Millennium Charters Pty Limited v Macarthur Jet Charter Pty Limited

District Court of NSW|2020-05-07

Introduction

Millennium Charters Pty Limited applies by notice of motion filed 2 March 2020 to set aside a notice to produce issued by Macarthur Jet Charter Pty Limited in proceedings commenced by Millennium against Macarthur and two related parties, Falcon 50 Pty Limited and Dr Sandra McRae. It relies on the affidavit of Luke Cameron Buchanan of the same date, which I read.

Background

Millennium entered an Aircraft Lease Agreement with Macarthur. The Court was not provided with a copy of the Agreement, but certain terms were not disputed on the pleadings. The aircraft the subject of the Agreement was a specific Falcon 50 aircraft. In the Agreement, Macarthur was obliged to supply the services requested by Millennium if "Macarthur had the necessary Aircraft and Personnel available". So far as can be discerned, the use of the aircraft by Millennium arose when a "Request for Quote" led to an agreement between Millennium and Macarthur in respect of a specific service being provided.
Millennium asserts (and Macarthur denies) that sometime prior to August 2019, the Falcon 50 company sold part of its interest in the Aircraft on terms that the Aircraft would not be used for commercial purposes, that in August 2019 Macarthur informed Millennium that it was ceasing commercial operations, and that this amounted to a repudiation of the Aircraft Lease Agreement. Millennium says that in September 2019 it elected to accept the alleged repudiation and terminated the Aircraft Lease Agreement, and now sues for alleged loss and damage.

Notice to produce

Macarthur's notice to produce relevantly seeks certain documents which can be grouped into three categories: 1. Documents recording attempts by Millennium to source replacement aircraft from the date of the asserted termination of the agreement to date. 2. Copies of documents used by Millennium to calculate the losses claimed in the statement of claim. 3. Copies of documents recording the sale of the aircraft by the Falcon 50 company.
Production of the documents is resisted by Millennium on two bases: relevance and inadequate identification of the documents sought.

(a) Relevance: the connection between the documents sought in the notice to produce and the pleaded case

The issues between the parties are informed by the pleadings. It is convenient first to consider the relevance of the documents sought to the pleaded case.
The statement of claim relevantly asserts: 1. "Millennium has, and will continue to suffer, loss and damage until an equivalent replacement for the Aircraft is sourced." [1] 2. "Millennium may suffer additional loss and damage if a replacement for the Aircraft can be sourced only at a cost higher than that which would have applied under the Aircraft Lease Agreement for the remainder of the term." [2] 3. "Millennium's loss and damage is at least $691,467.50 consisting of the following amounts: 1) loss of profit from the date on which Macathur ceased commercial operations to 17 July 2020, estimated at $538,005; 2) the amount of $3,462.50 for marketing material which will have to be revised in circumstances where Millennium no longer has access to the Aircraft; and 3) in addition to 1) above, the amount of $150,000 as a result of Millennium being unable to perform medevacs between USA and Australia and between Europe and Australia." [3]
In addition, the statement of claim alleges "Millennium demanded payment from Macarthur" [4] which Macarthur failed or refused to pay. I infer that this means that the amounts specified above in the statement of claim were demanded, and those amounts were not paid.
Thus, on its pleadings, whether Millennium has suffered any damages depends upon its inability to source, or source economically, an "equivalent replacement" aircraft. It follows that attempts to source other aircraft are directly relevant, both to the existence of a loss and the quantification of that loss. To this extent at least, documents in the first category have relevance to Millennium's allegations. Further, the documents used to calculate the asserted damages, the second category, are relevant in the assessment of the appropriateness of the methodology or algorithm used to calculate the alleged damages.
As to the third category of documents concerning the sale of the Aircraft, as indicated earlier, the statement of claim alleges that the Falcon 50 company sold a part of its interest in the Aircraft [5] prior to the alleged repudiation, on terms that the "Aircraft would no longer be used for commercial purposes", [6] and that the Falcon 50 company intended by the sale to cause Macarthur to breach the Agreement. [7] This intention is the foundation of the claim by Millennium that the Falcon 50 company induced a breach of contract by Macarthur. Again, any documents recording the sale of that Aircraft, and a term prohibiting its use for commercial purposes, is directly relevant to the alleged claim.
Millennium says that the conduct of Millennium "after 20 September 2019 is not an issue that arises on the pleadings". [8] This is not correct. The conduct of Millennium after 20 September determines if it has suffered any and what damages, as the quoted particulars make plain.

