Blanket and anor v Telstra Corporation Limited

Industrial Relations Commission (NSW)|2004-06-28|Before: Marks J, Sheppard J, Palmer J

Industrial Relations Commission of New South Wales in Court Session

CITATION : Blanket and anor v Telstra Corporation Limited [2004] NSWIRComm 161 FIRST APPLICANT Paul Blanket

PARTIES : SECOND APPLICANT The Blanket Partnership

Century Medical Inc v THLD Limited (No 3) [2000] NSWSC 428 E.I. du Pont de Nemours and Co v Commissioner of Patents (1987) 16 FCR 423 at 424 Ferguson v MacKaness Produce Pty Ltd [1979] 2 NSWR 66 CASES CITED : Glover Gibbs Pty Ltd trading as Balfours New South Wales Pty Ltd v Laybutt [2004] NSWCA 45 Mulley v Manifold (1959) 103 CLR 341 at 345 National Australia Bank Ltd v Idoport Pty Ltd [2000] NSWCA 8 Woods v Martin Bank Limited [1958] 1 WLR HEARING DATES: 06/01/2004 DATE OF JUDGMENT: 06/28/2004

APPLICANTS Mr D Knoll of counsel Solicitor: Mr G Adelstein Diamond Peisah Solicitors LEGAL REPRESENTATIVES: RESPONDENT Mr M Elliot of counsel Solicitor: Ms B Hall-Carney Mallesons Stephen Jaques

JUDGMENT: - 11 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: MARKS J Monday 28 June 2004 Matter No IRC 7508 of 2001 PAUL BLANKET AND ANOR v TELSTRA CORPORATION LIMITED Application under s 106 of the Industrial Relations Act 1996

JUDGMENT ON INTERLOCUTORY APPLICATION FOR COSTS RE DISCOVERY "Courts are publicly funded institutions. Except for a nominal filing fee, they provide their facilities free of charge. The judges who preside over them have a duty, consistently with their primary duty to administer justice, to do their utmost to prevent waste of public time and money. The days when parties were left at leisure to pursue private litigation in the way that they thought best suited their purposes have long gone. Courts have an overriding obligation to see to it that those using their facilities are proceeding in a way best calculated to bring litigation to an end at the earliest possible moment so long as the primary goal of achieving justice is not lost sight of". (per Sheppard J in the Federal Court of Australia in E.I. du Pont de Nemours and Co v Commissioner of Patents (1987) 16 FCR 423 at 424, cited with approval by Palmer J in the New South Wales Court of Appeal in Glover Gibbs Pty Ltd trading as Balfours New South Wales Pty Ltd v Laybutt [2004] NSWCA 45).

1 These unfortunate proceedings were commenced by summons filed originally on 19 November 2001. The applicants are Paul Blanket and The Blanket Partnership, and the respondent is Telstra Corporation Limited. The applicants sought relief under s 106 of the Industrial Relations Act 1996 ("the Act") with respect to an "employment arrangement" which was alleged to be unfair in a number of respects. After filing preliminary documentation the matter was referred for mandatory conciliation which was conducted before a judge of this court on 25 November 2002. It was then referred to me on 2 December 2002 to be dealt with within this court's directions list.

2 Consent directions were made on 20 December 2002 which required the applicants to file and serve an amended summons by 7 January 2003, the filing and service of a reply to the amended summons and made provision for the issue of summonses for the production of documents and the exchange of categories of documents for discovery by 7 February 2003. It was anticipated that formal discovery and inspection would be completed on or before 7 March 2003 and that thereafter the applicants would commence to file and serve their affidavit material on or before 28 March 2003. The consent directions then proceeded to deal with the usual orders made in connection with the preparation of s 106 matters in this court. The amended summons for relief was filed on 20 December 2002 followed by a reply to the amended summons.

3 Thereafter the parties commenced to engage in the discovery process, the circumstances of which need to be addressed in some little detail. The parties soon fell in arrears with the original timetable. Consent directions made on 8 April 2003 provided for the parties to exchange categories of documents for discovery by the following day and for formal discovery and inspection to be completed on or before 23 April 2003.

