North West Supermarkets Pty Ltd v The Leasing Centre

2 The relevant facts, which were not in contest, are as follows.

3 By three rental agreements dated 24 April 2008 ('the Rental Agreements'), the first plaintiff agreed to rent from the first defendant ('the defendant') certain business equipment for use in the first plaintiff's supermarkets. The first page of the Rental Agreements each contained a schedule, which included the following terms:

(a) The rent payable to the defendant was $1,210.45, $1,230.82 and $4,785.45 respectively per month inclusive of stamp duty and GST.

(b) The period of each agreement was 36 months from the date of acceptance by the owner (being 29 April 2008 to 29 April 2011).

4 The second and third pages of the Rental Agreements contained the Terms and Conditions of Rental, which included the following clause ('Clause 23'):

23 renewal This Agreement is for the Period of the Agreement set out in the Schedule (the 'initial term'). The term of this Agreement will be automatically extended at the end of the initial term (and any earlier extension under this clause) for a period being the lesser of the period of the initial term and 12 months unless the Renter: (a) Delivers to the Owner written notice at least three months (but no more than six months) prior to the expiration of the initial term; and (b) Delivers at the Renter's expense the equipment to the Owner in accordance with the provisions of clause 4(l) hereof on or before the expiry of the initial term.

5 On the same day the first plaintiff and the defendant entered into the Rental Agreements, they also entered into three purchase option agreements ('the Option Agreements') with respect to the same items of business equipment the subject of the Rental Agreements. The substantial term of the Option Agreements provided as follows:

NOW IT IS HEREBY AGREED between TLC [The Leasing Centre (Aust) Pty Ltd, the first defendant] and The Renter that in consideration of the parties entering into the said Rental Agreement AND PROVIDED The Renter meets all obligations under the terms and conditions of the said Agreement and providing (pursuant to clause 23) the Renter provides at least three months but no more than six months written notice of their intent to exercise this Option, and provided always that at no time does The Renter default under said terms and conditions, and provided that payment of all monies due (monthly rentals, arrears and other charges accrued) are made to TLC, then TLC will grant to The Renter an option to purchase the goods that are subject to the said Rental Agreement. Such option may be exercised by the payment by The Renter to TLC the sum of $1.00 following completion of the rental term. This option cannot be sold, transferred or assigned.

6 The Rental Agreements and associated Option Agreements were each executed on behalf of the first plaintiff by its director, the second plaintiff. The second plaintiff also executed the Rental Agreements as guarantor.

7 Between September 2010 and July 2011, the defendant had the following communications with the Australian Securities and Investments Commission ('ASIC').

(a) On 3 September 2010, ASIC telephoned and then sent a letter to the defendant, which relevantly stated the following:

As discussed during our telephone conversation on 3 September 2010, ASIC has received a number of complaints in relation to contracts held with The Leasing Centre (Aust) Pty Limited ('The Leasing Centre').

The nature of these complaints relates primarily to a contract provision requiring clients to notify, within three to six months prior to the expiration of the initial contract term, of their intention to end the contract, or purchase the goods supplied. Where notification is not received, the agreement term is automatically extended for a further 12 months. A number of complainants have alleged that they have been misled by The Leasing Centre in this regard.[1]

I discussed with you the reason(s) for the requirement to give three to six months notice of a client's intention to either return or purchase goods. You advised that this period of time is required for remarketing purposes; the three to six months allows The Leasing Centre to source new clients, minimising financial loss.

You highlighted that The Leasing Centre currently has approximately 8,000 active contracts, and as such you believe the complaints received by ASIC are likely to represent a very small number of clients. You also noted that it is The Leasing Centre's standard practice to advise clients of the above mentioned provision via the following means:

• In marketing material
• Upon providing a quote
• As part of the terms and conditions of the contract
• When a client contacts the customer service centre to enquire about their account.

As discussed, to minimise further complaints, it is recommended by ASIC that The Leasing Centre implement a measure to remind clients, within the three to six month timeframe, of the need to advise of their intentions. You advised that you would consider this option and respond in due course.

Please provide your response to this letter by Friday 10 September 2010. I can be contacted on the above telephone number or email address should you wish to discuss the matter further.

(b) By letter dated 8 September 2010 to ASIC, Mr Daniel Moses, the managing director of the defendant, relevantly replied as follows:

I refer to our conversation on 3 September 2010 and your letter dated 3 September 2010.

I note that you have not suggested in your letter that ASIC itself has formed the view that The Leasing Centre (Aust) Pty Limited ('TLC') has engaged in any misleading or unlawful conduct.

As I understand it, you have requested a response from us because:

1. ASIC has received a number of complaints in relation to contracts held with TLC; and
2. The nature of these complaints relate to a contract provision requiring clients to notify, within three to six months prior to the expiration of the initial contract term, of their intention to end the contract, or purchase the goods supplied; and
3. A number of complainants have alleged they have been misled by TLC.

TLC is mindful of the need to behave appropriately in all of its dealings with customers and members of the public. Accordingly, in order to enable TLC to provide a proper and meaningful response to your letter, I ask that you please provide the following further information to TLC:

1. The actual number of complaints that have been made to ASIC.
2. The identity of the complainants who have made the complaints.

3. The precise nature of each complaint, including:

(a) What each complainant alleges they have been misled about; and

(b) What specific conduct by our client is said to have been misleading.

1. What legislation or other law is it alleged TLC may be in breach of as a consequence of any of the matters the subject of the complaints.

I suggest that once TLC is in receipt of the above information, it be given an opportunity to consider that response and then a meeting be arranged with ASIC and senior representatives of TLC to obtain a better understanding of the concerns that ASIC has and to explore ways in which steps may be put into place by TLC to address those concerns.

As an aside, I do not believe that the words in the second sentence of the third paragraph of your letter accurately reflect what I said to you in our conversation of 3 September 2010. I would be pleased to elaborate in that regard in due course.

Should you have any further queries, please do not hesitate to contact me.

(c) By letter dated 21 September 2010 to Mr Moses of the defendant, ASIC replied as follows:

Thank you for your letter dated 8 September 2010.

I note your request for further details regarding complaints ASIC has received and advise that ASIC does not release details pertaining to individual consumer complaints. However as previously advised, a number of complainants have alleged that representations were made to them by The Leasing Centre (Aust) Pty Ltd (The Leasing Centre), leading to the understanding that ownership of goods subject to an agreement would automatically be transferred to them upon a final payment being made at the end of the agreement term.

Whilst the complaints may have prompted closer examination of The Leasing Centre's contracts, our contact with you at this point in time centres on ASIC having some concerns with the way in which The Leasing Centre's contracts are managed and we encourage you to focus on that aspect of our inquiries. You should note that ASIC does not need to form a positive view about whether The Leasing Centre has engaged in misleading or unlawful conduct prior to conducting additional enquiries.

It has been noted by ASIC that The Leasing Centre does not contact clients coming toward the end of their rental contract to remind them of the right to elect to buy out the goods. The consequence for clients failing to make a nomination within the stipulated timeframe is that the contract is continued for a further 12 months. We question whether this is reasonable given that those clients could have purchased the goods outright for the payment of one single additional month's rental beyond the original term of the contract. Having regard to the length of some of the rental contracts it is conceivable, even likely, that some clients will overlook or forget to notify The Leasing Centre of their intention and the complaints we have received bear this out.

One solution discussed in our phone conversation and suggested in our letter of 3 September 2010 was for The Leasing Centre to adopt a practice of contacting clients, within the appropriate timeframe, to remind them of the need to advise The Leasing Centre of their intentions before the contract moves into its final three months. You advised that The Leasing Centre would give this consideration and respond.

I note that The Leasing Centre is registered for credit and take this opportunity to remind you that credit licensees must do all things necessary to ensure that any credit activities authorised by the licence are engaged in fairly, honestly and efficiently. Licensees must comply with credit legislation which includes, but is not limited to, the National Consumer Credit Protection Act 2009 and Australian Securities and Investments Commission Act 2001 (ASIC Act). Our current concerns centre around Part 2 Division 2 of the ASIC Act. This Part provides inter alia that a person must not engage in conduct that is unconscionable or misleading or deceptive.

Other legislation that The Leasing Centre should be aware of in the course of its consumer lending business includes the newly introduced unfair contract terms provisions. These provisions amend the ASIC Act by introducing provisions to address unfair contract terms in relation to financial services and financial products.

Specifically, Section 12BG of the ASIC Act provides that a term in a consumer contract is unfair if it:

• causes a significant imbalance in the parties' rights and obligations under the standard form contract, and
• is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term, and
• would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

Although the unfair contract terms provisions currently apply to standard form consumer contracts, you may be aware that the second phase of credit reforms will consider, among other things, the regulation of credit for small businesses.

I trust this information is of assistance. I would be happy to arrange a telephone hook-up between ASIC staff and The Leasing Centre staff should you have other matters you cannot address in your written response. I look forward to hearing from you.

(d) By letter dated 20 October 2010, Mr Moses replied to ASIC as follows:

We refer to your letter dated 21 September 2010.

We are of course interested in working with you to address the matters that you have raised.

In view of the nature and scope of the issues raised in your letter, we consider that the best way forward is for us to meet with you to discuss each of the matters that you have raised.

We note that you are located in Adelaide and confirm that if you are unable to travel to Sydney for the meeting, we would be happy to make arrangements to travel to Adelaide for the meeting

In the circumstances, we feel it is appropriate that our lawyer also attend the meeting.

If you are able to please provide us with a range of ASIC's available dates in October/November for the meeting, we will be in a position to advise you as to which dates are suitable to both us and our lawyer within a relatively short timeframe. Please note that I am scheduled for Annual Leave from 17 November to 26 November inclusive.

We look forward to hearing from you.

Should you have any further queries, please do not hesitate to contact me.

(e) On 11 November 2010 there was a meeting between the defendant (represented by Mr Moses and Mr Terry Spurber, the defendant's solicitor) and ASIC (represented by Mr David Carson, senior manager, Ms Emily Howman, analyst, and Mr Ian Counsell, senior analyst). The meeting was the subject of a detailed minute prepared and held by ASIC. The minute relevantly included references to the following discussions:

...

In ASIC's opinion, this presents an imbalance in the rights and obligations of the parties to the contract. Should such a clause be used in the consumer space, ASIC considers it would likely breach of the [sic] unfair contract terms provisions.

...

TLC was advised that although ASIC acknowledges that the legislation relating to consumer credit does not apply to their business model, ASIC still has jurisdiction over misleading and deceptive/unconscionable conduct in relation to their business dealings. It was noted that although at this stage ASIC has not formed a view that TLC has engaged in such conduct, now that TLC is aware of the issues, failing to take action and allowing repeat instances of this issue could amount to conduct that is misleading or deceptive through silence/omission. For this reason, ASIC recommends that TLC adopt the practice of reminding clients subject to a purchase option agreement, within the appropriate timeframe, of the notification requirement.

...

TLC was advised that ASIC is satisfied that they are taking on board the issue and would look to hear from them again in February. They advised that they will keep ASIC informed.

(f) Following the meeting, by letter dated 16 November 2010 to ASIC, Mr Moses stated as follows:

We refer to our meeting with Emily Howman, Ian Counsell and David Carson.

We thank you for your input and the opportunity given to us to explain our position on the matters you have raised with your prior correspondence.

As we understand it, there is nothing further that you require from us.

As we mentioned to you in the meeting, we are looking at putting into place measures to remind renters about their options at the end of the term of the agreement, prior to the three to six month period within which they are required to give you notice if they wish.

We confirm that we will keep you updated with our progress in this regard.

Should you have any further queries, please do not hesitate to contact me.

(g) By email dated 1 April 2011 to Mr Moses, ASIC stated as follows:

I hope you are well.

Just following up on the progress of the measures mentioned in your letter dated 16 November 2010.

Could you please provide me with an update?

(h) By email dated 4 April 2011 to ASIC, Mr Moses explained the delay and stated as follows:

We had started the process of implementing change to TLC's process arising out of the meeting - however, this needed to be put on hold to focus on the internal re-structure.

We have now re-started the process of putting measures into place - and expect to have something to report on in the next few weeks.

(i) By email dated 21 June 2011 to Mr Moses, Ms Howman of ASIC asked as follows:

Just following up on the below email [being the email of Mr Moses dated 4 April 2011]. Could you please advise if this has now been finalised?

(j) By email dated 23 June 2011 to ASIC, Mr Moses apologised for not responding sooner and stated as follows:

We have completed the work internally on this and I will respond to you next week with more detail.

(k) By email dated 4 July 2011 to Mr Moses, Ms Howman of ASIC stated as follows:

Could you please provide your response to this? We are hoping to finalise the matter.

(l) By email dated 4 July 2011 to ASIC, Mr Moses replied to Ms Howman's email of earlier the same day relevantly stating as follows:

We have finalised our internal process to address the concerns raised during our discussions late last year. This process has been implemented as at 1 July 2011.

Please find attached a copy of the letter that will be sent to a Renter 12 months before the initial expiry of the Rental Agreement. This will of course be on our letterhead and refer to the relevant Rental Agreement number. Furthermore, and as per our discussions, this reminder comes before the period during which the Renter is required to give notice to The Leasing Centre of its intentions should they wish.

I trust that this finalises the matter. Please feel free to contact me if you have any further queries.

The above email attached a draft letter in the following form:

The Leasing Centre is one of Australia's most broad-based commercial equipment financiers. Our unique approach means we view every customer as a partner, and would be pleased to work with you on providing finance solutions for almost any commercial asset you need to run your business. Whether It's [sic] IT or office equipment, Industrial or construction equipment, materials handling, POS, or transportation and motor vehicles, we're in the perfect position to help your business grow.

One of the benefits of a rental or operating lease facility with The Leasing Centre is the flexibility with which we approach the end of term - allowing you to make the decision close to the end of the term so you know it's the right one for your business. It's now approaching the opportune time for you to consider which option you would like to pursue regarding Rental Agreement XXXXXXXXX.

You may wish to take advantage now of more up-to-date technology and consider replacing your current equipment with new equipment, before the expiry of your existing Agreement. In many cases, we have the ability to help you acquire the new equipment at a monthly payment close to the amount you're currently paying.

Should you not wish to upgrade your equipment now, during the period [date] to [date] you need to advise us in writing ..., which of the following options you would like to pursue at the end of your Agreement. You could choose to return the equipment and replace it with new equipment and enter into a new rental agreement or continue renting the equipment under the current Agreement. You might also consider offering to purchase the equipment, or simply return the equipment with no further obligations.

The rental agreement sets out some terms and conditions which are relevant to what happens at the end of the term of the rental agreement. We suggest you read those terms and conditions if you are not familiar with them. Of course, if you need to speak with someone to better understand the various options, please feel free to call your Account Manager or Customer Care team ..., and they'd be only too happy to discuss further.

(m) By email dated 8 July 2011 to Mr Moses, Ms Howman of ASIC replied to the above email as follows:

Thanks for this.

We were expecting that the reminder would be sent closer to, if not within, the three to six month notification timeframe. Is there a specific reason for the 12 month period? Our concern is that there is still a six month window between the reminder and a client's ability to notify of their decision.

(n) By email dated 14 July 2011 to ASIC, Mr Moses replied to the above email as follows:

Apologies for not responding sooner - I have been interstate on business.

In response to your query below, we had planned on sending the reminder 6 months before the notification period to allow the client an adequate amount of time to assess its options and to make the necessary arrangements for either upgrading the equipment, returning the equipment or acquiring the equipment. From our experience, we have learnt that many of our customers operate businesses where the optimum time to start looking at options, which include the possibility of replacing or acquiring the equipment, is 6 months before the notification period.

We understand that you would like the letter to be sent closer to the 3-6 month notification period. Presumably this is because you have in mind a client receives the letter but forgets about its contents over the ensuing 6 months. Taking that into account, we feel that we could probably send the notice 3 months prior to that period (rather than the 6 months we initially proposed). We feel that this still maintains a balance between providing the client with the adequate time to best assess their options and reminding customers of the options available under the rental agreement so that they have in mind those options when the 3-6 months notification period approaches.

As stated during our initial discussions, we are committed to working with ASIC to address your concerns and trust that we have now done this to your satisfaction.

I look forward to your response.

(o) By email dated 15 July 2011 to Mr Moses, Ms Howman of ASIC replied to the email of 14 July 2011 as follows:

Thank you for your response in your reconsideration of the timeframe before sending the reminder. This satisfies our concerns.

Thank you for your continued assistance throughout.

(p) By email dated 15 July 2011 to ASIC, Mr Moses replies to the above email as follows:

Thank you for letting me know. I appreciate your assistance with this as well.

Should you have any further queries, please do not hesitate to contact me.

8 It was not in issue that copies of all of the above documents, except the meeting minute referred to in sub-paragraph (e), ('the ASIC documents') were in the possession of the defendant at the relevant times, and that none of the documents were discovered in the Magistrates' Court proceeding.

9 The monthly rental payments under the Rental Agreements were made by direct debit authorities, which continued after the expiration of the initial term under the Rental Agreements on 29 April 2011 until July 2011.

10 In July 2011, the defendant prepared a file note of a telephone conversation with the second plaintiff in which the second plaintiff says that the Rental Agreements should have expired. According to the file note, Mr Nick Aronson, an employee of the defendant, explained that pursuant to Clause 23 the Rental Agreements were extended for a further 12 months because of the failure of the first plaintiff to give notice under that clause. The defendant's file note recorded the second plaintiff as saying that he would complain to the Australian Competition and Consumer Commission ('the ACCC') and the 'finance ombudsman'.

11 A file note prepared by the defendant on 12 July 2011 recorded that the following email was sent to the second plaintiff that day:

Hi Brendan, Further to your conversation with Nick Aronson yesterday I have received the three Rental Agreements (R004644400, R004644403 and R004644404) in dispute. I confirm that Northwest Supermarkets Pty Limited is currently renting equipment from The Leasing Centre and all instalments paid to date are payable under the terms and conditions of those three Agreements.

I also confirm that, in the absence of your written notice of intention by 29 January 2011 the terms of the abovementioned Rental Agreements have renewed for a further 12 months. Accordingly, all three Rental Agreements are currently due to expire on 29 April 2012 at which time you will have the option to return the equipment to TLC in fair working order, purchase the equipment for fair market value or continue to rent on a daily basis, with rental instalments payable monthly in advance.

12 On 12 December 2011, the first plaintiff filed a complaint against the defendant in the Magistrates' Court claiming the following:

(a) damages in the sum of $14,353.35 being the amounts received by the defendant for direct debits made after the expiry of the initial contract term;

(b) a declaration that the provisions requiring notice in the Rental Agreements and the Option Agreements were void; and

(c) a declaration that the title in the goods the subject of the Rental Agreements had passed to the first plaintiff.

13 On 10 February 2012, the defendant filed a notice of defence in the Magistrates' Court proceeding, and a counterclaim against the first plaintiff in which the defendant claimed $65,466.56 being rental payments due under the Rental Agreements as at 1 December 2011; and a similar claim against the second plaintiff (in this proceeding) pursuant to the guarantee.[2]

14 On 2 March 2012, the plaintiffs filed a defence to counterclaim.

15 On 26 March 2012, an affidavit of documents was sworn by Mr Tehshin Ching, the financial controller of the defendant.

16 By email dated 18 May 2012 to Mr Jeffrey Doo, the in-house lawyer for the defendant, Mr Samuel McMahon, a lawyer with FC Law (the solicitors for the first plaintiff in the Magistrates' Court proceeding), complained about the excessive number of documents which had been discovered. After referring to r 29.05 of the Magistrates' Court General Civil Procedure Rules 2010 ('the Rules'), Mr McMahon relevantly stated as follows:

The contents of the first two folders, with some exceptions, appeared largely to be relevant. At least it appeared that some contemplation had been given to each individual document's relevance. When I began to peruse Folder 3, however, it appeared that no further thought had been given to the documents' relevance. I carefully perused every page up to page 275 of that Folder, a process which took approximately half an hour. Not one of the documents I perused in that space appeared to be relevant. Contrarily, the documents appeared to be emails internally within your company and with the broker and financial institutions concerning my clients' credit assessment, such minutiae as who was in possession of the originally signed documents which my client had sent you, and other trivialities of no relevance to this case. Furthermore, the documents appeared to have been indiscriminately pulled from a computer email archive. There were numerous duplications, triplications and even quadruplications of identical emails, which I infer is explicable from the circumstance that two or three or four persons in your company had been party to the emails and for each person a party to the email a further copy of that email was produced and included. As an example picked entirely at random, pages 421-423 of Folder 3 were identical with each other (a triplication). Pages 424-427 of Folder 3 were identical with each other (a quadruplication). This is bad enough in the case of emails being only one page. It is even worse in the case of emails with multiple pages and attachments. It is even worse when those emails are not even relevant in the first place.

It would take me an estimated 5 hours to peruse Folders 3-13 entirely with the due care which I ought to give documents you have produced to us under discovery under the pretext that they are relevant. Judging by the first half hour's worth, this would be a complete waste of time and costs.

Given the close proximity of the trial, I require that you serve an Affidavit of Documents which properly accords with Order 29 of the Rules by noon on Tuesday. Failure to do so will result in the filing of an application under Rule 29.11, particularly paragraph (a) of that Rule, for an order that you do so. Such an order will no doubt result in an adjournment of the trial, and costs thrown away will be claimed, as well as costs of the application.

17 By letter dated 21 May 2012 to Mr McMahon, Mr Doo replied to the above email as follows:

We refer to your email dated 18 May 2012.

The Leasing Centre's affidavit of discovery was served upon you on 27 March 2012 and you were advised that it comprised 13 lever arch folders of documents.

On 30 April 2012 you requested inspection of The Leasing Centre's discovered documents.

On 4 May 2012, The Leasing Centre advised you that it's [sic] discovered documents were available for inspection from 7 May 2012 at its Melbourne address for service.

You initially arranged to attend and inspect the discovered documents on the afternoon of 17 May 2012. You then rescheduled that inspection to the afternoon of 18 May 2012.

The matters raised by your client in its complaint against The Leasing Centre are extremely broad, with general particulars. For example, the Statement of Claim raises allegations of unconscionability and unfair contract. These may go to the nature of the rental agreements between the parties and the manner in which the rental agreements were initiated, assessed and concluded.

In order to comply with its obligations under Rule 29.01.1(3) of the Magistrates' Court General Civil Procedure Rules 2010, The Leasing Centre saw fit and assessed as relevant all documents and records pertaining to the manner in which the agreements were initiated, assessed and concluded.

The Leasing Centre takes its obligations under the Magistrates' Court General Civil Procedure Rules 2010 very seriously. Accordingly, in our view the only appropriate course was to ensure that there was full and complete discovery of all documents relating to the transactions.

The determination of whether a document is or is not relevant to your client's claim against The Leasing Centre, and your client's defence to the counterclaim in accordance with Rule 29.01.1(3)(d) of the Magistrates' Court General Civil Procedure Rules 2010 necessarily only requires a reasonable enquiry as to that relevance by The Leasing Centre. Rule 29.01.1(3) does not contemplate that the party giving discovery undertake a detailed forensic analysis of the relevance that your client may or may not ascribe to a document. That is a matter for your client.

Your assertion that The Leasing Centre has made no assessment of the relevance of the documents it has discovered is misguided, as is your foreshadowed application.

However, with reference to the matters raised in your email, The Leasing Centre is willing, for your assistance, to reduce its discovered documents on the basis that your email is an indication by you as to what your client considers may be relevant to its claim and, together with those documents that The Leasing Centre may rely upon in the proceedings.

Accordingly, we enclose by way of service an updated Affidavit of Documents sworn 21 May 2012 noting that the following categories of documents, referable to your email, have been withdrawn from discovery:

1. Emails and attachments between TLC and financial institutions regarding rental agreements;

2. Emails relating to your client's credit worthiness; and

1. Duplicates of emails where the electronic record comprises duplicates of emails with multiple recipients.

The documents are available for inspection from Monday 21 May 2012 at The Leasing Centre's Melbourne address for service. Please contact our office to arrange a convenient time should you wish to undertake inspection.

Please note that The Leasing Centre is of the view that it has fully complied with its obligations under the Magistrates' Court General Civil Procedure Rules 2010 in relation to discovery.

Further, The Leasing Centre will tender this letter to the Court in the event that your client makes any submission to the Court that an inference be drawn against The Leasing Centre by virtue of it not discovering a document.

18 On 21 May 2012, Mr Ching swore a replacement affidavit of documents reducing the number of discoverable documents.

19 On 12 June 2012, the Chief Magistrate delivered written reasons in which he dismissed the first plaintiff's claim. With respect to the defendant's counterclaim, the Chief Magistrate ordered that the plaintiffs pay the defendant the sum of $71,337.07 plus interest.

20 On 12 June 2012, after the Chief Magistrate handed down the Decision, the first plaintiff and the defendant entered into an agreement under which the first plaintiff agreed to pay $32,000 to the defendant for the equipment referred to in the Rental Agreements and in satisfaction of the defendant's claim for costs.

21 In or around October 2012, the second plaintiff in this proceeding was telephoned by Mr Davan Philips from the ACCC about complaints the plaintiffs had made to both the ACCC and ASIC regarding the defendant's Rental Agreements prior to commencing the Magistrates' Court proceeding. Mr Philips told the second plaintiff that there had been an inquiry by the ACCC into the defendant and specifically into its standard contract renewal processes, and that following discussions with ASIC, the defendant had agreed to modify its practices. Mr Philips said that he would ask Mr David Carton of ASIC to call the second plaintiff to speak to him about the matter.

22 Approximately one month later, Mr Carton called the second plaintiff and informed him that ASIC had had discussions with the defendant and the defendant had agreed to provide a notice to each of its clients to advise them of the commencement of the notice period in which they could exercise their options under the Rental Agreements. Mr Carton said that he was unable to provide any documentation without a freedom of information request to ASIC under the Freedom of Information Act 1982 (Cth).

23 On 20 November 2012, the second plaintiff lodged a freedom of information request with ASIC ('the FOI request') seeking documents relating to ASIC's dealings with the defendant. As a result of the FOI request and the subsequent requests for internal review by letters dated 7 February 2013 and 11 June 2013, ASIC provided a number of documents to the second plaintiff. The documents included the ASIC documents, which had not been discovered by the defendant in the Magistrates' Court proceeding. It is the non-discovery of the ASIC documents which the plaintiffs contend entitles them to the relief sought in this proceeding.

24 Between June and September 2013, there was correspondence between the solicitors for the plaintiffs and Mr Doo for the defendant with respect to the alleged non-compliance by the defendant to comply with its discovery obligations.

25 On 15 November 2013, the solicitors for the plaintiffs, HWL Ebsworth Lawyers, filed a summons in the Magistrates' Court, which sought an order that the orders made by the Chief Magistrate on 12 June 2012 be set aside and the Magistrates' Court proceeding be reheard, together with an affidavit of Mr Bernard Edward Blake sworn 14 November 2013, which detailed the circumstances of the alleged non-compliance by the defendant with its discovery obligations. The summons and affidavit were accepted by the registry on 15 November 2013 and a return date for the summons was fixed for 28 November 2013.

26 In an affidavit filed in this proceeding, Ms Carlie Scher, a trainee solicitor at HWL Ebsworth Lawyers, deposes that, on 25 November 2013, a registry staff member at the Magistrates' Court said to her as follows:

(a) There was no power to have the Magistrates' Court proceeding reheard as all parties were present at the original hearing.

(b) Changing the form in which the relief was sought from the Magistrates' Court in respect of the Magistrates' Court proceeding would not alter this conclusion.

(c) There is no power to change the return date to the Magistrates' Court summons.

(d) They (being the registry staff member) had confirmed these matters with a Registrar of the Magistrates' Court.

27 As a result, the solicitors for the plaintiffs requested that the hearing date of 28 November 2013 be vacated.

28 On 18 December 2013, the plaintiffs filed the originating motion in this proceeding seeking to set aside the order of the Chief Magistrate of 12 June 2012 and an order that the matter be remitted to the Magistrates' Court for a rehearing, together with an affidavit of Mr Blake sworn 17 December 2013.

29 On 17 July 2014, the plaintiffs filed an amended originating motion pursuant to the orders of Associate Justice Derham dated 16 July 2014 which joined the Magistrates' Court of Victoria as the second defendant. The second defendant took no part in this proceeding.

30 Dr Hanak, who appeared for the plaintiffs, submitted that the Decision should be set aside and the claim be reheard on the basis of the following contentions:

(a) The defendant's failure to discover the ASIC documents was in breach of its discovery obligations in the Magistrates' Court proceeding.

(b) The non-compliance with the discovery obligations meant that the Court should approach the issue in accordance with the principles in the Commonwealth Bank of Australia v Quade[3] rather than the principles in Greater Wollongong Corporation v Cowan.[4]

(c) The defendant's failure to discover the ASIC documents demonstrated a high degree of culpability.

(d) There was at least a very real possibility that the discovery of the ASIC documents would have resulted in the first plaintiff succeeding in the Magistrates' Court proceeding.

(e) Accordingly, the best interests of justice required the Decision to be set aside and the first plaintiff's claim be reheard.

Non-compliance by the defendant with its discovery obligations

31 The scope of discovery is prescribed by r 29.01.1 of the Rules, which provides as follows:

29.01.1 Scope of discovery

(1) Unless the Court otherwise orders, discovery of documents pursuant to this Order is limited to the documents referred to in paragraph (3).

(2) Paragraph (1) applies despite any other rule of law to the contrary.

(3) Without limiting Rule 29.05, for the purposes of this Order, the documents required to be discovered are any of the following documents of which the party giving discovery is, after a reasonable search, aware at the time discovery is given -

(a) documents on which the party relies;

(b) documents that adversely affect the party's own case;

(c) documents that adversely affect another party's case;

(d) documents that support another party's case.

(4) Notwithstanding paragraph (3) -

(a) if a party giving discovery reasonably believes that a document is already in the possession of the party to which discovery is given, the party giving discovery is not required to discover that document;

(b) a party required to give discovery who has, or has had in his, her or its possession more than one copy, however made, of a particular document is not required to give discovery of additional copies by reason only of the fact that the original or any other copy is discoverable.

(5) For the purposes of paragraph (3), in making a reasonable search a party may take into account -

(a) the nature and complexity of the proceeding;

(b) the number of documents involved;

(c) the ease and cost of retrieving a document;

(d) the significance of any document to be found; and

(e) any other relevant matter.

32 For the purposes of determining whether a document would 'support' or 'adversely affect' a party's 'case', it was common ground between the parties that the reference to a party's 'case' must be determined by reference to the pleadings.[5]

33 The plaintiffs alleged that the ASIC documents were relevant to the allegation of unconscionable conduct pleaded in paragraph 9 of the statement of claim in the Magistrates' Court proceeding which alleged as follows:

The terms purportedly included in the Contract as set out in the preceding paragraph hereof were void in that:

(a) both terms are contradictory to each other and to the remainder of the Agreements; and

(b) the inclusion of or the reliance upon the said purported terms constitutes unconscionable conduct within the meaning of Section 51AC of the Trade Practices Act 1974 (as enforced on 24 April 2008) and within the meaning of Section 22 of the Australian Consumer Law.

Particulars

(i) The goods the subject of the Agreements were at the time of expiry of thirty six (36) months from the commencement of the Agreements of negligible commercial value.

(ii) The Defendant would have no reasonable prospect of letting the same goods to another renter following expiry of thirty six (36) months from the commencement of the Agreements.

(iii) There were no legitimate interests of the Defendant which made necessary the conditions of notice which the terms purport to require the Plaintiff to comply with.

(iv) It was unreasonable to require the giving of notice as set out in the purported terms without the Defendant alerting the Plaintiff to the relevant periods for giving notice pursuant to the purported terms.

(v) The Defendant was unwilling to negotiate the form of the Contracts.

(vi) The Defendant by purporting to include the terms and rely on them did not act in good faith.

34 The critical content of the ASIC documents as identified by the plaintiffs were the following:

(a) The requirements in Clause 23 of the Rental Agreements and the Option Agreements that clients give 3 to 6 months' notice of their intention to end the contract or purchase the goods supplied ('the Notice Requirements') had been the subject of a number of complaints.

(b) The letter dated 3 September 2010 from ASIC to the defendant recorded that the defendant had advised that the period of notice was required for any marketing purposes and allowed the defendant 'to source new clients, minimising financial loss'.

35 On behalf of the plaintiffs, it was submitted that these facts were relevant for the following reasons:

(a) The prior complaints were relevant because they supported a contention that:

(i) the defendant was engaged in a 'system of conduct or pattern of behaviour' which s 21(4) of the Australian Consumer Law (Sch 2 to the Competition and Consumer Act 2010 (Cth)) specifically provided unconscionable conduct was 'capable of applying to'; and

(ii) the defendant knew the effect that the Notice Requirements were having on its customers.

The plaintiffs alleged that these matters were relevant to the allegations in sub-paragraph (vi) of the particulars to paragraph 9 of the statement of claim that the defendant did not act in good faith.

(b) The letter from ASIC dated 3 September 2010, which noted the defendant's stated basis for the Notice Requirements (that is, 'to source new clients, minimising financial loss'), was relevant to the allegations in sub-paragraphs (iii) and (iv) of the particulars to paragraph 9 of the statement of claim extracted at [33] above.

