Finsbury Print Pty Ltd v CPI Graphics Ltd - [2006] SASC 287

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
FINSBURY PRINT PTY LTD & ANOR v CPI GRAPHICS LTD & ORS
[2006] SASC 287
Judgment of Judge Burley a Master of the Supreme Court
15 September 2006
PROCEDURE
Discovery - application for further and better discovery - whether issues in respect of which discovery is sought arise on pleadings.
SCR 58.04(e), referred to.
Mulley v Manifold (1959) 103 CLR 341; Harris Scarfe Ltd v Ernst & Young & Ors (No. 4) (2005) 93 SASR 300, considered.

TRADE PRACTICES
Future representations - whether reasonable to make such representations - whether such issue arose on pleadings.
Trade Practices Act (Cwlth) Section 51A, referred to.
Ting v Blanche (1993) 118 ALR 543 at 552, considered.

FINSBURY PRINT PTY LTD & ANOR v CPI GRAPHICS LTD & ORS
[2006] SASC 287

JUDGE BURLEY. By application filed on 19 June 2006 (FDN 60), the plaintiff sought orders against the defendant for further and better discovery and for the provision of further material facts in relation to the defendant’s Defence. The latter part of the application has not been argued and it is probable that it will be resolved by agreement between the parties. These reasons deal with the plaintiff's application for further and better discovery.
The orders sought by the plaintiffs are as follows:
1.The defendant make further and better discovery of all documents in its possession, custody or power relating to all defects in, problems with and/or complaints about the CTP equipment during the period 1 January 2000 to November 2002 of the type sold by the defendant to the first plaintiff that was sold by the defendant to:
1.1    Lane Bros Printers Pty Ltd;
                  1.2    New Style Printing Co Pty Ltd; and
                  1.3    Custom Press Pty Ltd.
A class of documents, originally within the ambit of the orders sought, was referred to during argument as “assistance request forms”. At my direction, a further affidavit on the part of the defendant was filed. The Managing Director of the defendant, Mr Bernard Cassell, swore an affidavit on 18 August 2006, the content of which has caused the plaintiff to accept that documents of that description are no longer in the custody, possession or power of the defendant. As a result, the plaintiffs no longer pursue this aspect of the application.
At the hearing of the application, Mr Keith appeared for the plaintiffs, Mr Slattery QC and later Ms Deuter for the defendant and Mr Miller for the third party.
In this action the plaintiffs claim from the defendant damages because, they allege, the first plaintiff was supplied by the defendant with defective machinery. The causes of action pursued include misrepresentation, breach of contract, breach of warranty, contravention of Section 52 of the Trade Practices Act and Section 56 of the Fair Trading Act. The causes of action based on breach of warranty include warranties implied by the provisions of the Trade Practices Act and the Sale of Goods Act.
In broad terms, the first plaintiff purchased from the defendant certain electronic printing equipment referred to as “the CTP equipment”. The plaintiff contends that the CTP equipment never performed satisfactorily, even after an allegedly major repair (referred to as “the plate upgrade”).
In the Further Amended Statement of Claim (“the Statement of Claim”) it is alleged that, in the second half of the year 2000, there were discussions which led to a contract relating to the purchase by the first plaintiff of the CTP equipment from the defendant. It was commissioned in May 2001. The plaintiff says that the CTP equipment did not perform as warranted. Repairs by way of a plate upgrade were carried out during 2002. The plaintiffs say that they experienced difficulty with the CTP equipment both before and after the plate upgrade. The plaintiffs replaced the allegedly defective CTP equipment in September 2004.
The plaintiffs also allege breaches of duty of care on the part of the defendant, both in relation to the original supply of the equipment and to the plate upgrade in 2002.
The plaintiffs rely upon SCR 58.04(e). The basis upon which further and better discovery may be sought is set out in the decision of the High Court in Mulley v Manifold (1959) 103 CLR 341. Although there have been changes to the South Australian Rules of Court, the decision remains authoritative in respect of all aspects of applications for further and better discovery apart from the application of the test for discoverability. The applicable Supreme Court Rules apply the “directly relevant” test, but leave may be sought to obtain discovery in respect of documentation which is indirectly relevant (SCR 58A.04(1)) where it is in the interests of justice to do so. It was the plaintiff’s contention that the documentation sought was directly relevant to the issues in dispute between the parties.
The directly relevant test was discussed by Bleby J in Harris Scarfe Ltd v Ernst & Young & Ors(No. 4) (2005) 93 SASR 300. In that case the point at issue was whether all of a receiver’s file should be discovered in respect of a disputed claim for damages including costs of the receiver. At [22] et seq Bleby J reviewed the cases including the decisions of the Chief Justice in Quenchy Crusta Sales Pty Ltd v Logi-Tech Pty Ltd (2002) 223 LSJS 266 and Rehn v Australian Football League & Ors (2003) 225 LSJ 378. Bleby J said (at page 4 of his reasons):
It can be seen that the phrase “directly relevant” is to be given a relatively narrow meaning. Its application to particular classes of documents will be governed by the pleadings. A document will be directly relevant if it tends to prove or disprove a matter which is in issue. It is not directly relevant if it merely tends to prove or disprove something that may be relevant to a matter in issue, or there is merely a chance that the document will prove or disprove a matter in issue.
His Honour then went on to discuss Rule 58.04(e). Having referred to the “uncompromising ethical obligation” that a legal practitioner has in relation to discovery, he said (at 5):