4 On 15 May 2003 the respondent's solicitors, Mallesons Stephen Jacques, filed a notice of motion seeking, inter alia, to attack the applicants' categories of documents for discovery. The notice of motion specified that categories numbered 2, 5, 6, and 8 "are broad and seek documents that have no relevance to the matters at issue. The ambit of the categories is well beyond the scope of any matters in issue and is thereby oppressive". The notice of motion was supported by an affidavit sworn by Ms Brooke Hall-Carney, solicitor with Mallesons Stephen Jacques, who had carriage of the matter subject to the supervision of a named partner, Roger Forbes. Annexed to that affidavit was correspondence between Ms Hall-Carney and Mr Geoffrey Adelstein, a partner in Diamond Peisah, solicitors for the applicants. By letter of 15 April 2003 to Mr Adelstein which, for reasons that I do not understand, was headed "confidential communication", Ms Hall-Carney asserted in general terms that documents in category 2 were "incomprehensible", that the ambit of categories 5 and 6 "goes well beyond the scope of any matters in issue in the proceedings" and that category 8 was "broad, extends beyond the matters on issue and is oppressive". Mr Adelstein responded by letter dated 24 April 2003 asserting that category 2 was "anything but incomprehensible", and denying the comments made with respect to the remaining categories.

5 Neither the letter of Ms Hall-Carney nor the letter of Mr Adelstein in reply seeks to address in any detail, either superficial or otherwise, the issues in the proceedings and neither seek to either attack or justify any appropriate relevance for the purpose of the discovery process. Accordingly, the respondent's notice of motion appears to have been filed on the basis of superficial allegation and counter-allegation made by the solicitors, or, perhaps stated more generously, there is no evidence of any significant attempt by the solicitors to deal with the controversy between them in any more meaningful manner. The month of May 2003 was significant because, as will be seen, it is not until May 2004 that the issue of discovery was significantly advanced, albeit then incompletely.

6 The summons alleged, in general terms, that following a commercial relationship between the first applicant and the respondent, the applicants were retained to provide strategic advice on the development of a smartcard which was to form part of a smartcard loyalty program to be implemented by the respondent conjointly with a third party, and in particular the MacDonald's Restaurant organisation. After some period during which the applicants had performed work on this programme the respondent, following the appointment of a new person in charge of sales and marketing for the respondent's "convergent technologies" division, terminated the applicants' involvement with the programme. The applicants allege that the circumstances in which their alleged involvement was terminated created unfairness for the purposes of s 106. They claim compensation referable to work performed which was allegedly not paid for and with respect to certain other benefits said to be derived by the respondent for which monies ought to be paid.

7 It is necessary to refer briefly to the three categories of documents sought which remained in issue. Category 5 related to visual presentations made to the respondent in relation to or which referred to "smartcard". Category 6 related to documents referring to "strategic advice" and "smartcard". Category 8 related to documents which referred to or evidenced or recorded the formation of a conversion technologies division within the respondent's organisation. I should add that at the end of the letter setting out the categories of documents there appears a Table A with the names of fifteen persons set out thereunder. There appears to be no reference in the letter to Table A, and the names of these persons appear to have been included by mistake.

8 There was a lengthy hearing of the notice of motion which I conducted on 29 May 2003. It transpired during the course of those proceedings that Ms Hall-Carney did not appreciate fully the nature and extent of the applicants' allegations contained within the amended summons. I do not state this at all critically of Ms Hall-Carney because in my opinion the relevant allegations contained in the summons were expressed in a rather cryptic fashion. Mr Knoll of counsel, who appeared for the applicants, sought to explain the true intent of the allegations upon which the applicants relied. However, he was careful to point out that the ultimate nature and extent of the allegations made by the applicants against the respondent would depend upon what documents were produced during the discovery process and what they indicated.

