Coventry Seafoods (Aus) Pty Ltd v SK Marketing Pty Ltd
[2019] WASC 47
•21 FEBRUARY 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: COVENTRY SEAFOODS (AUS) PTY LTD -v- SK MARKETING PTY LTD [2019] WASC 47
CORAM: MASTER SANDERSON
HEARD: 24 JANUARY 2019
DELIVERED : 21 FEBRUARY 2019
FILE NO/S: CIV 2265 of 2018
BETWEEN: COVENTRY SEAFOODS (AUS) PTY LTD
Plaintiff
AND
SK MARKETING PTY LTD
First Defendant
CSJ SEAFOODS PTY LTD
Second Defendant
KIMBERLEY PALMER
Third Defendant
SARAH JANE HOBSON
Fourth Defendant
Catchwords:
Practice and procedure - Application for pre‑action discovery - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA)
Result:
Discovery ordered
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr M L Bennett |
| First Defendant | : | Mr J M Healy |
| Second Defendant | : | Mr J M Healy |
| Third Defendant | : | Mr J M Healy |
| Fourth Defendant | : | Mr J M Healy |
Solicitors:
| Plaintiff | : | Bennett + Co |
| First Defendant | : | Stratos Legal |
| Second Defendant | : | Stratos Legal |
| Third Defendant | : | Stratos Legal |
| Fourth Defendant | : | Stratos Legal |
Case(s) referred to in decision(s):
The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 2] [2008] WASC 147
MASTER SANDERSON:
This was the plaintiff's application by originating summons filed 20 July 2018 for pre‑action discovery. The application was made under O 26A r 4 of the Rules of the Supreme Court 1971 (WA) (the Rules). It was supported by an affidavit of Jennifer Marie Poland sworn 19 July 2018. There has been some delay in this matter occasioned by procedural issues which are not presently of concern.
On 10 October 2018 the parties lodged consent orders. These orders did not anticipate the filing of further affidavits by any party. They dealt only with the issue of submissions.
The day prior to the hearing the plaintiff, without leave, filed an affidavit of Thaw Thaw Htin and at the hearing of the application sought leave to rely on that affidavit. Counsel for the defendants objected. He raised a number of objections including the late filing of the affidavit and the fact it was filed without leave. Counsel for the plaintiff proceeded with his argument without making reference to the affidavit. In determining this application I have not found it necessary to consider that evidence. But for the avoidance of doubt I should make it clear I would not admit the affidavit into evidence. Apart from anything else it was filed late, it was filed without leave and there was no explanation for the delay in filing the affidavit. To allow the plaintiff to rely upon that affidavit would in all the circumstances be unfair.
The scope of the dispute between the parties was very narrow. There was no disagreement between them as to the applicable legal principles and given only one affidavit was filed there was no real dispute on the evidence. There was an argument between the parties as to precisely what was disclosed by the evidence and I will deal with that issue below. First, I should outline briefly the legal principles applicable to such applications.
The principles were set out by Le Miere J in The Hancock Family Memorial Foundation Ltd v Fieldhouse [No 2] [2008] WASC 147 [33]. To succeed in an application the plaintiff must first establish that it 'may have a cause of action'. This is sometimes referred to as the 'jurisdictional' question. To satisfy this test the plaintiff does not have to establish that it has a prima facie cause of action let alone that the action is likely to proceed. A plaintiff does not even need to establish there is a serious question to be tried. Of course something more than speculation is required but the bar is set very low.
Once the jurisdictional question is answered in the plaintiff's favour then it is necessary for the plaintiff to establish the potential cause of action is against a person whose description has been ascertained, that it wants to commence proceedings against the party, that after 'reasonable enquiries' it has not been able to obtain sufficient information to decide whether or not to commence proceedings, at the time of making the application the plaintiff has not reached a decision about whether or not to take proceedings and that there are reasonable grounds for believing the potential party has in its possession documents which may assist in making the decision. Finally, the plaintiff must support the application by an affidavit which is served on the potential party. In this case these six requirements were satisfied. What was in dispute between the parties was whether or not the plaintiff 'may have a cause of action'.
