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[2009] VSC 264
Supreme Court of Victoria
2009-06-25
WARREN CJ
Original judgment source is linked above.
PRACTICE AND PROCEDURE - Preliminary discovery - Whether sufficient information to enable applicant to decide whether to commence proceedings - Whether reasonable grounds to believe that applicant may have right to obtain relief against respondent - Whether applicant already decided to commence proceedings - Whether applicant already able to commence proceedings - Supreme Court (General Civil Procedure) Rules 2005 r 32.05 - application allowed in part.
1 The applicant, the Australian Football League ('AFL'), seeks an order against the respondent, Stadium Operations Limited ('SOL'), for preliminary discovery under rule 32.05 of the Supreme Court (General Civil Procedure) Rules 2005 ('the rule').
2 Rule 32.05 provides as follows:
Discovery from prospective defendant
Where -
a) there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description the applicant has ascertained;
b) after making all reasonable inquiries, the applicant has not sufficient information to enable the applicant to decide whether to commence a proceeding in the Court to obtain that relief; and
c) there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had in that person's possession any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist the applicant to make the decision -
the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph c).
3 I agree with the statement of legal principles applicable to rule 32.05 articulated by Hollingworth J in Beston Parks Management Pty Ltd v Sexton[1]
The following general principles are not controversial. The rule should be construed benevolently, because it is intended to assist an applicant who does not have sufficient, precise information to commence a proceeding, and to prevent the bringing of speculative suits. It must be given the fullest scope its language will reasonably allow.
It is not necessary to show precisely what cause of action the applicant may have, merely that the facts are such from which it may reasonably be believed that the applicant may have a right to obtain relief. The word "may" indicates that the putative belief does not have to amount to a firm view that there is a right to relief. Although some "fishing" enquiry is permitted, a "flimsy foundation" or "mere hunch" will not be sufficient to constitute reasonable cause. An applicant does not have to prove that there will be, only that there may be, a real benefit from making the order. The benefit may be the drawing of an appropriate pleading with proper particulars and the avoidance of substantial amendment after discovery, or, alternatively, the possible avoidance of unnecessary and fruitless litigation. The "reasonable cause to believe" requirement is primarily concerned with whether, as an objective fact, an applicant has sufficient information to decide whether to commence proceedings. So, an application cannot succeed if the applicant has sufficient information (assessed objectively), but where the inability to determine whether to commence proceedings arises, for example, due to an overly indecisive or cautious nature. There is no dispute that there may be a subjective element, in the sense that if there is evidence that the applicant has in fact decided to commence proceedings, that will be fatal to the application.[2] (emphasis in original)
4 Each of the elements of the rule must be satisfied for relief to be granted. An applicant for preliminary discovery must therefore establish:
(a) there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the court from a person whose description it has ascertained;
(b) after making all reasonable enquiries, the applicant has not sufficient information to enable it to decide whether to commence a proceeding in the court to obtain that relief; and
(c) there is a reasonable cause to believe that that person has or is likely to have or has had or is likely to have had in its possession any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist it to make the decision.
5 Where each of the elements are satisfied, the question of whether the court's discretion should be exercised in favour of the making of an order will arise. As observed in Beston, the court may exercise its discretion where it is satisfied that there may be a real benefit for the making of the order.[3] The court was referred to a number of Federal Court authorities determined under the procedural equivalent of rule 32.05 in that jurisdiction. While there are some subtle differences between that rule and rule 32.05, the parties agreed that these were not substantive and do not affect the AFL's application.
6 The applicant and respondent have been in commercial relations for a number of years. It is well known that the AFL is a not for profit company limited by guarantee whose principal activity is the conduct of Australian Rules Football competitions throughout Australia. SOL is an unlisted public company limited by shares and is the ultimate holding company of Melbourne Stadiums Limited ('MSL'), the operator and manager of the stadium in the Docklands precinct in Melbourne ('the stadium'). The stadium opened in 2000, at which time the AFL began utilising the venue to host AFL matches. These matches are conducted in accordance with the terms and conditions of a User Agreement executed by the AFL and SOL and dated 1 September 1997 ('the User Agreement'), in which SOL grants various rights to the AFL and is subject to a number of obligations in connection with the AFL's use of the stadium.
7 The User Agreement imposes confidentiality obligations on the applicant and respondent with regard to the information contained in its terms. The parties agreed that many parts of the User Agreement are confidential, and both were careful not to divulge any confidential aspects of the document during their submissions. The parties also agreed that certain sections of the agreement would be shown to the court on a confidential basis, but not otherwise divulged during the hearing. Accordingly, although specific clauses of the User Agreement underlie these reasons, I will not refer directly to them, with the exception of confidential exhibit references. In view of the nature of the application at hand, however, some description of the relevant terms is necessary, and was agreed to by the parties. In describing the relevant terms, I will go no further than the parties during the course of their submissions in open court.
8 Much of the dispute revolves around the exercise of particular rights. Specifically, naming rights relating to the naming of the stadium; signage rights relating to signage around the stadium and arena; pouring and supply rights relating to the provision of catering, beverage and souvenir sales within the stadium; and comparative rights relating to other sporting codes' use of the stadium.
9 The rights correspond to specific clauses in the User Agreement. First, naming and signage rights in clauses 8.2(b) and 8.3 which prohibit SOL from entering into naming rights or sponsorship agreements that would have a particular series of effects. Secondly, pouring and supply rights in clause 8.2(d), which grant exclusive rights to the AFL in relation to pouring and supply and revenues, and impose an absolute prohibition on SOL in relation to competing or conflicting with the rights the subject of the clause. Thirdly, comparable terms of usage of the stadium in clause 8.8, which contemplate three conditions that, once met, require SOL to make a comparable offer to the AFL.
