ANTZ INYA PANTZ COFFEE COMPANY PTY LTD -v- MUHL [2023] WASC 320 (24 August 2023)

(3) while subject to those contractual obligations, Mr Muhl registered the second defendant (Brightside Coffee); and

(4) in some way in breach of his contractual obligations Mr Muhl (directly or through Brightside Coffee) dealt with clients of the Applicant.

1. It must be noted that by the Originating Summons the 'Relevant Period' in respect of which documents are sought is defined to be up to 'a period of 12 months after the cessation of' Mr Muhl's employment which appears to be up to 5 September 2022 (ie, 12 months after 5 September 2021).
2. At the commencement of the hearing, counsel for the Applicant said that Orders 3 and 4 of the Originating Summons were not pressed.

1. The Applicant sought to read four affidavits of its solicitor, Corrina Dowling, made:

(1) 30 March 2023 with Annexures CD1 - CD13 (First Dowling Affidavit);

1. The defendants objected to the 'late' filing of the Second - Fourth Dowling Affidavits without explanation or leave. In the light of the conclusion I have reached below, I do not need to resolve that objection.
2. The Respondents read the affidavit of Mr Muhl made 22 May 2023.
3. The Respondents objected to the first three Dowling Affidavits on the basis that they did not comply with the Rules. In short, that objection must be upheld: the first three Dowling Affidavits manifestly did not comply with O 37 r 6.
4. Order 37 r 6(2)(c) allows an affidavit to contain statements of information or belief if the affidavit is made for the purposes of interlocutory proceedings. That provides an exception to O 37 r 6(1) which provides:

An affidavit must be confined to such facts as the deponent is able of his or her own knowledge to prove.

1. Further, O 37 r 6(3A) and r 6(3) provide relevantly:

(3A) An affidavit containing statements of information or belief must set out the sources or grounds of that information or belief unless

(a) [which is not applicable here] or

(b) [which is not applicable here].

(3) The costs of an affidavit which unnecessarily sets forth matters of hearsay, argumentative matter or copies of or extracts from documents, shall be paid by the party filing the affidavit.

1. The rules in O 37 r 6 ought to be well known and are not difficult to apply.
2. Leaving aside the importance of compliance with the Rules generally, the importance of O 37 r 6 should be readily understood.
3. In this jurisdiction it is not common for there to be cross-examination on affidavits filed in interlocutory proceedings. The requirement that the deponent sets out the sources or grounds of their statements of information or belief is important for the opposing party in its assessment of what, if any, evidence it might seek to adduce in reply or opposition. Further, it allows the Court some ability to make an assessment of the cogency and reliability of the statements made by a deponent. Without compliance with O 37 r 6 there is a real danger that an affidavit turns into an ipse dixit exercise on the part of the deponent.
4. The Court of Appeal in Blythe v Western Australia [2008] WASCA 10 [43] (Pullin & Buss JJA) stated, with respect, the conventional position that hearsay evidence being led to prove its truth is inadmissible in an affidavit unless made admissible by O 37 r 6(2)(a). Their Honours stated by reference to Lewkowski v Bergalin Pty Ltd (Unreported, WASCA, Library No 7675, 26 May 1989) that:

Preferably statements of information or belief in affidavits should follow the form 'I have been informed by X and verily believe' ... This form is preferable, not because the court requires ritualised behaviour, but because it clearly indicates the source of the information, states the information and states that the deponent believes that what X has said is true. If that form, or something similar, is not followed, there may be a tendency for the drafters of affidavits to drift into bad habits which will produce affidavits inadmissible under O 37 r 6.

1. The Court of Appeal (in Blythe) then adopted statements made by Wheeler JA in Westpoint Management Pty Ltd v Goakes [2002] WASCA 317 [14]. In that passage, which bears repeating in full, her Honour said:

If the proceeding is interlocutory, the Rules require that the statements of information or belief must set out sources or grounds of that information and belief. The requirement is an important one for a number of reasons. It reveals the original source of the hearsay information and provides some opportunity to an opponent to counter or to challenge it and it enables a prosecution for perjury and a proper case if necessary. Further, in a case such as the present, where a judge or a master hearing such an application may refuse to accept and assertion in an affidavit if it appears inherently incredible and inconsistent with contemporary documents or for a number of other reasons which are well understood, then sources of information and belief assist in the determination of whether the assertion should be accepted. It is not, therefore, a requirement of the Rules which may be ignored in the preparation of such an affidavit. (emphasis added)

1. Speaking of the somewhat analogous provision of the Evidence Act 1995 (NSW), Palmer J said in Wily v Terra Cresta Business Solutions [2006] NSWSC 949 [11]:

[The] requirement of the section that the source of the information be revealed goes some way to assisting the Court in assessing the reliability of that evidence. Without any indication of the source of the evidence proffered on information and belief, the Court is unable to assess its weight nor can the opponent test the evidence or make any sensible submission as to its weight.

