Commonwealth Bank of Australia v Goater

[2017] NSWSC 418

Supreme Court

New South Wales

Medium Neutral Citation:	Commonwealth Bank of Australia v Goater & Ors [2017] NSWSC 418
Hearing dates:	28 February 2017
Decision date:	20 April 2017
Jurisdiction:	Common Law
Before:	N Adams J
Decision:	(1) Dismiss the cross-claimants’ notice of motion filed 27 January 2017. (2) Subject to an application being made in writing to my Associate within seven days of the date of this judgment for a different order, order the cross-claimants to pay the second cross-defendant’s costs of the motion.
Catchwords:	PRACTICE AND PROCEDURE – application for discovery – categories of documents in respect of which order for discovery sought not relevant to facts in issue or relevant only to credibility – application dismissed
Legislation Cited:	Bankruptcy Act 1966 (Cth), s 40(1)(g) Civil Procedure Act 2005 (NSW), ss 56-60 Uniform Civil Procedure Rules 2005 (NSW), r 21.2
Cases Cited:	Commonwealth Bank of Australia v Goater [2014] NSWSC 652 Commonwealth Bank of Australia v Goater [2016] NSWSC 710 Giles v Commonwealth (No 2) [2014] NSWSC 1531 Goater v Commonwealth Bank of Australia [2014] NSWCA 382 Goater v Moree Plains Shire Council [2016] FCAFC 135 Palavi v Radio 2UE Sydney Pty Ltd [2011] NSWCA 264
Category:	Procedural and other rulings
Parties:	Commonwealth Bank of Australia (Plaintiff/First Cross-Defendant) Shirley Ann Goater (First Defendant/Cross-Claimant) Terence Claude Goater (Second Defendant/Cross-Claimant) Moree Plains Shire Council (Second Cross-Defendant)
Representation:	Counsel: Mr N Hill (Solicitor) (First and Second Defendants/Cross-Claimants) Mr S L Bell (Second Cross-Defendant)   Solicitors: Australegal (First and Second Defendants/Cross-Claimants) Moray & Agnew (Second Cross-Defendant)
File Number(s):	2012/00332699
Publication restriction:	Nil

Judgment

1. By notice of motion filed on 27 January 2017 the defendants/cross-claimants, Shirley and Terence Goater (“the Goaters”), seek an order pursuant to r 21.2(1) of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) that the second cross-defendant, Moree Plains Shire Council, (“the Council”) give discovery in response to three specified categories of documents. The Council opposes the order sought.

2. This is not the first time that the Goaters have sought discovery in these proceedings. A similar motion was filed on 13 May 2016 seeking orders for discovery against both the Council and the plaintiff/first cross-defendant, the Commonwealth Bank of Australia (“the Bank”). Adamson J dismissed that notice of motion on 3 June 2016: Commonwealth Bank of Australia v Goater [2016] NSWSC 710.

3. I heard this motion in my capacity as Duty Judge. Mr Hill, solicitor, appeared on behalf of the Goaters and Mr Bell of counsel appeared on behalf of the Council. Mr Hill read an affidavit sworn by himself on 27 January 2017, including annexures, and relied upon a number of documents contained in exhibits NDH3 – 10 to that affidavit. He and Mr Bell also relied upon written submissions. It became apparent during the hearing of the motion that the parties placed reliance on portions of some of the affidavit evidence filed in the substantive proceedings. Accordingly, the affidavits of John Humphries sworn 28 July 2016, Suzie Treloar sworn 21 September 2016, and Mark Brothers sworn 16 February 2017 were all read on the motion.

4. The three categories of documents sought to be discovered in the present application are described in annexure NDH1 to the affidavit of Mr Hill as follows:

“5. Documents (if any) relating to or referring to any proposed payment arrangements in respect of the debts referred to in paragraphs 5D to 5F of the Further Amended Statement of Cross-Claim, including the Monthly Payment Arrangement (as defined in paragraph 5I of the Further Amended Statement of Cross-Claim) and any subsequent variation of the Monthly Payment Arrangement between 1 October 2013 and 6 November 2013;

6. Documents (if any), created between 29 October 2013 and 6 November 2013 (inclusive) relating or referring to any enquiries or investigations made by the second cross-defendant following the email referred to in paragraph 8A of the Further Amended Statement of Cross-claim and in paragraph 27 of the Affidavit of Suzanne Jan Treloar of 1 September 2016;

7. Documents (if any) created between 25 February 2014 and 13 May 2014 (inclusive) relating or referring to any possible misallocation by the second cross-defendant of the payments by the cross-claimants to the second cross-defendant including in connection with any investigation by the second cross-defendant in connection with such misallocation following requests by Mr Humphries referred to in paragraphs 31-32, 33-40, 46-50 and 62-65 of the Affidavit of John Humphries of 28 July 2016.”

5. Categories 5 and 7 have already been considered by Adamson J. Her Honour determined that it was not in the interests of justice to order discovery of those categories of documents.

Background

6. The Goaters run a funeral business in Moree. Their residential premises are situated next to their business premises. Mr Goater is the registered proprietor of both properties. The Bank provided an overdraft facility to Mrs Goater in the amount of $50,000 in December 2006 and had advanced a business loan of $290,000 to the Goaters in 2007. Both loan agreements were secured by mortgages over the two properties. The Bank commenced the principal proceedings by way of statement of claim filed on 23 October 2012, seeking orders for judgment and possession of the two properties due to default in loan payments.

7. The Bank temporarily ceased its enforcement action when the Goaters lodged a complaint with the Financial Ombudsman Service (“FOS”) in October 2012. That complaint was resolved on 18 October 2013 by way of agreement between the Bank and the Goaters (“the FOS agreement”).

8. One of the conditions of the FOS agreement was that the Goaters would provide written evidence to the Bank that they had reached repayment arrangements with any judgment creditors. The Goaters owed council and water rates to the Council. They had come to a repayment arrangement in respect of the water rates. It is the Council’s conduct in providing information to the Bank, under the authority of the Goaters, that is at the heart of the Goaters’ cross-claim against the Council.

9. This matter has had a long procedural history since the parties entered into the FOS agreement. Adamson J sets out that history in [11] – [26] of her judgment. I do not propose to describe it again in this interlocutory judgment. Suffice it to say that, consistent with the obligation imposed under the FOS agreement, Mrs Goater requested that the Council provide written evidence of the monthly repayment arrangement between it and the Goaters to the Bank. That was done on 6 November 2013, in terms that disclosed that the Goaters were not meeting their obligations to the Council. The Bank subsequently relied upon that email as being a breach of the FOS agreement and thereafter resumed its enforcement action in this Court. It obtained default judgment on 7 March 2014 and a writ of possession on 17 March 2014.

10. The writ of possession was executed on 13 May 2014. The Goaters unsuccessfully made application to this Court to set aside default judgment and to stay the enforcement of the writ of possession: Commonwealth Bank of Australia v Goater [2014] NSWSC 652. That motion was heard and determined by Davies J on 22 May 2014, after the Goaters’ eviction. They subsequently appealed to the Court of Appeal, which held that the default notice sent by the Bank on 27 November 2013 did not strictly comply with the terms of the FOS agreement, which required two default notices rather than one: Goater v Commonwealth Bank of Australia [2014] NSWCA 382. The Goaters regained possession of the properties. The Bank amended its statement of claim and continues its enforcement action. On 20 January 2016, the Goaters filed a cross-claim against the Bank.

11. In 2015, the Council commenced proceedings in the District Court against the Goaters for the outstanding rates. The Goaters filed a cross-claim in those proceedings. On 12 February 2016, default judgment was entered by consent in favour of the Council in the amount of $23,431.47. Also in February 2016, the outstanding cross-claim against the Council was transferred to this Court to be heard together with these proceedings.

The cross-claim against the Council

12. In 2013, the Goaters were significantly behind in their council and water rates and owed a considerable amount in unpaid burial costs, in addition to being in default in their payments to the Bank. The Council commenced proceedings against Mr Goater for the outstanding council rates in the Local Court at Moree in 2012. Those proceedings were not concerned with the water rates. Default judgment was entered in favour of the Council on 19 December 2012. An examination order was made that required the Goaters to attend to provide information regarding their financial affairs. The Goaters did not attend for the examination.

13. The Council and the Goaters entered into a monthly payment arrangement in relation to the unpaid water rates, which is set out in more detail below. The Council claims that as at 6 November 2013 the Goaters were in breach of that arrangement. The Goaters deny any such breach.

14. In late October 2013, a representative of the Bank, Rohan Dalal, contacted Suzie Treloar at the Council. Ms Treloar is the Council rates officer who managed the Goaters’ accounts. Mr Dalal sought information, on behalf of Mrs Goater, as to the payment arrangements between the Council and the Goaters. Such information was required under the FOS agreement. Mrs Goater gave Ms Treloar authority to provide this information. On 6 November 2013, Ms Treloar sent the following email to the Bank:

“Hi Rohan

As per our phone conversation, and Shirley Goater’s authorisation to give you information with us I advise that due to unpaid rates and water (no payments for the last two years), we took legal action against Terry Goater Funerals. They were requested to attend an exam order with us at the Moree Court House on 29th August 2013. They failed to attend. We sent another request notifying them of an arrest warrant to issue if they did not attend.

They attended the second request however part of the exam order requests full financial disclosure and information from the rate payer and they are required to bring tax returns, copies of bank statements as well as details of any debts (credit cards, loans etc.) with them. They claimed to have not completed a tax return for more than three years, that their only income was Centrelink benefits (for both of them), and they received no income from their business. They have bought a reasonably new vehicle recently which they said was purchased through the business.

They did not bring any bank statements to the court house and have so far refused our requests to provide them. We have continually asked for this information, and have so far been stone walled. This means that they have not legally complied with the Exam Notice.

They have made an agreement with us (which they signed) to pay off their rates arrears (currently $8,458.87 with another instalment of $1,553.00 due on 02/12/13) to pay $500 per month, which they have complied with since September 2013.

They made another agreement with us (which they signed) to pay off their water arrears (currently $2,479.32) at $500 per month (since September). They have so far not complied with this.

As you may be aware they are Funeral Directors. They had themselves in a situation where they owed Council $67,000 for unpaid burial costs. Mr Goater then became bankrupt and we are in the process of having to write this debt off. We have current legal action against Mrs Goater for $6,700 for unpaid burial costs. They are in the position now where Council will only take cash for any funerals booked by them which has to be paid before the funeral can occur.

Due to the non-compliance of the payment of the water debt, the non-compliance of the Exam Order and the current action for unpaid burial costs, our legal action continues.

Please do not hesitate to contact me should you require any further information.

[emphasis added.]

15. As a result of this email, the Bank considered the Goaters to be in default of the FOS agreement and re-commenced enforcement action.

16. In the amended statement of cross-claim filed on 7 October 2016, the Goaters make three allegations against the Council. First, it is alleged that by sending the 6 November 2013 email the Council breached its duties of both care and confidence because it should not have disclosed the first italicised paragraph. Second, it is alleged that the second italicised paragraph was misleading and deceptive. Third, it is denied that there was any breach of the monthly payment arrangement but, if there was, it is alleged that such breach was due to the fact that the Council misallocated money paid under the arrangement. They money paid was meant to go to both water and council rates but was instead applied by the Council to other debts.

The decision of Adamson J

17. In the motion before Adamson J, the Goaters sought discovery against both the Bank and the Council. This application is confined to orders for discovery against the Council. Correspondence exhibited to Mr Hill’s affidavit discloses that the Bank has provided some limited informal discovery since her Honour’s decision.

18. After setting out the relevant principles concerning discovery at [31] – [34], her Honour observed the following at [35]:

“Mr Hill has not persuaded me that it is appropriate to order discovery of any of the categories sought. I am satisfied, on the basis of the submissions of Mr Kaufmann, who appeared on behalf of the Bank, and Mr Bell, who appeared on behalf of the Council, that it would not be in the interests of justice to order discovery at this time. This is not to say that I consider that discovery would be appropriate in future. Rather, I am not satisfied, on the basis of the material before me, that it is appropriate at all. However, if, after service of the affidavit evidence, the other means available to the parties to obtain relevant documents, whether by request, notice to produce or subpoena, prove to be inadequate, a further application could be made. Accordingly, the notice of motion ought be dismissed.”

19. Her Honour then proceeded to provide reasons for her conclusion, having regard specifically to each of the categories of documents in relation to which the Goaters sought orders for discovery. In relation to category 5 in the present application (which comprised both categories 9 and 10 in the application before her), her Honour stated the following at [54]-[55]:

“Category 9: documents relating to the Goaters’ attendance at the Moree Court House in September 2013

[54] The discussions at the Moree Court House in September 2013 apparently led to a monthly payment arrangement between the Goaters and the Council. Presumably those persons on both sides who took part in the communications will put on affidavit evidence as to what occurred. It would be open to the Goaters to issue a notice to produce for any Council file note of what occurred on the day of the meeting, if any such record is not annexed to an affidavit served by the Council. There is no purpose in ordering discovery of this category in these circumstances.

Category 10: documents relating to proposed payment arrangements

[55] This category would seem to overlap with category 9. What the proposed payment arrangements were does not appear to be relevant. If there is an issue about what the actual payment arrangements were, that will be the subject of affidavit evidence. I am not persuaded that it is in the interests of justice to order discovery of this category.”

20. In relation to what is now category 7 (which comprised both categories 11 and 12 before her), her Honour stated the following at [56]-[58]:

“Category 11: documents referring to “any possible misallocation” of payments made by the Goaters to the Council

[56] As I understand the issue on the pleadings, it is that the Goaters say that they met the monthly payment arrangement with the Council but the Council misallocated the payments and treated them as if they were in breach when they were not. I was informed from the bar table that, although the Goaters attached a description to the payments when they made them by bank transfer, the description was not communicated to the Council when the payments were received. As I apprehend it, the issue is more likely to be what the terms of the monthly payment arrangement were (whether it was that they pay $500 for Council rates and $500 for water rates, as the Council contended; of $500 [sic] for both, as the Goaters contended) rather than how the payments made were allocated. There is a degree of inconsistency between the Goaters’ contention that they were not in breach of the monthly payment arrangement and the allegation that the Council misallocated their payments. This inconsistency need not be explored for present purposes.

[57] In any event, the category sought is wide. It seeks chain-of-inquiry discovery. More importantly, it is difficult to see how any documents discovered in this category could bear on the real issues in the proceedings. I decline to order discovery of this category.

Category 12: documents relating to any attempt by the Council to investigate or verify whether it had misallocated any of the payments made by the Goaters, particularly after communications by Mr Humphries

[58] For the reasons given with respect to category 11, I am not persuaded that it would be in the interests of justice to order discovery of this category.”

Events since the decision of Adamson J

21. The previous order for discovery was sought prior to the filing of any affidavit evidence. All evidence has now been filed. The affidavit of Suzie Treloar sworn 21 September 2016 was before me on the motion, although the documents exhibited to that affidavit were not. Any reference below to a document exhibited to Ms Treloar’s affidavit is a reference to a description of that document, not the contents of the document itself. Her affidavit discloses the following.

22. On 14 August 2013, Ms Treloar sent a final demand notice for overdue water rates to the Goaters. That letter is exhibited to her affidavit. She searched the Council’s record management system and believes that there was no response to that letter. A water restrictor was subsequently placed on the meter at the Goaters’ residence.

23. On 2 September 2013, Mrs Goater telephoned Ms Treloar and enquired as to what she had to do to get the water restrictor removed. Ms Treloar told her either to pay the $4,535.05 in full or enter into an arrangement to pay that amount. Mrs Goater agreed to pay $500 per month. Immediately after their conversation, Ms Treloar sent an email to Mrs Goater confirming that arrangement. Mrs Goater responded via email on 3 September 2013, advising Ms Treloar that she had paid $2,270 into the water account, asking when the water would be unrestricted, and agreeing to pay $500 a month until the arrears were paid off. Ms Treloar agreed with Mrs Goater’s proposal to pay $500 each month.

24. Ms Treloar raised with Mrs Goater in one of the 3 September 2013 emails the fact that she and Mr Goater had failed to comply with the examination order. She told Mrs Goater to contact the Council’s debt recovery solicitor as a matter of urgency. She also told Mrs Goater there needed to be an agreement regarding the outstanding council rates. Mrs Goater asked for the appropriate account number to pay rates. Mrs Treloar responded that it was the same account number as for the water rates, but that Mrs Goater should include the assessment number in the reference and mention that the payment was for council rates. She stated that, “As a precaution against any confusion about how the amounts should be applied I also asked her to let me know when she would be making payment and how much would be paid.” The emails exchanged between Ms Treloar and Mrs Goater on 3 September 2013 are exhibited to the affidavit.

21. On 4 September 2013, Ms Treloar sent Mrs Goater an email acknowledging receipt of the amount of $2,270 and of a payment of $500 made towards the outstanding council rates. This email exchange is exhibited to her affidavit.

22. Ms Treloar deposes that on the afternoon of 5 September 2013 she received a telephone call from the Moree Court House informing her that the Goaters had arrived for their examination. This was not a planned meeting. Ms Treloar and another council officer, Tammie Single, then went to the Court House to meet the Goaters. (I note that Ms Single has filed an affidavit stating that she has no specific recollection of the details of what occurred that day).

23. Ms Treloar, Ms Single and the Goaters met in a conference room. Ms Treloar asked the Goaters the questions in the examination order. The Goaters had not brought any financial information with them. Ms Treloar sets out in her affidavit her recollection of the conversation and concludes by stating, “I left the meeting with the clear understanding that the Goaters had agreed to pay $500.00 per month to pay off their rates arrears in addition to the $500 they had already agreed to pay for the water arrears.” A copy of the examination order recording the Goaters’ responses and signed by them is exhibited to Ms Treloar’s affidavit. It includes the words “$500pm on both rates and water – pay extra when possible (3rd monthly).”

24. There are other emails between Mrs Goater and Ms Treloar during this period described by Ms Treloar and exhibited to her affidavit. It is not necessary to describe those emails here. Ms Treloar then sets out the background to the sending of the email on 6 November 2013 (extracted above at [14]).

25. As for the application of the payments, Ms Treloar has exhibited to her affidavit a table setting out all of the account transactions for the Goaters’ council and water rates. Exhibited to her affidavit are the receipts for payments made and documents showing that the payments made by Mr Goater in October 2013 were for burial fees, not water rates, and that the payments made by Mrs Goater (after 3 September 2013) were allocated to council rates and funerals. She then sets out her reasons for concluding that the Goaters paid money for council rates, but not water rates, and the documents upon which she bases that conclusion. Ms Treloar describes the information that she provided to the Bank as accurate.

26. The Goaters relied upon an affidavit of John Humphries sworn 28 July 2016. Mr Humphries is a volunteer financial counsellor who is assisting the Goaters in this matter. He deposes, relevantly to this application, that in February 2014, three months after the 6 November 2013 email, he spoke to Ms Treloar and told her that she had misallocated some of the Goaters’ payments back in September and October 2013, which were meant to be applied to the water rates arrears, by allocating them to the council rates arrears. He requested that she rectify the problem, but she declined to do so.

27. The Council relied upon an affidavit of Mark Brothers, solicitor, annexing the decision of the Full Federal Court (Rares, Katzmann and Markovic JJ) in Goater v Moree Plains Shire Council [2016] FCAFC 135. Mrs Goater sought in those proceedings to set aside a bankruptcy notice served on her by the Council on 30 July 2015 requiring her to pay a judgment debt for outstanding burial fees. A judge of the Federal Circuit Court set aside the notice on the basis that he was satisfied that Mrs Goater had a counter-claim equal to or exceeding the amount owed (being the cross-claim now before this Court). The Council successfully appealed that decision. The Full Federal Court held that the primary judge did not properly consider the legal and factual merits of the counter-claim. Their Honours were not satisfied that Mrs Goater’s claim had sufficient legal or factual merit to justify setting aside the bankruptcy notice under s 40(1)(g) of the Bankruptcy Act 1966 (Cth).

28. The decision of the Full Federal Court concerns factual findings in respect of some of the matters in dispute in the present proceedings, including findings against Mrs Goater. Although the Council did not rely upon those factual findings in this application, it placed reliance on [60] and [62] of that decision in the limited way explained below at [41].

The submissions made on behalf of the Goaters

33. Mr Hill submitted that category 5 on this application is narrower than that considered by Adamson J, in that the dates are narrower. He submitted that any documents relating to the proposed payment arrangement are necessary in order properly to construe the terms of the monthly payment arrangement made on 5 September 2013. Mr Hill disputed that seeking such documents amounted to a “train of inquiry” request. Rather, he submitted that the documents go to the heart of the issues in dispute.

34. As for category 6, Mr Hill submitted that this category was not considered by Adamson J and is confined to documents created within a nine-day period. The documents sought in category 6 are said to be relevant because the pleadings disclose that an issue in the proceedings is whether the information that the Council provided to the Bank went beyond what the Bank sought. The Goaters allege that the Council did not “act in good conscience”; that its conduct was incompatible with community standards of commercial morality; that it did not seek the consent of the Goaters before divulging the information that it did; and that it did not tell the Goaters that it considered them to be in default. In this way, it was submitted, the documents sought are clearly relevant to a fact in issue.

35. As for category 7, it was submitted that that category is narrower than that which was before Adamson J. It was submitted that the Council was in breach of its duty of care when it did not investigate the possible misallocation issue. The Goaters contend that the Council refused to rectify the situation and knowingly remained silent. By not correcting the situation, it was submitted, the Council acted unconscionably.

36. Mr Hill conceded that Adamson J had refused to order discovery with respect to the documents in this category because she considered that such an order would entail “chain of inquiry” discovery. It was submitted that her Honour was wrong in this regard as the documents sought are clearly relevant to a fact in issue. It was submitted that documents relating to what efforts the Council made to investigate any possible misallocation after the fact are relevant. The fact that Ms Treloar has provided affidavit evidence setting out the circumstances surrounding the 6 November 2013 email confirms the relevance of any such documents.

37. Mr Hill conceded that he had not sought to subpoena the material or to issue any notices to produce. He stated that he was of the view that it would be in the interests of justice, and would ensure that the proceedings move swiftly, if the matter were instead resolved by way of discovery.

Submissions on behalf of the Council

38. Mr Bell of counsel relied upon the findings of Adamson J in relation to categories 5 and 7. He further relied upon the fact that there is no evidence before the Court that, since the decision of Adamson J, the Goaters have sought any documents from the Council by way of request, notice to produce or subpoena. He relied upon the affidavits now filed on behalf of the Council in these proceedings, including that of Ms Treloar.

39. With respect to category 5 in particular, Mr Bell noted that there was no pleading alleging that the payment plan had been modified. The parties who were present at the meeting when the agreement was made have all filed evidence setting out what occurred.

40. As for category 6, Mr Bell submitted that this is clearly a “chain of inquiry” request and it is difficult to see how any such document could be relevant to the facts in issue in these proceedings. Ms Treloar has now put on affidavit evidence as to the circumstances of the 6 November 2013 email.

41. As for category 7, Mr Bell submitted that Adamson J has already determined this category, that it is a further request for “chain of inquiry” discovery, and that the documents sought have no relevance to the proceedings. In addition, he relied upon pars [60] and [62] of the decision of the Full Federal Court as being relevant, as the Court there held that Mrs Goater has not only to establish that the 6 November 2013 email was inaccurate, but also that the inaccuracy caused the Bank to assert its legal right to take enforcement action. Thus it was submitted by Mr Bell that, not only is chain of inquiry discovery sought, such a chain of inquiry does not lead anywhere.

The relevant principles

42. The relevant rule is r 21.2(4) of the UCPR, which provides that an order for discovery is not to be made in respect of a document unless the document is relevant to a fact in issue.

43. The relevant principles are conveniently summarised by Garling J in Giles v Commonwealth (No 2) [2014] NSWSC 1531 at [43]-[52]. His Honour noted at [44] – [45]:

“In the exercise of any power under the UCPR, the Court must seek to give effect to the overriding purpose fixed by s 56 of the Civil Procedure Act 2005. That overriding purpose is in the following form:

"The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.” s 56(1) Civil Procedure Act.

The making of an order for discovery is one feature of the case management of proceedings. In making such an order, it is necessary to keep in mind the objects of case management which are set out in s 57 of the Civil Procedure Act, relevantly here, the just determination of the proceedings and the timely disposal of the proceedings at a cost affordable by the respective parties.”

44. Justice Garling then referred to the observations by Allsop P (as his Honour then was) in Palavi v Radio 2UE Sydney Pty Ltd [2011] NSWCA 264, where his Honour observed the following, obiter, at [101]:

“Parties should understand that the restriction on discovery now contained in Pt 21 is the current framework for discovery. Discovery (and its uncontrolled use) always contains (and contain) the risk of abuse and oppression. Discovery can be a highly expensive exercise. Courts in defamation, as in all other matters, including commercial matters, should be astute to ensure that it is not used as a weapon of oppression by wealthy litigants to oppress less well-funded parties. Even when all parties are well resourced, over-enthusiastic and unnecessary use of discovery impedes the due administration of justice and undermines confidence in the court system's ability to resolve disputes justly, quickly and cheaply. Parties should understand that there is no entitlement to "chain of inquiry" discovery. If discovery is being used abusively, the courts can and should control it”.

45. Justice Garling went on to observe in Giles v Commonwealth at [49] and [50]:

“As is apparent from the judgment in Palavi, the discretionary power which the Court is being asked to exercise requires the Court to consider and balance various competing rights and interests. On the one hand, although the plaintiffs do not have a right to discovery, in an appropriate case, an order for discovery should be made so as to enable a fair trial to be held in circumstances where all parties have access to relevant documents. But any order for discovery is necessarily a limited one.

Plaintiffs seeking discovery have to identify documents within a class of documents which are relevant to a fact in issue: UCPR r 21.2. A document is not relevant to a fact in issue within the UCPR if the document, or class of documents, is only relevant to a "chain of inquiry", or to credit or credibility. Such documents are not the subject of any discovery order.”

[emphasis added]

46. The relevant principles are also summarised at [31] – [34] of the judgment of Adamson J in these proceedings.

Consideration

47. Having regard to the relevant principles, the submissions of the parties, the relevant pleadings and some of the evidence, I am not satisfied that the orders sought in the notice of motion ought to be made.

48. The arguments raised by the Goaters on this application were largely ventilated before Adamson J. Her Honour noted that the application was made before the evidence was filed, but stated that that was not the basis upon which she determined the motion. Rather, her Honour was not of the view that the interests of justice required orders for discovery. Her Honour did allow for the fact that a further application could be made “…if, after service of the affidavit evidence, the other means available to the parties to obtain relevant documents, whether by request, notice to produce or subpoena, prove to be inadequate.” Any such application must be considered having regard to the relevant principles. Those principles include that the documents sought must be relevant, not go solely to credit or credibility, and not amount to “chain of inquiry” discovery.

49. Mr Hill conceded that he had not made any requests of the Council, nor had he issued any notices to produce or subpoenas. There is a letter from the solicitor for the Council dated 15 December 2016 annexed to the affidavit of Mr Hill stating that:

“It has consistently been the position of the 2nd Cross Defendant that discovery is totally unnecessary in this matter. It is a waste of time, costs and resources for all parties. All relevant documents of 2nd (sic) cross defendant have been produced and exhibited to affidavits. If you require further documents we suggest you avail yourself of the more appropriate mechanisms of subpoena or notice to produce.

We trust this ends the question of discovery. In the event that you proceed to file a motion seeking discovery we reserve the right to tender this document to the Court on the question of costs of any motion.”

50. Although it is to be accepted that the Goaters did not avail themselves of the alternate mechanisms suggested in that letter, it is not that failure alone that has led me to dismiss the motion. Rather, I am not satisfied that an order for discovery is appropriate by reason of the fact that the documents sought are not relevant to a fact in issue (or only to credibility) and/or involve a chain of inquiry.

51. In so finding I have had regard to ss 56 – 60 of the Civil Procedure Act2005 (NSW) and to the fact that this matter is listed for hearing on 29 May 2017. I have also taken into account, as was submitted by Mr Hill, that the Goaters are litigants who do not have the same resources at their disposal as does the Council, and for that matter the Bank. I am nonetheless not satisfied that it is in the interests of justice to make an order for discovery in this matter.

52. My reasons in respect of each of the three categories are as follows.

Category 5: the monthly payment arrangement and any subsequent variation

53. An order for discovery in relation to category 5 was sought on the basis that, although the monthly payment arrangement was made at the meeting at Moree Court House on 5 September 2013, any correspondence after the making of the agreement and before the email on 6 November 2013 would be relevant to the construction of that agreement. The dates specified are 1 October 2013 to 6 November 2013.

54. I am not satisfied that any document created a month or so after the agreement could be relevant to its terms. The terms of the agreement made at Moree Court House on 5 September 2013 are set out in a document signed by the Goaters and annexed to Ms Treloar’s affidavit. Although it is to be accepted that there is some ambiguity on the face of that agreement, each person present has now put on affidavit evidence as to what he or she considered the agreement to mean. Ms Treloar has set out her reasons for concluding that she believed that the agreement was that the Goaters would pay $500 a month for water rates and $500 a month for council rates. It is difficult to see how any documents created after 5 September 2013 would assist in determining the terms of the agreement.

55. I have had regard to the amended cross-claim. There is nothing pleaded in that document as to variation of the monthly payment arrangement. Rather, the claim is that the arrangement was made on 5 September 2013 but is in ambiguous terms. The parties take a different view of what occurred on that day.

56. Documents are not relevant for the purposes of discovery if they are sought merely for credibility purposes. It seems to me that the only possible reason that any documents created by the Council in the months after 5 September 2013 could be relevant would be by way of suggestion that Ms Treloar’s understanding of what occurred on that day should not be accepted. That is not a proper basis to make an order for discovery.

57. I accept that the dates covered by category 5 have been narrowed somewhat since the application before Adamson J. Its breadth has also been narrowed. However, her Honour did not oHonrefuse to make an order for discovery at that time because of the breadth of the category, but because of lack of relevance. Thus, the narrowing of the dates does not assist the Goaters.

Category 6: inquiries made by the Council between 29 October and 6 November 2013

58. This category was not before Adamson J. It concerns documents held by the Council from the time Rohan Dalal from the Bank contacted Ms Treloar on 29 October 2013 until Ms Treloar sent the email of 6 November 2013 to Mr Dalal. In particular, the Goaters seek any documents concerning any investigations made by the Council before Ms Treloar sent that email.

59. Ms Treloar has set out at [20] to [27] of her affidavit the background to the sending of the email from the time she received the telephone call from Mr Dalal. Exhibited to her affidavit are the documents to which she refers. At [28] she states:

“I recall that I had been aware that no payments for water arrears had been credited to the Goaters’ account since at least 5 September 2013. Nevertheless prior to writing the email I checked the position by searching the Council’s computer system. I found no record of any payment being made to the water account and I found no correspondence or notes of telephone calls from either Mr or Mrs Goater saying payment had or was being made for water.”

60. I am satisfied that the email sent to Mr Dalal by Mr Treloar is relevant in general terms to the proceedings. Its significance to the cross-claim is that the Goaters allege that, when Ms Treloar sent the email, the Council did not act in good conscience, provided too much information and failed to take reasonable care. The Goaters are apprised of all of the evidence upon which the Council relies in response to this allegation as it is set out in the affidavit evidence now filed on behalf of the Council. What is sought under this category is an inquiry of Ms Treloar as to whether she made any other inquiries in addition to that to which she has referred in her affidavit. I am not satisfied that any document could be relevant to whether the Council breached its duty in this regard and, in any event, this category seeks chain of inquiry discovery.

Category 7: inquiries made by Mr Humphries

61. This category has already been considered by Adamson J.

62. I accept that it is alleged in the cross-claim that Mr Humphries made representations to both the Council’s solicitor Giselle Simons and to Ms Treloar in February and March 2014 to the effect that the Goaters were actually up to date with both their water rates and council rates payments under the monthly repayment arrangement. Mr Humphries requested at that time that the Council rectify the misallocation. The Goaters allege that the Council should have realised its mistake and corrected the error by contacting the Bank and informing it that there had been a mistake and that the Goaters were not in fact in breach of the arrangement made on 5 September 2013.

61. Again, the relevance of this category of documents is not apparent. What is clear from the pleadings and evidence filed on behalf of the Council is that the position of the Council was and still is that the Goaters were in breach of the monthly payment arrangement. The Council’s position is that there has been no misallocation. Implicit in this position is that there was no reason to make further inquiries when Mr Humphries contacted Ms Treloar and Ms Simons four months after the 6 November 2013 email. It is difficult to see how it could be relevant to the facts in issue in this litigation to inquire whether the Council created any documents between 25 February 2014 and 13 May 2014 as to further enquiries by staff about a potential misallocation. Either there had been a misallocation or there had not. That will be a question of fact for the judge who hears this matter on 29 May 2017.

62. The documents sought under this category are those that might have been created if, although Ms Treloar states that she made inquiries in November 2013 to ensure that the information in her email was correct, she doubted herself in February or March 2014 and subsequently made some other enquiry, found out that there had been a misallocation and is lying when she now says that there was no misallocation. The documents in this category could only be relevant to her credit and, in addition, the order sought involves chain of inquiry discovery.

Conclusion

65. I do not propose to make the order sought. The cross-claimants have been unsuccessful. No submission was advanced on behalf of the Goaters as to why, in the event that they were unsuccessful in their motion, costs should not follow the event. Despite this, I propose to follow the course taken by Adamson J and make an order that the Goaters pay the Council’s costs subject to an application for a different order being made in writing to my Associate within seven days of the date of this judgment.

ORDERS

66. I make the following orders:

1. Dismiss the cross-claimants’ notice of motion filed 27 January 2017.

2. Subject to an application being made in writing to my Associate within seven days of the date of this judgment for a different order, order the cross-claimants to pay the second cross-defendant’s costs of the motion.

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Decision last updated: 21 April 2017