Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd - [2006] FCA 1001 - FCA 2006 case summary — Zoe

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Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd

[2006] FCA 1001

Federal Court of Australia|2006-02-15|Before: Collier J

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Court

Federal Court of Australia

Decision date

2006-02-15

Before

Collier J

Source

Original judgment source is linked above.

Judgment (98 paragraphs)

[1]

Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 2) [2006] FCA 1001

[2]

PRACTICE AND PROCEDURE - discovery - whether inclusion of a document as an annexure to an affidavit is in itself proper discovery of the document - whether discovery is necessary when documents are already in the hands of the other party - whether various documents satisfy the criteria required by O15 r 2(3) Federal Court Rules - meaning of possession, custody or power - whether documents in the possession, custody or control of a company in administration under Pt 5.3A Corporations Act 2001 (Cth) - meaning of 'general discovery' under O 15 Federal Court Rules - whether an order for general discovery under O 15 includes documents discoverable pursuant to the 'train of inquiry' test. Held: Simply annexing a document to an affidavit is not in itself 'discovery' of that document within O 15. A supplementary list of documents should be filed and served in circumstances where a significant quantity of material is produced annexed to affidavits in the days leading to trial which had not previously been discovered. The relationship of administrator and company as contemplated by Pt 5.3A Corporations Act does not permit the company other than with the consent of the administrator to have "power" over documents retained by the administrator. The consent order for discovery made on 15 February 2006 was an unqualified order for general discovery, as contemplated by O 15 r 5, and requiring discovery of documents as contemplated by O 15 r 2, in particular subrule 2(3). The 'train of inquiry' test is not applicable to such order. Federal Court Rules O15 rr 2(3), 2(4), 2(5), 3, 5, 6, 8 Part 5.3A Corporations Act 2001 (Cth) Australian Competition & Consumer Commission v Advanced Medical Institute Pty Ltd (2005) FCA 366 applied Australian Independent Newspapers Ltd v John Fairfax Holdings Ltd (Federal Court of Australia, 22 June 1994) cited Australasian Memory Pty Ltd v Brien (2000) 172 ALR 28 cited Aveling v UBS Australia Capital Markets Holdings Ltd [2005] FCA 415 applied Federal Commissioner of Taxation v ANZ Banking Group Ltd (1979) 143 CLR 499 cited Hore-Lacy v David Syme and Co unreported Supreme Court of Victoria, 5 September 1996 cited Horsley v Phillips Fine Art Auctioneers Pty Ltd (1995) 7 BPR [97557] cited KC v Shiley Inc [1997] 796 FCA (14 August 1997) cited Kennedy v Dodson (1895) 1 Ch 334 cited Lonrho Limited v Shell Petroleum (1980) 1 WLR 627 applied Lubizol Corp Inc v Imperial Chemical Industries plc [2000] FCA 1464 applied Mulley v Manifold (1959) 103 CLR 341 cited Netaf Pty Ltd v Bikane Pty Ltd (1990) 92 ALR 490 applied Reading Entertainment Australia Pty Ltd v Birch Carroll & Coyle Ltd [2002] FCAFC 109 cited Re McGorm; ex parte Co-operative Building Society of SA (1989) 86 ALR 275 cited Spyer v Cuddles 'N' Mum (Franchise) Pty Ltd (No 3) (2002) FCA 1563 considered South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 519 cited Taylor v Rundell (1841) Cr & Ph 104, 41 ER 429 cited Telstra Corporation Ltd v Australian Competition & Consumer Commission [2006] FCA 737 cited

[21]

REASONS FOR JUDGMENT 1 I have before me two notices of motion both filed on 20 July 2006. One is brought by the first, second and third applicants in the substantive case ('the first notice of motion'), the other by the first and second respondents in the substantive case ('the second notice of motion'). For convenience, I shall refer to the first notice of motion in this case as that brought by 'the applicants', and the second notice of motion as that brought by 'the respondents', and I propose to deal with them in that order. 2 On 15 February 2006 I ordered the parties to make discovery by verified List of Documents and file and serve such List of Documents on or before 4.00 pm on 29 March 2006. 3 The applicants filed and served their list of documents on 13 April 2006 and provided inspection of the documents contained in the applicants' list of documents to the respondents on 4, 8 and 9 May 2006. On 11 May the respondents requested the provision of certain documents contained in the applicants' List of Documents and these were provided on 16 May 2006. 4 The respondents filed and served their list of documents on 29 March 2006 on the applicants on 28 April 2006. On 19 April 2006 the applicants requested the provision of certain documents contained in the respondents' List of Documents and these documents were provided on 28 April 2006. 5 Solicitors for both the applicants and the respondents depose that on 28 June 2006, McCullough Robertson, acting on behalf of the respondents, wrote to Lynch & Co, acting on behalf of the applicants, and noted that they intended to raise with them 'the issue of the inadequacy of the applicants' discovery' (affidavit of Paul Hardman of 20 July 2006 par 4). 6 (Reference to this letter of 28 June 2006 and this specific statement was repeated in par 8 of the affidavit of Mr Paul Lynch filed 27 July 2006. At the hearing of these notices of motion last Friday the respondents objected to certain evidence of the applicants, including par 8 of Mr Lynch's affidavit. This objection is somewhat surprising, given that Mr Hardman deposes to the same facts in his affidavit par 4.) 7 The immediate history of this matter is set out in (2006) FCA 920. The hearing of the substantive case was scheduled to commence on Monday 17 July 2006 for two weeks. On the application of the applicants I adjourned the hearing of this matter for reasons including that a considerable volume of material was put before the applicants in the days before the trial. 8 The notices of motion represent claims by each party in respect of documents for which they are seeking discovery.