It was submitted that prior knowledge of the defendant's asserted commercial reasoning behind the Notice Requirements would have made it '... very easy to unpick' as not being the true commercial reason.

(c) The ASIC documents would have disclosed the change of practice as requested by ASIC thereby demonstrating how the defendant could have given notice of the requirement and still satisfied its stated commercial requirements.

36 Mr Caillard, who appeared on behalf of the defendant, submitted that the ASIC documents were not relevant for the following reasons:

(a) The pleadings did not make any allegation about knowledge, previous complaints or systematic conduct, which would have indicated that the ASIC documents were relevant.

(b) The ASIC documents did not refer to unconscionable conduct and did not make any finding that there had been misleading or deceptive conduct.

(c) The discovery would have disclosed that there were approximately seven complaints out of approximately 8,000 relevant rental contracts since 2001, which would not have supported any systematic conduct and, as the Chief Magistrate found, the complaints with respect to the Notice Requirements involved their own factual circumstances.

37 It was submitted by counsel for the plaintiffs that there had been a high degree of culpability in the failure of the defendant to comply with its discovery obligations for the following reasons:

(a) The defendant had discovered duplicates, triplicates and even quadruplicates from which it was submitted that it should be inferred that the defendant, and in particular its in-house lawyer Mr Doo, had not had adequate regard to O 29 and in particular sub-r (4)(b) of the Rules. It was further submitted that the Court should reject Mr Doo's evidence that he had had regard to r 29.01.1(5) because this evidence had not been included in his affidavit.

(b) Mr Doo had not discovered documents which would have identified the alleged legitimate interests of the defendant in pursuing the Notice Requirements.

38 Counsel for the defendant submitted that, even if the ASIC documents ought to have been discovered, the culpability for non-compliance was at a very low level for the following reasons:

(a) The affidavit sworn by Mr Doo on 13 August 2014 set out in detail the steps taken by him for the purposes of complying with the defendant's discovery obligations, which show that he took reasonable steps in the circumstances.

(b) The only contemporaneous complaint made by the plaintiffs about discovery was that Mr Doo had given excessive copies of emails obtained from different computers.

The effect of the ASIC documents on the Magistrates' Court proceeding

39 Counsel for the plaintiffs submitted that there were four ways in which the ASIC documents would have affected the outcome of the Magistrates' Court proceeding.

(a) First, the ASIC documents identified the defendant's purported commercial rationale for including the Notice Requirements. When this rationale was identified it could have been shown to be 'illogical' and the true reason for the Notice Requirements, which was as 'a trick for the unwary'[6], would have been apparent.

(b) Second, the ASIC documents showed that the defendant could have implemented a simple step of giving written notice to its customers.

(c) Third, the fact that other customers of the defendant had overlooked the need to give written notice supported the plaintiffs' submission that the Notice Requirements in the Rental Agreements were a 'trick for the unwary'.[7]

(d) Fourth, the ASIC documents would have alerted the plaintiffs to the existence of the complaints and the complainants could then have been subpoenaed to give evidence or provide documents in relation to their dealings with ASIC or the defendant.

40 Counsel for the defendant responded to these submissions as follows:

(a) The Chief Magistrate referred to the commercial rationale for the inclusion of the Notice Requirements when he stated:

Looking at the Rental Agreements alone, one understands the usefulness of clause 23 to the defendant. By the end of the terms, the equipment had no book value after depreciation. However, it retained commercial value, evidenced by the plaintiff's continued use. The defendant's place of business is in a Sydney suburb. The timing of the notice gave the defendant an opportunity to find another renter or purchaser.[8]

It was submitted that this rationale was consistent with that recorded in the ASIC letter of 3 September 2010 and did not prompt the Chief Magistrate to reject this as the true rationale for the Notice Requirements.

(b) It was not necessary to produce the ASIC documents for the first plaintiff to demonstrate that the giving of notice by the defendant would have reduced the prospect of the first plaintiff omitting to give the notice required by the Notice Requirements. The Chief Magistrate determined this case on the basis that it was for the first plaintiff to protect its own interests and described the matter as 'simply a case of the plaintiff failing to protect its interests'.[9] It was further submitted that the ASIC documents indicated no finding of wrongdoing by the defendant in not issuing notices.

(c) The existence of other customers of the defendant who had overlooked the need to give written notice was, according to the ASIC records, limited to seven (which probably included the first plaintiff). The learned Chief Magistrate was referred to four decisions where the renter had failed to give notice, and in his judgment, concluded that 'None is helpful for they turn on their facts'.[10]

(d) There was nothing to suggest that the chain of inquiry, which would have revealed the other complainants, would have made any difference to the Decision. ASIC had found no wrongdoing by the defendant arising out of the complaints and an inquiry into the circumstances of the other complainants would have been tantamount to a fishing expedition only.

41 An appellate court may set aside a verdict on the grounds of fresh evidence, if reasonable diligence on the part of the defeated party would not have procured the evidence at the trial, and it is 'reasonably clear' that if the evidence had been available at the first trial, an opposite result would have been produced. The test was stated by Dixon CJ in Wollongong:

If cases are put aside where a trial has miscarried through misdirection, misreception of evidence, wrongful rejection of evidence or other error and if cases of surprise, malpractice or fraud are put on one side, it is essential to give effect to the rule that the verdict, regularly obtained, must not be disturbed without some insistent demand of justice. The discovery of fresh evidence in such circumstances could rarely, if ever, be a ground for a new trial unless certain well-known conditions are fulfilled. It must be reasonably clear that if the evidence had been available at the first trial and had been adduced, an opposite result would have been produced or, if it is not reasonably clear that it would have been produced, it must have been so highly likely as to make it unreasonable to suppose the contrary. Again, reasonable diligence must have been exercised to procure the evidence which the defeated party failed to adduce at the first trial.[11]

42 In Quade[12], the High Court considered a case in which the Commonwealth Bank admitted, but did not explain why, it had failed to provide proper discovery prior to judgment. The Court said that the test propounded by Dixon CJ in Wollongong would not apply to '... a case where the material constituting the fresh evidence was unknown to the unsuccessful party by reason of misconduct on the part of the successful party, such as an admitted failure to comply with the requirements of the trial court's order for the discovery of documents'.[13]

43 The Court explained that the application of the test in Wollongong[14] was not appropriate because such a stringent test:

... would cast upon the innocent party an unfairly onerous burden of demonstrating to virtual certainty what would have happened in the hypothetical situation which would have existed but for the other party's misconduct. In so far as the public interest in the administration of justice is concerned, it would be likely to ensure to the successful party the spoils of his own default and thereby encourage, rather than to penalize, failure to comply with pre-trial orders and procedural requirements.[15]

44 Accordingly, the High Court in Quade[16] concluded:

It is neither practicable nor desirable to seek to enunciate a general rule which can be mechanically applied by an appellate court to determine whether a new trial should be ordered in a case where misconduct on the part of the successful party has had the result that relevant evidence in his possession has remained undisclosed until after the verdict. The most that can be said is that the answer to that question in such a case must depend upon the appellate court's assessment of what will best serve the interests of justice, 'either particularly in relation to the parties or generally in relation to the administration of justice'.[17] In determining whether the matter should be tried afresh, it will be necessary for the appellate court to take account of a variety of possibly competing factors, including, in addition to general considerations relating to the administration of justice, the degree of culpability of the successful party [citation omitted], any lack of diligence on the part of the unsuccessful party and the extent of any likelihood that the result would have been different if the order had been complied with and the non-disclosed material had been made available. While it is not necessary that the appellate court be persuaded in such a case that it is 'almost certain' or 'reasonably clear' that an opposite result would have been produced, the question whether the verdict should be set aside will almost inevitably be answered in the negative if it does not appear that there is at least a real possibility that that would have been so.[18]

45 Accordingly, if I was to find that there was a failure by the defendant to comply with its discovery obligations, I am bound to assess whether or not to order a retrial would best serve the interests of justice in relation to the parties or generally in relation to the administration of justice. In undertaking that task, I am obliged to take into account all factors bearing on that question and, in this case, I consider that each of the following factors, which were specifically identified by the High Court in Quade[19], are relevant to the assessment:

(a) The general considerations relating to the administration of justice.

(b) The degree of culpability of the successful party.

(c) Any lack of diligence on the part of the unsuccessful party.

(d) The extent of any likelihood that the result would have been different if the order had been complied with and the non-disclosed material had been made available.

Did the defendant fail to comply with its discovery obligations?

47 I have set out above at paragraph [31] the full terms of r 29.01.1, which prescribes the ambit of a party's responsibility in giving discovery. In this case, the rule relevantly required the defendant to discover documents which it was, after a reasonable search, aware adversely affected its own case, or supported the plaintiffs' case. As noted above, counsel for the plaintiffs, properly in my view, did not dispute the proposition that the reference to a party's 'case' in r 29.01.1 is a reference to the case as disclosed by the pleadings.

48 In my opinion, the ASIC documents did not support the plaintiffs' case in the Magistrates' Court proceeding as pleaded or adversely affect the defendant's case as pleaded. I have reached that conclusion on the following bases.

49 The plaintiffs relied upon the allegation that the Notice Requirements constituted unconscionable conduct within the meaning of s 51AC of the Trade Practices Act 1974 (Cth) and within the meaning of s 22 of the Australian Consumer Law. Section 22 in fact identifies the matters to which the Court may have regard for the purpose of determining whether a person has contravened s 21 of the Australian Consumer Law. Section 21(1) of the Australian Consumer Law provides that:

A person must not ... engage in conduct that is, in all of the circumstances, unconscionable.

'Unconscionable' is not defined in the Act and the effect of s 20(2) is that the term is not limited to the unwritten law relating to unconscionable conduct. As a result, it has been said that the concept of 'unconscionable' in this context is wider than the general law and the provisions are intended to build on, and not be constrained by, cases of general law and equity.[20] Statutory unconscionability has been described as 'an open-ended concept'.[21] French CJ, speaking extra-judicially on 1 July 2009, made the following observations about how judges are required to approach the application of broad legislative concepts:

Beyond the interpretation of statutes, the words used may require judges to make choices about the outcomes of particular cases according to legal standards rather than precise legal rules. There are many judge-made common law rules which use language such as 'reasonable' or 'unconscionable' or 'foreseeable' or 'remote' or 'good faith'. The use of these words is not a new phenomenon. But they involve value judgments in their application to particular facts or circumstances.

Similarly, some statutes lay down legal standards expressed in broad terms rather than legal rules. These involve the use of evaluative expressions such as "good faith" which appears in over 160 Commonwealth Acts, 'reasonable' which appears in over 140, the 'interests of justice' which appears in at least 50 Acts and 'unconscionable' which appears in at least 12. There are also terms like 'just cause' and 'just excuse'. In taxing statutes, terms such as 'in relation to' and 'in connection with' require judges to consider their general range and make evaluative judgments about their application in particular cases. Interpretation and application of these standards case by case involves not only the development of a principled approach based on logic, but one necessarily informed by value judgments. Even in these cases the judge does not have free reign to indulge prejudices or predispositions or idiosyncratic values. The proper application of such standards will generally be limited to what is necessary to dispose of the case before the judge. It will also be constrained by binding decisions of higher courts on the same point. The decisions of the judge will also be subject to appellate review. [22]

50 In my opinion, the amorphous nature of this cause of action accentuates the need for the party making the claim to particularise the facts and circumstances on which it relies to establish the statutory concept of unconscionability.

51 In this case, I do not consider that the allegation in sub-paragraph (iv) of the particulars to paragraph 9 of the statement of claim (that is, 'the Defendant by purporting to include the terms and rely on them did not act in good faith') provides a significant advance in communicating to the other party the circumstances that will be relied upon in support of the contention that the defendant's conduct in entering into, or enforcing, the Rental Agreements was unconscionable. Certainly, I do not consider that an allegation of a failure to act in good faith is sufficient to identify to the discovering party that a document relating to prior complaints was material to the plaintiffs' claim. Mr Doo gave evidence that he was aware of the existence of other complaints about the Notice Requirements; but he did not believe, at the time of the giving of discovery, that those documents were relevant to the transactions with the first plaintiff 'because each of those disputes really turned on the individual circumstances of the particular complaint at the time'. I accept Mr Doo's evidence as to his belief at the time of giving discovery.

52 I consider that, if the first plaintiff had specifically pleaded for example that the defendant had knowledge that Clause 23 was not likely to be read or understood by a renter, or that Clause 23 was part of a deliberate system to take advantage of renters, a person in the position of Mr Doo would have had a reasonable opportunity to identify documents relating to prior complaints as material. However, the first plaintiff's pleadings at first instance did not descend to that level of particularity. Counsel for the plaintiffs submitted that a deficiency in the pleadings may be more readily excused in the Magistrates' Court. Whether or not that may be the case, I consider that a party putting forward deficient pleadings is in a difficult position if it then wishes to complain that the other party has failed to appreciate issues, which the first party considers material, in the giving of discovery.

53 I do not want to be read as saying that, unless there is a specific particular, a party is not obliged to discover documents which are plainly adverse to its case. However, without some specific point of relevance, prior complaints arising out of related but different circumstances may not, in general, be discoverable. Plainly each case will be determined by reference to its own facts and pleadings but I note the following considerations of the relevance of prior complaints by courts.

(a) In Thorpe v Chief Constable of the Greater Manchester Police,[23] the Court of Appeal found that, in a claim against an arresting officer for assault, documents relating to whether the arresting officer had used excessive violence when arresting other persons on other occasions were not relevant.

(b) In GE Capital Corporate Finance Group Ltd v Bankers Trust Co,[24] Dillon LJ said in obiter that, in an action for damages for professional negligence against a solicitor, evidence as to other claims in negligence made or established against the defendant by a client in respect of other matters would not be relevant or admissible.[25]

(c) In Mahlo v Westpac Banking Corporation,[26] Santow J considered an application for discovery in a claim made by a customer of the defendant bank, who conducted business at the defendant's Forbes branch. The plaintiff sought discovery of documents containing statements by the Forbes branch, which were similar to the statements referred to in the statement of claim. The court rejected the application on the basis that such evidence was not relevant and, as it could not establish a system or established pattern, it could not be introduced as propensity or tendency evidence.[27]

54 Similarly, in this case the fact that, at the time of the giving of discovery, there had been approximately seven complaints about the Notice Requirements over 11 years could not, in my opinion, indicate to a person in the position of Mr Doo that prior complaints were material to the first plaintiff's claim in the absence of an appropriate particular. As the cases referred to in [53] demonstrate, the fact that such material may have assisted the plaintiffs in cross-examining as to similar conduct or credibility is not sufficient to make the documents d[28]coverable.28

55 The plaintiffs further contended that the letter from ASIC dated 3 September 2010 was relevant because, in the third paragraph, it included a record of the reason purportedly given by the defendant for the Notice Requirements - that reason being that the 'period of time is required for remarketing purposes; the 3 to 6 months allows The Leasing Centre to source new clients, minimising financial loss'. The plaintiffs submitted that this reason was 'really very easy to unpick once it's exposed through the ASIC documents and to demonstrate that - it's unlikely to be the commercial reasoning behind this clause'. Therefore, the plaintiffs submitted that this letter was relevant to sub-paragraphs (iii) and (iv) of the particulars to paragraph 9 of the statement of claim because it adversely affected the defendant's own case.

56 Mr Doo's evidence was that he was generally aware of the ASIC inquiry but it did not 'occur' to him when he was undertaking discovery. I consider that taking into account the considerations referred to r 29.01.1(5) of the Rules, a reasonable search by the defendant with respect to a claim for unconscionable conduct arising out of the Notice Requirements would have included a search of the ASIC documents relating to complaints about that same issue. It is arguable that the contents of paragraph 3 of the letter of 3 September 2010 may have appeared to Mr Doo to be a document that adversely affected the defendant's own case because it may stand as an admission fixing the position of the defendant on the relevant question of what was its legitimate interest in including the Notice Requirements.

57 However, it may not have been perceived by a person in the position of Mr Doo that the contents of paragraph 3 of the letter of 3 September 2010 were adverse to the defendant's case because the defendant's justification for the clause did not apparently change at any time up to or including the hearing. This is demonstrated in the written decision of the Chief Magistrate, who stated that:

The timing of the notice gave the defendant an opportunity to find another renter or purchaser. Requiring delivery enabled the defendant to decide the equipment's destination, whether to itself or a third party. Requiring delivery on or before term's end deprived the renter of some minor use of the equipment unless the place for delivery was nearby.[29]

58 In the circumstances, whether the letter of 3 September 2010 was properly discoverable is a matter about which reasonable minds may differ.[30] However, for the reasons set out below, I do not consider that if there was non-compliance, in this respect, it could in all of the circumstances justify setting aside the Decision.