10 The conduct giving rise to each of the AFL's applications occurred after the execution of the User Agreement, when SOL or MSL (presumably in its capacity as a wholly owned subsidiary of SOL) entered into agreements relating to the use of the stadium with the national airline of the United Arab Emirates, Etihad Airways P.J.S.C. ('Etihad'), Carlton and United Breweries ('CUB') (also referred to as Fosters), Coca-Cola Amatil (Australia) Pty Ltd ('Coca-Cola'), Melbourne Victory and other parties. For a number of years, major sponsors of the AFL have included the Australian airline Qantas, and also Coca-Cola, and CUB. It appears that pursuant to SOL's arrangements with these parties, Etihad has been given use of the name of the stadium, raising the issue of the naming rights under clause 8.2(b); CUB, Fosters and Coca-Cola have been given access to the stadium to provide beverages, raising the issue of pouring and supply rights under clause 8.2(d); and Melbourne Victory has been given use of the stadium on a number of occasions, playing 11 soccer games in 2007 and at least 12 in 2008, raising the issue of comparable terms of usage under clause 8.8. There was disagreement between the parties whether these games, some of which were finals matches or 'friendlies', constituted 'sporting events' under the User Agreement.
11 These matters were the subject of extensive correspondence between the AFL and SOL/MSL between 17 June 2008 and 15 December 2008, following which, the AFL commenced this proceeding.
12 The AFL submits it has reasonable cause to believe it has, or may have, the right to obtain relief for breach of its naming rights (ground 1), pouring and supply rights (ground 2) and comparable terms rights (ground 3) under the User Agreement.[4] The AFL is concerned that SOL may have acted in breach of the User Agreement by granting naming rights to Etihad and, pouring and/or supply rights to major sponsors of the AFL, and by ignoring its obligation to make a comparable terms offer to the AFL. The AFL submits it lacks sufficient information to enable it to decide whether to commence proceedings on each of the three grounds, despite reasonable requests having been made of SOL for further information. In response, SOL submits that the AFL already has sufficient information to enable it to decide whether to commence proceedings under grounds 1 and 2 and that, in fact, the AFL has already decided to do so. With regard to ground 3, SOL contends that the AFL has, at best, a mere 'hunch' that it may have the right to obtain relief.
13 The correspondence is pivotal to the AFL's application. As a general observation, both the applicant and the respondent continued to reserve all of their rights under the User Agreement throughout the course of the correspondence.
14 On 17 June 2008, the AFL wrote to MSL to notify its intention to exercise the pouring and supply rights under the User Agreement from the conclusion of the 2008 AFL season. The AFL had not previously sought to exercise this right. In the letter, the AFL sought 'an understanding of the arrangements which have applied since 2000.' In the same letter, the AFL also requested specific information on the terms offered to other users of the stadium including soccer, rugby league and rugby union clubs, as well as information relating to soccer games conducted at the stadium involving Melbourne Victory. In response, MSL wrote to the AFL on 20 June 2008, indicating that it would take the matter on advice and respond in due course. It did not provide any information on the terms offered, if any, by it to other sporting clubs.
15 On 8 September 2008, the AFL wrote to MSL stating that it was yet to receive a response. The AFL advised that it would formally begin the process of granting pouring and supply rights on 22 September 2008. The AFL also advised that it reserved its right to grant other supply rights for products of AFL sponsors and to claim any revenues from MSL that it may have derived from the sale of pouring and/or supply rights at AFL events during the term of the User Agreement. On 11 September 2008, MSL stated that it was prepared to work with the AFL in relation to the exercise of its pouring and supply rights, but that any new arrangements brokered by the AFL would need to take into account and address MSL's existing contractual arrangements with AFL sponsors at the stadium, some of which having a number of years to run (including contracts with Fosters and Coca-Cola). MSL also indicated that the formal process to be adopted by the AFL to grant the rights was not clear.
16 The AFL wrote to MSL on the separate issue of naming rights on 15 October 2008 and stated that
a naming rights arrangement with an international airline would have the effect of competing with an AFL sponsor, namely Qantas Airways Ltd ... such an arrangement would place MSL in breach of the User Agreement, MSL should not progress this matter any further without the prior consent of the AFL' (emphasis added).
17 In a further letter dated 22 October 2008, the AFL said
a naming rights agreement between [MSL] and an international airline would place MSL in breach of the AFL User Agreement. As such MSL should not progress this matter any further ... without the consent of the AFL'. (emphasis added)
18 The AFL went on to state that it would take further action to protect its interests, including seeking potential injunctive relief.
19 MSL responded to the AFL on the same day in two separate letters. The first stated that the AFL had
provided no evidence ... to verify that entry by MSL into the proposed naming rights agreement would breach the ... User Agreement [and] it is incumbent upon [the AFL] to provide either that evidence, or [its] approval of the new naming rights arrangements.
20 In addition MSL stated that should the AFL seek injunctive relief, MSL would expect to receive due notice and an opportunity to be represented and heard. The second letter stated that MSL 'proposes to appoint [Etihad] as the new naming rights sponsor of the stadium' and that there was no legal, commercial or other basis under the User Agreement for the AFL to question this appointment.
21 The AFL reiterated its position in an additional letter to MSL on 22 October 2008 which stated
Etihad Airways clearly competes with Qantas which is an AFL sponsor. Accordingly it is clear that MSL should not enter into a Naming Rights Agreement with Etihad and to do so would be a breach of the User Agreement ... Qantas has been an AFL sponsor since 2002 [and] is currently an AFL sponsor' (emphasis added).