9 During the course of that hearing on 29 May 2003 the parties were able to reach some form of agreement as a result of the dialogue which was initiated with the legal practitioners representing each of them. The controversy with respect to category 5 originally arose because the respondent's solicitor understood the summons to have raised particular allegations of unfairness not including any allegations that the respondent may have been dealing concurrently with other third parties at the same time as it had retained the applicants to explore the strategy with respect to the use of smartcards. As I previously indicated, it is possible to read the summons in this broader sense, but the difficulty arises because of the cryptic way in which the allegations are framed. Once it was clear to Ms Hall-Carney that the applicants' claim was to be framed in this way an agreement was reached that the respondent would search for documents, including documents in electronic form, to ascertain whether there were any concurrent presentations being made by persons or entities other than the applicants with respect to the smartcard strategy. Such a process also provided a first step in resolving the controversy with respect to category 6. With respect to category 8, some of the controversy disappeared when the applicants conceded that the inclusion of the names in the table was irrelevant and that what the respondent was seeking was the discovery of documents, including documents in electronic form, which evidenced or referred to the reorganisation of the conversion technologies division by or at the request of a Mr Neil Peckham and the issue of a direction by Mr Peckham to the applicants to cease work on the smartcard strategy. The proceedings were adjourned on this basis.

10 The proceedings came back before the court for further directions on 1 July 2003. A new timetable was set requiring that discovery and inspection be effected by 23 July 2003 and that thereafter the parties file and serve their affidavit evidence.

11 In July 2003 the applicants and the respondent filed lists of documents. By letter dated 29 July 2003 Ms Hall-Carney wrote to Mr Adelstein, again under the heading "confidential communication", advising that in relation to categories 5 and 6 that no third party was retained on a continuing basis to provide advice on the development of a smartcard strategy, nor was any party retained to provide the same or similar services as those provided by the applicants or as allegedly provided by the applicants. That letter also referred to an assertion previously made by Mr Adelstein that the "Singleton Group" was a "party that had a significant exposure to the Telstra Corporation Limited business in marketing at the relevant time". Despite this Ms Hall-Carney indicated that the respondent did not propose to discover any documents under categories 5 and 6 and again raised the question of relevance and sought greater precision as to what documents were required.

12 With respect to category 8 Ms Hall-Carney said that the respondent admitted certain factual matters concerning the creation of the Telstra convergent business unit and the appointment of Mr Peckham as well as a revised business structure. The letter then proceeded: "In light of these admissions our client does not propose to discover any documents falling within category 8. If your client persists with this request we again ask that you clarify what is sought and why it is sought."

13 By letter dated 26 August 2003 the applicants' solicitors sought to have the matter relisted before the court and this occurred on 1 September, when it was placed in the 9:30am directions list, to ascertain the nature and extent of the reasons for the request for further listing. On that occasion I observed from the correspondence that the controversy between the parties was created by the stance taken by the respective legal representatives of the parties. Furthermore, I was advised that both Mr Adelstein and Ms Hall-Carney had a different view about the nature and extent of any attempts to resolve the matter by way of sensible discussion, particularly concerning the relevance of what was sought to be discovered in terms of issues in the proceedings. The matter was stood over on the basis that further discussions would be held, including participation by counsel to be briefed by the respondent, and that if necessary the matter could be listed for further formal hearing.

14 The matter next came before the court for default directions on 29 March 2004. I should emphasise that it was placed in the list that day on the court's own motion. On that occasion I was informed that the legal practitioners for the parties had met towards the end of September 2003 in order to resolve the outstanding discovery issues and had been unable to do so. I set the outstanding matters down for hearing on 10 May and required that formal documents be filed in the interim. On that occasion Mr Knoll again appeared for the applicants and Mr M Elliot of counsel for the respondent. There was tendered into evidence letters between the solicitors. With respect to categories 5 and 6, I have already set out what was asserted by Ms Hall-Carney in her letter of 27 June 2003. In particular that "no party was retained to provide the same or similar services as those provided by the applicants…". During the course of dialogue which I conducted with counsel at the hearing on 10 May 2004 it emerged that the applicants were seeking to discover not only documents evidencing a retainer as such but also documents which would indicate that the respondent was in discussion with or in receipt of proposals from other potential service providers in this area. In my opinion the correspondence from and any other communication from the applicants' legal practitioners addressed to the respondent's solicitors or indeed asserted during the course of proceedings does not make it perfectly clear what was the scope of what was then intended to be sought by the applicants by way of discovery and why. For example, a letter from Mr Adelstein to the respondent's solicitors dated 4 July 2003 asserts that the Singleton Group could be identified as being amongst a party or parties "that were retained to provide a similar service to Mr Blanket", although the Singleton Group is also described as being "a party that had a significant exposure to the Telstra Corporation Limited business in marketing at the relevant time". After discussion, it was agreed that Ms Hall-Carney would explore with those instructing her at Telstra whether there were any documents which would fall within the category of what was then being sought by the applicants by way of refinement, namely negotiations with the Singleton Group with respect to the smartcard strategy. This, then, disposed of categories 5 and 6.

