Kaji Australia Pty Ltd v Glover (No. 2)

1. [1]

   The cross-claimant complains about the discovery provided by the third and fourth cross-defendants. He seeks, first, an order that the fourth cross-defendant, who is also a director of the third cross-defendant, be ordered to attend Court to be cross-examined in relation to his affidavit verifying discovery. Alternatively, he seeks an order that the fourth cross-defendant be ordered to swear, file and serve an affidavit deposing to the facts and circumstances pursuant to which he claims the third cross-defendant does not have its file relating to the cross-claimant, and the circumstances surrounding the disposition of the file. Finally, and alternatively, he seeks an order that he be given leave to serve on the fourth cross-defendant interrogatories in relation to the discovery given by him and the third cross-defendant.

Background

1. [2]

   In 2004 the cross-claimant advanced money to a friend, John Lippits. To do that, the cross-claimant sold shares and incurred a capital gains tax liability of $56,000 which he could not pay.

2. [3]

   The ATO commenced proceedings against the cross-claimant. It obtained judgment against him in February 2009 and served a bankruptcy notice on him in January 2010. A creditor’s petition was filed and served in August 2010.

3. [4]

   According to the cross-claim the cross-claimant was endeavouring to obtain a loan to pay the ATO debt. It appears that Mr Lippits may have been involved also. At some point the third and fourth cross-defendants were engaged as finance or mortgage brokers to obtain a loan for the cross-claimant.

4. [5]

   The cross-claimant alleges that the third and fourth cross-defendants submitted a loan application to St George Bank on or about 27 January 2011 but that the cross-claimant’s signature on the loan application was a forgery.

5. [6]

   The cross-claimant alleges that the fourth cross-defendant said, on about 1 February 2011, that he had obtained an approval for a loan from St George Bank and that he gave to Mr Lippits a copy of a letter of conditional approval from St George Bank dated 1 February 2011. Thereafter the fourth cross-defendant is alleged to have advised Mr Lippits that he had been informed by St George Bank that the St George loan could not be settled in time for the cross-claimant to avoid a sequestration order being made against him, and suggested to Mr Lippits that an approach be made to private lenders with a view to obtaining a short-term loan pending the settlement of the St George loan.

6. [7]

   It was in those circumstances that the cross-claimant came to enter into the loan agreement with the plaintiff on 21 February 2011 to borrow $115,000. That loan was repayable on 21 April 2011.

7. [8]

   Ultimately the St George loan did not proceed and the cross-claimant failed to repay the loan to the plaintiff.

8. [9]

   The cross-claimant alleges that the representations made by the fourth cross-defendant about the St George loan were false and/or misleading and deceptive in contravention of the Australian Securities and Investments Commission Act 2001 (Cth), the Australian Consumer Law (Cth) and the Fair Trading Act 1987 (NSW).

9. [10]

   The cross-claimant identified the following categories of documents for discovery in relation to the third and fourth cross-defendants:

10. [11]

    The fourth cross-defendant swore an affidavit of discovery on an unspecified date in October 2017 in these terms:

11. [12]

    Part 2 of the List of Documents identified the documents in possession of other persons as being:

12. [13]

    Subsequently, on 18 October 2017, the cross-claimant’s solicitors served a Notice to Produce on the third and fourth cross-defendants seeking production of the following documents:

13. [14]

    On 19 October 2017 DLA Piper, for the third and fourth cross-defendants, wrote to the Court saying that their clients did not have any documents to produce in answer to the Notice to Produce.

14. [15]

    On 23 October 2017 the cross-claimant’s solicitors wrote to DLA Piper noting the List of Documents provided by the third and fourth cross-defendants, asserting that the response did not comply with UCPR 21.3, and saying that it was simply not credible that their clients did not or could not know in whose possession the documents described in the Schedule were, nor to claim that they were in the possession of an unknown person.

15. [16]

    DLA Piper responded the following day saying (inter alia) that they were instructed to inform the cross-claimant’s solicitors:

16. [17]

    Mr Newell, solicitor for the cross-claimant, essentially put his argument on two bases. The first was on the implausibility of the fourth cross-defendant having simply moved offices without taking both hard copy and, particularly, soft copy documents with him. Further, the evidence showed a clear relationship of some sort between the fourth cross-defendant and Mr Prestia, with whom he occupied the Alexandria office and shared both document storage facilities and an email server. In those circumstances, reasonable enquiries would have involved contacting Mr Prestia to retrieve or ascertain the whereabouts of the material, both soft and hard copy, left at those premises which Mr Prestia still occupies.