[22]

Discovery 9 Order 15 Federal Court Rules deals with discovery. The parties in particular have referred me to O 15 rr 2(3), 3, 6 and 8, and Practice Note 14. 10 Order 15 r 2(3) provides that: Without limiting rule 3 or 7, the documents required to be disclosed are any of the following documents of which the party giving discovery is, after a reasonable search, aware at the time discovery is given: (a) documents on which the party relies; and (b) documents that adversely affect the party's own case; and (c) documents that adversely affect another party's case; and (d) documents that support another party's case. 11 Matters to be taken into account in for the purposes of making a reasonable search as required by r 2(3) are set out in O 15 r 2(5), namely: (a) the nature and complexity of the proceedings; and (b) the number of documents involved; and (c) the ease and cost of retrieving a document; and (d) the significance of any document likely to be found; and (e) any other relevant matter. 12 Order 15 r 3 provides that: (1) The Court may, before or after any party has been required under rule 1 to give discovery, order that discovery under rule 2 by any party shall not be required or shall be limited to such documents or classes of documents, or to such of the matters in question in the proceeding, as may be specified in the order. (2) The Court may make such orders under sub-rule (1) as are necessary to prevent unnecessary discovery. 13 Rule 6 provides that: (1) A list of documents required by or under this Order shall, unless the Court otherwise orders, be in accordance with Form 22 and conform to the requirements of this rule. (2) A list of documents shall enumerate the documents which are or have been in the possession, custody or power of the party making the list. (3) A list of documents shall enumerate the documents in a convenient sequence and as shortly as possible, but shall describe each document or, in the case of a group of documents of the same nature, shall describe the group sufficiently to enable the document or group to be identified. (4) … (5) … (6) … (7) … (8) … 14 Rule 8 provides for orders for particular discovery and is as follows: Where at any stage of the proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any matter in question in the proceeding may be or may have been in the possession, custody or power of a party, the Court may order that party: (a) to file any affidavit stating whether that document or any document of that class is or has been in his possession, custody or power and, if it has been but is not then in his possession, custody or power, when he parted with it and what has become of it; and (b) to serve the affidavit on any other party. 15 Notwithstanding my order of 15 February 2006 it appears that a considerable volume of material was disclosed by the respondents to the applicants in the days leading to trial in July this year. 16 On the other hand, the respondents claim that a significant amount of material remains to be discovered by the applicants. 17 The adjournment of the hearing of this case, because of issues involving relevant documents which both parties claim require disclosure, requires questions of further discovery to be resolved without delay. Without doubt, it is in the interests of the litigants that discovery be concluded, to ensure this matter be progressed to trial in November this calendar year. 18 Both the written and oral submissions of counsel in this hearing focused on two composite documents, both of which were prepared by the solicitors for the respondents for the purposes of the hearing. These composite documents contained comments from each party, and were headed: · Response to page 4 of fax dated 14 July 2006 and further response to fax dated 20 July 2006. This table of responses refers specifically to some of the documents listed in the schedule attached to the applicants' notice of motion and sought by the applicants, and summarises pre-hearing communications between the legal representatives of the applicants and the respondents as to those documents. · Schedule of applicants' undiscovered documents. This schedule contains a list of documents sought by the respondents, and summarises pre-hearing communications betweens the legal representatives of the applicants and the respondents as to those documents. 19 During the hearing I noted that a considerable volume of material had been filed by the parties by way of affidavit, both in the lead up to and during the hearing itself. I asked the parties to consider whether they had any additional submissions to direct my attention to specific aspects of those affidavits. It was clear however, both from the written and oral submissions, and the responses of counsel, that the key documents for both parties are the two composite documents I note above.

[23]

The First Notice of Motion 20 The applicants in the first notice of motion sought the following orders:

The first and second respondents file an affidavit stating whether any of the documents or classes of documents referred to in the schedule to this application is or has been in their possession, custody or power and, if it has been but is not then in their possession, custody or power when they parted with it, such affidavit to be filed and served within 7 days of the date of this order.
The first and second respondents file and serve a Supplementary List of Documents in Form 22 and otherwise in compliance with O 15 r 6 of the Federal Court Rules within 14 days of the date of this order discovering any document annexed to the affidavits of the respondents' witnesses filed in this action which are not already listed in the first and second respondents' List of Documents filed 29 March 2006 and the documents referred to in the affidavit required to be filed by par 1 of this order.
The first and second respondents and the solicitors for the first and second respondents file and serve an affidavit within 14 days of the date of this order stating the grounds and reasons why the documents contained in the schedule prepared by the first and second respondents and tendered to the Court on 17 July 2006 - (a) were not discovered in the first and second respondents' List of Documents filed 29 March 2006; and/or (b) were not discovered by Supplementary List of Documents between 29 March 2006 and the date of the delivery of the first and second respondents' statements to the applicants; and/or (c) have not yet been discovered.
The first and second respondents pay the first, second and third applicants' costs of this motion to be taxed. 21 The Schedule attached to the notice of motion reads as follows : Strahley Class of documents referred to in paragraph not Paragraph discovered in Respondent's List of Documents 11 Agreement for Purchase of Assets dated 24 January 2001 14 Agreement for Purchase of remaining 20 percent held by Vendors 18(g) Reports provided by Davidson and Sims 20 Farm Management Reports 20 Budgets 22 Farm Manager Reports prior to August 2004 23 Budget Summaries 32 Records detailing rejection by juice producers 40 SmartPak and TotalPak software data files 1998-2005 41 E-mails between Strahley and Breed since April or May 2004 in which Strahley had requested Breed to provide historical data as to pack out rates and crop yields for the orchards

[37]

22 I understand the reference to 'Strahley paragraph' in the first column to be a reference to paragraphs in the affidavit of Mr Andrew Strahley sworn and filed 12 July 2006. 23 Prior to the hearing there were communications between the parties as to documents for which the applicants now seek an order for discovery. On 14 July 2006 Lynch & Co on behalf of the applicants faxed a letter to McCullough Robertson on behalf of the respondents, inter alia, asking for further discovery of documents which Lynch & Co had identified as relevant from the affidavit of Mr Andrew Strahley. There was further correspondence between the parties, including facsimile transmissions between the parties on 20 July 2006. 24 A table of responses was prepared headed 'Response to page 4 of fax dated 14 July 2006 & further response to fax dated 20 July 2006', and handed to me in Court. The submissions of the parties, to the extent that they dealt with this notice of motion, referred to this table. 25 I note however that the documents referred to in the Schedule to the notice of motion, and the documents referred to in the table of responses handed to me in court, are not identical. The Schedule to the notice of motion includes additional documents which, to the extent I can ascertain, have not been previously discussed by the parties. They are: · Agreement for purchase of remaining 20% held by vendors (par 14 Strahley affidavit) · Reports provided by Davidson and Sims (par 18(g) Strahley affidavit) · Records detailing rejection by juice producers (par 32 Strahley affidavit) · Employment contract - Matthew Burns · Notice of resignation - Matthew Burns to Sunstate Orchards · Copies of material provided by Andrew Strahley to Hancock Board from May 2004 concerning historical yields and packout percentages for Bundaberg and Tiaro Orchards · Copies of any minutes of the Hancock Board containing resolutions or evidencing discussion of the material provided to it by Mr Strahley from May 2004 concerning historical yields and packout percentages for Bundaberg and Tiaro Orchards.

[45]

SmartPak and TotalPak software data files 1998-2005 (par 40 Strahley affidavit) 47 These documents are also the subject of a discovery application by the respondents. 48 It is common ground that: · the 'SmartPak' and 'TotalPak' records are data files located on a computer · the computer is located in the packing shed which is currently on property controlled by the respondents. 49 However, each party claims that: · they do not have the documents in their possession, custody or power; rather · the other party has the documents in their possession, custody or power. 50 The applicants have submitted that, as the computer is on the property of the respondents, the respondents should return the computer to the applicants. In turn, the respondents have submitted that they would, if requested, allow the applicants access to the packing shed to obtain the records. 51 In light of this apparent consensus, it is somewhat surprising that these records continue to require a ruling by this Court. 52 The parties have not sought an order, nor do I propose to make any order giving rise to any inference, that operates as a final adjudication upon any entitlement, by way of right, in either party to the property in question, in terms of proprietary or possessory title to the relevant computer or its contents. The question arises however as to whether the documents are in the 'possession, custody or power' of either party. 53 The terms 'possession, custody or power' in O 15 represent three alternative states. As summarised in one learned text: 'The term "possession" means the physical or corporeal holding of the document pursuant to a legal right to its possession… (for example, agents and bailees); "custody" means the mere actual physical or corporeal holding of a document, regardless of its right to possession, (for example, servants and employees)…; and "power" means an enforceable right to inspect the document or to obtain possession or control of it from the person who ordinarily has it in fact.' (SD Simpson, DL Bailey and EK, Evans Discovery and Interrogatories 2nd edn, Butterworths, Australia, 1990 at 43, see also Halsbury's Laws of England 4th edn vol 12 Discovery par 39. With respect to 'possession' and 'custody' see also Santow J in Horsley v Phillips Fine Art Auctioneers Pty Ltd (1995) 7 BPR [97557] at 14,371-14,372; Stephen J in Federal Commissioner of Taxation v ANZ Banking Group Ltd (1979) 143 CLR 499 at 504-505; and S Fisher Commercial and Personal Property Law, Butterworths, Australia, 1997 ch 3; and with respect to the meaning of 'power' see also Beaumont J in Australian Independent Newspapers Ltd v John Fairfax Holdings Ltd (Federal Court of Australia, 22 June 1994) par 12 and Lord Diplock in Lonrho Limited v Shell Petroleum (1980) 1 WLR 627 at 635-6.)

[66]

The Second Notice of Motion 102 The respondents in the second notice of motion sought the following orders pursuant to O 15 Federal Court Rules:

The applicants within 7 days provide discovery by list of the documents described in the attached schedule and inspection of those documents be provided within 14 days.
In the alternative, the applicants file an affidavit stating whether the document or any of the documents of that class is or has been in their possession, custody or power, when it was parted with and what has become of it.
The affidavit referred to in par 2 above be served on the first and second respondents within 14 days.
The time for service of the Notice of motion be abridged until a time no later than 4.00 pm, 20 July 2006.
Any other Orders that this Honourable Court deems appropriate.
Costs. 103 In my view it is appropriate to deal with the subject of the first three orders sought by the respondents together, before turning to the remaining orders in their notice of motion. Mr McQuade on behalf of the respondents handed me a modified version of the schedule during the hearing ('Schedule of Applicants' Undiscovered Documents'), indicating - by bold font - a number of documents for which the respondents no longer press. The documents for which the respondents no longer press are, using the numbering in the schedule as follows: · Item 11. Income Tax Returns for both first and second applicants for year ended 30 June 2006 · Item 23. Trend line data constructed by second applicant · Item 24. Email from David Breed to second applicant dated 28 February 2005 · Item 29. Weekly reports for performance, picking, packing, dispatch and pricing, payments received and debtors listing for period from 21 March 2005 to 23 June 2005 · documents or categories of documents identified by the first and second respondents from documents discovered by the National Australia Bank Limited pursuant to Order dated 28 June 2006 and identified by the following numbers: 32, 35, 36, 38, 40, 42, 43, 44, 45. 104 The balance of the Schedule is useful because it groups documents for which the respondents seek discovery.

[68]

Financial Documents held by Administrator of the Third Applicant (Items 3, 4, 5, 6, 7, 8, 9, 12) 110 The third applicant is currently subject to a deed of company arrangement in accordance with Pt 5.3A Corporations Act 2001 (Cth). As a general rule the administrator has control of the company's business, property and affairs (s 437A(1)(a)), the powers of other officers of the company are suspended (s 437C), and the administrator is entitled to all books and records of the company (s 438C). If the company becomes subject to a deed of company arrangement, the affairs of the company are conducted according to the deed (s 444G). 111 In relation to the financial documents of the third applicant, the applicants state that these documents were seized by the administrator on his appointment on 23 June 2005. Accordingly, the applicants submit that the documents are not in their possession, but are in the possession of the administrator, and they cannot discover them. 112 The respondents submitted that a number of the applicants' responses to requests concerning the documents simply state that the documents are not in their possession. The respondents further submit that if the applicants do not have the documents in their custody or power they should say so. The respondents also submit that if documents were in the applicants' possession, custody or power and no longer are, the applicants need to say so in the list of documents. 113 I do not understand the respondents to be submitting that all relevant financial records of the third applicant are not in the possession of the administrator. In other words, I understand that the respondents are not claiming that the applicants have financial records, other than those in the possession of the administrator. 114 However the respondents also submit that, in performing a function of the company under administration, the administrator is taken to be acting as the company's agent. Accordingly, notwithstanding that the records have been seized by the administrator, they do not cease to be records of the company. The respondents therefore submit that those documents are discoverable by the third applicant and should be included in the list of documents. 115 There is no question that the administrator is the agent of the company to which he or she is appointed: s 437B. However, as made clear by s 437A(1), administrators have very extensive powers over all aspects of the company's business, property and affairs. Indeed as the High Court noted in Australasian Memory Pty Ltd v Brien (2000) 172 ALR 28 at 30, Div 3 of Pt 5.3A Corporations Act 2001 (Cth) provides that the administrator of a company under administration is to assume control of the company's affairs. On the basis that the administrator had possession of the documents, the relationship of administrator and company as contemplated by Pt 5.3A Corporations Act does not permit the company other than with the consent of the administrator to have 'power' over documents retained by the administrator: s 438C (cf Lord Diplock's comments in Lonrho at 636H discussed earlier in this judgment). 116 Notwithstanding a submission by the respondents that 'Mr Tracy is responsible for the day to day management of the company', I note that the financial records were produced to the Court by the administrator by subpoena on 21 July 2006. From this event, it is clear that the applicants do not have possession, custody or power over the records, other than as determined by the administrator in the exercise of his powers. In circumstances where a company is under administration, an order for non-party discovery or subpoena is the appropriate order to require the production of documents in the possession of the administrator (cf Beach J in Hore-Lacy v David Syme and Co unreported Supreme Court of Victoria, 5 September 1996, BC9604308 p 4). 117 Order 15 r 15 provides: 'The Court shall not make an order under this Order for the filing or service of any list of documents or affidavit or other document or for the production of any document unless satisfied that the order is necessary at the time when the order is made.' 118 In the circumstances the court would be imposing an artificial tier of disclosure to order the third applicant to disclose the financial records. 119 It follows that the answer of the applicants in relation to this request of the respondents, namely that they cannot make discovery of these documents, is the correct one.

[71]

The second applicant's 100 day plan (Item 14) 133 The applicants submit that they have already discovered this document and that it consists of two separate documents: · the 'Sunstate Orchards Acquisition Implementation Plan', and · the 'Sunstate Citrus Pty Ltd kick off meeting Maryborough'. 134 The respondents however submit that the document described by the applicants as the '100 day plan' is not those documents, for two reasons:

A witness, Mr James Palfreeman, deposed in his affidavit sworn 6 July 2006 that he was specifically shown a document described as a 100 day plan by the second applicant, and that the document consisted of a number of items. I note in particular paragraphs 14 and 15 of that affidavit.
The documents which the applicants have identified as the 100 day plan refer in turn to: · in the case of the Sunstate Orchards Acquisition Implementation Plan - 'develop and implement 100 day plan' · in the case of Sunstate Citrus Pty Ltd kick off meeting Maryborough - there are two references in the Action Items to (in relation to the Advisory Board visit) "100 day plan" and (in relation to the Management Meeting Process and content) 'Implementation of 100 day plan'. 135 The clear inference which may be drawn, in particular from the second reason (given that those documents actually refer to a document described as the '100 day plan'), is that there is a separate document which is the '100 day plan'. 136 Accordingly, it is necessary for the applicants to discover this document. 137 The respondents have also submitted that the records subsequent to settlement 'will also lead to a train of inquiry which would advance the respondents' case or damage the applicants' case'. The applicants submit that this submission of the respondents, which is replicated throughout the Schedule, relates to a test of disclosure obsolete since 1999. In my view however it is not necessary to consider this issue in the context of this document. Leaving aside the issue of exact identification, there does not appear to be any contest by the applicants that the '100 day plan' should be discovered. 138 Before turning to consider other documents in the Schedule which were not the subject of written submissions, it is appropriate to deal with the issue of discovery sought on the grounds that the document 'will also lead to a train of inquiry which would advance the respondents' case or damage the applicants' case'.

[72]

'Train of Inquiry' (Items 13, 14, 15, 19, 20, 21, 22, 27, 28, 30, 50, 55, 56, 58) 139 I have already noted this issue in relation to items 14, 19, 20, 22 and 30. In relation to these items however, it was unnecessary to consider this issue on the basis that: · in relation to item 14, the issue was not whether the document should be discovered, but whether it had been discovered · in relation to items 19, 20, 22 and 30 in my view it was clear that the documents fell within O 15 r 2(3). 140 The other documents listed however, namely those referred to in items 13, 15, 21, 27, 28, 50, 55, 56 and 58, also refer to this test. 141 During the hearing this issue was the subject of some contention. Counsel for both parties have since filed supplementary submissions. 142 In essence, the submissions of the applicants are as follows:

Order 15 r 2(3) sets out the criteria by which the obligation to disclose might be tested.
Those criteria do not include documents leading to a train of inquiry. That was the test before the rules were amended in 1999.
Order 15 r 2 should be interpreted according to its terms; and the 'train of inquiry' test (as articulated in the leading case of The Compagnie Financiere et Commerciale du Pacifique v The Peruvian Guano Company (1882) 11 QBD 55 per Brett LJ at 63, note also Menzies J in Mulley v Manifold (1959) 103 CLR 341 at 345) has no place in that context.
General discovery is that which occurs under O 15 r 2.
Order 15 r 8 entitles a court to make an order wider than that apprehended under O 15 r 2, however only where an application is made under O 15 r 8.
In terms of the Federal Court Rules and Practice Note 14, the order made by the Court on 15 February 2006 was an order apprehended under O 15 r 2(3). 143 The submissions of the respondents may be summarised as:
The order of 15 February 2006 was 'The applicants and the respondents make discovery by verified List of Documents and file and serve such List of documents on or before 4.00 pm on 29 March 2006'.
The order did not limit discovery to the categories of documents in O 15 r 2, O 15 r 2(3) or otherwise.
Order 15 r 2 continues to authorise orders for general discovery, and although the court would not ordinarily make an order for general discovery it may consider it appropriate to do so, in which case the traditional obligations to discovery any document relating to a matter in question in the proceeding continues to apply.
Pursuant to O 15 r 8 the court may make orders requiring discovery of a document or class of documents 'relating to a matter in question in the proceeding' that may be or may have been in the possession, custody or power of a party.
An order of the court that the parties give discovery, without any further limitation, is a general order or direction for discovery. To limit the ambit of discovery the order, by its terms, should limit the extent of the discovery to be made by a party.
As there was no limitation appearing in the orders/directions the direction was for general discovery and the train of inquiry test applies.
Alternatively, the court may order a document or class of documents be discovered by affidavit in terms of O 15 r 8. 144 The current version of O 15 r 2 was introduced into the Rules by SR 295 of 1999 Schedule 1, and became effective 3 December 1999. On the same day Practice Note 14 was issued by the Chief Justice. This practice note states, inter alia, that: · the general position is that the Court will not order general discovery as a matter of course · the Court will mould any order for discovery to suit the facts of a particular case · in determining whether to order discovery the Court will have regard to the issues in the case and the order in which they are likely to be resolved, the resources and circumstances of the parties, the likely cost of the discovery and its likely benefit · to prevent orders for discovery requiring production of more documents than are necessary for the fair conduct of the case, orders for discovery will ordinarily be limited to the documents required to be disclosed by O 15 r 2(3). 145 There seems no doubt that, as a result of the 1999 amendments to O 15 r 2, the criteria in O 15 r 2(3) superseded the 'train of inquiry' test as the usual requirements for discovery. As pointed out by Branson J in Lubizol Corp Inc v Imperial Chemical Industries plc [2000] FCA 1464 (par 9) '…unless the Court should order to the contrary, documents the relevance of which is only that they may fairly lead to a train of inquiry which may directly or indirectly enable one party to advance its case or change that of its opponent are not required to be discovered.' (note also Finn J in South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 519 at par 10, The Hon Justice JW von Doussa 'Discovery in the Federal Court' Law Society of South Australia and the Federal Litigation Section Seminar, 14 March 2000; Spyer v Cuddles 'N' Mum (Franchise) Pty Ltd (No 3) (2002) FCA 1563 pars 4-8; Aveling v UBS Australia Capital Markets Holdings Ltd [2005] FCA 415 at par 10).

[73]

146 The history to the amendment to O 15 r 2(3) was explained by Lindgren J in Spyer v Cuddles 'N' Mum (Franchise) Pty Ltd (No 3) (2002) FCA 1563. His Honour in that case also observed that the broader test of 'relating to any matter in question in the proceeding', which derives from the Peruvian Guano case, continues to be used in the context of O 15 r 8 (par 6 of Spyer), and that in this respect there is a disconformity between the tests of discoverability as between O 15 r 2(3) and r 8 (par 7 of Spyer). 147 In Aveling v UBS Australia Capital Markets Holdings Ltd [2005] FCA 415, Lindgren J considered the principles which should guide the parties in identifying categories of documents. His Honour observed that they were the same principles which guide the Court when ordering discovery, and continued: 'It may be appropriate for parties to describe categories in terms which do not expressly incorporate the language of O 15 r 2(3), but that subrule should nonetheless govern the formulation of the categories. Alternatively, of course, the categories may be defined so as to incorporate expressly the terms of the subrule. Whatever approach is taken, it is important to understand that when, as happened in the present case, the Court orders discovery by categories to be notified by one party to another, the Court does not intend that the notifying party be at liberty to widen the discovery obligation beyond the four classes of documents referred to in O 15 r 2(3).' (par 11) 148 More recently, Lindgren J had cause to consider the operation of O 15 r 2(3) in Australian Competition & Consumer Commission v Advanced Medical Institute Pty Ltd (2005) FCA 366. Significantly, after reciting r 2(3), his Honour said at par 23: 'In the rare case in which the Court grants leave to a party to give a notice requiring general discovery, that subrule operates, rather than, as formerly, the Peruvian Guano test, to identify the discoverable documents. The Explanatory Memorandum which accompanied the Federal Court Amendments Rules 1999 (No 6) (SR 1999 No 295) stated of the new subrule 2(3) that '[t]he aim of the rule is to limit the documents that must be discovered to those which are directly relevant to the proceedings.' 149 The history of the law in this area, and more recent cases, indicates that 'general discovery' means an unqualified or unlimited order for discovery, possibly in one of the following forms: · as noted by Beaumont J in Reading Entertainment Australia Pty Ltd v Birch Carroll & Coyle Ltd [2002] FCAFC 109 at 70, quoting Butterworths Practice & Procedure of the Federal Court at [40.760] - 'general discovery as traditionally understood'. This refers to discovery of any document which may fairly lead to a train of inquiry, as per the Peruvian Guano test, and is consistent with the submissions of the respondent; or · as submitted by the applicants, 'general discovery' as is now contemplated by O 15 r 2(3) (The court may make an order for particular discovery in broader terms under O 15 r 8). 150 In my view, in the absence of qualifications or limitations to an order for discovery, the correct interpretation is that the discovery ordered by the Federal Court pursuant to O 15 is that contemplated by O 15 r 2(3), as submitted by the applicants. Clearly this will not be the case if the Court makes an order pursuant to O 15 r 8, which, as pointed out by Lindgren J in Spyer v Cuddles 'N' Mum (Franchise) Pty Ltd (No 3) (2002) FCA 1563, seems to countenance a continuation of the broader test of discoverability. 151 This interpretation is consistent with: · Order 15 r 5, which is titled 'Order for General Discovery', and provides: 'The Court may, at any stage of the proceeding, order any party to give discovery in accordance with rule 2.' · the amendments to O 15 r 2 in 1999, the aim of which, according to the Explanatory Statement Statutory Rules 1999 No 295, was 'to limit the documents that must be discovered to those which are directly relevant to the proceedings' (note also Advanced Medical Institute per Lindgren J at par 23) · Practice Note 14, which states that orders for discovery will ordinarily be limited to the documents required to be disclosed by O 15 r 2(3) · Order 15 r 8 which continues to use the language of Peruvian Guano but only in the context of particular discovery and · the authority of cases to which I have already referred, in particular Spyer, Aveling and Advanced Medical Institute. 152 The respondents have referred to comments of Beaumont J in Reading Entertainment at par 70 concerning the court ordering general discovery following the 1999 amendments, however in my view his Honour's observations were referable to extraordinary circumstances where the courts may order discovery in accordance with the Peruvian Guano test. Although his Honour did not give the example, an order pursuant to O 15 r 8 would be an instance of such a circumstance. 153 The consent order made on 15 February 2006 was in my view an unqualified order for general discovery, as contemplated by O 15 r 5, and requiring discovery of documents as contemplated by O 15 r 2, in particular subrule 2(3). Accordingly, the 'train of inquiry' test as posed by the respondents in this case is not applicable. 154 It is appropriate to consider the remaining documents in the Schedule where this test is sought to be applied, in that light.

[75]

Item 10 Rain data records 156 In seeking discovery of these documents, which are identified as rain data records of the first or second applicant in respect of the Bundaberg and Tairo Orchards, the respondents claim they are relevant to loss and damage, and cite par 21 of the amended Statement of Claim and par 30 of the Defence. 157 In support of this contention the respondents rely on statements of Sheppard and Pincus JJ in Netaf Pty Ltd v Bikane Pty Ltd (1990) 92 ALR 490 at 494. This case also involved an application under s 52 Trade Practices Act 1974 (Cth) for misleading and deceptive conduct in relation to the sale of a business. The majority of the Full Court said: 'We reiterate that, where a purchase has been induced by misleading conduct, it is not enough, in order to recover losses subsequent to the purchase, to prove that but for the misleading conduct or as a partial consequence of it, the agreement to purchase would not have been made; that is so in every successful application of that kind. It is not the law that in every such case the party held to have been engaged in misleading conduct (who may have acted quite innocently) becomes the insurer of the other's success and prima facie liable to indemnify him against the consequences of the purchase. As the trial judge said in the present case: "To recover a loss sustained in the business, the applicant must show more than that it was sustained in the conduct of that business; for to show only that is to establish what is perfectly consistent with the loss having arisen from his own misguided management decisions, or even total neglect."' 158 I agree with this reasoning. 159 The applicants state that: · records up to 22 March 2005 are in the possession of the respondents already and are not required to be discovered by the applicants · the applicants do not have records after 22 March 2005, but they may be with the Administrator. 160 Unfortunately the respondents have not specifically indicated how these documents satisfy the criteria under by O 15 r 2(3). To the extent that the applicants are required to prove their case - as explained by the Full Court in Netaf - the rain data records appear to be documents which fall within r 2(3). The response of the applicants does not suggest a dispute that the documents are discoverable. 161 However, the applicants have stated that these documents up to 22 March 2005 are already in the possession of the respondents. This is not denied by the respondents. In my view, O 15 r 2(4) applies in this case. It is difficult to know what further could be achieved by requiring the applicants to discover the documents. 162 Unless there is some further reason why the applicants should provide discovery of those documents, it is unnecessary to make an order requiring them to do so (note recent similar comments of Bennett J in Telstra Corporation Ltd v Australian Competition & Consumer Commission [2006] FCA 737 at par 31). 163 In relation to the documents after 22 March 2005, on the basis that the documents are in the possession, custody or power of the administrator, in my view the applicants are not required to discover them for the reasons I have already explained in relation to documents held by the administrator.

