Brinsmead & Ors v Property Solutions (Australia) Pty Ltd [2009] QSC 223

SUPREME COURT OF QUEENSLAND CITATION: Brinsmead & Ors v Property Solutions (Australia) Pty Ltd [2009] QSC 223 PARTIES: JUDITH BRINSMEAD (First Plaintiff/Applicant) AND ROBERT HILL (Second Plaintiff/Applicant) AND PACIFIC CHARTER CORPORATION PTY LTD (ACN 098 962 406) (Third Plaintiff/Applicant) AND STERLING SECURITIES (QLD) PTY LTD (ACN 060 226 959) (Fourth Plaintiff/Applicant) v PROPERTY SOLUTIONS (AUSTRALIA) PTY LTD (ACN 052 536 740) (Defendant/Respondent) FILE NO/S: BS2051/08 DIVISION: Trial Division PROCEEDING: Applications ORIGINATING COURT: Supreme Court, Brisbane DELIVERED ON: 13 August 2009 DELIVERED AT: Supreme Court, Brisbane HEARING DATE: 6 July 2009 JUDGE: Douglas J ORDER: 1. The plaintiffs’ application for further disclosure is dismissed. 2. Direct that the plaintiffs provide particulars of the amounts claimed under paragraphs 23(b) and 23(d) of the amended statement of claim by a date to be fixed. -- 1 of 7 -- 2 CATCHWORDS: PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – JURISDICTION AND GENERALLY – Where the plaintiffs/applicants have applied to the Court for further disclosure of documents related to the claim – Where the disclosure sought is resisted by the Defendant on the basis that the disclosure is not for a proper purpose PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – Statement of claim – Where the defendant claims that the amended statement of claim is not pleaded adequately – Where the defendant claims that the pleadings are contrary to the Uniform Civil Procedure Rules 1999 (Qld), which requires every type of damage claimed to be specifically pleaded – Where the purpose of the pleading rules under the UCPR is considered Uniform Civil Procedure Rules 1999, rr 150, 155, 166, 371 BHP Billiton Petroleum (Bass Strait) Pty Ltd v Esso Australia Resources Pty Ltd [2007] VSCA 224, referred Cape York Airlines Pty Ltd v QBE Insurance (Australia) Pty Ltd [2008] QSC 302, followed Chen v City Convenience Leasing Pty Ltd [2005] NSWCA 297, referred Lifetime Securities (Aust) Pty Ltd v Formula Properties (Qld) Pty Ltd [2003] QSC 412, considered Meredith v Palmcam Pty Ltd [2001] 1 Qd R 645, considered Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152, referred COUNSEL: A M Pomerenke for the plaintiffs D R Cooper SC with B Whitten for the defendant SOLICITORS: Corrs Chambers Westgarth for the plaintiffs DLA Phillips Fox for the defendant [1] Douglas J: This is an application for further disclosure in an action for breach of a contract. There is also a cross-application to strike out two paragraphs of the amended statement of claim on the basis that the damages claimed are not pleaded adequately. Disclosure [2] The claim is for payment of a balance of $2 million said to be owing as a security amount payable in advance for the performance of a share sale agreement created by a “put and call option deed” dated 21 December 2007 in respect of the potential purchase of shares in two companies by the defendant from the plaintiffs. Damages for breach of contract are also claimed. [3] The defence alleges that the defendant was induced to enter into the deed by misrepresentations and has suffered loss and damage as a result. The defendant has -- 2 of 7 -- 3 also asserted that it has rescinded the deed and is not obliged to make the payment claimed. [4] The plaintiffs seek disclosure of three categories of documents: the first consists of documents related to services alleged to have been wasted, the second relates to a “due diligence” exercise conducted by the defendant shortly before the deed was executed and the third relates to communications between the defendant and a firm called Walsh’s Chartered Accountants in respect of services provided by another firm of accountants called PKF Chartered Accountants and Business Advisors. “Wasted services” documents [5] The first category of documents relates to an allegation in the amended defence and counterclaim that the defendant was induced by the plaintiffs’ misrepresentations to spend money on services relating to a development that has been wasted. Some documents relevant to that issue have been disclosed, including invoices and letters of engagement. Others, evidencing services then provided by the defendant’s solicitors, are the subject of a claim for legal professional privilege while the disclosure of others is resisted because of the defendant’s intention to amend its defence and to file a rejoinder bearing on the allegations in issue. [6] The documents disclosed relating to the wasted services do not include documents which evidence or record the actual work performed by the consultants whose letters of engagement and invoices have been disclosed. It seems very likely that such documents exist. One example identified was an invoice from a firm of architects claiming a fee for its services. The plaintiffs’ submission was that the drawings or plans produced by the architects would be likely to establish whether or not they related to the development the subject of the proceedings