Expectation Pty Ltd v PRD Realty Pty Ltd

REASONS FOR JUDGMENT 1 On 5 December 1996 the applicant filed proceedings in this Court seeking damages and other relief against the respondents arising out of the appointment and conduct of the first respondent as agent of and adviser to the applicant in respect of certain real estate transactions. 2 The causes of action pleaded are alleged to arise at common law (breach of contract and negligence), under statute (s 52 of the Trade Practices Act 1974 (Cth) ("the TPA"); s 38 Fair Trading Act 1989 (Qld) ("the FTA") and in equity (breach of fiduciary duty). 3 By its further amended statement of claim the applicant, in paragraph 4, pleads the oral appointment of the first respondent as adviser to the applicant in relation to possible real estate investments and as the agent for the applicant in relation to the investigation, negotiation for and purchase of such real estate investments. The express terms of the appointment were pleaded in paragraph 5 of the further amended statement of claim, as follows : "5. Express terms of the 1992 Appointment were (inter alia) that; 5.1 the First Respondent, through the Second Respondent, would act as exclusive purchasing agent for the Applicant, would locate land and other property for investment, would investigate each such investment opportunity and would make recommendations to the Applicant as to the purchase or otherwise thereof; 5.2 where instructed to do so, the First Respondent, through the Second Respondent, would negotiate the purchase of the identified land or other property as the Applicant's agent; 5.3 the First Respondent would be remunerated by the payment of commissions, marketing fees and management fees payable in relation to land or other property purchased; and 5.4 the First Respondent, through the Second Respondent, would provide like services to Hill." 4 By paragraph 5A, the following implied term was pleaded : "5A It was an implied term of the 1992 Appointment that: (a) the Respondents would exercise due care and skill in the performance of the tasks particularised in paragraphs 5.1, 5.2 and 5.4; (b) the Respondents would act honestly and in the best interests of the Applicant." 5 By paragraph 7A it was pleaded : "7A On or about 16 July 1993 the Applicant and the First Respondent varied the 1992 Appointment by entering into an agreement (the 1993 Appointment) whereby the First Respondent agreed to also act as the Applicant's purchasing agent in respect of commercial properties, in consideration whereof the Applicant agreed to pay the First Respondent commission in the sum of 2.5% calculated on the purchase price of any property introduced by the Respondents and then purchased by the Applicant. Particulars are: a letter from the First Respondent to Hill dated 16 July 1993, and a letter in reply dated 16 July 1993." 6 The express terms of the varied agreement were pleaded in paragraph 7B : "7B Express terms of the 1993 Appointment were (inter alia) that : (a) the First Respondent, through the Second Respondent, would act as exclusive purchasing agent for the Applicant, would locate properties for investment, would investigate each such investment opportunity and would make recommendations to the Applicant as to the purchase or otherwise of the property; (b) where instructed to do so, the First Respondent, through the Second Respondent, would negotiate the purchase of the identified property as the Applicant's agent; (c) the First Respondent, through the Second Respondent, would be remunerated by the payment of the commission; and (d) the First Respondent, through the Second Respondent, would provide like services to Hill." 7 The implied terms were pleaded in paragraph 7C : "7C It was an implied term of the 1993 Appointment that :- (a) the Respondents would exercise due care and skill in the performance of the tasks particularised in paragraph 7B(a), (b) and (d); (b) the Respondents would act honestly and in the best interests of the Applicant." 8 A fiduciary duty was alleged to have arisen by virtue of the contractual relations between the applicant and the respondents. That duty was pleaded in paragraph 7D in the following terms : "7D In the premises the Respondents at all material times owed to the Applicant a duty :- (a) not to allow their personal interests to come into conflict with their duty to act in the interests of the Applicant; (b) not to allow their duty to any other person to come into conflict with their duty to act in the interests of the Applicant." 9 Broadly speaking, the applicant alleges that in relation to the acquisition of the Benowa Gardens Shopping Centre, the first respondent breached the implied duty of care owed to it under the appointment contract by the second respondent making representations as to the shopping centre, including the value of it, which were in contravention of the TPA and the FTA and which were negligent. In consequence of such conduct, the applicant pleads that it suffered loss and damage. 10 It is also alleged in paragraph 14B of the further amended statement of claim that the conduct complained of in paragraphs 9, 10, 10A, 11, 14 and 14A was in breach of the fiduciary duty pleaded in paragraph 7D. 11 The case alleged against the second respondent is that he was knowingly concerned in the conduct which contravened the TPA and the FTA, and that his conduct was in breach of a fiduciary duty owed by him to the applicant as pleaded in paragraph 7D of the further amended statement of claim. 