Bradken Consolidated Ltd v Broken Hill Proprietary Co Ltd

Federal Court of Australia|1998-06-19|Before: Goldberg J, Lindgren J, Davies J, Mansfield J

REASONS FOR JUDGMENT This is an application for discovery from a prospective respondent under O 15A r 6 of the Federal Court Rules ("the Rules"). Global Intertrade Pty Ltd ("Global") invested $2.5 million in an Australian tour of part of Madame Tussaud's Exhibition ("the exhibition") under an agreement made 15 August 1996 between Taylor Evans Pty Ltd ("Taylor Evans") and the Adelaide Festival Centre Trust ("the AFCT"), a body corporate established under the Adelaide Festival Centre Trust Act 1971 (SA), of the one part, and Global as the investor of the other part. Taylor Evans and the AFCT were the producers of the exhibition, under licence from The Tussaud's Group Ltd. It is apparent that the exhibition did not perform, in financial terms, as well as had been expected. As a result of various breaches which occurred in the licence agreement, The Tussaud's Group Ltd terminated the licence to conduct the exhibition in May or June 1998. The residual assets of the exhibition were sold to The Tussaud's Group Ltd. Global lost the value of its investment in the exhibition. In the course of negotiations leading up to the agreement of 15 August 1996, the AFCT produced an Information Memorandum to Global on 29 May 1996, and also provided other

communications to Global from time to time. That material expressed expectations about the anticipated financial performance of the exhibition. Those expectations were not fulfilled. In particular, for present purposes, the exhibition, which was licensed to tour Australia and South East Asia, and which was to run for some five years, ceased to be under the aegis of the producers in mid 1998. It had been intended to run for one year in Melbourne, and thereafter to tour the Australian capital cities, as well as cities in South East Asia. Effectively, the exhibition ran for somewhat less than a year only. Global now asserts that it was induced to enter into the agreement of 15 August 1996 on the basis of certain representations in the Information Memorandum and in other material provided to it by the AFCT. It wishes to consider bringing proceedings against the AFCT in respect of those representations. It identifies in its submissions on this application particular representations as to the duration of the exhibition, as to the attendance figures projected, and as to the average ticket price projected to be received in respect of the operations of the exhibition. In each instance, the reality as it transpired did not accord with or fulfil the expressed expectation. In the light of the submissions, it is not necessary to review in any detail the material adduced to support the facts that the AFCT, in its communications with Global, did include representations on those three topics. Nor is it necessary to review the materials by which it is sought to demonstrate that those projections proved to be incorrect. The AFCT does not dispute on this application that the projections, said to represent the representations, were conveyed to Global and that the performance of the exhibition showed, with the wisdom of hindsight, that those projections did not come to pass. Global proposes to bring proceedings against the AFCT alleging breaches of s 52 of the Trade Practices Act 1974 (Cth) and s 56 of the Fair Trading Act 1987 (SA) and for negligent misrepresentations. There are other possible causes of action identified in the material, but it is not necessary to refer to them. This application, in the nature of pre-action discovery, must satisfy each of the three criteria specified in O15A r 6, which provides:

"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 has been ascertained; (b) after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made 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 possession of 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 in making 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)." Global submits that, on the material before the Court, there is reasonable cause to believe that it has or may have the right to obtain relief in this Court from the AFCT, that it has made all reasonable inquiries, but that those have not led to it having sufficient information to enable a decision to be made whether to commence the proposed proceeding in the Court for that relief, and that there is reasonable cause to believe that the AFCT has possession of documents relating to the question whether Global has a right to obtain the relief and that inspection of those documents by Global would assist in making its decision. The AFCT opposes the application. Its contentions are in two alternatives, but they are each straightforward. First, it says that the application is unnecessary and should therefore be dismissed. It contends that, on the material before the Court, Global has sufficient material to enable it to decide to bring an action against the AFCT, and it ought simply to get on with that proceeding. The AFCT will then plead such matters as it may be advised to plead by way of defence, and in the ordinary course of discovery, the material in issue will become available to Global. In a discrete and specific way, the AFCT contends alternatively that it is not established that there is reasonable cause to believe that Global has or may have the right to obtain relief in this Court from the AFCT. It submits that the Trade Practices Act 1974 (Cth) does not apply to the AFCT because it is the State Crown. If that proposition is correct, it is then contended that because the affidavits of Global do not expressly refer to the cause of action under the Fair Trading Act 1987, even though ss 56 and 54 are parallel provisions to ss 52 and 51A of the Trade Practices Act, Global does not qualify under O 15A r 6(a). The argument is not available under the Fair Trading Act 1987, as s 4 expressly says that that Act binds the Crown. The AFCT additionally contends that, on the material before the Court, Global has not made out the matters required by r 6(b). I shall deal with AFCT's alternative contention first. In my judgment, it is not necessary to decide whether the AFCT is a State Government entity, so that it is under the shield of the Crown: see Bradken Consolidated Ltd v Broken Hill Proprietary Co Ltd (1979) 145 CLR 107. To make such a finding, it would be necessary carefully to consider the functions and powers of the AFCT to determine whether or not it enjoys the privileges and immunities of the Crown. The parties drew to my attention Paul Dainty Corporation Pty Ltd v National Tennis Centre Trust (1990) 22 FCR 495 as an illustration of a case in which the constitution and powers of a body similar to those of the Adelaide Festival Centre Trust, and its relationship with the Victorian Government, were considered in the context of whether that body did enjoy the privileges and immunities of the Crown, so that it was not liable to comply with the Trade Practices Act 1974. I reject the second and necessary step in the argument advanced by the AFCT, namely that the failure of Global expressly to refer in its affidavits to the provisions of the Fair Trading Act 1987 has the consequence that Global cannot in those circumstances rely on the Fair Trading Act 1987 for the purposes of its application. It has expressly done so in the written and oral submissions in support of its claim. As noted above, ss 56 and 54 of the Fair Trading Act 1987 correspond with ss 52 and 51A of the Trade Practices Act 1974. There is no material difference. On the same facts, if there were reasonable cause to believe that Global has or may have the right to obtain relief in the Court from the AFCT, based upon breach of the Trade Practices Act 1974, it will necessarily also give rise to there being reasonable cause to believe that Global has or may have the right to obtain relief in the Court against the AFCT based upon breach of the Fair Trading Act 1987. It was not contended that the Court did not have jurisdiction to entertain an application under the Fair Trading Act 1987. Section 4 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (SA), together with the provisions of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth), have the consequence that the Court has jurisdiction to hear and determine an application under the Fair Trading Act 1987. There was no contention that the Court could not receive and exercise that jurisdiction. In those circumstances, in my judgment, there was little merit in the point which was taken. As counsel for the AFCT acknowledged, if the point was right, the same issues would simply be reventilated before the Supreme Court of South Australia. Rule 60 of the Supreme Court Rules (SA) provides for pre-action discovery. It is not in the same terms as O 15A r 6 of the Rules. Its terms suggest that eligibility for an order under R 60 of the Supreme Court Rules is not subject to the specific hurdles which O 15A r 6 prescribes. It was acknowledged that there were no provisions of r 60 of the Supreme Court Rules imposing any qualifying hurdle for a "pre-action discovery" order than under O 15A r 6 and that the discretionary considerations would be the same. There was no suggestion that the matter should be cross-vested to the Supreme Court of South Australia for determination. In those circumstances, I cannot see merit in not acceding to the application under O 15A r 6 if I am otherwise disposed to do so, simply because the affidavits did not themselves expressly refer to s 56 of the Fair Trading Act. Whether or not a cause of action can exist against the AFCT under the Trade Practices Act 1974, because it is an instrument of the Crown, the same facts will demonstrate reasonable cause to believe that Global has a claim under the Fair Trading Act 1987, and that is a claim which the Court has jurisdiction to determine. The principle submission of the AFCT was that the information available to Global was such as to lead to the positive view