Metcash Trading Limited v Bunn

REASONS FOR JUDGMENT 1 This is an application by the applicants by notice of motion filed on 16 October 2007 for orders under O 35A r 2(2)(d) and (g) and r 3(2) of the Federal Court of Australia Rules 1979 (Cth) (the Rules), on account of the respondent's alleged default in complying with orders made by me on 4 May 2007. 2 The relevant orders made on 4 May 2007, in respect of which the applicants now allege the respondent is in default, were: 1. The respondent make further and better discovery of the documents in paragraphs 1.2, 1.3, 1.4, 1.5 and 1.11 of the notice of motion by making a better description of the documents so as to allow the applicants to identify the documents described by making a reasonable search for each of the documents. 2. The respondent make further and better discovery of the documents in paragraph 1.12 of the notice of motion. 3. The respondent make further and better discovery of all contracts and agreements provided to the respondent to which one or more of the applicants are parties. 3 The orders did not provide for a time within which the respondent had to comply and, on 23 October 2007 (after this notice of motion was filed), I made further orders: 5. The respondent make further and better discovery of the documents in paragraphs 1.2, 1.3, 1.4, 1.5 and 1.11 of the applicants' notice of motion dated 2 February 2007 by making a better description of the documents so as to allow the applicants to identify the documents described by making a reasonable search for each of the documents within 21 days. 6. The respondent make further and better discovery of the documents in paragraph 1.12 of the applicants' notice of motion dated 2 February 2007 within 21 days. 7. The respondent make further and better discovery of all contracts and agreements provided to the respondent to which one or more of the applicants are parties within 21 days. 4 The orders of 4 May 2007 and 23 October 2007 identify the documents which Mr Bunn was obliged to discover by reference to the notice of motion in respect of which the orders were made. Because the orders are in the same terms, it is enough that I simply refer to the orders of 4 May 2007. Paragraphs 1.2, 1.3, 1.4, 1.5, 1.11 and 1.12 of the notice of motion in respect of which the respondent was to give a better description were: 1.2 any correspondent or communications with "friends and colleagues" regarding the Applicants or any of them and referred to in the Respondent's facsimile to the first Applicant dated 24 March 2006; 1.3 any correspondence or communications with "other independent supermarket operators" regarding the Applicants or any of them and referred to in the Respondent's email to Peter Campbell dated 16 December 2005; 1.4 any documents, correspondence or communications received in response to: 1.4.1 the advertisement the Respondent caused to be published in the Daily Telegraph newspaper on 3 February 2006; 1.4.2 the advertisement the Respondent caused to be published in The Age newspaper on 3 February 2006; 1.4.3 the material published on any of the websites: 1.4.3.1; 1.4.3.2; and 1.4.3.3; 1.5 any documents, correspondence or communications regarding the Applicants or any of them which have been provided or distributed (in hard copy or electronically) by or on behalf of the Respondent to any news or media organisation; 1.11 Any drafts or copies of the documents specified in Schedule 2 to the Respondent's List of Documents; 5 Paragraph 1.12 of the notice of motion which formed the subject matter of Order 2 of 4 May 2007 provides: 1.12 any documents which are referred to in or which were received in response to any of the following documents: 1.12.1 letter dated 20 September 2005 titled 'Open letter to Mr Andrew Reitzer and the Board of Metcash Trading Limited'; 1.12.2 letter dated 23 September 2005 titled 'Your letter dated 20 September 2005'; 1.12.3 letter dated 1 December 2005 titled 'Another Open letter to Mr Andrew Reitzer (Chief Executive) and the Board of Metcash Trading Limited'; 1.12.4 letter dated 15 December 2005 titled 'Open letter to all creditors, suppliers, customers, shareholders and all other interested parties ...'; 1.12.5 letter dated 17 December 2005 titled 'Open letter to all creditors, suppliers, customers, shareholders and all other interested parties ...'; 1.12.6 facsimile dated 8 February 2006 titled 'Welcome to Metcashinfo.net'; 1.12.7 letter dated 15 February 2006 titled 'Open letter to all creditors, suppliers, customers, shareholders and all other interested parties ...'; 1.12.8 letter dated 27 February 2006 titled 'Open letter to: Mr Andrew Reitzer (Chief Executive) and the Board of Directors of Metcash Trading Limited'; 1.12.9 document titled 'Press Release: 7 March 2006'; 1.12.10 letter dated 10 March 2006 titled 'Open letter to all creditors, suppliers, customers, shareholders and all other interested parties ...'; 1.12.11 letter dated 12 March 2006 titled 'Open letter to: Mr Andrew Reitzer (CEO) and the Board of Metcash Trading Limited'; 1.12.12 letter dated 26 March 2006 titled 'Open letter to: Mr Andrew Reitzer (CEO) and the Board of Metcash Trading Limited'; 1.12.13 letter dated 28 March 2006 titled 'Open letter to: Mr Andrew Reitzer (CEO) and the Board of Metcash Trading Limited'; 1.12.14 letter dated 31 March 2006 titled 'Open letter to: Mr Andrew Reitzer (CEO) and the Board of Metcash Trading Limited'; 1.12.15 letter dated 23 April 2006 titled 'Open letter to: Mr Andrew Reitzer (CEO) and the Board of Metcash Trading Limited and All Interested Parties ...'; 1.12.16 letter dated 8 May 2006 titled 'Open letter to: the Board and Directors of Metcash and All Interested and Related Parties'; 1.12.17 document titled 'Media Release: 10 May 2006'; 1.12.18 all editions of any newsletter known as "TIGA", The Independent Grocer's Advocate or other newsletter or similar publication regarding the Applicants or any of them and prepared or distributed by the Respondent; 1.12.19 "Press Release: 7 March 2006"; and 1.12.20 "Media Release: 10 March 2006". 6 Order 35A rule 2(2)(d) and (g) and rule 3(2) relevantly provide: Order 35A Order or judgment on default 2 When a party is in default (2) For this Order, a respondent is in default if the respondent has not satisfied the applicant's claim and: (d) the respondent fails to comply with an order of the Court in the proceeding; or (g) the respondent fails to do any act required to be done by these Rules; or 3 Orders on default (2) If a respondent is in default, the Court may: (a) order that a step in the proceeding be taken within the time limited in the order; or ... (c) if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings - give judgment against the respondent for the relief that: (i) the applicant appears entitled to on the statement of claim; and (ii) the Court is satisfied it has power to grant; or (d) give judgment or make any other order against the respondent; or (e) make an order specified in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time limited in the order. 7 The applicants and respondent relied upon a number of affidavits and exhibits which were identified in oral argument and subsequently in written submissions: 1. Affidavit of Peter Campbell of 16 October 2007. 2. Exhibits TPM1, TPM2, TPM3, TPM4, TPM6 and TPM8 to the affidavit of Toby Moritz of 2 February 2007. 3. Exhibit PAC1 to the affidavit of Peter Campbell of 18 December 2007. 4. Affidavit of Toby Moritz of 6 October 2006. 5. Exhibits PCB168, PCB171, PCB175, PCB179, PCB180, PCB191, PCB198, PCB199 to the affidavit of Peter Bunn of 29 November 2007. 6. Affidavit of PC Bunn of 10 December 2007. 7. Affidavit of PC Bunn of 15 February 2007. 8. Affidavit of PC Bunn of 24 April 2007. 8 In addition to those affidavits, it appears that since the matter was heard on 18 March 2008, three further affidavits have been filed that relate to this matter. They are the affidavit of P C Bunn of 30 April 2008, the affidavit of Toby Moritz of 13 May 2008 and the affidavit of P C Bunn of 20 May 2008. The purpose of these affidavits was for both the applicants and the respondent to put further material before the Court. This included further evidence from the respondent regarding electronic records and electronic copies of documents and for the applicants to place before the Court material referred to in their further submissions filed 13 May 2008. 9 The respondent has filed the following lists of documents: a list of documents on 4 August 2006; a supplementary list of documents on 31 August 2006; an amended list of documents on 13 March 2007; an additional list of documents on 26 September 2007; an additional (amended) list of documents on 3 October 2007; a second additional list of documents on 9 October 2007; a third additional list of documents on 12 November 2007; a fourth additional list of documents on 28 November 2007; and a fifth additional list of documents on 10 December 2007. Since the hearing of the notice of motion, the respondent has filed: a sixth additional list of documents on 31 March 2008; a seventh additional list of documents on 14 April 2008; an eighth additional list of documents on 28 April 2008; a ninth additional list of documents on 15 May 2008; a tenth additional list of documents on 26 May 2008; and an eleventh additional list of documents on 17 June 2008. 10 The matter came on for hearing before me on 18 March 2008. Subsequently, the applicants made written submissions on 4 April 2008 to which the respondent replied on 18 April 2008. The applicants then made submissions in reply on 28 April 2008 and then further submissions identifying the evidence relied upon in support of the orders on 13 May 2008. Lastly, the respondent made further submissions in reply on 27 May 2008. The further lists of documents, perhaps with the exception of the eleventh list, are therefore relevant in a consideration of this matter. The respondent has by filing the lists of documents to which I have referred indicated an understanding of his continuing obligations in relation to discovery. 11 The applicants accept that the decision of Besanko J in Jianshe Southern Pty Ltd v Turnbull Cooktown Pty Ltd (No 2) [2007] FCA 903 means that an order for judgment against the respondent as sought by the applicants would only be made if there has been very substantial default or blatant disregard of prior orders by the respondent. 12 His Honour applied a decision of the Full Court of the Federal Court in Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388. In that case, the Full Court was concerned with O 10 r 7 of the Rules which, at that time, dealt with procedure on default. Order 10 rule 7(1) empowered the Court to make orders of the kind now contained in O 35A r 3. At that time, those orders could be made when a party failed to comply with an order of the Court directing that party to take a step in the proceeding. The provisions of O 35A r 2, which now provide for default by a respondent, are somewhat wider than were contained in O 10 r 7 but the powers were much the same. 13 The majority (Wilcox and Gummow JJ) observed that there was no obligation on the part of the party seeking the exercise of the power to prove an intentional default or contumelious disregard for an order. There was no requirement on the part of a moving party to prove "inordinate and inexcusable delay", although that would be a significant matter in determining whether the power should be executed. 14 Their Honours also observed that the rule ought not to be used to cause parties to apply for orders "simply because there had been a non-compliance with a direction by the [other party], even though it does not cause or indicate a continuing problem in preparing the matter for an early trial". 15 Justices Wilcox and Gummow addressed the question of the exercise of the discretion and said at 396: The discretion conferred by O 10, r 7 is unconfined, except for the condition of non-compliance with a direction. As it is impossible to foresee all of the circumstances under which the rule might be sought to be used, it is undesirable to make any exhaustive statement of the circumstances under which the power granted by the rule will appropriately be exercised. We will not attempt to do so. But two situations are obvious candidates for the exercise of the power: cases in which the history of non-compliance by an applicant is such as to indicate an inability or unwillingness to co-operate with the Court and the other party or parties in having the matter ready for trial within an acceptable period and cases - whatever the applicant's state of mind or resources - in which the non-compliance is continuing and occasioning unnecessary delay, expense or other prejudice to the respondent. Although the history of the matter will always be relevant, it is more likely to be decisive in the first of these two situations. Even though the most recent non-compliance may be minor, the cumulative effect of an applicant's defaults may be such as to satisfy the judge that the applicant is either subjectively unwilling to co-operate or, for some reason, is unable to do so. Such a conclusion would not readily be reached; but, where it was, fairness to the respondent would normally require the summary dismissal of the proceeding. 16 The applicants also accepted that this "is not a clear case where it would be appropriate to enter judgment against the respondent at this time". 17 Apart from the affidavit evidence to which I have referred, the applicants also sought and obtained leave to cross-examine the respondent in respect of his compliance with the orders. 18 These are my reasons which have regard to the affidavit evidence, the oral evidence and the subsequent submissions. 19 Before I address the application itself, some understanding has to be had of the principal proceeding. 20 The first and third applicants are the proprietors of trade marks. They carry on substantial grocery and liquor wholesale businesses throughout Australia. In the conduct of their businesses, they supply grocery stock and liquor products to supermarket operators and liquor retailers in Australia. 21 The respondent was a shareholder director and secretary of Chadmar Enterprises Pty Ltd (Chadmar) which, in turn, was the sole shareholder of Kayso Pty Ltd (Kayso), both of which operated supermarkets in the Australian Capital Territory. 22 Between 1997 and 2004 the applicants supplied goods on credit to Chadmar and Kayso. On 7 September 2004 the second applicant served a statutory demand for payment against Chadmar. On 13 July 2005 an order was made for the winding up of Chadmar. On 29 November 2004 an order was made for the winding up of Kayso. 23 The applicants complain of conduct by the respondent subsequent to the orders for winding up of Chadmar and Kayso and, in particular, arising out of publications on a website which the respondent has established and other publications. 24 The applicants contend that the respondent has disclosed confidential information; threatens to interfere with contractual relationships existing between the applicants and third parties; has defamed them; alternatively, or in addition, has committed the tort of injurious falsehood; and has been guilty of misleading and deceptive conduct in contravention of ss 52 and 53 of the Trade Practices Act 1974 (Cth). The respondent denies all of those allegations. 25 Whether the respondent has complied with the orders made on 4 May 2007 must be determined by reference to the lists of documents which have been filed subsequent to those orders. 26 It is somewhat difficult to identify the documents which are said to address each of the categories which are in turn referred to in the orders, because the respondent has not filed his list of documents by reference to the orders or the particular categories of documents in the applicants' notice of motion of 2 February 2007. 27 The applicants have made an attempt to categorise the documents by reference to the notice of motion and the orders in their further submissions filed on 13 May 2008 but, as the applicants readily contend, "there is no means to identify if these documents do respond to the order or if there are any other documents which might respond to the orders". 28 It is the respondent's contention that he has complied with the orders for further and better discovery to the extent to which he is obliged under the Rules. Insofar as he has not complied, it is his assertion that this is due to his laptop computer having been stolen on or about 30 June 2006. 29 The respondent was cross-examined on his affidavits. 30 His evidence was that the hard copy documents which he has discovered were available to him in hard copy prior to the loss of his computer. The loss of his computer meant that he lost a lot of documents which otherwise would have become hard copy documents. He also, with the loss of his computer, lost contact with a number of persons with whom he had had prior contact. He did not keep written records of those contacts. 31 He maintained in his cross-examination that he had made discovery of all documents which are or were in his possession, custody or power of which he has a memory. 32 I have no reason to doubt Mr Bunn's evidence that he lost his computer in the circumstance in which he mentioned and, as a result, he has lost his ability to access a number of documents which were on the hard drive of his computer. 33 The applicants contend that it is open for me to find that it is not credible that the respondent does not have or has ever had any electronic or hard copy record of e-mails, facsimiles or letters or documents being transmitted or received by him relating to the categories of documents identified above. 34 The applicants contend that it is open to the Court to make an order pursuant to O 35A that the respondent file and serve an affidavit within seven days setting out details of all records of communication transmitted or received by the respondent with respect to the categories of discovery sought. 35 The applicants accept that "the respondent asserts on oath that he has no other contract or agreement provided to him to which one or more of the applicants are a party" but that it is for the Court to determine "if the respondent's protestations are credible or truthful." 36 The applicants accept that, ultimately, it would be for the trial judge to determine if the respondent's protestations in relation to his compliance with the orders are credible or truthful. They assert that on the face of the respondent's own documents "it might appear incredible that the respondent's memory supports the degree of recall recorded in, for example, the TIGA newsletter". By that, the applicants contend that it is highly unlikely that the respondent could have published the newsletters he did without access to some sort of document, whether electronic or hard copy, which allowed him to include the information in the newsletter. 37 The applicants rightly accept that that is not a matter for determination on this application. 38 In their submissions, the applicants seek an order pursuant to O 35A r 3(2)(a) and (5) that the respondent, within seven days of the order, file an affidavit expressly identifying: 1. the documents, if any, which respond to orders 1 and 2 made on 4 May 2007 by the categories referred to in the order and the notice of motion dated 2 February 2007; and 2. the documents, if any, which were, but no longer are, in the possession, custody or power of the respondent that correspond to the categories referred to in the order and the notice of motion dated 2 February 2007. 39 Further, the applicants seek an order that the respondent should make further and better discovery of the electronic record of the documents referred to in the orders of 4 May 2007 and all further electronic records as the respondent has, or has had, in his possession, custody or power relevant to the issues in dispute in the proceeding. 40 That order would go further than the orders made on 4 May 2007 but it was submitted the Court has power to make such an order. 41 Lastly, the applicants seek a consequential order that unless the respondent comply with the orders referred to above, that judgment be entered for the applicants in accordance with O 35A r 3(2)(e). 42 In the applicant's reply submissions, filed on 28 April 2008, the applicants seek that the respondent files even more affidavits in relation to this matter. They submit: 7. The applicants submit that, in light of this acknowledgment, the respondent's assertions that he has actively promoted the methods of communication identified for such an extended period of time without: 7.1 those communication methods being used at all; 7.2 any expectation or intention that those communication methods will be used at all, whether by himself or others, are not credible and should not be accepted by the Court. The applicants further submit that the respondent should be ordered to file an affidavit that expressly addresses the invitations he has made to the public to communicate with him about the allegations he makes against the applicants to identify what, if any, response he has had to each type of invitation. ... 12. This assertion indicates that there have been communications exchanged between the respondent and such persons. The respondent should file an affidavit identifying when, by what means and from what location the contacts were made. ... 18. If the respondent is unwilling or unable to discover his electronic records, the applicants seek orders for delivery up of the relevant computer(s) or other data storage device(s) in the possession, custody, power or control of the respondent. The applicants will provide such reasonable undertakings as the Court might require, including the limitation in the first instance of the discovery and production of the material to solicitors, Counsel and a nominated IT consultant. 43 This application has the potential to distract the parties from the object of this litigation which is the hearing and disposal of the principal proceeding. The applicants are, of course, entitled to expect that the respondent make discovery in accordance with his obligations under the Rules. That means, as I have explained to the respondent from time to time, that he must discover all documents relevant to any issue raised on the pleadings which are, or have, been in his possession, custody or power. 44 That obliges him to discover all of the hard copy documents which have been in his possession, custody or power and all of the electronic documents which have been in his possession, custody or power. 45 It is almost impossible now to work out from the very many affidavits and the number of submissions which have been made on both sides what it is that has been discovered and what it is that the applicants contend should be discovered. 46 I think that the applicants are entitled to know what documents the respondent has discovered in compliance with the orders made on 4 May 2007. 47 I intend to make an order directing the respondent to discover on oath those documents. That, essentially, is to accede to the applicants' first submission. 48 I am not prepared at this stage to make the further orders which the applicant seeks and whether I will make those further orders will depend upon the respondent's response to the orders. I think compliance with this order will better determine the extent of compliance with the orders of 4 May 2007. 49 I am not prepared at this stage to make an order in the absence of compliance with the orders to be made, that judgment be entered for the applicants. I am still not sure that the respondent has not complied with his obligations pursuant to the orders made on 4 May 2007. I need to be satisfied of that prior to taking any steps under O 35A. 50 If the applicants wish to continue with this application, the applicants can do so after the respondent has complied with the orders which I will make. 51 So there is no misunderstanding on any party's part, I make it clear the respondent has a continuing obligation to make discovery of any documents which are directly relevant to any issue raised on the pleadings. In those circumstances, the respondent should have discovered the documents which are referred to in paragraph 21 of the applicants' submissions of 4 April 2008. 52 There will be an order that: 1. The respondent file an affidavit within 21 days identifying precisely the documents in the further list of documents filed after 4 May 2007 which identify: 1.1 the documents, if any, which respond to orders 1 and 2 of the orders made on 4 May 2007 by reference to the categories in the order and the notice of motion dated 2 February 2007; and 1.2 the documents which were, but no longer are, in the respondent's possession, custody or power that correspond to the categories referred to in the order made on 4 May 2007 and by reference to the notice of motion dated 2 February 2007; and 1.3 the documents which have been discovered in response to order 3 of the orders made on 4 May 2007. 2. The respondent make further and better discovery of the electronic record of the documents referred to in the orders of 4 May 2007 and all such further electronic records as the respondent has or has had in his possession, custody or power relevant to the issues in dispute in this action within 21 days. 53 I will reserve the question of costs until such time as the respondent has complied with these orders. I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.