GLR Injection Technologies Pty Ltd v Forton Automotive Treatments Pty Ltd - [2009] WASC 131

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: GLR INJECTION TECHNOLOGIES PTY LTD -v- FORTON AUTOMATIVE TREATMENTS PTY LTD [2009] WASC 131

CORAM: MASTER SANDERSON

HEARD: 26 MARCH 2009

DELIVERED : 19 MAY 2009

FILE NO/S: CIV 1190 of 2009

BETWEEN: GLR INJECTION TECHNOLOGIES PTY LTD (ACN 106 876 439)
Plaintiff
AND
FORTON AUTOMATIVE TREATMENTS PTY LTD (ACN 008 872 197)
Defendant

Catchwords:

Discovery - Application for preaction discovery by plaintiff - Turns on own facts

Legislation:

Nil

Result:

Application granted

Category: B

Representation:

Counsel:

Plaintiff: Mr P Mendelow
Defendant: Mr N J Timoney

Solicitors:

Plaintiff: Karp Steedman Ross-Adjie
Defendant: Stables Scott

Case(s) referred to in judgment(s):

Hancock Family Memorial Foundation Ltd v Fieldhouse (No 2) [2008] WASC 147
McCarthy v Dolpag Pty Ltd [2000] WASCA 106
Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2009] FCA 61
Rohanna Pty Ltd v Horwath Perth (a firm) [2003] WASC 172
Waller v Waller [2008] WASC 51

