the owners of an aircraft. They allege that they purchased it in 1999, each contributing $90,000. It is further alleged the aircraft was delivered to the defendant’s premises for Mr Arnott (the second plaintiff) and others to carry out restoration work. [3] It is alleged by the plaintiffs that in December 2000 Mr Arnot loaned Mr Hart, a former director of the defendant, $275,000, repayable within six months. This agreement was, it is alleged, subsequently varied to provide that the capital sum would be repaid within twelve months, and that interest thereon would be offset by restoration work on the aircraft performed by the defendant at no cost. [4] Mr Hart was bankrupted on 16 April 2002. None of the capital sum has ever been repaid. [5] The plaintiffs allege that the defendant, despite requests, has refused to return the aircraft. [6] The defendant does not admit the plaintiffs’ ownership of the aircraft. It alleges that the second plaintiff has sworn on oath that the aircraft was in fact purchased by Ultimate Aerobatics Pty Ltd, a company owned by the second plaintiff. It asserts the plaintiffs have no entitlement to an order giving them possession of the plane. [7] The defendant also alleges that the aircraft was delivered to the premises to carry out restoration work. Subsequently it has exercised a lien over the aircraft for work it says it has done on the aircraft valued at $77,454. Some of this work relates to an invoice in January 2000 and the balance to three separate invoices in October 2006, May 2007 and June 2008. -- 2 of 9 -- 3 [8] The defendant also counterclaims for almost $1million. That matter has been stayed, pending the defendant’s (plaintiff’s by counterclaim) providing security for costs. [9] By amended application before me the defendant seeks orders that each plaintiff supply to the defendant the following: (i) Copies of tax returns for the financial years 2000-2006 1 (ii) Copies of all financial accounts, notes to the accounts, profit and loss statements, balance sheets and depreciation schedules of the plaintiffs, for the same years (iii) Copies of the contract for purchase of the aircraft, copies of cheque butts, bank statements or other material which evidences the purchase of the aircraft. [10] The defendant says it needs this further material to support its argument that the plaintiffs are not the owners of the aircraft. It seems to be also seeking the material in support of an argument that the offsetting of interest that I have referred to was a non-cash business benefit which should be bought into account in assessing income, at least that of the second plaintiff. It does not seem to me that this latter issue relates to a matter directly relevant to an allegation in issue in the pleadings as required by r. 211(1)(b) of the UCPR in order to make a document discoverable. One wonders in fact whether Mr Hart, who appeared by leave for the Defendant, seeks documents in support of that argument for some other motivation. [11] I note in an affidavit of John Stanley Smith, who is the solicitor for the plaintiffs, filed in these proceedings that he says that he has had conversations in relation to such documentation, with Mr Daryl Beattie, a director of the first plaintiff, with the second plaintiff and with Mr Maurice Maughan of KPMG Chartered Accountants, the accountants for the first plaintiff. In particular I note that the affidavit discloses: (i) That Mr Beattie told Mr Smith he has no documents concerning the purchase of the aircraft including bank statements, cheque records or a written contract. Mr Beattie said no written contract was ever entered into. (ii) That the second plaintiff told him that he had no documents in his power or possession concerning the purchase of the aircraft, and in particular that no written contract was ever entered into in respect of the purchase. (iii) That the second plaintiff said that he was a 50% owner of the aircraft and had paid $90,000 to the first defendant as evidenced by a facsimile from the second plaintiff dated 18 October 2000 which is part of Exhibit “SAP3” to an Affidavit 1 The application itself seeks tax returns up to 2009, but before me Mr Hart, who appeared with leave for the company, limited the claim to the period up to 30 June 2006 -- 3 of 9 -- 4 of Shirley Ann Peterson sworn 9 August 2010, and filed by the defendant in these proceedings. (iv) That the first plaintiff’s accountants indicated that they had only a depreciation schedule, which refers to the aircraft, and which document has, I was told, been provided to the defendants. Mr Maughan otherwise said that the first plaintiff had not traded or lodged tax returns since 2003 and the only reference to the aircraft in tax documents was in the depreciation schedule to which I have referred. (v) That documents provided by the second plaintiff concerning the ownership and registration of the aircraft are part of Exhibit “SAP3” that I previously referred to. (vi) That the second plaintiff said that neither his tax returns, nor that of his company, Ultimate Aerobatics Pty Ltd, contain any reference to the aircraft and neither he nor his company has ever claimed the aircraft for GST, depreciation or any other taxation purpose. (vii) That the second plaintiff said he has been an aircraft engineer and owner for more than 20 years and, when registering an aircraft pursuant to the Civil Aviation Act, the regulations require the nomination of one person or entity as the owner or interest holder and, for the aircraft, the first plaintiff is the nominated owner or interest holder. [12] Interestingly, Exhibit “SAP3” to the affidavit of Shirley Ann Peterson sworn 9 August 2010 and read by the defendant includes documents sent by the plaintiff’s solicitor to the defendant under cover of a letter of 7 July 2010. The documents include a Civil Aviation Safety Authority (“CASA”) Certificate of Registration of 22 January 1999 which shows the registered owner of the aricraft as the first plaintiff. The Exhibit also includes a Certificate of Appointment of Registered Operator of 11 August 2006. This document shows the second plaintiff as the registered operator, under regulation 47.100 of CASA Regulations, effective from 11 August 2006. [13] In its submissions the defendant sought significantly wider orders in respect of disclosure than it had sought in its application. In particular it sought: “… (iv) A copy of any correspondence to the respective Accountants of the Plaintiffs evidencing the instruction to them on the non-cash benefit to be declared in the income tax returns to the Plaintiffs; (v) A copy of the general ledger printout of each of the plaintiffs’ accounting/taxation records evidencing the declaring of the non-cash benefit in each of the years of the relevant period. 