BETWEEN : RAY MULLINS & SONS PTY LTD (ACN 009 177 324)

Practice and procedure - Application for discovery of particular documents - O 26 r 6 - Whether documents relevant - Application under O 26A r 4(1)(b) - Whether available to make a decision whether to make new claims in existing proceedings - Whether grounds of application made out - Turns on own facts

Rules of the Supreme Court, O 26 r 6, O26A r4(1)(b)

John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679

Malouf v Malouf [1999] FCA 710

McCarthy v Dolpang Pty Ltd [2000] WASCA 106

St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147

Attorney-General v North Metropolitan Tramways Co [1892] 3 Ch 70

Beecham Group Ltd v Bristol Myers Co [1979] VicRp 27; [1979] VR 273

Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55

Edmiston v British Transport Commission [1956] 1 QB 191

Index Group of Companies Pty Ltd v Nolan [2002] FCA 608

Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341

PDM Australia Pty Ltd v Kellogg Overseas Corp, unreported; SCt of WA; Library No 6646; 26 March 1987

Science Research Council v Nasse [1979] UKHL 9; [1980] AC 1028

Woodwork v Conroy [1976] QB 884

Yorkshire Provident Life Assurance Co v Gilbert & Rivington [1895] 2 QB 148

1 MASTER NEWNES: On 20 June 2005, on the plaintiff's application, I made orders for particular discovery by the defendant of certain documents and dismissed the application in relation to other documents. The plaintiff has requested written reasons for my decision. These are those reasons.

2 It is necessary, in order to make the application explicable, to describe the issues arising in the action.

3 In the amended statement of claim the plaintiff pleads that by an agreement in writing which is undated, but was stamped on 17 February 1998, the defendant sub-leased to the plaintiff the first floor (the "premises") of a building (the "building") known as the function centre located within Hillary's Boat Harbour, on the basis that the premises had an area of approximately 1393 square metres. It was agreed that from 1 December 2001, until varied in accordance with the lease, rent would be payable by the plaintiff at the rate of $100 per square metre of floor area of the premises, being an amount of $139,300 per annum.

4 It was also agreed that the plaintiff would pay a proportion of the variable outgoings incurred by the defendant in respect of the building, calculated as the percentage of the total variable outgoings which the floor area of the premises bore to the floor area of the building. In addition, the plaintiff agreed to pay, for the first year, an amount of $5432.70 or at the rate of $3.90 per square metre of the floor area of the premises, whichever was the greater, to a promotional fund and agreed that in subsequent years that amount may be increased by a percentage in the defendant's discretion.

5 The plaintiff says that, properly calculated according to the lease, the floor area of the premises is, and has at all material times been, 1001.7 square metres, not 1393 square metres, or as variously contended by the defendant, 1087.7 or 1113.6 square metres. The plaintiff says that the defendant has also miscalculated the floor area of the building over the term of the lease to date. Accordingly, the plaintiff alleges that it has been overcharged for rent, variable outgoings and in respect of the promotional fund. The plaintiff seeks declarations that the correct floor area of the premises is, and since 1 December 2001 has been, 1001.7 square metres and that the floor area of the building is of the various dimensions set out in the statement of claim. The plaintiff also seeks to recover the alleged overpayments.

6 The defendant, relevantly for present purposes, admits that the plaintiff leased the premises but denies that the floor areas of the premises and the building respectively are of the sizes alleged by the plaintiff and denies that the plaintiff has paid more than it was obliged to pay by way of rent, variable outgoings and the promotional fund. The defendant says that the floor area of the premises has at all times been 1113.6 square metres and that the floor area of the building, which has varied, has been less than that claimed by the plaintiff. The floor area of the building has increased as the defendant has constructed market style stalls and al fresco dining areas on the ground floor and has converted common areas to lettable areas on the ground floor.

7 The plaintiff says that at the commencement of the lease there were some 20 to 25 tenancies in the building. There are now about 21 separate tenancies in the building. The area of some of the ground floor tenancies have changed over the period of the plaintiff's occupancy of the premises.

8 The essential dispute between the parties, therefore, is the correct measurement of the floor area of the premises and the building respectively. It was common ground between the parties that that dispute involved the size of five of the other tenancies within the building but did not relate to the size of the balance of the tenancies.

9 The plaintiff's application was in two parts. It sought discovery, pursuant to O 26 r 6, of particular documents which had not been discovered by the defendant but which the plaintiff argued were relevant and discoverable. The plaintiff also applied under O 26A r4(1)(b) for discovery of other documents which it argued were necessary to enable it to make a decision whether to commence proceedings against the defendant in respect of other matters, it being contemplated that such fresh proceedings would be by way of an amendment to the current proceedings.

10 In the application under O 26 r 6 the plaintiff sought discovery of the following documents:

"1.1 leases and licence agreements for all tenancies and licensed areas in the Building or on the Land (as defined in the amended statement of claim) which have operated in the period 1 December 1997 to date;

1.2 any correspondence between the defendant and tenants/licensees of the Building or the Land relating to any extensions or variations to leased or licensed areas in the period 1 December 1997 to date;

1.3 statements for the Bank account for the Promotional Fund as constituted by clause 6.4 of the Lease for the period 1 December 1997 to date;

1.4 reports to the defendant from any surveyors engaged by the defendant for the purpose of surveying the Building since 1 December 1997;

1.5 any plans of the Building or for alterations to the Building since 1 December 1997;

1.6 any applications for approval to commence development of the Building or on the Land created since 1 December 1997;

1.7 invoices for and records of payments out of the Promotional Fund from 1 December 1997 to date;

1.8 variable outgoings apportionment records for the 2003/04 year maintained by the defendant or its auditor."

11 I granted the application in par 1.1, limited to those part or parts of the leases or licence agreements which relate to the floor area of the leased or licensed premises (as the case may be) and the total area occupied by the tenant or licensee, and further limited to the five premises in respect of which the floor area is in dispute in these proceedings.

12 There is nothing to suggest that the lease or licence agreements, beyond that material, are relevant to the matters in issue or at least sufficiently relevant to warrant an order for discovery. I might add that, in that context, it is also a relevant (albeit, by no means decisive) consideration that, as submitted by the defendant's counsel, the individual agreements are likely to contain material that is confidential to the parties to them and of a nature that may be relevant to the future position of the plaintiff as a tenant of the premises, for instance, in relation to future rent reviews, in which case the implied undertaking on discovery would be of little benefit to the defendant.

13 I do not consider that the documents in par 1.2 of the application are relevant, or at least sufficiently relevant to justify an order for discovery. The request is so wide that it is capable of covering correspondence dealing with any issues regarding extensions or variations to the leased or licensed premises, not just correspondence dealing with the size of the relevant leaseholds or of the building.

14 I do not consider there is any basis for an order for discovery of documents of the nature sought in par 1.3 of the application. The issue on the pleadings in relation to the Promotional Fund is simply whether, based on the floor area of the premises, the plaintiff has paid more than it was obliged to pay. That turns on the true floor area of the premises occupied by the plaintiff. There is no dispute as to the amount the plaintiff has paid. Nor is it relevant how much has been paid in total by the other tenants. That will depend, among other things, on the rate at which they were each required to contribute to the Promotional Fund under their respective agreements with the defendant. The total amount received by the Promotional Fund is therefore of no assistance on the question of the floor areas of the premises and the building, which are in issue in the action.

15 I would grant the application in respect of pars 1.4 and 1.5 of the application, limited to the parts of the documents which relate to the floor area of the premises and the building respectively, and to the areas occupied by the tenants or licensees of the other five premises where the floor area is in dispute between the parties.

16 I do not consider that the documents sought in par 1.6 are relevant, or to the extent that they may have any marginal relevance to the matters in issue, are sufficiently relevant to justify an order for discovery.

17 The documents sought in par 1.7, relating to the Promotional Fund, are not discoverable, in my view, for the reasons I have previously given in respect of par 1.3 of the application.

18 I understand that the documents sought in par 1.8 of the application have been provided by the defendant and this part of the application was not pursued.

19 As I have said, the plaintiff also sought discovery of documents under O 26A r 4(1)(b) of the Rules of the Supreme Court. The plaintiff contended that this rule applies where a party to proceedings seeks from the other party discovery of documents relating to a claim which has not been advanced in the proceedings but which the first party is considering advancing by way of an amendment to the claim. The defendant, on the other hand, argued that the provision only applies where a party is contemplating fresh proceedings and does not apply where what the party has in mind is an amendment to existing proceedings. I think, however, that the determination of that question can be left for another occasion. In my view, the requirements of O 26A r 4(1)(b) have not been met, even if it does apply in the present circumstances.

20 The relevant principles to be applied on an application under O 26A r 4(1)(b) are set out in McCarthy v Dolpang Pty Ltd [2000] WASCA 106 at [13] and Malouf v Malouf [1999] FCA 710 at [16]. In short, the rule permits "fishing" to be engaged in where an application is bona fide and it should be given the fullest scope its language reasonably allows in order to enable parties to commence litigation only after careful consideration. But the rule is a serious invasion of privacy and confidentiality, and the scope for its possible misuse is wide. The Court will therefore exercise caution before making an order under this rule and will only do so where it is reasonably necessary to achieve the proper administration of justice.

