Bulga Coal Management Pty Ltd v Hope Wine Group Pty Ltd

Supreme Court of NSW|2020-11-27|Before: Ward CJ

Judgment

HER HONOUR: Before me for hearing on 27 November 2020 was an application by the defendant in these proceedings (Hope Wine Group Pty Ltd, to which I will refer as Hope Wine), by way of notice of motion filed on 1 October 2020, seeking discovery from the plaintiff (Bulga Coal Management Pty Ltd, to which I will refer as Bulga Coal). The categories of documents in respect of which discovery is sought are itemised in Annexure A to the notice of motion (and are set out in due course).
Hope Wine relies in support of its notice of motion on two affidavits affirmed by its solicitor (Michelle Aitken), on 1 October 2020 and 27 November 2020, respectively.
Bulga Coal resists the application for discovery on the basis that: documents in a substantial number of the categories are not relevant to any issue in the proceedings; an obligation to give discovery of the categories sought would be unjustifiably oppressive, particularly having regard to any utility that may be gained by discovery; and the application is brought late and following numerous other instances of delay. It is submitted that no further delay in the resolution of the proceedings (which are otherwise said to be ready to be listed for hearing) should be permitted. Bulga Coal relies on an affidavit affirmed on 6 November 2020 by its solicitor (Timothy Castle), and an affidavit affirmed on the same day by its group Deputy General Counsel (Thomas Cregan).

Procedural history

Before turning to the categories of documents sought on the present application, it is relevant to consider the procedural history of the matter (set out in Mr Castle's affidavit at [4]-[27]).
As noted above, the proceedings were commenced in January 2018. Lay evidence was completed by March 2019. Bulga Coal's expert evidence was completed by July 2019; and Hope Wine's expert evidence was completed by February 2020. There was an unsuccessful mediation in the matter on 7 August 2020. On 3 September 2020, Hope Wine foreshadowed an application for discovery.
Bulga Coal points to the fact that on two separate occasions, in March 2019 and again in September 2019, Hope Wine consented to orders setting the matter down for hearing (see Mr Castle's affidavit at [7] and [13]), the latter occasion being over two months after service of Bulga Coal's expert evidence.
Both parties appear to accept that, but for the question of discovery, the matter would be ready to be listed for hearing.

Categories of documents now sought to be discovered

The categories of documents of which discovery is sought, as set out in Annexure A to the notice of motion, are described as follows: Internal correspondence within Bulga Coal means all memorandum, minutes of meetings, emails, messages, or any other documents between officers, employees, agents of Bulga Coal Management Pty Ltd (ACN 055 534 391) ("Bulga Coal") Property means the property the subject of these proceedings, being Lot 1 in DP822165 and Lot 1 in DP966407 (sometimes known as 196 Cobcroft Road Broke NSW 2330). 1. All internal correspondence within Bulga Coal between 1 January 2004 and 28 September 2017 relating or referring to negotiations between the plaintiff and the defendant for the sale and/or lease of the Property. 2. All internal correspondence within Bulga Coal between 1 January 2004 and 28 September 2017 relating or referring to rent payable or not payable by the defendant for the lease of the Property. 3. All internal correspondence within Bulga Coal or between Bulga Coal and any other person between 1 January 2004 and 28 September 2017 relating or referring to subsidence, or potential subsidence, on the Property. 4. All internal correspondence within Bulga Coal or between Bulga Coal and any other person from 1 January 2004 to date relating or referring to the development or use of the Property other than by the defendant. 5. All documents relating or referring to the extraction of coal or other mineral resources from on or under the Property. 6. All maps of mining activities on or under the Property by the plaintiff. 7. All mine operation plans relating to Bulga Coal's underground mine at Broke for the period from 1 January 2004 to date. 8. All subsidence management plans in relation to Bulga Coal's underground mine at Broke for the period from 1 January 2004 to date. 9. All subsidence monitoring reports in relation to Bulga Coal's underground mine at Broke for the period from 1 January 2004 to date. 10. All documents relating or referring to environmental risks affecting, or potentially affecting, the Property. 11. To the extent it is not already within an above category, all documents generated or kept by Bulga Coal's geographic information system relating or referring to subsidence, potential subsidence, cracking or other damage to the Property. 12. To the extent it is not already within an above category, all documents relating or referring to management or rehabilitation of subsidence impacts on the Property from 1 Janua1y 2004 to date. 13. All independent environmental audits carried out in relation to Bulga Coal's underground mine at Broke that relate or refer to the Property from 1 January 2004 to date.
In their submissions, the parties have addressed the issues in relation to the above identified categories by reference to the following three broad topics (as will I): 1. lease negotiations (categories 1 and 2 above); 2. mine subsidence (categories 3, 8-9 and 11-12 above); and 3. the use and intended use of the vineyard (categories 4-7, 10 and 13 above).

Legal Principles

The Court may make an order for discovery under r 21.2 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR): 21.2 Order for discovery (1) The court may order that party B must give discovery to party A of - (a) documents within a class or classes specified in the order, or (b) one or more samples (selected in such manner as the court may specify) of documents within such a class. … (4) An order for discovery may not be made in respect of a document unless the document is relevant to a fact in issue.
Practice Note SC Eq 11 further provides that the Court will not make orders for disclosure of documents until the parties have served their evidence, and unless it is necessary for the resolution of the real issues in dispute, which has been held to mean "reasonably required for the fair disposition of the matter" (see Leighton International v Hodges; Thiess Reinforced Earth [2012] NSWSC 458 at [13] per McDougall J; and see also his Honour's observations at [21]-[23]).
The "touchstone" to discovery (by reference to r 21.2(4) of the UCPR) is relevance to a fact in issue in the proceedings (see Graphite Energy Pty Ltd v Lloyd Energy Systems Pty Ltd [2014] NSWSC 1326 at [21] per Brereton J (as his Honour then was)). Relevance is to be determined by the capacity of the document "rationally [to] affect the assessment of the probability of the existence of that fact … regardless of whether the document or matter would be admissible in evidence". A fact ceases to be in issue only when abandoned by the plaintiff or admitted by the defendant (see his Honour's observations in British American Tobacco Australia Ltd v Peter Gordon & Anor [2006] NSWSC 1473 at [8]).
The general discretion as to applications for discovery is to be exercised consistent with the overriding principles in the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) (see Palavi v Radio 2UE Sydney Pty Ltd [2011] NSWCA 264 per Allsop P as his Honour then was). Relevantly, his Honour noted that, in ordering discovery, the Court must consider the potential for discovery to give rise to oppressive and disproportionate costs and to impede the overriding purpose (see at [101]).
In In the matter of Metal Storm Limited (subject to a DOCA) [2016] NSWSC 306 (Metal Storm) at [13], in a passage on which Hope Wine here places no little weight, Brereton J at [17]: 17. In that context, it is necessary to remember the purposes of discovery. While it is a common use of discovery to obtain evidence of Party B's knowledge or conduct, that is far from its sole use or purpose. The purposes of discovery include not only obtaining relevant evidence, but also reducing surprise and promoting fairness by putting parties in an equal position at trial, so that the parties are "playing with all the cards face up on the table". Discovery has the consequence that Party B cannot adduce documentary evidence at trial which takes Party A by surprise. Thus, simply ascertaining what documents relevant to a fact in issue are in the possession of Party B and may be deployed at trial by that party, or may aid Party A's case or harm Party B's case, is a relevant and proper purpose of discovery. It is a means of a party ascertaining what the other party has in its hand, and thereby avoiding surprise [Footnotes omitted; emphasis added].
Hope Wine also points out that oppression is not a "mere factor of extent, time and cost" and that it has been said that discovery is not oppressive merely because it is burdensome but only where it is unnecessarily burdensome (see Metal Storm at [29] per Brereton J).

Relevance

I turn first to the parties' submissions as to the relevance of the documents sought in the three categories referred to above.

Categories 1 and 2 (Lease negotiations)

Categories 1 and 2 (reproduced above) seek discovery of internal correspondence within Bulga Coal over a more than thirteen year period, from 1 January 2004 to 28 September 2017. Category 1 concerns negotiations between Bulga Coal and Hope Wine for the sale or lease of the property. Category 2 concerns the rent payable by Hope Wine.
In essence, Hope Wine contends that documents in categories 1 and 2 are relevant to a fact in issue being relevant to the alleged assumed state of affairs.
In that regard, Hope Wine says that, in about mid-August and early September 2006, there were deliberations within Bulga Coal about the proposed lease (which at the time included rent free or $1 per year rent) and that, in order "to get the sale and lease-back through" the Lease was amended as a mere formality (referring to [24] of the amended defence).
Hope Wine says that there has been no explanation from Bulga Coal as to why it chose not to ask for rent or outgoings under the Lease for eight years; and that the internal deliberations of Bulga Coal (or the lack thereof) are relevant to the question of the extent to which Bulga Coal had adopted the alleged assumed state of affairs.
Hope Wine argues that it is not unreasonable to suppose that, from time to time, over the eight year period until 20014 "certain persons" within Bulga Coal questioned why Hope Wine was not being invoiced for rent and that an explanation had been given. Hope Wine says that it seeks by these categories to ascertain Bulga Coal's knowledge or conduct behind the failure to call for rent or outgoings.
It is thus submitted that any correspondence that pertains to how the Lease came to amend the $1 rent to market rent, and any correspondence that relates to how or why no rent was sought for eight years, is clearly relevant to the alleged assumed state of affairs alleged by Hope Wine.
Bulga Coal says that the assumptions pleaded at [26] of the statement of claim are assumptions said to have been held by Hope Wine; and that the internal correspondence of Bulga Coal cannot be relevant to whether or not those assumptions were held by Hope Wine.
Bulga Coal further points out that the detriment said to have been suffered by Hope Wine's reliance on the pleaded assumptions is its entry into the Lease containing the rent obligation (amended defence at [27]) and that this occurred in September 2006. Bulga Coal says that correspondence internal to Bulga Coal in the period after entry into the Lease is not necessary to resolve any issue in the proceeding as to Bulga Coal's state of mind at the time of entry into the Lease.
Thus, Bulga Coal contends that discovery of documents falling into categories 1 and 2 is not reasonably necessary for disposing of the matter fairly or in the interests of a fair trial.

Categories 3, 8 - 9, and 11 - 12 (Mine subsidence)

Categories 3, 8-9 and 11-12 (again extracted above) concern Bulga Coal's internal consideration of the issue of mine subsidence.
Hope Wine says that, in seeking to make Hope Wine liable in damages for the condition of the vineyard at the time of the Lease termination, Bulga Coal must necessarily make a causative link between the state of the Property at the beginning and end of the Lease. (Whether that is properly characterised as a causative link or a comparative exercise might be debated but it may readily be accepted that one would test the extent of the make-good obligations at least prima facie by reference to the condition in which the leased premises were at the commencement of the lease.) Hope Wine says that Bulga Coal's own evidence includes a report on the effect of mine subsidence on the vineyard near the start of the Lease in January 2007 (reference being made to a report annexed to Ms Aitken's affidavit in which mine subsidence cracks were noted).
Hope Wine submits that the issue of mine subsidence will have an impact on both the vines and the state of the trellises; noting that Bulga Coal is running a 7,000 hectare mine with underground seams on and in the vicinity of the vineyard. It is said that, as Bulga Coal owns the vineyard and owns the mine, this is information within its control relevant to the make good issue.
Mine subsidence is also said to be relevant to the question of damages and the constraints placed on those damages by s 133A of the Conveyancing Act. It is noted that Bulga Coal is seeking damages to reinstate the vineyard including the rehabilitation of the vines and trellises. Hope Wine says that "the reality of this prospect against the actual utility of the Property could be impacted upon by the level of subsidence on the Property".
Bulga Coal says that, on Hope Wine's pleaded case, the issue of mine subsidence is to the effect that, in reliance on the assumptions pleaded at [26] of the amended defence, Hope Wines lost an opportunity to investigate whether deterioration in the condition of vines on the property was caused by subsidence, and that this lost opportunity would make it unconscionable for Bulga to resile from an assumed state of affairs (amended defence at [29]-[33]). It is noted that the amended defence does not plead that there was mine subsidence, let alone that deterioration in the condition of vines on the property was caused by subsidence, or that Hope Wine suffered any detriment from mine subsidence. It is said that the existence or otherwise of subsidence is thus not relevant to the issues raised on Hope Wine's pleading.
Bulga Coal says that the suggestion that subsidence was a cause of Bulga Coal's loss pleaded at [14] of the statement of claim is unpleaded and that Hope Wine does not adequately explain how the documents sought are relevant to the issue of causation. Bulga Coal argues that this appears to be entirely speculative (noting that the only evidence to which reference is made is a report from 2007 that suggests there may have been mine subsidence cracks in a portion of the vineyard in 2007) and it says that this evidence does not suggest any link between subsidence and the loss for which damages is claimed (as further particularised in [1.2] of the letter dated 25 September 2020 from Bulga Coal's solicitors, Sparke Helmore, to Hope Wine's solicitors, (Aubrey Brown; a copy of which is annexed to the affidavit affirmed 6 November 2020 of Timothy Castle). Bulga Coal complains that Hope Wine points to no evidence to suggest a link between any subsidence and the works described in that paragraph.
Bulga Coal also says that the asserted reliance on s 133A of the Conveyancing Act takes the matter no further; and that it should not be accepted that the existence or extent of subsidence is a real issue in dispute in the proceedings. Accordingly, it is said that discovery of documents falling into categories 3, 8-9 and 11-12 is not reasonably necessary for disposing of the matter fairly or in the interests of a fair trial.

Categories 4-7, 10 and 13 (Use and intended use of the Vineyard)

These categories of documents cover a variety of matters said to be relevant to the issue as to the use and intended use of the Property as a vineyard.
Hope Wine says that Bulga Coal's damages claim for make good relies on the proposition that it will continue using the Property as a vineyard and that it needs to be put in the monetary position to replace vines and trellises so that it may continue to be used as a vineyard.
Reliance is placed on s 133A of the Conveyancing Act for the proposition that Bulga Coal would not be entitled to damages for work that it has no intention to undertake or if it intended to render valueless the repairs (by, for instance, using the property for grazing rather than growing grapes).
Accordingly, Hope Wine submits that ascertaining "whether a global coal mining conglomerate intends to rehabilitate and lease or sell a working vineyard" is relevant to the question of damages under the repair covenant. It is said that discovery of these categories would disclose Bulga Coal's knowledge and conduct on this topic.
Bulga Coal again notes that Hope Wine does not plead reliance on s 133A of the Conveyancing Act and points to the language of s 133A (which I extract below) (and, in particular, the reference to repairs covered by the covenant that would be rendered valueless "by structural alterations at or shortly after the termination of the agreement"). Bulga Coal says that, in the absence of any pleading, Bulga Coal is not in a position to know the case it would be required to meet based on s 133A of the Conveyancing Act. Bulga Coal maintains that any matters on which Hope Wine seeks to rely to make out a defence or limitation based on s 133A would have to be specifically pleaded (citing r 14.14 of the UCPR) and says that, in the absence of such a pleading, the question of the applicability of s 133A is not an issue in the proceedings. In any event, it is submitted that the material sought by categories 4-7, 10 and 13 is not necessary for disposing of the matter fairly.
Bulga Coal says that to the extent that Hope Wine's submissions suggest that the contention will be advanced that Bulga Coal intends to use the Property for a purpose that would render the repairs valueless, attention must be paid to the temporal limitation of s 133A, namely, that relevant structural alterations are to occur at or shortly after termination of the Lease. It is noted that the Lease was terminated in 2017 (or 2016, on Hope Wine's case, as noted at [12] above). It is said that Hope Wine points to no structural alterations that took place at or shortly after the termination of the Lease.
Bulga Coal emphasises that the particulars of the damages sought by Bulga Coal are for works already completed to remediate the property (referring to [1.2] of the letter dated 25 September 2020 from Sparke Helmore to Aubrey Brown). It is said that this is sufficient to rebut any suggestion that Bulga Coal is claiming damages for work it has no intention to undertake. It is also submitted that it is highly improbable that Bulga Coal would in fact have incurred the costs of performing those works, as it has, if it intended to render them valueless.
Complaint is also made that these categories: each cover a period from 1 January 2004 to date (a period said to be substantially greater than that which could potentially have relevance to s 133A of the Conveyancing Act); that Hope Wine has not adequately explained, either in evidence or submissions, how the documents in these categories may be relevant to the application of s 133A (for example, how it is that a map of mining activities is relevant to a question of the quantum of the diminution in the value of the land owing to Hope Wine's failures to make good); or how these documents go to the question whether Bulga Coal intends to use the property for grazing or to lease or sell a working vineyard. Bulga Coal says that even if the categories may conceivably include documents relevant to the application of s 133A of the Conveyancing Act, they are also likely to include a vast range of documents that do not. It is submitted that discovery should not be ordered in those circumstances (citing Graphite Energy at [22]). Bulga Coal says that it is not in the interests of the just, quick and cheap resolution of the real issues in dispute to require discovery of a large tract of documents in the hope that it may include some of relevance. Thus, it is submitted that discovery of documents in categories 4-7, 10 and 13 is not necessary for disposing of the matter fairly.

Is an order for discovery unnecessarily burdensome?

The second basis on which Bulga Coal objects to the discovery here sought is that it would be unnecessarily burdensome (or, in other words, unjustifiably oppressive). Bulga Coal says that the documents sought have, at best, tangential relevance and that the time and cost likely to be taken up by the provision of the discovery sought means that discovery should not be ordered (here invoking s 56 of the Civil Procedure Act).
It is said that the oppressive nature of the discovery sought can be seen from the terms of the categories themselves. It is noted that, to the extent that they have temporal limitations, the categories cover documents from 1 January 2004 (over two years before the lease was entered into) to either September 2017 or to date. It is said that the real issues in dispute in the proceeding do not necessitate or warrant discovery of documents over a thirteen year period.
Bulga Coal also complains that the categories are drawn in extremely broad terms. Reference is made in this regard to categories 1-5, 10, and 12 which seek all internal correspondence or documents relating or referring to certain broad topics. It is said that there has been no attempt to limit the categories to relevant staff, or to documents that record particular matters or decisions. Further, it is said that this approach means that the categories are certain to capture documents of no relevance to the proceeding; and makes the task of giving discovery unduly burdensome and time-consuming.
Bulga Coal relies on the evidence of both Mr Cregan and Mr Castle as to the estimated cost of the discovery process.
In his affidavit Mr Cregan has deposed to the practical difficulties associated with giving discovery of the categories sought due, in large part, to the time period covered by the proposed categories. It is noted that, over that period, Bulga Coal used three different "backup" applications (see Mr Cregan's affidavit at [8]). Mr Cregan has deposed that, particularly for the period before 2010, Bulga Coal would be required to undertake significant manual processes to enable a search for responsive documents to be conducted (see Mr Cregan's affidavit at [10]).
Mr Cregan has deposed that, between 2004 and 2017 (the Requested Period), Bulga Coal did not have a centralised document management system, and documents were stored on employees' hard drives (see Mr Cregan's affidavit at [6]). All emails during the Requested Period will be archived and will likely only be retrievable from 2010 onwards.
Mr Cregan has deposed that: it would take at least nine to twelve months to set up the necessary hardware, software and retrieve the relevant documents ([13]-[14]); Bulga Coal and its parent companies used multiple applications to back up data during that period (including older tapes) and each application would need to be resurrected; in relation to some of the older tapes, Bulga Coal does not own (nor do its parent companies - Xstrata and then Glencore) the requisite hardware that would allow it to access these documents; Bulga Coal's IT department estimates that the review would take up to six months and external resources would be required to undertake the task; external IT and administrative support would amount to between $80,000 and $100,000 ([16]); and, while it is difficult to say with any certainty the number of documents to be retrieved, the breadth of the categories (which span a period of sixteen years) could produce tens of thousands of documents ([11]).
Furthermore, Bulga Coal claims that the review process will be significant (see affidavit of Mr Cregan at [7], [10]-[12] and [14]). Mr Cregan has deposed that retrieval of electronic correspondence will require a complete review of all documents on the server in the Requested Period, of which there are likely to be hundreds of thousands and there is not a simple way to review relevant documents efficiently. As adverted to above, it is said that archived documents, contained on two different systems (a "tape system" and a "hard drive system") will need to be restored before they can be reviewed; the tape system will require restoration by specialised IT contractors and all documents will need to be reviewed to locate relevant documents; the hard drive system can be resurrected more quickly, but will also require a review of all documents if the location of a relevant document is unknown.
It is said that once Bulga Coal has retrieved potentially relevant documents, further review for relevance and privilege by its solicitors would be required. Mr Castle estimates that this could cost many hundreds of thousands of dollars (Mr Castle's affidavit at [37]).
The total cost of discovery (on Mr Castle's calculations and assuming some tens of thousands of documents are to be retrieved and reviewed) is estimated to be likely to exceed the amount claimed. In those circumstances, Bulga Coal submits that the limited potential relevance of the documents sought does not warrant the incursion of such costs (see Mr Castle's affidavit at [28]). It is said that the costs associated with complying with the discovery orders sought by Hope Wine are wholly disproportionate to the value of the claim. Further, it is said that the requirement to give discovery will unjustifiably delay the hearing of this matter. Thus it is submitted that an order for discovery would not be consistent with the overriding purpose in s 56 of the Civil Procedure Act, as explained in s 57 of the Civil Procedure Act.
Hope Wine in response says that each of the contended facts in issue and the documents which pertain to those issues is within the possession or custody of Bulga Coal and that Hope Wine has no way of proving the intention of Bulga Coal or to throw light on the internal deliberations without the coercive processes of the Court.
It is submitted that it would be "utterly inappropriate" to call on the Court to make determinations about the assumed state of affairs between the parties if documents corroborating Hope Wine's account existed in the internal correspondence of Bulga Coal but it was never before the Court because Bulga Coal could not go to the time and expense of discovering those documents.
It is submitted that the detailed account in Mr Cregan's affidavit as to why it would be onerous to ask Bulga Coal to undertake the discovery process allows the inference that this due diligence of potential evidence has not already been taken. Hope Wine says that it does not appear, for instance, that any records have been recovered from before 2010 (referring to [9] and [10] of Mr Cregan's affidavit) to ascertain whether there might be truth to Hope Wine's allegation that both parties were operating on the assumption that rent was not payable.
It is further submitted that the allegation that the process is onerous does not distinguish between the various categories; and that rebuilding servers would "presumably" not be required to access environmental risk reports that Bulga Coal has certain statutory obligations to produce.
Hope Wine maintains that each of the categories has been "marked out" by topics and time periods and says that, once the archived material is resurrected and searchable, it ought not be onerous to undertake key word searches.
Hope Wine submits that there should be little sympathy for a party who has sued on allegations and obligations that go back to 2005 and who appears to have left their records in "such a decentralised and fragmented state". It is noted that Bulga Coal is the plaintiff in civil litigation; and that it has been Bulga Coal's choice to sue Hope Wine and to proceed in this case in the manner it has. Complaint is made that it has been Bulga Coal's choice to "escalate the matter from a rent claim in the District Court worth a few hundred thousand dollars" to the present claim in the Supreme Court (which is for around $1.284 million - see T 17.8).
Further, Hope Wine considers it suspicious that there has been a "round number of $80,000 to $100,000" estimated without any corroborating documentation as the true cost of searching the archives. It is submitted that the costs alleged by Bulga Coal to comply with the discovery order should be taken as being "at the high end" and that Bulga Coal "has no interest in underquoting on that amount". It is said that, treating the time and cost estimate cautiously, it cannot be said to be disproportionate to the proceedings (though this seems to be based on a misapprehension of Mr Castle's evidence - in that Ms Aitken appears in her affidavit affirmed 27 November 2020 to have accepted the estimated costs of disclosure as a reasonable estimate but has not factored in that this was an estimate per a thousand documents whereas Mr Castle has estimated that there are likely to be tens of thousands of documents to be reviewed).
In any event, Hope Wine says (emphasising the "just" in the expression "just, quick and cheap", seemingly at the expense of "cheap") that if the discovery sought is truly a burden on Bulga Coal then it is a necessary one.

Delay

The third ground on which Bulga Coal resists the application for discovery is on the basis of delay - not so much, as I understand it, that Hope Wine has delayed in making the application (although there is complaint made as to this) but more on the basis of the delay that it will inevitably cause to the hearing itself.
Bulga Coal says that Hope Wine's claim that discovery is truly necessary should be approached with some scepticism, given its delays in bringing this application. It is submitted that, if Hope Wine had truly considered discovery of the documents sought in this application necessary for a fair trial, then it would have sought that discovery at a much earlier point and certainly before consenting to the matter being set down for hearing (as it has already twice done). Bulga Coal draws from this the inference that Hope Wine does not consider the documents necessary for the just resolution of the matter.
Bulga Coal submits that further delay in the resolution of these proceedings should not be countenanced.
Hope Wine in response says that minimal weight ought be given to the delay argument advanced by Bulga Coal. It says that it was proper to wait for the close of evidence to consider whether to bring an application for discovery and that it should not be criticised for wanting to abide the outcome of the mediation before engaging in a discovery process. In that regard Ms Aitken has deposed that she is informed by Mr Hope that he did not seek discovery until this stage of the proceedings because he understood from legal advice he received that it was not appropriate to seek discovery until all evidence was filed and served, and that he did not wish to go to the time and cost of a document gathering exercise unless the mediation failed.
Hope Wine maintains that ultimately it is in the interest of justice that documents be brought forth by Bulga Coal that means all the cards are face up on the table. It is said (invoking the language of Brereton J in Leighton - as extracted above) that "[t]he cards flipped up may give the Court evidence that explains the currently inexplicable: why Bulga Coal did not ask for payment for 8 years and why a coal conglomerate would want to resurrect the trellises and vines to lease or sell an operating vineyard".

Determination

The concept of relevance has been considered in various contexts. When looking at whether there is a legitimate forensic purpose for a notice to produce or subpoena, for example, in Portal Software International Pty Ltd v Bodsworth [2005] NSWSC 1115, Brereton J (as his Honour then was) described the relevant test (see at [24]) as being whether the documents sought have "a sufficient apparent connection to justify their production or inspection" (citing White v Tulloch (1995) 127 FLR 105; 19 Fam LR 696). His Honour said that the test of adjectival relevance (i.e., as distinct from substantive relevance) will be satisfied if the material has apparent relevance and is established if the documents called for "could possibly throw light on the issues in the main case" (at [24]), citing Trade Practices Commission v Arnotts Ltd (No 2) (1989) 21 FCR 306; [1989] FCA 340) (Trade Practices Commission v Arnotts Ltd (No 2)).
Whether the formulation of the test of relevance in civil proceedings is best expressed as an "on the cards" test (i.e., that it is on the cards that the documents sought will materially assist on an identified issue) (see the use of that expression in criminal proceedings in Alister v R (1984) 154 CLR 404 at 414 per Gibbs CJ; [1984] HCA 85; R v Saleam (1989) 16 NSWLR 14 at 18; Attorney-General (NSW) v Chidgey [2008] NSWCCA 65), or that the material could "possibly throw light on" an identified issue (see Trade Practices Commission v Arnotts Ltd (No 2); or as formulated by Nicholas J in ICAP Pty Ltd v Moebes [2009] NSWSC 306 at [30] (namely, that "it must be shown that it is likely the documentation will materially assist on an identified issue, or there is a reasonable basis beyond speculation that it is likely that the documentation will [materially assist]"), in those contexts what is ultimately required is an assessment as to the relevance of the documents sought by reference to the issues in the proceedings (see Cosco Holdings Pty Ltd v Federal Commissioner of Taxation (Cth) [1997] FCA 1504; 37 ATR 432 at 439-440 per Spender J; Nicholls v Michael Wilson and Partners Limited [2010] NSWCA 100 per Young JA (as his Honour then was)).
I also note at the outset what is meant by the concept of a "fishing expedition", as explained in Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN (NSW) 250, at 254, where it was said: A "fishing expedition", in the sense in which the phrase has been used in the law, means, as I understand it, that a person who has no evidence that fish of a particular kind are in a pool desires to be at liberty to drag it for the purpose of finding out whether there are any there or not. If, however, there is material before the Court pointing to the probability that a party to litigation has in his possession documents tending to destroy his case or to support the case of his opponent and that privilege from inspection of such documents has been wrongly claimed, an application by that opponent to be allowed to inspect them cannot properly be described as a mere "fishing expedition".
I turn then to the question of the relevance of the documents that are here sought to any issues in the proceedings that are disclosed by the pleadings (noting that cases are dealt with on the issues raised in the proceedings - to which the parties will usually be held - see Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets (No 6) [2007] NSWSC 124.

Categories 1 and 2

I accept that evidence as to the pre-Lease negotiations may shed light on Bulga Coal's state of mind on entry into the Lease (which would not be relevant to a construction of the signed Lease but may be relevant to whether it would be unconscionable for Bulga Coal to depart from that position if it was a shared common assumption at that time). I am also prepared to accept that evidence of later communications within Bulga Coal as to the pre-Lease negotiations or as to the rent payable or not payable under the Lease might be relevant to whether there was a shared common assumption after that time as to how the Lease terms were to operate (though it seems to me to be pure speculation that any such documents exist).
However, both categories are very broad and likely to capture irrelevant information. I note that the particularised estoppel claim (see the letter dated 1 October 2020) asserts that the conduct adopted by both parties after the entering into of the lease was consistent with an understanding that rent would not be charged; and that Mr Istomen had left the defendant's director with the impression that notwithstanding what was contained in the lease the plaintiff would not enforce the rental clause. One would have thought that relevant correspondence would exist only between 1 January 2004 and 5 September 2006, and possibly, around 15 October 2014, when Bulga Coal first made a demand for rent. Moreover any such category should surely be limited to include only internal correspondence between relevant persons in the company.

Categories 3, 8-9, 11-12

As to the categories going to the issue of mine subsidence, while I accept that documents going to the condition of the Property at the time of the commencement of the Lease and at the time of termination of the Lease would be relevant to establishing the prima facie extent of the make good obligation, the breadth of these categories is seemingly unconstrained and extends to issues of "potential subsidence" and subsidence management plans or monitoring reports, which would not be relevant to whatever was the actual condition at either of those times.
Whether mine subsidence was present, or more precisely, Bulga Coal's supervision of or management of mine subsidence, is not a relevant fact in issue. Hope Wine's case is that in reliance upon the Representations and the Assumptions, it did not take steps to confirm to what extent (if any) mine subsidence was causing crop failure, and in turn did not ask for a rent reduction.
The argument appears to be that these documents are relevant to an issue as to whether its actions have caused Bulga Coal loss (and the applicability of s 133A of the Conveyancing Act) but there is no allegation as such that any damage for which Hope Wine is said to be liable was caused or even contributed to by mine subsidence and, again, the fact that it extends to "potential" mine subsidence (or plans to manage - and presumably prevent or address potential mine subsidence risks) seems to me to make the relevance of that material marginal at best. And I consider that there is force to the argument that Bulga Coal has not pleaded that subsidence was a cause of its loss, and it is entirely speculative to suggest that these documents would be relevant to a causation defence.
To the extent that the argument that any damages for the failure to make good the trellises and vines must not exceed the value of the reversion, and that the value of the reversion has diminished because of mine subsidence for which Hope Wine is not responsible, arises from the pleadings, I would have accepted that category 3 was potentially relevant, but should be amended to include a reduced date that corresponds with the term of the lease and should identify specific persons involved; that category 8 might potentially be relevant to the extent that management plans responded to subsidence identified on the land, but that any documents sought should be limited to correspond with the term of the Lease; that category 9 is relevant but should be limited to correspond with the term of the Lease; and that the documents sought in categories 11 and 12 were likely to be caught by categories 3, 8 and 9 and are not necessary.
As it is I am not persuaded that any of these categories 3, 8-9 and 11-12 are sufficiently relevant to the real issues in the proceedings in order to be necessary for a fair trial so as to warrant an order for discovery in light of the considerations of cost and delay.

Categories 4-7, 10 and 13

As to the contention that categories 4-7, 10 and 13 are relevant to an issue arising under s 133A of the Conveyancing Act, I am troubled that there is no positive allegation that the repairs would be rendered valueless by structural alterations at or shortly after the termination of the Lease and that there is no positive allegation that the damages claimed for breach of the covenant to keep or leave the premises in repair exceed the value of diminution in value of the reversion owing to that breach.
Section 133A of the Conveyancing Act provides that: (1) Damages for a breach of a covenant or agreement to keep or put premises in repair during the currency of a lease, or to leave or put premises in repair at the termination of a lease, whether such covenant or agreement is expressed or implied, and whether general or specific, shall in no case exceed the amount (if any) by which the value of the reversion (whether immediate or not) in the premises is diminished owing to the breach of such covenant or agreement as aforesaid; and in particular no damage shall be recovered for a breach of any such covenant or agreement to leave or put premises in repair at the termination of a lease, if it is shown that the premises, in whatever state of repair they might be, would at or shortly after the termination of the lease have been or be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant or agreement. (2) A right of re-entry or forfeiture for a breach of any such covenant or agreement as aforesaid shall not be enforceable, by action or otherwise, unless the lessor proves that the fact that such a notice as is required by section 129 had been served on the lessee was known either: (a) to the lessee, or (b) to an under-lessee holding under an under-lease which reserved a nominal reversion only to the lessee, or (c) to the person who last paid the rent due under the lease either on the person's own behalf or as for the lessee or under-lessee, and that a time reasonably sufficient to enable the repairs to be executed had elapsed since the time when the fact of the service of the notice came to the knowledge of any such person. Where a notice has been sent by post in a registered letter addressed to a person at the person's last known place of abode in or out of New South Wales, and that letter is not returned through the post office undelivered, then, for the purposes of this subsection, that person shall be deemed, unless the contrary is proved, to have had knowledge of the fact that the notice had been served as from the time at which the letter would have been delivered in the ordinary course of post. This subsection shall be construed as one with section 129. (3) This section applies whether the lease was created before or after the commencement of the Conveyancing (Amendment) Act 1930.
Hope Wine says that it is not required to plead reliance on that section (and it is for Bulga Coal to establish that the costs of repair that are claimed do not exceed the diminution in the reversionary interest), referring to the discussion of s 133A in Midcoast Petroleum Pty Ltd v Keldros Pty Ltd [2019] NSWSC 970, in a section where I was summarising the submissions that had there been made by the parties as to a make good claim.
There I said at [279]: 279. It is noted that if the lessor has repairs actually carried out that is strong evidence that the cost of the works is the proper amount of damages (Jones v Herxheimer [1950] 2 KB 106) but that, otherwise, the lessor should prove the actual diminution in value of the premises to achieve more than nominal damages (Espir v Basil Street Hotel Ltd [1936] 3 All ER 91; James v Hutton [1950] 1 KB 9; [1949] 2 All ER 243).
Reference was there also made (at [280]) to the passage in the Annotated Conveyancing and Real Property Legislation New South Wales (3rd edn, 2003, Butterworths) which explained the effect of s 133A (at [32740.1]) as follows: The effect of this section is to provide an upper limit to the amount of damages which may be received by a landlord for breach of a covenant to keep or put premises in repair during the currency of the lease or to leave or put premises in repair at its termination. The section does not provide an altered method for assessing the damages: Hanson v Newman [1934] Ch 298, nor does it apply to other covenants, such as a covenant to restore a building to its original condition at the determination of the lease: James v Hutton and J Cook & Sons Ltd [1950] 1 KB 9; [1949] 2 All ER 243. The purpose of the section is to prevent landlords recovering damages or forcing payments from tenants where strictly speaking, a tenant may be under an obligation to repair an uneconomic building that will be pulled down in any event, though it does not only operate in such an extreme class of case. If the landlord actually does have repairs carried out, that is strong evidence that the cost of the works is the proper amount of damages: Jones v Herxheimer [1950] 2 KB 106; [1950] 1 All ER 463; Smiley v Townshend [1950] 2 KB 311; Haviland v Long [1952] 2 QB 80; [1952] 1 All ER 463. Otherwise it would seem that the landlord should give evidence of the actual diminution in value of the premises if he is to succeed in more than nominal damages: Espir v Basil Street Hotel [1936] 3 All ER 91; James v Hutton and J Cook & Sons Ltd [1950] 1 KB 9; [1949] 2 All ER 243. As an illustration of how the section operates, in Salisbury v Gilmore [1942] 2 KB 38, there was a lease for 14 years expiring in 1939. In 1936 the tenant requested a renewal of the lease, but was informed that the landlord intended to pull the premises down at the expiration of the lease. In 1939 the tenant vacated the premises and left them out of repair, but the landlord then changed its mind. The court held that the tenant was entitled to rely on this section to limit the landlord's damages. [Emphasis added]
Here, however, the evidence is that the costs have already been incurred. So the predicate for the proposition espoused in the above passages that the landlord should give evidence of the actual diminution in value of the premises if the landlord is to succeed in more than nominal damages, does not here apply. I consider that it is incumbent on Hope Wine, if it wishes to invoke s 133A (and to assert that the cost of the repairs in fact exceeded the diminution to the value of the reversionary interest in the Property caused by the alleged breach of the covenant to keep in repair or to make good the premises on termination of the lease) to plead that allegation. In other contexts it is the case that a party seeking to invoke a statutory provision must plead it (such as a party seeking to invoke the presumption as to representations in relation to future matters under the now repealed Trade Practices Act 1974 (NSW), though I do not suggest that this is directly analogous to the present case.) More relevantly, this involves a positive allegation as to a factual matter on which Hope Wine wishes to rely in its defence and that should be pleaded.
Otherwise, Bulga Coal is left in the dark, so to speak, as to what Hope Wine's case is in this respect. Even if as a strict pleading point it was not necessary to plead this by way of defence (and I do not accept that this is the case), the surprise rule would require it to be pleaded.
Therefore, strictly speaking I do not see that there is an issue pleaded to which documents as to the use or intended use of the Property post termination of the Lease are relevant. However, even assuming that conclusion to be wrong, it is my view that the categories are far too broad. Category 10 is a prime example - "all documents relating or referring to environmental risks affecting or potentially affecting the Property". Risks of this kind might include matters with absolutely nothing to do with the use or intended use of the Property as a vineyard. Similar observations may be made as to category 7 (mine operation plans) or category 6 (maps of mining activities). Again I see these categories as fishing for a defence.

Conclusion as to relevance

I accept that documents in categories 1 and 2 have potential relevance to the resolution of real issues in the proceedings (namely as to the alleged assumed state of affairs and/or common assumption in relation to the rent obligations). However, I consider that the categories sought have at best tangential relevance. And I consider that across all categories there is a large element of "fishing". So, for example, when I challenged the proposition as to how category 1 would be relevant beyond the time of the Lease, it was said that the internal documents might throw light on the state of mind of Bulga Coal when no rent was called for by the owner; and reliance was placed on what was said in Metal Storm about cards on the table.
Tellingly, the proposition was made (see at T 7.6) that there might be "some smoking gun" (incorrectly transcribed as "smoking garden") where there was general discussion within Bulga Coal as to the reason it did not charge rent for eight years. It was submitted that that document (if there was one) should be before the Court (and that while it might be time consuming and costly to research the IT systems, Bulga Coal, or its parent company, was the owner of its own misfortunes). To my mind, the smoking gun analogy (an extreme example as it was conceded to be) does not assist Hope Wine. It is to my mind an extraordinary submission in the modern litigious world where the overriding statutory purpose is the just, quick and cheap determination of the real issues in dispute that one would glibly countenance spending an enormous amount of costs and incurring inevitable delay in the proceedings just to see if there might be a "smoking gun" somewhere in the depths of Bulga Coal's archived IT systems.
That brings me neatly to the second and third bases on which Bulga Coal resists the orders here sought.

Oppression

I consider that orders of the kind sought would, in the circumstances be unjustifiably oppressive and unnecessarily burdensome. There is no reason not to accept the evidence given by Mr Cregan and Mr Castle as to the tasks that would be involved in retrieving the IT systems and reviewing the documents. The suggestion that rebuilding servers would not be costly and that keyword searches would not be onerous cannot be accepted in the face of the reasoned basis put forward by Mr Cregan and Mr Castle for their estimates. I do not consider that the fact that sums are estimated in round figures (for the external IT consultants' costs) is inherently suspicious. I can well accept that Bulga Coal has an interest in minimising the cost and effort involved in the proposed discovery process but I cannot draw from that the inference that Bulga Coal has deliberately inflated the likely costs or time of the discovery process (and I consider that it is a serious accusation to make of a legal practitioner who is an officer of the Court that he would be party to such conduct). In this regard, I note that Ms Aitken, in her affidavit, did not appear to demur from the basis of calculation of the costs of disclosure per se.
I consider that the real issues raised by the pleadings do not require discovery of documents from 1 January 2004 to date; that there has been insufficient attempt to limit the categories (say to documents of relevant staff or to documents that record particular matters or decisions), which means that it is inevitable that wholly irrelevant documents will be captured; and that what I see as being the limited potential relevance of the documents does not warrant the incursion of costs of the magnitude here likely to be incurred and would be disproportionate to the amount of the claim itself. I accept the proposition that in those circumstances an order for discovery would be inconsistent with the overriding purpose of s 56 of the Civil Procedure Act.

Delay

I am also concerned about the delay that the process would involve. I do not consider that it would be consistent with the just, quick and cheap resolution of the real issues in dispute. No criticism can be made of the fact that Hope Wine waited until after evidence was filed in order to make such an application - that is what the Practice Note contemplates. Nor do I criticise Hope Wine for waiting until after the (unsuccessful) mediation before incurring further costs. However, the bottom line is that the process now envisaged will take up to twelve months to complete - all for the prospect that something might turn up in the discovery process that may assist the Court to determine the issues. Imperfect as the litigious process is, the fact that some unknown cards are not on the table does not mean that the interests of justice are not able to be served consistent with the rule of law.
While I do not draw the inference that Bulga Coal seeks (namely, that Hope Wine cannot have considered these documents truly necessary because of its delay in seeking them), nor do I consider that Hope Wine's submission carries the day (namely that all the documents sought are in the possession of Bulga Coal and that Hope Wine has no other way of proving Bulga Coal's intentions) - as to the latter, if that were to have been the case then a claim for preliminary discovery would have been sensible at a much earlier point. As to the fact that Bulga Coal should be required to disclose these documents because it has initiated proceedings and has "escalated" a claim in the District Court for unpaid rent to a complex claim in the Supreme Court, I do not consider that there should be a punitive element to discovery orders - such conduct if unreasonable can be addressed in costs at the end of the day.

Conclusion

For the above reasons, I consider that the motion for discovery should be dismissed and that, as the general rule is that costs follow the event, that Hope Wine should pay the costs of the motion. I make the following orders: 1. Dismiss with costs the notice of motion filed on 1 October 2020 by the defendant. 2. List the matter for directions in the Real Property List on 18 December 2010.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 December 2020

Trade Practices Act 1974(NSW)

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