22 The AFL wrote to MSL again on 23 October 2008, restating its position with regard to pouring and supply rights and naming rights, and indicating to MSL its position on a proposed way forward to resolve the differences between them. MSL replied on the same day and informed the AFL that it did not regard a breach of the naming rights or other provisions of the User Agreement as having occurred.
23 On 14 November 2008, MSL and SOL wrote jointly to the AFL denying the assertions made by the AFL in its letters of 8 September and 15 October 2008. The letter stated,
we consider that ... by its conduct and other matters, AFL is precluded from asserting any rights whatever under clause 8.2 (d) ... Clause 8.3 of the [User Agreement] does not preclude this company entering into a naming rights agreement with Etihad (or anyone else) merely because the naming rights sponsor might be a competitor of an existing AFL Sponsor.
24 The letter went on to state that any claims made by the AFL would be strenuously defended. On 28 November 2008, the AFL wrote to SOL formally requesting that certain copy documents be provided to it in connection with SOL's obligations under the User Agreement. The AFL specifically requested the following:
25 SOL and MSL wrote to AFL on 4 December 2008, stating their disagreement and asserting that the AFL was precluded by its past conduct from taking issue with its contracts with Coca-Cola and CUB. It was also asserted, that Melbourne Victory is not a user of the stadium as required by the User Agreement. Importantly, SOL and MSL made the following statement:
In these circumstances we believe that there is no justification or basis for your request for documents. Our agreements with Etihad, Coca Cola, CUB and Melbourne Victory are confidential and we are not prepared in the circumstances to risk commercial information in the agreements being exposed in a way to SOL's disadvantage or the AFL's advantage.
26 On 12 December 2008, the AFL formally notified SOL that a dispute had arisen out of and in connection with each of the three grounds under the User Agreement. Importantly, the AFL stated '[a]s SOL will appreciate, if the AFL is dissatisfied with SOL's reply it will be open to the AFL to commence proceedings without further notice to SOL.' (emphasis added).
27 The final relevant piece of correspondence was from SOL to the AFL on 15 December 2008 which stated,
[w]e do not accept that it is open to AFL to commence proceedings. We reserve our position on the validity of your purported notice and we reserve our rights generally under the agreement.
28 Following this lengthy exchange of correspondence, the AFL filed an Originating Motion requesting preliminary discovery of certain documents relevant to the rights and obligations discussed in the correspondence.
29 The AFL has narrowed the scope of the discovery. It seeks:
1. The agreement between MSL and Etihad dated 16 December 2008 ('the Etihad Agreement') described as
[the agreement] the defendant has entered into with Etihad P.J.S.C by which the defendant's stadium at Melbourne Docklands, previously known as 'Telstra Dome' will become known as 'Etihad Stadium'.[5] (emphasis added)
2. The agreement between CUB, SOL and NVM No 2 Pty Ltd (formally known as Nationwide Venue Management Pty Ltd) applying since 12 January 2000 ('First CUB Agreement'), and the agreement between MSL, CUB, Beringer Blass Wine Estates Limited and Southcorp Wines Pty Ltd dated 1 July 2005 ('Second CUB Agreement') described as
[the agreements] the defendant has continuously, since 12 January 2000, been a party to ... with Carlton and United Breweries Ltd [which] grant CUB the right to supply certain alcoholic beverages at the stadium, including during AFL matches'.[6] (emphasis added)
3. Two agreements between MSL and Coca-Cola, one of which is effective from 1 January 2001, and the other dated 7 June 2007 (together 'the Coca-Cola Agreements') described as
[the agreements] the defendant has continuously been a party to ... with Coca-Cola Amatil (Aust) Pty Ltd since the stadium commenced operation [that grant Coca-Cola] the right to sell beverages at ... AFL Matches.'[7] (emphasis added)
4. The contract between Nationwide Venue Management Pty Ltd, CUB and Coca-Cola (date unspecified) described as
[the agreement] NVM first [had] with CUB and [Coca-Cola], for all events at the stadium, including AFL matches, with the defendant, for the supply of beverages. Those contracts were approved by the defendant's board.'[8] (emphasis added)
5. The agreement between SOL and Nationwide Venue Management Pty Ltd dated 10 August 1998 ('the NVM Agreement'), described as the agreement in which 'Nationwide Venue Management Pty Ltd previously held the catering rights to the stadium between 10 October 1997 and 26 June 2000'.[9]
6. Two agreements between MSL and Cadbury Schweppes Pty Ltd, one operative from 1 January 2003 and the other dated 28 September 2005 (the 'Cadbury Schweppes Agreements').[10]
7. Two agreements between MSL and Melbourne Victory Ltd dated 22 September 2006 and 29 May 2007 (together 'Melbourne Victory Agreements'), described as 'the only on-going agreement between the defendant and any soccer club or league.'[11] (emphasis added)
30 Relating the documents requested by the AFL to each ground of the application, under grounds 1 and 2, the AFL seeks discovery of the Etihad, CUB, Coca-Cola, Cadbury Schweppes and NVM Agreements, and under ground 3, the Melbourne Victory Agreements.
31 It was submitted by the AFL that one central difficulty was common to all three grounds permeating each of the applications: uncertainty as to who the correct parties are and who grants which rights in the various agreements.[12] The AFL relied on the fact that the relevant obligations under the User Agreement are placed on SOL, and that 'material considerations' arise as to the identity of the parties and the basis on which the rights are granted. This aspect, it was submitted, meant that in relation to a range of matters, the AFL does not have sufficient information to enable it to make an informed decision about whether to commence proceedings. To illustrate the difficulty, the AFL pointed to the following examples:
• The Deed of Variation to the User Agreement dated 23 September 2004 is executed by MSL on behalf of SOL in its capacity as SOL's duly appointed attorney.
