Brookfield v Yevad Products Pty Ltd - [2004] FCA 1164

FEDERAL COURT OF AUSTRALIA
Brookfield v Yevad Products Pty Ltd [2004] FCA 1164
PRACTICE AND PROCEDURE – setting aside judgment – discovery – obligation to make discovery – whether discovery of documents withheld fraudulently or deliberately – where respondent’s representatives became aware of undiscovered documents – whether documents had been discovered a train of inquiry would have opened up for applicants – probable effect of documents on trial judge’s decision – grounds for setting aside judgment – setting aside judgment where obligations of discovery not complied with.
Federal Court Rules, O 15
Hip Foong Hong v H Neotia and Company [1918] AC 888 cited
Cabassi v Vila (1940) 64 CLR 130 cited
Jonesco v Beard [1930] AC 298 cited
Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501 cited
Brookfield v Davey Products Pty Ltd [1996] FCA 24; (1996) 14 ACLC 303 related
Brookfield v Davey Products Pty Ltd [1998] FCA 535; (1998) ATPR 41-635 related
Brookfield v Davey Products Pty Ltd [2001] FCA 104 related
Brookfield v Yevad Products Pty Ltd [2002] FCA 1376 related
Brookfield v Davey Products Pty Ltd [1996] FCA 971 related
Davies v Eli Lilly & Co [1987] 1 All ER 801 cited
Rockwell Machine Tool Co Ltd v E P Barrus (Concessionaires) Ltd [1968] 2 All ER 98 cited
Mulley v Manifold (1959) 103 CLR 341 cited
Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Company (1882) 11 QBD 55 cited
Orr v Holmes (1948) 76 CLR 632 cited
Council of the City of Greater Wollongong Corporation v Cowan (1955) 93 CLR 435 cited
Commonwealth Bank of Australia v Quade (1991) 178 CLR 134 applied
Londish v Gulf Pacific Pty Ltd (1993) 117 ALR 361 cited
Quade v Commonwealth Bank of Australia (1991) 27 FCR 569 cited
IAN WALTER BROOKFIELD AND SEPTIC PRODUCTS AUSTRALIA PTY LTD (IN LIQ) v YEVAD PRODUCTS PTY LTD (FORMERLY KNOWN AS DAVEY PRODUCTS PTY LTD) ACN 004 813 192
SG 112 of 1993
LANDER J
ADELAIDE
9 SEPTEMBER 2004

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

SG 112 OF 1993

BETWEEN:

IAN WALTER BROOKFIELD
FIRST APPLICANT

AND:

SEPTIC PRODUCTS AUSTRALIA PTY LTD
SECOND APPLICANT

AND:

YEVAD PRODUCTS PTY LTD
RESPONDENT

JUDGE:

LANDER J

DATE OF ORDER:

9 SEPTEMBER 2004

WHERE MADE:

ADELAIDE

THE COURT ORDERS THAT:
1.The applicants to bring into Court short minutes of order to reflect and give effect to these reasons.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

SG 112 OF 1993

BETWEEN:

IAN WALTER BROOKFIELD
FIRST APPLICANT

AND:

SEPTIC PRODUCTS AUSTRALIA PTY LTD
SECOND APPLICANT

AND:

YEVAD PRODUCTS PTY LTD
RESPONDENT

JUDGE:

LANDER J

DATE:

9 SEPTEMBER 2004

PLACE:

ADELAIDE

REASONS FOR JUDGMENT
GENERAL INTRODUCTION

The issues to be decided arise from notices of motion filed by the two unrepresented applicants on 27 November 1998, 12 February 2003 and 1 May 2003 seeking several orders, including an order that the judgment and orders of the trial judge in this matter, given on 8 February 1996 and 19 December 1997, be set aside. The applicants failed in the proceedings against the respondent before the trial judge.
The orders sought and the grounds for those orders will be more precisely identified later in these reasons. At this stage, it is enough to say that the applicants complain that the respondent failed to make proper discovery of the documents which the respondent was bound to discover before trial or at any time before judgment.
This matter has a long and complicated history and some attempt should be made to introduce the matter as a whole.
These proceedings centre around waste-water treatment systems in which Mr Brookfield (the first applicant) was involved or had an interest.
Mr Brookfield held a 50% shareholding in the second applicant, Septic Products Australia Pty Ltd (SPA) which manufactured and installed waste-water systems designed to clarify waste-water for irrigation use. Mr Brookfield was also the Chief Executive Officer and a director of SPA. The other shareholder of SPA was his former partner. That company’s history will be discussed in some detail later.
There were three waste water treatment systems in which Mr Brookfield and SPA were involved or had an interest. The first system was known as the Parco Beaver system. The second system was a modification of the Parco Beaver system (modified Parco Beaver system); it incorporated a different filter medium which Mr Brookfield had designed. The third system, the BPS Trickle Filter system (BPS system), was entirely Mr Brookfield’s own design. The three systems are described in detail at par [48] of these reasons. The relationship between Mr Brookfield and each of the systems is discussed at pars [26] to [34] of these reasons.
In October 1990 Mr Brookfield approached the respondent, which was then called ‘Davey Products Pty Ltd’, to provide him with various pumps to use in his waste-water systems. Each system required two pumps. The two pumps which were supplied by the respondent were the Doc 3 and Doc 7 pumps.
The pumps supplied by the respondent and installed in the waste-water systems failed prematurely due to wearing of the pump shaft and the failure of contact lip seals which were designed to prevent the water being pumped from coming into contact with the pump motor.
Mr Brookfield brought proceedings in his own name, and caused SPA to bring proceedings against the respondent (and two other respondents) seeking relief pursuant to several causes of action under the Trade Practices Act 1974 (Cth) (the TPA), and the Misrepresentation Act 1972 (SA), and in contract and negligent misrepresentation (the principal proceedings). The claims against the two other respondents were settled shortly before the trial of the principal proceedings and no further reference needs to be made to those respondents.
Both applicants’ claims failed before the trial judge, who gave her decision on 8 February 1996 (many claims pleaded failed because they were misconceived or procedurally deficient): Brookfield v Davey Products Pty Ltd [1996] FCA 24; (1996) 14 ACLC 303.
Her Honour found that SPA had been the relevant purchaser of pumps and it was that company, not Mr Brookfield, that had suffered the pleaded loss. ‘No attempt was made… to prove loss or damage suffered by Mr Brookfield directly.’
SPA was in liquidation when the principal proceedings went to trial. Mr Brookfield purported to sue in his own right pursuant to a deed of assignment by which the liquidator of SPA assigned to Mr Brookfield ‘the choses in action the subject matter’ of the trial. Following an amendment to the pleadings, the deed was treated as constituting a purported equitable assignment (the assignment did not comply with the Law of Property Act 1936 (SA)). SPA was named as a co-applicant to satisfy the procedural requirement ‘as to joinder of an assignor of a chose in action’.
The pleadings did not distinguish between claims for relief made by Mr Brookfield personally and those made pursuant to the deed of assignment.
Consistent with the finding referred to in par [11], Mr Brookfield was held not to have any right to relief independently of the deed of assignment because the pleaded losses were those of SPA and SPA was the proper party.
The trial judge held that Mr Brookfield was not entitled to relief pursuant to s 82 of the TPA because ‘on its proper construction, s 82 of the Trade Practices Act does not allow recovery by an assignee who has not himself or herself suffered the loss or damage sought to be recovered’.
Her Honour held that the deed constituted a valid sale by the liquidator of property of SPA pursuant to s 477(2)(c) of the then Corporations Law. Having already ruled against the applicants in relation to the Trade Practices causes, her Honour considered the claims in negligent misrepresentation and breach of contract.
The claim for negligent misrepresentation failed because the trial judge held that the applicants had failed to establish a causal relationship between representations made by the respondent and any loss suffered by SPA.
The claim for breach of contract also failed, the reasons for which need to be examined in more detail later.
The applicants appealed against the whole of the trial judge’s decision to the Full Court of the Federal Court, but the appeal was dismissed: Brookfield v Davey Products Pty Ltd [1996] FCA 971.
Special leave to appeal to the High Court was sought and refused.
Subsequently, Mr Brookfield has made several attempts to set aside the orders of the trial judge and stay the execution of orders for costs made against him in the principal proceedings, but those attempts have been unsuccessful. This is a further attempt to set aside the trial judge’s orders. Before addressing the facts, I need to say something about these notices of motion seeking to set aside the trial judge’s judgment.
The applications before me are to have the judgment in this matter SG112 of 1993 set aside. It can be seen, therefore, that the notices of motion were filed in the proceedings in which judgment was entered for the respondents. Earlier authorities suggest that an application to set aside a judgment on the ground that the judgment was procured by fraud is by separate action: Hip Foong Hong v H Neotia and Company [1918] AC 888; Cabassi v Vila (1940) 64 CLR 130 at 147. However, the rule is not inflexible: Jonesco v Beard [1930] AC 298 at 301. In some circumstances, the Court will entertain a claim to set aside a judgment said to be procured by fraud in the action in which the judgment was based. The reason why courts had formerly insisted upon the bringing of a separate action was to ensure that the charge of fraud was properly particularised in that separate action.
However, even if the application is permitted to be made in the original action that does not mean that an applicant’s obligation to fully particularise the claim is relaxed. In Jonesco v Beard, Lord Buckmaster said at 301:
‘ If, however, for any special reason departure from the established practice is permitted, the necessity for stating the particulars of the fraud and the burden of proof are no whit abated and all the strict rules of evidence apply. The affidavits used must, therefore, be examined as on final trial; every particle of hearsay evidence and reference to documents, not produced, must be excluded, and it must be kept constantly in mind that the rules which permit, on interlocutory proceedings, hearsay evidence, where the exact source of the information is afforded, have no more application than they would possess were the deponent a witness in the box speaking at the trial.’
Order 35 rule 7 of the Federal Court Rules provides:
‘          7 (1)  The Court may vary or set aside a judgment or order before it has been entered.
(2)  The Court, where it is not exercising its appellate or related jurisdiction under Division 2 of Part III of the Act, may if it thinks fit vary or set aside a judgment or order after the order has been entered where—
(a)the order has been made in the absence of a party, whether or not the absent party is in default of appearance or otherwise in default and whether or not the absent party had notice of the motion for the order;
(b)the order was obtained by fraud;
(c)the order is interlocutory;
(d)the order is an injunction or for the appointment of a receiver;
(e)the order does not reflect the intention of the Court; or
(f)the party in whose favour the order was made consents.
(3)  A clerical mistake in a judgment or order, or an error arising in a judgment or order from an accidental slip or omission, may at any time be corrected by the Court.
(4)  Subrule (2) shall not affect the power of the Court to vary or terminate the operation of an order by a supplementary order.’
In my opinion, O 35 r 7(2)(b) contemplates that an application to set aside a judgment obtained by fraud may be made in the action in which the judgment was entered. That rule gives power to a judge of the Court, not exercising the appellate or related jurisdiction of the Court, to vary or set aside a judgment. Of course, the Court will be vigilant to ensure that the claim of fraud is properly particularised. The rule should not be understood to mean that this Court is not concerned to ensure that litigation is brought to an end.
THE PARTIES - APPLICANTS
Mr Brookfield is a qualified master plumber who, at the relevant time, carried on the business of a manufacturer and installer of septic tanks and waste-water systems using the registered business name ‘Brookfield Plumbing Services’.
The first waste-water system with which Mr Brookfield became involved was the ‘Parco Beaver Aerobic Septic System’ (Parco Beaver system) in respect of which the company Parco Pty Ltd (Parco) had applied to register a patent in early 1989. Allwater Treatment Pty Ltd (Allwater) was licensed by Parco to manufacture and sell the system.
In early 1989, Mr Brookfield became a shareholder in a company, Waterite (SA) Pty Ltd, which became the supplier of the Parco Beaver system in South Australia. Mr Brookfield installed the systems using the business name Brookfield Plumbing Services.
A provisional liquidator was appointed to Allwater in September 1990. Parco, which had assigned its rights with respect to the Parco Beaver system to Allwater, re-acquired those rights from the provisional liquidator. On 6 December 1990, Mr Brookfield entered into a deed with Parco whereby Mr Brookfield was licensed to manufacture and sell the Parco Beaver system in Australia, and was authorised to incorporate a company to be called Parco Beaver Australia Pty Ltd (PBA).
PBA was duly incorporated in July 1991 and the assets and liabilities of Mr Brookfield’s business, Brookfield Plumbing Services, were transferred to that company.
In September 1991, Mr Brookfield received provisional patent approval for a waste water treatment system known as the BPS Trickle Filter System (BPS system). From that time, PBA installed only BPS systems.
In January 1992, Parco terminated the deed between it and Mr Brookfield.
Parco’s application for the Parco Beaver system was accepted in November 1991 and the patent was sealed in May 1992.
Parco brought proceedings against Mr Brookfield and PBA in the Supreme Court of New South Wales seeking interlocutory injunctive relief. In June 1992, orders were made restraining Mr Brookfield and PBA from manufacturing or selling any product under the name of Parco Beaver. It was shortly after this that the name of PBA was changed to Septic Products Australia Pty Ltd, the second applicant.
SPA’S STATUS
As I have already said, SPA went into liquidation when, on 5 April 1993, an order was made for its winding up. Mr Russell Heywood-Smith was appointed liquidator. The winding up order gave rise to significant difficulties for the applicants in the principal proceedings. SPA’s status in these applications also needs to be examined.
During final addresses at the trial of the principal proceedings, an application was made ‘for Mr Brookfield to be granted authority to conduct this litigation’ using SPA’s name. Her Honour made the order authorising Mr Brookfield to name SPA as a co-applicant in the principal proceedings.
SPA’s status changed again after judgment and before these notices of motion were brought. In February 1998 SPA was deregistered. At the commencement of the hearing of these notices of motion SPA had ceased to exist because it had been deregistered: s 601AD(1) Corporations Act 2001 (Cth).
SPA’s status was raised on the first day of the hearing by the respondent’s counsel, Mr Wells QC, who indicated that the respondent would not object to the matter proceeding provided Mr Brookfield gave certain undertakings as to the re-registration of SPA.
For reasons which I could not understand, Mr Brookfield sought to resist effecting the re-registration of SPA. However, I advised him that there was a significant risk that the notices of motion would ultimately be dismissed because SPA, which was a necessary applicant, had ceased to exist.
After some argument, Mr Brookfield gave the following undertakings which had been requested of him by the respondent in a letter dated 3 September 2003:
‘(a) That [Mr Brookfield] will forthwith, and in any event, before the conclusion of this hearing, take all necessary steps to obtain re-registration of SPA, and the appointment of a liquidator of [sic] the re-registered company; and
(b) That upon that re-registration, and the fulfilment of any conditions imposed upon the re-registration or appointment, [Mr Brookfield] will forthwith seek the leave of the court at [his] own expense and risk as to costs to use the name of SPA as a co-applicant to commence and prosecute this Notice of Motion.

(c) That [Mr Brookfield] will enter into a binding and enforceable agreement with the liquidator of SPA to indemnify the company against all costs and expenses incurred (including adverse costs orders) in relation to the present proceedings’
The respondent sought the undertaking in terms of paragraph (b) above because it argued Mr Brookfield’s authority to name SPA as a co-applicant expired when the proceedings in SG112 of 1993 were finally determined. It argued that the notice of motion presently before me was in substance a fresh proceeding, and the authority for Mr Brookfield to use SPA’s name did not survive the refusal of the special leave application to the High Court.
On 3 December 2003, the District Registrar of this Court ordered that:
‘Pursuant to s601AH(2) of the Corporations Act 2001 the Australian Securities and Investment Commission reinstate the registration of Septic Products Australia Pty Ltd (in Liquidation) (ACN 050 294 972).’
ASIC confirmed the re-registration of SPA by letter dated 12 December 2003 and a liquidator was appointed by order of the Registrar on 19 December 2003. An indemnity was given to the liquidator in the following terms:
‘I, Ian Walter Brookfield, being a director of [SPA], hereby agree to indemnify you and keep you indemnified against all costs, actions, suits, claims, demands, adverse costs orders, expenses and liabilities that may be assessed which may be brought or made against or incurred by you in connection with your activities as liquidator of the company if you should be so appointed.’
Paragraphs (a) and (c) of Mr Brookfield’s undertaking were thereby discharged. On 22 December 2003 I relieved Mr Brookfield of the undertaking given in paragraph (b) above, given that it was contemplated that SPA be deemed to have existed during the course of the proceedings.
I will proceed on the basis that Mr Brookfield has authority to use the name of SPA in the present proceedings and that SPA is properly a party to these applications.
THE PARTIES – THE RESPONDENT
The respondent was formerly known as Davey Products Pty Ltd (Davey) and, at the relevant time, carried on the ‘business of importer and supplier of pumps and other associated irrigation products’. I shall identify the circumstances in which the respondent changed its name later.
THE WASTE WATER SYSTEMS AND PUMPS
The various waste water systems from time to time installed and/or manufactured by Mr Brookfield were described by the trial judge as follows:
‘WASTE WATER SYSTEMS
(a)      Parco Beaver System
…
The Parco Beaver system utilises two tanks each divided into two compartments. The first tank serves as a settlement tank with primary settlement taking place in its larger compartment. Waste water, with limited solids, flows from the smaller compartment of the first tank into the larger compartment of the second tank. The larger compartment of the second tank is known as the holding tank. It is situated beneath a bio-filter module. The waste water is repeatedly pumped by a recirculation pump above the bio-filter module from where it trickles through the filter medium back to the holding tank. By this process clarification of the waste water is achieved. Clarified waste water flows into the smaller compartment of the second tank where it is treated with chlorine. From this compartment it is pumped by the irrigation pump out of the system, usually through a garden irrigation system.
(b)      Modified Parco Beaver System
The Parco Beaver system utilises short lengths of cut plastic piping held within a concrete bowl as its filter medium. It is this aspect of the system which Mr Brookfield modified. The modification involved the replacement of the cut plastic piping with a series of plastic discs set one above the other on a horizontal plane ("the disc pack"). The discs had a regular pattern of small holes drilled through them so as to allow water discharged over the top disc to trickle through the series of discs and return to the holding tank.
(c)       BPS System
The BPS system is, in essence, a modification devised by Mr Brookfield of the Parco Beaver system. The settlement tank is not materially different from that used in the Parco Beaver system. The second tank as designed for the BPS system is illustrated in annexure 2 to these reasons [not reproduced]. The significant differences between the second tank of the Parco Beaver system and the second tank of the BPS system include the following:-
(a)the BPS system used the disc pack as the filter medium rather than the cut pipe used in the Parco Beaver systems;
(b)the BPS system did not use a concrete filter bowl but rather a free-standing PVC column which supported the disc pack;
(c)in the BPS system the stilling chamber extended to the floor of the tank although it had a 100 millimetre diameter circular opening 50 millimetres above the floor of the tank. In the Parco Beaver system the stilling chamber was open at the bottom and did not reach to the floor of the tank;
(d)the BPS system returned water which had passed over the filter packs to the stilling chamber. The Parco Beaver system returned such water to the outside of the stilling chamber.’

