Dib Group Pty Limited v WISDA Group Australia Pty Ltd

District Court of NSW|2022-07-14

The applicant's submissions

In Mr Elliott's written submissions (MFI 2), Counsel submits, firstly, that each of the items 1 to 15 are relevant and probative to the applicants' allegations in paragraphs 13(b) and 14(b) of MFI 2 since it may be expected that they will establish whether there were shortfalls in fuel supplied and, if so, the quantum of the shortfalls and thus assist in the quantification of the loss and damage. He argued that the request for bills of lading and other documents, as between the respondent and its suppliers would likely indicate what fuel products, and in what quantity, the respondent had obtained from its supplier or suppliers, and what the respondent, in turn, supplied to the first applicant. He also argued that the same documents would expose a discrepancy between what the respondent had charged the first applicant and what it was entitled to charge.
Mr Elliott said that on his instructions, invoices were issued on a weekly basis.
Counsel submitted that item 16 is relevant and probative to the applicants' allegation that the provision of fuel was not fit for purpose. He referred to Mr Qiu's affidavit to support it.
Counsel submitted that item 17 is relevant to proof of its 'overcharging' allegations arising from its incorrect running account. Counsel argued that the only item that was different to the other items was item 17(d), which would likely assist the applicants to prove discrepancies, or perhaps irregularities in the running of the respondent's accounts.
On the issue of vacation of the hearing, the applicant's counsel cited observations of Black J in HP Mercantile Pty Ltd v Clements [2013] NSWSC 1974 at [26]-[28], which I bear in mind. The applicants' Counsel submitted that vacation is necessary to permit discovery and for the applicants to lead expert accounting evidence following the provision of those documents.

General

Counsel for the respondent emphasised that discovery is not of right, but because of its intrusive nature, must be necessary in the sense of enabling parties to obtain evidence and avoid surprise. The respondent says that contextual circumstances from the pleadings prove two things: the first defendant had been purchasing fuel from the respondent since 2009 and, save for the invoice or invoices, which is or are, the subject of the respondent's claim in the proceeding, it has paid every one of them.
Further, the respondent says that, in that context, it has only been very recently that the applicants have suggested that there has been a weekly shortfall in the supply of products by up to 1000 litres. Counsel says that the respondent pressed for particulars of the shortfalls suggested from October 2020, but received no meaningful response. The evidence served on the applicants' behalf does not take the matter further.
Further still, the application for discovery was brought in circumstances where her Honour Gibb DCJ indicated, when the idea of discovery was mooted, that what was sought was nothing more than a fishing expedition (28/2/22, T 7.39 - 8.19). That remained the case, he argued. Counsel complained that the drafting of the categories evinced contempt for the respondent's time and resources.
Counsel argued that the Court should, in its discretion, refuse discovery because of the lateness with which it has been brought.

Specific

The respondent's Counsel argued that some items in the Schedule were poorly expressed, with the implication that the respondent may not understand what it was expected to discover. However, whilst there may have been some linguistic concerns, a brief exchange with me indicated that what was sought was tolerably clear.
Mr Robinson argued that items 1, 4, 7, 10 & 13 in the Schedule to the notice of motion seek tax invoices issued to the first defendant since 4 July 2009. He says all should be in the possession of the first defendant; an inference which was irresistible given that they were all paid. The exception is the invoices currently in dispute and they have been well identified. Mr Robinson estimated, if I was against him on his primary objection, that these documents could be produced, or generated, within a couple of days.
The respondent's Counsel argued that items 2, 5, 8, 11 and 14 were unnecessary in circumstances where there is no reference to any bill of lading in any of the pleadings. Mr Robinson's main point, to pick up a matter I had raised with the applicants' Counsel, was the extent to which bills of lading, or other documents as between the applicant and its suppliers would likely bear upon proof that there had been a shortfall in fuels supplied or overcharging. Although he did not accept any obligation on his client's part to make up for what he said was a deficient list of items, Mr Robinson pointed to delivery dockets contained within Mr Rahal's exhibit (Exhibit 2 on the hearing) as being the most reliable means of indicating what amount of fuel was supplied and charged for, to be read in combination with the receipts of service stations like the first applicant itself which the stations had, or should have, maintained. Mr Robinson said, admittedly from the 'Bar Table' [2] , without evidence from Mr Rahal in support, that it might be an impossible burden upon his client to track down documents answering the description, given the high volume. I take Mr Robinson to submit that given the scale of the respondent's activities, it would be an onerous task to retrieve its records in the absence of an express reference to it in any such bill of lading.
In relation to items 3, 6, 9, 12 and 15, there is a request for tax invoices from an unspecified next level supplier for invoices issued to the respondent since 4 July 2009. Such documents cannot assist the applicants and they are plainly confidential to the respondent.
Item 17(a)-(c) is simply a repeat of earlier requests. It was said that item 17(d) was too broad.
Item 16 was said to be too vague and refers to messages between someone associated with the applicants and someone associated with the respondent.