• A letter from MSL to the AFL on 27 March 2003 states 'by way of an amendment to the AFL User Agreement between AFL and Stadium Operations Limited (with MSL as its duly appointed attorney)'.
• The descriptions of the documents provided in the respondent's affidavit are 'illusory' and 'unhelpful' because they refer generically to the 'defendant', and obscure whether SOL does or does not grant rights and, if it does, which ones.
• The correspondence between the parties does not clarify the identity of the parties - MSL and SOL are used interchangeably - and it provides no information to clarify which entity grants what rights, and on what authority.
32 It was submitted by the AFL that the effect of these examples is 'confusing, contradictory, and unsatisfactory' and that it should not be required to select from contradictory pieces of information relating to the 'defendant's' identity in order to satisfy itself whether SOL itself has granted, or purported to grant, rights of a kind that the AFL has the exclusive right to grant. Discovery of the documents, it was argued, would enable the AFL to determine whether to bring an action against it on that basis. It was argued that without discovery of the documents, the AFL would be confined to making a decision on insufficient information.
33 In view of the overlapping evidence, it is appropriate to deal with these grounds together. The AFL's belief is founded on the following:
• A media release published on the stadium's website on 23 October 2008 stating
Melbourne Stadiums Limited (MSL) is delighted to announce the national airline of the United Arab Emirates, Etihad Airways as its new naming rights partner, taking effect from March 1, 2009 ... The five year deal ... will see the Abu Dhabi-based airline's branding feature prominently inside and outside the stadium, including on perimeter signing and giant scoreboards.
• The respondent's affidavit deposing that 'the defendant has entered into an agreement with Etihad Airways P.J.S.C. by which the defendant's stadium at Melbourne Docklands, previously known as "Telstra dome" will become known as "Etihad Stadium".'[13]
• The correspondence between the parties on 17 June, 8 and 11 September, 15, 22 and 23 October, 14 November, and 4 December. [14]
• The letter from MSL to the AFL on 11 September 2008 stating that
implementation of any new arrangements brokered by the AFL will need to take account of and address ... existing contractual arrangements with AFL sponsors at Telstra Dome, at least some of which (for example, contract with Fosters [sic] and Coca Cola) have a number of years to run until expiry of their term.[15]
• The respondent's affidavit deposing first that 'the defendant has continuously, since 12 January 2000, been a party to agreements with Carlton and United Breweries Ltd [which] grant CUB the right to supply certain alcoholic beverages at the stadium, including during AFL matches'; secondly that 'continuously since the stadium commenced operation, the defendant has been a party to agreements with Coca-Cola Amatil (Aust) Pty Ltd [which] have granted [Coca-Cola] the right to sell beverages at ... AFL Matches.'; and thirdly that 'Nationwide Venue Management Pty Ltd previously held the catering rights to the stadium between 10 October 1997 and 26 June 2000.'[16]
34 In essence, the AFL submitted that because it has not seen any part of the Etihad, CUB, Coca-Cola, Cadbury Schweppes or NVM Agreements, there is insufficient information available to it to decide whether to commence proceedings. Further, the AFL submitted, that if SOL has granted, or purported to grant, rights of the kind referred to, it would be necessary for the AFL to review the terms on which the rights were granted to ascertain the nature and extent of the rights and whether such granting of rights gives rise to a breach of the User Agreement.
35 The AFL's belief under ground 3 is founded on the following:
• Melbourne Victory being recorded as a tenant on the stadium's website.
• The evidence on the number of matches played by Melbourne Victory at the stadium in 2007 and 2008.
• Two newspaper reports of September 2006 stating that Melbourne Victory had signed a lucrative deal with the stadium giving rise to speculation that the terms and conditions of the agreements with Melbourne Victory include financial windfalls, training rights, guaranteed revenues and income.[17]
• The respondent's affidavit referring to an on-going agreement between the 'defendant' and Melbourne Victory pursuant to which Melbourne Victory used the stadium for at least 11 matches in 2007 and at least 12 matches in 2008. [18]
36 The AFL submitted that this evidence gives rise to a reasonable cause to believe it has a right to obtain relief from SOL when the evidence is considered in light of the terms and definitions in the User Agreement relevant to clause 8.8. These terms, the AFL argued, are not restricted to matches but include contractual commitments to use the stadium for 'sporting events' on ten or more dates in a calendar year in respect of two or more successive calendar years. It was further submitted by the AFL that on this basis, match play statistics including finals matches may be relevant because of the broad definitions in the User Agreement.
37 The same submission on insufficiency of information was made under this ground as under grounds 1 and 2.
38 SOL took no issue whether it or MSL entered into the relevant agreements. For the purposes of its submissions to the court, SOL indicated that references to SOL included references to it and/or MSL.[19]
39 In response to grounds 1 and 2, SOL presented two main arguments. First, the AFL already has sufficient information to enable it to decide whether to commence proceedings. Secondly, on the evidence, the AFL has already made up its mind, as a subjective fact, to commence proceedings.
40 With regard to naming rights, SOL submitted that when the evidence is considered objectively, the AFL clearly has enough information on which to base a decision. SOL submitted that the AFL has at all relevant times:
41 With regard to pouring and supply, SOL submitted that if it had granted rights or entered into agreements that were the same as or conflicted with the AFL's rights under clause 8.2(d), then breach would have occurred on the face of the User Agreement because the right is exclusive and the prohibition absolute.[23] SOL referred to the AFL's letters of 17 June, 8 September and 28 November, and to SOL and MSL's letter of 4 December to demonstrate that the AFL knows there have been arrangements in place since 2000 as to the pouring and supply of products with AFL sponsors and that, in being the major user of the stadium, the AFL would know of and witness this.