that it did have a cause of action against the AFCT, so there was no scope for O 15A r 6(a) to operate. It was contended that, on the evidence, Global did not have reasonable cause to believe in the possible existence of a cause of action because its belief had been converted into a positive belief that a cause of action against the AFCT did exist. Once that belief was shown to exist, then O 15A r 6(a) cannot provide a foundation for an order such as that now sought. The observations of Burchett J in Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 at 733, are generally regarded as properly stating the scope and purpose of O 15A r 6 and the approach the Court should take to an application made under that rule. His Honour said: "It is no answer to the applicant's application under r 6 to say that the proceeding is in the nature of a fishing expedition: cf Meth v Norbert Steinhardt & Son Ltd (1959) 33 ALJR 78 at 81. Rule 6 is designed to enable an applicant, in a situation where his proof can rise no higher than the level the rule describes, to ascertain whether he has a case against the prospective respondent - that is, to "fish" in the old sense: see Caltex Refining Co Pty Ltd v Amalgamated Metal Workers Union (Federal Court (Full Court), 6 December 1990, unreported); Williams, Civil Procedure Victoria (1987) vol 1, 3,928-9; cf Richardson Pacific Ltd v Fielding (Federal Court (Burchett J), 22 August 1990, unreported) which was concerned with another rule in O 15A. It would be unfortunate if a rule designed to amplify the court's power to penetrate obscurities and uncertainties in the interests of justice were to be weakened by restrictive and unnecessary glosses. I think the rule is of a beneficial kind within the meaning of the well known principle of interpretation, and should be given the fullest scope its language will reasonably allow. The proper brake on any excesses in its use is the discretion of the court, which is required to be exercised in the particular circumstances of each case. One guide for that discretion is provided by the reference in r 6(b) to "all reasonable inquiries", as to which see W R Pateman Pty Ltd v Walker Corp Pty Ltd (1990) ATPR 41-016 at 51,299." The passage in his Honour's reasons relied on by the AFCT immediately follows that passage. It is in the following terms: "I have referred to the terms of the rule as indicating that it is unnecessary (indeed it would put his case outside the rule) for the applicant to show a good cause of action against the respondent." In particular the bracketed words are submitted to mean that once a proposed applicant has shown a good cause of action, or a belief that there is a good cause of action, O 15A r 6 is no longer available as a vehicle to get access to documents. It is contended that in reality Global's purpose for the discovery sought is not to determine whether there is a cause of action, but to find out what the defence is, to assess the strength of Global's case and the strength of any defence which the AFCT may have. It is contended that that is an improper use of the rule. Reliance was placed upon Prosnow International Pty Ltd v Polar Technologies Pty Ltd (1997) 39 IPR 369 in which O'Loughlin J declined an application for "pre-action discovery". At the other end of the spectrum, Branson J in Glowatzky v Insultech Group Pty Ltd (1997) 39 IPR 215 declined an order because the applicant was unable to establish reasonable cause to believe that a right to obtain relief may have existed. In Paxus, the promoters of People Bank had been previously employees in senior positions with Paxus, but had left in acrimonious circumstances. They had set up the business of the People Bank in competition with the business of Paxus. There was evidence that made Paxus suspicious that People Bank was using confidential computer disk information wrongly obtained from Paxus for the purpose of building its business, and a specific incident had crystallised those suspicions. It was in respect of that suspicion that the order for pre-action discovery was made. In Prosnow, O'Loughlin J found that Prosnow was not faced with any real measure of uncertainty. On the material of O'Loughlin J, Prosnow had no doubt that Polar Technologies was in breach of its copyright. In those circumstances, O'Loughlin J found that O 15A r 6 was not intended to be of assistance. By way of contrast, in Telstra Corporation Ltd v Billbusters Pty Ltd (19 June 1998, Goldberg J, unreported) the submission was put that Telstra should not obtain an order under O 15A r 6 because it had sufficient information to determine whether to commence a proceeding. Goldberg J accepted that there may be circumstances where that degree of certainty may exist, but his Honour explained that the decision whether to commence a proceeding contains an element of a value judgment, and he was satisfied that there was still a value judgment to be made in the circumstances. He made an order under O 15A r 6 enabling Telstra to complete its inquiries by getting the additional pre-action discovery which it sought before finally determining to bring the proposed proceeding. In my view, it is significant that the criterion for eligibility for a "pre-trial discovery order" under O 15 r 6(a) is not reasonable cause to believe that there exists a cause of action, but reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court. The expression "right to obtain relief"is not necessarily synonymous with the existence of a cause of action. In Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd (24 May 1996, unreported) Lindgren J said: "Contrary to a submission of Eli Lilly, in my opinion rule 6 is not necessarily rendered unavailable by the fact that the applicant already has available evidence establishing a prima facie case for the granting of relief. This is made clear by the reference in para (a) to the existence of "reasonable cause to believe that the applicant has …the right to obtain relief …" (emphasis supplied). It would impose an artificial constraint on rule 6, not supported by its terms or purpose, to exclude, a priori, all cases in which the insufficiency of the information possessed by the applicant to enable a decision to be made whether to litigate is due to a matter of "defence" which would defeat the prima facie case." (Lindgren J's emphasis)

I respectfully agree with his Honour's remarks. The structure and wording of r 6 contemplates that its three eligibility criteria are complementary. Subrule (a) is directed to an objective assessment as to whether there is reasonable cause to believe that the applicant has

or may have the right to obtain certain relief. Subrule (b) builds on that state of affairs. It requires that the applicant has made all reasonable inquiries to have reached the point of deciding whether to commence a proceeding to obtain that relief (an objective assessment) and that the applicant has not sufficient information to enable a decision to be made whether to do so. As Lindgren J pointed out in Alphapharm, that latter element involves both subjective and objective elements. Then subr (c) is directed to ensuring that the order sought is likely to assist in making that decision by directing attention to whether the proposed respondent may have the documents sought and, more assertively, that the documents would assist in the making of the decision whether to commence proceedings. The question to be measured under r 6(a) accommodates a range of degrees of confidence as to whether there is a right to obtain relief. Provided the initial hurdle of getting into the spectrum is achieved (cp Glowatzsky above), then O 15A r 6 may be available for an order for pre-trial discovery until, at the other end of the spectrum, the material shows firmly that there is no real doubt that there is the right to obtain the relief sought (cp Prosnow above). I do not think that the particular comment of Burchett J in Paxus upon which the AFCT relies did more than recognise that there will be such cases. The question to be decided in this matter is whether, on the material, this is one such case. The purpose of O 15A r 6 is to facilitate the making of a decision whether to bring a proceeding in the Court. Where there is a genuine concern on the part of the applicant, in my view it will not be common that the material before the Court will push the matter beyond the position where a value judgment (to use Goldberg J's term) is required. The interrelationship of the subpars of r 6 in my view tends to confirm that conclusion. Global's uncertainty in the present matter arises because the representations about which it proposes to complain are representations as to future matters. It is able to show that the representations were made, and that they did not come to pass. It is uncertain whether it can show that the AFCT had no reasonable grounds available to it upon which to make those representations. It proposes to rely upon s 51A of the Trade Practices Act 1974 and s 54 of the Fair Trading Act 1987 to assist it to prove that final step. Merely because it has available to it that statutory aid to proof does not necessarily mean that, ultimately, it will be found that the AFCT had no reasonable grounds for the making of those representations. Even on that basis, in my view, there is a value judgment to be made such that the material does not fall outside the spectrum within which O 15A r 6(a) operates. In addition, I consider that it was within the proper contemplation of Global, in deciding whether to commence the proposed proceeding, to consider whether the AFCT had available to it material which might enable it to respond under s 51A(2) and s 54(2) of those two Acts respectively to the statutory presumption. In a real sense, the consideration of that question falls squarely within those matters reasonably addressed when it was determining whether it has the right to obtain the relief proposed to be sought. It is not necessary to determine generally the extent to which O 15A r 6 may permit "pre-action discovery" to assess whether there are any defences which a proposed respondent may raise, or the strength of any such defence. It is sufficient to conclude, as I do, that O 15A r 6 entitles consideration to be given to the significance of s 51A of the Trade Practices Act and s 54 of the Fair Trading Act, and how the AFCT might make use of those provisions, in addressing the question whether Global has or may have the right to obtain relief in the Court under those Acts. The material shows Global in fact desires to learn from the AFCT what underlay the representations, to determine whether it has or may have that right to relief. That issue is one that is relevant to the existence of that right to relief, by reason of the qualified deeming provisions in those sections. It would serve the beneficial purpose of O 15 r 6 to permit that issue to be further investigated by Global before deciding whether to commence an action. Although the right to seek relief is based upon s 52, and the remedies available under ss 82 and 87 of the Trade Practices Act , and the comparable provisions of the Fair Trading Act, because the representations relate to future events, unless the AFCT had reasonable grounds for making the representations s 51A(1) or s 54(1) of those two Acts dictate that the representations shall be taken to be misleading. As an aid to proof, ss 51A(2) and 54(2) then also provide that the person or entity making the representation is deemed not to have had reasonable grounds for making the representation unless evidence to the contrary is adduced. There is therefore a significant evidentiary onus presently laid upon the AFCT. It is a real consideration for Global whether the AFCT is able to adduce evidence to the contrary. In my judgment, the particular knowledge of the AFCT which existed at the time of the representations being made is therefore an important question of fact, touching on whether Global has reasonable cause to believe that it has or may have a right to obtain relief in the Court. I accept that it does not presently have sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief, because it does not have sufficient information to enable it to decide whether AFCT may or may not be able to adduce evidence that it had reasonable grounds for making the representations. In the light of the further discovery sought, Global can make its decision whether to commence proceedings. I do not think that the other cases referred to by the AFCT dictate any different conclusion as to the reach of O 15A r 6. In Hughes Aircraft Systems International v Civil Aviation Authority (, 20 April 1995, Davies J, unreported), the applicant was concerned about unfairness in the tendering process for the Australian Advance Air Traffic System, for which it was an unsuccessful tenderer. It sought access to documents of the respondent relating to the decision making process, with a view to establishing whether the evaluation criteria had been applied fairly in accordance with the priorities stated in the criteria. If they had not been, it may have had a cause of action for breach of contract against the respondent. Davies J made the order sought. One issue which his Honour addressed was whether Hughes had sufficient information to enable a decision to be made. Included in the material before the Court was an assertion on behalf of the applicant to the respondent setting out the substance of its proposed claim, the assertion of advice from senior counsel that it had good prospects of succeeding in establishing a breach of s 52 of the Act, and "reasonable prospects" of establishing the breach of contract alleged in relation to the tender process. His Honour observed briefly: "Notwithstanding those matters, it seems to me that, on the present information available to it, Hughes would be unlikely to have sufficient information before it responsibly to commence a proceeding in this Court." In W R Pateman Pty Ltd v Walker Corporation Pty Ltd (1990) ATPR 41-016, an order under O15A r 6 was also made. The applicant, a lessee under a commercial lease, was also entitled under the lease to a first right to purchase the leased premises upon the terms which the respondent would otherwise offer to a third party. The respondent had embarked upon negotiations with third parties with a view to selling the leased premises, and had communicated the general effect of those negotiations to the applicant from time to time. The applicant could not exercise its right to acquire the premises upon those terms. It suspected that the respondent had misstated those terms to it, and that had the terms been conveyed accurately to it, it may well have exercised the right to purchase the premises. It had in mind an action under s 52 of the Trade Practices Act for the failure to give it the opportunity to which it claimed to have been entitled under the lease. The particular point now raised by the AFCT was not raised in that matter. In my view, those cases do not limit the reach of O 15 r 6, but serve as illustrations of its application. I conclude that the criterion under r 6(a) does exist in the present circumstances. It is a question of fact whether the condition in r 6(b) has been made out. Global has made inquiries of the AFCT. It has not received the documents which it has requested. There is no suggestion that, with more time, those documents will be provided on a voluntary basis. It has also approached Taylor Evans, and has been given access to certain of its documents. Counsel for the AFCT was somewhat critical of the extent of inquiries conducted through Taylor Evans. It was pointed out that on 29 October 1998, solicitors for Taylor Evans had indicated that, within fourteen days, they would have available to solicitors for Global the documents requested but that it was not until 23 November 1998 that they sought to make arrangements to inspect those documents. They did not inspect them until 3 December 1998. Counsel for AFCT was also critical of the fact that the evidence did not convincingly indicate that solicitors then inspecting the documents had been through them carefully. I do not see reason for doubt in my consideration of the affidavit relied upon. It was also submitted that Global's solicitors should have arranged for Global's accounting adviser also to consider those documents before making the present application. Finally, there was the suggestion that Global should also have made inquiries of the directors of Taylor Evans in circumstances where they had been told, and the inspection apparently confirmed, that Taylor Evans had no documents upon which the representations made in the information provided by the AFCT were based. I am satisfied that all reasonable inquiries have been made. The significant thing is not really the availability generally of information or documents underlying the representations, but their availability to the AFCT at the material time. In a case where s 51A of the Trade Practices Act and s 54 of the Fair Trading Act have potential significance, and are the reason why Global is presently undecided whether to bring proceedings to enforce the right to obtain relief which it considers it may have, the relevant focus is upon whether the AFCT itself had reasonable grounds for making the representations about which there is complaint, and what documentary material it had available to it at material times upon which it might have formed those reasonable grounds. Information held by Taylor Evans or others will not really provide any firm and persuasive answer on those topics. Accordingly, as a matter of fact, I find that condition 6(b) is made out. No submission was directed to condition 6(c). I am satisfied that there is reasonable cause to believe that the AFCT has or is likely to have documents revealing the extent to which it had available to it up to mid 1996 (that is during the period it was providing information to Global), material providing the foundation for the projectiosn, and so relating to the question whether Global has the right to obtain the relief which it contemplates. The inspection of those documents will assist Global in making the decision whether to commence proceedings. There were no other considerations relevant to the exercise of the discretion under O 15A r 6 urged upon this Court. Accordingly I am of the view that an order as sought by Global should be made. In the course of submissions, it became clear that the proposed minutes of order as expressed were too ambitious. I propose therefore to publish these reasons, giving Global an opportunity to present minutes in accordance with them, and the parties an opportunity to speak to those minutes. I certify that this and the preceding eleven (11) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield

Associate: Dated: 17 December 1998 Counsel for the Applicant: Mr R D Ross-Smith

Fair Trading Act 1987(SA)ss 4, 54, 56

Trade Practices Act 1974(Cth)ss 51A, 52

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