or whether they were of general application and therefore unlikely to be work that was wasted. [7] Prima facie, the argument appears sound and is supported by the approach taken by Mackenzie J in Lifetime Securities (Aust) Pty Ltd v Formula Properties (Qld) Pty Ltd,1 where his Honour required the production of documents showing the work completed by people who had rendered tax invoices that had already been disclosed. [8] Further disclosure is resisted, however, on the basis that the application is a “fishing” or speculative one; the plaintiffs not having established that special circumstances and the interests of justice require the orders to be made, or that the duty to disclose has not been complied with, or that the documents exist and have passed out of the defendant’s possession or control. 2 [9] More particularly, the defendant argues that paras 77(c) and 78(a) of the plaintiffs’ reply and answer only put in issue that the defendant has spent the monies claimed and the making of the payments, not whether they were wasted payments. The monies spent were wasted, its counsel submitted, because the plaintiffs have terminated the performance of their obligations under the deed and that allegation was not denied in accordance with the rules. In that context, they relied on comments by Daubney J in Cape York Airlines Pty Ltd v QBE Insurance (Australia) Pty Ltd3 dealing with the obligations to provide a direct explanation for a denial of 1 [2003] QSC 412 at [8]. 2 See r 223(4) Uniform Civil Procedure Rules 1999 . 3 [2008] QSC 302 at [27] – [30]. -- 3 of 7 -- 4 an allegation in a pleading in r 166(4) of the Uniform Civil Procedure Rules 1999 to avoid the making of a deemed admission of the allegation. Accordingly, they submitted that, as the reply and answer did not supply such an explanation, the pleading was deemed to admit the fact that the payments alleged in para 74 of the amended defence and counterclaim were wasted and there was no issue as to which further disclosure was warranted. [10] That seems to me to be correct. The purpose of the pleading rules in the UCPR is to identify the real issues in dispute. The disclosure rules were specifically designed to reduce the number of documents required to be disclosed to those directly relevant to an allegation in issue in a pleading. These pleadings have not identified whether the allegation that the expenses claimed were wasted is in issue in the case. [11] There is also some strength in the defendant’s argument that this request amounts to a “fishing” expedition. That is evidenced by the plaintiffs’ solicitors’ letters suggesting that the documents they seek “may well” go to the issues or will permit them to consider whether or not the costs of which details were sought related to the development. 4 This does not establish an objective likelihood that the duty to disclose has not been complied with. Rather, it suggests simply that the solicitors want to satisfy themselves of that fact. Consequently, no further disclosure than has already occurred in respect of this issue is warranted. [12] The same conclusion applies to the request for the disclosure of the other documents than the invoices and payment records produced by the defendant’s solicitors as part of those services relating to the development. Production of them was also resisted on the basis that they were protected by legal professional privilege. Had it been made clear on the pleadings that there was an issue as to whether those payments were wasted or not, then a good argument exists that any legal professional privilege must have been waived because of considerations of fairness requiring an examination of the pleading’s assertion that the payments had been wasted.5 Because of my conclusion as to relevance, however, I do not need to decide that issue. “Due diligence” documents [13] The relevance of the “due diligence” documents stems from an allegation in para 14 of the reply and answer said to be responsive to allegations in the defence that the plaintiffs had made certain misrepresentations to the defendant. Documents directly relevant to those allegations of misrepresentation should, no doubt, have been disclosed. Paragraph 14 of the reply and answer goes on to say, however: “During the period from about 15 November 2007 to about 21 December 2007, the Defendant conducted its own due diligence with the assistance of such consultants and advises as it considered appropriate. Particulars 4 See exs E and F to the affidavit of Mr Byers filed 16 June 2009. 