42 SOL's second main argument in reply to the AFL's application, that the AFL has already decided to commence proceedings, is made on the evidence contained in the correspondence. The court was invited to consider this evidence and to make a finding that the AFL had already made up its mind, as a subjective fact, to commence proceedings, thereby excluding the operation of the rule.
43 In answer to ground 1, counsel for SOL drew the court's attention to the AFL's 'unequivocal' statement of position in the correspondence. In reliance on the AFL's letters to MSL of 15 and 22 October, SOL submitted this position to be that before any new naming rights agreement was entered into, the AFL had to be involved or any such arrangement would be a breach of the User Agreement. This inference was supported by the AFL's mention of possible injunctive relief. In reference to MSL's letter to the AFL of 22 October, SOL submitted that there was no doubt or confusion in the mind of the AFL of the certainty of breach, the AFL being entirely aware of MSL's intention to proceed with the Etihad Agreement. To further illustrate this point, SOL drew attention to the AFL's letter of 22 October, to what it said were clear statements of the AFL's state of mind.
44 SOL contended that by the time of the AFL's letters to MSL of 23 October and 28 November, it knew there was an agreement in place with Etihad and that the agreement entitled Etihad to branding and advertising both inside and outside the stadium. This, it was submitted, was demonstrated by the AFL's assertion to MSL that appointing Etihad as the naming rights partner of the stadium would result in breach of the User Agreement.
45 According to SOL, the evidence establishes that the AFL has repeatedly indicated to SOL that it has a case against it, and that as a result of SOL's conduct there has been a breach of the User Agreement.
46 In answer to ground 2, SOL referred to the AFL's letter of 23 October which contained the AFL's assertion of breaches of the pouring and supply rights. SOL submitted that there is no doubt on the evidence that the AFL had made up its mind that SOL's conduct had breached the User Agreement.
47 Importantly, it was said, there was nothing in the evidence, either by way of correspondence or by way of affidavit to suggest the AFL would ever change the position indicated in the correspondence, and in particular the letter of 12 December.
48 SOL submitted that the AFL has no reasonable cause to believe that it has or may have a right to obtain relief against SOL under ground 3. It says that, at best, the AFL has a mere 'hunch' that Melbourne Victory has a contractual commitment to SOL to use the stadium in a way that would trigger the AFL's comparative terms right, and this 'hunch' is not supported by evidence.
49 SOL submitted that the AFL's application under ground 3 is based on speculation because the evidence on which it relies leaves open uncertainty as to a number of elements required to establish breach under clause 8.8. SOL submitted that there are three elements that must be satisfied under clause 8.8 before the comparative right obligation is triggered. Firstly, that the AFL remains a major user of the stadium; secondly, that SOL agrees to terms and conditions with another stadium user that are more favourable than the terms and conditions of the User Agreement; and thirdly, that the commitment to the other user be for 'sporting events' on 10 or more dates in a calendar year in respect of two or more successive calendar years. Once the three elements are present, breach would arise where SOL failed to positively act in accordance with the directions of the clause.
50 To this effect, SOL submitted that the mere fact that there has been ten or more sporting events involving Melbourne Victory in two successive years does not objectively give rise to a reasonable cause to believe that Melbourne Victory has entered into contractual commitments with SOL to use the stadium in a way that would engage the terms of the User Agreement or that, if that was the case, SOL had chosen to breach its positive obligation under clause 8.8.
51 SOL placed emphasis on the fact that breach only arises when SOL fails to positively act as required under clause 8.8. It submitted there was no evidence before the court to suggest that SOL had decided to ignore its obligations under clause 8.8.
52 Furthermore, SOL submitted there was no reasonable basis to suggest that Melbourne Victory had given a contractual commitment to play ten matches or more over two successive years, there being not one year in which Melbourne Victory had participated in ten matches in two successive years at the stadium. SOL further submitted that neither the correspondence or other evidence demonstrates that any training facilities that might be used by Melbourne Victory at the stadium could amount to 'sporting events' for the purposes of the clause.
54 SOL submitted that an applicant who has made the decision to commence proceedings cannot satisfy sub-paragraph (b) of the rule, even if the information available to it was insufficient when considered objectively. In support of this proposition, SOL relied on Beston.[24]
55 If the court is satisfied on the evidence that the AFL had made up its mind to commence proceedings for breach of the User Agreement, the effect of that finding would be that the AFL is subjectively in a position to commence proceedings and it will be considered to have sufficient information for the purposes of the rule, whether or not this is confirmed by an objective assessment. SOL submitted that authorising the use of the rule to obtain more information in the case where a party has already decided to commence proceedings would be an abuse of process.
56 The AFL did not challenge that this proposition correctly stated the law but submitted that to disallow a party to change its position would undermine the purpose of the rule. It argued that decisions are often made but events transpire that require the party to obtain further information.
57 While there are obvious process problems that may arise in circumstances where a party is attempting to obtain more information from a prospective defendant after that party has already decided to commence proceedings, I do not find that this is so in the present case. Such a finding would necessarily rest on a preliminary finding that the AFL had in fact decided to commence proceedings. In my opinion, the correspondence does not establish this as a subjective fact.
58 SOL's argument on this point is contingent on my finding that the AFL had made up its mind to commence proceedings. I do not find this to be the case. Although there are strong intentions expressed by the AFL in the correspondence, a conclusion that it still lacked sufficient information of the kind contemplated by the rule, namely, information confirming a potential cause of action is open to the court. If I were to make a finding that the AFL had made a subjective decision to commence proceedings on the evidence, one would have to ask who, and for what?
