Bernie Lewis Home Loans Pty Ltd v J Speirs Nominees Pty Ltd

AND: J SPEIRS NOMINEES PTY LIMITED ACN 113 945 930

JUDGE: BESANKO J DATE: 17 DECEMBER 2010 PLACE: ADELAIDE

REASONS FOR JUDGMENT 1 By notice of motion, the applicant sought an order under Order 15 rule 8 of the Federal Court Rules for further and better discovery against the two respondents to the proceeding and an order under O 15A r 8 for non-party discovery against Smartline Home Loans Pty Limited, GR5 Pty Limited, Dwight Andrews, David Baker, Michael Karp and Brenton Rolton. 2 The parties made submissions on the notice of motion on Monday 13 December 2010. Prior to that, the applicant had lodged a detailed outline of submissions. At the conclusion of the argument I made an order dismissing all paragraphs in the notice of motion except for paragraph 4.5. I reserved my decision in relation to paragraph 4.5.

Paragraphs 4.1-4.4 and 4.6 (Orders sought against the respondents) 3 These paragraphs seek an order for further and better discovery in relation to certain classes of documents. A person seeking an order for further and better discovery must satisfy certain requirements before an order is made. Those requirements were the subject of submissions made by the parties. I was able to decide this matter by reference to one of those requirements. I was not satisfied that the matters to which the documents relate were 'matters in question in the proceeding' within O 15 r 8. In the circumstances, I will not deal with the other arguments. 4 The applicant's case is that in order for the first respondent (the franchisee) to be entitled to the right of renewal of the franchise referred to in the Franchise Agreement it must have substantially complied with the Franchise Agreement throughout its term (Amended Statement of Claim 'ASOC' para 6.3). It alleges that in a number of respects the first respondent has not been in substantial compliance with the Franchise Agreement throughout the term. The applicant presently pleads 15 acts or omissions by the first respondent that constitute non-compliance (ASOC para 24). In their Defence the respondents plead that the first respondent has been in substantial compliance with the Franchise Agreement (Amended Defence 'AD' para 23). 5 In effect, the documents sought by the applicant relate to two or possibly three, further alleged breaches of the Franchise Agreement by the first respondent. Those two or possibly three further breaches are identified in a general way in paragraphs 17 and 26 of the applicant's detailed outline of submissions. It seems to me that the onus is on the franchisor to show that the franchisee has not substantially complied with the Franchise Agreement. In the absence of a proper pleading the matters to which the documents relate are not matters in question in the proceeding within the rule (even accepting the Peruvian Guano test) and the request for documents is a fishing expedition. I appreciate that in some circumstances this may create difficulties for a person in a position similar to that of the applicant, but the terms of the rule are clear. In any event, there are good reasons not to allow a party to embark on a fishing expedition. The authorities are clear that O 15A r 6 does not apply once proceedings have been commenced: Ricegrowers Cooperative Ltd v ABC Containerline NV (1996) 138 ALR 480; Hooper v Kirella Pty Ltd [1999] FCA 1584; (1999) 96 FCR 1.

Paragraphs 1-3 (Orders sought against the non parties) 6 The applicant accepted that if it failed to secure orders in relation to paragraphs 4.1-4.4 and 4.6 of the notice of motion, it could not succeed in relation to paragraphs 1-3.

Paragraph 4.5 (Order sought against the respondents) 7 The order sought here is as follows: 4. An order pursuant to Order 15 Rule 8 that within 7 days of the date of this order the Respondents/Cross Applicants make further and better discovery to the Applicant the following documents: 4.5 All documents relating to the exercise by Speirs Nominees of the Right of Extension pursuant to clause 4.9 of the lease dated 23 February 2006 ('the Lease') between Helen Estelle Hill-Smith as lessor and Speirs Nominees as lessee in respect of the Premises. 8 The lease over the premises from which the franchisee operates the franchise business is in the name of the franchisee as lessee and a third party as lessor. A condition of the right of renewal of the Franchise Agreement is that the franchisee has the right to occupy the premises throughout the renewal term. Whether the franchisee has such a right by reason of an exercise of the right of extension in clause 4.9 of the lease is an issue in the proceeding (Second Amended Cross Claim para 17.2, Defence to Second Amended Cross Claim paras 16.3.5, 16.4.3). I am satisfied that there are grounds for a belief that documents falling within the description in para 4.5 may be or may have been in the possession of the respondents and that it is appropriate to make an order in terms of paragraph 4.5 in the notice of motion.

Conclusion 9 There should be an order under O 15 r 8 of the Federal Court Rules in relation to paragraph 4.5 of the notice of motion dated 23 November 2010. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.