Principles applicable to applications for discovery

The Court is most concerned about the timing for the application for discovery, particularly given its scope. For some categories, there is no limitation upon the class of document required to be produced which goes back to 2009.
Nevertheless, applications for discovery, like every other procedural order, must be determined consistently with case management objects in ss 56-60 of the Civil Procedure Act. Important, in this regard, is the anticipated cost and extent of delay (including the impact of an imminent hearing).
However, it is fair to acknowledge that the respondent has raised no argument at a level of principle, against discovery. Further complaints about cost, although presumptively valid, have not been backed up by hard evidence estimating what the costs are likely to be.
What is most relevant to my mind, is the extent to which the requests are reasonably required for the applicants to fairly prepare their case for trial, but that is subject to consideration of what is reasonably required to determine the proceedings, in accordance with the case management requirement: Graphite Energy at [17]. But other discretionary considerations intrude, including the extent to which the applicants could and should have raised request earlier than it did, and other means of obtaining the evidence, from third parties or its own records.
Even assuming that the documents are necessary, however, there is a still a requirement of relevance. A useful barometer to a valid test for a request for discovery is to identify the fact in issue which each item relates to: Graphite Energy at [22].
However, the authorities posit that it is not a proper purpose for a party to use discovery for a fishing expedition. In Trade Practices Commission v CC(NSW) Pty Ltd (1995) 58 FCR 426 (at 438) Lindgren J said (at 438) (citations omitted): "What does the reference to a 'fishing expedition' mean? After all, ex hypothesi, the giving of discovery will often, if not always, reveal documents of which the other party was not previously aware (similarly, the administering of interrogatories will often, if not always, reveal information of which the other party was not previously aware). What is meant is that discovery must not be used for the purpose of ascertaining whether a case exists, as distinct from the purpose of compelling the production of documents where there is already some evidence that a case exists…In WA Pines Pty Ltd v Bannerman at 181, Brennan J said that what is required is that 'sufficient is shown to ground a suspicion that the party applying for discovery has a good case proof of which is likely to be aided by discovery'. On the facts of particular cases, the application of the distinction between 'fishing' and 'non-fishing' may well be difficult."
These observations were cited by Besanko J in Procter v Kalivis [2009] FCA 795 at [68]-[83], and applied by Brereton J in Graphite Energy at [27].