17. [18]

    The second basis concerned the suspicion surrounding the fourth cross-defendant and his involvement with the loan applications. Subpoenas had been issued by the cross-claimant to St George Bank and to BankWest which had resulted in information from those banks that no such loan applications were received by them. A copy of a loan application purportedly made to St George was available from a source other than the Bank, but the cross-claimant denied that what purported to be his signature on the face of the document was really his signature. In relation to St George Bank there was what purported to be an approval-in-principle dated 1 February 2011 faxed on that morning from St George to a fax number that was said to be the fourth cross-defendant’s fax machine in offices he then occupied in Clarence Street in the city.

18. [19]

    In relation to BankWest there was what purported to be an unconditional loan approval dated 20 December 2010. The reference on the letter was 6057963, and although the letter was addressed to Johann Benson Glover, it commenced:

19. [20]

    In answer to the subpoena to BankWest, a compliance officer said that the Bank was unable to locate any documents in relation to Johann Benson Glover, that the property said in the BankWest letter to be used as security in Mt Druitt had never been mortgaged to them, and that the reference number 6057963 was assigned to “a different processing” not related to any loan applications or to Mr Glover.

20. [21]

    The cross-claimant issued a further subpoena to BankWest which sought employment files of Adam Zammit, the person said in the letter of 20 December 2010 to have been the cross-claimant’s personal lending representative, and Mark Reid, the head of retail sales who purportedly signed the letter. Subsequently, BankWest wrote to the Registrar of the Court saying that Mr Reid was an ex-employee of the Bank, that Mr Zammit was not a current employee but more information would be needed for them to search to see if he had been such an employee, and suggesting that the loan approval document might not be a genuine bank document.

21. [22]

    In all of those circumstances and, taking into account the fact that the St George loan never proceeded, Mr Newell submitted that there were a number of suspicious matters with which the fourth cross-defendant was clearly involved, and which gave him an incentive not to produce files.

22. [23]

    Mr Newell submitted that a further matter to be taken into account was that the fourth cross-defendant swore an affidavit in support of the plaintiff’s case against the cross-claimant/defendant on 29 October 2015. He submitted that it was likely that the fourth cross-defendant would have made some enquiries about or searches for his files, electronic or otherwise. In that affidavit the fourth cross-defendant said this:

23. [24]

    The affidavit then went on to set out the explanation that Mr Prestia and Mr Lippits gave to him concerning the cross-claimant and his need to borrow money. At the end of the January 2011 meeting, it was agreed that Mr Lippits was to organise for the cross-claimant to meet with the fourth cross-defendant, and the fourth cross-defendant asked Mr Lippits to ensure that the cross-claimant brought identification documents with him including a driver’s licence, Medicare card and up-to-date council rates notice.

24. [25]

    All of that material contrasts starkly with an email dated 23 December 2010 from the fourth cross-defendant to Mr Lippits which reads as follows:

25. [26]

    The third and fourth cross-defendants submitted that there was nothing by reference to the documents discovered, the affidavit verifying discovery, the pleadings or from any other source that the discovery was inadequate. The third and fourth cross-defendants submitted that they had not misconceived the nature of the obligation of discovery because of the detailed letter of advice provided by their solicitors to them. The third and fourth cross-defendants noted that in written submissions in support of the notice of motion, allegations of fraud against the fourth cross-defendant were made in a way which could only amount to a contention that he had sworn a false verifying affidavit. The cross-defendants submitted that neither the pleadings nor the evidence supported the allegations of fraud that were made and in that way the submissions went well beyond the case pleaded.

26. [27]

    At the end of his submissions, Mr Lloyd of counsel for the third and fourth cross-defendants proposed that, before a final decision was made in the matter, his clients would agree to an order for the provision of a further affidavit in terms that were to be forwarded to me for consideration. The proposal was not to foreclose the decision in the matter which was essentially between two alternatives, being either that the fourth cross-defendant provide a supplementary affidavit or attend for cross-examination on his existing affidavit.

27. [28]

    Subsequently the solicitors for the fourth cross-defendant forwarded a proposed order in these terms:

28. [29]

    Accordingly, I adjourned the proceedings for a short time to enable the further affidavit to be prepared.

29. [30]

    On 7 April 2018 the fourth cross-defendant swore a further affidavit that detailed his relationship and dealings with Mr Prestia, including the sharing of offices with him. The fourth cross-defendant said that in his time at the shared office with Mr Prestia in Alexandria the majority of the work he performed was done electronically by email. He said it was his usual practice to maintain a hard copy file for each loan application which would not usually contain many documents but which would usually include a copy of the loan application and borrower identification. He said that he stored the hard copy files for work he was undertaking on a bookshelf near his desk, that he would store hard copy files for work he had completed in archived boxes, and that he would store electronic files on the server.

30. [31]

    The affidavit then continued:

31. [32]

    The fourth cross-defendant then said that in early 2013 he telephoned Mr Prestia to ask him about the old server because he thought he had some old files on it. Mr Prestia said that he did not have it anymore because it was constantly breaking down.

