Kyocera Mita Australia Pty Ltd v Mitronics Corporation Pty Ltd

Federal Court of Australia|2005-03-15|Before: Stone J

1 In a notice of motion filed on 28 January 2005, the applicant and first cross-respondent ('Kyocera') sought an order that the first respondent and cross claimant ('Mitronics') discover a wide range of documents. In addition Kyocera sought certain other orders including an order that Mitronics file and serve an affidavit in accordance with O 15 r 8 of the Federal Court Rules ('Rules'). By the time of the hearing of Kyocera's notice of motion on 15 February 2005, the parties had agreed on a number of issues and, with their consent, I made orders in respect of those issues. The parties also agreed that certain aspects of Kyocera's notice of motion should be stood over to a later date. However, there remained three issues that Kyocera pressed for immediate resolution; see [4] below. Having heard the parties on those issues I declined to make the orders sought by Kyocera and dismissed the relevant paragraphs of the notice of motion. I undertook to provide written reasons at a later date. These are my reasons.

2 In so far as is presently relevant, Mitronics claims that Kyocera, in breach of an agreement between the parties, provided photocopiers that were not of merchantable quality and were not fit for the purpose for which they were intended. In particular it is pleaded that the machines were unreliable and prone to frequent breakdowns.

3 As a result of continuing issues in relation to discovery, on 1 December 2004 I ordered that the parties file and serve any supplementary lists for discovery by 24 December 2004. I further ordered that any notices of motion in relation to discovery be filed by 28 January 2005. These orders were made with a view to finalising discovery as soon as possible and allowing the matter to proceed to a hearing on the substantive elements of the case. Both parties availed themselves of the opportunity to file a notice of motion in relation to discovery.

4 At the hearing before me on 15 February 2005 senior counsel for Mitronics, Mr Ireland QC, was able to report that the parties had agreed on a number of matters and had consented to short minutes of order to that effect. Nevertheless, three issues remained in dispute. These issues were:

(a) whether Mitronics should be ordered to particularise the documents they have discovered in which Mitronics claims privilege by specifically identifying and describing each document; (b) whether Mitronics should be ordered to discover documents in relation to machines in respect of which Mitronics has not made a claim of unmerchantable quality; and (c) whether Mitronics should be ordered to discover its electronic database.

Principles of Discovery 5 Discovery is clearly an important interlocutory procedure. The fundamental policy behind discovery is to ensure that litigation is decided upon the merits and that cases are not decided by ambush and surprise; see Ammerlaan v The Distillers Co (Bio-Chemicals) Ltd (1992) 58 SASR 164 per Olsson J at 173. The Court's powers in relation to discovery are set down in Order 15 of the Rules and elucidated in Practice Note 14. The basis of ordering discovery in this Court is that, as a general rule, the Court will not give general discovery. In Pasini v Vanstone [1999] FCA 1271 at [30] Finn J stated that: '…(i) A party does not have an unqualified right to discovery under the Federal Court Rules: see Cameron v Rural Press Ltd (Burchett, Gummow and Hill JJ, 20 July 1990, unreported); Federal Court Rules O10 r2. (ii) As Practice Note 14 makes plain, general discovery will not be ordered as of course, discovery commonly being ordered only in relation to particular issues or defined categories of documents…(v) Whether or when discovery will be ordered "depends upon the nature of the case and the stage of the proceedings at which the discovery is sought": Australian Securities Commission v Somerville [(1994) 51 FCR 38 at 50]…' [emphasis added] 6 It is clear that the Court has considerable discretion in ordering discovery and that it is a very relevant issue to weigh the costs involved in any order against the likely benefit in all of the circumstances of the case; see O 15 rr 3, 5 and 15. Practice Note 14, issued by the Chief Justice on 3 December 1999, recognises this in stating: 'Discovery

Practitioners should expect that, with a view to eliminating or reducing the burden of discovery, the Court: (a) … (b) will mould any order for discovery to suit the facts of a particular case; and (c) will expect the questions set out below to be answered: (i) is discovery necessary at all, and if so for what purposes? (ii) can these purposes be achieved: · by a less expensive means than discovery? · … (iii) … (iv) should discovery be given in a list of documents by general description rather than by identification of individual documents? 2. 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 discovery and its likely benefit. 3. …' [emphasis added]

See also Tanner v Shergold [2004] FCA 176 per Marshall J at [41]. 7 In Ammerlaan v The Distillers Co (Bio-Chemicals Ltd (1992) 58 SASR 164, Millhouse J at 167, with whom Legoe J agreed, stated: 'I have always understood discovery, certainly if challenged, to be a matter of the discretion of the Court. In Burmah Oil Co Ltd v Governor and Co of the Bank of England [1980] AC 1090 at 1141 Lord Scarman said: 'Although in the High Court discovery of documents is automatic in most civil litigation, this is no more than a convenient practice ordered and regulated by the rules of court: see RSC O 24, and the recent decision of this House in Science Research Council v Nasse [1980] AC 1028. Discovery of documents remains, ultimately, a matter for the discretion of the court.' [emphasis added]

8 In Murex Diagnostics Australia Pty Ltd v Chiron Corporation (1995) 55 FCR 194, Burchett J at 199-200 expressed a similar view: 'In my opinion the Rules confer upon me a very wide discretion to make appropriate orders in respect of discovery. … The obligation of discovery would be burdensome for the second respondent, and I am not satisfied that any commensurate benefit would be derived by the applicant.'

9 In Home Office v Harman [1983] 1 AC 280, Lord Keith of Kinkel laid stress on the compromise of interests involved in discovery and the necessity to control the process. His Lordship said at 308: 'Discovery constitutes a very serious invasion of privacy and confidentiality of a litigant's affairs. It forms part of English legal procedure because the public interest in securing that justice is done between the parties is considered to outweigh the private and public interest in the maintenance of confidentiality. But the process should not be allowed to place upon the litigant any harsher or more oppressive burden than is strictly required for the purpose of securing that justice is done.' [emphasis added]

See also Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 per Hayne JA at 37 (Winneke P and Phillips JA agreeing); Australian Securities Commission v Somerville [1994] 51 FCR 38 per Black CJ, Ryan and Olney JJ at 54; and WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 per Brennan J at 181 (Bowen CJ agreeing).

Privileged Documents 10 Mitronics has discovered a number of documents in respect of which it has claimed privilege. Those documents are identified by categories. Kyocera seeks an order requiring Mitronics to provide a list in which each document is specifically identified and a description of each such document. This order was sought, according to Mr Panna, counsel for Kyocera, so Kyocera could be confident that what is in the privileged list is in fact properly privileged documents. 11 Mr Ireland for Mitronics submitted that, given the history of this case, especially the extensive communications between the parties' solicitors, there are conceivably many hundreds or thousands of documents in respect of which privilege is claimed. They are, he submitted, conventional privileged documents such as communications with the client, proofs of witnesses and drafts. He submitted that the increasing tendency of case management in this Court is to consider the 'the horrendous cost … of simply listing clerical work' and to weigh the enormous cost of providing the list sought by Kyocera against the very remote possibility that Kyocera may somehow be able to upset the oath given to the affidavits verifying privilege. He described the benefit identified by Kyocera as 'non-existent or illusory'. 12 Mr Panna made reference to 'the rules' in relation to the requirement to enumerate each document. I take it that he was referring to O 15 r 6 of the Rules. However, O 15 r 6(3) provides: '(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.' [emphasis added] 13 I do not propose to make the order sought by Kyocera. The categories have been identified not by description of the legal privilege that is claimed but by description of the documents themselves. The discovery has been verified by affidavit. In the circumstances, I am of the view that the costs involved in a matter that has been going for such a long period of time as this far outweigh any benefit from identifying and describing the documents individually in the way Kyocera seeks.

The 5000 Machines 14 The second and third issues, it seems to me, are linked. Mitronics has presently based is cross claim on 275 machines but has discovered material in relation to an additional 87 machines. In the short minutes of orders to which both parties consent, there is a provision for Mitronics to amend its second further amended cross claim to add to the machines in respect of which a claim is made those additional 87 machines. What remains at issue relates to the balance of approximately 5,000 machines that I understand Kyocera has supplied to Mitronics ('5,000 machines') and to the nature or form of documents discovered. 15 Kyocera's argument is that discovery in relation to the 5,000 machines is required in order to establish a baseline for determining what the normal performance of each model is. Mr Panna referred me to paragraph 11(a) of Mitronics's second further amended cross claim by way of example. Paragraph 11(a) provides: '11. There were implied terms of the 1996 Mita Agreement that: (a) the Mita Products the subject of Mita's service contracts would be: (i) of merchantable quality and would require maintenance at a level that a machine of merchantable quality would normally require; and (ii) fit for the purpose for which they were intended, namely as reliable office machines and would therefore require maintenance at a level that a machine that a reliable office machine would normally require; …' 16 Mr Panna submitted that as Mitronics make the claim in paragraph 11(a), to determine the maintenance level for a normal machine one must look to the 5000 machines. Mitronics, he contends, is itself equating the level of maintenance a normal machine would require with the concept of merchantable quality. Kyocera also argued that the issue of the expense and time Mitronics would incur could be avoided by an order requiring Mitronics to discover the electronic database discussed below. 17 Mitronics responded to these submissions by pointing to the considerable expense that would be incurred if Mitronics was ordered to discover documents in relation to the 5000 machines. In addition, Mitronics submitted that Kyocera's parent company, the second respondent, is the manufacturer of these machines. They are therefore in a position to know how these machines perform on a proper and normal basis. 18 I am not persuaded that it is appropriate or necessary to seek to establish merchantable quality in the way contended by Kyocera. Merchantable quality relates not to what machines do, but by what they ought to do in relation to the standards of the industry, the description of the goods, the price at which they are sold and other factors relevant to the particular case. I accept that to produce this additional material for the 5000 machines would entail huge expense and a great deal of time. In my view the benefit, if any, could not possibly warrant discovery in the form sought by Kyocera.

Electronic Database 19 In relation to the electronic form of the relevant material, Kyocera seeks discovery of Mitronics's electronic database as it relates to the 362 machines which either are or will be the subject matter of the cross claim. Mitronics has given discovery in relation to the 362 machines by providing hard copies of the documents. Kyocera now seeks the electronic database to the extent that it relates to these machines. Mr Panna argued that if everything is in electronic format, then it should be discovered. 20 Mitronics resists the claim on that basis that the electronic database at issue contains a large pool of computer information that, in effect, includes every facet of Mitronics's business. It is said that the documents already discovered in respect of the 362 machines have no facsimile counterpart on the electronic database. Rather, the electronic database has information from the hard copy documents already discovered (eg. invoice details). The electronic database contains therefore a summary for each machine of the service history that finds its detail in the hard copy file already discovered. Kyocera sought this information, Mitronics argued, so that they can derive some information by creating new documents from the database. Unfortunately these points were made as submissions from the bar table rather than being supported by evidence. 21 Mr Ireland contended it is not the law that any document from which you can produce other documents is discoverable. In addition, he submitted that it is important to note that Mitronics and Kyocera are now competitors. He further contended that the information with respect to the 362 machines cannot be separated from the rest of the information on the database. While Mr Panna was correct in stating that there are numerous ways around this issue, including limiting access to the parties' legal representatives and independent experts, this is nevertheless a consideration in the exercise of the Court's discretion. 22 Although Mr Ireland's case is short on evidence, I am not persuaded that it would be appropriate to order discovery of the electronic database at this point. While I would hope the parties did not regard this as an invitation to come back before the Court on discovery issues, if there are any serious difficulties with discovery it can be raised at a later stage. At this stage, however, I am not satisfied that any purpose would be served by ordering that Mitronics discover or provide a copy of its database. It is appropriate that Mitronics discover material in relation to those machines and to do that in the form of Exhibit A seems at this stage to be adequate. 23 For these reasons I am prepared to make the orders in the short minutes of order and to stand over paragraphs 1(j), 1(k) and 2(b) of Kyocera's notice of motion and Mitronics's notice of motion to another day. 24 I note that since the hearing of 15 February 2005 when I gave brief oral reasons and stated I would provide more detailed written reasons later, the solicitors for Kyocera have indicated that they intend to seek leave to appeal from this judgment. The solicitors have raised the issue of the time in which the application for leave to appeal must be filed. Order 52 r 10(2)(b) of the Rules provides that an application for leave to appeal from an interlocutory judgment must be 'filed and served with seven days of the pronouncement of the interlocutory judgment from which leave to appeal is sought or within such time as the Court or a Judge may allow'. Judgment on the applicant's notice of motion was given on 15 February 2005 however given that the applicant did not have written reasons at that time it is appropriate that time under O 52 r 10(2)(b) be extended for seven days after the publication of these reasons, that is until 22 March 2005. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

Associate: Dated: 15 March 2005 Counsel for the Applicant/First Cross-Respondent: Mr A Panna

Solicitor for the Applicant/First Cross-Respondent: Stephens Lawyers & Consultants

Counsel for the First Respondent/Cross Claimant: Mr JM Ireland QC and Mr B Burke

Solicitor for the First Respondent/Cross Claimant: Hicksons Lawyers

Date of Hearing: 15 February 2005

Date of Judgment: 15 February 2005

Date of publication of reasons: 15 March 2005

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Cases Cited (6)