MASTER SANDERSON: This is the plaintiff's application for pre‑action discovery. The application is brought under O 26A r 4 of the Rules of the Supreme Court 1971 (WA). That rule empowers the court to order that a potential party give discovery of documents which are or have been in the potential party's possession and that might assist the applicant to decide whether to institute proceedings against the potential party.
To succeed in an application, the plaintiff must satisfy seven criteria. These are:
(a)it must establish that it 'may have a cause of action';
(b)that the potential cause of action is against a person whose description has been ascertained;
(c)that it either wants to commence proceedings against the potential party or wants to take proceedings against the potential party in the cause of action to which the person is a party;
(d)if after 'reasonable enquiries' it has not been able to obtain sufficient information to decide whether or not to commence proceedings;
(e)as a necessary concomitant to (d), at the time of making the application the plaintiff has not reached a decision about whether or not to take proceedings;
(f)there are reasonable grounds for believing that the potential party has in its possession documents that may assist in making the decision; and
(g)the application must be supported by an affidavit which is served on the potential party.
These principles arise from a number of decisions including Rohanna Pty Ltd v Horwath Perth (a firm) [2003] WASC 172 and Waller v Waller [2008] WASC 51. The defendant accepted that the application required these matters be considered in determining the application. However, the defendant added two additional factors which it was submitted are relevant to whether or not an order is made. First, the court must be satisfied that it is appropriate to exercise its discretion to make the order for preliminary discovery. Reference was made to Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2009] FCA 61 and Hancock Family Memorial Foundation Ltd v Fieldhouse (No 2) [2008] WASC 147 [47].
Second, if any order is made, only those documents actually relevant to a cause of action with the potential party should be discovered and should be no wider than necessary: see McCarthy v Dolpag Pty Ltd [2000] WASCA 106.
The plaintiff did not dispute that these two additional points were properly made.
The application is supported by two affidavits of Colin William Gilbert, the first sworn 28 January 2009 and the second sworn 17 March 2009. The summary of the facts which follow is drawn from these two affidavits. The plaintiff conducts a business under the name GLR Injection Technologies Pty Ltd. This business manufactures and distributes machines used to clean fuel injectors and associated spare parts and liquid solvent used in the operation of those machines. On 14 October 2004 the plaintiff and the defendant entered into a written agreement pursuant to which the plaintiff appointed the defendant as its distributor of its machines and solvent in Western Australia. Mr Gilbert says that during negotiations prior to the conclusion of the agreement, he advised the defendant through the defendant's agent Mr Breck Ivan Hoffman that the plaintiff was particularly concerned to ensure that only the plaintiff's solvent would be used in the operation of the machines. Further, the plaintiff was concerned to ensure that the solvent would be used in volumes recommended by the plaintiff in relation to different engine sizes. Mr Gilbert was concerned about these two matters because the plaintiff provided warranties on the sale of its machines and the use of different, inferior or insufficient solvent would cause damage to the machines and potentially increase warranty claims.
According to Mr Gilbert, Mr Hoffman gave him the assurances he required. The detail as to these representations is found in pars 9, 11 and 12 of Mr Gilbert's affidavit of 28 January 2009. Mr Gilbert says that in reliance upon these representations he on behalf of the company, the plaintiff, entered into the agreement with the defendant. Thereafter the plaintiff commenced selling and supplying machines and insolvent to the defendant for distribution in Western Australia.
Mr Gilbert says he now has reasonable cause to believe that the plaintiff may have a right of relief against the defendant. He says during late May or early June 2007 he met with Mr Hoffman of the defendant. Mr Gilbert says he advised Mr Hoffman that he (Mr Gilbert) had noted that the defendant's orders for solvent had dropped off compared with earlier buying patterns. Mr Hoffman undertook to provide the plaintiff with the defendant's monthly sales figures to each of their relevant customers. Although it is not entirely clear from the affidavit, it would appear that this information was never supplied. By February 2008 Mr Gilbert was concerned that the defendant might have been breaching the agreement. He asked Mr Hoffman for a reconciliation to be prepared of all solvent that had been supplied by the plaintiff to the defendant and of all solvent that had been bottled by or on behalf of the defendant and supplied to its customers and of all such solvent that the defendant retained in stock.
After making this request Mr Gilbert went to see Mr Russell Lindsay. Mr Lindsay was involved with a company known as Profill Pty Ltd, a firm who acted as bottlers for the defendant. Mr Gilbert asked Mr Lindsay to provide a spreadsheet of the solvent supplied by the plaintiff to the defendant which had been bottled by Profill. This schedule was duly provided. A copy of the document is annexure B to Mr Gilbert's affidavit.
In March 2008 Mr Hoffman provided Mr Gilbert with certain information. Details of that information are contained in pars 22 to 25 of Mr Gilbert's affidavit. The upshot of all this information is that it shows the defendant handled just over 8,800 litres of solvent. The plaintiff's record showed that only 8,040 litres had been supplied by the plaintiff to the defendant. Clearly something was amiss.
Further meetings took place between Mr Gilbert and Mr Hoffman and further documents were exchanged. The position is rather complicated and is dealt with in some detail in pars 35 to 47 of Mr Gilbert's affidavit. It is sufficient if I say that despite what has passed between the parties, Mr Gilbert has been unable to reconcile the amount of solvent supplied by him to the defendant and the amount of solvent the defendant has handled.
In his affidavit, Mr Gilbert has made a considered effort to analyse the defendant's records. It would serve no purpose if I was to detail his evidence. Suffice it to say that I am satisfied that Mr Gilbert, on behalf of the plaintiff, has used his best endeavours to work out how the discrepancies in solvent supplied by the plaintiff and sold by the defendant arises. But with the information he has available to him at present he has been unable to resolve the situation.
In the circumstances he says that he needs discovery from the defendant so that he can determine whether or not the plaintiff has a right of action against the defendant. Furthermore, he says that in the circumstances he has made all reasonable enquiries and has insufficient information to allow him to determine whether or not to commence proceedings.
I am satisfied that the plaintiff has made out both of these grounds. The detailed information in Mr Gilbert's affidavit makes it plain that he has made all reasonable enquiries. He has given the defendant every opportunity to produce material which will clarify the position. Despite cooperation from the defendant, the position remains unclear. This is the case despite the fact that Mr Gilbert has made every effort to reconcile his records with the information provided by the defendant.
Furthermore, I am satisfied that the plaintiff has not determined one way or the other if it will take proceedings. I accept that it may be once all of the defendant's records are available, there might be a reasonable and logical explanation for the discrepancies that presently appear to exist with respect to the solvent. After examining the defendant's records the plaintiff will be in a position to make a decision. It is not sufficiently informed at present to make a decision as to whether to proceed or not.
Once these two points are satisfied, the plaintiff has clearly made out its case for the orders that it seeks. None of the other matters to be considered are in issue. The remaining question is the extent to which orders ought be made protecting the confidentiality of the business records produced. After all, the plaintiff and the defendant are competitors in the market place. There is also a question of the extent of the discovery which ought be provided.
In opposition to the application, the defendant relied on an affidavit of Mr Hoffman sworn 23 February 2009. At pars 10 to 24 of that affidavit, Mr Hoffman offers an explanation for what has occurred and why there may be discrepancies between the records held by the plaintiff and the defendant in relation to the solvent. While taking all those matters into account, it does reinforce that there is an unresolved dispute between the parties. It may be that Mr Hoffman is correct and that in fact the records will show there has been no dilution of the plaintiff's product by the defendant or any other interference with the solvent supplied. But based upon the evidence of Mr Hoffman alone, disputed as it is by the evidence of Mr Gilbert, I could not conclude that the plaintiff does not have a cause of action.
The remainder of the affidavit in large measure deals with two issues. The first is the difficulty of producing the records sought. That, I think, is a question of cost and timing. I indicated to the parties during the course of the hearing that if a discovery order was made then I would order that the plaintiff provide security for the costs of giving that discovery. In his written submissions, counsel provided an estimate of the costs of complying with the order. Based upon the evidence produced to date, it seems to me the estimate presently provided may be too low. I will give the defendant the opportunity to reconsider what it regards as an appropriate amount of security for the giving of discovery.
In summary then, I am prepared to make an order for discovery, largely in terms of the chamber summons. I will provide the parties with an early copy of these reasons and allow them to confer. On balance, it seems to me that some order for confidentiality ought be made and the parties should attempt to resolve the form of that order. If they are unable to do so then I will hear further argument on this question.
The parties ought also confer as to a reasonable amount of security for the giving of discovery. Again, if a resolution of this issue is not possible I will hear further argument and make the appropriate order.
As to the costs of the application, these costs ought be fixed by agreement. If proceedings are not commenced by the plaintiff within three months of discovery having been given then the costs should be paid by the plaintiff to the defendant. If proceedings are commenced then the costs of this application should be costs in the cause of the proceeding.
Judgment in this matter will take effect from the date of approval of an agreed minute or the parties can relist the matter for further argument.