1. Each of Ms Dowling's four Affidavits stated at its respective par 3:

The matters I depose to in relation to the underlying matter are (unless stated otherwise) based upon a combination of my personal knowledge, unless otherwise stated) [sic], and a review of documents held on [the plaintiff's solicitors'] files.

1. Leaving aside for the moment the difficulty in understanding exactly what that paragraph is intended to mean, it is immediately obvious that more than one potential source of information is identified without identifying which source gave rise to any particular deposed matter. Further, there is no statement that the deponent believes the matters to be true.
2. Clearly, par 3 of the three affidavits do not comply with the preferable form identified by the Court of Appeal in Blythe.
3. Under O 37 r 6(1) the starting position is that a deponent is confined to the facts which they know directly. The exception in O 37 r 2(c) is conditioned by the requirement of O 37 r 6(3A). Stating of the sources or grounds of the information or belief conditions the exception to the affidavit being confined to the deponent's direct knowledge. It needs to be complied with with some care rather than the adoption of some formula such as par 3 to each of the Dowling Affidavits. That the adoption of the formula in par 3 was somewhat unthinking is perhaps most starkly illustrated by its inclusion in the Fourth Dowling Affidavit.
4. In my judgment, the following paragraphs of the First Dowling Affidavit do not comply with the Rules: [4], [5]. [6], [7], [8], [9], [10], [11], [12], [13], [14], [15], [16], [17], [18], [19], [20], [25] (first sentence).
5. In the Third Dowling Affidavit, in my judgment, the following paragraphs do not comply with the Rules: [5], [6], [7].
6. The following paragraphs are examples only of the First and Third Dowling Affidavits not complying with O 37 r 6(3A). From the First Dowling Affidavit:
   1. As at 25 June 2021, Filament Coffee was a recurring client of the plaintiff. [Mr Muhl] was a key point of contact for Filament Coffee from at least 25 June 2021 (if not earlier).
   2. On 29 October 2021 Arron Ellwood, Co-founder of Filament Coffee, advised the Plaintiff's Managing Director, Mr Pedler, that Filament Coffee would cease purchasing coffee from the Plaintiff. Now shown to me and marked 'CD-4' is a true copy of the email from Mr Ellwood to Mr Pedler.
   3. As at 25 June 2021, Queen Bee's Coffee was a recurring client of the Plaintiff. The Defendant was a key point for Queen Bee's Coffee from at least 25 June 2021 (if not earlier).
   4. On 22 August 2022 John Smalling from Queen Bee's Coffee advised Mr Pedler by way of email that they would cease sourcing coffee from the plaintiff. Now shown to me and marked 'CD-6' is a true copy of the email from Mr Smalley to Mr Pedler.
   5. On 13 February 2023 at 11.36 am Mr Pedler observed a Queen Bee Coffee truck selling coffee to a customer with a sign placed in front of the truck indicating that 'Brightside Coffee' was being served by the truck. Now shown to me and marked 'CD-7' is a true copy of the photograph taken of the Brightside Coffee sign in front of the Queen Bee truck.
7. From the Third Dowling Affidavit:
   1. I refer to and repeat paragraph 11 of [the First Dowling Affidavit] and say further that following the email from Arron Ellwood on 29 October 2021, Filament Coffee did not ever purchase coffee or any other products or services from the plaintiff. Filament Coffee made its final order on 25 October 2021.
   2. As to paragraph 14 of the First Dowling Affidavit, I say further that following the email from John Smalling on 22 August 2022, Queen Bee Coffee made a final order on 31 August 2022 and after this time Queen Bee Coffee did not ever purchase coffee or any other products or services from the plaintiff.
8. Quite properly, counsel for the Applicant did not contend that the paragraphs identified in [23] and [24] above in the First and Third Dowling Affidavits complied with the Rules. After a short adjournment of the hearing, the Applicant did not seek leave to put on any further affidavit material.

1. Order 26A r 4(3) provides that a pre-action discovery Application such as this shall be supported by an affidavit. That, obviously, means an affidavit which complies with the Rules and the rules of evidence.
2. Without the objected-to paragraphs which do not comply with the Rules I have identified above, there is no sufficient evidence, if any at all, to support the Application and it must, accordingly, fail.
3. Where the Application has failed by reason of the manifest deficiencies in its solicitors' affidavits, then I would expect that the Applicant's solicitors will give careful consideration to their charging of the Applicant for their preparation.
4. There are different difficulties with the admissibility of the Second Dowling Affidavit to which I will return below.