59 As noted above, Quade[31] requires an assessment of the following considerations.

General considerations relating to the administration of justice

60 A general consideration relating to the administration of justice is 'every system of justice is bound to insist upon the finality of the judgment arrived at by a due process of law'.[32] The principle was expressed by the High Court in Burrell v The Queen[33] in which Gummow A-CJ, Hayne, Heydon, Crennan and Kiefel JJ said:

Secondly, it is important to recognise that underpinning consideration of the issues presented in this matter are fundamental principles about finality of litigation. As was said in D'Orta-Ekenaike v Victoria Legal Aid: 'A central and pervading tenet of the judicial system is that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances'. That tenet finds reflection in rules concerning the bringing of an action to set aside a final judgment on the ground that it was procured by fraud and in doctrines of res judicata and issue estoppel. The principal qualification to the general principle of finality is provided by the appellate system. But in courts other than the court of final resort, the tenet also finds reflection in the restrictions upon reopening of final orders after they have been formally recorded.

The third consideration of principle which it is necessary to state at the outset is related to the second. It is that the principle of finality serves not only to protect parties to litigation from attempts to re-agitate what has been decided, but also has wider purposes. In particular, the principle of finality serves as the sharpest spur to all participants in the judicial process, judges, parties and lawyers alike, to get it right the first time. Later correction of error is not always possible. If it is possible, it is often difficult and time-consuming, and it is almost always costly.[34]

61 A competing consideration in non-disclosure cases was expressed by Muir JA (with whom Cullinane and Jones JJ agreed) in Wiltshire v Amos[35] where his Honour said:

Where, as is the case here, there was a failure to disclose documents which were plainly directly relevant and highly pertinent to the resolution of the central issues in the case, there are strong reasons why the failure to disclose should not be overlooked. To excuse the breach would be to condone, in effect, a party's misconduct and tend to impact adversely on the reputation of a court and lessen public confidence in it and its processes. It would also be unjust to the innocent party which has been deprived of its right to a fair trial and leave the party in breach with the spoils of its wrongdoing.[36]

The degree of culpability of the successful party

62 For the reasons set out with respect to the issue of non-compliance with its discovery obligations, I consider that, if there was any non-compliance by the defendant, it was minor. Further, I accept the evidence of Mr Doo to the effect that his intentions were to carry out the defendant's discovery obligations carefully and to comply generally.

Any lack of diligence on the part of the unsuccessful party

63 I do not wish to criticise the conduct of the case by the plaintiffs in the Magistrates' Court proceeding but, as stated above, I do consider that the lack of particularity in the pleading makes it difficult for the plaintiffs to then complain about the failure to obtain the ASIC documents on discovery. If the plaintiffs wished to focus its unconscionability claim on the fact that other customers of the defendant were likely to have been misled, it had opportunities with reasonable diligence to ascertain the existence of prior complaints including the following:

(a) The rental agreements were of a standard form with conditions attached in fine print. The presentation of the document makes it readily apparent that it was likely to be used in most if not all rental agreements entered into by the defendant.

(b) A search of Austlii of the defendant's name would have revealed a number of claims against the defendant arising out of Clause 23.

(c) At the hearing before the Chief Magistrate, reference was made to four decisions involving claims against the defendant arising out of Clause 23.[37] The plaintiffs did not at the trial take the opportunity to complain at that time about the failure to discover such complaints.

64 I repeat I do not criticise the plaintiffs' conduct of the hearing in the Magistrates' Court because, for the reasons set out below, I do not consider that there was a real prospect that such a change of focus would have resulted in a different outcome before the Chief Magistrate.

The extent of any likelihood that the result would have been different if the order had been complied with and the non-disclosed material had been made available

65 I consider that there is a very low prospect that the Magistrates' Court proceeding would have resulted in the opposite outcome had the defendant made discovery of the ASIC documents for the following reasons.

(a) In his written reasons, the Chief Magistrate emphasised the fact that the first plaintiff's sole director, the second plaintiff, was a successful businessman who had obtained advice from accountants and held an apparently equal bargaining position with the defendant. He had signed the Rental Agreements on behalf of, and as guarantor for, the first plaintiff. The Chief Magistrate even found that an employee of the defendant, Mr James Thomas, had misrepresented the effect of the Rental Agreements but considered it appropriate to disregard this matter because the second plaintiff 'possessed the [Rental Agreements] many days before signing them', and had sought accounting advice. In addition, cl 11 of the Rental Agreements excluded the effect of the misrepresentation.[38]

(b) The Chief Magistrate was referred to four decisions in which persons had made claims based on disputes with respect to the Notice Requirements but he apparently did not consider them relevant because he stated: 'None is helpful for they turn on their facts'.[39]

(c) With respect to the 3 September 2010 letter, as noted above, the Chief Magistrate accepted in substance that the reason contained in that letter was the reason for Clause 23. Counsel for the plaintiffs submitted that with prior notice, the plaintiffs could have more effectively attacked this as being the legitimate reason for the Notice Requirements. I do not consider that, given the heavy burden facing the plaintiffs, I can accept this submission. In particular, if the plaintiffs had wanted to conduct their case on the basis of the inadequacy of the defendant's purported justification for it, they could have pressed the defendant to state its reasons by requesting further particulars or by interrogating.

66 There was no dispute between the parties that the relief sought by the plaintiffs in this proceeding was within the inherent jurisdiction of this Court. Of course, the lack of dispute of itself does not confer jurisdiction on this Court.[40] Accordingly, I propose to summarise the basis on which I have concluded that the relief claim would fall within the inherent jurisdiction of the Court.

67 The courts in both Quade[41] and Wollongong[42] were exercising appellate jurisdiction. Accordingly, it is necessary to resolve the question of whether the inherent jurisdiction of the Court, other than the appellate division, extends to providing the relief sought by the plaintiffs in this proceeding.

68 The nature of the inherent jurisdiction of the Court was described by Dawson J in Grassby v The Queen[43] as follows:

In Reg v Forbes; Ex parte Bevan, Menzies J pointed out that:

'Inherent jurisdiction' is the power which a court has simply because it is a court of a particular description. Thus the Courts of Common Law without the aid of any authorizing provision had inherent jurisdiction to prevent abuse of their process and to punish for contempt. Inherent jurisdiction is not something derived by implication from statutory provisions conferring particular jurisdiction; if such a provision is to be considered as conferring more than is actually expressed that further jurisdiction is conferred by implication according to accepted standards of statutory construction and it would be inaccurate to describe it as 'inherent jurisdiction', which, as the name indicates, requires no authorizing provision. Courts of unlimited jurisdiction have 'inherent jurisdiction'.

Inherent jurisdiction is an elusive concept and the proposition that it arises from the nature of a court has been described as metaphysical. But it is undoubtedly the general responsibility of a superior court of unlimited jurisdiction for the administration of justice which gives rise to its inherent power. In the discharge of that responsibility it exercises the full plenitude of judicial power. It is in that way that the Supreme Court of New South Wales exercises an inherent jurisdiction. Although conferred by statute, its powers are identified by reference to the unlimited powers of the courts at Westminster.[44]

69 I am satisfied that this Court has the inherent power to set aside a judgment for failure to comply with discovery orders by reference to the following cases.

(a) In Brookfield v Yevad Products Pty Ltd,[45] Lander J, applying the principles in Quade,[46] set aside a judgment on the basis that the successful respondent had failed in its obligations to make discovery of vital documents.[47] The decision of Lander J was varied but substantially upheld by the Full Federal Court.[48]

In Tresize v National Australia Bank Ltd,[49] Sundberg J appeared to accept the decision in Brookfield[50] as authority for the proposition that the principle in Quade[51] is not confined to the exercise of appellate jurisdiction.[52]

(b) In Titan Corporation Ltd v Ultra Tune Pty Ltd,[53] Harper J considered an application to set aside a judgment in favour of the defendants on the basis that subsequently obtained affidavits demonstrated that the key witness for the defendants had perjured himself at trial. The Court dismissed the application after accepting that it had jurisdiction. Harper J referred to an article by D M Gordon entitled 'Fraud or New Evidence as Grounds for Actions to Set Aside Judgments'[54] and, in particular, cited the following passage:

In general, judgments rendered after a trial are conclusive between the parties unless and until reversed on appeal. Certainly in general judgments of superior courts cannot be overturned or questioned between the parties in collateral actions. Yet there is a type of collateral action, known as an action of review, by which even a superior court's judgment can be questioned, even between the parties, and set aside. By recognising that a judgment is open to this kind of attack, the courts recognise an exception to the principles of res judicata and estoppel by judgment. The attack in no way resembles an appeal; but when it is against a superior court's judgment, it is always made in the trial court that gave the first judgment, which is asked to rescind that judgment. If the action of review runs its full course, it results in a second trial, in part at least upon oral evidence. An action of review is now always based on a claim (a) that the original judgment was based on fraud, or (b) that new evidence has been found that shows the first judgment to have been wrong on the facts.