15 The discussion with respect to category 8 was somewhat different. The applicants asserted that the reorganisation of the convergent technologies division and the conduct of Mr Peckham in that connection and in particular with respect to the cessation of work involving the applicants constituted unfairness for the purpose of the proceedings. It was contended that even though the respondent was prepared to make the admissions stated by Ms Hall-Carney, which I have previously summarised, this did not avoid compliance with the obligation to discover documents, because as Mr Knoll submitted such documents "may shed light on the factors which contributed to the respondent's unfair and unconscionable dealings with the applicant".

16 For the respondent it was submitted that the applicants' case was pleaded by reference to unfairness in the terms of the contract pursuant to which the work was performed and that there was "no allegation that the respondent dealt with the applicants unfairly or unconscionably at a later date". On this basis it was asserted none of the documentation in category 8 could be relevant to an issue in the proceedings, and relevant for the purpose of determining whether discovery was available. In my opinion such a submission should be rejected. It is clear from paragraph A(1) of the summons that one of the bases upon which the contract was said to be unfair was that "it allowed the respondent to terminate the applicants' employment arrangement in circumstances where the applicants had committed no irremediable default". Paragraph B(18) of the summons which sets out inter alia the facts upon which the applicants rely states that "the applicants were given no opportunity to address or remedy any concerns the respondent had when the Stop-Work Order was given".

17 During the course of submissions which involved dialogue with each of the counsel, Mr Knoll agreed that one of the aspects of unfairness upon which the applicants would rely was the formation of the conversion business division coupled with the decision to bring the smartcard project in-house and to terminate the services of the applicants. Put that way, Mr Elliot agreed that the respondent would need to give discovery of documents referrable to that issue, but it would then be necessary to formulate with greater precision the search that the respondent would have to undertake.

18 After discussions between the parties consensus was reached as to the terms of the documents to be discovered by the respondent in category 8 and, more significantly, the search criteria which would be utilised for the purpose of undertaking a search in electronic form of the respondent's relevant data stored in electronic form.

19 The proceedings were stood over on the basis that the respondent would attend to discovery with respect to category 8 in the matter which was the subject of the agreement. In terms of categories 5 and 6 it was agreed between the parties that the controversy would not necessarily be complete but it was hoped by the legal practitioners that the agreed way forward would produce a resolution of the problem. At that stage I reserved argument about costs which was heard on 1 June 2004, and which is the subject of this judgment.

20 I should state initially that, as Mr Elliot pointed out, the discovery process is not yet complete. It is possible that more controversy might arise when the respondent completes its electronic search of its data stored electronically. Nevertheless, for reasons which will appear, I think it important that I deal with the conflicting submissions of the parties as to costs, particularly as raised during the course of the hearing on 1 June.

21 The applicants sought orders for indemnity costs. They submitted that the respondent had unreasonably prolonged the discovery process and that the respondent's solicitor had misunderstood her role and the obligations of the respondent with respect to the discovery process. For its part, the respondent rejected any suggestion that it should pay for the applicants' costs associated with the discovery process on any basis, especially an indemnity basis, and sought an order that the applicants pay its costs of the interlocutory proceedings.

22 In order to deal with the competing submissions it is necessary to have regard to the discovery process and some relevant principles with respect to it. Discovery is provided for under rule 162 of the rules of this court. A party may be ordered by the court to give discovery to another party of documents within a class or classes specified in the order or one or more samples of documents with such a class (rule 162(1)). The manner in which documents may be specified is set out in rule 162(3) which is in the following terms:

(3) Subject to subrule (2), a class of documents may be specified: (a) by relevance to one or more facts in issue, (b) by description of the nature of the documents and the period within which they were brought into existence, (c) in such other manner as the Commission considers appropriate in the circumstances.