What acceptance of the assertion of the plaintiff’s solicitor does mean, however, is that if the defendant is to succeed in its application, it must point to some evidence to raise the necessary belief required by Rule 58.04(e). It requires more than merely an assumption or speculation that such documents may exist. The necessary belief may be formed from the examination of the pleadings. Common experience may dictate that there must have been a particular relevant document in the custody, possession or power of a party concerning a particular transaction. The existence of a relevant document may be properly inferred from the contents of another document. Alternatively, the description of a document or class of documents by the respondent party may be so vague and uncertain as to require more particularity. There may be other circumstances which induce the necessary belief. However, the court will not act on speculation.
His Honour came to the view that further and better discovery of documentation relating to the calculation of the receiver’s costs should be provided because it was directly relevant to the issues in the action even though the evidence thereby obtained might only be circumstantial.
The order sought, as set out above, refers to documentation relating to defects notified to the defendant in respect of the CTP equipment by three other companies. Two questions arise: first, whether or not the defendant may have such documentation in its custody, possession or power; and second, whether or not such documentation is directly relevant to issues in dispute between the parties.
It is apparent from Mr Bett’s affidavit of 19 June 2006 that documentation of the type described in para. 2.1 set out above is in existence. That was not disputed by the defendant. The opposition to the application consisted of the defendant’s contention that such documentation was not directly relevant to any issue in dispute between the parties. It was further submitted by the defendant that, to the extent that the plaintiff sought indirectly relevant documentation pursuant to SCR 58A.04(1), it was not in the interests of justice to make such an order.
At one stage, the thrust of the plaintiff’s argument was to be derived from the following exchange during the submissions of counsel for the plaintiff on 1 August 2006 (T. 15/16 et seq):
MR KEITH:It is our submission that the fact that the one letter from the defendant to the second third party bundles up a whole range of problems with the machinery for several customers shows that there is ground to say that documents concerning defects arising from other customers are properly said to be directly relevant to the issues pleaded in this case; namely, defects in the equipment.
HIS HONOUR: I don’t want to oversimplify your position, but is it as simple as this: that you rely upon evidence of defects in machinery or equipment supplied to others as part of your case that there were defects in the equipment that was supplied to you?
MR KEITH:Yes. On the basis of it shows there were design defects in the equipment.
HIS HONOUR: I see, so that if you allege a design defect and you can ascertain, by a process of discovery that the same defects occurred in the same type of machinery supplied to others, then that furthers your case that it was a design defect.
MR KEITH:Yes, and secondly it furthers our case that the defendant had knowledge of these defects. It will depend on the documentation as to what time we can establish the knowledge.
Mr Keith further submitted that:
Knowledge goes to the question of representation and to fitness for purpose and merchantable quality … to show that a statement was misleading or deceptive, it would assist our case if we can show that complaints of defects had been made by a customer and representations or statements were made to us, it would be directly relevant to the question of whether the defendant had any reasonable basis for the statement they made to us, which is a question concerning misleading or deceptive conduct when it goes to future performance.
It can be seen from the orders sought that the plaintiffs seek to obtain from the defendant discovery of documentation relating to defects and complaints concerning the same type of equipment sold by the defendant to the three entities referred to at paragraphs 1.2 to 1.3 of the proposed order. The latter argument of Mr Keith was that such documentation is material to the state of knowledge of the defendant at the time the defendant’s representatives allegedly made representations both prior to the purchase of the CTP equipment and prior to the plate upgrade. He argued that because (in paragraph 28 of the Statement of Claim) representations as to future performance are alleged to have been made, the state of knowledge of the defendant, through its representatives, was material since it went to the question of whether or not it was reasonable, at the time of their making, to have made the representations.
Section 51A (1) and (2) of the Trade Practices Act deals with future representations. It is as follows:
51A (1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) For the purposes of the application of sub-section (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it deduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.
It seems to me that there is a simple answer to the plaintiffs’ contention that further and better discovery sought ought to be given. It is that, although the defendant’s knowledge of what problems it had with the machinery of a similar type sold to other entities might potentially go to the question of whether or not it reasonably held a particular belief at the time of making either the pre-contract representations or the representations allegedly made prior to the plate upgrade, Section 51A (2) puts the onus on the defendant to establish that it held the relevant beliefs reasonably. The sub-section provides that unless the defendant “adduces evidence to the contrary” it will be deemed not to have had reasonable grounds for making the representation. No such contention is raised in the Amended Defence of the defendant.
Paragraph 28 of the Statement of Claim asserts that:
To the extent that the representations and the plate upgrade representations were as to future matters, there were no reasonable grounds for those representations.
Not only has the defendant not sought to plead in response to paragraph 28 any material facts upon which it relies to support a contention that it reasonably held a particular belief, but also the defendant has failed to plead to paragraph 28 at all. Thus, the question of reasonableness does not arise. For that reason alone, the plaintiffs’ application for further and better discovery ought to be refused.
Very little of what I have referred to was mentioned at the hearing of the application. When I asked Mr Keith whether matters relating to future representations had been pleaded, he stated that they were. The defendant and third party did not demur. However, the reality is that Section 51A of the Trade Practices Act has only been introduced at the periphery in para. 28 of the Statement of Claim. That paragraph makes no attempt to specify which of the many alleged representations referred to earlier in the pleading are representations as to future matters. Since the onus of proof is reversed by Section 51A, a much more specific pleading in the Statement of Claim is necessary. Only then may the defendant adequately address the question of which material facts it pleads in support of a contention that, if a future representation was made, there were reasonable grounds for doing so.
It is possible that, if Section 51A is relied upon by the plaintiff and responded to by the defendant, discovery of the type now sought by the plaintiff should be made. That depends entirely on what may be pleaded. However, it is clear that discovery of that type is not presently justified.
Much of the argument, particularly from the defendant and third party, was taken up with what Mr Keith described as “shadow boxing”. This related to those contentions of the defendant which were to the effect that the further and better discovery should not be granted because, if it were based on the plaintiffs’ proposal to adduce similar fact evidence, no such approach was foreshadowed in the Statement of Claim. Mr Keith effectively rebutted this contention by specifically disavowing that the plaintiffs sought further and better discovery for the purposes of adducing evidence of a similar fact nature. He said (at T83/12):
I have not put a similar fact case. The defendant and third party have effectively built a straw man to knock it down and give an appearance that there is no substance in the plaintiffs’ application. We have not put a similar fact evidence application.
I mention also that the defendant’s and third party’s submissions in opposition to the application were directed towards a concern that the plaintiff, without pleading it, was relying upon an alleged “design defect” in the machinery. This may have arisen from a reference to same on 1 August 2006 by Mr Keith during the course of his submissions which are set out earlier in these reasons. Whatever the case may be, when submissions were resumed on 31 August 2006, Mr Keith specifically disavowed the notion that the plaintiffs’ case was based on the concept of defective design. He said (T83/28):
We do not sue the defendant for having wrongly designed the equipment because the defendant did not design the equipment.
It was thus made clear that the basis of the plaintiffs’ application for further and better discovery was that documentation relating to defects in similar machinery sold to persons other than the first plaintiff may have a bearing upon the defendant’s state of knowledge at the time of making the respective representations prior to the contract and to the plate upgrade. As I have stated, discovery in this respect is not warranted because, as the pleadings stand, the relevant state of knowledge of the defendant is not an issue in dispute. The defendant has not relied upon a positive averment in its defence that it had reasonable grounds to make any representations as to the future. In other words, the plaintiffs do not have the onus of establishing a particular belief or lack of belief on the part of the defendant. The onus is upon the defendant to establish, in respect of any representation that could be regarded as a future representation, as contemplated by Section 51A of the Trade Practices Act, that it had reasonable grounds for the making of the representation at the time that it was made. This is evident from Ting v Blanche (1993) 118 ALR 543 at 552 where Hill J said:
What Section 51A does, in a practical sense, in cases where it applies, is to cast the burden of proof upon the respondent corporation who has made a representation about a future matter to show that in making that representation it had reasonable grounds for doing so.
Finally, I mention a submission put by Mr Keith in the course of his submissions in reply (at T90/22 et seq). The submission came immediately after the point at which he had confirmed that the further and better discovery was sought on the basis that the material thereby gained goes to the knowledge of the defendant at the time the various representations were made. I then asked him if there was any other basis and he put to me:
[t]he documentation we submit is directly relevant to the question of the performance of this type of machine not in a similar fact sense, but the defendant as distributor was the party passing on these complaints from customers to the third party … The communications passing between these customers and the defendant will then be reflected in communications between the defendant and the third party. In the sense that the defendant has taken action on the complaints made as to the performance of the equipment and that action taken by the defendant is itself a material fact and the documents are directly relevant to the action taken by the defendant in light of its knowledge. I stress not in a similar fact way but to show that when the defendant responds to the plaintiff’s complaints about the performance of the equipment, the defendant does so in the knowledge of other pieces of equipment … That the defendant’s knowledge goes to our case that the machine supplied to us was not fit for the purpose and was not of merchantable quality as well as the knowledge behind our seeking to establish that the representations as to the performance of the machine did not have a reasonable basis.
To the extent that Mr Keith has asserted that the knowledge of the defendant is material to the question of whether or not there has been compliance with terms as to merchantable quality and fitness for purpose statutorily implied in the contract, I reject such a submission. Those statutorily implied terms are either part of the contract or they are not and if they are part of the contract, they have either been complied with by the defendant or they have not. The defendant’s state of knowledge in relation to the existence of defects is not material.

In light of the conclusions to which I have come, it has not been necessary for me to address that component of the plaintiffs’ case, namely that if it is found that the documentation is not directly relevant to issues raised in the pleadings, it should in the interests of justice nevertheless be discovered even though it is only indirectly relevant.
For the above reasons the plaintiffs’ application will be dismissed. I will hear the parties as to costs.