12 The applicant further alleges that the first respondent, by the second respondent, recommended to the applicant the purchase of the Broadway on the Mall Shopping Centre in Brisbane. The recommendation is alleged to have been given pursuant to the contractual appointment pleaded in paragraphs 4 and 7A of the further amended statement of claim. It is alleged that the first respondent, by the second respondent, made representations and withheld information which was in breach of the implied terms pleaded in paragraphs 5A and 7C of the further amended statement of claim, was in contravention of the TPA and the FTA and was negligent. The applicant alleges it suffered loss and damage in consequence of the conduct alleged. 13 The allegation against the second respondent in respect of the Broadway on the Mall matter is that he was knowingly concerned in the conduct which contravened the TPA and the FTA. 14 The further amended statement of claim contains in paragraph 6 the following pleading : "6. Pursuant to the 1992 Appointment, the First Respondent (by and through the Second Respondent) located, recommended and negotiated the purchase of a number of parcels of land both for the Applicant including land at Chancellor Park (which the Applicant purchased for $9.5M in May 1993), at Canterbury Downs (which the Applicant purchased for $3.5M in July 1993), and for Hill, at Mermaid Beach (which Hill purchased for $1,030,000.00 in July 1993)." 15 There is no pleading which alleges that the transactions pleaded in paragraph 6 give rise to any cause of action or entitlement to relief of any kind. Indeed, there is no suggestion in the pleading that these transactions gave rise to any loss or damage or to any matter of justiciable complaint. 16 The applicant, in paragraphs 1(a) and 1(b) of its notice of motion filed 15 July 1999, seeks an order under O 15 r 8 or O 15 r 5 of the Federal Court Rules for discovery of : "(a) all correspondence, file notes, agreements, memoranda, invoices, bank statements or other financial or other documents with respect to properties purchased by the applicant at Canterbury Downs and Chancellor Park (also known as Sippy Downs) during the period from or about January 1993 until January 1994 including but not limited to all documents relating to communications between the respondents and their representatives and the applicant and its representatives in relation to those properties; (b) all bank statements and other financial documents with respect to the payment, receipt or treatment of commission in relation to the purchase of the Benowa Gardens Shopping Centre by the applicant in or about December 1993." 17 Order 15 r 8 of the Federal Court Rules provides : "8. 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." 18 Order 15 r 5 states : "5. The Court may, at any stage of the proceeding, order any party to give discovery in accordance with rule 2." 19 The respondents have given discovery. They submit that on the issues raised by the applicant's further amended statement of claim the documents sought do not relate to any matter in question in the proceeding and are not in consequence discoverable under O 15 r 8 or at all. They further submit that discovery having been given in accordance with O 15 r 2, no basis has been made out for ordering further discovery. 20 The applicant contends that the matters in issue in the proceedings, so far as presently relevant, are : (a) what was the nature of the contract between the parties? (b) what the terms were? (c) what terms should be implied? (d) what sort of remuneration was called for? (e) was the contract to advise and recommend, or merely to introduce? (f) were the respondents to be paid more than mere commission and were they so paid? 21 The applicant contends that on the face of pleadings the involvement of the respondents in the purchase and sale of the properties pleaded in paragraph 6 are live issues to which the documents sought in the first category relate. It submits that documents which relate to the role of the first and second respondents in the transactions pleaded in paragraph 6 of the further amended statement of claim would form part of the train of inquiry relating to the matters in issue, namely what was the nature of the contract between the first respondent and the applicant, what were its terms and how was it performed? 22 The applicant also submits that references to the circumstances of the sale of the properties in the affidavit of the second respondent and the receipt and distribution of the commission on those sales, also means the documents specified in paragraph 1(a) of the notice of motion relate to a matter in question in the proceedings within the meaning of O 15 r 8. 23 As to the second category of documents relating to the sale of the Benowa Gardens Shopping Centre, the applicant submits that the live issues between the parties include : (a) the nature of the contract between the applicant and the respondents; (b) the nature of the duties owed by them to the applicant; (c) whether the contract was performed; (d) whether there was more to the contract than a mere introduction to a property; (e) whether the respondents were to act as agent for the applicant rather than a mere agent for sale for the vendor. 24 The commission documents on the sale of the Benowa Gardens Shopping Centre are financial documents which relate to the receipt of the commission upon payment by the vendor, and the distribution of the proceeds by the first and second respondents. The applicant submits that these are live issues arising on the pleadings and in the affidavits of the second respondent, Langford and Johnson, filed by the respondents as part of their material in defence of the proceedings. Because they appear in the respondents' material, the applicant submits they must be treated by the respondents as relating to a matter in issue in the proceedings and as such they are discoverable. 