The Applicant is able to make a decision as to whether to commence proceedings

1. I have considered this matter as briefly as possible in the event that I am wrong to exclude the evidence I have from the First and Third Dowling Affidavits.
2. The Applicant by its solicitors wrote to Mr Muhl on 25 May 2022: see CD-12 to the First Dowling Affidavit. Unobjectionably, Ms Dowling deposes at [22] of the First Dowling Affidavit to the Applicant not receiving a response to that 25 May 2022 letter.
3. The Applicant's solicitors then wrote again on 18 July 2022, which is CD‑11 to the First Dowling Affidavit.
4. The relevant parts of the Applicant's solicitors' letter of 18 July 2022 are as follows:

2.2 Our Client considers that you have engaged in conduct in contravention of your post-employment obligations;

1. By reason of the conduct outlined in [the letter of 25 May 2022], our Client has reason to believe that they have suffered and will continue to suffer financial loss as a result of your unlawful actions.
2. We are instructed to provide you with a final opportunity to respond to the matters set out in [the letter of 25 May 2022].
3. If you fail to respond by 5.00 pm on 29 July 2022, proceedings may be commenced against you, including by seeking urgent injunctive relief, without further notice.
4. We put you on notice that should you not respond to this correspondence, our Client may also seek an order for costs against you. To that end, we will produce [the letter of 25 May 2022] and this correspondence on the question of costs. Our Client otherwise fully reserves its rights.
5. In my judgment the statements made and quoted in 4, 6 and 7 above suggest strongly that the Applicant and its solicitors considered that they had enough information to state that the Applicant had:

(2) that was as a result of its unlawful actions of Mr Muhl (at least); and

(3) a proper basis to seek urgent injunctive relief without further notice and to seek costs against the First Respondent, Mr Muhl, at least.

1. Those clear statements, in my view, militate strongly in favour of a conclusion that the Applicant did not consider it required any further documents to assist it to decide whether or not to commence proceedings against the Respondents.
2. I do not consider that those statements could or would have been made responsibly by solicitors if they did not consider, at the time of their making, that there were reasonable and supportable grounds for them. As the Applicant's submissions made plain, it knew what its drop in revenue was and, so, at any particular point in time could have assessed well enough the quantum of any damages claim.
3. Whether an Applicant has sufficient information to enable a decision to be made to commence proceedings is to be determined objectively. Newnes JA said in New South Wales Solicitors Mutual Indemnity Fund v Hancock Family Memorial Foundation Ltd [No 2] [2009] WASCA 146 [60]:

It does not depend upon the subjective qualities of the applicant, so that what is sufficient will vary depending on whether the application is unusually cautious or unusually robust, or at what point on such a spectrum the applicant happens to fall. Nor does it depend upon whether the applicant considers that the information he or she has is insufficient to enable the decision to be made.

1. In my view, it is possible to decide that objective question from, at least in part, statements made by the Applicant's solicitors in the 18 July 2022 letter.
2. In my judgment, by no later than 18 July 2022 when the Applicant's solicitors wrote the letter, it appears objectively, that the Applicant had sufficient information.
3. Counsel for the Applicant submitted that I ought not be satisfied that objectively the Applicant had enough information to commence proceedings at 18 July 2022 because as time went on more clients appeared to leave and so the question of the Applicant's damages may have changed. I accept that the Applicant may, after 18 July 2022, have received further information but that does not, in my view, take away from the proposition or finding I would have made that the Applicant had enough information as at 18 July 2022 to make the decision.
4. I need to say something here about the Second Dowling Affidavit. At par 6 Ms Dowling seeks, impermissibly in my view, to give evidence as to what subjectively she intended by what was written in the letter of 18 July 2022 at par 2.2 quoted above.
5. The Second Dowling Affidavit further went on to seek to depose that the Applicant had not instructed its solicitors to commence proceedings (par 7), while at the same time seeking not to waive any privilege in respect of communications: par 4. The Fourth Dowling Affidavit again asserted no waiver of privilege (par 4) but then in its par 5 did reveal instructions.
6. Ms Dowling in her Second Affidavit does not specifically address the paragraphs I have referred to above in the 18 July 2022 letter.
7. In any event, in my view, the words used in a solicitors' letter should, ordinarily, stand by themselves and it is not, in my view, generally permissible to seek to explain what was intended by the words used.
8. In my judgment, none of the Second Dowling Affidavit, assuming it was admissible, takes away from the conclusion that I have reached as to whether the Applicant was able to make a decision as to whether to commence or take the proceedings. It is not, in my view, to the point to say that no instructions had been given to commence or that the Applicant had not reached a definitive decision to commence proceedings.
9. Without deciding, I observe that there does appear to be something of a clash between the statements made in the 18 July 2022 letter that I identified above and the matters which Ms Dowling deposes to in her Second and Fourth Affidavits. It is, with respect, difficult to reconcile all of those statements.