At intervals complaints have been made that such actions are anomalous and imperil the concepts of res judicata and estoppel by judgment. Certainly it is anomalous that judgments not even claimed to be void should be attacked collaterally. But the remedy by such review must have been recognised for something like four centuries, and by such high authority that it is too firmly established to be disturbed.[55]

(c) In Clone Pty Ltd v Players Pty Ltd (in liq) (recs apptd),[56] Kourakis J considered an application to set aside a judgment on the grounds that the respondent had failed to discover a critical document. His Honour undertook a detailed historical analysis of the power to set aside perfected orders[57] and concluded that the Supreme Court of South Australia was:

... empowered to set aside a perfected judgment on an application brought in the action in which it was made, or in a separate action brought for that purpose, on the ground of an intentional or reckless abuse of the procedures of this court which has concealed, from the unsuccessful party, important evidentiary material which it would otherwise have obtained.[58]

The Full Court of the Supreme Court of South Australia in Players Pty Ltd (in liq) (recs apptd) v Clone Pty Ltd[59] reversed the decision of Kourakis J on other grounds but confirmed that:

... the court retains a discretion in its inherent jurisdiction to control its own processes and provide an appropriate remedy when justice requires.[60]

70 The second question is whether the Court's inherent jurisdiction extends to applying the principles in Quade[61] to a proceeding in the Magistrates' Court. In my opinion, it does and I reached that conclusion on the following basis.

(a) The Supreme Court has, as part of its inherent jurisdiction, the power to supervise proceedings in those parts of the justice system of the State outside the Court itself.[62] In undertaking its general responsibility, it is able to exercise 'the full plenitude of judicial power'.[63] In exercising a supervisory jurisdiction '... it is not concerned with questions of form but will, in my opinion, go to the substance of the matter'.[64]

(b) In Walton v Gardiner,[65] Mason CJ, Deane and Dawson JJ held that the inherent jurisdiction of a superior court to stay its proceedings on the grounds of abuse of process extends to all those categories of cases in which the processes and procedures of the Court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness.[66]

(c) In Barron v Attorney General (NSW),[67] Cooke v Purcell[68] and Gill v Walton,[69] Mahoney JA reviewed the circumstances in which the Court can exercise its supervisory jurisdiction and concluded it was where there was 'a departure from the requirements of natural justice to the extent that there is an abuse of process and/or [unacceptable] injustice'.[70] In Gill v Walton, His Honour said 'unacceptable injustice' related to 'for example, the procedural or evidentiary fairness of a particular trial'.[71]

(d) The power to intervene contemplated by Quade similarly depends upon the Court's assessment of 'what will best serve the interests of justice either particularly in relation to the parties or generally in relation to the administration of justice'.[72]

71 Although the exercise of the supervisory jurisdiction in the cases referred to above were interventions to prevent an unfair trial or hearing, there does not appear to be any reason why the broad based supervisory jurisdiction would not permit intervention in the processes of an inferior court after a trial, in the circumstances identified in Quade.[73]

72 I propose to dismiss the plaintiffs' application and hear the parties on the question of costs.

[1] An internal memorandum of ASIC notes that 'Since 2001 ASIC has received nine complaints involving TLC. Of these complaints, seven relate to ownership of goods subject to an agreement not being transferred to the client as expected by them at the end of the agreement term.'

[2] Accordingly, in the Magistrates' Court proceeding the first plaintiff was the plaintiff and the second plaintiff was a defendant by counterclaim. In these reasons they will together be referred to as 'the plaintiffs'.

[3] (1991) 178 CLR 134 ('Quade').

[4] [1955] HCA 16; (1955) 93 CLR 435 ('Wollongong').

[5] For example, see UBS AG, Australia Branch v Galileo Japan Funds Management Ltd; In the matter of Galileo Japan Funds Management Ltd (Responsible Entity) [2012] FCA 364 [17]-[18].

[6] North West Supermarkets Pty Ltd v The Leasing Centre (Aust) Pty Ltd (Unreported, Magistrates' Court of Victoria, Chief Magistrate Lauristen, 12 June 2012), 5.

[11] [1955] HCA 16; (1955) 93 CLR 435, 444.

[12] (1991) 178 CLR 134.

[14] [1955] HCA 16; (1955) 93 CLR 435.

[15] (1991) 178 CLR 134, 142.

[17] McDonald v McDonald [1965] HCA 45; (1965) 113 CLR 529, 533 (Barwick CJ).

[18] Quade (1991) 178 CLR 134, 142-3 (emphasis added).

[20] Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 [291] citing Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132, 140.

[21] Australian Competition and Consumer Commission v Seal-A-Fridge Pty Ltd & Anor [2010] FCA 525; (2010) 268 ALR 321, 324 [12].

[22] Chief Justice Robert French, 'In Praise of Unelected Judges' (Speech delivered at the Public Policy Forum, The John Curtin Institute of Public Policy, 1 July 2009), [15]-[16].

[23] [1989] 2 All ER 827.

[24] [1995] 2 All ER 993.

[26] (Unreported, Supreme Court of New South Wales, Santow J, 21 November 1996).

[28] Also see Beecham Group Ltd v Bristol Myers Co [1979] VicRp 27; [1979] VR 273, 277.

[29] North West Supermarkets Pty Ltd v The Leasing Centre (Aust) Pty Ltd (Unreported, Magistrates' Court of Victoria, Chief Magistrate Lauristen, 12 June 2012), 7. However, it was not apparent to the Chief Magistrate why it was necessary for an additional notice to be given under the Option Agreements - see p 8.

[30] See also Central Queensland Mining Supplies Pty Ltd v Columbia Steel Casting Co Ltd [2011] QSC 183, where Applegarth J said at [16] that 'disputes of this kind may arise because the parties have genuine reasonable differences of opinion about the issues that are truly in dispute.'

[31] (1991) 178 CLR 134.

[32] Connelly v Director of Public Prosecutions [1964] AC 1254, 1353 (Lord Devlin).

[33] [2008] HCA 34; (2008) 238 CLR 218.

[34] Ibid 223, [15]-[16] (citations omitted).

[35] [2010] QCA 294.

[37] North West Supermarkets Pty Ltd v The Leasing Centre (Aust) Pty Ltd (Unreported, Magistrates' Court of Victoria, Chief Magistrate Lauristen, 12 June 2012), 5.

[40] Mason v Ryan [1884] VicLawRp 115; (1884) 10 VLR (L) 335; Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150, 163; Hopper v Egg & Egg Pulp Marketing Board (Vic) [1939] HCA 24; (1939) 61 CLR 665, 673.

[41] (1991) 178 CLR 134.

[42] [1955] HCA 16; (1955) 93 CLR 435.

[43] [1989] HCA 45; (1989) 168 CLR 1.

[45] [2004] FCA 1164 ('Brookfield').

[46] (1991) 178 CLR 134.

[47] [2004] FCA 1164 [417]-[420].

[48] See Yevad Products Pty Ltd v Brookfield [2005] FCAFC 177.

[49] [2005] FCA 1095; (2005) 220 ALR 706.

[50] [2004] FCA 1164.

[51] (1991) 178 CLR 134.

[52] [2005] FCA 1095; (2005) 220 ALR 706 [26].

[53] [1998] VSC 56 [21].

[54] (1961) 77 Law Quarterly Review 358.

[56] [2012] SASC 12.

[59] (2013) 115 SASR 547.

[61] (1991) 178 CLR 134.

[62] Gill v Walton (1991) 25 NSWLR 190, 209.

[63] Grassby v The Queen [1989] HCA 45; (1989) 168 CLR 1, 16 (Dawson J).

[64] Cooke v Purcell (1988) 14 NSWLR 51, 65 (Mahoney JA).

[65] [1993] HCA 77; (1993) 177 CLR 378.

[67] (1987) 10 NSWLR 215, 226-7.

[68] (1988) 14 NSWLR 51, 63-67.

[69] (1991) 25 NSWLR 190, 210-12.

[71] Ibid 211. Mahoney JA's analysis was approved by the plurality in Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378, 392.

[72] (1991) 178 CLR 134, 142 (citation omitted).