Cosmetic Equipment Company Pty Ltd v Mobile Cosmetic Treatments Pty Ltd
[2010] VSC 92
•29 March 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
PRACTICE COURT
No 5877 of 2007
| BETWEEN | |
| COSMETIC EQUIPMENT COMPANY PTY LTD (ACN 095 419 364) | Plaintiff (and first Defendant by counterclaim) |
| and | |
| MOBILE COSMETIC TREATMENTS PTY LTD (ACN 114 886 154) | Defendant (and first Plaintiff by counterclaim) |
| AND BETWEEN | |
| MOBILE COSMETIC TREATMENTS PTY LTD and BRENDAN BYRNE | Plaintiffs by Counterclaim |
| and | |
| COSMETIC EQUIPMENT COMPANY PTY LTD and TANYA VISCARIELLO | Defendants by Counterclaim |
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JUDGE: | ROBSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 February 2010 | |
DATE OF JUDGMENT: | 29 March 2010 | |
CASE MAY BE CITED AS: | Cosmetic Equipment Company Pty Ltd v Mobile Cosmetic Treatments Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 92 | |
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PRACTICE AND PROCEDURE – appeal from Associate Justice - discovery – inspection – discovered documents of plaintiff redacted for inspection without prior application to do so – redaction necessary to protect commercially confidential information from a competitor – principles relevant to inspection of commercially sensitive documents – solicitor for defendant permitted to inspect on condition of confidentiality – appeal allowed
PRACTICE AND PROCEDURE – appeal from Associate Justice – application under r 24.02 to dismiss plaintiff’s claim and to strike out plaintiff/defendant’s defence to counterclaim – failure by plaintiff to comply with order as to further discovery – circumstances where jurisdiction to dismiss and strike out may be exercised – jurisdiction enlivened – insufficient grounds to warrant court to exercise discretion – appeal dismissed - r 24.02 of Supreme Court (General Civil Procedure) Rules 2005
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Phillips | Efron & Associates |
| For the Defendant | Mr N P Byrne | Nicholas P Byrne |
Cases cited
Attorney-General v North Metropolitan Tramways Company [1892] 3 Ch 70
Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 98 ALR 200
Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34
HIS HONOUR:
INTRODUCTION AND SUMMARY
The defendant and first plaintiff by counterclaim, Mobile Cosmetic Treatments Pty Ltd (“MCT”), appeals against two orders made by Associate Justice Evans: the first made 9 October 2009, upon the hearing of a summons dated 25 September 2009 issued by MCT, for further discovery by the plaintiff and the first defendant by counterclaim, Cosmetic Equipment Company Pty Ltd (“CEC”); and the second, made 9 December 2009, upon the hearing of a summons dated 26 November 2009, for judgment against the plaintiff and the first defendant by counterclaim pursuant to r 24.02 of the Supreme Court (General Civil Procedure) Rules 2005, for failing to obey an order for discovery.
For the following reasons, I would allow the appeal against the order of 9 October 2009 on the issue of the inspection of the redacted invoices. I would order that within 7 days hereof, the solicitor for MCT be given inspection of the unredacted invoices on the condition that he keeps the names of the customers confidential to himself and counsel. I will direct that the solicitor may identify to his clients the redacted invoices that identify sales in Victoria. I will order that CEC pay MCT’s costs of the application for inspection in paragraph 3(ii) of the summons of 25 September 2009. Otherwise, the orders of 9 October 2009 remain unchanged.
I would dismiss the appeal against the order of 9 December 2009 concerning the application for judgment and to strike out the defence under r 24.02 of the Supreme Court (General Civil Procedure) Rules 2005.
As to costs of the appeals. I would order that CEC pay the costs of the appeal against the orders of 9 October 2009. I would order that all parties’ costs of the appeal on the application under r 24.02 be costs in the cause.
THE PROCEEDINGS
By a writ dated 26 April 2007, CEC claimed against MCT damages and other relief arising out of alleged misleading and deceptive conduct and alleged false and misleading representations made by MTC in relation to the advertising for sale of the GSD Intense Pulsed Light Machine (“the Product”) supplied by ShenZhen GSC Tech Co Ltd of China (“GSD”) in contravention of ss 52 and 53 of the Trade Practices Act 1974 and ss 9 and 12 of the Fair Trading Act 1999.
In substance, the statement of claim of 21 June 2007 alleges the following: with effect from 6 November 2007, CEC entered into a Test-Marketing Agreement with GSD whereby CEC became the exclusive distributor of the Product in all states of Australia save for Victoria, the Northern Territory and the ACT (the “CEC Agreement”).
The CEC Agreement included minimum purchase requirements of some twelve sets which CEC exceeded.
With effect from 28 April 2007, CEC entered into an Exclusive Distribution Agreement with GSD whereby CEC became the exclusive distributor of the Product in the Commonwealth of Australia until 1 May 2008 (the “ED Agreement”).
In accordance with CEC’s obligations to GSD under the CEC Agreement and the ED Agreement, CEC has spent and continues to spend resources on marketing the Product as the “GSD 3000”.
The Product is marketed at $31,500 per set.
In accordance with CEC’s obligations to GSD under the ED Agreement, CEC secured a stand at the Melbourne International Beauty Expo & Conference held at the Melbourne Exhibition Centre on Saturday 28 April and Sunday 29 April 2007 (the “Expo”).
In support of CEC’s appearance at the Expo, CEC placed an advertisement in the April 2007 edition of “Professional Beauty”, a magazine published in the week commencing Monday 23 April 2007.
With effect from 16 December 2006, MCT entered into a Test-Marketing Agreement with GSD whereby MCT became the exclusive distributor of the Product in Victoria subject to minimum purchase requirements (the “MCT Agreement”).
MCT failed to meet the minimum purchase requirements and as a consequence the MCT Agreement came to an end on 17 January 2007, or alternatively on 16 April 2007, or in the further alternative GSD terminated the MCT Agreement on 17 January 2007, or in the further alternative GSD terminated the MCT Agreement on 16 April 2007.
During the term of the MCT Agreement and after the MCT Agreement came to an end:
(a) MCT placed an advertisement in the April edition of the ”Professional Beauty” magazine for the sale of the Product;
(b) MCT placed an advertisement in the May edition of a magazine called “Australian & New Zealand Beauty Specialists” for the sale of the product at $21,900;
(c) On or about the week commencing Monday 23 April 2007, MCT distributed a flyer to beauty clinics in Victoria advertising the Product for sale at the Expo at $5000 off the normal retail price of $26,500;
(d) MCT operated a stand at the Expo and offered the product for sale at $26,500;
(e) MCT distributed flyers at the Expo; and
(f) MCT advertised the Product for sale on its internet site and on eBay.
By reason of this conduct, it is alleged that MCT represented in trade and commerce in Australia that it was the authorised distributor of the Product in Australia and the representation was misleading and deceptive in that MCT was not an authorised distributor of the Product in Australia at the time the representations were made and thereby contravened ss 52 and 53(d) of the Trade Practices Act.
CEC sought an injunction, a corrective advertisement and damages under s 87 of the Trade Practices Act.
By its defence and counter claim of 24 July 2007, MCT admits and alleges in substance the following. MCT alleges that under the MCT Agreement, MCT was appointed the exclusive distributor of the Product in Victoria from 16 October 2006 to 16 April 2007 and undertook to purchase a minimum quantity of the Product.
MCT says that notwithstanding that MCT did not purchase the minimum quantity of the Product, GSD agreed to extend the original term of the MCT Agreement until 16 July 2007.
MCT admits that it published the advertisements and distributed flyers and says that it represented in trade and commerce in Australia that it was an authorised distributor of the Product in Victoria because it was entitled to pursuant to the MCT Agreement as extended.
Under its counterclaim, MCT alleges that in April 2007, CEC made statements to a person acting as a potential customer of CEC and/or MCT to the effect that MCT:
(a) was selling an older version of the Product that had been bought on the “black market”; and
(b) could not provide a warranty for the Product
(the “First Statements”).
On or about 28 April 2007 at the Expo, CEC made statements to potential customers, inter alia, to the effect that MCT was not the legal distributor of the Product; that CEC was the only legal distributor of the Product; that the Product offered by MCT had been bought illegally by MCT and that MCT could not provide a warranty for the Products (the “Second Statements”).
MCT through its solicitors demanded that CEC cease making the First and Second Statements and other such misleading and deceptive statements.
Notwithstanding the demand, from about the last week of May 2007 to mid July 2007, CEC made comments to potential customers and/or MCT to the effect that MCT purchased old models of the Product on the internet and/or re-sold those Products (the “Third Statements”).
MCT alleges that the First, Second and Third Statements were misleading and deceptive in breach of the Trade Practices Act 1974.
Further MCT alleges that between 16 October 2006 and 16 April 2007, during the term of the MCT Agreement and at the time MCT was the exclusive distributor of the Product in Victoria, CEC:
(a) made representations to the effect that it was entitled to distribute the Product in Victoria; and/or
(b) sold the Product in Victoria.
(the “Fourth Statements”).
MCT provides particulars of the sales. It alleges that between 16 October 2006 and 16 April 2007, CEC sold approximately 10 Products to customers in Victoria. MCT says that further particulars will be provided after discovery and interrogatories.
Further, MCT alleges that the First, Second, Third and/or Fourth Statements constituted false statements about MCT’s property and induced customers not to deal with MCT, causing a loss of sales.
In the premises MCT alleges that CEC engaged in the tort of injurious falsehood.
MCT claims, inter alia, an injunction to restrain CEC from making further statements to the effect of the First, Second and Third Statements; a declaration that MCT is entitled to distribute the Product in accordance with the MCT Agreement; and damages pursuant to s 82 of the Trade Practices Act. MCT also seek an account of profit for all sales made by CEC of the Product in Victoria between 16 October 2006 and 16 April 2007.
AMENDED COUNTERCLAIM
By order of 6 August 2008, MCT was given leave to add Brendan Patrick Byrne, a director of MCT, as second plaintiff to the counter claim. On 17 September 2008, MCT was given leave to amend the defence and counter claim which also added Tanya Viscariello as a second defendant to the counter claim. The amended counter claim alleged an additional claim in defamation against CEC, based largely upon the representations the subject of complaint in the misleading and deceptive conduct claim, added a claim of deliberately causing economic harm, alleged a claim against Tanya Viscariello as aiding and abetting the alleged misleading and deceptive conduct, alleged defamation against Tanya Viscariello and alleged against her deliberately causing economic harm.
In 2009, CEC disputed that the additional parties were properly added to the proceedings. On 10 December 2009, Daly AsJ vacated the order joining Mr Brendan Byrne as a plaintiff to the counter claim. MCT was given leave to join Mr Byrne as a second defendant and thereafter have leave to join Mr Brendan Byrne as a second plaintiff to the counterclaim in the amended defence and counterclaim dated 11 September 2008. MCT was also given leave to join Tanya Viscariello as a second defendant to the amended defence and counterclaim dated 11 September 2008. These orders were to take effect as if they had been made on 17 September 2009.
The issues in the first appeal do not involve the added claims save that the orders sought in the summons of 25 September 2009 referred to above were directed to CEC and Tanya Viscariello as defendants to the counter claim of MCT and Mr Brendan Byrne. As it is, Mr Brendan Byrne and Tanya Viscariello are now taken to have been parties at the date of the summons and from the subsequent orders thereon.
The amended defence and counter claim of 11 September 2009 continues to make the allegations that CEC sold the Product in Victoria and alleges in particulars that between 16 October 2006 and 16 April 2007 CEC sold approximately 10 Products to customers in Victoria.
DISCOVERY
So far as CEC is concerned, on 7 November 2007, John Viscariello swore an affidavit of documents. On 12 February 2008, Master Daly ordered that CEC file and serve a supplementary affidavit of documents by 20 May 2008. She also ordered that MCT inspect any further discovery made by CEC by 6 June 2008. On 23 May 2008, John Viscariello swore a supplementary affidavit of documents pursuant to the order of Master Daly made 12 February 2008.
In the affidavit of 23 May 2008, he swore he was the sole director of CEC. As will become relevant later, he discovered an arch lever folder of documents relating to sales by CEC of the Product in Australia for the period between 6 November 2006 to 31 March 2008 and an arch lever folder of documents relating to purchases of the Product by CEC from GSD for the period between 6 November 2006 to 31 March 2008.
SUMMONS OF 25 SEPTEMBER 2009
By paragraph 3(ii) of a summons dated 25 September 2009, MCT and Mr Brendan Byrne sought an order that CEC and Tanya Viscariello make a full and proper disclosure of all invoices recording sales of the Product or machines by production and complete copies of all invoices and sales made by CEC and Tanya Viscariello and provide for inspection complete copies of the 38 copy invoices previously produced by CEC and Tanya Viscariello for inspection and in which they had deleted relevant information including the identities and addresses of the respective purchasers as invoiced, together with additional documents recording sales of all of the machines sold, including 26 of the 64 disclosed in the affidavit of documents of 12 May 2008 as having being purchased from the supplier in China by MCT.
In support of this application, Mr Nicholas Byrne, the solicitor for MCT and Mr Brendan Byrne, deposes in his affidavit of 24 September 2009 that names and addresses of the customers were redacted in the invoices of the sales in the lever arch folder of documents relating to sales by CEC of the Product in Australia for the period 6 November 2006 to 31 March 2008 that MCT discovered in its supplementary affidavit of documents and produced for inspection to Mr Nicholas Byrne.
Associate Justice Evans did not make the order sought requiring MCT to produce for inspection the un-redacted originals of the discovered documents. Under other matters in his order of 9 October 2009 he said:
The court was satisfied that it was not necessary for the fair disposition of this proceeding for production to be ordered of un-redacted copies of the plaintiff’s sales invoices revealing the names and addresses of the plaintiff’s customers and that there was good reason to permit production of those invoices as the plaintiff has done.
Associate Justice Evans dismissed the application of MTC for inspection of the redacted invoices under paragraph 3(ii) of the summons of 25 September 2009.
On the appeal, MTC contends that Evans AsJ erred in not making the order for inspection.
As mentioned above, Master Daly had ordered that MCT inspect any further discovery made by CEC by 6 June 2008. No application was made by CEC to be relieved from the obligation to give inspection of the documents discovered. No issue was raised about compliance with r 29.09. MCT contends that no reason was advanced by CEC in its affidavit material for not giving inspection of the un-redacted invoices, and in particular in the affidavit of Jeremy Broadbent of 8 October 2009 sworn in opposition to the application. In fact, in his affidavit of 8 October 2009, Mr Broadbent did not address the order sought in paragraph 3(ii) of the summons at all despite addressing the orders sought in paragraphs 1 and 2 of the summons.
SHOULD INSPECTION OF THE REDACTED INVOICES BE ORDERED?
The learned authors of Discovery and Interrogatories Australia state that unlike some other states of Australia and in the Federal Court of Australia there is no express rule in the Supreme Court of Victoria permitting the court to limit inspection on discovery.[1] In the Federal Court of Australia, the court may refrain from ordering production unless it is necessary.[2]
[1]Discovery and Interrogatories Australia, [33,122].
[2]Ibid.
In this court, a defendant may be relieved from the obligation to provide inspection of discovered documents to a competitor where disclosure is unnecessary for the purpose of enabling the competitor to prosecute their own case and where the disclosure may be prejudicial to the discovering party.[3]
[3]Attorney-General v North Metropolitan Tramways Company [1892] 3 Ch 70 at 74, paraphrasing the words of North J; Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34 at 38 per Hayne JA.
CEC contends that the MCT parties have admitted in Mr Nicholas Byrne’s letter of 10 July 2009 that they wish to have the un-redacted copies of the invoices “to verify the plaintiff’s allegations of sales and further to obtain evidence of misleading conduct and deception in the course of the plaintiff’s business (CEC’s emphasis)”.[4] CEC says that the demand for un-redacted copies of the invoices in this context can only be explained by the MTC parties as fishing for a claim. In written submissions, counsel for the MCT parties, Mr Phillips, contends that MCT and CEC are competitors and MCT should not be unnecessarily informed of CEC’s customers.
[4]Exhibit NPB(j) to the affidavit of Nicholas Byrne sworn 24 September 2009.
Applying the test laid down in Attorney-General v North Metropolitan Tramways Company[5] the relevant question appears to be as follows: is it necessary for the MCT parties to inspect the names and addresses of CEC’s customers for the purpose of prosecuting their own case? If it is necessary, can justice be done by limiting inspection to counsel and solicitor?
[5][1892] 3 Ch 70 at 74.
MCT’s counterclaim alleges that CEC sold the Product in Victoria. The discovery given by CEC is of sales in Australia. Accordingly, in my opinion, it is necessary for CEC to ascertain which of the sales in Australia were of the Product in Victoria as alleged in its counter claim.
In my view, the proper order on the application was to order inspection of the un-redacted invoices by the solicitor for MCT. He would then be able to mark or identify those invoices relating to sales of the Product in Victoria for the use of his client. In that way the trade secrets of CEC would be preserved and MCT would be able to prosecute its case.
SUMMONS OF 26 NOVEMBER 2009
By this summons, MCT as defendant and plaintiff by counterclaim sought judgment against CEC as plaintiff and an order that the defence of CEC as defendant to the counterclaim be struck out.
MCT relied on the failure of CEC to comply with paragraph 2 of the order of Evans AsJ of 9 October that provided that by 4.00 pm on 6 November 2009 CEC make an affidavit pursuant to r 29.08 of the Supreme Court (General Civil Procedure)Rules 2005 in respect of CEC’s sales invoices relating to machines ordered by CEC from GSD in the period 16 October 2006 to date not the subject of CEC’s sales invoices which are already discovered.
On 9 December 2009, Evans AsJ did not grant the relief sought by MCT and instead extended the time for compliance with paragraph 2 of the order of 9 October 2009 to 16 December 2009. He further ordered that the affidavit pursuant to that order be made by Carol Anne Smith, the sole director of the plaintiff. He ordered that the further hearing of the application for the orders sought by MCT be adjourned to 12 February 2009.
On 16 December 2009, MCT appealed against the orders of Evans AsJ of 9 December 2009. The notice of appeal set out grounds including the following:
2 (a) The decision of His Honour in adjourning the “further hearing” of the defendant’s application in February 2010, failed to take appropriate account of the adverse impact of the plaintiff’s failure to comply with orders for discovery and the defendants reasonable concern as expressed to the court in the affidavit material filed on its behalf, of the continuing delays being occasioned by the plaintiff’s conduct of these proceedings in having those proceedings brought to trial, the prompt discovery of all relevant documents being prerequisite to such proceedings being set down for trial, the parties, including the plaintiff, having participated in drafting and executing minutes of proposed consent orders for pre-trial directions before her honour Associate Justice Kings as she then was on the 27 July 2009.
(b) That His Honour in failing to act upon the plaintiff’s breach of order for discovery in which he had previously given the plaintiff 28 days to comply, upon the evidence before him, has failed to act judicially, fairly and impartially to the immediate detriment of the defendant in granting a further indulgence to the plaintiff for Carol Anne Smith to make an affidavit by this date.
The written submissions relied on by MCT also assert that the affidavit of Carol Anne Smith of 16 December 2009 filed in accordance with the order of Evans AsJ of 9 December 2009 did not comply with the order and that CEC remains in breach of the orders of 9 December 2009.
Whether or not Carol Anne Smith’s affidavit of 16 December 2009 complied with the order of 9 December 2009 is not in issue before me on this appeal. Rather, it is the order of 9 December 2009 which is the subject of the appeal.
At the hearing on 9 December 2009, CEC relied on the affidavit of Tanya Viscariello of 4 December 2009. MCT relied on the affidavits of Amanda Forrest of 8 December 2009 and its solicitor Nicholas Byrne of 26 November 2009 and 8 December 2009.
Tanya Viscariello deposes that she was the second defendant to the counterclaim and a consultant to CEC. She deposes that she has read the affidavits of discovery of John Viscariello of 7 November 2007 and 12 May 2008. She says that she has searched the paper record of CEC to identify if there are any copies of sales invoices other than those that have already been discovered and produced. She says she has not been able to find any further hard copy invoices.
She says that she is not in a position to conduct a search of CEC’s computer records for the following reasons. She says that CEC conducts its business at 162 Fullerton Road, Rose Park in South Australia. She says she also conducts another business at those premises including the business conducted by International College of Cosmetic Technology Pty Ltd (“ICOCT”). She says ICOT owned two laptop computers that were kept on the premises. She says CEC used the laptop computers owned by ICOCT for keeping records concerning its business. She says the two laptops were stolen on 16 September 2009.
Tanya deposes that the laptops had stored on them all of the books and records of ICOCT’s business including the books and records of CEC in electronic form.
She says that she has made inquiries with third parties including CEC’s accountants in order to locate the documents or copies of documents referred to in order 2 of the 9 October 2009 order. She says that those searches did not reveal any documents of the type described in order 2.
She says that the delay in swearing her affidavit was substantially due to the time taken to exhaust reasonable lines of inquiry in order to try and locate the class of documents referred to in order 2 given the theft of the laptops.
She apologises for the inconvenience caused as a consequence of the late filing of her affidavit.
Amanda Forrest deposes that in 2005, continuing until 2006, she had conducted a distributorship business for laser hair removal machines and that during that time she had frequent association with Tanya Viscariello and her domestic partner John Viscariello who is a solicitor and then practiced law with solicitor Stephen McNamara.
She deposes that during the period of her association with Tanya Viscariello and John Viscariello, their business practice was that on each occasion either a purchase or sale of a machine was made, records were kept in the computer of the law practice of John Viscariello, and copied to the computer of Tanya Viscariello. She says Tanya Viscariello also kept hard copy records of each financial transaction. She says that in addition to those records retained on the respective computers of Tanya and John Viscariello, which were not laptop computers, their accountant Mr Nick Nicolou of Leustner & Associates was informed of each transaction, so that he could attend to the preparation of taxation records including the collection and remission of GST known as BAS returns.
She says that she is unable to comment on the recording processes adopted by John and Tanya Viscariello in relation to the conduct of CEC’s business from 2007, but she can say from her own experience that they meticulously recorded and duplicated financial records during the time of her association with them. She says that she considers it most uncharacteristic of them not to be in possession of accurate records of all financial transactions conducted for their business.
In Mr Nicholas Byrne’s affidavit of 26 November 2009, he deposes to a letter of 4 November 2009, to the solicitors for CEC expressing, inter alia, his concern that the affidavit of documents to be made by 16 November 2009 should include copies “of all orders placed… with the supplier” by CEC for the relevant period and that he received no response to that letter. Further he deposes to unsuccessfully seeking to speak to Mr Stephen McNamara, the solicitor representing CEC, seeking a response to his queries but has not received any responding telephone call or correspondence.
He deposes that on 16 November 2009, at a directions hearing concerning this matter, he spoke to Mr Phillips of counsel for CEC and informed him that CEC was in breach of the order of Evans AsJ. He says Mr Phillips telephoned Mr John Viscariello in his presence and he was advised by Mr Phillips that CEC would comply with the order of Evans AsJ “this week”. He says he then wrote to CEC’s solicitors advising them of MCT’s intention to institute proceedings to have CEC’s proceedings dismissed as a consequence of its failure to obey the order for discovery of documents.
Mr Nicholas Byrne deposes as to unsuccessful attempts to have CEC comply with pre-trial directions to prepare summaries of evidence of witnesses and a draft proposed court book to comply with orders of 11 September 2009 and 29 September 2009.
Mr Nicholas Byrne submits that:
…the failure of the plaintiff to comply with the orders is consistent with an apparent concern by the plaintiff to delay the trial of these proceedings and such failure to comply is unfairly prejudicial to the defendant against whom the proceedings were initiated by the plaintiff in 2007 at which time the current instructing solicitor of the plaintiff John Viscariello was then director and shareholder of the plaintiff company.
That in the circumstances hereinbefore deposed, I seek orders for dismissal of the proceedings brought by the plaintiff in addition to striking out of the plaintiff’s defence to the counterclaim, preserving the defendants’ counterclaim against the plaintiff.
In Mr Nicholas Byrne’s affidavit of 8 December 2009, he says that Tanya Smith, the domestic partner of John Viscariello, who was the former director of CEC, is the daughter of Carol Anne Smith who is, to the best of his knowledge, the current sole director of CEC.
Mr Nicholas Byrne deposes that at the hearing of 9 October before Evans AsJ, John Viscariello was present in court instructing counsel for CEC. He says that CEC sought further time to prepare the affidavit of discovery, as the person privy to the relevant information to make discovery was then overseas. Mr Byrne says no reference was made of the alleged burglary at that hearing. Mr Byrne says , by way of argument, that the assertion by Tanya Viscariello in her affidavit that “the books and records were not backed up onto any other computer or storage medium” contradicts Tanya’s and John’s usual business practice as deposed to by Amanda Forrest.
He also says that Luestner & Associates is the registered agent of CEC and that in those circumstances it would be in possession of the financial records of purchases and sales of machines by CEC.
He also puts forward other arguments challenging the statements made by Tanya Viscariello in her affidavit. These include the fact that according to ASIC records, ICOCT did not exist before 14 January 2008, nor did another similar company, College of Cosmetic Technology (ACN 133 788 824), before 20 October 2008.
Mr Byrne submits that the affidavit of Tanya Viscariello sworn 4 December 2009 does not comply with the order of 9 October 2009 for discovery.
He also criticises the failure of John Viscariello to respond to the affidavit material in support of the summons for dismissal. He accuses CEC of a lack of bona fides and of a concerted effort by its representatives, Tanya and John Viscariello, to conceal from the court and MCT evidence of sales of machines within the period of time described and the particular territory in respect of which MCT had exclusive distributorship rights accorded to it by the supplier of those machines.
THE ORDERS OF ASSOCIATE JUSTICE EVANS
It is apparent that Evans AsJ did not accept the affidavit of Tanya Viscariello as complying with his order of 9 October 2009. He ordered that the affidavit of discovery be made by the sole director of CEC.
He adjourned the further hearing of CEC’s application for judgment and to strike out the defence to the counterclaim to 12 February 2010.
Although the hearing before me is an appeal de novo I am entitled to have regard to the orders made by Evans AsJ and to consider them in the context of the material before him.
Associate Justice Evans decided to give CEC further time to comply with his order of 9 October 2009 before considering the application for judgment and to strike out the defence to counterclaim. He declined to decide that application on the material then before him. MCT urges that I should decide the application that was made before Evans AsJ.
MCT relies on r 24.02 of the Supreme Court (General Civil Procedure) Rules 2005 which provides:
Failure to obey order
(1) Where a party fails to comply with an order to give particulars of any pleading or with an order for the discovery or inspection of documents or for answers to interrogatories, the Court may order—
(a) if the party is the plaintiff, that the proceeding be dismissed;
(b) if the party is a defendant, that the defendant's defence, if any, be struck out.
(2) A defendant whose defence is struck out in accordance with paragraph (1)(b) shall, for the purpose of Rule 21.02(1), be taken to be a defendant who, being required to serve a defence, does not do so within the time limited for that purpose.
In Lenijamar Pty Ltd v AGC (Advances) Ltd[6] Wilcox and Gummow JJ of the Federal Court of Australia examined a similar rule of the Federal Court Rules, O 10 r 7 which provides:
7 (1) Where a party fails to comply with an order of the Court directing that party to take a step in the proceeding, any other party may move the Court on notice -
(a) if the party in default is an applicant - for an order that the proceeding be stayed or dismissed as to the whole or any part of the relief claimed by him in the proceeding;
(b) if the party in default is a respondent - for judgment or an order against him; or
(c) for an order that the step in the proceeding be taken within the time limited in that order.
(2) The Court may make an order of the kind mentioned in sub-rule (1) or any other order or may give such directions, and specify such consequences for non-compliance with the order, as the Court thinks just.
(3) This rule does not limit the powers of the Court to punish for contempt.
[6](1990) 98 ALR 200.
Wilcox and Gummow JJ made observations about the circumstances where the jurisdiction of the court to exercise its discretion may be enlivened and factors relevant to the exercise of the discretion. As to the matters enlivening the discretion of the court they said:
[33] It is to be noted that the power given by this rule is conditioned on one circumstance only: the failure of a party to comply with an order of the Court directing that party to take a step in the proceeding. There is no requirement of intentional default or contumelious conduct, although the attitude of the applicant to the default and the Court's judgment as to whether or not the applicant genuinely wishes the matter to go to trial within a reasonable period will usually be important factors in weighing the proper exercise of the discretion conferred by the rule. There is no requirement of "inordinate and inexcusable delay" on the part of the applicant or the applicant's lawyers, although any such delay is likely to be a significant matter. There is no requirement of prejudice to the respondent, although the existence of prejudice is also likely to be significant. And it must be remembered that, in almost every case, delay adversely affects the quality of the trial and is an additional burden upon the parties.[7]
[7]Ibid at 208 per Wilcox and Gummow JJ.
As to the circumstances where the court, if its jurisdiction were enlivened, might exercise the power, they said:
[35] The observations which we have just made about the scope of Order 10, rule 7 are not intended to convey the impression that any failure to comply with a procedural direction will appropriately result in the dismissal of the proceeding. On the contrary, the rules must be administered sensibly and with an appreciation both of the fact that some delays are unavoidable, and unpredictable, by even the most conscientious parties and their lawyers, and of the likely serious consequences to an applicant of staying or dismissing a claim; compare the approach taken to non-compliance with time limitations in respect of appeals in Van Reesema v Giameos (1979) 27 ALR 525. We would not wish our observations to cause respondents to apply for dismissal of proceedings simply because there has been a non-compliance with a direction by the applicant, even though it does not cause or indicate a continuing problem in preparing the matter for an early trial.
[36] The discretion conferred by Order 10 rule 7 is unconfined, except for the condition of non-compliance with a direction. As it is impossible to foresee all of the circumstances under which the rule might be sought to be used, it is undesirable to make any exhaustive statement of the circumstances under which the power granted by the rule will appropriately be exercised. We will not attempt to do so. But two situations are obvious candidates for the exercise of the power: cases in which the history of non-compliance by an applicant is such as to indicate an inability or unwillingness to co-operate with the Court and the other party or parties in having the matter ready for trial within an acceptable period and cases - whatever the applicant's state of mind or resources - in which the non-compliance is continuing and occasioning unnecessary delay, expense or other prejudice to the respondent. Although the history of the matter will always be relevant, it is more likely to be decisive in the first of these two situations. Even though the most recent non-compliance may be minor, the cumulative effect of an applicant's defaults may be such as to satisfy the Judge that the applicant is either subjectively unwilling to co-operate or, for some reason, is unable to do so. Such a conclusion would not readily be reached; but, where it was, fairness to the respondent would normally require the summary dismissal of the proceeding.
[37] In the second of the two situations we postulate, a significant continuing default, it does not really matter whether there have been earlier omissions to comply with the Court's directions. Ex hypothesi the default is continuing and is imposing an unacceptable burden on the respondent. But the continuance of the non-compliance is of the essence of this situation. If, when the Court looks at the matter, the direction has already been complied with, the defaulting applicant may be ordered to pay any wasted costs; but it would be difficult to justify the dismissal of the proceeding solely because of that default. [8]
[8]Ibid at 209.
I accept that my power to make the orders sought has been enlivened. CEC did not file the affidavit of discovery within the time as ordered by Evans AsJ on 9 October 2009 and that the affidavit of 4 December of Tanya Viscariello was not given by a proper officer of the company. The question is whether or not, in my discretion, I ought to exercise the power to make the orders sought.
As indicated by Wilcox and Gummow JJ, it is not appropriate to foresee all circumstances where the power might be exercised.
MCT relies on several factors in support of its contention that the circumstances of this case warrant the exercise of the court’s power under r 24.02. These include the following:
(a) That on 9 October 2009, no mention was made to Evans AsJ by CEC of the break in and the loss of the laptops, even though Mr Viscariello was present and instructing counsel;
(b) That the statement by Tanya Viscariello in her affidavit of 4 December 2009 that the books and records were not backed up onto any other computer or storage medium contradicts the evidence of Amanda Forrest that the records were backed up on two non laptop computers of both John Viscariello and Tanya Viscariello and her evidence of their business practice to keep meticulous recording of all financial transactions upon both Tanya and John’s respective computers, including John’s computer at his law practice, and the retention of hard copies of all orders placed with suppliers, invoices of sales to customers plus the prompt supply of copies of all financial documents to their personal and business accounting firm Luestner & Associates for the purposes of taxation and BAS returns for CEC;
(c) That Luestner & Associates are the registered agent of CEC and that accordingly that firm would be in possession of the financial records of purchases and sales of all machines by CEC;
(d) That CEC has made no adequate explanation as to why some hard copies of invoices exist but others do not;
(e) That CEC alleges its computer records were stored on laptops belonging to the company ICOCT, when ICOCT was not incorporated until 14 January 2008, some eighteen months after 16 October 2006;
(f) That the affidavit of Tanya Viscariello does not comply with the order of 9 October as she is not an officer of CEC; and
(g) That John Viscariello as the person principally concerned with the bringing of the proceeding against MCT in 2007 and the conduct of them since that date as solicitor for CEC has elected not to respond to the affidavit material of MCT in support of its summons for dismissal of the proceedings brought by CEC and his apparent election to rely on Tanya Viscariello’s affidavit which fails to address the matters referred to above.
MCT says these and other matters demonstrate CEC’s lack of bona fides and a concerted effort by its representatives, Tanya and John Viscariello, to conceal from the court and MCT evidence of sales of machines within the period of time described and the particular territory in respect of which MCT had exclusive distributorship rights accorded to it by the supplier of those machines.
I accept these factors may be relevant to the exercise of the court’s jurisdiction under r 24.02. Nevertheless, on balance, after carefully reviewing all the evidence relied on by MCT, I do not consider that the evidence establishes that the non compliance of CEC with the order of 9 October 2009, indicates an inability or unwillingness by CEC to co-operate with the court or MCT in having the matter ready for trial within an acceptable period. Nor does the evidence establish that the non-compliance is as yet continuing and occasioning unnecessary delay, expense or other prejudice to MCT.
In the circumstances, I would not have made, nor do I make, the orders sought on the application and would have, as Evans AsJ did, allow CEC further time to comply with order 2 of 9 October 2009 concerning discovery. I too consider that the appropriate order was to adjourn the further hearing of the application as he did. I too would order CEC to pay MCT’s costs of the day.
Whether or not on the resumption of the hearing of the application, the court should or would have granted the application is not a matter I have to or should address on the hearing of this appeal.
CONCLUSIONS
On the appeal against the order of 9 October 2009:
(a) I allow the appeal.
(b) I order that within 7 days of the date hereof that CEC at the offices of its Melbourne agent provide inspection of the redacted invoices to the solicitor for MCT in an unredacted form on condition that he keeps the names of the customers confidential to himself and counsel.
(c) I direct that the solicitor may identify to his clients the redacted invoices that identify sales in Victoria.
(d) I order that CEC pay MCT’s costs of the application for inspection in paragraph 3(ii) of the summons of 25 September 2009.
(e) Otherwise the orders of 9 October 2009 remain unchanged.
On the appeal against the order of 9 December 2009 concerning the application for judgment and to strike out the defence under r 24.02 of Supreme Court (General Civil Procedure) Rules 2005, I dismiss the appeal
As to costs of the appeals, I order that CEC pay the costs of the appeal against the orders of 9 October 2009. I order that all parties’ costs of the appeal on the application under r 24.02 be costs in the cause.
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