Analysis

Mr Elliott acknowledged at the outset that justification for the burden of discovery necessarily centred attention upon the state of the pleadings. What are the facts in the pleadings, or the evidence otherwise in the discovery application, to suggest that there were shortfalls in the supply of fuel and overcharging, or improprieties in the respondent's record keeping dating back to 2009? The allegations in the Defence are at best generalised. The applicants did not voluntarily give particulars of these allegations and it rebuffed the requests for particulars which had been made on behalf of the respondent.
I take into account the dictates of justice in s 58 of the Civil Procedure Act 2005 (NSW) when dealing with this procedural application. Generally, there are considerations pointing in different directions. It is plainly unsatisfactory that, two years into the proceeding, the base of the documentary evidence is not complete, let alone expert evidence. However, it is fair to acknowledge that the factual allegations to sustain the defence were only settled in March this year after earlier iterations of the statement of claim. The question of discovery to assist the applicants has been festering for a significant time, with the acquiescence of the respondent. The respondent has not seriously pointed to material prejudice, other than delay in taking what, from its perspective, is a straightforward claim in debt. The most material consideration is the prejudice that would flow if some provision for discovery was not made. This is the type of problem arising where a party has a sufficiently reasonable basis for a suspicion to make a reasonably arguable allegation, or allegations, but certain categories of document are likely to be in its adversary's possession and unless there is discovery, prosecution of the allegation is hindered. That is detrimental to the interests of justice and notwithstanding delay (which can be partly compensated by an order for costs and another measure I will refer to later in these orders), the balance of discretionary considerations favour disclosure. The question then becomes what form of disclosure should be permissible having regard to the principles I have referred to.
I will now address the items in the schedule. An immediate difficulty is that the issues that the applicants identify relate to mere generalised allegations in the Defence, in a context where, it appears, the respondent has asked for, but been refused, particulars of the allegations of shortfalls in the supply of fuel or such products or overcharging. Obvious and reasonable questions arise as to what is the criteria to determine whether there has been a shortfall between what was agreed to be supplied and what was supplied and what was agreed to be charged and what was charged? Usually, such questions can be determined by reference only to the contractual arrangements. If, however, it is suggested that other surrounding circumstances are relevant, than they need to be identified. They have not been. It appears to me that what is proposed is a significant and potentially costly retrieval of documents dating back to nearly 13 years, in the hope that something may turn up that indicates some basis for complaint which is not yet been precisely identified. This engages the Court's concern, previously expressed by Gibb DCJ, about the discovery amounting to a fishing expedition.
It is puzzling that the applicants would seek to put the respondent to the expense and trouble of retrieving and discovering a range of tax invoices which, it is uncontroversial, had been paid, giving rise to the irresistible inference that they had at least been in the applicants' possession at some point in time. As I recall, Mr Elliott intimated that they might have been misplaced. But Mr Pan supplied no explanation as to what efforts, if at all, the applicants had made to ascertain whether it had retained the documents, or whether they were incapable of retrieving them itself. The powerful inference is that the applicants simply seek to cast the burden upon the respondent to do so. Nevertheless, the respondent did not suggest that the task or cost of discovering the documents was oppressive; estimating that the task could be accomplished within a couple of days. The content of the tax invoices are plainly relevant to facts in issue identified in the pleadings. Accordingly, I order that there be discovery of items 1, 4, 7, 10, 13 & 17(a).
In my opinion, on the evidence in this application, in their current form items 2, 5, 8, 11, 14 and 17(b) amount to an attempt to engage in a fishing expedition. As the applicants plead their allegation, the quantity of fuel to be supplied was in accordance with orders as between the applicants and the respondent. There was no evidence to sustain a necessary, or even likely, correlation between documents identifying the fuel that was supplied to the respondent and documents indicating the quantity of fuel which the respondent supplied to the first applicant, as distinct from other service stations.
Nevertheless, to forestall a likely further request for discovery, or a notice to produce that might flow from the rejection of these items in the light of Mr Robinson's persuasive argument, in my view, it is appropriate that, in lieu of my rejection of items 2, 5, 8, 11, 14 and 17(b), the respondent discover a fuller set of the delivery dockets of the kind in Exhibit 2, pp 38-39 for the duration of the period 1 July 2009 to 23 June 2020 (the date when the proceeding commenced).
As to items 3, 6, 9, 12, 15 and 17(c), similar to my last ruling, the Defence alleged that charging would be in accordance with orders from the applicant for prices set by both the first applicant and respondent (paragraph 2(g)(iii)), and not by reference to charges negotiated between the respondent and its suppliers. Accordingly, those items are rejected.
As to item 16, the description of the request specifically identifies two people, although not completely by full name, associated with the respective companies over a discrete and narrow period, which has already been the subject of evidence from Mr Qiu, in relation to a specific event in March 2019. On balance, the respondent should provide discovery of this category.
As to item 17(d), I accept that in a context of a general allegation of incorrect running of accounts, the respondent's receipts are relevant to a fact in issue. I permit discovery of receipts for the period 1 July 2009 to 23 June 2020, when the proceeding commenced.

Vacation application

Counsel for the respondent indicated that if discovery was to be granted, then the existing date for the hearing should be vacated. Reluctantly, I accept that submission.
In the hearing of the application there was discussion about some consequential matters that would follow from discovery.

Expert evidence

Counsel for the applicants said that his client wanted to obtain the opinion of an expert forensic accountant.
Counsel did not dispute that given the scattered references to the applicants' need for expert evidence in earlier stages of the proceeding, and the indulgence that the applicants were seeking to obtain a late discovery order in order to brief such expert, the Court was entitled to expect that the identity of an expert should have been ascertained before today. Counsel indicated that he thought a further period of 6 weeks should be permitted from the date that the applicants have access to discovered documents. He did not object that there should be a guillotine order, although suggested that some leeway should be permitted in the event of unforeseen contingencies.
To avoid yet further delay in an already protracted case proceeding, I propose to set a finite date for such report, failing which the applicants will not be able to rely upon a report, subject to a grant of leave from the Court to deal with unforeseen contingencies.

Particulars

Once discovery has been completed and the applicants' expert has produced its report, the applicants need to attend to the generalised allegations in their Amended Defence. At the moment, without that particularity, the respondent is not in a position to meaningfully know what the applicant's complaints are. The provision of particulars will serve the purposes of providing procedural fairness to the respondent and also to assist the trial judge to better understand aspects of the defences than a mere perusal of the defence, in its current form, would otherwise impart.
The respondent had previously requested particulars of the applicants as long ago as October 2020 but these were not supplied. The applicants' counsel argued that some of them were not proper requests. I propose to set certain minimum particulars and, in my view it is appropriate to ensure that these particulars are supplied before the respondent is put to the expense of preparing any competing expert report.
Further, given the substantial delay that it has taken to the applicants to state its case and compile its evidence, if they do not comply, the respondent should be at liberty to seek orders that might flow from the non-compliance.

Costs

I will hear the parties on costs. The parties distinguished costs on the application for discovery and costs of the vacation application. Having heard arguments for both Counsel, I have determined that costs of the discovery application should be costs in the cause.
As to costs of the vacation application, as was amply canvassed in oral argument, the timing for the bringing of this application was unsatisfactory. Although there has been movement in the parties' pleadings throughout the proceeding, the applicants' allegations, giving rise to the discovery application from 16 March were evident when they filed their Defence. Subsequent amendments to the cross-claim and the defence to the cross-claim in June did not alter their awareness of the need for discovery from the allegations in their Defence. The applicants were well aware of a need for documents even as late as 2 June 2022, when they appeared before Judge Levy SC. This much was conceded by their Counsel. The explanation supplied by Counsel today for why they did not seek discovery on that occasion - that they wanted to await what would happen about the fate of a strike out application - was unsatisfactory given the clear intent in r 18(2) and (3) of the UCPR, that insofar as practicable all interlocutory applications are to be heard at the same time. Had the applicants canvassed and argued their application for discovery before Judge Levy, there was a realistic and substantial prospect that the hearing date could have been preserved. The applicants should pay the respondent's costs of vacating the hearing.

Orders

The orders of the Court are: 1. Paragraphs 2 (a)-(c) (incl), the first two lines of sub-paragraph 2(d), and sub-paragraphs 3A (a)-(c) of the Amended Defence filed 16 March 2022 are struck out. 2. The hearing date of 25 July 2022 is vacated on the basis that the defendants are to pay the plaintiff's costs thrown away as a consequence of the vacation. 3. The plaintiff is to give discovery of the documents in accordance with these reasons, pursuant to r 21.2- 21.5 of the Uniform Civil Procedural Rules 2005 (NSW), on terms that, without prejudice to any entitlement they may have to costs at the conclusion of the proceeding, the defendants are to pay the plaintiff $10,000 forthwith on account for the purpose of the discovery. The List of Documents is to be prepared by 18 August 2022 and inspection is to be completed by 1 September 2022. (I have taken into account Mr Pan's estimate, which was not substantiated). 4. The time for the defendant to serve any expert accounting report is extended to 6 October 2022. 5. In the event that the defendant does not serve any expert accounting report by 6 October 2022 it will not be permitted to rely upon such report without obtaining the leave of the Court. 6. By 20 October 2022, the defendants are to file and serve proper particulars of the following: 1. the facts and circumstances relied upon to sustain the allegation that there were 'shortfalls' that they allege over the period; 2. the quantum of the loss and damage they say was caused by the shortfalls; 3. the facts and circumstances relied upon to allege that the supply of fuel was not fit for purpose over the alleged period; 4. the quantum of the loss and damage they say was caused by the supply of fuel which was not fit for purpose; 5. the facts and circumstances relied upon to allege that the respondents' accounts were run 'improperly and incorrectly'; and 6. the quantum of loss that the first applicant contends was sustained by the alleged breach of improperly and incorrect accounts. 1. In the event that the defendants do not provide proper particulars, the plaintiff is at liberty to make such application as advised for orders under s 61(3) of the Civil Procedure Act 2005 (NSW) on 3 days' notice. 2. Subject to order 7, the plaintiff is to serve any evidence in reply (including any expert accounting report in response) by 10 November 2022. 3. On the assumption that both parties obtain and serve expert accounting evidence, the parties' respective experts are to participate in a joint conference for the purpose of producing a joint report which illuminates points of agreement and points of disagreement, and the experts' respective reasons for their positions as to disputed matters 14 days before the hearing date 4. The matter is set down for hearing on 6 December 2022 (with an estimate of 4 days). 5. On the application for discovery, costs are to be costs in the cause.

Final word

It should be implicit, from the tone and context of these reasons, that the busy Judges of this Court should not be required to determine further interlocutory disputes before this case goes to hearing. The parties, and their representatives, are reminded of the High Court's deprecation of satellite disputes, in its decision in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303, and their obligations, under s 56(3) of the Civil Procedure Act 2005 (NSW). Further hearings of interlocutory disputes will not only be viewed with reference to case management objects generally, but will be expected to invite scrutiny of the way the parties and their representatives have complied with their obligations under s 56(3).

Endnotes

They were not published on Caselaw nor otherwise apparent within the Court file.
Both Counsel appeared at the hearing via AVL 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: 15 July 2022

Uniform Civil Procedural Rules 2005(NSW)

Civil Procedure Act 2005(NSW)ss 56, 57, 58, 59, 60, 61(3)

A defective defence?

I note that prior to the hearing of the motion, I arranged, through my Associate, to send an email (10:18am on 12 July 2022) to the applicants' solicitor indicating the Court's concerns about the document and warning the applicants' solicitor that, at the hearing of the motion, he or she (or they) should be prepared to address argument as to why the Defence should not be struck out. The solicitor for the applicants emailed back, (unsurprisingly) indicating that the respondent's notice of motion of 23 April 2022 had been dismissed and inquiring whether it was still necessary for the applicants to be in a position to address the adequacy of their Defence. In response to that, the applicant's solicitor was informed (12 July 2022 at 12:41pm) that it was so necessary.
In my view, consistently with the Court's obligation under s 56(2) of the Civil Procedure Act 2005 (NSW), read with the other provisions in ss 57-60 of the same legislation, it is appropriate for me to try to bring some order to the pleadings where there is prolixity and obscurity in the pleadings, even on the Court's own motion.
It could be argued that the basis for Judge Levy's decision in not striking out the Defence - an alternative document would be prepared illuminating the disputed factual issues - has been vitiated by the parties' failure such that it would be open to the Court to revisit the adequacy of the pleaded defence.
However, the respondent did not seek this. Nevertheless, it was necessary for the court to review the Amended Defence in order to appreciate what were the real issues in the proceedings and to assess the applicants' discovery application. It became clear that the Defence (as amended) signally fails to comply with rules against the inclusion of irrelevancies (complaints about particulars) and argumentative assertions. As indicated during argument, I was inclined to strike out sub-paragraphs 2 (a)-(c) and the first two lines of 2(d), 3A (a)-(c) for its offence to pleading rules. As was explained by Brereton J (as his Honour then was) in Graphite Energy Pty Ltd v Lloyd Energy Systems Pty Ltd [2014] NSWSC 1326 ("Graphite Energy"), a decision which I will return to for other reasons, at [59], a party's pleadings will eventually need to be read by the trial judge. In that case, Brereton J struck out part of the party's pleading which he had reviewed when assessing a discovery application. The offending sub-paragraphs I have identified are likely to distract and waste the time of the trial judge, as they have distracted me and wasted my time.
Counsel for the applicants did not resist the striking out in the manner indicated and that should occur.

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