5 Cf BHP Billiton Petroleum (Bass Strait) Pty Ltd v Esso Australia Resources Pty Ltd [2007] VSCA 224 at [18] – [19]. -- 4 of 7 -- 5 The best particular the Plaintiffs can provide until after the completion of interlocutory steps are that the following consultants and advisers assisted the Defendant: (a) Andrew Gutteridge, an architect; (b) Michael Walsh, a tax adviser; (c) Megan Crowley and Rod Besley, solicitors from DLA Phillips Fox.” [14] The defendant wishes to deliver a rejoinder and to respond with some precision to these allegations, which, on the present state of the pleadings, should be regarded as deemed non-admissions. Consequently, it argues that it would be premature to order disclosure of the documents relevant to this allegation before the further pleading is delivered. It argues that the allegations may be disputed only in a limited sense, which would therefore reduce the disclosure that needs to be made. That approach appeals to me as there is little point in ordering broader disclosure than may eventually be required. [15] Whether those documents, or any of them, are also the subject of a claim for legal professional privilege which has been waived can then be tested against the allegations contained in the further pleading. It seems to me that the answer to whether any privilege has been waived, and in respect of which documents, may be affected by how the defendant responds to the allegation. This may well be a case where the effect of the alleged misrepresentations on the defendant’s state of mind may render the legal advice it received at times relevant to the making of the misrepresentations disclosable, 6 but that point should be determined on the whole of the pleadings. Communications with Walsh’s Chartered Accountants concerning the services of PKF [16] PKF wrote to Walsh’s Chartered Accountants on 12 December 2007 in a document that has been disclosed. It contains “draft tax calculations in respect of consolidating M D Pty Ltd for income tax purposes” and discusses the effect of an increase in the tax value of that company’s capital assets. The plaintiffs argue that there must also be documents evidencing communications between Walsh’s and the defendant on that subject. That is not self-evident. Nor was it made clear how any such communication was relevant by reference to the pleadings. I would not order further disclosure in respect of this part of the application. Is the claim for damages pleaded properly? [17] Paragraphs 23(b) and 23(d) of the amended statement of claim plead some of the loss and damage claimed in this form: “(b) Further, Judith Brinsmead and Robert Hill have suffered loss and damage represented by the difference between: 6 See Telstra Corporation Ltd v BT Australasia Pty Ltd (1998) 85 FCR 152, 158 and Chen v City Convenience Leasing Pty Ltd [2005] NSWCA 297 at [41]. -- 5 of 7 -- 6 (i) the consideration payable by the defendant pursuant to the Share Sale Agreement for Murarrie Developments as pleaded in paragraph 16 above; (ii) the market value of the shares the subject of Share Sale Agreement for Murarrie Developments as at 9 July 2008; Particulars Particulars of the said difference will be provided prior to trial. … (d) Pacific Charter and Sterling Securities have suffered loss and damage represented by the difference between: (i) the consideration payable by the defendant pursuant to the Share Sale Agreement for Rivergate Marina as pleaded in paragraph 17 above; (ii) the market value of the shares the subject of the Share Sale Agreement for Rivergate Marina as at 9 July 2008; Particulars Particulars of the said difference will be provided prior to trial.” [18] The complaint is that the statement that particulars will be provided prior to trial is in breach of r 150(1)(b) of the UCPR requiring every type of damage claimed to be specifically pleaded. Rule 155(1) also requires the pleading to state the nature and amount of the damages claimed. The plaintiffs are seeking advice from expert valuers which had not yet been provided when this matter was heard. That explains why the particulars of the relevant amounts have not been set out yet. [19] The defendant drew my attention to the Court of Appeal’s decision in Meredith v Palmcam Pty Ltd, 7 where the Court said: “Expecting a plaintiff to comply with these quite specific provisions is in our respectful option not a matter of mere pedantry.” [20] Accepting that that is the case, Mr Pomerenke submitted, however, and in my view, quite justifiably, that the nature of the damages suffered had been clearly pleaded using the appropriate measure of damages as the contract price less the market price and that, if there were an irregularity, it could be remedied by an exercise of my powers under r 371. I propose to do that by requiring the provision of particulars of 7 [2001] 1 Qd R 645, 647 at [7]. -- 6 of 7 -- 7 the amounts claimed under those paragraphs by a fixed date after the plaintiffs have obtained their expert advice. Further directions and orders [21] There was some debate as to whether I should make an order in respect of the appointment of an expert under r 429G but the parties eventually took the view that that issue would best be dealt with by the judge dealing with the supervised cases list. [22] Accordingly, the plaintiffs’ application for further disclosure is dismissed and the defendant’s application to strike out paras 23(b) and 23(d) of the amended statement of claim will be made the subject of a direction that the plaintiffs provide the particulars of the amounts claimed under those paragraphs by a date to be fixed. I shall hear the parties as to costs. -- 7 of 7 --