Turning then to the affidavit of Ms Poland, she is a director of the plaintiff. She says a principle part of the plaintiff's business is the supply of seafood to distributors within Australia. In other words, the plaintiff imports seafood but does not sell to retail outlets. It supplies distributors. Ms Poland says as part of the plaintiff's business it developed an 'exclusive' supply agreement with a company known as Ocean Source Group Co Ltd (Ocean Source) a company incorporated in the British Virgin Islands. Ocean Source supplied mud crab sections and blue swimmer crab meat to the plaintiff. As part of its development of its business Ms Poland says the plaintiff adopted a distinctive form of packaging and a distribution network within Australia.[1]
[1] Affidavit of Jennifer Marie Poland sworn 19 July 2018 pars 1 – 4.
A company search of the plaintiff which appears as attachment JMP 1 to Ms Poland's affidavit shows the third defendant was appointed a director of the plaintiff on 26 May 2016 and that he ceased to be a director on 24 January 2018. The first defendant is a company which was registered on 16 November 2017. There are two directors of the first defendant. They are the third and fourth defendants. No search of the second defendant was provided. However, it seems clear from the evidence the company is a seafood distributor based in New South Wales. For present purposes that description of the second defendant and its activities is sufficient.
During June 2018 the plaintiff discovered that Ocean Source was supplying the third defendant, or an entity associated with the third defendant, and the second defendant with produce contrary to what the plaintiff says was the exclusive supply agreement between the plaintiff and Ocean Source. This conclusion requires some explanation and that explanation is provided by reference to email correspondence attached to Ms Poland's affidavit. Appearing as attachment JMP 2 to Ms Poland's affidavit is an email from Michael Hallager, the Sales Director of Ocean Source. The contents of that email relevantly read as follows:
Further to earlier discussions, 1 want to confirm the NSW and MLB strategies so there are no ambiguities.
OSG launched Sweet Blue in NSW with CSJ. We flew our chef in, supported sampling and marketing programs, and built the market from scratch with significant dollar investment over the last 3 years.
There is an existing and previous agreement and understanding in place that CSJ is the NSW agent for Sweet Blue. I think Kim gave CSJ a shot at MLB but it my understanding that now that market is open.
Please confirm your intention to maintain exclusive supply to CSJ through 2018 for NSW.
Second, there was also an understanding that Coventry would not pursue development of Mud Crab Sections or Sweet Blue outside of Ocean Source. Please confirm this is active and in place.
Please reply to the e-mail and then we suggest a Skype call today and 4pm Perth time. The sweet blue shortage needs some solutions.
It is worthy of note that email was sent 2 March 2018. That is to say it was sent sometime after the third defendant ceased to be a director of the plaintiff. Ms Poland responded the same day. That email appears as attachment JMP 3. Relevantly it reads as follows:
Thanks for your email.
Regarding supply, ok let's firm up this deal. I've spoken to Greg and we were both unaware of this understanding, only knowing we had the sole agency for your product in Australia.
We are happy to confirm that we will not import raw mud crab sections or raw blue swimmer crab meat from any other companies on the proviso you also confirm you will not supply any other person in Australia? Would love to reach agreement on this and keep our strong relationship going. We appreciate the support through the last two months and feel going forward we have a good thing going with you, Craig and your company.
We currently buy half cut blue swimmer crab sections (previously discussed with Craig) and cooked blue swimmer meat, although, I've discussed with Craig and am happy to look at and potentially switch to your product to strengthen our relationship. The quantities and pricing of the sections looks good, just need a bit of work on sizing etc.
Regarding CSJ, of course we understand this condition. We fully take on board that Colin is our 'sub-agent' for the raw sweet blue meat in NSW and he will only service NSW.
Spoke to Colin yesterday, he's at the surf champs. He let me know the air freight price was too high. Not sure what other options we have. Good for call at 4pm though to discuss.
Look forward to your reply and confirming our business relationship.
These two emails are the only evidence of the relationship between the plaintiff and Ocean Source. There was no written contract between the parties. It was the defendants position not only that there was not an exclusive distributorship arrangement between the plaintiff and Ocean Source but that there was no contractual relationship at all. Counsel maintained the parties were in a position where they were negotiating an agreement. It was his submission it was not possible to conclude there was anything beyond an ad hoc arrangement between the parties so that the purchase of seafood by the plaintiff from Ocean Source from time to time amounted to no more than single one off contracts. It did not represent an ongoing relationship.
Counsel for the plaintiff maintained the direct evidence of Ms Poland was that there was an exclusive distributorship arrangement. He submitted in the absence of evidence to the contrary, Ms Poland's affidavit must be accepted. With respect, I am not satisfied that is a correct assessment of the effect of Ms Poland's affidavit. Whether or not there was an exclusive distributorship arrangement is a question of law. Ms Poland's opinion is really neither here nor there. True it is no objection was taken to the conclusory nature of the affidavit – perhaps some objection should have been raised. But the fact remains some assessment of the nature of the contractual relationship must be made based upon documents provided and what can be gleaned from them.
While it is true that the evidence is thin it seems to me there is sufficient evidence to suggest there was an ongoing contractual relationship between the plaintiff and Ocean Source. Not all of the terms of that agreement may have been settled between the parties. But clearly there had been a course of dealing over a number of years. The email exchange suggests that both parties accepted they had obligations. The precise scope of those obligations may not have been settled. But I think it is at least arguable that were it necessary to do so a court could tease out a contractual relationship which would have consequences for both parties.
In June 2018 the plaintiff came into possession of an email which was sent by Michael Hallager of Ocean Source to the second defendant. The email was copied to the third defendant at the email address he had when he was employed by the plaintiff. The email is in its terms rather cryptic. But it does indicate that Ocean Source was supplying the second defendant direct with seafood. The final sentence of the email reads:
In addition Kim, there are 2.5 tons of Sweet Blue on the container departing next week, along with Sections.[2]
[2] Attachment 'JMP-4' to the affidavit of Jennifer Marie Poland sworn 19 July 2018.
This comment is clearly directed at the third defendant. It does tend to suggest Ocean Source is suppling product directly to the third defendant. Of course there is no affidavit evidence to suggest that is not the case.
To summarise the plaintiff's argument is this. During 2016 and 2017 and up until January 2018 the third defendant was a director of the plaintiff. He was intimately involved with the importation of seafood supplied by Ocean Source. He set up a company, the first defendant, in November 2017 while he was still a director of the plaintiff which was a marketing company – that much is suggested by its name. When the third defendant left the plaintiff the amount of product from Ocean Source declined. The plaintiff believes it may have a cause of action against the third defendant for breach of fiduciary duties – that is to say his duty not to use information obtained from the plaintiff to his advantage. The first defendant is a party to the action because that might be the vehicle the third defendant has used to trade with Ocean Source. The second defendant is a party to the action because they are allegedly knowingly concerned in the third defendant's breach of fiduciary duty. The fourth defendant is included because she is a director of the first defendant and on the plaintiff's reasoning must be intimately involved in the third defendant's business.
Against all of that the defendants say first, that there was no exclusive supply agreement between the plaintiff and Ocean Source and that absent such agreement, the plaintiff's suspicions as to what may have occurred between the defendants and Ocean Source is irrelevant. Furthermore, they say that there is a paucity of evidence to support the plaintiff's suspicions to the point where they are nothing more than speculation. Of course the weakness in that argument is the defendants' failure to file any affidavit material. If the email from Ocean Source to the second defendant has some innocent explanation then it could have been provided. But it was not. On that basis alone it is reasonable to assume Ocean Source is supplying product both to the second and the third defendant (or his nominee).
Once that point is reached it is necessary to revert again to the question of the contractual relationship between the plaintiff and Ocean Source. As I have already dealt with that point and found it is arguable such a relationship exists then the conclusion must be the plaintiff may have a cause of action against the defendants. The jurisdictional question having been satisfied there is no reason why orders sought by the plaintiff ought not be made.
During the course of his submissions counsel for the defendants said no submissions had been made as to the scope of the discovery sought because it was not conceded discovery should be ordered. With respect, at the hearing of a matter such as this, all aspects of the plaintiff's claim ought be addressed. To do so does not in some way diminish the defendants' position. It is inefficient to have in effect two hearings – one to decide whether an order ought be made and the other to decide what the scope of the order should be. Having considered the orders sought by the plaintiff I am satisfied they are reasonable in their scope. The costs orders are consistent with the usual orders made in pre‑action discovery cases and I doubt in any circumstances those orders could have been the subject of argument. Having considered the scope of the discovery I am satisfied it is reasonable and I would accordingly make orders in terms of pars 1 to 4 of the originating summons. The only adjustment I would make to the proposed orders is to provide 28 days for the provision of discovery rather than the 14 days anticipated in the originating summons.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DG
Associate to Master Sanderson21 FEBRUARY 2019
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