2) An order be made directing each of the plaintiffs to make an application to CASA for copies of the documents signed by the purchaser and the vendor for the purchase of the aircraft VH-BBL under the Freedom of -- 4 of 9 -- 5 Information Act if necessary and that these documents be disclosed to FFMR. 3) An order be made : (i) Directing each of the plaintiffs to make enquiries of their respective Accountants to obtain copies of any record held by them, including general ledger printouts of the income earned in each of the relevant years, copies of the financial statements of each of the relevant years, copies of the taxation returns for each of the relevant years, copies of all the depreciation schedules for the relevant years and copies of any correspondence sent to them or by them, from/to each/both plaintiffs or any other party which evidences either the purchase of the aircraft or the inclusion of the non-cash benefit as income in each of the relevant years and for any records missing. (ii) An application to the ATO under the Freedom of Information Act for copies of the taxation returns of the relevant years and that these documents be disclosed to FFMR. 4) An order be made that at no such document or documents are presently in the possession or under the power and control of either of the Plaintiffs that by affidavit they are to depose to the following effect: (iii) The (sic) each/both of the plaintiffs does not have a document or documents as requested under paragraphs 1, 2 and 3 above, under their power or control. (iv) If such documents did once exist and were in their possession, power and control, that they cease to exist or passed out of their possession, power or control stating the relevant circumstances in which that occurred.” [14] Essentially however the defendant sought documents relating to what the defendant says was the plaintiff’s obligation under relevant taxation legislation with respect to the non-cash benefit attributable to the plaintiffs by reason of their foregoing interest on the loan made by the second plaintiff to one of the former directors of the defendant, Mr Hart and documents relating to the obligation to register the aircraft with CASA. [15] A relevant CASA advisory circular AC 47-01(3) of October 2009, which was tendered by Mr Hart, provides in paragraphs 10.1 and 10.2 thereof for one transfer document to be signed by any vendor (Form 027, Part 1) and one by any purchaser (Form 027, Part 2) of an aircraft. Furthermore, any new owner must make a mandatory declaration of whether there is in fact only one owner or more than one, and of the fact that the applicant has been appointed to act on behalf of the other owners. [16] It appears to me clear from that advisory circular and from the comments in respect of ownership and registration of aircraft referred to in the Affidavit of Mr Smith and -- 5 of 9 -- 6 attributable to the second defendant that there would have been such documents executed in this case and lodged with CASA. There may be other similar documents also. Furthermore, it seems to me that they might well be relevant to the question of whether or not the first and/or second plaintiffs have an interest in the aircraft the subject of the proceedings. In such circumstance it seems to me that such documents are directly relevant to an issue in the proceedings. It would seem that these documents would still be in the possession of CASA. [17] I might add that even if such documents do not show that the Form 27 was completed to indicate that there was more than one owner, that would not necessarily be conclusive of the issue. It may be that the form was incorrectly completed by the first defendant or it may be that the second defendant acquired his interest at a later date, even if this was not subsequently advised to CASA. These are not matters I presently have to determine. [18] What I do need to determine is whether or not the documents, which are likely to be still held by CASA, are documents that are discloseable by the plaintiff. It seems clear that they would be directly relevant to an allegation in issue in the pleadings, namely whether the second plaintiff is a joint owner of the aircraft with the first plaintiff. The question is whether they are “in the possession or under the control” of the plaintiffs, which are the words used in UCPR r. 211(1)(a). [19] A similar consideration was relevant in a decision of Erskine v McDowell [2001] QDC 192. In that case the plaintiff had sought an order that the defendant disclose copies of all forms that the defendant had signed and lodged with Centrelink or the Department of Social Security concerning the defendant’s domestic living arrangements over a particular period. [20] The action involved issues of an alleged constructive trust arising out of a de-facto relationship so the documents were clearly relevant to an allegation in issue. The matter which most concerned Robertson DCJ was whether the documents were “in the possession or under the control” of the defendant. [21] In that case the documents could not be obtained by Notice Requiring Non Party Disclosure pursuant to r.242(1) of the UCPR because of s.207 of the Social Security (Administration) Act 1999. It was however conceded that the defendant had a right under the Act to obtain copies of such