A M S Fabrications Pty Ltd v B M F Pty Ltd

[2010] VCC 1024

IN THE COUNTY COURT OF VICTORIA Revised

Not Restricted

AT MELBOURNE
CIVIL DIVISION
COMMERCIAL

GENERAL DIVISION

Case No. CI-07-04203

A M S FABRICATIONS PTY LTD	Plaintiff
v
B M F PTY LTD	Defendant
and
DIMON CONSULTANTS PTY LTD & ANOR	Third Party
and
S E S STRUCTURAL ERECTORS INTERNATIONAL PTY LTD	Second Third Party

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JUDGE:	HIS HONOUR JUDGE GINNANE
WHERE HELD:	Melbourne
DATE OF HEARING:	5 August 2010
DATE OF JUDGMENT:	10 August 2010 – Revised 12 August 2010
CASE MAY BE CITED AS:	A M S Fabrications Pty Ltd v B M F Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2010] VCC 1024

REASONS FOR JUDGMENT

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Catchwords: County Court Civil Procedure Rules 2008, r.29.08 – discovery – vacation of trial date.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Anthill	Gilberthorpes Business Lawyers
For the Defendant	Mr M Whitten	Arnold Bloch Leibler
For the First Third Party	Mr M Saw	DLA Phillips Fox
For the Second Third Party	No appearance	-
HIS HONOUR:

1 By Summons dated 22 July 2010, the defendant, who is the plaintiff by counterclaim, seeks an order pursuant to Rule 29.08 of the County Court Civil Procedure Rules 2008 for further discovery. If that application is granted, it seeks vacation of the trial date, which is 31 August 2010.

2          The application is supported by an affidavit of the defendant’s solicitors and opposed by an affidavit of the plaintiff’s solicitor. There is also an affidavit relied on by the plaintiff by Mr M McDonald of Hall & Wilcox, solicitor for the insurer, who has paid a claim made by the plaintiff.

3          The plaintiff’s claim is pleaded to arise from an agreement with the defendant for the supply of steel, fabrication, surface treatment and the erection of structural steel work services for a project at North Laverton. The claim is in debt, alternatively damages or on a quantum meruit.

4          The defendant’s Defence and Counterclaim relates to the collapse of the initial steel work on 22 December 2006. This collapse is alleged to have caused the defendant to be late in constructing a warehouse and office facilities on the site under a contract with Boxbrook Pty Ltd.

5          These proceedings were commenced in 2007 but delayed because of a Victorian WorkCover Authority investigation, and subsequent prosecution.

6          Standard discovery orders were made. The plaintiff served its Affidavit of Documents on 31 March 2010, four-and-a-half months ago.

7          On 2 July 2010, the defendant’s solicitors commenced communication with the plaintiff’s solicitors, seeking details of any payments received by the plaintiff from its insurance company in respect of its liability in respect of the collapse. The plaintiff’s solicitor replied on 5 July 2010 in respect of this issue, stating that the plaintiff had not received any payment from its insurer in respect of any liability relating to this matter.

8          By letter of 7 July 2010, the defendant’s solicitors sought discovery of specific categories of documents.

9          After further correspondence on 20 July 2010, the plaintiff’s solicitors sent some documents to the defendant’s solicitors, stating:

“Whilst we do not accept that these documents are discoverable there

now follows the documents requested.”

10        When these documents were received, the defendant’s solicitors emailed in reply on 20 July 2010, stating that it did not appear that all the documents sought in the letter of 7 July 2010 had been provided. The email stated:

“The documents produced disclose that your client has received payment in the sum of $307,516.39 from its insurer in respect of reinstatement of steelworks to a pre-collapse state and ‘makesafe’ works.”

11        The letter also stated: “Our client apprehends that the amount received by your client exceeds the true cost of rectification.” The defendant’s solicitors then sought documents falling into widely-framed categories. For example, they sought, under category (d):

“… copies of your client’s timesheets and other documents evidencing

your client’s delayed labour directed to the Works.”

The letter also stated:

“Once the documents sought have been discovered, it will be necessary for our client to consider and possibly obtain expert evidence on the cost of rectification. In those circumstances, we foreshadow that it may also be necessary for the trial date to be vacated.”

12        The plaintiff’s solicitors replied, in a long email, which included the following:

“As we stated to you in our fax of 19 July 2010, we do not accept that the documents that we provided to you on 19 July 2010 are discoverable. Quite simply, they have no bearing on any of the issues in dispute in this proceeding.

Similarly, we do not accept that the further documents that you have requested in your letter of 20 July 2010 are discoverable.

Under cover of the same objection, we enclose a copy of the GAB site surveillance Form dated 22 December 2006 which our client obtained from Allianz. It is unclear to us whether this is the final report from GAB referred to in Allianz’s letter dated 5 April 2007 to Dennis Reid & Associates. Nevertheless, we have obtained the document from Allianz and they have given us permission to provide you with a copy.

Your request for further documents, your insistence of our client making an affidavit of documents and the deadline of 5.00 pm today that you have imposed are all completely unreasonable, if not impossible.”

13        Mr J Blankfield, the solicitor for the defendant, in paragraphs 20 and 21 of his affidavit in support of the Summons, states that:

“AMS’ insurer has made payment to AMS in the amount of $307, 516.39 in respect of the collapse, which is the subject of the proceeding (Collapse). I am informed by Mr Ian Wright, BMF’s managing director, that he apprehends that the payment received by AMS from its insurer exceeds the true cost of rectification of the steelworks installed by AMS to the state they were in immediately prior to the Collapse. If Mr Wright’s apprehension is correct, the damages claimed by AMS in this proceeding may be reduced. In other words, AMS cannot receive payment from its insurer and BMF in respect of the works.