(b) Identification of the relevant document

The other reason advanced by Millennium to resist production is that there is insufficient identification of the specific documents. It complains about the use of the term "equivalent replacement", asserting that this requires Millennium to make a subjective assessment about equivalence. [9]
Millennium makes reference to Patonga Beach Holdings Pty Ltd v Lyons [2009] NSWSC 869 at paras 11 to 15 and Loulach Developments Pty Ltd v Roads and Maritime Services No 2 [2018] NSWSC 1465 at para 12. The first passage clarifies the distinction between "specified document" in UCPR r 34.1, and a "specific document" that is "clearly identified" in UCPR r 21.10 with the former terminology permitting, for example, "all documents recording oral communications between A and B within a stated period and referring to a particular company", [10] thus, clarifying that the identification of one specific document is not required. What is impermissible is to require production of all documents relevant to the dispute or a particular subject matter for that "would be in effect discovery of documents". [11] That prohibition has no application here. Similarly, in Loulach, Leeming JA indicates the need for "the subject of the requirement for production" to be identified with "reasonable particularity", but this could be done by requiring production of a nominated file, or of documents "capable of being identified on their face" of answering the notice.
Millennium's complaint about the use of the term "equivalent replacement" is ironic. In the statement of claim, in the passage quoted above, [12] Millennium pleads, as a particular to para 19 the term "equivalent replacement" and "replacement". In these circumstances, no greater subjective assessment is required of Millennium than the judgment it has already made in the statement of claim. Nor do I think there is any other deficiency in the identification of the documents sought by the use of this term.
Millennium also challenges the identification of the second category of documents, those used to calculate its damages. The parties disagree about whether it is appropriate for Millennium to be required to assess whether a document was so used. There seems to be a material difference between whether Millennium used a document to calculate its pleaded damage, and whether it "used...or referred to" a document in creating some historical correspondence, the vice identified in Loulach at paras 15 and 16. But whether this be so or not, many documents of the nature sought may well have been created for the purpose of providing legal services, and are thus privileged. Their mere production, without inspection, is not conducive to achieving the overriding purpose of resolving the real issues in the proceedings, as mandated in s 56 of the Civil Procedure Act 2005.
What is important, in order to progress the resolution of the issue of damages, is for Millennium to provide full particulars of its damages, including how it calculates the sums of $538,005, $3,462.50, and $150,000. If those sums were derived from an expert report, which is intended to be relied on in the proceedings, it seems appropriate that the report be produced. It may be that the production of such a report would be sufficient to provide the relevant particulars.
For these reasons, I am inclined, under UCPR 34.2(1), to relieve Millennium of producing the second category of documents on terms that it supplies full particulars of the calculation of damages, including the reasoning to reach the figures particularised in the statement of claim, and that it produce any expert report in its possession that it intends to rely upon in the proceedings in respect of the quantification of its damages.
Millennium also seeks to be relieved of the obligation to produce the third category of documents, namely those which record the sale of the Aircraft, on the basis that it "would" have none. As I have found such documents relevant, relief from production should not be granted on this ground. If Millennium has no such document, then it need only say so directly in order to fulfil its requirements under the Notice.
Macarthur makes reference to whether Millennium did "mitigate their loss". [13] So far as can be discerned, the failure to mitigate loss is neither pleaded, [14] nor is a real issue in the proceedings. A failure to mitigate loss arises when an actual loss occurs, but that loss could, by reasonable action, have been averted in whole or in part. Here, so far as the pleadings currently reveal, the only damages issue seems to be whether, and in what amount, any loss occurred. The onus on that issue remains wholly on the plaintiff, Millennium. Neither Macarthur's reference to "mitigate", nor the absence of a defence of failure to mitigate loss, seems to be relevant to the issues raised in respect of the notice to produce about documents relevant to a proof of loss.
Millennium also raises a question about the timing of the notice to produce. If it was premature, as being prior to the close of pleadings, or inappropriate on the pleadings that then existed, it is not so now. That Millennium continues to resist production indicates that the timing of the motion is immaterial to the real issues in dispute.

Costs

As the defendants have been largely successful, the defendants' costs should be costs in the proceedings.

Orders

The orders of the Court are: 1. Pursuant to UCP Rule 34.2(1), I relieve the plaintiff from producing documents answering paragraphs 5, 6 and 7 of the Notice to Produce issued by the defendants on 19 February 2020. 2. I direct the plaintiff to provide full particulars of its damages, including the method of calculation used to derive the figures $538,005, $3,462.50 and $150,000 particularised in the Statement of Claim, within seven days. 3. I direct the plaintiff to serve within seven days any expert report in its possession upon which it intends to rely to establish its damages or the quantification of its loss. 4. I confirm the obligation on the plaintiff under UCP Rule 34.1 to produce documents answering paragraphs 2, 3, 4 and 8 of the Notice to Produce. 5. I otherwise dismiss the notice of motion filed 2 March 2020. 6. I order the defendants' costs of the motion to be costs in the proceedings. 7. Note the matter is listed for a status conference on 23 June 2020.

Endnotes

See Statement of Claim at [19] Particular A.
See Statement of Claim at [19] Particular B.
See Statement of Claim at [19] Particular C.
Statement of Claim at [21]-[22].
Statement of Claim at [26].
Statement of Claim at [27].
Statement of Claim at [29].
Plaintiff's written submissions, 8/4/20 at [16].
Plaintiff's written submissions, 8/4/20.
Patonga at [14].
Commissioner for Railways v Small (1938) 38 SR (NSW) 564, 573.
See [7] above.
Defendants' written submissions, 16/4/20 at [7].
Cf Plaintiff's written submissions, 24/4/20 at [8]. 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: 02 June 2020

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Judgment (8 paragraphs)

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Cases Cited (2)