32. [33]

    The fourth cross-defendant said that, in about 2014, the desktop computer that he had used at Alexandria suffered an irrecoverable breakdown, and that he disposed of it at a recycling facility. He said that he did not think it was likely that the computer had stored on it any data relating to the cross-claimant.

33. [34]

    In 2015 the fourth cross-defendant was contacted by his solicitor asking him to search his office and home for any files or documents relating to the cross-claimant. He said he searched his office and home but did not locate any such documents.

34. [35]

    In late 2017, after receiving a letter from his present solicitors concerning his discovery obligations, he said that he thoroughly searched his home and office for any documents about the cross-claimant or Mr Lippits but again did not locate any such documents.

35. [36]

    He then said that he had not contacted Mr Prestia to ask what had happened to the hard copy files he left at the Alexandria premises because he did not wish to have any contact with Mr Prestia, especially after he became aware of Mr Prestia’s possible involvement with the Mafia. He said that he had made deliberate attempts to have no contact with Mr Prestia since about early 2013. He said that if the Court ordered him to contact Mr Prestia to fulfil his discovery obligations he would comply with it, but he preferred the contact to be between Mr Prestia and his solicitors.

36. [37]

    When the hearing resumed on 8 March 2018 Mr Newell submitted that the further affidavit was inadequate in three ways. He said it was not relevant to speak about locating the server when, in ordinary circumstances, a person in the fourth cross-defendant’s position would ordinarily have a data file.

37. [38]

    Secondly, Mr Newell submitted that the cross-claimant was informed by this further affidavit for the first time that there had been a destruction of the fourth cross-defendant’s computer. Thirdly, Mr Newell submitted that it was fanciful that the fourth cross-defendant so feared for his life that there was no way he could get a handful of archived boxes out of the premises at Alexandria. He submitted that the archived boxes would have been necessary for taxation purposes and yet the fourth cross-defendant was not ingenious enough to find a way to have them retrieved from the Alexandria offices.

Legal principles

1. [39]

   In Proctor & Gamble v Medical Research Pty Ltd [2001] NSWSC 183 Hunter J said at [64]:

2. [40]

   In Preston v Star City Pty Ltd [2007] NSWSC 293 Hoeben J (as his Honour then was) said at [21]:

3. [41]

   In Dai v Zhu [2013] NSWCA 412 the Court of Appeal said:

Determination

1. [42]

   Notwithstanding Mr Newell’s objections to the further affidavit, in my opinion it was inadequate in one respect only, namely, the fourth cross-defendant’s reluctance to contact Mr Prestia to obtain any archived boxes belonging to the fourth cross-defendant at the Alexandria premises.

2. [43]

   Mr Lloyd accepted that a subpoena should issue to Mr Prestia and his company for any documents of the fourth cross-defendant in his possession or control. Mr Lloyd offered that it would be appropriate if his instructing solicitors were to issue that subpoena.

3. [44]

   Apart from the matter of the archived boxes, I consider that the affidavits sworn by the fourth cross-defendant demonstrate a sufficient compliance with his obligations to provide discovery. I do not consider that the cross-claimant brings himself within any of the tests discussed in the authorities. I am not satisfied that from the pleadings, the affidavits of discovery or from any other source, there may still be documents not discovered or searched for apart from what may be found on service of the subpoena already mentioned.

4. [45]

   Much of the cross-claimant’s argument depends on inferences being drawn from matters that might be thought to relate to the fourth cross-defendant’s credit. Some questions of Mr Nicholson’s credit may arise, but they are not appropriate matters to be dealt with in relation to discovery. A number of inferences can be said to be no more than speculation about what might be the case if there had not been irregularities such as the asserted fraudulent signature of the cross-claimant on one loan application, the addressing of the loan approval to “Bruno”, and the suggestion from BankWest that the loan approval might not have been genuine.

5. [46]

   Matters concerning the fourth cross-defendant’s credit previously raised and which are outlined at [23]-[25] above are also dealt with in the fourth cross-defendant’s affidavit. It is not necessary to make findings about those matters on this application in relation to discovery. It is sufficient to say that I accept, for the purposes of the fourth cross-defendant’s obligations with regard to discovery, the evidence he has given in his recent affidavit of 7 March 2018.

6. [47]

   Had it not been for the offer by the fourth cross-defendant through his counsel to swear a further affidavit as to the performance of his obligations to discover documents, I would have been minded to make an order to similar effect. I would not have required the fourth cross-defendant to attend for cross-examination unless that further affidavit had proved to be completely inadequate. I note in that regard that prayer 2 in the notice of motion sought a further affidavit, although with a greater degree of specificity than I consider is necessary.

7. [48]

   In the light of the events that have happened, it is appropriate simply to make an order dismissing the notice of motion. I will hear the parties on the costs of the motion.

8. [49]

   I make the following order: