Grifols (HK) Limited v DHL Supply Chain

The parties' positions

1. The plaintiff submits that, by consent, the Court made orders for the parties to circulate proposed categories of discovery on 18 June 2020. Subsequent to those orders being made, all of the parties, including the first defendant, circulated proposed categories for discovery. The plaintiff and the other defendants have now agreed on categories.
2. However, there is no agreement with the first defendant as to the categories of documents. The plaintiff submits that it is now too late for the first defendant to be seeking to alter its position and resist providing any discovery. The plaintiff disputes the position of the first defendant that it would be onerous and oppressive to provide discovery of all the categories of documents sought by the plaintiff.
3. Further, the plaintiff says that the Practice Note relied upon by the first defendant at this stage of the proceedings, Practice Note SC Eq 11, does not apply as the proceedings remain in the Common Law Division.
4. The plaintiff opposes the transfer of the matter to the Commercial List, suggesting that the proceedings involve claims arising out of property damage, consequent upon causes of action in contract and negligence which are commonly heard in the Common Law Division.

The first defendant's position

1. The first defendant's position is that: 1. By consenting to provide draft categories for consideration, it has not consented to provide discovery. 2. The matter should be transferred to the Commercial List. 3. The determination of the application for discovery should have regard to Practice Note SC Eq 11. 4. Discovery should not be ordered until after evidence has been served (in accordance with Practice Note SC Eq 11). 5. The plaintiff has not adduced evidence that would satisfy the Court of any exceptional circumstances. Indeed, it has not adduced evidence explaining why discovery is even necessary at this stage. 6. The matter involves complex commercial issues involving construction of contracts and questions relating to coordinate liability which should be dealt with in the Commercial List.

The evidence

1. The plaintiff read three affidavits of Nancy Barakat dated 19 August, 11 September and 12 October 2020. The defendant read affidavits of Maurice Gerard Lynch dated 9 October and 12 October 2020. Ms Barakat is employed by the solicitors for the plaintiff. Mr Lynch is a solicitor employed by the solicitors for the first defendant.
2. Annexed to the affidavits of the solicitors is the extensive correspondence between the parties relating to the general conduct of the matter and the issues between the parties which bring them before the Court.
3. Further, Mr Lynch deposes to his instructions as to the oppressive nature of the proposed discovery on the first defendant.

Consideration

1. The issues raised by the plaintiff and the first defendant are intertwined. There is merit in the first defendant's position that, if this matter is to be transferred to the Commercial List in the Equity Division, I should make an order so transferring the matter and that the matter could then be case managed and dealt with in accordance with Practice Note SC Eq 11 (and, presumably, Practice Note SC Eq 3, although it was not relied upon by the first defendant).
2. I also accept the submission of the first defendant that part of the reason for the restrictions on discovery are the Court's control over the costs in litigation [1] and, further, that I should adopt the same general approach to discovery on the issues arising in this matter.
3. Discovery is often a costly and time-consuming exercise. The Court has long since moved on from the position of allowing general discovery as is made plain by r 21.2 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). Nor does the Court allow a form of chain of inquiry discovery. [2]
4. The following principles should be uncontroversial: 1. The right to discovery is limited to a class or classes of documents; 2. Prior to coming before the Court, the parties should endeavour to reach agreement on the classes of documents or if agreement cannot be reached, the Court will determine the classes of document in respect of which discovery must be provided; 3. Discovery will only be ordered in respect of a document if it is relevant to a fact in issue (UCPR r 21.2(4)); 4. Entitlement to discovery of a document is not to be determined by the ultimate admissibility of the document. As set out in UCPR r 21.1(2), a document or matter is taken to be relevant to a fact in issue if it could, or contains material that could, rationally affect the assessment of the probability of the existence of that fact (otherwise than by relating solely to the credibility of a witness); 5. As set out in UCPR r 21.2(3), a class of documents may be specified either: 1. by relevance to one or more facts in issue, or 2. by description of the nature of the documents and the period within which they were brought into existence (unless the Court, in its discretion, considers that another manner of description is appropriate); 1. The Court's power to order and limit discovery must be exercised in accordance with the overriding purpose set out in s 56 of the Civil Procedure Act 2005 (NSW). [3] The Court must facilitate the just, quick and cheap resolution of the real issues in the proceedings. 2. Further, it is important to observe that, as set out in s 56(3) of the Civil Procedure Act, a party to civil proceedings is under a duty to assist the Court to further the overriding purpose and, to that effect, participate in the Court process. 3. The Court may limit discovery if it is established on evidence that it is oppressive and unduly time-consuming or costly.
5. In terms of applying the principles to the particular facts in this matter, I make the following observations: 1. The proceedings were commenced on 2 September 2019. 2. The plaintiff filed an amended statement of claim on 27 March 2020. 3. Defences and cross-claims have now been filed. 4. On 16 June 2020, the plaintiff circulated proposed orders in preparation for a directions hearing. 5. On 18 June 2020, the Court made orders by consent which included that the parties circulate proposed categories for discovery by 20 July 2020 and that if there were any dispute as to discovery, a motion should be filed prior to 21 August 2020. 6. On 20 July 2020, the plaintiff circulated proposed categories for discovery by the defendants, including the first defendant. 7. On 29 July 2020, the first defendant responded raising a number of objections to discovery. 8. The second, third and fourth defendants have agreed on categories for discovery. 9. There has been some refinement of the proposed categories of discovery by the first defendant, but agreement has not been reached either on the categories or whether discovery should be given at all. 10. The plaintiff's evidence does not address why each category sought is necessary although Mr Weinberger provided some assistance from the bar table and in some instances it is not difficult to figure out. 11. The defendant's complaint of the required discovery being oppressive is really limited to the category of documents in category 2. Leaving aside category 2, having regard to the appropriate concessions made by Mr Cox on my direct questioning, the first defendant appears ready and able to provide discovery at this time in accordance with the identified categories.
6. The first defendant's reliance on Practice Note SC Eq 11 at this stage is misplaced as the matter remains in the Common Law Division. The first defendant's reliance on this Practice Note appears to be based on its assertion that the matter should be transferred immediately to the Equity Division.
7. Plainly, the solicitors for the first defendant have made enquiries as to the availability of documents and whether discovery could be provided at this time. Indeed, on the hearing of these applications, I took Mr Cox through the proposed categories and he was able to readily identify whether the first defendant was in a position to provide discovery in respect of each category, whilst of course maintaining the fundamental objection that the plaintiff had not demonstrated that discovery was necessary or even adduced sufficient evidence to identify why discovery is necessary at this time in respect of a number of categories.
8. At least, in my view, an impression is created from the correspondence between the solicitors that: 1. the plaintiff wishes to cast the net as broadly as possible and obtain discovery prior to being required to serve its evidence; and 2. the first defendant is resisting on the basis that it considers that this matter should be in the Commercial List and that the plaintiff should be required to serve its evidence prior to it being required to give discovery.
9. The first defendant says that some of the categories sought are irrelevant to the issues and are otherwise oppressive. Again, the first defendant identifies category 2 specifically. The first defendant then identifies categories 4, 16 and 18 as extending to other customers of the first defendant beyond the plaintiff.
10. As a result of the exchanges during the hearing of these applications, some of the problems arising can be easily solved. For example: 1. Category 4 - there may be a claim for privilege but it must be that the documents could be readily locatable and producible. It is the type of category commonly found in these types of matters. 2. Category 5 - the first defendant has the documents, although it points out that the documents are otherwise being produced by the other defendants. 3. Category 6 - the first defendant says it has no documents. 4. Category 7 - the first defendant says it has no documents. 5. Category 8 - the first defendant says there is a forensic difficulty in producing documents because they cannot simply be provided in paper form. Mr Weinberger accepted the difficulty and said he would administer interrogatories on this issue. 6. Category 9 - the first defendant says it has no documents. 7. Category 10 - the first defendant does not suggest that it is oppressive. 8. Category 11 - the first defendant does not suggest it would be oppressive but questions the relevance. I consider the documents could be relevant. 9. Categories 12, 13 and 14 - the first defendant has not suggested that it would be oppressive to produce those documents. 10. Category 15 - the first defendant says there is only one document and it would produce it if it was asked to do so. The plaintiff says it has made a request for the document. Leaving aside who may be right on that issue, Mr Cox said that the first defendant will produce all documents in answer to category 15 and says there is only one document. I would expect the first defendant to send it to the plaintiff. 11. Category 16 - this seems to be in the nature of an ambit claim seeking access to much of the insurer's file. Mr Cox says that much would be privileged but the first defendant is content to produce a claim form. I gather that the plaintiff might accept that at this stage. I consider that category 16 should be limited to the claim form and any documents attached to the claim form. 12. Categories 17, 18 and 19 - there is no suggestion that it would be oppressive to produce the documents and no suggestion they would not relate to a fact in issue.
11. As it turns out, other than in respect of category 2, there is no real impediment to production of the documents at this stage and on a fair reading of the pleadings and having regard to Mr Weinberger's submissions, as well as subject to my observations above, the categories are appropriate.
12. The other parties are ready and willing to provide discovery at this time. The first defendant can be ready and would be willing if so ordered.
13. Irrespective of the merits of adopting the approach set out in Practice Note SC Eq 11, an order that the first defendant provide discovery at this time would facilitate the just, quick and cheap resolution of the real issues in the proceedings. Even if these proceedings were entered in the Equity Division and Practice Note SC Eq 11 did apply, such an order would not be inconsistent with the approach to discovery that may generally be taken in the Commercial List, in particular. As Practice Note SC Eq 3 relevantly provides: Application 2. This Practice Note applies to all new and existing proceedings in, or to be entered in, the Commercial List … in the Equity Division. … Discovery 27. The Court endorses a flexible rather than prescriptive approach to discovery to facilitate the making of orders to best suit each case. … 31. The Court will make orders for discovery having regard to the overriding purpose of the just, quick and cheap resolution of the disputes between the parties.
14. If I do not make the order, then the same issues will be ventilated at some stage later in the proceedings and the Court will no doubt hear from the plaintiff as to how the plaintiff has been unable to finalise its evidence because it has not had access to the documents it requires.
15. It is not an answer to suggest that no order should be made before the matter is transferred to the Commercial List, as all I would be doing is shifting the argument and burden to another judge at another time.

Category 2

1. The plaintiff seeks discovery of documents recording the negotiation of the Master Services Agreement and/or the Quality Agreement, so far as they relate to specific clauses or the subject matter of any of those clauses. The first defendant opposes discovery on the basis that: 1. such documents would not be relevant to a fact in issue; and 2. production of such documents would be oppressive.
2. The plaintiff submits that the documents could relate to a fact in issue as they are evidence of the surrounding circumstances, leading to the formation of the contract. The plaintiff submits that, having regard to the principles set out in cases such as Codelfa Construction Pty Ltd v State Rail Authority of New South Wales, [4] pre-contractual documentation may be relevant to a fact in issue.
3. As I have already said, the test is one of relevance rather than admissibility. It is not necessary for me to make any statements about this issue at this time, as the issue arising under category 2 can be disposed of with reference to the evidence adduced by the first defendant as to the difficulties in complying with discovery in respect of category 2.
4. Mr Weinberger suggests that I would not accept the evidence that production would be oppressive. I am uncertain as to the basis on which I could simply reject it without it even being tested.
5. I accept that the time and cost of production of all documents under category 2 may be significant and disproportionate. Further, as the first defendant points out, all terms relied upon by the plaintiff are express terms and the issue that might give rise to any consideration of the surrounding circumstances is not clear.
6. At this stage, I confine my findings to the following: 1. on the evidence on this application, I am not satisfied that it is necessary for the first defendant to produce documents under category 2; and 2. production of all category 2 documents would be oppressive, having regard to the evidence adduced by the first defendant, which was not the subject of any challenge.
7. I hasten to add that Mr Cox accepted as a matter of principle that it is permissible for a party to again seek production of further categories of documents if it becomes apparent that production is necessary at some later stage.
8. At this stage, I am not satisfied that the first defendant should be required to produce documents under category 2. However, I am satisfied that the first defendant should provide discovery in accordance with the other categories sought by the plaintiff (subject to my modifications).

Transfer to the Commercial List

1. The first defendant makes an application pursuant to s 54 of the Supreme Court Act 1970 (NSW) that the proceedings be transferred into the Commercial List of the Equity Division.
2. As set out in s 54 of the Supreme Court Act, the Court in a Division may, on application by a party or of its own motion, order that the whole or any part of any proceedings in that Division be transferred to another Division.
3. The first defendant also relies on UCPR r 45.6, which states: 45.6 The Commercial List (1) The following proceedings in the Equity Division of the Supreme Court may be entered in the Commercial List …
4. Plainly, the rule provides for the entrance in the Commercial List of proceedings already in the Equity Division rather than the transfer of proceedings from the Common Law Division across to the Commercial List.
5. The plaintiff accepts that I have power to transfer the matter to the Equity Division but says that the application is incompetent as Practice Note SC Eq 3 relevantly provides: Pleadings and Entry in the Lists … 16. Any motion for an order for entry of proceedings in either of the Lists shall be made returnable before the List Judge on a Friday.
6. The plaintiff submits that as the first defendant has not followed the Practice Note, I should not make the order transferring the matter.
7. No doubt the purpose of the requirement that any application for entry into the Commercial List be made before the List Judge on a Friday is so that the List Judge may determine whether the matter is suitable for the list.
8. It is a curious feature of the parties' positions that the first defendant relies on an Equity Division Practice Note for the purposes of opposing the giving of discovery whilst the matter remains in the Common Law Division and the plaintiff relies on an Equity Division Practice Note for the purposes of resisting the transfer of the matter from the Common Law Division to the Equity Division.
9. I plainly have the power to transfer the matter to the Equity Division. I should not refuse to entertain the application on the basis raised by the plaintiff.
10. The first defendant says that the issues raised by the proceedings are complex and involve the construction of contracts, insurance issues and matters relating to coordinate liability, which should be determined by a judge of the Commercial List.
11. The plaintiff says that this is a claim for property damage based on a breach of contract and negligence. The claims against the second and fourth defendants are in the nature of professional negligence claims, being claims which are commonly dealt with within the Common Law Division and the first defendant has not established why this matter should be transferred to the Equity Division / Commercial List.
12. As set out in UCPR r 45.6, proceedings in the Equity Division may be entered in the Commercial List when they arise out of commercial transactions or there is an issue of importance in trade or commerce.
13. The first defendant relies on the observations of Rogers CJ Comm D back in 1989, in Challenge Bank Ltd v Raine & Horne Commercial Pty Ltd: [5] "The assignment of business is for the purpose of allowing the most appropriate distribution of the Court's business, taking all relevant matters into account."
14. Reference was made to the wide discretion that should be exercised by the Commercial List judge to ensure that the case is approached with expedition in minimising expense in dealing with the real matters in issue.
15. Of course, the structure of the Court was different in 1989 and there were much more significant delays. It seems plain that the Court endeavours to deal with cases in both Divisions with as much expedition as possible, minimising expense and getting to the real matters in issue.
16. In Giorgi v European Asian Bank Aktiengesellschaft, [6] McLelland J observed: "The orderly conduct of the business of the Court requires that proceedings properly commenced in one Division remain in that Division unless a sufficient case for transfer to another Division has been made out."
17. The first defendant says that it initially raised the question of transfer in October 2019, such that the delay should not be an impediment to transfer. The first defendant also says that the plaintiff has not indicated any reason why the transfer should not occur. No prejudice has been identified. The first defendant submits that the plaintiff's position on transfer is a device to avoid the ordinary practice on discovery in the Commercial List.
18. These submissions rather assume that the plaintiff, having decided to commence these proceedings in the Common Law Division, should now recognise that the matter should be heard in the Commercial List of the Equity Division. Plainly, the plaintiff disagrees.
19. In my view, the proceedings were properly commenced in the Common Law Division. They should not be transferred to another Division, particularly over objection of the plaintiff, unless a sufficient case for transfer has been made out. The fact that they may have been commenced in another Division and entered in the Commercial List does not mandate the exercise of the discretion to transfer.
20. The question is whether the first defendant has established a sufficient reason for the transfer.
21. This case is conveniently summarised as a claim for loss consequent on property damage arising out of breach of contract and negligence. The Common Law Division routinely hears such cases.
22. Unsurprisingly, it has not been suggested that the judges of this Division are incapable of applying orthodox tortious and contractual principles to the facts as found. Claims based on contractual indemnities routinely arise in both personal injury and property damage cases heard in this Division. The fact that the case involves the construction of contractual terms, about which there may be competing arguments, does not of itself provide a sufficient basis for transfer out of the Common Law Division.
23. There are perhaps two points raised on the pleadings that might give rise to some attraction for the proposition that the case should be heard in the specialist Commercial List, being: 1. the construction of the clause relating to insurance, which is disputed; and 2. the first defendant's claim for contribution against a Spanish insurer, which is pleaded in its amended cross-claim filed on 31 August 2020.
24. I understand that the essence of that latter claim is that, should the first defendant be found liable to indemnify the plaintiff, as pleaded in the amended statement of claim, then the plaintiff's insurer (RSA) and the first defendant would have a coordinate liability to indemnify the plaintiff and contribution would apply.
25. Mr Weinberger submits that such a claim would be readily and easily dismissed. [7]
26. Yet the pleading remains on foot and I would not simply assume that it has no merit for the purposes of this application.
27. In my experience, claims for contribution have often been dealt with in the Common Law Division, as has the construction of contracts dealing with insurance.
28. The fact that cases involving such issues may be and are regularly accepted in the Commercial List does not provide a sufficient basis for transfer.
29. I am not considering whether the matter might be suitable for entry in the Commercial List. This is an application for transfer from one Division to another Division which is opposed by the plaintiff. It is necessary for the party seeking the transfer to establish that there is a sufficient case for the transfer.
30. The matter is progressing in the Common Law Division. Orders are being made for discovery. The matter is progressing with reasonable expedition. It does not seem to me that the issues raised by the first defendant provide a sufficient basis for transfer to the Equity Division.

Conclusion

1. I make the following orders: 1. The first defendant is to provide discovery in accordance with the suggested categories as modified (that is, not categories 2 and 8 and with category 16 limited to the claim form and any attached documents). 2. The motion filed by the first defendant on 21 August 2020 is dismissed.

Costs

1. This type of skirmish is one that regularly arises during the conduct of these large property damage-type matters.
2. The plaintiff obtained an order for discovery but not of the scope which it sought. The first defendant did not obtain an order transferring the matter but had already reached agreement on some of the other orders it had sought. The motions were heard together and interrelated.
3. In my view, it would be appropriate that the parties pay their own costs.
4. The appropriate order in respect of each motion is that there be no order as to costs. If any party wishes to seek to vary that order, I grant liberty to apply on three days' notice.

Endnotes

1. Leighton International v Hodges; Thiess v Reinforced Earth [2012] NSWSC 458 at [8]-[11], [14]-[25] (McDougall J).
2. Palavi v Radio 2UE Sydney Pty Ltd [2011] NSWCA 264 at [101] (Allsop P).
3. Palavi at [101]; Apollo Kitchens (NSW) Pty Limited v Goway Travel Pty Limited (No. 2) [2020] NSWSC 1157 at [44]-[48].
4. (1982) 149 CLR 337; [1982] HCA 24.
5. (1989) 17 NSWLR 297 at 308.
6. (Supreme Court (NSW), McLelland J, 3 March 1986, unrep) at 5. See also Coastline Constructions (Aust) Pty Ltd v Kakavas [2008] NSWSC 388 at [15]-[18].
7. Caledonia North Sea Ltd v London Bridge Engineering Ltd [2000] SLT 1123; Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd (2000) 23 WAR 291; [2000] WASCA 408. 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: 28 October 2020