21 To that end, an applicant must put before the Court evidence to show objectively that there is reasonable cause to believe the applicant either has, or may have, a right to relief against the respondent. It is not relevant what an applicant might think or hope or believe the documents might show, but on the evidence there must be a reasonable prospect that an action could be revealed by the material in the possession of the other party. Accordingly, the mere assertion of a cause of action is not sufficient, and nor is conjecture or suspicion, or the mere possibility that a cause of action may exist: John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679; St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147 at 154.

22 The documents in respect of which the plaintiff sought discovery under O 26A r 4(1)(b) are as follows:

"2.1 all invoices and vouchers for expenditure by the defendant for those expenses which comprised Variable Outgoings as defined in the Lease for the period 1 December 1997 to date;

2.2 any plans for development on the land as defined in the Lease in the period 1 December 1997 to date;

2.3 statements for the bank account for the Promotional Fund as required by clause 6.4 of the Lease for the period 1 December 1997 to date;

2.4 invoices for and records of payments out of the Promotional Fund from 1 December 1997 to date."

23 In the present case, the deponent to the affidavit filed on behalf of the plaintiff says, in respect of par 2.1 of the application, that the rate of increase in the variable outgoings the plaintiff has been charged is well in excess of the inflation rate over the relevant period. He says the defendant is not required under the lease to permit the plaintiff to inspect invoices for expenses which constitute variable outgoings, so the plaintiff cannot verify whether what has been charged as variable outgoings falls within the definition in the lease and whether the amounts charged for the defined components of variable outgoings are justifiable. The plaintiff "is concerned" that the defendant has charged as variable outgoings, costs which are not permissible under the lease and it is also "concerned" that that expenses have been wrongly apportioned between the building and an adjacent building owned by a director of the defendant. The plaintiff says that "if the inspection [of the documents sought] reveals a basis for these concerns" then the plaintiff will expand the issues in this action or bring a fresh action.

24 In my view, the evidence is insufficient to give reasonable cause to believe that the plaintiff has or may have an action in respect of the amount charged for variable outgoings. There is, for instance, no evidence of any analysis on behalf of the plaintiff of the likely increases in the variable outgoings, bearing in mind that increases in some components, such as rates and taxes and other public charges, are ascertainable, nor is there any reference to any relevant indices, apart from the inflation rate, or any other information or analysis which might support a conclusion that the amount charged by way of variable outgoings includes, or may include, costs which do not fall within the description of variable outgoings in the lease or that the amount charged exceeds the true costs incurred by the defendant. There is also no evidence that increases in variable outgoings in a lease of this nature would be expected to reflect the rate of inflation or to bear some specific relationship to it.

25 In par 2.2 of the application the plaintiff seeks plans of any development of the land. The plaintiff says it is concerned the defendant is proposing to erect structures that will interfere with the plaintiff's views, contrary to cl 4.10 of the lease. The plaintiff's solicitors wrote to the defendant's solicitors on 29 March 2005 asking if the defendant had any such intention. It has not received an assurance that no such proposal is contemplated. The deponent to the plaintiff's affidavit says he has seen people with plans in and around the building who have said they have been requested to quote on work proposed on the northern and eastern sides of the building. There is, however, nothing in the evidence that indicates any basis for the plaintiff's concern that proposed construction work will interfere with its views. The deponent simply says the plaintiff "needs to know precisely what construction work will take place to determine whether the proposed structure will breach the lease".

26 It is therefore apparent that, far from having reasonable cause to believe that the plaintiff may have a cause of action, the plaintiff has no reason to believe that it may have a cause of action. It merely wants the documents referred to in order to ascertain whether construction work is proposed and, if so, whether it might breach the lease. The application is therefore entirely speculative and is not permitted by O 26A r 4(i)(b).

27 Similarly, the applications in pars 2.3 and 2.4 of the application, in respect of documents relating to the Promotion Fund, have no foundation in the evidence. The deponent to the plaintiff's affidavit simply says that the plaintiff is concerned as to whether the payments from the Fund have been properly made by the defendant and wishes access to the documents to ascertain whether they have been properly made. The plaintiff says that "if the inspection [of the documents sought] reveals a basis for these concerns" then the plaintiff will expand the issues in this action or bring a fresh action.

28 No basis for the plaintiff's concern appears in the evidence. In other words, it appears the plaintiff simply seeks something in the nature of reassurance that the funds have not been improperly used. There are no facts referred to upon which could give rise to a reasonable belief that there may be a cause of action for misuse of the funds.

29 I therefore granted the application in respect of pars 1.1, 1.4 and 1.5, amended as I have indicated, and otherwise dismissed the application.

30 The parties are to confer on the terms of orders to give effect to these reasons and on the question of costs, and to bring in a minute if agreement can be reached. Otherwise I will hear the parties on the appropriate form of orders and costs.