[84]

Remaining documents in the Schedule Items 33, 34, 37, 39, 41, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58 182 The remaining documents in the Schedule for which discovery is sought fall into six categories:

Documents or categories of documents identified by the first and second respondents from documents discovered by the National Australia Bank Limited pursuant to Order dated 28 June 2006. This list comprises items 33,34, 37, 41 and 46.
Documents or categories of documents identified by the first and second respondents from documents discovered by Herron Todd White pursuant to Order dated 28 June 2006. This list comprises items 47, 48, and 49.
Documents or categories of documents identified by the first and second respondents from the email from the second applicant to David Breed dated 7 February 2005, part of discovered document no 149 of the first and second respondents' List of Documents dated 29 March 2006. This list comprises items 50, 51, 52 and 53.
Further documents or categories of documents identified by the first and second respondents. This list comprises items 54, 55 and 56.
Documents or categories of documents identified by the first and second respondents from the email from the second applicant to David Breed dated 11 April 2005 (part of email from David Breed to Peter Nichols, copied to the second applicant, on 12 April 2005). This list comprises item 57.
Documents or categories of documents identified by the first and second respondents from the applicants' discovered document titled 'Sunstate Citrus Pty Ltd Kick Off Meeting'. This list comprises item 58. 183 It is not clear to me whether the respondents have these documents already as a result of previous discovery, although the applicants suggested at the hearing that that was the case. 184 Mr Perry for the applicants submitted that it is a matter of concern that, at least in respect of some of the documents it appears that the respondents may have had them since 29 March 2006. Alternatively, if the respondents do not have the documents, it seems that in relation to such documents the respondents have had the opportunity since 29 March 2006 to seek discovery. 185 It does not appear that these items have been the subject of previous correspondence between the parties. As a consequence of this, there are few grounds submitted by the respondents as the basis of discovery, and no responses from the applicants in relation to discovery of these documents. To the extent that I can interpret the schedule, the only grounds submitted as a basis for discovery of these documents are: · in relation to items 33, 34, 37, 41 and 46: they are relevant to allegations in issue and reliance. They will also lead to a train of inquiry which would advance the respondents' case or damage the applicants' case · there are no grounds asserted in relation to items 47, 48 and 49 · in relation to items 50, 51, 52, 53: these classes of documents are relevant to allegations in issue as to reliance and loss or damage. They will also lead to a train of inquiry which would advance the respondents' case or damage the applicants' case; also see Netaf Pty Ltd v Bikane Pty Ltd (1990) 92 ALR 490 at 494 · in relation to items 54 and 55: these classes of documents are relevant to allegations in issue as to reliance. They will also lead to a train of inquiry which would advance the respondents' case or damage the applicants' case · in relation to item 56: these classes of documents are relevant to allegations in issue as to reliance. They will also lead to a train of inquiry which would advance the respondents' case or damage the applicants' case. Also see Netaf Pty Ltd v Bikane Pty Ltd (1990) 92 ALR 490 at 494 · there are no grounds asserted in relation to item 57 · in relation to item 58: these classes of documents are relevant to allegations in issue as to loss or damage. They will also lead to a train of inquiry which would advance the respondents' case or damage the applicants' case. Also see Netaf Pty Ltd v Bikane Pty Ltd (1990) 92 ALR 490 at 494. 186 Other than in relation to the '100 day plan' referred to in item 58, and in relation to which an order will be made, it is not possible to identify whose documents these documents are. I also note there is some duplication, for example '2005 business plan' in items 53 and 56, 'SHE plan' in items 53 and 58, 'marketing plan' in items 53, 56 and 58, and 'communications plan' in items 53 and 56. 187 Although the respondents have referred to the Netaf case in relation to a number of the items, the relevance of the principle is not substantiated in relation to these items. Further, the 'train of inquiry' test is applied in relation to all documents with the exception of items 47, 48, 49 and 57. 188 On the basis of the evidence before me I am not satisfied that an order for discovery is necessary in relation to any of these documents.

Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd

At a glance

Court

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Judgment (98 paragraphs)

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Legislation Cited (2)

Cases Cited (10)

Cited By (3)