59 SOL's approach to this aspect of the AFL's application focused on key phrases and assertions in the correspondence. However, in my view, the kinds of benefits contemplated by the rule require the court to view all of the evidence rather than to clinically dissect material, for example, phrases in letters. Sometimes statements, even postures, are made in exchanges that warrant closer analysis and scrutiny before the boom of the writ comes down.
60 As stated by Gillard J in United Energy Limited v Energy Risk Management Pty Ltd,[25]
a robust legal practitioner may consider that there is sufficient evidence to justify the bringing of a proceeding. On the other hand, nobody could possibly criticise a cautious lawyer seeking further information before making the decision.[26]
61 Similarly in FAI Home Security Pty Ltd v Price,[27] a conservative approach on the part of an applicant was approved by Byrne J,
the gist of the rule is to enable a prospective plaintiff to obtain material sufficient to make a decision to commence a proceeding. Counsel for FAI maintained that, for a conservative litigant, the material presently available to it was not sufficient for this purpose. In the circumstances of this case I agree.[28]
62 The AFL is arguably seeking to take a cautious and conservative, even prudent, course. Having regard to the policy underlying the rule, that there may be a benefit, the court should not condemn the applicant for taking such an approach.
63 It is appropriate to make some further observations on the nature of the relationship between the applicant and respondent. The nature of the contractual relationship between the AFL and SOL is, as attested to in the dispute resolution provisions of the User Agreement, one in which contractual disputes will arise from time to time in the ordinary course of business. This was a reality contemplated by the parties in the drafting of the User Agreement. Accordingly, the correspondence in question is readily conceivable of the kind that would pass between contractual parties, often involving their legal representatives, and often mentioning potential breach of contract or court proceedings. Given the absolute nature of the rights and obligations in question, it would be natural for the AFL to use language such as 'breach' and the right to take possible action. In my opinion, more would be required to establish that the AFL had made the decision to commence proceedings in the circumstances of this case, especially when both parties were careful in the correspondence to reserve their rights. It would be wholly unsatisfactory if parties found themselves unduly constrained in correspondence because they may wish to preserve their potential right to obtain an order under the rule for preliminary discovery.
64 That being said, my finding with regard to the AFL's decision is separate and distinct from the question of whether inferences can be drawn from the evidence that the AFL is already able to decide to commence proceedings on the information already available to it, even where it has not yet decided to do so. This is the objective test posed by sub-paragraph (b) of the rule. I now turn to whether the AFL already has sufficient information under grounds 1 and 2 to make such a decision.
65 The prime object of rule 32.05 is to enable a person to determine whether or not he or she has a cause of action against an identified prospective defendant by allowing access to the relevant documents which the respondent has, or has had, in its possession.[29] Subparagraph (b) of the rule contemplates the situation where the applicant is lacking information reasonably necessary to decide whether to commence proceedings.[30] This acknowledges that a person may have a potential claim capable of being pleaded but still lack sufficient information upon which to decide whether to commence proceedings.[31]
66 The fact that an applicant feels unable to decide to commence a proceeding because of a lack of information is not sufficient on its own for the purposes of the rule.[32] In this regard, SOL relied on the authorities to submit that the rule cannot be used to obtain material to verify a cause of action which the applicant already knows it has, to verify that belief, or otherwise to ascertain the strength of the case for the right to relief.[33] If the evidence went so far as to show that a particular applicant was already able to decide to commence a proceeding, subparagraph (b) of the rule would not be satisfied.[34] Therefore, the question posed by subparagraph (b) is whether the applicant, as an objective fact, has sufficient information to make a decision whether to commence proceedings.
67 In Beston, Hollingworth J adopted and applied the decision in Alphapharm.[35] In that case, Lindgren J applied a test of 'reasonable sufficiency' in which the court examines whether it is reasonable for an applicant to be required to make a decision without having the information that would become available from the document or documents of which discovery is sought.[36] Lindgren J observed that this question is to be answered in light of the nature of the cause of action contemplated and the range of information potentially available in respect of a cause of action of that kind.[37]
68 The nature of the cause of action contemplated by the AFL, breach of contract, and the range of information potentially available to the AFL in respect of that breach will be determinative of this question. I have reviewed the User Agreement and the exhibited Deeds of Amendment to the extent necessary to assess grounds 1 and 2, as well as the relevant correspondence and other evidence.
69 There is little doubt that the existence of the Etihad Agreement has given the AFL cause to reasonably believe that it may have the right to obtain relief from SOL. After having made inquiries for information on 28 November 2008, and despite the information contained in the respondent's affidavit, the critical piece of information that the AFL is missing relates directly to whether it does or does not have a cause of action, that is, who grants what rights and on what authority. As stated by Gillard J in United Energy:
The mischief which the rule seeks to address is the avoidance of a situation where a prospective plaintiff does not have all the relevant documentation to enable him and his advisers to make a decision whether he has a good cause of action or not, but nevertheless issues a proceeding and subsequently gains access to relevant documents in the possession of the opposing party, only to find he does not have a cause of action.[38]
70 After consideration of the User Agreement as a whole, with specific consideration of clauses 8.2(b) and 8.3 and clause 1.10, I find that discovery of the Etihad Agreement is necessary for the AFL to know whether it has a cause of action relating to ground 1. In my view, sufficient information in these circumstances would be information enabling the AFL to know whether the agreement between MSL and Etihad involves SOL in a way that can be legally ascribed to SOL under the User Agreement.