I shall refer to the three systems in the same manner as the trial judge.
On appeal, Mr Brookfield complained, inter alia, that the trial judge misunderstood the evidence concerning the operation of the waste water systems. For example, Mr Brookfield claimed that, in fact, the Parco Beaver system also returned filtered water to the stilling chamber, and not to the outside of that chamber, as the trial judge found in para (d) above.
The Full Court held that:
‘On the evidence the learned trial judge did not misunderstand the way in which waste water returned from the filter to the holding tank in the Parco Beaver System.’
Although the trial judge’s finding was upheld by the Full Court, there is evidence, contrary to that finding, to support Mr Brookfield’s contention that the Parco Beaver system also returned water to the stilling chamber. However, my function on these applications is not to decide whether the trial judge’s decision was correct on the evidence before her or, indeed, whether the Full Court’s decision was correct. That would be quite inappropriate.
THE DISPUTE AND RELEVANT FINDINGS OF THE TRIAL JUDGE: LOWARA DOC 3 PUMPS
Mr Brookfield approached the respondent in early October 1990 before the incorporation of PBA (the second applicant, later called SPA) to inquire about purchasing pumps for his waste water systems. He spoke to the State Manager, Mr Dallas Wilsdon. He required two pumps, one to recirculate waste water over the filter medium (‘the recirculation pump’), and one to pump chlorinated water out of the system for irrigation use (‘the irrigation pump’).
Mr Brookfield said that in early October 1990 he met with Mr Wilsdon at the offices of the respondent and advised Mr Wilsdon that he wanted to discuss the use of an alternative recirculation pump in his waste water system. The pump then being used was the ‘Grundfos KP 100’. Mr Brookfield said that he told Mr Wilsdon that the pump would be used to recirculate waste water over a filter medium and detailed the cycle times. Mr Brookfield claimed that certain representations were made to him by Mr Wilsdon regarding the suitability of pumps sold by the respondent for the systems being manufactured by Mr Brookfield. His case was that Mr Wilsdon indicated that the ‘Lowara Doc 3’ pump would be a suitable alternative to the Grundfos KP 100.
On this occasion, Mr Wilsdon provided certain brochures to Mr Brookfield containing performance statistics and other information for Lowara pumps.
Shortly after this meeting, Mr Wilsdon attended at the applicants’ premises and viewed a display unit of the Parco Beaver System pumping fresh water. The Parco Beaver system used the cut pipe filter medium. Mr Brookfield claimed that having seen the display unit, Mr Wilsdon confirmed the suitability of the Lowara Doc 3 pump for use as a recirculation pump in the system. Mr Wilsdon did not recall any discussion on this occasion regarding Doc 3 pumps. He said that discussions regarding the suitability of the Doc 3 pump as a recirculation pump took place at the meeting at Davey’s premises. He agreed that he may have said that ‘Davey pumps were going to be more than suitable for the job at hand’.
The trial judge preferred the evidence of Mr Wilsdon.
Doc 3 pumps were subsequently supplied by the respondent to the applicants for inclusion in their waste water systems. The trial judge held that the particular purpose made known to the respondent for which the Doc 3 pumps were required was for recirculation of waste water in a Parco Beaver system; not a system which incorporated the disc pack filter in place of the cut-pipe filter.
The trial judge found that 50 per cent of the Doc 3 pumps supplied by Davey to SPA failed in use. The failure rate of 50 per cent led to a finding by the trial judge that the Doc 3 pumps were not fit for the purpose for which they were in fact used. However, she did not find that the pumps were not fit for the purpose for which they were made known to the respondent.
Mr Brookfield commenced installing the original Parco Beaver system in 1989. He commenced installing the modified Parco Beaver system which incorporated the disc-pack filter in South Australia during 1990 and in New South Wales during 1991. From September 1991, Mr Brookfield installed only BPS Systems which also incorporated the disc-pack filter. The trial judge’s conclusion was that ‘all, or nearly all, waste water systems installed by [SPA] utilised disk packs as the filter medium’.
The Doc 3 pumps failed because working fluid came into contact with the pump motors as a result of the failure of contact lip seals.
The applicants’ case at trial was that the Doc 3 pump shafts were manufactured from steel which was too soft or prone to wear for the use of contact lip seals. An expert called by the applicants expressed the opinion that the pump shafts were too soft but explained that hardness of the shaft is only one factor relevant to wear.
The trial judge noted that Doc 7 pumps, which had been installed as irrigation pumps and pumped filtered, chlorinated water, failed at a much lower rate than the Doc 3 pumps. Her Honour indicated that if the wear resulting in lip seal failure was attributable only to the softness of the pump shaft, then one would expect similar rates of failure in both pumps.
The evidence of an expert, Mr Mark Gobbie, who was called by the respondent, was that use of the disc-pack filter medium resulted in the development of uneven biomass growth resulting in ‘large pieces of biomass sloughing from the filter medium into the area of the holding tank in which the recirculation pump (for present purposes, the Doc 3 pump) operates’.
Mr John Weir, another expert witness, also called by the respondent, gave evidence that the lip seals failed in the Doc 3 pumps because ‘the pumps were operated for an extended period in an environment containing an excessively high concentration of abrasive particles’.
The trial judge concluded that:
‘On the balance of probabilities, there is a relationship between the established failure of a significant proportion of the Doc 3 pumps supplied to [SPA] by the respondent and the modification effected by Mr Brookfield to the Parco Beaver system. The evidence does not disclose that Mr Brookfield, or any other person on behalf of the applicants, advised the respondent of the modification made by Mr Brookfield to the Parco Beaver system.’
The case in negligent misrepresentation failed.
The applicants’ case in contract was that it was an express or implied term of the contract for the sale and purchase of the pumps that ‘they were of merchantable quality and fit for the purpose made known to [the respondent].’ In support of this claim, the applicants relied on s 14 of the Sale of Goods Act 1895 (SA) which relevantly provided:
‘14. Subject to the provisions of this Act, and of any Statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:
IWhere the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply … there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose;
IIWhere goods are bought by description from a seller who deals in goods of that description ... there is an implied condition that the goods shall be of merchantable quality: Provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed ...’
The trial judge held that the particular purpose which was made known to the respondent for which the Doc 3 pumps were required by Mr Brookfield was the use of the Doc 3 pump in the Parco Beaver system. The Parco Beaver system used cut-pipe as the filter medium.
There were some faults in certain pumps which were provided by the respondent which rendered the pumps not fit for purpose. However, those faults were unrelated to shaft wear and lip seal failure and need not be further addressed.
Her Honour found that the particular purpose for which the Doc 3 pumps were actually required, that is, for use as a recirculation pump in a waste water system using the disk-pack filter (the BPS system), was never made known to the respondent. Therefore, ‘[t]he claim for breach of an implied condition of the contracts of sale of Doc 3 pumps between [SPA] and the respondent based upon the first proviso of s 14 of the Sale of Goods Act failed’.
The Dispute and Relevant Findings of the Trial Judge: Lowara Doc 7 Pumps
Mr Brookfield used the Doc 7 pump as the irrigation pump in his waste water systems from about July 1989. Following the liquidation of Allwater, Mr Brookfield approached the respondent as an alternative supplier of Doc 7 pumps.
The respondent supplied Doc 7 pumps to Mr Brookfield and SPA from October 1990.
In dealing with the contracts for the sale and purchase of Doc 7 pumps, the trial judge said:
‘In my view the… contracts for the supply by the respondent to Mr Brookfield of Doc 7 pumps were contracts “for the sale of a specified article under its patent or other trade name” within the meaning of the proviso to paragraph I of s14 of the Sale of Goods Act. The evidence does not suggest that the position was different with respect to the contracts between [SPA] and the respondent for the sale and purchase of Doc 7 pumps.
I conclude that the contracts between [SPA] and the respondent for the sale of Doc 7 pumps included no implied condition of fitness for any particular purpose.’
Her Honour further noted:
‘At the time when he first approached the respondent with respect to purchasing pumps from it, he had been using Doc 7 pumps supplied by Allwater in Parco Beaver systems since 1989. As is mentioned above, he had witnessed extensive testing of Doc 7 pumps by Allwater, apparently in conjunction with the respondent. He had found that the Doc 7 pumps performed satisfactorily in the Parco Beaver system and he was happy to continue to use them. I regard this as compelling evidence that the steel with which the Doc 7 pump shafts are manufactured is not in practice too soft for the satisfactory operation of such pumps in Parco Beaver systems.’
The applicants’ claim in contract in respect of the Doc 7 pumps failed.
In dismissing the claim for negligent misrepresentation, as it pertained to the Doc 7 pumps, the trial judge noted:
‘… the evidence as to the Doc 7 pumps falls short of establishing that in October 1990 Mr Brookfield himself placed reliance on the respondent in respect of the Doc 7 pump or that he acted in reliance on any representations made by the respondent in October 1990 as to the Doc 7 pump.’
The negligent misrepresentation claim by SPA failed, however, because, as the trial judge found:
‘… it cannot sensibly be suggested on behalf of the applicants that any representations made by the respondent to Mr Brookfield in October 1990 concerning the Doc 3 and Doc 7 pumps were relied upon by [SPA], or were influential on [SPA] in any relevant way so far as its conduct of its waste water business was concerned. In my view, the applicants have failed to establish the necessary relationship of proximity between [SPA] and the respondent to support the pleaded duty of care. If I am wrong in this, I conclude that the applicants’ claim must in any event fail on the basis that no loss has been shown to have been suffered by [SPA] as a consequence of any representations made by the respondent.’
Sumprat Pumps
During February and March 1991, due to a supply shortage, the respondent supplied Mr Brookfield with alternative pumps to the Lowara Doc 3 and 7 pumps. The alternative pumps were known as ‘Sumprat’ pumps, and Mr Brookfield experienced the same problems with these pumps as he had with the Doc 3 pumps. No Sumprat pumps were supplied to SPA, but 46 such pumps were invoiced to Brookfield Plumbing Services in February and March 1991.
Claims made on behalf of SPA in negligent misrepresentation and contract also failed in relation to the Sumprat pumps.
THE TRIAL, THE APPEAL AND THE SUBSEQUENT COSTS ORDER
On 8 February 1996 the trial judge dismissed the applicants’ proceedings and ordered the applicants to pay the respondent’s costs of the application to be taxed if not agreed. The applicants seek to set aside those orders.
On 12 September 1996 the Full Court of this Court (von Doussa, O’Loughlin and Lehane JJ) dismissed the applicants’ appeal and ordered the applicants to pay the respondent’s costs of the appeal.
On 30 May 1997 the High Court of Australia (Dawson, Toohey and Kirby JJ) dismissed the applicants’ application for special leave to appeal to that Court with costs.
On 19 December 1997 the trial judge varied the order for costs made on 8 February 1996 and ordered Mr Brookfield to pay the respondent’s costs specified in the sum of $380,493.82. The applicants seek to set aside that order.
PROCEEDINGS SG 99 OF 1997
On 16 December 1997, Mr Brookfield issued separate proceedings (SG99 of 1997) on his own behalf, and that of SPA, seeking a stay of execution of the costs order made against him by the trial judge in the principal proceedings ‘until perjury and fraud charges are laid against Mr Dallas Wilsdon (formerly of Davey Products Pty Ltd)’: Brookfield v Davey Products Pty Ltd [1998] FCA 535; (1998) ATPR 41-635. The application claimed:
‘1.The conduct of the respondents is questioned by the applicant and is outlined and will be pursued as follows.
2.That the cost order be suspended until perjury and fraud charges are laid against Mr. Dallas Wilsdon (formerly of Davey Products Pty Ltd).
3.Until fraud charges are laid against officers of Davey Products Pty Ltd.
4.Until fraud charges are laid against the solicitors for the respondent, Piper Alderman.
5.The suspension of cost orders to extend to the application to have judgment set aside is commenced.
6.On the granting of such order, the applicant will keep this Honourable Court advised at all material times to all events with the perjury and fraud charges as and when they occur.
7.The application to have judgment set aside will commence on the finality of the perjury and fraud charges being completed.
8.Any such further orders this Honourable Court sees fit to impose.’
A notice of motion was filed in those proceedings on 30 January 1998 seeking the following relief:
‘1. For the suspension of the execution of the judgment of [the trial judge] dated 19 December 1997 [sic] until 2 August 1998 when the application to have judgment set aside will be served and filed.
2. That the respondent make full and proper discovery of all correspondence in its possession or power located at or from its Melbourne office of Davey Products Pty Ltd with relation to its trading with Lowara Pumps in Italy and its trading with Gould Pumps in Singapore and Italy.’
O’Loughlin J, who heard the notice of motion, treated the notice of motion of 30 January 1998 as having overtaken the relief sought in the application of 16 December 1997. O’Loughlin J noted that, ‘[t]he date 19 December 1997 should, presumably, be 8 February 1996’. The judgment was given on 8 February 1996. The costs order was varied on 19 December 1997.
The applicants relied for a stay on an affidavit sworn by Mr Dallas Wilsdon on 30 July 1995 in the principal proceedings. It is not entirely clear whether that affidavit was tendered in the principal proceedings. It was certainly marked [MFI R8]. The reason why I think it may also have been tendered is that the trial judge referred to the contents of the affidavit in her reasons. She could not have done so unless the affidavit had been tendered.
Mr Wilsdon was then, but is not now, the State Manager of the respondent. In his affidavit, Mr Wilsdon had deposed to having inspected the records of the respondent and to having determined the number of pumps sold by the respondent throughout Australia and the number of pumps returned to, or replaced by the respondent for the five financial years commencing 1 July 1988 and concluding on 30 June 1993. He also deposed to having determined from the respondent’s records, the number of pumps sold to manufacturers of waste water systems, and the number of such pumps returned to or replaced by the respondent during those years. The affidavit exhibited schedules summarising the determinations, and exhibited the records upon which the determinations were said to have been based.
He exhibited to his affidavit a summary of total pump sales and returns / replacements [Exhibit DW25] which indicated that there were ‘no records’ for the two financial years commencing on 1 July 1988 and concluding on 30 June 1990.
Mr Brookfield complained that the documents contained in exhibit DW28 to Mr Wilsdon’s affidavit showed that there were records for pump returns during those two years, which were not discovered in the principal proceedings. He complained that DW28 was inconsistent with DW25.
Mr Wilsdon also exhibited a summary of sales to waste water system manufacturers and returns to or replacements by the respondent [Exhibit DW27] related to two waste water companies: ‘Envirocycle’ and ‘Biocycle’. There is a notation at the end of the schedule stating: ‘These figures have been collated from Customer Sales Reports, Warranty Transaction Reports, and Return Job Cards over the above period’.
Mr Brookfield complained that the documents referred to in this notation were also not discovered by the respondent.
In the same affidavit, Mr Wilsdon deposed to there having been a fire in the offices of the respondent in 1993 which destroyed certain records. He said:
‘69. A fire in the office of Davey in Sydney in 1993 destroyed certain records of Davey. Amongst those records were those which would allow me to determine why a pump was returned to or replaced by Davey. Without those documents I have been unable to undertake that analysis …’
The date which Mr Wilsdon said that the fire occurred was incorrect. The fire had in fact occurred in 1991. An affidavit of Robert Leopold Morrow, who was the credit manager for Davey since 1985 and the officer of the company responsible for co-ordinating its defence to the proceedings brought by Mr Brookfield and SPA up until 1995, sworn on 4 March 1998, deposing to the fact that the fire had occurred on 16 March 1991, was filed in the proceedings before O’Loughlin J. Mr Morrow said that the only records which would have been housed in the offices where the fire occurred were those stored there in the six month period immediately preceding the fire, that is, records relating to the period between mid September 1990 and 16 March 1991. Mr Morrow’s affidavit contradicted Mr Wilsdon’s affidavit in a number of material aspects. First, the date of the fire. Secondly, the documents which could have been destroyed. Thirdly, the reason why Mr Wilsdon could not determine why a pump was returned or replaced before mid September 1990 and after 16 March 1991.
Mr Brookfield complained that the failure to discover the documents referred to in the notation to Exhibit DW27 was deliberate. O’Loughlin J found that those documents should have been discovered.
Initially, Mr Brookfield alleged that Mr Wilsdon had perjured himself. In the end result, however, Mr Brookfield did not pursue allegations of fraud and perjury, but maintained his complaint that the respondent had failed to make discovery of relevant documents, principally those referred to in the notation to Exhibit DW27 and to a lesser extent, those documents from which Exhibit DW25 were drawn.

O’Loughlin J refused to grant a stay because ‘the complaints made by Mr Brookfield on behalf of the applicants on the subject of non-discovery of documents are not of sufficient substance to warrant the intervention of the Court’. O’Loughlin J concluded that the applicants were on notice of the existence of such documents (at least in relation to the documents referred to in DW27) at trial by virtue of DW27 itself. He said:
‘… Mr Brookfield acknowledged during the course of argument that he and his legal representatives were aware, prior to and during the course of the trial, of the information that is contained in Exhs DW25 and DW27.’
O’Loughlin J concluded that, although there had been a failure to make discovery:
(1) there was no fraud or deliberate failure to make discovery;
(2)the documents were disclosed, and the deficiencies in discovery were self-evident, and quite capable of being pursued by Mr Brookfield and his solicitors before and at trial had they thought them important. Indeed, ‘Mr Brookfield acknowledged that he did see reference to [the documents referred to in exhibit DW27] during the course of the trial’;
(3)in any event, the issues raised by non-discovery did not go to the finding of a relationship between the established failure of a significant proportion of the Doc 3 pumps supplied to SPA by the respondent and the modifications effected by Mr Brookfield to the Parco Beaver system.
O’Loughlin J’s reasons for judgment were published on 19 May 1998. He made an order dismissing the applicants’ notice of motion filed on 30 January 1998 and he ordered the applicants to pay the respondent’s costs.
The proceedings before O’Loughlin J principally concerned the first respondent’s failure to make discovery, as evidenced by Mr Wilsdon’s own affidavit and the exhibits to that affidavit, but there was one further complaint made in the proceedings before O’Loughlin J which related to discovery.
In his affidavit, sworn on 4 March 1998 (which was tendered in the proceedings before me), Mr Morrow deposed that:
‘Although records postdating the fire would have existed in 1995 during the course of the trial they no longer exist because the respondent’s New South Wales Repairs Facility closed operations in March 1992 and at the time of a move of the New South Wales office to Moorebank in August 1996 all such records were destroyed.’
The records to which Mr Morrow was referring were ‘records including Job Cards and Goods Return Advice forms of the Sydney office’.
Mr Brookfield complained that the destruction of records in August 1996 took place after the Full Court appeal hearing in May 1996, but before the delivery of its judgment in September that year. O’Loughlin J noted that ‘[n]one of the issues raised in the appeal to the Full Court addressed the need for the production or examination of the respondent’s records’. His Honour was unable to draw any adverse inference against the respondent as a consequence of the destruction of documents.
Mr Brookfield’s complaint in relation to the non-discovery evidenced by Mr Wilsdon’s affidavit presumably encompassed the documents that Mr Morrow deposed were destroyed in August 1996. That is, the documents said to have been destroyed in August 1996 were not a further category of documents not discovered, in addition to those to which reference was made in Mr Wilsdon’s affidavit. The documents destroyed in 1996 were of the kind referred to in the notation to DW27.
An application by Mr Brookfield for an extension of time within which to file and serve a notice of appeal from the judgment of O’Loughlin J was refused by Mansfield J on 6 August 1998. Those proceedings (SG99 of 1997) have been finally determined.
Although Mr Brookfield’s application to O’Loughlin J was unsuccessful, he did establish that:
1. Mr Wilsdon’s claim that records did not exist was false.
2. Records which were not discovered must have been available.
3.Those records were relevant because they were referred to in Mr Wilsdon’s own affidavit.
4.Those records were destroyed in August 1996.
THE HISTORY OF THESE PROCEEDINGS
On 27 November 1998, Mr Brookfield filed a notice of motion in these proceedings (SG112 of 1993). These are the proceedings in which judgment was given by the trial judge dismissing the applicants’ claims against the respondent. The following orders were sought:
‘1. That the judgment of Branson J dated the 8^th day of February 1996 be set aside.
2. That the judgment proceeded on a misapprehension as to the facts and the law.
3. The judgment was obtained by extrinsic fraud.
4. That this matter be transferred from Adelaide to Sydney.’
The notice of motion was in Mr Brookfield’s name only, but points of claim filed on 18 June 1999 purported to be on behalf of both the applicants.
In the points of claim filed on 18 June 1999, the applicants alleged that the respondent did not discover and had not discovered:
‘15….
(a)…
(i)        Customer Sales Reports;
(ii)       Warranty Transaction Reports;
(iii)      Return Job Cards;
(iv)the source documents for the information contained in exhibit “DW25”;
(v)notes, memoranda and other records of examination and testing of Lowara pumps returned as faulty;
(vi)notes, memoranda, correspondence and other records of communications with Lowara as to the causes and extent of failure of the pumps.’
The points of claim contained the following allegations of fraud:
‘17. The existence of the documents referred to in paragraph 15(a) was at all material times concealed from the Court and the applicants.
…
22. [The respondent] by its servants and agents:
(a)deliberately withheld from the applicant the documents relating to the extent of failures of the Davey Lowara pumps; or
(b)alternatively, were recklessly indifferent to their obligation to make discovery and well knowing the documents would negate the basis of the defence to the applicants’ claim, turned a blind eye to its obligations to discover such documents and permitted its solicitors to defend the claim on grounds which it knew or ought to have known were false; or
(c)alternatively, well knowing that the pumps were failing in large numbers instructed their solicitors to falsely assert that the pumps failed because of a modification in the applicants’ operating system when the respondent well knew that numbers of Lowara pumps were failing in exactly the same manner in other applications which did not involve such a modification;
(d)destroyed documents which it well knew had been withheld from discovery when the appeal to the Full Federal Court was pending and which it knew:
(i)would support the appeal; and
(ii)would be relevant in any new trial ordered by that Court.’
Various procedural directions were made on the notice of motion and it was adjourned several times. Several directions were not complied with by the applicants and the respondent filed a notice of motion on 23 September 1999 seeking the dismissal or a permanent stay of the applicants’ notice of motion.
The respondent argued that the applicants’ notice of motion of 27 November 1998 should be dismissed or stayed because the decision of O’Loughlin J refusing to stay execution of the trial judgment created an issue estoppel or was barred by reason of res judicata. The respondent also contended that the notice of motion constituted an abuse of the Court’s processes because it sought to litigate afresh a case which had already been dealt with by O’Loughlin J in the stay proceedings.
In a judgment delivered on 12 April 2000, Mansfield J rejected those three grounds and refused to make the orders sought by the respondent.
In the alternative, the respondent argued that the applicants should be ordered to give particulars of the fraud alleged in the points of claim filed on 18 June 1999. On 12 April 2000 Mansfield J ordered that those particulars be given.
No particulars of the fraud alleged in the points of claim were filed by the applicants in compliance with Mansfield J’s orders despite the time for them to do so having been extended. Further procedural directions were made which were either not complied with in a timely fashion or at all.
On 6 December 2000 the respondent again filed a notice of motion seeking dismissal of the applicants’ notice of motion of 27 November 1998.
On 22 February 2001 Mansfield J stayed the applicants’ claims in the notice of motion of 27 November 1998: Brookfield v Davey Products Pty Ltd [2001] FCA 104. His Honour said:
‘I propose to stay the claim made by motion of 27 November 1998 until further order, rather than to dismiss it. Whether that is properly described as a permanent stay is a moot question. Any stay order may be the subject of an application that it be lifted. I intend, by that order, to avoid a claim that the order finally determines the rights of the parties on the question which the motion raises so as to give rise to any issue estoppel or res judicata: Cooper v Williams [1963] 2 QB 567. I adopt that course because, if it be the case that [the respondent’s] discovery in the proceeding leading to the primary judgment was deliberately and significantly inadequate, the public interest in the administration of justice would not be served by securing to [the respondent] the spoils of that default because of the way in which the present claim has been conducted.’
On 5 August 2002 Mr Brookfield filed a notice of motion on behalf of himself and SPA seeking orders that the stay imposed by Mansfield J on 22 February 2001 be lifted and that the judgment of the trial judge, and the order for costs made by the trial judge on 19 December 1997, be set aside.
The orders sought in the applicants’ notice of motion of 5 August 2002 were refused by Mansfield J on 6 November 2002: Brookfield v Yevad Products Pty Ltd [2002] FCA 1376.
On 12 February 2003, Mr Brookfield filed a notice of motion in these proceedings seeking the following orders:
‘1.That the stay imposed by Mansfield J on 22 February 2001 in proceedings SG112 of 1993 be lifted in order to hear this fresh application / notice of motion.
2.That the judgement’s [sic] of [the trial judge] of the 8^th of February 1996 and the 19^th of December 1997 be set aside.
3.That McPherson’s Limited be joined by this court, as second respondent to the action.
4.That summary judgement [sic] be handed down in favour of the applicant Brookfield on the following grounds …’
The notice of motion proceeded to set out the grounds upon which Mr Brookfield relied.
On 24 April 2003, Mansfield J refused to join McPherson’s Limited as sought in paragraph 3 of the applicants’ notice of motion of 12 February 2003.
On 1 May 2003, the applicants issued a further notice of motion in which they purported to amend paragraph 3 of the notice of motion of 12 February 2003 to read: ‘That the action against McPherson’s Limited be heard in parallel to the within action SG112 of 1993’. The amended notice of motion also added further grounds in support of the order sought ‘that “summary judgment” be handed down in favour of the applicant Brookfield’.
On 29 May 2003, applications 1 and 2 in the notice of motion filed on 12 February 2003 were listed for hearing before Mansfield J on 4 September 2003. Application 4 was stayed by Mansfield J pending the outcome of applications 1 and 2. Paragraph 3 had been dealt with previously. In due course, I heard the applications.
On the first day of the hearing the respondent’s counsel argued that I should decline to hear the present application because the applicants had continued to fail to comply with Mansfield J’s order of 12 April 2000 that particulars of the alleged fraud be provided. The respondent had not indicated to Mansfield J that objection to the hearing of this notice of motion would be taken on that ground. Presumably, Mansfield J would not have listed the notice of motion for hearing before me had he been given notice of that application. In any event, I continued to hear the matter.
At the hearing, Mr Brookfield requested that I treat the further grounds supporting the application for summary judgment included in the notice of motion of 1 May 2003 as particulars in support of the orders sought in paragraphs 1 and 2 of the notice of motion of 12 February 2003. There being no objection by the respondent’s counsel, I proceeded on that basis. The particulars or grounds are:
‘a) Despite the respondent’s continued denial of having discoverable documents in their possession, evidence has revealed, that Doc pump failure records were in fact available to the respondent at all material stages of the litigation and proceedings.
b)The discoverable documents were available from a third party who purchased the documents and business records of the respondent, six months prior to trial.
c)Evidence before the court has verified the existence of failure records for the states of New South Wales, Victoria, Tasmania and South Australia.
d)The respondent has confirmed via affidavit, the recent destruction of the records pertaining to pump failures in New South Wales and Victoria. (Note; the Victorian records have now been discovered by Thomson Playford).
e)The respondent’s [sic] have not advanced an explanation as to the whereabouts of the records pertaining to the states of Western Australia, Queensland, and South Australia.
f)The granting of a new trial would not assist in the administration of justice, due to the respondent’s failure to exercise due diligence throughout the proceedings and complete its obligations for full and proper discovery, resulting in the subsequent destruction by a third party of all relevant material.
g)The applicant is now prevented from access to a fair new trial, as a direct result of the respondent’s continuing conduct with relation to its discovery obligations.
h)Had the fresh evidence that is now before this Honourable Court been available at prior trial, there would have been a material difference to the outcome of the trial.
i)That material difference would have been a judgement that favoured the applicant’s [sic] Brookfield and Septic.
j)Had the fresh evidence that is now before this Honourable Court been available at trial, the respondent would have been prevented from proffering the defence they did.
k)Had the fresh evidence that is now before this Honourable Court been available at trial, the respondent would not have had a defence in the original action.
l)Had the fresh evidence that is now before this Honourable Court been available at trial, the court would have found that the failures of the applicant’s [sic] Brookfield and Septic were experienced in an identical fashion and time by other pump users around Australia.
m)Had the fresh evidence that is now before this Honourable Court been available at trial, the court would have found summary judgement in favour of the applicant’s [sic] Brookfield and Septic at first instance.
n)The respondent’s [sic] have no defence in delaying the discovery process for a period of “five years” after the trial date.
o)The respondent’s explanation to date for not discovering the fresh evidence is untenable.
p)The respondent’s delay and unwillingness in providing the fresh evidence, has caused the applicant Brookfield and The Federal Court of Australia unnecessary delay and duress.
q)The respondent’s delay and unwillingness in providing the fresh evidence, has caused the applicant Brookfield to endure continuing and permanent medical conditions, which are well known to the court and the respondent.
r)The respondent’s conduct has caused this Honourable Court to hand down a judgement, that does not reflect the true facts and evidence that now stands before it.
s)The public interest in the administration of justice requires this Honourable Courts [sic] intervention.’
Before dealing with the substantive matters before me, I should note that a further notice of motion was filed by the applicants on 21 August 2003 seeking orders that certain documents, which I shall shortly identify, ‘be exempt from the protection of “solicitor third party privilege”’. I dismissed this notice of motion on the first day of the hearing and indicated that I would give my reasons later. It would be convenient to deal with that matter before dealing with the substantive matter. In doing so, it is necessary to go back in time to recount the circumstances leading up to the hearing of these applications.
THE NOTICE OF MOTION OF 21 AUGUST 2003
By agreement dated 1 March 1995, the respondent, then ‘Davey Products Pty Ltd’, sold its business to a third party, Domali Pty Ltd. Domali Pty Ltd subsequently changed its name to Davey Products Pty Ltd (Davey) and the respondent changed its name to Yevad Products Pty Ltd, but, of course, retained its ACN.
The documents the subject of this notice of motion were produced by Davey to the Court pursuant to a subpoena dated 23 May 2003, issued by the applicants and made returnable on 29 May. On 29 May the return of the subpoena was adjourned to 16 June 2003 before the Registrar. On 29 May 2003 Mansfield J made the following order:
’10.Liberty to the parties to inspect any documents produced by Davey Products Pty Ltd (ACN 066 327 517) in answer to the subpoena issued at the request of the Applicants. Direct that the Respondent do first inspect any documents produced by Davey Products Pty Ltd in response to the subpoena dated 23 May 2003 and the Applicants may then inspect them 48 hours after the production, save for any documents in respect of which the respondent claims privilege. In respect of the documents the respondent claims privilege, direct the respondent to file and serve within 48 hours of the inspection, a list of those documents and the grounds upon which privilege is claimed.’
The documents were produced to the Court on the day of the adjourned return of the subpoena.
Apparently, there was some confusion about the meaning of the order. The Court intended that the respondent would have 48 hours from the time the documents were produced to the registry within which to inspect the documents and to make any claim for privilege it might be advised. The respondent’s solicitors had apparently understood that they would have 48 hours from the date set for the return of the subpoena to carry out that inspection. The confusion, I think, arises out of the terms of the order where the respondent was entitled to inspect first and the applicants entitled to inspect in any event within 48 hours of production. The respondent, however, was not obliged to claim privilege until 48 hours after the respondent’s inspection.
On 18 June 2003, the respondent filed an affidavit of Stephen John White, a partner in the firm of the respondent’s solicitors, which exhibited a list of documents for which the respondent claimed privilege. However, by that time all of the documents had already been inspected by Mr Brookfield.
By notice of motion dated 18 June 2003, the respondent sought orders that the documents in respect of which the respondent claimed privilege be removed from the bundles of documents produced to the Court by Davey; that the documents so removed be delivered up to the respondent; and that Mr Brookfield deliver up for destruction all notes relating to his inspection of the documents and any copies thereof.
On 20 June 2003, Selway J made orders that the documents produced by Davey be sealed and not available for inspection until further order, and that Mr Brookfield be restrained from publishing or discussing any information gleaned from his inspection of the documents (except to or with his legal advisers).
The documents which had been produced were in two bundles. The first bundle contained the documents in respect of which the respondent claimed privilege. On 28 July 2003, Mansfield J marked this bundle ‘MFI TP1’. The remainder of the documents produced by Davey were contained in the second bundle and were marked ‘MFI TP2’.

The respondent’s counsel sought leave to inspect the documents contained in ‘MFI TP1’ so that the claim for privilege could be properly identified. Leave was given and the respondent subsequently filed a further affidavit of Stephen John White, sworn on 30 July 2003, which supported claims for privilege made in respect of some of the documents within ‘MFI TP1’ which had been produced by Davey. The affidavit exhibited an updated list of documents summarising the privilege claim. Leave was given to all parties to inspect the documents marked ‘MFI TP2’.
The matter was adjourned until 4 August 2003 when the parties argued the question of privilege. The applicants argued that any privilege was waived when the respondent provided the documents to the third party, Davey, following the sale to it of the respondent’s business. The respondent’s counsel argued that the documents were released to Davey on a confidential basis which was not inconsistent with the maintenance of a claim to legal professional privilege if, of course, privilege attached to the relevant documents before their release.
After hearing the parties, Mansfield J varied the order in the nature of an injunction by lifting that order in respect of 18 of the documents contained within ‘MFI TP1’. Those documents were identified in the annexure to Mr White’s affidavit as documents in respect of which the respondent no longer claimed privilege. Mansfield J directed that those documents contained within ‘MFI TP1’ in respect of which the order was lifted be separated from the remainder of the documents in ‘MFI TP1’ and be re-marked ‘MFI TP1B’. Leave to inspect those documents was extended to Mr Brookfield
The remainder of ‘MFI TP1’; which were the documents which continued to be subject to a claim for privilege, were remarked ‘MFI TP1A’.
On 8 August 2003, Mansfield J determined that 20 of the documents contained in ‘MFI TP1A’ attracted legal professional privilege. The remainder did not and Mansfield J directed that those documents to which privilege did not attach be removed from ‘MFI TP1A’ and placed in ‘MFI TP1B’, and thereby made available for inspection by Mr Brookfield.
Mansfield J ordered that the remaining documents contained in ‘MFI TP1A’ be unavailable to any party other than the respondent until further order.
The applicants’ notice of motion filed on 21 August 2003 sought the release to the applicants of three documents contained within ‘MFI TP1A’. The documents sought were:
(1)a 20 page document complied by Mr John White of Thomson Playford in 1999, summarising the Lowara Doc 3 and Doc 7 pump failures of his client;
(2)a letter from Mr John White of Thomson Playford to Mr Robert Morrow of Davey, requesting further documents relating to Doc 3 and Doc 7 pump failures; and
(3)a letter of response from Mr Robert Morrow to Mr John White explaining that the reason why further discovery of documents could not be provided was because the initial requests for discovery by the former solicitors, Piper Alderman, were that Davey only provide the pump failure records of Envirocycle and Bio Cycle and that no request was made to Davey to provide documentation as to the cause of the pump failures, and all records have since been destroyed.
The applicants claimed that those three documents were included in the 20 documents which Mansfield J had determined on 8 August 2003 attracted legal professional privilege.
Mr Brookfield was unable to identify the three documents to which he was seeking access by reference to the exhibit to Mr White’s affidavit. Rather, he tried to recall and identify them from his first inspection of the subpoenaed documents.
The first document was described by Mr Brookfield as a 20 page document prepared by the respondent’s current solicitors summarising 810 pages of documents discovered by the respondent to Mr Brookfield in December 2000. The 810 pages of documents were in fact first identified to Mr Brookfield in a letter from the respondent’s solicitors to Mr Brookfield in October 2000. In December 2000, however, Mr Brookfield sought a direction that the documents and their origin be identified by an affidavit on oath. Mr Brookfield, therefore, asserts that discovery of the 810 pages of documents, for the purposes of this argument, did not occur until December 2000. Nothing turns on whether that discovery was made in October or December 2000.
The 810 pages discovered consisted of handwritten records kept by the respondent which recorded requests made by pump purchasers for warranty repairs. The records related to sales and returns mainly in Victoria, but also some sales and returns in Western Australia.
I should describe how and why these documents were created by the respondent in the course of its business. Those documents are not only relevant to this application but are very relevant to the applicants’ principal application to set aside Branson J’s orders for the respondent’s failure to make discovery.
Mr Wilsdon’s affidavit of 20 July 1995, to which I have already referred, was tendered by the applicants. Two further affidavits of Mr Wilsdon sworn on 3 March 1998 and 8 August 2003 were tendered by the respondent. Mr Wilsdon was cross-examined by Mr Brookfield on the contents of all those affidavits.
His evidence disclosed that if a customer of the respondent returned a pump as defective, the respondent created a document recording the return of the product and any repairs undertaken. These records were known as ‘job cards’. Mr Wilsdon said that the information from the job cards was entered into a computer system which recorded the details in a database. DW26 to the affidavit of 30 July 1995 is a printout of that database.
An affidavit of Robert John Mills, sworn on 3 March 1998, was tendered. He said the purpose of paragraphs 65 and 66 of Mr Wilsdon’s affidavit of 30 July 1995 was to establish the number of pumps sold and returned, not the reasons for the return or the faults. The database does not disclose the reasons or identify the faults.
Pump sales were recorded manually by way of delivery dockets, information from which was entered into the respondent’s computer system. Mr Wilsdon said that if a faulty pump was returned and then replaced, rather than repaired, a ‘no charge’ delivery docket was issued.
Some job cards recording returns by the applicants were discovered pre-trial. Other job cards were available during the trial, but were not discovered. The existence of such job cards, however, was to be inferred from the notation to Exhibit DW27 to the affidavit of Mr Wilsdon sworn on 30 July 1995.
Job cards not discovered pre-trial were provided to Davey in March 1995 when it purchased the respondent’s business. Some of the job cards were subsequently destroyed by Davey in 1996 in the ordinary course of business.
After O’Loughlin J’s decision refusing the applicants’ application for a stay, Mr Brookfield continued to assert that Piper Alderman, who previously acted for the respondent, had failed to make appropriate discovery on behalf of the respondent. In early April 1999 Piper Alderman wrote to Mr Fahy, the then Chief Financial Officer of McPhersons Ltd, the parent company of the respondent:
‘With this in mind, please can you assist by ascertaining the following information (the relevant years are 1989-90, 1990-91, 1991-92 and 1992-93):
1.Precisely what documents for the relevant years relating to the supply of Lowarra [sic] pumps to wastewater treatment system manufacturers in New South Wales, and the return of Lowarra [sic] pumps from such manufacturers, would have been available for discovery at the trial although such documents have now been destroyed.
2.What documents relating to the supply of Lowarra [sic] pumps generally, Australia wide (and not limited to waste water treatment manufacturers), and returns generally of such pumps, does Davey have for the relevant years.
3.If certain of the records referred to in 2 above have now been destroyed, please advise when they were destroyed and why. Please also advise what documents would have been available at the time of the trial in 1995.’
Piper Alderman’s request was referred to Mr Robert Morrow.
In early May 1999, following that correspondence, the 810 pages of job cards were provided to Piper Alderman by Mr Robert Morrow. The documents were inspected by those solicitors who extracted documents relating to the relevant Lowara pumps. A draft list of documents was then prepared.
In early July 1999, Piper Alderman ceased to act for the respondent and the respondent instructed Thomson Playford.
The respondent asserts that the job cards were inspected by Thomson Playford at the offices of Piper Alderman on 30 September and 1 October 1999. The job cards were subsequently delivered to Thomson Playford in about mid November 1999. On 17 November 1999, Thomson Playford obtained the respondent’s instructions to release the job cards, but Mr White, the partner in Thomson Playford with conduct of the matter, had reservations whether the documents were relevant or strictly discoverable.
The issue of discovery of the job cards was not resolved until late October 2000 at which time, as I have said, Thomson Playford wrote to Mr Brookfield and identified the job cards in their possession and offered to allow him to inspect the documents.
Mr Brookfield claimed that because the 20 page document summarising the job cards was prepared by Thomson Playford in July 1999, the document proves that the respondent’s solicitors were in possession of relevant material which they failed to discover over an extended period.
The respondent’s solicitors claim not to have come into possession of the documents until November 1999. I accept the respondent’s solicitors’ evidence in that regard. However, even so, the documents still remained undiscovered to Mr Brookfield after they had been provided to the respondent’s current solicitors for a period of about a year.
Mr Brookfield sought access to the 20 page document on what seem to me to be two grounds.
First, he argued that privilege did not attach to the document because it was a document generated from material which was not subject to any claim for privilege. That is not the test to determine whether a document is or is not privileged. Copies of non-privileged documents may become privileged if they were created for the obtaining of legal advice or for use in pending litigation: Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501. This document was clearly created by the respondent’s solicitors for the dominant purpose of use in connection with legal proceedings. This ground fails.
Secondly, Mr Brookfield argued that the delay in making discovery of the job cards by the respondent’s solicitors was evidence of a course of conduct whereby both the respondent’s former and current solicitors deliberately withheld discovery of relevant material. Mr Brookfield resiled from the term ‘fraud’ but insisted that the delay in discovery between July 1999 and December 2000 was evidence of deliberate concealment of relevant documents and, as a result, the document to which he sought access should be stripped of any privilege attaching to it, presumably pursuant to what I will now call the ‘fraud’ exception to legal professional privilege.
Mr Brookfield complained that the solicitors deliberately failed to make discovery and claimed that legal professional privilege should not attach to the document in circumstances where a claim of privilege would interfere with the proper administration of justice.
The delay which Mr Brookfield complains of on this notice of motion is the delay between 1999 and 2000. The period of delay which he relies upon to establish the claim that the privilege has been lost occurred well after the principal proceedings had been finally determined. I cannot infer from that delay, for which the solicitors in the principal proceedings were not responsible, that the respondent or their former solicitors were guilty of misconduct in relation to their obligations in making discovery in the principal proceedings.
However, whilst the delay does not establish any course of deliberate concealment of relevant material from which it may be inferred that the respondent or its former solicitors deliberately failed to make proper discovery, the delay in the respondent making discovery between 1999 and 2000 calls for some explanation.
The respondent’s solicitors concede delay on their part of at least 12 months in making discovery. The only explanation for the delay is contained in Mr White’s affidavit. I say immediately that I do not believe that the respondent’s delay was for the purpose of deliberate concealment or for any sinister purpose. However, I think that the respondent’s solicitors’ failure to discover the 810 pages of documents in a timely fashion is inexcusable. It seems from Mr White’s affidavit that some time between July and September 1999 he was ‘persuaded’ by senior counsel that the respondent had an obligation ‘to make continuing discovery in the existing proceedings’.
On 30 September and 1 October, a solicitor in the employ of the respondent’s solicitors inspected the documents at Piper Alderman. Those documents were delivered to Thomson Playford on or before 16 November 1999. On 17 November 1999 Mr White was given instructions ‘to release the job cards in my discretion, despite my continuing reservation that they may not be relevant or strictly discoverable’. His affidavit continues:
’17.Thomson Playford’s file records that in 22 November I reported to the Respondent that I had disclosed the documents, and that I would make them available to Mr Brookfield. I cannot now recall how I had disclosed them, but I suspect I told Mr Townsend or the Applicants’ counsel at court on 18 November 1999.
18.On 24 November 1999 I raised with counsel what might be an appropriate method of making “de-facto” discovery. I can find no record of counsel’s response, and suspect I was still waiting for it when I again went on leave on 23 December 1999.
19.Thereafter, the question of disclosing the job cards seems to have fallen in abeyance. In February and April 2000, tentative discussions about settlement occurred at the invitation of the Applicant’s [sic] advisers. Mansfield J delivered judgement on 12 April 2000, refusing to strike out the Points of Claim, but ordering the delivery of particulars. I am unable to locate transcript of hearing on that day, but do not believe that any order was made for discovery. We prepared a request for particulars. From May 2000 further discussions about mediation occurred at the invitation of the Applicant’s [sic] advisers. The question of further discovery was included in certain discussions and a letters (sic) between me and Mr Townsend in the context of without prejudice discussions. Now produced and shown to me and marked “SJW 7” and exhibited hereto are true copies of Townsends’ letter of 17 May, my response (not signed but sent by facsimile) on 19 May, Mr Brookfield’s letter and my responses of 16 June, and Mr Brookfield’s letter and my response of 20 June. On 21 June the issue of discovery was mentioned at an unscheduled directions hearing, and was adjourned. The Applicants did not attend the next hearing on 21 July which was adjourned to 4 September.
20.On 18 August, Townsends informed me they no longer acted in the proceedings, but continued to act in the mediation. In about September the attempts to mediate the matter collapsed, and Townsends ceased to represent the Applicants at all. On 4 September 2000 the issues of discovery and the proper constitution of the proceedings were debated before Mansfield J who relevantly ordered:
“3.Direct applicant to write to respondent’s solicitors by 18 September 2000 indicating precisely what order for discovery is sought in this proceeding and the facts upon which the applicants assert that such documents should now be ordered to be discovered; that is how the applicants claim that such documents exist”.
21.Correspondence then ensued between this firm and Mr Brookfield, as is exhibited to an affidavit of Mr Hannaford sworn 25 October 2000. In particular, by letter dated 12 October 2000 Thomson Playford specifically identified the job cards, and offered to allow Mr Brookfield to inspect and copy them. Now produced and shown to me and marked “SJW 8” and exhibited hereto is a further true copy of that letter.
22.Mr Brookfield inspected the job cards on 3 November 2000. On 7 November 2000 Thomson Playford sent a facsimile to Mr Brookfield advising him of the cost of copying the documents and asking him to provide payment if he wished to obtain copies. Now produced and shown to me and marked “SJW 9” is a copy of this facsimile. Copies of them were provided to him by letter on 15 December 2000 after he paid Thomson Playford photocopying account dated 14 December 2000. Now produced and shown to me and marked “SJW 10” is a copy of Thomson Playford photocopying account.’
I must say I regard the explanation for the delay as unsatisfactory. The applicants’ case was that the respondent had failed to make proper discovery in the principal proceedings.
As soon as the respondent realised that its discovery was incomplete it should have responded to those complaints by making proper discovery. The failure to make further discovery, in my opinion, was an important factor in Mr Brookfield believing that the respondent had deliberately concealed documents in the principal proceedings.
The respondent’s solicitor told his client in November 1999 that he would make the documents available to the applicants. They were not disclosed for nearly a year.
The claim in paragraph 19 of Mr White’s affidavit that the question of disclosing job cards seems to have fallen in abeyance is not right. The letters exhibited as SJW 7 to that affidavit show that the respondent’s solicitors resisted discovering the documents to the applicants. On 17 May 2000 the applicants’ former solicitors wrote:
‘We refer to discussions at the without prejudice conference on Friday, 7 April 2000.
You indicated during the course of that meeting that you had seen numerous documents that had not previously been made available to our client.
We are instructed to request that you forthwith make discovery of all those documents.’
On 19 May 2000 Mr White relevantly replied:
‘Your second letter refers to matters discussed at an explicitly “without prejudice” meeting, called for the sole purpose of discussing possible ways to try to resolve this action. Nothing said at that meeting can appropriately be the subject of a request for discovery.
The issue of discovery stands quite independently. If there are documents which are relevant to the proceedings, they will be discovered as part of the ordinary obligations of a party in litigation.’
The documents which were sought by the applicants were the subject matter of the application. They should have been discovered and produced.
On 16 June 2000, in response to Mr Brookfield’s request for copies of documents, Mr White wrote:
‘I note your request for copies of documents. I will consider it. However, I do not propose to have copies of anything available on Monday next.’
On 16 June 2000 he wrote to Mr Brookfield’s solicitors:
‘Mr Brookfield makes a demand for production of documents. We intend that discovery, and production of documents, take place in the confines of the proceedings. Mr Brookfields’ [sic] case is in an unsatisfactory state, and until it is clarified, we do not consider it is appropriate to respond further to discovery requests.’
On 20 June 2000 he wrote to Mr Brookfield:
‘The present position of the legal proceedings is also unsatisfactory. You have attempted to revive the old legal proceedings when, in fact, you are making a new application. You are misusing those proceedings to confuse issues of discovery of documents between the original proceedings and the present proceedings.
I do not understand you to be requesting discovery in the old proceedings.
The present proceedings are not properly constituted. In addition, you have made various serious allegations which have been partly withdrawn by your counsel in argument, and which in any case have not been properly pleaded or substantiated.
The process of discovery in the present proceedings must await clarification of the issues, and a proper pleading and substantiation of them. You correctly quote my refusal to provide documents in answer to your request of 16 June. You omit the context, in which I told you that the discovery process must await getting the proceedings in order, and that I was not inclined to provide you with material to foster a claim which appears to have no basis. I should have added, although I did not at the time, that your request for discovery is patently fishing and inappropriate.
There needs to be some consideration of the interaction between the proposed mediation and the litigation. The present position is that the litigation is not proceeding pending the proposed mediation. However, your attempts to revive the litigation suggest that you are not interested in mediation.
Both the litigation and the proposed mediation have this in common – the onus is on you to clearly and fully state your allegations and the material supporting them. You have not done so, and I suspect that you cannot.
I have no intention of responding further to telephone calls from you. You should put any further communications in writing. Please address them to the attention of Simon Hannaford of this firm.
Nor will we submit to arbitrary demands or deadlines which you attempt to impose. We will deal with your requests on their merits.
This prolonged and unnecessary litigation has cost our client a great deal of money. On your own assertion, you cannot pay the various costs orders against you. I intend to try to keep my client’s further costs to a minimum, and that means we will only respond further as we think necessary in accordance with out professional obligations. We will not respond to requests that we think are irrelevant or misconcerned [sic].’

I accept the respondent’s submission that non-discovery of this last category of documents could not have affected the decision at which the trial judge arrived. I accept the respondent’s submission that although they ‘were discoverable pre-trial … they have no further relevance, both because they are consistent with the Trial Judge’s findings of fact and with her findings that SPA did not suffer from the bottom-bearing housing problem’.
THE LAW
Discovery, which originated in the Court of Chancery, was introduced into all courts in England following upon the enactment of the Judicature Acts.
The process was introduced as part of the simplification of the courts’ processes. The Judicature Acts were passed in order to introduce a civil legal system which was understandable and which had procedures which would enable litigation to be conducted efficiently, expeditiously and reasonably inexpensively. The purpose of including a regime which allowed for discovery was to ensure that the parties had full access to all relevant material whether in their hands or their opponents.
The process enables the parties to obtain documents from their opponents which support their own case, and which destroy their opponents’ case. It enables the parties to assess their own prospects of success before trial and to ensure that they are not ambushed at trial. Interrogatories also form part of this process and are designed to identify the opposing parties’ oral evidence.
Sir John Donaldson MR said in Davies v Eli Lilly & Co [1987] 1 All ER 801 at 804:
‘ Let me emphasise that the plaintiffs’ right to discovery of all relevant documents, saving all just exceptions, is not in issue. The right is peculiar to the common law jurisdictions. In plain language, litigation in this country is conducted “cards face up on the table”. Some people from other lands regard this as incomprehensible. “Why”, they ask, “should I be expected to provide my opponent with the means of defeating me?” The answer, of course, is that litigation is not a war or even a game. It is designed to do real justice between opposing parties and, if the court does not have all the relevant information, it cannot achieve this object.’
The integrity of the discovery process must be maintained. The discovery process in many ways depends upon the honesty of the parties and their legal advisers.
It is essential for the administration of justice that the parties’ legal advisers properly instruct their clients as to their responsibilities in the discovery process. The parties must be instructed on the issues in the litigation, including the issues raised by their opponents’ pleadings. They must be instructed as to what documents are relevant for the purposes of discovery. They must be encouraged to open up their documents for assessment by their own legal advisers. If the parties are not mindful of the heavy responsibility that lies upon them, including the responsibility to discover and provide production of documents which might be destructive of their own case, then it is likely that the parties might fail to discover those documents.
In Rockwell Machine Tool Co Ltd v E P Barrus (Concessionaires) Ltd [1968] 2 All ER 98 at 99, Megarry J said:
‘In preparing for trial solicitors bear a great responsibility and a heavy burden. Not the least of these burdens is that of discovery. This is of especial weight in a complex case of passing off such as this was. Many litigants (and not least corporate litigants) have little appreciation of the scope of discovery, and the duty of making full disclosure. So often they neither know nor appreciate the requirement that they must search for and disclose to their adversary any documents which, in the classic phrase of Brett LJ, in the Peruvian Guano case, “may fairly lead him to a train of inquiry” which may either advance his own case or damage his opponent’s.
Accordingly, it seems to me necessary for solicitors to take positive steps to ensure that their clients appreciate at an early stage of the litigation, promptly after writ issued, not only the duty of discovery and its width but also the importance of not destroying documents which might by possibility have to be disclosed. This burden extends, in my judgment, to taking steps to ensure that in any corporate organisation knowledge of this burden is passed on to any who may be affected by it.’
The obligation to make discovery arises under the Federal Court Rules: O 15. The obligations as they now stand are different to the obligations which existed at the time of the trial judge’s judgment.
Order 15 governs a party’s obligations to make discovery and provide inspection of documents.
At the relevant time, when judgment was delivered, O 15 provided that a party give discovery not less than 14 days after service of a notice of discovery upon that party: O 15 r 2.
Discovery was to be given by filing and serving on the party giving the notice of discovery a list of documents ‘relating to any matter in question between him and the party giving the notice of discovery’: O 15 r 2(2).
The list of documents had to comply with O 15 r 6 and, in particular, had to describe each document or, in the case of a group of documents of the same nature, describe the group sufficiently to enable the document or group to be identified: O 15 r 6(3).
The list of documents had to enumerate the documents ‘which are or have been in the possession, custody or power of the party making the list’: O 15 r 6(2).
The list of documents needed to appoint a time within seven days after service of the list and a place where the documents could be inspected: O 15 r 6(7). It had to be certified by the party’s solicitor that, according to his instructions, the list and the statements in the list are correct: O 15 r 6(8).
Order 15 r 9 provided for an affidavit verifying a list of documents if ordered under O 15 r 8.
Order 15 r 16 provided for procedure on default and, in particular, provided that where a respondent did not file or serve a list of documents or produce any documents as required under O 15, an applicant could move for judgment against that respondent.
The extent of the obligation to give discovery is governed, of course, by the pleadings: Mulley v Manifold (1959) 103 CLR 341 at 345. The pleadings determine what documents are relevant.
There is no doubt that in this case the respondent had a general obligation to make discovery. The obligation was to make discovery of all documents which might lead to a train of inquiry: Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Company (1882) 11 QBD 55.
In that case, the Court of Appeal in England was concerned with the extent of the obligation to make discovery of documents which were in the possession or under the control of a party relating to any matter in question in the action.
Brett LJ said at 62-63:
‘We desire to make the rule as large as we can with due regard to propriety; and therefore I desire to give as large an interpretation as I can to the words of the rule, “a document relating to any matter in question in the action.” I think it obvious from the use of these terms that the documents to be produced are not confined to those, which would be evidence either to prove or to disprove any matter in question in the action; and the practice with regard to insurance cases shews, that the Court never thought that the person making the affidavit would satisfy the duty imposed upon him by merely setting out such documents, as would be evidence to support or defeat any issue in the cause.
The doctrine seems to me to go farther than that and to go as far as the principle which I am about to lay down. It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may—not which must—either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in the words “either directly or indirectly,” because, as it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary, if it is a document which may fairly lead him to a train of inquiry, which may have either of these two consequences: …’
In this case, there is no dispute that the respondent failed to make discovery of documents which were both directly and indirectly relevant to issues in the trial. The failure to make discovery is, as I have found, not as a consequence of fraud on the part of the respondent.
However, I am still of the opinion that the respondent’s continuing and existing failure to make discovery in accordance with the rules by providing a list of documents setting out all of the documents which are or have been in the possession of the respondent is a matter for which it may be criticised.
In my opinion, the documents which should have been discovered would have led the applicants to a train of inquiry and, in particular, to investigate the causes of failure of Doc 3 and Doc 7 pumps in other working situations. Moreover, if discovery had been made, the applicants would have been motivated to enquire as to the circumstances giving rise to Mr White’s memorandum.
The question is whether the applicants should be entitled to have their case reopened as a result of the failure to give discovery of documents which are and were relevant to issues in the trial.
Section 27 of the Federal Court Act 1976 (Cth) provides:
’27 In an appeal, the Court shall have regard to the evidence given in the proceedings out of which the appeal arose, and has power to draw inferences of fact and, in its discretion, to receive further evidence, which evidence may be taken:
(a) on affidavit; or
(b)by video link, audio link or other appropriate means in accordance with another provision of this Act or another law of the Commonwealth; or
(c)by oral examination before the Court or a Judge; or
(d)otherwise in accordance with section 46.’
However, this is not an appeal. Nor is this an application to tender further evidence. It may or may not be that the applicants would tender some of the documents lately discovered. It may be that those documents would put them on a train of inquiry such that they would present a different case. For example, they may retain other experts and ask those experts to make other assumptions or consider different conclusions.
In Orr v Holmes (1948) 76 CLR 632, the High Court considered a case where an unsuccessful defendant sought to set aside a verdict in order to introduce fresh evidence which might, if accepted, have led to the dismissal of the action. Dixon J said at 640:
‘ If a trial has been regularly conducted and the party against whom the verdict has passed cannot complain that evidence has been wrongly received or rejected or that there has been a misdirection or that he has not been fully heard or has been taken by surprise or that the result is not warranted by the evidence, the successful party is not to be deprived of the verdict he has obtained except to fulfil an imperative demand of justice. The discovery of fresh evidence makes no such demand upon justice unless it is almost certain that, if the evidence had been available and had been adduced, an opposite result would have been reached and unless no reasonable diligence upon the part of the defeated party would have enabled him to procure the evidence.’
There are good reasons why there are limits upon the reception of fresh evidence after trial. It is in the public interest that litigation be brought to an end.
However, Dixon J’s statement supposes that the trial will have been regularly conducted. A trial has not been regularly conducted where a party to the litigation has not discovered documents which are relevant to the issues in the trial. That party has not complied with its obligations in the interlocutory processes and by failing to make full discovery that party has withheld evidence from its opponent.
Moreover, another aspect of the administration of justice must be considered. Because it serves the administration of justice, it is also in the public interest that the integrity of the courts’ processes are preserved.
For the reasons already given the discovery process is very important in ensuring that the parties are accorded a fair trial. Litigants will lose confidence in the courts’ processes and decisions if they think that a party might avoid giving proper discovery and not be later held to account.
In Council of the City of Greater Wollongong Corporation v Cowan (1955) 93 CLR 435, Dixon CJ said at 444 (Williams, Webb, Kitto and Taylor JJ concurring):
‘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.’
There, Dixon CJ continued to qualify the circumstances where the courts relax the rigours of the rule that a verdict cannot be set aside. The trial should not have miscarried and the verdict must be regularly obtained. Moreover, the rule does not apply in cases of surprise, malpractice or fraud. The failure to make full discovery may amount to malpractice.
In Commonwealth Bank of Australia v Quade (1991) 178 CLR 134, the High Court was called upon to consider whether a new trial should be granted in circumstances where a successful party had failed to comply with an order for discovery of documents which had the result that relevant evidence in that party’s control had remained undisclosed until after judgment. The Court referred to Orr v Holmes and the passage to which I have referred in Greater Wollongong Corporation v Cowan and said at 140-141:
‘The words “rarely, if ever” in the above passage leave open the possibility of exceptional circumstances justifying a departure from the general rule even in the class of case to which the general rule is directed. It is not, however, necessary to pursue that aspect of the matter for the purposes of the present case. Nor is it necessary to consider whether the somewhat obscure qualification expressed by Dixon C.J. in the words “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” represents other than an illusory relaxation of the primary test (i.e. “reasonably clear that … an opposite result would have been produced”).
As the above quotation makes plain, the general rule formulated by Dixon C.J. is directed to the ordinary case where all that is involved is that relevant fresh evidence has come to the notice of the unsuccessful party after the trial. It is not directed to the case where the trial itself has miscarried “through misdirection, misreception of evidence, wrongful rejection of evidence or other error” or to a case of “surprise, malpractice or fraud”. Such cases cannot properly be seen as mere cases of “fresh evidence”. Nor can a case where the material constituting the fresh evidence as 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 discovery of documents. True it is that a case of failure by a party to comply fully with such an order can be distinguished from one in which the trial has miscarried by reason of error or fault on the part of the tribunal itself or a case where the verdict can be seen to have been procured by fraud or perjury. On the other hand, a case of failure to comply with a discovery order could, particularly where the failure was deliberate or remains unexplained, come within the category of “cases of malpractice”, and be a stronger case than the category of “cases of surprise”, which were both expressly exempted from the above statement of what we have referred to as the “general” rule.’
The Court then discussed the policy that there be an end to litigation and referred to the ordinary class of case where it would be unfair to deprive a successful party of the fruits of victory where some relevant evidence had, without fault on that successful party’s part, been unavailable at the time of the trial to the unsuccessful party.
The Court then said at 142:
‘ The position is, however, different in a case such as the present where the unavailability of the evidence at the trial resulted from a significant failure by the successful party to comply with an order for the discovery of relevant documents in his possession or under his control. The application to that category of case of the general rule that a new trial should only be ordered on the ground of fresh evidence if it is “almost certain” or “reasonably clear” that the opposite result would have been produced if the evidence had been available at the first trial would, particularly where the failure was deliberate or remains unexplained, serve neither the demands of justice in the individual case nor the public interest in the administration of justice generally. In so far as the demands of justice in the individual case are concerned, it 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 generally 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.’ (Footnotes omitted.)
The Court then went on to say at 142-143:
‘ 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”. 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, 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.’ (Footnotes omitted.)