23 The reference to relevance to a fact in issue in rule 162(3)(a) requires recourse to rule 160 which, in paragraph (d) provides that "a document or matter is to be taken to be relevant to a fact in issue of [sic] it could, or contains material which could, rationally affect the assessment of the probability of the existence of that fact (otherwise than by relating solely to the credibility of a witness), regardless of whether the document or matter would be admissible in evidence."

24 Whilst the matter was not specifically argued in submissions before me, it seems that on a prima facie reading of the provisions of rule 162 that the definition of what is relevant to a fact in issue contained in paragraph (d) of rule 160 applies only to specification of documents under rule 162(3)(a), that is "by relevance to one or more facts in issue". In the circumstances of these proceedings the documents were specified by way of description of the nature of the documents as referred to in rule 162(3)(b). Accordingly, whether documents are properly discoverable is to be determined by reference to the common law position rather than by applying the more confined test provided for in paragraph (d) of rule 160.

25 Whilst this proposition, on one view of it, is unexceptional, there is authority which supports the construction of the rule in this way. If one combines the provisions of rule 160(d) and rule 162, that part of the discovery rules of this court which are relevant for the purpose of the determination of these proceedings is essentially identical with the provisions of Part 23 of the rules of the New South Wales Supreme Court. The application of that part of the rules to the construction of the rules which I am concerned with in these proceedings was the subject of a judgment of Rolfe J in the Supreme Court of New South Wales in Century Medical Inc v THLD Limited (No 3) [2000] NSWSC 428. After considering the provisions and context of the rules and the part which they play within the discovery process, his Honour concluded that the equivalent of the definition contained within paragraph (d) of rule 160 applied only to the equivalent of rule 162(3)(a) and did not apply to the equivalent of rule 162(3)(b). In coming to this conclusion his Honour also had regard to the joint judgment of Mason P and Priestley JA in the New South Wales Court of Appeal in National Australia Bank Limited v Idoport Pty Ltd [2000] NSWCA 8. I respectfully adopt the reasoning and conclusion of Rolfe J in Century.

26 It follows, therefore, that the common law test of "relevance" applies to the discovery process undertaken between the parties to these proceedings. That test was conveniently identified by Rolfe J in Century by reference to a test formulated by Menzies J in the High Court of Australia in Mulley v Manifold (1959) 103 CLR 341 at 345. Menzies J said: "Only a document which relates in some way to a matter in issue is discoverable, but it is sufficient if it would, or would lead to a train of inquiry which would, either advance a party's own case or damage that of his adversaries." Whilst there are well known qualifications to this rule so as to preclude what is commonly known as "a fishing expedition" and whilst the rule is sometimes difficult to apply in particular circumstances, the thrust of what is involved is well known and ought to have been well known to Ms Hall-Carney and to Mr Adelstein. I should add for completeness that there is further contemporary reference to the wider nature of the common law rule contained within the joint judgment of Mason P and Priestley J in Idoport, particularly at paragraphs 3 to 11.

27 It is not necessary for the purpose of the determination of the particular issue with which I am dealing in these interlocutory proceedings that I discuss this aspect further, because the parties are currently involved in what is hoped is a final process of defining the categories of documents for discovery. However, the application of the appropriate test has some significance in determining what is the appropriate response of the court to the opposing submissions with respect to costs.

28 In submissions on behalf of the applicants Mr Knoll emphasised that even with respect to the agreement that had been reached in May 2003 the respondent had still not as at May 2004 conducted any electronic search of the documents the subject of that agreement. He blamed the attitude of the respondent and its solicitors for having unduly delayed the progress of the applicants' claims.

29 The respondent's submissions were to the effect that the real cause of the difficulties has been the insistence of the applicants that irrelevant documents be produced, that the discovery process in effect has been utilised as a "fishing expedition" and that the applicants have been compelled to re-formulate their position in order to have gained some access to the discovery process.

30 To some extent the positions of each of the parties taken in anticipation of the proceedings on 10 May 2004 were modified by reason of consensus reached during the course of proceedings during that day. The process that occurred on that day replicated the previous process which occurred on 29 May 2003.