71 It is apparent from the authorities that the information to which subparagraph (b) of rule 32.05 is referring is information that goes to the existence of a cause of action. While it may be true, as SOL points out, that the AFL knows that the Etihad Agreement exists, this knowledge must relate to whether it has a cause of action, or a right to relief, and that knowledge must confirm the putative cause of action to the requisite threshold under the rule. In reality, the AFL is seeking to understand whether its right to sue exists at all. Essential to this is the capacity and authority of MSL to enter into the Etihad Agreement, and whether the AFL can show it did so as SOL's agent or attorney or in some way that legally ascribes the conduct to SOL.
72 Many of these observations also apply to ground 2. For the reasons expressed in relation to ground 1, I am of the view that discovery of the Coca-Cola and Cadbury Schweppes Agreements, and of the Second CUB Agreement should be available to the AFL. However, in view of the nature of the obligations contained in clause 8.2(d), which impose absolute prohibitions on SOL in relation to competing or conflicting with the AFL's rights, and having regard to the AFL's awareness that SOL's arrangements with AFL sponsors apply to AFL matches, I am of the view that the AFL already has sufficient information with regard to the NVM Agreement and the First CUB Agreement.
73 I find that the applicant has otherwise satisfied the requirements of the rule under grounds 1 and 2. It is not in dispute that SOL is in possession of the Etihad, Coca-Cola, Cadbury Schweppes, and Second CUB Agreements and it is not in dispute that the AFL's letter of 28 November, formally requesting copy documents, satisfies the inquiries threshold under the rule.
74 It follows that ground 1 is made out and that ground 2 is made out in part.
75 One final issue arises with regard to the documents relevant to these grounds. The AFL requested an order for preliminary discovery of the agreement between Nationwide Venue Management Pty Ltd, CUB and Coca-Cola Agreement referred to in the respondent's affidavit. SOL has informed the court that this document is not in its possession. This was not challenged by the AFL nor did it suggest SOL or MSL had copies of the documents. As matters stand, I am not satisfied the respondent has the documents in its possession such that the rule might be triggered.
76 I now turn to consider the question of the discretion.
Should the court exercise its discretion against the applicant?
77 Both parties agreed that where the elements of the rule are satisfied, the discretion would ordinarily be exercised in favour of the applicant. However, the discretion will not necessarily be exercised automatically. In Glowatzky v Insultech Group Pty Ltd,[39] Branson J said
I would, in any event, in the exercise of my discretion, refuse the applicant relief under [the rule] in the particular circumstances of this case. Assuming that there is reasonable cause to believe that the applicant may have the right to obtain relief in the Court from the respondents, the possibility has not, in my view, been shown to be sufficiently strong to justify an order.[40]
78 Glowatsky demonstrates that the discretion will not be exercised as of right, especially in circumstances where an applicant does not have a strong case.
79 SOL submitted that the court should exercise its discretion against AFL in these circumstances, on the grounds that the evidence was weak with respect to this part of the application.[41] To this effect, SOL referred to the assertions made by the AFL in the correspondence indicating it had already made up its mind to sue.
80 Taking these matters into account, I am of the view that in the present case, little arises to impact negatively on the exercise of the discretion. In Optiver, the Full Federal Court said:
There normally will be little scope for refusal of relief where the requirements of [the rule] have been met. The remedy is beneficial and should not be refused, save for good cause. In our opinion, it would have been, and would be, wrong in principle to decline relief in the circumstances of the present case, if it be concluded that the requirements of [the rule] were met.[42]
81 The confidentiality of the documents for discovery is of concern, however such a consideration should not impact on the exercise of the discretion or the proper function of the rule to the detriment of an otherwise successful application.
82 The court has a duty to prevent the bringing of speculative suits and the wasting of court time. The only benefit for the AFL that may be derived from this application may be to confirm that it does not have a cause of action against SOL under the User Agreement, but the benefits envisaged by the rule as described by the authorities are of a kind that uphold the administration of justice by avoiding what would otherwise be fruitless litigation. SOL itself submitted that the only benefit to which the court should have regard is whether there is a benefit to the AFL being able to make a proper decision on whether to commence proceedings. I agree with this contention.
83 SOL submitted that there is nothing in the Etihad Agreement that can be construed by the AFL to confirm the existence of what it squarely alleges is the offending conduct of SOL. I do not consider that this is the purpose of the AFL's application. SOL presented a similar argument with regard to the pouring and supply documents. It submitted that the AFL seeks documents that it knows, on the evidence, were entered into, on the face of it, in breach of clause 8.2(d). As I have already discussed, the AFL is seeking to inspect the documents in order to ascertain whether it has a cause of action against SOL under the User Agreement by virtue of the existence of those documents. It does not seek to confirm what it knows has occurred.
84 The final aspect of the AFL's application related to ground 3 to which I now turn.
Is there reasonable cause for the AFL to believe that it has or may have a right to relief?
85 While the rule should be given the fullest scope its language will reasonably allow, a flimsy foundation will not be sufficient; it cannot constitute reasonable cause within the plain meaning of the rule.[43]
86 Whether there is reasonable cause to believe under subparagraph (a) of the rule is determined on an objective test.[44] The requirement to be established is a reasonable cause to believe that the applicant has or may have a right to relief, not a conclusion that a prima facie case in fact exists. This question is informed by examining the various elements of the potential cause of action and coming to a determination about whether there is a reasonable cause to believe that each of the necessary elements exist.
[W]hile uncertainty as to only one element of a cause of action might be compatible with "reasonable cause to believe" required by subpara (a), uncertainty as to a number of such elements may be sufficient to undermine the reasonableness of the cause to believe.[45]
88 If there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application insofar as it is based on that cause of action.[46]
89 The determination of ground 3 turns largely on the terms of clause 8.8 and the definitions in the User Agreement that relate to that clause, and whether, by virtue of those terms and the information available to the AFL, there is reasonable cause to believe.