In Londish v Gulf Pacific Pty Ltd (1993) 117 ALR 361, the Full Court of this Court was called upon to consider the principle expounded in Quade v Commonwealth Bank of Australia (1991) 27 FCR 569.
In that case, the appellants established that a party had not discovered documents relevant to a company’s change of name. It was argued that the appellants ought to have had their suspicions aroused in relation to the matters contained in the undiscovered documents.
The Court said at 368:
‘ But to ask whether the solicitors or counsel representing the appellants ought to have had their suspicions aroused seems to us to be to ask altogether the wrong question. From time to time, a defendant in a fraud case has attempted to rely on the defence that the plaintiff had the means of knowledge of the truth, and was unduly gullible in submitting to be deceived. Such defences have always had from the courts a short shrift: see Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 37. So here, in our opinion, if it was unsatisfactory that this point should have emerged when the pleadings raised no issue as to the identity of the company Gulf Pacific Pty Ltd, the responsibility ought to attach to the party that made the false assertion in the statement of claim. Particularly is this so when the respondent has failed to make proper discovery. In Quade v Commonwealth Bank of Australia (1991) 27 FCR 569; 99 ALR 567, this court held that the stringent rules, which ordinarily restrict the grant of a new trial to enable the calling of fresh evidence, must be relaxed where the reason why the evidence was not available at the hearing was the failure of the successful party to comply with that party’s own obligations in respect of discovery. An appeal was dismissed by the High Court in Commonwealth Bank of Australia v Quade (1991) 192 ALR 487, where (at 489) the joint judgment of Mason CJ, Deane, Dawson, Toohey and Gaudron JJ referred, inter alia, to cases of surprise as being cases which could not properly be seen as mere cases of “fresh evidence”. Their Honours continued:
Nor can 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 discovery of documents.
Their Honours thought a case of failure to comply with a discovery order could, particularly if it remained unexplained, provide a stronger case for allowing an appeal than a case of surprise, which was expressly excluded from the general rule restricting appeals of this kind by Dixon CJ in Wollongong Corp v Cowan (1955) 93 CLR 435 at 444.’
The respondent defended its failure to make discovery by pointing to the material which was available which might have alerted the applicants to trains of inquiry or the existence of the non-discovered documents.
The applicants could not have known of Mr White’s very important memorandum. They were dependent upon the respondent to discover that document.
They might have been aware of job cards but they were advised by Mr Wilsdon, on his oath, that the documents had been lost in a fire in 1993. That was wrong and, whether innocent or not, seriously misleading.
I can find no want of diligence on the part of the applicants in respect to the failure of the respondent to make discovery.
This case is not the ordinary case. In this case, the successful party failed to make discovery of documents which were relevant to the case prosecuted by the unsuccessful party. The failure to make full discovery remains largely unexplained. The limited explanation offered is unsatisfactory. In this case, the successful party has continued to fail to give discovery of all documents which are or have been in its possession, custody or power. True it is, it has identified, through affidavit evidence, documents which it has found in the many years since the trial which it now accepts are relevant to issues in the trial.
It has not, however, as I have already said, ever made discovery of all the documents which it was bound to discover under the Federal Court Rules.
Mr Ashley White’s memorandum, which I think is a critical document in the respondent’s possession and which was not discovered for reasons unexplained, was sent to a number of persons in the respondent’s organisation. The copies of that document should be discovered so that the applicants can know who received it. For example, if all the addressees received it then it might be more difficult to accept Mr Wilsdon’s evidence that he did not. However, no attempt has been made to discover those documents. As I have already explained, the job cards, apart from the 810 pages produced, have not been discovered in the sense that the respondent has not disclosed when they were last in its possession and what happened to them.
The third category of documents would probably have made little difference in the evidence produced at trial and made no difference to the result. However, the first two categories, in my opinion, stand in a different position.
810 pages of job cards and Mr White’s memorandum of 29 October 1991 would, at the very least, have put the applicants on a train of inquiry. So also would the destroyed job cards. They would have, in my opinion, been relevant to put before the applicants’ expert to obtain an opinion as to the likely cause of the failure of the pumps. In my opinion, the applicants’ experts might have offered different opinions. They were relevant to the opinions offered by the respondent’s experts. In my opinion, they had, at the very least, the tendency to contradict the respondent’s experts’ opinions.
They might have led the trial judge to make findings of the causes of the failure of the Doc 3 and Doc 7 pumps different to those made.
In those circumstances, in my opinion, it can be said that there is a real possibility that if these documents had been available to the applicants at the trial of their proceedings a different result would have been obtained.
In my opinion, this Court should ensure that a party complies with their obligation to make discovery.
It is imperative that parties have access to all relevant documentary evidence before trial in order to advance a party’s case or in order to destroy their opponent’s case. Often, especially in commercial causes, the best evidence of the events the subject of the inquiry in the trial is contained in the contemporaneous documents. Usually, documents are created in circumstances where parties do not expect the documents to surface in a trial. They often, therefore, contain the true account of the contemporaneous event.
In my opinion, the trial in this case miscarried. It miscarried because the respondent failed in its obligations to make discovery of all relevant documents which were or had been in its possession or power at the time of trial. It failed to discover vital documents which may have led the Court to a different conclusion to that at which it arrived.
In my opinion, the applicants did not fail to prosecute their case diligently. The respondent, for all of the reasons I have given, failed and continues to fail in its obligations.
There is a real possibility that at trial the Court may conclude that the failure of these pumps was not due to any particular aspect of the applicants’ systems but were due, as Mr White said in his memorandum, to two matters:
‘1.The Doc range is designed for sump pump operation which usually involves intermittent use, not continuous operation.
2.The Doc is intended is intended for use as a sullage or grey water pump capable of handling some solids in suspension. Continuous pumping of slurries will lead to premature wear, especially at the seal area.’
In my opinion, the interests of justice will be served by setting aside the order made by Branson J on 8 February 1996 dismissing the applicants’ application and ordering the applicants to pay the respondent’s costs. There should also be an order setting aside the order made by Branson J varying the order for costs made on 8 February 1996 and providing that the first applicant pay the respondent’s costs specified in the sum of $380,493.82.
Although the applicants have not sought further orders, unless otherwise ordered the orders for costs made by the Full Court of this Court on 12 September 1996 and the order for costs made by the High Court of Australia on 30 May 1997 will continue to stand. I could not set aside the order for costs made by the High Court. Application would need to be made to that Court for that order. It may be that I can make an order staying those orders for costs but I need to be addressed on that matter.
As presently advised, I think that there should also be a further order that the matter proceed to trial although the applicants’ notice of motion of 12 February 2003 sought summary judgment. That aspect of the notice of motion was stayed by Mansfield J pending the hearing of these matters: [124].
I invite the applicants, who since I have reserved judgment have become represented, to bring in short minutes to reflect and to give effect to these reasons.

I certify that the preceding four hundred and twenty three (423) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.
Associate:
Dated: 9 September 2004

Counsel for the First and Second Applicants: The First Applicant appeared in person

Counsel for the Respondent: Mr J Wells QC with Mr D Rydon

Solicitor for the Respondent: Thomson Playford

Date of Hearing: 4, 5, 8, 9, 10, 12, 15 September; 3, 4, 5 November; and 8 & 22 December 2003

Date of Judgment: 9 September 2004

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 112 OF 1993

BETWEEN:	IAN WALTER BROOKFIELD FIRST APPLICANT
AND:	SEPTIC PRODUCTS AUSTRALIA PTY LTD SECOND APPLICANT
AND:	YEVAD PRODUCTS PTY LTD RESPONDENT
JUDGE:	LANDER J
DATE OF ORDER:	9 SEPTEMBER 2004
WHERE MADE:	ADELAIDE

JUDGE:	LANDER J
DATE:	9 SEPTEMBER 2004
PLACE:	ADELAIDE

Counsel for the First and Second Applicants:	The First Applicant appeared in person
Counsel for the Respondent:	Mr J Wells QC with Mr D Rydon
Solicitor for the Respondent:	Thomson Playford
Date of Hearing:	4, 5, 8, 9, 10, 12, 15 September; 3, 4, 5 November; and 8 & 22 December 2003
Date of Judgment:	9 September 2004