31 On my analysis of the circumstances surrounding these proceedings in connection with the competing cost applications made by the parties, the following observations are relevant: 1. The description of the categories of documents, and in particular categories 5, 6 and 8, as originally formulated, was imprecise in terms of assisting the respondent in understanding and appreciating the nature and extent of what was sought to be discovered by reference to any appropriate relevance to an issue in the proceedings or by reference to any other matter which might justify an order for discovery. 2. The response of Ms Hall-Carney on 15 April 2003 was therefore not unreasonable. 3. The dialogue which occurred during the proceedings conducted on 29 May 2003 fleshed out potential areas for relevance with respect to the three categories and exposed the cryptic manner in which the applicants' case was put in the amended summons. 4. At least as at 29 May 2003 consensus had been reached between the parties as to a process which could be utilised by them in resolving any further controversy and in particular the necessary nexus with respect to relevance to issues in the proceedings. 5. The approach taken in the letter of Ms Hall-Carney of 21 July 2003, the contents of which have been previously described, does not reflect the obligations of the respondent with respect to the discovery process. It was inappropriate in connection with category 8 to set out a number of factual matters and then to proceed on the basis that discovery would not be given. Clearly the establishment of the Telstra conversion business unit and the conduct of Mr Peckham forms an important part of the allegations made by the applicants in the amended summons. Whether any of the documentation sought to be discovered might ultimately be relevant is not to the point in terms of the discovery process. If it was felt that the adjusted discovery criteria required further examination, then this is a matter which should have been the subject of further inquiry or elaboration by Ms Hall-Carney. In the same way the statement which was made by Ms Hall-Carney to the effect that: "our client does not propose to discover any documents under categories 5 and 6" seems to have shut the gate on further discussions even though she sought a statement "in clear terms" how the documents referring to the Singleton Group might be relevant and as to what type of documents were sought. 6. It is obvious from the narration that the legal practitioners have made some effort to resolve the controversy. However, it seems to me that the attitude of the respondent's solicitors, as manifested in the correspondence and which may have been taken on instructions from the respondent, precluded any real consensus being reached with respect to category 8. As to categories 5 and 6 I am at a loss to understand why the legal practitioners were not able to reach agreement amongst themselves in the same or similar terms to that which was reached during the course of proceedings before me on 10 May 2004. 7. Legal practitioners have an obligation not only to advance their clients' interests in an appropriate manner, but also to ensure that the proceedings are conducted on a cost effective and reasonable basis. Where legal practitioners reach a position which is diametrically opposed concerning matters such as discovery in these proceedings, at the end of the day only one of the competing views will be found to be correct. It is, in my experience, much more efficient for the legal practitioners who are thus opposed to at least attempt to understand the position put by the opponent and as to why and to undertake a process to endeavour to convince the opponent as to why his or her view is incorrect. My overall impression is that Ms Hall-Carney did not understand, at least in the first instance, the basis upon which discovery was being pursued and, even when the matter was clarified by the applicants' solicitors, did not apply the appropriate test at law as to what documents were properly the subject of discovery. Whilst I have not been given any evidence or, indeed, information as to what transpired when the legal practitioners ultimately met, such evidence as I have is indicative of a position being put on behalf of the respondent by way of an ultimate position. In the same way the applicants, through their solicitor, responded in the same ultimate fashion. It is my overall impression that neither solicitor has endeavoured in any meaningful way to engage in a dialogue or process with the other which would have precluded what I suspect is a large amount of costs being incurred over a period in excess of 12 months which in turn has added to undue delay in the prosecution of these proceedings. At the risk of repetition I refer again by way of example to the correspondence between the solicitors for the parties. With respect to categories 5 and 6 the respondent through Ms Hall-Carney insisted that it was only documents which dealt with the retention of the third party, as opposed to discussions or negotiations with the third party, which were required to be discovered. With respect to category 8 Ms Hall-Carney persisted in asserting that once the factual admissions had been made there was no scope for discovery. In my opinion Ms Hall-Carney was incorrect in making this assertion. The factual matters about which the admissions were made were not co-extensive with the issues raised in the proceedings including, most obviously, the circumstances in which the respondent determined to sever its relationship with the applicants. 8. I am not comfortable that, with respect to category 8, the attitude taken by the respondent as manifested in the correspondence of Ms Hall-Carney represented an appropriate response. Equally I am not comfortable that the attitude taken by the applicants as manifested by the correspondence of Mr Adelstein, solicitor, represented an appropriate refinement of what was required to be discovered with respect to categories 5 and 6. Albeit, the respondent focussed for the whole of the 12 month period on the retainer of third parties, I am of the impression that the applicants' solicitor failed to appropriately endeavour to satisfy Ms Hall-Carney that it was not the retainer of third parties but dealings with third parties which was at the heart of this aspect of the discovery process.

32 Once a party embarks upon the discovery process, the opponent to whom the discovery process is applied is bound to make the necessary inquiries and cannot choose to ignore the process without suffering the sanctions which are imposed by the court rules. Importantly, solicitors have a duty not only to their clients but also to the court in connection with the discovery process. In Woods v Martin Bank Limited [1958] 1 WLR at 1018, Salmon J sitting in the Leeds Assizes observed (at 1022) that "solicitors owe a duty to the court, as officers of the court, carefully to go through the documents disclosed by their clients to make sure, as far as possible, that no relevant documents had been omitted from their clients' affidavit". Observations to a similar effect were made by Macfarlan J in the Supreme Court of New South Wales in Ferguson v MacKaness Produce Pty Ltd [1970] 2 NSWR 66. At 68 his Honour said: "It is therefore, I hope, clear from what I have said that it is not sufficient for a solicitor simply to inquire of his client or of a principal, if he himself happens to be an agent only for the principal's solicitor in another State, if he has any documents and request that he send any documents that he has to him; the obligation extends much further, namely, to the extent that the solicitor is obliged to make an appraisal of the case and form his own opinions as to what documents probably are in existence and actively to seek out from the client or his interstate or foreign principle whether or not those documents exist. It is only, indeed, in that way that the obligation of the solicitor can be properly discharged."

33 In normal circumstances the costs of the discovery process would become costs in the cause. On one view of the matter that is what should occur in these proceedings. However I find it disturbing that more than 12 months have passed without the discovery process having been undertaken and without inspection of documents having occurred. Unless and until this process is complete the applicants cannot commence to compile their affidavit evidence. These proceedings have been delayed considerably and I suspect that the costs incurred to date on both sides probably exceed the amount in issue.

34 What has occurred thus far in connection with these proceedings does not reflect well on the litigation process as a cost-effective means of resolving disputation between parties. Whilst ultimately judicial officers have a measure of control over all interlocutory steps to be taken in connection with the preparation of proceedings for hearing and over the conduct of the hearing itself, ultimately only the legal practitioners are in a position to assess and determine the nature and extent of resources which need to be expended in connection with an interlocutory process. Whilst the applicants clearly have an interest in discovery in connection with the circumstances of the termination of their relationship with the respondent, which is more specifically referrable to category 8, categories 5 and 6 are arguably in a different position in terms of the discovery process, as I observed to Mr Knoll during the course of the submissions. Ultimately, it is for the parties, guided by their legal practitioners, to determine whether and to what extent they will pursue any investigative or interlocutory process in connection with proceedings having regard especially to what is cost effective. This is particularly so in connection with the discovery process which may produce a windfall, but which might also produce nothing of significance for a litigant. It is not for a judge to engage in that process, which is one purely for the parties guided by their legal practitioners so long as what is sought to be discovered falls within the principles as to the necessary relevance.

35 In Glover Gibbs, the New South Wales Court of appeal made some general observations with respect to what it called "the culture of litigation". At paragraph 21 Palmer J said (Ipp JA agreeing): "The responsibility for changing the culture of litigation lies both with the courts and with the legal profession. Much has been written curially and extra-curially concerning the duty of the legal profession to conduct cases efficiently, expeditiously and economically: see e.g. Ipp JA Lawyers' Duties to the Court (1998) 114 LQR 63, and see the many judicial statements in the cases cited in footnotes 209, 211 and 212. But members of the legal profession alone cannot be expected to take the lead in paring issues for trial to the essential, confining documentary evidence to what is important and limiting cross-examination to the critical questions for decision; they must be encouraged and supported by the courts. The courts should be more willing to intervene when counsel are dwelling too long on irrelevancies or are engaging in needless repetition, and judges should know that in this endeavour they, in turn, have the support of the appellate courts".