1. The following further considerations would only arise if I was wrong as to the admissibility of the Dowling Affidavits and I was wrong as to the Applicant being able, without the discovery sought, to make a decision as to whether to commence proceedings.
2. The question of whether to grant pre-action discovery pursuant to O 26A r 4 remains discretionary even if, contrary to the above, the jurisdiction to grant such orders had been enlivened.
3. If I am wrong that the Applicant had enough information to commence proceedings, then, as a matter of discretion, I take into account that the Applicant considered itself well close enough to be able to make that decision without the requested documents. That would weigh against the exercise of discretion.
4. I would not have exercised my discretion for two further principal reasons, being:

(1) the Applicant's (unexplained) delay in bringing its Application; and

(2) in all of the circumstances, it does not appear to me that the cost and effort involved in the provision of the pre-action discovery as sought would be proportionate to the forensic benefit likely to be derived and to the value and importance or complexity of the subject matter of the contemplated proceedings: BWS v ARV [No 2] [2021] WASCA 62 [36]; where the Court of Appeal relied on Kelbush Pty Ltd v ANZ Banking Group [2016] WASCA 14; [2016] 49 WAR 374.

1. The events 'deposed to' in Ms Dowling's Affidavits occurred in October 2021,[3] May 2022,[4] 22 August 2022[5] and October 2022.[6]
2. The first solicitors' letter adduced by Ms Dowling was sent in May 2022 and the second, which I have quoted from above, was in July 2022.
3. As counsel for the Applicant properly accepted, there was no evidence which sought to explain that delay.
4. In my view, the Applicant's delay in bringing this Application at the end of March 2023 would significantly count against the exercise of discretion.

1. In BWS v ARV [No 2] [36] the Court of Appeal said that the notion of proportionality was central to the exercise of the Court's discretion. That is, even if the requirements of the Rule are met, it remains a matter of discretion as to whether the orders will be made. The Court is to consider whether the order is reasonably necessary to achieve the proper administration of justice. The cost and delay involved in the provision of pre-action discovery as sought should be proportionate to the forensic benefit likely to be derived and to the value and importance or complexity of the subject matter of the contemplated proceedings.
2. There are questions going to proportionality, about the possible causes of action and the scope of the documents sought.
3. Firstly, the Relevant Period in the Originating Summons would be at the maximum period of the alleged Restraint Period: see page 17 in CD-12 in the First Dowling Affidavit. That is in circumstances where, even on a preliminary basis, one may have sensible reservations as to whether a three, six or 12-month restraint of an employee in Mr Muhl's position and occupation (as a coffee bean roaster with some customer facing responsibilities) was necessary for the adequate protection of the Applicant. That is, it appears unlikely to me that it would be necessary for such a restraint to be enforced given the starting position is that restraints of trade are contrary to public policy and therefore void: Smith v Nomad Modular Building Pty Ltd [2007] WASCA 169 [6], [8] (McLure JA, Buss JA agreeing).
4. Secondly, as was properly accepted by counsel for the Applicant, there is no evidence as to the size and value of orders which had been lost by the Applicant, nor any evidence as to what the Applicant's potential damages may have been.

1. For the above reasons, I conclude that the Application was not supported by admissible affidavit evidence.
2. If I am wrong about that, I consider that the Court's jurisdiction was not enlivened as I consider that the Applicant had enough information to commence proceedings without the documents sought.
3. If I am wrong about both of those above matters, then I would not have exercised the discretion to order the discovery as:

(1) the Applicant in July 2022 considered that it was in a position to directly assert it had a proper basis to seek urgent injunctive relief;

(2) there was an unexplained delay in bringing the Application from the date of its solicitors' letter of July 2022 until March 2023, being the date of the Application; and

(3) I consider the ordering of the discovery would not be proportionate and that the order is not reasonably necessary to achieve the proper administration of justice.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[2] The Contract of Employment was CD-1 to the First Dowling Affidavit and the Deed of Confidentiality was CD-2 to the First Dowling Affidavit.