25 The respondents contend that the sale of the properties listed in paragraph 6 of the further amended statement of claim and the receipt of commissions on sale which are admitted in the defence, do not relate to any matter in issue in these proceedings and further, that discovery of the documents has not been shown as necessary within the meaning of O 15 r 15. They further submit that the receipt and disposition of commission on the sale of the Benowa Gardens Shopping Centre does not relate to any matter in issue in the proceedings. 26 In my opinion, the matters pleaded in paragraph 6 of the further amended statement of claim are not material facts required to be pleaded in support of any of the causes of action pleaded by the applicant in respect of the acquisition by the applicant of the Benowa Gardens Shopping Centre, or, the investigation of a possible purchase of the Broadway on the Mall Shopping Centre. They do not, in themselves, give rise to any justiciable issue between the parties. The presence of paragraph 6 of the statement of claim cannot extend the bounds of discovery beyond that which properly arises in relation to matters in question in the proceedings: Martin and the Miles Martin Pen Coy Ld v Scrib Ld (1950) 67 RPC 127 (CA) at 131 where Jenkins LJ, with whom Asquith LJ agreed, said : "The correctness of the learned judge's decision has been challenged in this Court by Mr Aldous for the Defendants on, in effect, two main grounds. First of all, he says: Look at the pleadings, and you will find that the Defendants have raised an allegation that neither of the Plaintiffs were the proprietors of or entitled to the patents in suit or either of them. He says that that allegation has been made; there it is in the amended defence and counterclaim. No steps have been taken on the part of the Plaintiffs to strike it out as being irrelevant or otherwise improper, and while it stands any discovery germane to that allegation is discovery which can and should properly be ordered. In support of that contention he referred to the well known observations of Brett LJ, as he then was, in the case of Cie, Financiere et Commerciale du Pacifique v The Peruvian Guano Coy (1883) 11 Q.B.D. 55, the relevant passage being on p 63, where the learned Lord Justice says: 'It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may - not which must - either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary.' In my judgment this contention of Mr Aldous makes the right of a party to discovery in an action far too wide. The object of discovery is to assist the proper determination of the relevant issues between the parties. It is not open to a defendant to enlarge the area of discovery indefinitely by making irrelevant allegations. The Court must be satisfied that the documents of which discovery is sought are relevant to the matters properly in issue in the action and are not merely made relevant by the inclusion by a defendant in his pleadings of irrelevant matter which, even if substantiated, could not affect the result of the action. ..." 27 Pleading to an irrelevant allegation or leading evidence in respect of it, does not make it relevant and one in respect of which discovery must be given. Nor is it necessary that the allegation must be struck out before discovery can be resisted: Martin v Scrib Ld at 133. 28 The conduct of the respondents, to which the documents specified in paragraph 1(a) of the notice of motion relates, is post-contractual conduct. However, the case advanced by the applicant is not one that from the conduct of the respondents in their dealings in these sales, the existence of a contract and its basic terms may be inferred, notwithstanding the absence of the usual evidence as to formation and content. (As to the use of past contractual conduct to prove up the existence and content of an earlier contract by admission, see Australian Energy Limited v Lennard Oil NL [1986] 2 Qd R 216 at 237). 29 In the present case the applicant pleads a particular oral contract entered into in November 1992 by specific agreement of the parties containing the pleaded express and implied terms. Further, the variation of that contract on 16 July 1993 is pleaded as being a written variation and the writing is pleaded and particularised. What the respondents did after the making of the alleged 1992 contract, and what they believed their arrangements with the applicant entitled them to do in relation to the purchases referred to in paragraph 1(a) of the notice of motion, does not relate to whether the respondents, in acting in relation to the Benowa Gardens Shopping Centre purchase in November and December 1993 and in relation to a possible purchase of the Broadway on the Mall Shopping Centre in January 1994, were acting under the contractual arrangements pleaded in paragraphs 4, 5, 5A, 7A, 7B and 7C of the further amended statement of claim or some other contractual arrangement, and whether they were at the time of so acting bound by the fiduciary duties pleaded in paragraph 7D. 30 It follows in my judgment that the documents specified in paragraph 1(a) of the applicant's notice of motion seeking particular discovery, are not documents relating to any matter in question in the proceedings within the meaning of O 15 r 8, and are not discoverable under that rule or under any other rule of the Federal Court Rules. 31 Even if I had been persuaded to a contrary view, I would, as a matter of discretion, have refused discovery as being oppressive having regard to the width of the category of documents sought and because I am not satisfied that discovery of the category of documents sought is necessary: O 15 r 15 of the Federal Court Rules. 32 The issue as to the documents specified in paragraph 1(b) of the notice of motion concerns the payment of sales commission to the respondents and the receipt and treatment of it, in relation to the sale of the Benowa Gardens Shopping Centre. The only specific reference to commission payable on the sale of the shopping centre is that contained in paragraph 14A(a). It is to the effect that the respondents had agreed with the vendor for a commission on sale in accordance with a sliding scale which favoured the interests of the respondents acting to maximise the sale price, whereas their duty to the applicant obliged them to act to obtain the lowest purchase price. 33 There is no issue in question in the proceedings that the first respondent acted as agent for the vendor of the Benowa Gardens Shopping Centre and received commission on the sale to the applicant. Nor is it in issue that the commission arrangements in relation to the sale were not disclosed to the applicant. So much is clear from paragraph 7 of the amended defence. 34 The conduct which is alleged to have breached the fiduciary duty pleaded in paragraph 7D of the further amended statement of claim, is that pleaded in paragraphs 9, 10, 10A, 11, 14 and 14A of the further amended statement of claim. This conduct does not include the payment to, and receipt by the first respondent of a commission on sale and the internal or external disposition of that commission by the respondents or either of them. The relevant breach of duty pleaded in paragraph 14A(a) is the failure to disclose that commission was payable in accordance with a sliding scale, so that the respondents' personal interest in receiving greater commission from a higher sale price was in conflict with their duty to act in the interests of the applicant to negotiate a sale at the lowest sale price achievable. 35 The only matter in issue is whether the particular sale arrangements alleged by the applicant in paragraph 14A(a), which are not admitted by paragraph 7 of the defence (see paragraphs 7(e) and 12), in fact existed as part of the proof of the situation of conflict of duty and interest alleged in paragraph 14B of the further amended statement of claim. The fact that commission was paid and the quantum of it, its receipt and its treatment by the respondents do not relate to that issue; nor do the financial documents relating to these matters relate to that issue. The documents which relate to the issue in question are the documents which evidence or contain the commission arrangements relating to the basis upon which the commission was earned, calculated and payable, including details of any applicable sliding scale. The documents specified in paragraph 1(b) of the notice of motion do not include these documents. This may be because they have already been discovered as the allegation in paragraph 14A(a) of an agreement made on or about 29 July 1993 would suggest. 36 The documents sought in paragraph 1(b) of the notice of motion do not go to the issue of breach of fiduciary duty, as that issue is pleaded in paragraphs 7D, 14A and 14B of the further amended statement of claim. 37 It cannot, in my view, be contended that the matter identified in paragraph 1(b) of the notice of motion relates to the issue of the formation of a contract between the parties, the content and terms of that contract, and whether the contract gave rise to fiduciary duties. A right to commission to be calculated upon a sliding scale as agreed between the vendor of Benowa Gardens Shopping Centre and the respondents on or about 29 July 1993 does not relate to the existence of an oral agreement entered into in November 1992 and varied in writing by an exchange of letters on 16 July 1993 or the content of any such agreement. Nor does it relate to the creation of a fiduciary duty or the scope of it said to arise out of those contractual arrangements. The receipt and disposition of the commission, presumably after completion of the sale on 7 February 1994, is further removed in point of time and relevance to the issues touching the creation and content of contractual arrangements and fiduciary duties. 38 The fact that reference is made in the material filed by the respondents in defence of the proceedings to the receipt and disposition of the commission, whether as part of the background material or under a misapprehension as to its relevance, does not give the material, for the purposes of discovery under O 15 r 8 or O 15 r 5, a sufficient relationship to any matter in question in the proceeding to make the material discoverable. 39 That the financial documents specified in paragraph 1(b) and the notice of motion may be used to cross-examine the second respondent to attempt to show that he acted flagrantly in his own interests to earn commission to the prejudice of the applicant, which adversely reflects on his credit and character, does not entitle the applicant to particular discovery of the documents specified in paragraph 1(b) of the notice of motion: Officine Meccaniche Toschi Sp.A. v Cosco Holdings Pty Ltd (1992) 2 Qd R 418 at 422. 40 The notice of motion will be dismissed with costs. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper.