Lion-Dairy & Drinks Pty Limited v Sinclair Knight Merz Pty Limited [2014] FCA 114 | Case summary

REASONS FOR JUDGMENT 1 The Court has before it today an interlocutory application dated 18 December 2013, filed by the respondent. The interlocutory application seeks orders for non-party discovery under r 20.23 of the Federal Court Rules 2011 (Cth). The nature of the non-party discovery that is sought is reflected in the interlocutory application, as set out below: Interlocutory orders sought 1. An order pursuant to Rule 20.23 of the Federal Court Rules 2011 (sic) that Labpoint Pty Ltd (ACN: 096 903 749) (Labpoint) make discovery of the following categories of documents to the Respondent within 21 days: (i) documents relating to the retainer of Labpoint by one or more of the Applicants for the purpose of Labpoint undertaking the testing of samples of the Smithfield Wastewater in 2007; (ii) documents relating to the laboratory procedures, systems, protocols, or methodology used by Labpoint in 2007 to determine the relative oxygen requirements of wastewaters, effluents, and polluted waters for the purpose of advising the BOD level of such material; and (iii) documents relating to the testing of samples of the Smithfield Wastewater in 2007 including: A the laboratory procedures, systems, protocols, or methodology used by Labpoint to determine BOD levels for the Smithfield Wastewater samples in 2007; and B the results of testing of the Smithfield Wastewater samples in 2007. 2. An order pursuant to Rule 20.23 of the Federal Court Rules 2011 (sic) that Ovivo Australia Pty Limited (ACN: 089 029 809) (AJM) make discovery of the following categories of documents to the Respondent within 21 days: (i) Documents relating to the investigations and enquiries undertaken by AJM in preparing its tender and entering into the contract with National Foods Australia Pty Ltd; (ii) Documents relating to the design by AJM of the Smithfield Wastewater Treatment Facility including plans, drawings diagrams, specifications, computations, notes, memoranda and the like; (iii) Documents relating to the commissioning by AJM of the Smithfield Wastewater Treatment Facility including documents relating to: A. practical completion under the AJM Contract and/or achieving compliance with the performance requirements there under; B. the commissioning of the facility and its initial operation, including plans, drawings, operating manuals and the like of the facility as built; C. the problems in operating the facility giving rise to the Applicants' allegation that the facility is incapable of treating the Smithfield Wastewater so as to reduce its BOD to a level which would achieve the Sydney Water BOD Requirement; and D. the investigations and enquiries made by AJM in relation to such problems including reports to Lion or others, correspondence, emails, notes and memoranda. 2 The background to these proceedings is outlined in an earlier judgment reported as Lion-Dairy & Drinks Pty Limited v Sinclair Knight Merz Pty Limited [2013] FCA 869 and need not be repeated. Two non-parties are the subject of the interlocutory application. The first is Labpoint Pty Ltd (Labpoint) which tested and measured certain matters relating to the installation of the waste water plant at Smithfield. 3 Labpoint did not appear at today's hearing, but I was told from the bar table that Labpoint apparently has some issues with some aspects of the interlocutory application, but that the parties are seeking to resolve those matters. No application was made defeating determination of this aspect of the interlocutory application. 4 Different considerations arise in respect of the second party against whom non-party disclosure is sought. Ovivo Australia Pty Limited is the current name of a company which is referred to in the amended statement of claim as AJM Environmental Services Pty Limited. (AJM). For convenience I will continue to refer to the company as AJM. AJM resists the application for non-party discovery against it on various grounds, which are set out in a helpful outline of submissions which was provided to the Court this morning by Mr Cox SC, who appears on the application for AJM. 5 The essence of the resistance, putting to one side the question of costs, is that the proposed non-party discovery goes beyond what is said to be the core of the complaint raised by the applicant against the respondent in the further amended statement of claim. Mr Cox submits that the core of that complaint is of alleged inadequacy in the design of the waste water treatment facility at Smithfield, and that the non-party discovery goes beyond that question of inadequate design to raise separate matters of installation and commissioning. 6 The difficulty I have with that submission relates to the terms of paragraph 88(c) of the defence which is in the following terms: AJM failed to design, construct, install and commission a wastewater treatment plant that was fit for its intended purpose. Particulars The Respondent refers to and repeats the particulars sub-joined to subparagraph 88(a) above and says further that in the event that the Applicants establish the matters set out in their Amended Statement of Claim, then AJM: (i) failed to design, construct, install and commission a wastewater treatment plant that was fit for its stated purpose; and (ii) failed to interpret the flow, load and other information provided in the Smithfield Tender Documentation to determine design conditions relevant to the processes and equipment it had contracted to design and supply. 7 As is evident from subparagraph (i) of the particulars to paragraph 88(c), the respondent alleges that there was a failure on the part of AJM to design, construct, install and commission a waste water treatment plant that was fit for its stated purpose. Mr Connolly, who appeared today for the respondent, made it clear that the pleading in paragraph 88(c) is not to be objectively construed as being confined to an allegation of under-designing the plant. Rather the intention and objective meaning of the words encompasses an allegation which goes beyond under-design to include failures in respect of the construction, installation and commissioning of the waste water treatment plant. I accept that submission. 8 It is appropriate at this point to set out the terms of r 20.23: 20.23 Discovery from non-party (1) If a party believes that a person who is not a party has or is likely to have, or has had or is likely to have had, in the person's control, documents that are directly relevant to an issue raised on the pleadings or affidavits, the party may apply to the Court for an order that the person make discovery of the documents to the party. (2) An application under this rule must: (a) be served personally on the person; and (b) be accompanied by an affidavit: (i) stating the facts on which the applicant relies; and (ii) identifying, as precisely as possible, the documents, or categories of documents to which the application relates. (3) A copy of the accompanying affidavit for an application must be served on each person on whom the application is served. (4) In subrule (1), a reference to an affidavit is a reference to: (a) an affidavit accompanying an originating application; and (b) an affidavit in response to the affidavit accompanying the originating application. 9 One of the important features of that provision is its reference to discovery of documents that are directly relevant to an issue raised on the pleadings or affidavits. In my view, the issues of the adequacy of the design, construction, installation and commissioning of the plant are adequately raised by paragraph 88(c). And, in my respectful view, the material that is being sought is material that is directly relevant to the issues that are raised in that subparagraph. Accordingly, to the extent that there is resistance to the application for non-party discovery going beyond design documents, I cannot agree with it. 10 It is also relevant to bear in mind some of the relevant jurisprudence on a provision such as r 20.23. The parties have referred to some of that relevant jurisprudence in their submissions, both orally and in writing. Some of the jurisprudence relates to earlier versions of the non-party discovery rule and, in particular, r 15A.8 of the previous rules. That rule has been the subject of determination and elucidation in a number of cases, including Burchett J's decision in Richardson Pacific Ltd v Fielding (1990) 26 FCR 188. There is also a helpful discussion of that earlier rule in the decision of French J, as he then was, in Re Francesco Candeloro La Rosa; Ex Parte Norgard [1992] FCA 514. 11 That jurisprudence needs to be read now against the background of the differently worded provision in r 20.23 relating to non-party discovery and, in particular, the significance of the fact that the current rule refers to documents that are directly relevant to an issue raised in the pleadings or the affidavit. Having said that, however, I still think that there is some helpful guidance to be obtained from that earlier jurisprudence insofar as the exercise of the Court's discretion to make an order under r 20.23 is concerned. One of the matters which is a relevant factor to be taken into account is whether or not the party moving for non-party discovery has exhausted other available avenues to obtain copies of the relevant material. It was a matter of some concern that the current interlocutory application is being brought at a time when the applicant is yet to provide its list of discovered documents. The applicant has not met the timetable that was set at the previous directions hearing for providing that material. 12 Having said that, however, I am persuaded by what Mr Connolly has put to me about the likelihood of the documents that are being sought under his client's application as being documents which may, to a limited extent, overlap with some of those in the possession of the applicant, but in other respects are likely to be documents only in the possession of AJM. 13 Another relevant factor to be taken into account is the attitude of the party moving for non-party discovery as to costs. I understand that the respondent is willing to pay the reasonable costs of AJM in providing the discovery which is sought, as well as its reasonable legal costs in considering and responding to the application for non-party disclosure. 14 I am also persuaded by alternative formulations of some of the categories of proposed discovery, as put forward by Mr Cox. I propose to make an order for discovery against AJM which takes into account Mr Cox's reformulation of sub-categories (i) and (ii) of the interlocutory application. 15 For these reasons, I make appropriate orders for non-party discovery against Labpoint and AJM but not in the precise terms set out in the interlocutory application. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.

Lion-Dairy & Drinks Pty Limited v Sinclair Knight Merz Pty Limited

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