documents by making an application under s.18 and paying the required fee. -- 6 of 9 -- 7 [22] His Honour referred to a decision of Theodore v Australian Postal Commission [1988] VR 272. It was there held that the fact the litigant has, under the Freedom of Information Act, a right of access to a document does not place that document within his “power”, which was a term used in the discovery provisions in the Victorian Supreme Court Rules. [23] In Taylor v Santos Limited [1998] 71 SASR 434, another case considered by Robertson DCJ, the Full Court of South Australia held that documents in the custody of a wholly owned subsidiary of Santos Limited were not in its “possession, custody or power”. In that case Doyle CJ, with whom Prior J agreed, said that the obligation to discover documents hinges upon; “having a right or actual and immediate ability to examine the document. A person does not have the right or actual immediate ability if the person is able to inspect the document only if a third party, who has control of the document, agrees to permit inspection.” [24] After considering those cases Robertson DCJ concluded: “that control is a more stringent requirement than power. It is difficult to conclude that in the ordinary sense of the meaning of ‘control’ the defendant here has an ability to ‘direct’ or ‘command’ the Commonwealth Agencies to provide her with copies of the document”. [25] In my view, similar considerations apply in the circumstances of this matter. [26] Clause 15.4.1 of the Advisory Circular in respect of Registration of Aircraft and Related Matters provides that registration documents and some of their contents (including identification details, telephone and facsimile numbers), notifications and general correspondence are classified documents and therefore not available to the public unless requested and approved under the provisions of s.15 of the Commonwealth Freedom of Information Act (1982). [27] In my view, such documents are not in the plaintiffs’ possession or control. In the circumstances it is not appropriate to make an order under r.223(1) requiring the plaintiffs to disclose such documents to the defendant. [28] It does seem to me that documents relating to the application to register the aircraft in the name of the first plaintiff, which may be relevant to the question of the ownership of the aircraft, exist or have existed, but have now passed out of the possession or control of the plaintiffs. -- 7 of 9 -- 8 [29] As occurred in Erskine v McDowell [supra] it is my view that those documents may be of relevance. Having regard to the general power under UCPR r 367 to make any order that is appropriate about the conduct of the proceedings, I propose to direct the first and second plaintiffs to make the necessary application to CASA to obtain copies of all registration documents including documents lodged by the plaintiffs or by the vendor of the aircraft when sold to either or both of the plaintiffs, relevant to the registration of the aircraft in the name of the first plaintiff and for the second plaintiff. [30] I note that under r.15 of the Freedom of Information Act, the defendant could in fact have made such an application. It may be however, that there are circumstances whereby CASA may not disclose documents to members of the public, such as the defendant, concerning such registration, which it might disclose to the plaintiffs, who are the parties to whom ownership of the vehicle seems to be registered with CASA. In that circumstance I think it more appropriate for the plaintiffs to make such application than for the defendant to do so. [31] In making such an order I note however that the defendant, at the time of bringing this application: (i) Had not made its own application under the Freedom of Information Act. (ii) Had not sought discovery of such documents pursuant to the third party disclosure provisions of the UCPR. [32] In that circumstance it seems to me that the application was premature. The order I have made is merely to ensure that the action is suitably progressed in a timely and cost efficient fashion. [33] In respect of the application for tax returns the first plaintiff’s accountants have informed Mr Smith that they have no such documents relevant to the aircraft other than the depreciation schedule which has already been provided. Indeed no tax returns have been lodged since 2003 by the first Plaintiff, because the company no longer trades. The second Plaintiff says that there is no reference to the aircraft in his, or his companies, tax returns. [34] Whilst Mr Hart asserts the company should have lodged returns because of matters he identified in his submissions, I have no reason to doubt what the accountants or the second plaintiff have said. If there is a breach of the obligation to file tax returns – and I make no suggestion that there has been in this case – that is not a -- 8 of 9 -- 9 matter which here concerns me. The point is that there are no returns or other documents which are directly relevant to an allegation in issue in the pleadings. [35] In the circumstances I dismiss the defendant’s application, other than ordering, as I have indicated, that the first and second plaintiffs make application to CASA to obtain copies of all registration documents lodged by them or the vendor of the aircraft relating to the registration of the aircraft in the name of the first Plaintiff and/or Second Plaintiff. [36] Because of what I have said about the fact that such documents are not in the possession or under the control of the first plaintiff and because I have proceeded instead under UCPR r.367, and in circumstances where the defendant has not itself sought disclosure of such documents pursuant to the Freedom of Information Act and/or by way of third party discovery, but instead brought this application against the plaintiffs directly, I order that the defendant pay the plaintiff’s costs of and incidental to this application. [37] I propose to fix such costs in a sum to be determined after hearing argument. -- 9 of 9 --