Aramis Vineyards Partnership v Fleurieu Vintners Pty Ltd - [2020] SADC 100

District Court of South Australia
(Civil)
ARAMIS VINEYARDS PARTNERSHIP v FLEURIEU VINTNERS PTY LTD
[2020] SADC 100
Reasons for Decision of His Honour Judge Slattery (ex tempore)
23 July 2020
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS
The applicant is a vigneron and a wine producer. The respondent provides viticultural and winemaking services. Under their contract, the respondent undertook viticultural and winemaking services for the applicant for the production of white label cabernet sauvignon wine and black label cabernet sauvignon wine from grapes grown by the applicant. In 2014 the defendant made no black label wine because, it contends, there was a reduced quality of the grapes grown by the applicant to source this wine. The applicant contends that the respondent was thereby in breach of contract. It claims damages in the amount of $145,378.60 said to be caused by the respondent’s breach of contract.
The respondent brought a number of applications for the applicant to produce discovery in support of its damages claim especially in light of the precision of its calculation. The respondent contends that the discovery made by the applicant was deficient and sought orders for the applicant’s evidence-in-chief as to quantum to be by way of affidavit pursuant to r 154.8 of the Uniform Civil Rules 2020. The applicant sought orders for the filing and service of such affidavits by the applicant.
The action is set for mediation on 30 July 2020 before a Judge of this Court and for trial in November 2020, having been brought forward from February 2021. Whether, and on what basis, an order may be made pursuant to r 154.8 Uniform Civil Rules 2020.
Held:
1. Respondent’s application granted.
2. The Court will not ordinarily make such orders where an applicant has been merely dilatory in responding to its discovery obligations.
3. In this case the applicant: -
3.1. Failed to make proper discovery in support of its damages claim calculation; while the action was commenced in 2017.
3.2. Failed to make proper discovery of supporting documents from which the calculation of its damages claim may be derived;
3.3. Failed to discover the documents which disclose how it made its damages claim calculation;
3.4. Made discovery of only broadly generic records that did not inform the calculation of its loss;
3.5. Disclosed very late that it did not maintain on an annual or other basis a full suite of financial records such as profit and loss accounts, balance sheets, cash statements and BAS statements;
3.6. Disclosed late that it did not keep a separate set of financial records but that such records formed a part of a consolidated record with other related and associated entities in a group of entities;
3.7. Agreed to a mediation before a Judge of this Court on 30 July 2020 and the bringing forward of the trial of this action from February 2021 to November 2020; and
3.8. Failed to properly, or at all, respond to orders made for discovery of documents connected with the calculation of its damages notwithstanding the applications made by the respondent.
and, in the premises it is appropriate for the court to exercise its discretion in favour of the respondent’s application.
4. Orders accordingly including for the protection of the confidentiality of the documents of the applicant.
Uniform Civil Rules 2020 r 154.8, referred to.
Mobil Oil Pty Ltd v Guina Developments Pty Ltd [1996] 2 VR 34, considered.

ARAMIS VINEYARDS PARTNERSHIP v FLEURIEU VINTNERS PTY LTD
[2020] SADC 100

In this action, the respondent was retained by the applicant to perform winemaking services. According to its tradition, the applicant produced Black Label cabernet sauvignon wine and White Label cabernet sauvignon wine in each year of vintage. The Black Label version of the wine was of a higher quality and more expensive than the White Label.
The applicant alleges that in the 2014 vintage, the respondent unlawfully blended all of the designated Black Label wine juice and White Label wine juice and did not properly store the wine after fermentation. This aspect of the obligation derives from the various blocks in which grapes are grown. In the result, the two separate vintages of wine were not produced for that year. It says that it has suffered loss and damage including that it did not have available to it the usual volume of Black Label cabernet sauvignon wine for bottling.
The statement of claim sets out what is described as the processing agreement between the applicant and the respondent. It is alleged that the agreement required the respondent to process the Black Label and the White Label grapes, to ferment them in different fermenters and to store them in oak barrels separately for 12 to 14 months before bottling. It alleges that the respondent held itself out as being experienced in providing services of the type it carried out for the applicant. It had provided these services for many years to the applicant.
It is alleged that it was an express term of the processing agreement that the services would be provided in a professional manner with the exercise of all reasonable skill, care and diligence such that the wine produced would be the best that could be produced using the grapes supplied to it from the various blocks on the applicant’s vineyard. It is also alleged that it is implicit in the agreement that the respondent would follow good winemaking practice.
The applicant alleges that in the processing of the 2014 grapes and after harvest of those grapes, there was a wrongful blending and storage together of the wine derived from the Black Label and White Label grapes. The juice from them was combined into one fermenter such that it was all fermented together rather than being put into separate fermenters and the wine was stored in one tank rather than separately. This was said to be a breach of the obligations under the terms of the agreement between the applicant and the respondent and therefore a breach of the overall agreement between the parties. It is alleged that the respondent did not inform the applicant of the decision to mix the blends of wine, which it says is a fundamental breach of their arrangement. The applicant goes on to plead other consequential breaches of the arrangement.
In its pleading, the applicant says that the appropriate remedy in estoppel is damages as a result of the departures from the promises made by the respondent to the applicant. The damages are expressed to be calculated on the basis that the applicant was unable to attempt to salvage the 2014 Black Label cabernet sauvignon from the blended wine, due to the respondent failing to inform the applicant of what it had done until 10 months after these events and the respondent’s failure to place the blended wine in oak barrels in around December 2014. It is suggested that if that had occurred, the blended wine may still have been salvageable for 2014 Black Label cabernet sauvignon wine. Whether that is so is a matter for evidence at the trial.
The applicant quantifies its loss in the amount of $153,585.50. This is comprised of one claim for $145,378.60 from the loss of sales. This is calculated by loss of gross sales of $264,406.10 excluding GST minus costs of production of $72,540 and minus the cost of bulk wine sold at $46,487.50. There is a further adjustment of the amount of $8,206.90 paid by the applicant to the respondent in respect of services. The applicant therefore claims a total failure of consideration in relation to that payment.
The outstanding feature of this calculation of loss is its precision down to the level of cents. It has the hallmark of a calculation by an accountant based upon available financial records. Significantly, the pleading appears to reflect a carefully crafted calculation of loss said to have been suffered by the applicant.
In its defence, the respondent says that the 2014 vintage suffered fundamental problems with growing conditions. It alleges that Mr Scott Rawlinson, as the winemaker responsible for making the wine, had a broad scope of authority as to the winemaking decisions including the decisions to be made in relation to the quality of the wine. Implicitly at least, it was his professional call about whether the grapes, the juice and eventually the wine achieved a particular and sufficient standard for Black Label wine.
The respondent largely denies a number of the allegations of the applicant concerning the agreements between them, are, in para.14 of its defence, the respondent pleads that reasonable winemaking practice will be informed by the individual winemaker and factors including cost relative to reasonably anticipated improvement in the wine, timing, specific instructions, volume and quality of grapes and the desired characteristics of the wine.
It pleads that Mr Rawlinson assessed the available grapes and having made his assessment, he made picking decisions concerning the grapes on the vine and inspected the blocks from time to time as is the usual practice for a winemaker. He made the timing of the picking decision about the grapes. He assessed the various blocks from which the Black Label and White Label grapes were usually selected to be of equal value and determined that neither block was of sufficient quality to produce the wine in the nature of the higher quality Black Label wine. This, it is later pleaded, was within his authority.
The respondent goes on to plead a number of aspects concerning damages. It denies that the applicant has suffered any damage as a result of anything done by Mr Rawlinson. At para.30 of its defence, the respondent says that the applicant has suffered no loss or damage as a result of any breach. It pleads that the cabernet sauvignon grapes on the Hillside block and Bottom block were of equal quality and neither was of sufficient quality to produce the wine known as the higher quality Black Label wine. As a result, the respondent has produced a wine to the highest quality that could reasonably be produced using those grapes. If those wines had been separately presented, they would have been of the same quality and would not have been of a higher quality sufficient for the Black Label wine and so no loss has been suffered. Therefore, the respondent says that there is a complete answer to the applicant’s claim because the applicant was only ever in a position to produce the wine which it did produce. It asserts that its actions could not be the source of a loss.
At a request of the master of this court, I commenced judge-management of this trial. It was initially listed for trial in February 2021, however, it has now been brought forward to November 2020. I have made an order under the rules for a mediation to take place before Judge O'Sullivan on 30 July 2020.
At the time that I became seized of this action, it was apparent that there was a significant deficiency in the disclosure of the applicant. Although this was a 2017 action, the applicant had not made any proper or complete disclosure of its documents in order to support its quite precise measure of its damages. This was not satisfactory and as a result, the respondent has now brought several applications to the court for disclosure to explain the applicant’s damages claim. As will become clear below, the applicant has not in any timely way provided to its solicitors those documents that are said to support its damages claim. The solicitors have informed me through counsel of some of the difficulties explained to them by their client about provision of supporting documents. A spreadsheet has been provided, however this requires the respondent to make its own calculation from the material disclosed on the spreadsheet. This is not only unsatisfactory, it is peculiar in light of the fact that the applicant has calculated its damages in such a precise way.
On 11 June 2020, I made orders that by 4 p.m. on 19 June 2020, the applicant respond to the respondent’s request for further and better disclosure contained within correspondence from Camatta Lempens Solicitors to the applicant's solicitors, being Exhibit BWP1 to the affidavit of Brenton Wayne Priestley, affirmed 1 May 2018, FDN11A. This request concerned, inter alia, information connected to the calculation of the claim for damages which had been reflected in the pleadings of the applicant with such particularity as I have earlier set out.
In order 3 of the orders I made on that day, I ordered that if subsequently the respondent contended that the applicant was required to make further and better disclosure, then on or before 1 p.m. on Monday, 22 June, it should file and deliver an application for orders of the court. These orders reflected the ongoing difficulty of the solicitors obtaining from the applicant sufficient instructions about documents to be disclosed and which support the calculation of its losses.
An interlocutory application was made by the respondent on 22 June 2020 pursuant to that leave. In it, the respondent sought orders (1) that the applicant's evidence in-chief as to quantum be by way of affidavit pursuant to the Uniform Civil Rules 2020, r 154.8;[1] and (2) that within 14 days, the applicant file and serve an affidavit or affidavits setting out the quantification of its loss, including particulars of its calculation and exhibiting any supporting documents relied thereon. Other orders for disclosure by the applicant were also sought by the respondent.
[1] 154.8—When required
(1) The Court may order, or the parties may agree, that some or all of the evidence in chief of some or all witnesses at trial be adduced in the form of affidavits or signed written witness statements.
(2) If evidence in that form is to be adduced, rules 154.10, 154.11 and 154.12 apply except to the extent modified by the order of the Court or agreement of the parties.
(3) The Court may order that the deponent of an affidavit or author of a written witness statement to be tendered at trial need not attend at trial to give the evidence adduced in the affidavit or written witness statement.
(4) Unless the Court makes an order under subrule (3), the deponent of an affidavit or author of a written witness statement to be tendered at trial must attend at the trial to give evidence.
I reserved for further consideration paras.1 and 2 of that application. The reason I did so was to ensure that the court had exhausted all of the available steps that could be taken through ancillary orders for the parties to provide full disclosure. As a result, the applicant was given further opportunities to disclose to the respondent the method of calculation of its losses.
I made further orders on 26 June 2020 that within seven days, the applicant provide to the respondent in electronic format the MYOB files containing the financial and operational records of the applicant connected with the production, storage and sale of the vintages of cabernet sauvignon grapes for production of wine for the years 2012, 2013, 2014, 2015 and 2016. I had been informed during argument of the existence and availability of these electronic files, as well as the spreadsheet to which earlier reference was made. I was given to understand that the comparison of the content of these two documents would fully elucidate the calculation of the damages claims. I consider that this has been shown not to be the correct position.
I further ordered the production for the years 2012, 2013, 2014, 2015 and 2016 of the whole of the applicant's financial statements, including profit and loss accounts, balance sheets, cash statements, taxation returns and BAS statements. I was given to understand that these could be made available for inspection.
I made these orders because the applicant’s solicitors had by then informed the respondent’s solicitors that apart from the spreadsheet, the records of the applicant were stored in MYOB records, some of which could not be read. Arrangements would have to be made for steps to be taken to read them and that was to be done by the applicant. Again, there was an aspect of peculiarity about this position of the applicant in light of its precise pleading of its damages. It does not appear to have suffered any adverse consequences of these difficulties when it made its calculation. This compounded my concerns about the applicant’s discovery to date.
There was no suggestion that the usual financial records of the applicant were not available for inspection. As things have turned out, this is not the case because today I am informed that the applicant did not maintain a full suite of financial records. I find this to be both unusual and confusing in equal measure. Arrangements are sometimes made where there are group consolidated accounts that involve minor subsidiaries but I have not been informed that this is the case here. Even so, there are basic accounting records that all companies usually will keep.
I further ordered that documentation in the possession, custody or power of the applicant relating to the operation of its vineyard water irrigation system for the 2013 calendar year up to and including the commencement of the applicant's 2014 vintage be provided.
I ordered that for the 2011/2012 and 2012/2013 vintages, the documents in the possession, custody or power of the applicant relating to its employment of Mr Rawlinson be provided. I also made orders for production of records concerning stocks of bottled wine, wine in oak barrels or in metal containers held by the applicant for the 2011, 2012 and 2013 vintages as at the date of completion of the 2014 vintage. The relevance of these documents is immediately apparent. The applicant claims damages, the calculation of which may be informed by historical records of production and sale of these wines. In addition, documents connected with the manufacturing of the wine are equally relevant, because they inform market rates at which the wine was planned to be sold and the range of expected margins for the wine.
I also ordered the provision of documents held by the applicant concerning the transfer of grape juice produced from the 2014 vintage, whether from steel vats to oak barrels and then to bottle or from steel vats straight to bottle or steel vats for sale on a bulk wine basis. The direct relevance of these documents is also apparent. The 2014 wine that was produced was from an homogenous batch without delineation of quality. Implicitly, it met the standard of White Label but not Black Label wine. The records of the applicant will disclose the sales of that wine which is a matter to be taken into account in the evaluation of losses. It is necessary to have these records to identify, for example, (and if it occurred) the cost to the applicant of the purchase of higher quality grape juice if it was intended to produce a vintage of Black Label wine in the 2014 year. There would be a set off between the proceeds of sale of wine over and above the usual amount of White Label wine and the cost of the purchase of the substitute juice for Black Label wine. I gave liberty to apply on short notice.
I continued to reserve the orders 1 and 2 concerning the affidavit on the basis that I wished to see the result of the orders that I had made on 26 June.
The matter was brought back before me under the liberty to apply on 8 July 2020. I made orders on that day that by midday on Friday, 10 July 2020, the applicant produce to the respondent the relevant electronic MYOB files in its possession as deposed to in para.12.1 of the affidavit of Rebecca Clafton dated 7 July 2020, FDN30. A significant period of time had transpired since the first orders made by me for disclosure connected with damages. The applicant had not been able to provide any or any sufficient documents to the respondent sufficient to enable the respondent to comprehend the integers of the formulation of the applicant’s damages claim.

I further ordered that by 4.30 p.m. on Thursday, 23 July 2020, the applicant produce to the respondent upgraded MYOB files and documents described in para.12.5 of Rebecca Clafton's affidavit sworn 7 July 2020, FDN30.
I also ordered that there be a pre-mediation conference before Judge O'Sullivan on Friday, 24 July 2020 at 10 a.m. I reserved to Judge O'Sullivan for further consideration paras.1 and 2 of the respondent's interlocutory application, namely, for the production of the affidavit in relation to loss.
The orders that I made on 26 June 2020 and 8 July 2020 arose out of disputes between the parties concerning the provision of documents. As will be obvious from the terms of the orders that I have made, the applicant did not or could not provide the materials that had been ordered. Those materials were ordered following my review of the affidavit material that had been filed before the court by the applicant and after hearing argument put by counsel for both sides. The matter came before me again today on the liberty to apply.
I have received a number of documents, but in particular the third affidavit of Ms Amanda Forsyth, sworn 23 July 2020.[2] It sets out a number of exhibits, the first a letter of 10 July 2020 requiring provision of the MYOB files that had not been produced; provision of the financial statements which had not been produced; provision of documents relating to vineyard water irrigation system that had not been produced; provision of documents relating to stocks of bottled wine, wine in oak barrels for the 2011, 2012 and 2013 vintages as at the date of completion of the 2014 vintage; and other documents as required under the terms of the orders that I had made.
[2] FDN 33.
I was also shown exchanges of letters between the solicitors. It is apparent that in relation to the documents sought, the exchanges between the solicitors disclose that the applicant has not complied with the orders that I made. What is also apparent is that, albeit the applicant’s solicitors were informed of the availability of particular electronic records, those records have not been made available in a form that may be transmitted from one party to the other and there is yet a further difficulty in taking access to those documents because, as I am told for the first time, these MYOB records reflect the financial records of a number of consolidated businesses of which the applicant is one. This had not been mentioned previously and consistent with my earlier comments, it is a peculiar development. It must be assumed that if the applicant could precisely formulate its damages claim, other sufficient work must have been done to isolate the relevant records. Presumably they would have now historically been kept separately from the applicant’s other financial records. As is explained below, none of this appears to have happened. I emphasise that this is not the fault, in this instance, of the respondent nor, the applicant's solicitors; it is the fault, in my opinion, of the applicant.
The situation arose today that two things are to be determined. The first, the question of the provision of the MYOB records; the second, the pressing by the respondent of paras.1 and 2 of its interlocutory application (FDN23). Those are the issues that I had earlier referred to Judge O'Sullivan. I consider that there is now a different discretionary landscape that has arisen about these matters. The history I have recited shows that for many months attempts have been made to obtain the documents that support the pleaded calculation of loss. Those attempts have not met with complete or really any tangible success. No explanation is given about why the applicant has not provided a letter of explanation and supporting documents signed off by whoever did the calculation. This would obviate these problems.
A second factor is that today I am told that there has been an extraction of records from MYOB material, it is on a USB stick given to the respondent today and it is said to be the directly relevant material. However, it is not said to be the material that explains the loss calculation but only the material from which the calculation was drawn. The problems are the same.
I have heard argument today. It is plain to me that if the mediation before Judge O'Sullivan on 30 July 2020 is to be effectual, it is necessary for there to be a wholesale change in the approach of the applicant about the material provided by it to the respondent concerning the quantification of its damages. Otherwise the mediation will be inutile and a waste of time and money.
I am also informed today that the whole of the MYOB records are available. There is a combination of various businesses reflected within the MYOB records, and there has been a selection from the MYOB records which are the relevant documents from those records. A USB stick electronic record of them has been produced. An offer has been made for the whole MYOB record to be produced to the respondent’s solicitors but for there to be protective orders made for the review of those materials because they contain records that are obviously confidential and are not relevant to the proceedings.
I have reached the conclusion that this matter has gone on too long without a resolution of the dispute about disclosure concerning damages that should so easily have been resolved. It is quite difficult to understand why some form of explanatory report now referenced to documents was not prepared by the applicant. I am equally concerned that this material now to be produced will still require an enquiry by the respondent that may be rendered nugatory if a wrong assumption is made by the respondent’s advisors about some aspect of the material disclosed.
Having heard argument now on at least four occasions in and around the question of the orders sought on paras.1 and 2 of FDN23 and in relation to the provision of the electronic records, it is my view that insufficient progress has been made by the parties in the resolution of these matters such that the conservatism of my earlier orders is no longer justified. That conservatism presumed that the applicant would provide documents in a timely way. This has not been the case so far.
I consider that it is necessary to revisit my earlier orders and to make different orders.
In a case of this nature, an application that the applicant file the affidavit sought is quite out of the ordinary. That is because parties to a proceeding, especially an applicant, would be expected to comply with court orders but that has not been the case here. However, I do not consider that this is sufficient of itself to make such an invasive order. I consider that something more must be shown to obtain a favourable exercise of the court’s discretion. Each case turns on its facts. Here, I consider that the failure of the applicant to disclose the materials that justify and explain its own precise calculation of its loss despite the repeated and costly attempts of the respondent in the circumstances where the applicant has agreed to mediate the dispute and the trial is shortly to be held means that this case stands in a unique category. I consider that this unique category justifies the exercise of the discretion of the court in favour of the respondent’s application for orders for the filing of an affidavit by the applicant.
I also consider that upon production of the MYOB material, protective orders in the nature of those made in Mobil Oil Pty Ltd v Guina Developments Pty Ltd[3] should be made. However, I only consider that protections must be created for the benefit of the applicant in order to preserve its legitimate claims to confidentiality. It is necessary to strike a fair balance between the interests of the applicant and the respondent here. In this case, it should only be necessary for the respondent’s counsel and solicitors and one nominated person from the respondent, preferably an outside expert, to see the whole of the documents. It is not obvious currently why the principals of the respondent need to see documents in the MYOB records. That position may vary but it should be taken in stages.
[3] [1996] 2 VR 34.
I am aware that a person from the accounting function of the respondent is intended to see the documents and may give evidence as an expert. This person is not in any different position than an outside expert who gives a confidentiality undertaking. It is for the respondent to decide if that is the optimum approach because of the internal difficulties that such a situation creates. However, that is the result of what has been an unnecessarily drawn out process.
I am informed today that the applicant has prepared a USB stick containing what is described as the relevant documents. These are derived from the MYOB disc of documents. It is said by the applicant that thereby it has fulfilled its obligation to make disclosure and at the same time will allow the respondent to verify the calculation of loss that it has made.
It is not necessary to address the sufficiency of this discovery because the usual presumption of compliance with obligations applies. The position is different when addressing damages. That is because it will still be necessary for the respondent to be in a position to make some judgment about selections of the documents which will possibly be arbitrary when attempting to address damages. I consider this to be an unsatisfactory situation which is a further reason for making the orders for the provision of the affidavit of damages.
That said, I am also reaffirmed in my view that only relevant documents may be inspected by the respondent’s advisers as well as representatives of the respondent in obtaining these documents.
I therefore make the following orders.
1That on or before 4 p.m. on 28 July 2020, the applicant file such affidavit or affidavits as are necessary to disclose to the respondent its evidence as to the calculation of the quantum of its claim as more particularly set out in para.28 of the second statement of claim, FDN16. Such affidavit shall include a demonstration of the quantification of the loss allegedly suffered by the applicant, including any particulars of its calculation and exhibiting any supporting documents relied thereon. For the purposes of this order, a reference to a document by reference to its disclosure number in a list of documents shall be sufficient for satisfaction of the order that I have made.
2The applicant provide to the respondent on or before midday, 24 July 2020 its MYOB records in its possession as deposed in para.12.1 of the affidavit of Rebecca Clafton dated 7 July 2020, FDN30.
3That the access of the respondent to the MYOB file of the applicant is limited to the following persons: instructing solicitor and counsel. An expert retained by the respondent or an officer employed by the respondent may have access to the content of the MYOB records only after an inspection has been made of the MYOB file by the solicitors and counsel for the respondent and in respect of which the solicitor and counsel then reasonably form the view that it is necessary to obtain advice or instructions in relation to the relevance or otherwise of any record or any aspect connected with any document on that MYOB record when consideration has been given to the USB stick records provided by the applicant.
4The expert or the officer of the respondent shall not take access to the documents identified by the respondent solicitors and counsel until such time as that expert or officer executes a confidentiality agreement under which that expert or officer undertakes to maintain the confidentiality of any document which he or she peruses, not to disseminate, circulate by any means or otherwise copy to any other person or entity in any way the content of that document with the intent that the expert or the officer stands in precisely the same position as solicitors and counsel in any litigation under the principles enunciated in Harman v Secretary of State for the Home Department.[4]
[4] [1983] 1 AC 280.
5I give liberty to apply.