Cash Converters Pty Ltd v Tilmak Pty Ltd

[2010] VCC 1112

IN THE COUNTY COURT OF VICTORIA Revised

Not Restricted

AT MELBOURNE
CIVIL DIVISION
COMMERCIAL

GENERAL DIVISION

Case No. CI-09-05192

CASH CONVERTERS PTY LTD	First Plaintiff
and
MON-E PTY LTD	Second Plaintiff
v
TILMAK PTY LTD	First Defendant
and
MARIA KLONA	Second Defendant
and
GORDON JAMES LEA	Third Defendant

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JUDGE:	HIS HONOUR JUDGE GINNANE
WHERE HELD:	Melbourne
DATE OF HEARING:	6 August 2010
DATE OF JUDGMENT:	19 August 2010 - Revised 1 September 2010
CASE MAY BE CITED AS:	Cash Converters Pty Ltd v Tilmak Pty Ltd
MEDIUM NEUTRAL CITATION:	[2010] VCC 1112

REASONS FOR JUDGMENT

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Catchwords: PRACTICE – discovery – inspection of documents – should customer details in pawn tickets be redacted – whether use of documents to identify and interview customers should be preceded by letter of explanation – County Court Civil Procedure Rules 2008, Order 1.14; 29.05.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr C Moller	Thomsons Lawyers
For the Defendants	Ms S Burchell	Franchise Legal Pty Ltd
HIS HONOUR:

1          The plaintiffs seek inspection of pawn tickets produced, pursuant to an order for discovery, in an unredacted form.

2          On 15 July 2010, the parties, by consent, submitted to an order that the first defendant, Tilmak Pty Ltd, make discovery, including full inspection, of all documents, including pawn tickets, direct debit requests, loan application and computer records relating to each pawnbroking loan as referred to in paragraph 28 of the affidavit of Maria Klona, sworn 29 June 2010, and made by Tilmak between 3 December 2009 and 30 June 2010.

3          The documents, being the pawn tickets, of which there are apparently 2,373, were delivered in what is called a redacted form, which included at least the deletion of the names and addresses of the customers. The principal issue to be determined is whether they should remain in a redacted form.

4          Tilmak contends that the names and addresses of the pawnbroking customers constitute private and confidential information and it is under an obligation of confidentiality to those customers.

5          Tilmak operates a second-hand dealer and pawnbroker business in Richmond. The second and third defendants are directors and shareholders. The business is conducted as a Cash Converters’ franchise store. The first plaintiff, Cash Converters, is the franchisor.

6          Cash Converters’ case is that, in breach of the franchise agreement, Tilmak used a system for the offering of cash advances which was not authorised. It claims loss and damages. On 9 December 2009, consent orders were made striking out the proceeding without adjudication. The proceeding was subsequently re-instated. Cash Converters became concerned that Tilmak was making cash advances under its own system rather than the authorised system.

7          The defendants contend that they can discharge the onus of justifying the redaction of the documents, although there is no reference to redaction of the documents in the consent order.

8          Tilmak contends that it agreed to make discovery of the relevant source documents relating to each pawnbroking loan in the period 3 December 2009 to 30 June 2010 before the provision of pleadings and affidavit of discovery to enable the plaintiff to verify the data on what is called the CCWIN system reports. Tilmak argues that it was not apparent to it that Cash Converters wished to call evidence from any of its customers. However, Cash Converters began investigations in order to ascertain whether Tilmak was breaching the terms of the injunction and it says that it has identified a number of customers whose evidence suggests that it was. Ms van der Merwe swore an affidavit on 9 June 2010 on behalf of Cash Converters detailing those investigations and referring to evidence gained from twenty five customers.

9          The issue is whether Tilmak has discharged the onus of justifying the redaction of the pawn tickets. Tilmak refers to the obligations of confidentiality: see Tournier v National Provincial & Union Bank of England [1924] 1 KB 461. Tilmak refers to the fact that the pawnbroking tickets have inscribed on them that all dealings are strictly confidential. That point in itself does not provide a reason for denying inspection of documents or requiring their full discovery. It is often the case that confidential documents have to be discovered. They receive the protection of the implied undertaking, that the documents are not to be used for a collateral purpose. Tilmak argues that if the pawn tickets are inspected in an unredacted form, Cash Converters may contact a great number of customers about sensitive information and that the customers may suffer considerable distress. There have been affidavits filed indicating a degree of disquiet and apprehension by some customers who have been approached by Cash Converters. In reply, Cash Converters argues that it is entitled to call evidence from any of the customers of the first defendant, including those to which it had issued pawn tickets

10        Tilmak queried the relevance of the documents, pointing out that Cash Converters already had access to many customers. It referred to the dangers of customers incriminating themselves if it be alleged that they had signed documents that contained false information about pawnbroking transactions.

11        Cash Converters argues that it has no desire in approaching customers to erode the goodwill of its business or, indeed, the franchisee’s business. It also argued that it has not been proved that the documents are confidential.

12         Cash Converters argued further that it was central to its case to prove that Tilmak has made or offered loans and/or cash advances to customers other than in an authorised manner and that there is already evidence that some borrowers under the alleged pawnbroking loans did not pledge goods as security for the loans. Cash Converters argued that the argument based on the protection of customers’ confidential information is irrelevant, even if it is accepted that Tilmak is under a duty similar to that of a bank to a customer. That obligation does not excuse a litigant from its discovery obligations.

13        Cash Converters argued that Tilmak’s objection had been taken too late, because the consent order had been made. However, there is authority that the claim to seal up documents, if not made originally, may be made in subsequent affidavits.

Consideration of Submissions

14        Cash Converters alleges breaches of the franchise agreement, however it does not particularise any such breach. In the normal case, if the consent order had not been made, it is unlikely that the Court would have required the production on discovery of all the 2,373 pawn tickets, but would have required particularisation of the allegations of breach of agreement. Otherwise the application for access to the 2,373 pawn tickets on discovery may well have been characterised as a fishing exercise. Yet, as the investigation referred to in Ms van der Merwe’s affidavit has already been conducted, the application for inspection of the unredacted documents cannot be regarded entirely as a fishing exercise.

15        I take into account the cost of the inspection of the 2,373 pawn tickets and the subsequent interviewing of customers, which may have to be paid by the litigants. In any event, it will be a substantial exercise.

16        The purpose of the Court’s Rules are particularly relevant. First, Rule 1.14 provides that in exercising any power under the Rules, the Court should endeavour to ensure that all questions in the proceedings are effectively, completely, promptly and economically determined and the Court may give any direction or impose any term or condition it thinks fit. Second, under Rule 29.05, the Court can, in order to prevent unnecessary discovery, limit discovery to such documents or claims or documents as specified in the order.

17        I invited and received helpful submissions as to what course I should follow if I saw some merit in Tilmak’s claims for some redaction of documents.

18        In my opinion, in this unusual case, taking into account all the matters I have referred to, it is appropriate to allow inspection of some, but not all of the pawn tickets in an unredacted form. I therefore propose to allow Cash Converters to select 100 pawn tickets and have them provided in an unredacted form, by which I mean in a complete form with no blanking out. Cash Converters should be allowed to re-apply to the Court if the initial examination is said to justify a wider investigation.

19        I appreciate that any further application will add an additional step to the proceeding, but I consider it appropriate to balance the objectives of the Rules, the costs of the discovery and inspection processes and the fact that the documents were inscribed with the notation that all dealings are strictly confidential.

20        I have taken into account Cash Converters’ submission that the imposition of a numerical limitation on the documents to be produced is neither feasible nor fair for reasons of both principle and practicality. It also argued that concerns about confidentiality and privacy would not be alleviated by a numerical limitation and that there is difficulty in identifying what the number should be and how the customers contacted should be identified.

21        In response to that submission, I take into account the following considerations. First, the large size of the exercise that Cash Converters seeks to engage in. In a normal case, as I have said, Cash Converters would be required to allege the breaches of the franchise agreement on which it was suing. I appreciate the consent orders have, to some extent, overtaken that approach, but the Court still has a general control over the extent of discovery. Secondly, there are a very large number of persons who appear to be involved in the transactions. Thirdly, the Court has a duty under the Rules to, where appropriate, contain discovery within reasonable limits

22        I do not accept that it is an appropriate case, as Tilmak submitted, to split the case on quantum liability. Some of the information that may be forthcoming to Cash Converters through discovery may go to liability as well as quantum.

23        The parties also discussed the suggestion that a letter of explanation might be sent to each of the customers named in the pawn tickets who were to be contacted by Cash Converters. In the unusual features of this case, that is an appropriate step. The customers who are approached in many instances will be unaware of this proceeding, so it is appropriate that they be informed in advance of their position, why they have been contacted and of their rights.

24        The letter that I propose differs from Cash Converters’ draft, in that it informs the recipients that they are under no obligation to respond to the letter or to speak to Cash Converters. They are also informed in the next paragraph, that they are under no obligation to speak to, or respond to Cash Converters, if they consider that their answers to questions may prove that they have committed an offence against the law or are liable to a civil penalty. That paragraph is necessary because Cash Converters’ case may involve allegations that Tilmak’s conduct breaches State law and the customers receiving the letter, in theory, might be involved in those breaches. I have also included a sentence that the recipient of the letter is entitled to obtain their own legal advice at their own expense.

25        Tilmak suggested that this letter should not be sent out by Cash Converters, but should be sent out by their lawyers. I do not consider that to be the case. It would involve me assuming that Cash Converters would not carry out the task appropriately and I have no basis at this stage for that assumption.

26        I will order that by 4.00 pm on 26 August 2010, Cash Converters’ solicitors nominate to Tilmak’s solicitors 100 pawn tickets falling within paragraph 3 of the order of 15 July 2010 to be delivered to them in an unredacted form; secondly, by 4.00 pm on 2 September 2010, Tilmak’s solicitors serve on Cash Converters’ solicitors the 100 pawnbroking tickets in an unredacted form; and, thirdly, at least seven days prior to the plaintiffs contacting any person whose details are recorded on the 100 pawn tickets, the plaintiffs post, by pre-paid post, to the person named on the pawn ticket, a letter in the form attached to the order.

27        I reserve liberty to apply and, as I have indicated, I do not close off the possibility of Cash Converters seeking further discovery of more unredacted pawn tickets. I have attempted to strike a balance. Discovery is always under the control of the Court.

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