36 In my opinion the discovery process undertaken by the legal practitioners for both parties fails the test postulated in Glover Gibbs in terms of efficiency, expedition and economy. This must raise the question as to whether the circumstances constitute in the context of these proceedings a breach of the duty of the legal practitioners involved. In raising this question I expressly exclude any involvement of Mr M Elliot who was retained only recently to represent the respondent in the proceedings. This court is empowered under rule 209 to intervene in the question of costs. Such power is shared in common with many other courts including in particular the Supreme Court of New South Wales and the District Court of New South Wales. Rule 209 is in the following terms: 209 Barrister or solicitor or agent to repay costs due to delay, misconduct etc (1) Where costs are incurred improperly or without reasonable cause, or are wasted by undue delay or by any other misconduct or default, and it appears to the Commission that a barrister, solicitor or agent is responsible, the Commission may, after giving the barrister, solicitor or agent a reasonable opportunity to be heard: (a) disallow the costs as between the solicitor or agent and the solicitor 's or the agent's client, (b) disallow the costs as between the barrister and that barrister's instructing solicitor or as between the barrister and the client, (c) direct the barrister, solicitor or agent to repay to the client costs which the client has been ordered to pay to any other party, (d) direct the barrister, solicitor or agent to indemnify any party other than the client against costs payable by the party indemnified. (2) Without limiting the generality of subrule (1), a barrister, solicitor or agent is responsible for default for the purposes of that subrule where any proceedings cannot conveniently proceed, or fail or are adjourned without useful progress being made, because of the failure of the barrister, solicitor or agent: (a) to attend in person or by a proper representative, (b) to file any document which ought to have been filed , (c) to deliver any document which ought to have been delivered for the use of the Commission , (d) to be prepared with any proper evidence or account, or (e) otherwise to proceed. (3) The Commission may, before making an order under subrule (1), refer the matter to the Registrar for enquiry and report. (4) The Commission may order that notice of any proceedings or order under this Rule must be given to the client in such manner as may be specified in the order under this subrule. (5) The term solicitor in this Rule includes the solicitor's agent.

37 Because of the concerns which I have expressed as to the conduct of the discovery process in these proceedings, I am of the opinion that the most appropriate first step is to determine whether either party should be required to make any payment to a legal practitioner retained by him or it in connection with such part of the discovery process as has occurred since the date of the initial hearing, namely 29 May 2003, up to and including the hearing on 10 May 2004. If such an order were made, then it would seem appropriate on a prima facie basis that the costs of discovery otherwise incurred could become costs in the proceedings. If no such order is made against any or all legal practitioners (other than Mr M Elliot), then this may require further consideration by me as to whether a particular costs order should be made in favour of a particular party and the basis therefore.

38 Whilst I am conscious of the fact that a failure to deal conclusively with any costs order at this stage and the invoking of rule 209 will create further delay and may potentially result in the expenditure of further costs, I am of the opinion that, given the observations which I have already made, this is the appropriate course to be adopted in the further conduct of these proceedings. Such a course should not in any event further delay the discovery process upon which the parties have currently embarked.

39 Accordingly, I make the following orders: 1. Messrs Knoll and Adelstein and Ms Hall-Carney are asked to show cause why any of their costs incurred (other than disbursements) in connection with the discovery process between the period 30 May 2003 to 10 May 2004 inclusive should not be disallowed as between their respective clients. 2. That with respect to the fees of Mr Elliot of counsel incurred during the same period, Ms Hall-Carney should be asked to show cause as to why they should not be met by Malleson Stephen Jacques solicitors. 3. The 3rd day of August next at 10:00am is fixed for the purpose of hearing submissions with respect to the above. 4. Mr Adelstein and Ms Hall-Carney are directed to forward a copy of this interlocutory judgment to their respective clients.

Otherwise the proceedings are stood over with liberty to apply.

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At a glance

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Judgment (50 paragraphs)

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Cases Cited (5)