90 I have reviewed the User Agreement to the extent necessary. At its lowest level, subparagraph (a) of the rule requires that there be reason to believe that the applicant may have the right to obtain relief in relation to its purported cause of action, however, it is not sufficient for the AFL to point to a mere possibility that it may have a claim. The AFL submitted that preliminary discovery of the Melbourne Victory Agreements would enable it to know whether the right to relief is plausible. That may be so, but such an order can only be made by the court once it is satisfied that reasonable cause to believe is actually present.
91 The evidence, in my view, does not incline towards the matter as it is put by the AFL. Having regard to the terms of the User Agreement, it is not enough for the AFL to merely assert that the definition of 'sporting event' includes all of the elements that it suspects constitute the terms of the Melbourne Victory Agreements. For this assertion to be acceptable, the court would require evidence that 'sporting event' did in fact include things other than matches such as training sessions, finals matches and the like, and that the AFL and SOL considered that to be so. This information, on a proper construction of the rule, cannot come from the Melbourne Victory Agreements itself if reasonable cause to believe is not yet present. Otherwise, I am confined to the evidence provided by the parties. As noted by counsel for SOL, all of the evidence put before the court concerning the Melbourne Victory Agreements relates to matches.
92 With regard to ground 3, the AFL has not satisfied the requirements of the rule and therefore discovery of the Melbourne Victory Agreements is not available. By reason of that finding, the question of discretion does not fall to be considered.
94 SOL submitted that the AFL's application was 'intrusive'. There is little doubt that confidential information can often be very valuable, particularly where parties are trade rivals. SOL indicated its concern that there may be a real benefit to the AFL in obtaining the information contained in the documents for purposes other than those the subject of the rule.
95 While I agree that the court should approach any application with a degree of care, and 'must be on guard against the rule being used to ascertain trade secrets or stifle competition',[47] the AFL has indicated to the court and asserted to SOL in the correspondence that reasonable measures can be adopted in relation to confidentiality. It appears that the AFL is not averse to a specific confidentiality regime being developed. At this stage it is a matter between the parties.
96 It follows the application is granted in part. The AFL is entitled to an order for discovery of each of the agreements of which SOL is not a party, with the exception of the Melbourne Victory Agreements and the agreement between NVM, CUB and Coca-Cola. For convenience, and in the interests of certainty, a list of the agreements to be discovered is set out in the appendix to these reasons.
1. The agreement between MSL and Etihad dated 16 December 2008;
2. The agreement between MSL, CUB, Beringer Blass Wine Estates Limited and Southcorp Wines Pty Ltd dated 1 July 2005;
3. The agreement between MSL and Coca-Cola effective from 1 January 2001;
4. The agreement between MSL and Coca-Cola dated 7 June 2007;
5. The agreement between MSL and Cadbury Schweppes Pty Ltd operative from 1 January 2003;
6. The agreement between MSL and Cadbury Schweppes Pty Ltd dated 28 September 2005.
[1] [2008] VSC 392 ('Beston').
[2] Ibid [52]-[56] (citations omitted).
[3] See also Hemley v Medical Indemnity Protection Society [2000] VSC 496; Scarletti Pty Ltd v Milwood Printing Co Pty Ltd (Unreported, Supreme Court of Victoria, Court of Appeal, Phillips CJ, Crocket and Southwell JJ, 28 July 1994) ('Scarletti).
[4] The applicant presented its argument in a variety of ways. However, for convenience, it is appropriate to refer to the argument as grounds 1-3.
[5] Affidavit of Peter George, solicitor for the respondent, sworn 19 February 2009 (the 'George affidavit'), [3].
[10] Referred to by counsel for SOL in response to the AFL's request for third party agreements relating to pouring and/or supply rights.
[12] In the course of argument, SOL released some information to the AFL. The AFL submitted that the further information provided by SOL's counsel did not clarify who the parties are, nor who grants what rights.
[14] See paragraphs [13] - [26] above.
[16] George affidavit, [14]-[16(b)].
[17] Affidavit of Andrew John Dillon, General Manager for the applicant, sworn 18 February 2009, [19]-[20] (the 'Dillon affidavit').
[19] Counsel for SOL also said that the issue of identity had not been raised by the AFL until the day of the hearing of the present application.
[20] Letter from MSL to the AFL of 22 October.
[23] The nature of the obligations are absolute. This was acknowledged by the respondent in the course of its submissions without admitting any liability with regard to any future claim.
[25] [1998] VSC 133 ('United Energy').
[29] United Energy, [28]-[35]; Gibson v Australia New Zealand Banking Group Ltd (Unreported, Supreme Court of Victoria, Gobbo J, 30 August 1991), 3-4; Dyer v Hunter [1999] VSC 531, [7] ('Dyer').
[30] St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360, 154 ('St George').
[31] Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2008] FCAFC 133, 36 ('Optiver').
[32] Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391, 24 ('Alphapharm').
[39] (1997) 39 IPR 215 ('Glowatzky').
[41] SOL also indicated a factor of delay but did not submit that element should have an impact on discretion. The argument was not, in the end, advanced.
[43] See generally Scarletti; Schmidt v Won [1998] 3 VR 435; Beston.
[44] Quanta Software International Pty Ltd v Computer Management Services Pty Ltd [2000] FCA 969; (2000) 175 ALR 536, [24].
Australian Football League
Stadium Operations Limited [2009] VSC 264
(1997) 39 IPR 215
(2000) 175 ALR 536