MARTINCIC -v- MARUSCO  WASCA 133
"The defendants cannot reasonably complain that they have been denied access to documents which they have not clearly requested."
Opinions vary as to when experts should be engaged. This judgment illustrates that failure to adhere to court deadlines can lead to refusal of an adjournment where a party has not made reasonable attempts to mount its defence, including timely engagement of an expert.
The defendants in the primary proceedings had applied for leave to appeal against a decision by the trial judge not to vacate the hearing dates. The application argued that the defendants had been unreasonably denied 'unfettered' access to books and records, including computers, to provide to their expert accountant.
Leave was denied, partially due to the defendants "failing to brief their accountants about information in their possession earlier, not being sufficiently proactive in securing the report and in failing to utilise the formal and informal means available to them to obtain copies of relevant documents".
The primary proceedings related to allegations that the defendants, a former director and his wife, had misappropriated funds from a bank account of M3 Building and Construction Pty Ltd.
There were two alleged methods of misappropriation. Firstly, it was alleged that the defendants falsified invoices from service providers for amounts which were paid into bank accounts which the defendants controlled. Secondly, it was alleged that the defendants made cash withdrawals from the accounts, which were not authorised or necessary for M3's business.
Proceedings commenced, supported by an affidavit of the first plaintiff, on 4 May 2016. Although the plaintiffs initially sought interlocutory injunctive relief, this was considered unnecessary when the parties agreed on 24 May 2016 to orders programming the matter for an expedited trial. These orders called for a request for specific discovery by the defendants and an exchange of affidavits.
This is where things began to go wrong.
The defendants requested 'unrestricted' and 'unfettered' access to documents, which the plaintiffs repeatedly denied. Rather, the plaintiffs provided documents which their own forensic accounting expert had relied upon, and asked the defendants to provide a list of further documents requested.
The parties eventually agreed on the defendants' expert attending the plaintiffs' premises. But the expert was not given access to records such as the plaintiffs' computers (on the grounds that they might have contained privileged material and confidential material unrelated to the matter).
Applications to vacate trial
In the primary proceedings, the defendants argued that the trial date should be vacated because they had been denied access to emails which, the defendants said, would show the first plaintiff's authorisation of the payments. In support of their application, the defendants did not include any statements from their expert or any documents that suggested that supportive emails actually existed.
The primary judge rejected the applications, finding that:
- there was nothing concrete before him to indicate that any documents demonstrating authorisation existed, other than assertions in broad terms;
- the plaintiffs had complied with trial directions and the defendants had not: the defendants had failed to comply with directions to file affidavits;
- the plaintiffs' affidavits further established the need to expedite the trial;
- the plaintiffs' expert evidence supported an already 'compelling case'; and
- "...the defendants ... seem to have created a lot of dust and noise but have not actually ventured forth to articulate the semblance of a barely arguable defence to the concerning matters that are raised against them."
Leave to appeal
The defendants sought leave to appeal on the basis that the primary judge's discretion was exercised unreasonably or unjustly.
It was again contended that the defendants' forensic accountants were "denied full access to the documents of M3, meaning that the accountants had inadequate time to prepare their report".
The Court of Appeal found the following:
- The "available mechanism for the defendants to obtain copies of emails" was set out in the programming orders. The defendants did not make use of this mechanism;
- "There is no substance to the defendants' complaints so far as they relate to a denial of unfettered access to M3's computer systems. Denial of such access was reasonably required to protect M3's legitimate interests, such as the preservation of legal professional privilege and the confidentiality of documents not related to any matter in issue in the proceedings";
- "There was both a formal and informal mechanism for the defendants to obtain access to relevant documents held by M3. The formal mechanism was to request discovery of specified classes of documents...The informal mechanism was that offered by the plaintiffs: for the accountants to ask for categories of documents they required";
- It was only at the hearing before the primary judge on 19 July 2016 that the defendants had said that they were seeking emails that would assist in establishing that the first plaintiff had authorised the transactions; and
- In any event, the defendants' forensic accountants were not approached regarding scope until 17 June 2016, were not briefed until after receiving the plaintiffs' expert reports (which were due the day before any request for discovery was to be made) and were not 'immediately provided' by the defendants with the records included in the first plaintiff's affidavit of 4 May 2016 or records of accounts controlled by the defendants.
The Court found that the defendants "cannot reasonably complain that they have been denied access to documents which they have not clearly requested".
The defendants pointed to the terms of the confidentiality agreements which their forensic accountants were required to sign as indicating the extent of the restrictions placed on their access.
The Court found no substance in that contention: the undertaking merely required the forensic accountants to use information obtained from M3 only for the purposes of preparing expert evidence in the proceedings and to keep confidential (including from the defendants) any information that was not related to the subject matter of their report.
Consideration and decision
Leave to appeal was denied. The Court of Appeal made the following observations:
"A party who is given a sufficient opportunity to present their case, and who fails to take advantage of that opportunity without reasonable cause, cannot complain that they have been denied procedural fairness because the court has declined to provide a further opportunity to do so."
"... The evidence before the primary judge supported the conclusion that the defendants had not taken advantage of that opportunity [to prepare for trial], and that the difficulties which they faced in obtaining expert evidence were largely of their own making."
"The defendants were at fault in failing to brief their accountants about information in their possession earlier, not being sufficiently proactive in securing the report and in failing to utilise the formal and informal means available to them to obtain copies of relevant documents."
Experts rely heavily on the information provided to them. Providing experts with incomplete information can produce imperfect results. However, practitioners need to balance the need for caution in providing experts with incomplete information with the strictures of court timetables. This judgment highlights the need for legal practitioners to:
- consider when to provide initial documents to an expert, even when further documents are expected; and
- discuss with experts what can be produced in order to comply with a short timetable, even if further evidence will be required.
Another option which might have helped resolve the impasse in this matter would have been the use of an independent computer expert to acquire images of computer systems forensically; to remove privileged information; and then to provide the remaining information to the requesting party.
However, where time is limited (as it was in this case) the option to appoint an independent computer expert might not be practical. In such cases, practitioners should focus on full use of the formal and informal means of access to relevant information (while also diligently recording any resistance to those attempts, to facilitate any applications for more time).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.