Once proper discovery has been made by AMS, it will be necessary for BMF to obtain expert evidence regarding what the true cost of rectification is in order to ascertain whether the payments received by AMS from its insurer did in fact exceed the true cost of rectification.”

14        The plaintiff’s solicitor, Ms Gilberthorpe, in an affidavit of 3 August 2010, exhibits correspondence suggesting, so it is put, that the defendant and Mr Ian Wright have been on notice since at least 16 January 2007 that the plaintiff had made an insurance claim in relation to the project.

15        As previously mentioned, Mr McDonald of Hall & Wilcox has made an affidavit of 3 August 2010 in which he swears that he acts for Allianz Australia Insurance Limited in relation to a contract’s work insurance claim arising out of the collapse of the structure. He sets out the details of the cover provided by the policy. In paragraph 8, he states that in accordance with the advice it received from its loss adjustors, Allianz settled the claim for the total sum of $307,516.39, comprising:

(a) make safe works $10,130.00

(b) rectification/replacement of collapsed structure $299,886.39

(c) less excess ($2,500.00)

16        Mr McDonald states that after reading the defendant’s solicitor’s affidavit and the comments about Mr Wright’s apprehensions, he instructed the loss adjustor to conduct a review of their file to address the overpayment allegation and that he conducted his own review of the Allianz’s file to assess whether there was any substance to the overpayment allegations. Mr McDonald states, in paragraph 11:

“I have subsequently obtained a report from Cunningham Lindsay dated 29 July 2010 which based on a review of the Cunningham Lindsay claim file, concludes that the claim was settled in accordance with the terms and conditions of the Policy and the sum paid by Allianz to AMS was in accordance with Allianz’s obligations under the policy.”

In paragraph 12, he states:

“Having conducted my own review of the Allianz claim file I am satisfied that the settlement of the claim by Allianz was in accordance with its obligation to pay AMS the cost of repairs to and/ or replacement of the structure to its condition immediately before the collapse. I am satisfied that there is no substance to the overpayment allegation.”

In paragraph 13, he states:

“I am instructed that Allianz is also satisfied there is no substance to the

overpayment allegations.”

17        Mr McDonald indicates that a payment may be made to the defendant under the policy in respect of the collapse incident.

18        Mr McDonald attaches the loss assessor’s Report which is dated 29 July 2010 which is headed “Draft Report No. 3 Supplementary”. The defendant submitted that because the report was marked “Draft”, it should receive limited weight, if any. However, I propose to decide this application on the basis that it contains in material respects what would be contained in a final report. If there were a further report that altered the Draft Report’s conclusion, in any material respects, it is likely that it would have been referred to in the affidavit of Mr McDonald.

19        The plaintiff resisted the discovery application on three grounds: first, that the application could have been brought earlier; second that, particularly as a result of Mr McDonald’s affidavit, there was no substance in the apprehension of the defendant; and third, that because the plaintiff’s claim was for a debt, it did not matter if there had been an overpayment unless it had been attributed to that debt.

20 Rule 29.08 is headed “Order for Particular Discovery”, and in sub-rule (2) states:

“Where, at any stage of a proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any question in the proceeding may be or may have been in the possession of a party, the Court may order that party to make and serve on any other party an affidavit stating—

(a)	whether that document or any, and if so what, document or documents of that class is or has been in that party's possession; and
(b)	if it has been but is no longer in that party's possession, when the party parted with it and that party's belief as to what has become of it.”

21 Having considered the affidavits and submissions, I am not satisfied that it is an appropriate case for an order under Rule 29.08 or otherwise, for the following reasons:

(a)

First, the issue of overcompensation is not in any way pleaded.

(b)

Second, the apprehension of the defendant or its officers is not sufficient by itself to provide grounds for the required belief, particularly in circumstances where the affidavit of Mr McDonald suggests that there are no grounds for that apprehension. I appreciate, in reaching that conclusion, that the test in Rule 29.08 is whether there are grounds for a belief, but a statement of apprehension in the context of this particular case and on the contents of the affidavits before the Court, does not establish those grounds.

The fact that the plaintiff’s solicitors have discovered some documents with objections as to relevance, does not by itself establish the necessary grounds.

(c) Third, if this application is granted, it could cause a significant adjournment of the proceeding. The defendant has known for some time that the plaintiff has made an insurance claim. The proceedings have been previously delayed for reasons that are collateral to and have no direct bearing on the application. However, the further delay of proceedings has to be taken into account, even in commercial litigation where corporations are involved. As their Honours, stated in the joint judgment in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, [101], albeit in the context of an amendment to a pleadings application:

“But it should not be thought that corporations are not subject to pressures imposed by litigation. A corporation in the position of a defendant may be required to carry a contingent liability in its books of account for some years, with consequent effects upon its ability to plan financially, depending upon the magnitude of the claim. Its resources may be diverted to deal with the litigation. And, whilst corporations have no feelings, their employees and officers who may be crucial witnesses, have to bear the strain of impending litigation and the disappointment when it is not brought to an end. The stated object in the Court Procedures Rules, of minimising delay, may be taken to recognise the ill-effects of delay upon the parties to proceedings and that such effects will extend to other litigants who are also seeking a resolution in their proceedings.”

22        Under this Court’s Rules, the relevant provision is Rule 1.14, but it contains objects which are in accord with the observations of their Honours in the Aon decision.

23        For those reasons, the defendant’s Summons dated 22 July 2010 is dismissed.

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