Hickinbotham Developments Pty Ltd v Barossa Real Estate Pty Ltd
[2009] SASC 313
•2 October 2009
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
HICKINBOTHAM DEVELOPMENTS PTY LTD & ANOR v BAROSSA REAL ESTATE PTY LTD & ANOR
[2009] SASC 313
Reasons of Judge Burley a Master of the Supreme Court
2 October 2009
PROCEDURE
Discovery - further discovery sought by the plaintiffs - whether directly or indirectly relevant - consideration of the rules relating to further and better discovery and to application for discovery of indirectly relevant documents.
Supreme Court Rules 1987 RR 58.04(e) and 58A.04, referred to.
Rehn v AFL & Ors (2003) LSJS 378, applied.
HICKINBOTHAM DEVELOPMENTS PTY LTD & ANOR v BAROSSA REAL ESTATE PTY LTD & ANOR
[2009] SASC 313
JUDGE BURLEY: By their amended application dated 19 May 2009 (FDN 59), the plaintiffs have applied for orders under the 1987 Rules for further and better discovery as follows:
All documents relating to the sale of the land, the subject of the proceedings, situated at Greenock in the State of South Australia from the appointment of the third and/or fourth defendant as sales agent for that land including all documents recording or evidencing:
1The sales agency agreement or arrangement;
2Any commission paid or payable to the third and/or fourth defendant.
3The pricing or the proposed pricing of the lots in the subdivision comprising the land that was sold or proposed to be sold;
4The timing of the sales of those lots; and
5Any marketing plans relating to the development and sale of those lots.
The plaintiffs’ claim is set out in the further amended statement of claim (FDN 63) filed on 28 August 2009. The background to the proceedings is conveniently summarised in the Reasons of Judge Lunn delivered on 19 March 2007 (FDN 36) as follows:
In broad terms the statement of claim pleads that there was a parcel of land at Greenock suitable for subdivision and building purposes which was being offered for sale by the defendants as land agents for its owners. The first plaintiff made an offer to the defendants to purchase the land. Another offer was made by Kentia Developments Pty Ltd ….. Subsequently the first plaintiff supplemented its offer by several addenda which it communicated to the defendants. It is alleged that the defendants failed to communicate these addenda to the owners. The owners accepted the offer of Kentia and sold the land to it. The plaintiffs plead that the defendants were guilty of misleading and deceptive conduct contrary to s 52 of the Trade Practices Act and s 56 of the Fair Trading Act, or were in breach of their duty to them, in not communicating the addenda to the owners.
The owners of the relevant land were a Mr O’Callahan and a Mr Woods. In essence, the plaintiffs plead that as a result of the misleading conduct of the defendants:
28.6 The first plaintiff lost the opportunity of Woods, or alternatively Woods and O’Callahan accepting all the terms of its offer;
28.7 The first plaintiff lost the opportunity to purchase, subdivide, develop and sell the land for residential housing purposes; and
28.8 The second plaintiff lost the opportunity of entering into contracts with the purchasers of allotments for the construction of residential dwellings thereon and/or constructing and owning a retirement village on the land comprising independent living dwellings and community facilities.
I have not set out all of the statement of claim relating to the nature of the alleged loss sustained by the plaintiffs. The subparagraphs referred to above and paragraph 29 of the further amended statement of claim which raise similar assertions, form the basis of the present application for further and better discovery.
At the hearing of the application Mr Cox appeared for the plaintiffs and Mr J White for the third and fourth defendants.
The plaintiffs relied upon the affidavit of Mr L G Walsh, the plaintiffs’ solicitor, sworn on 19 May 2009 (FDN 60). In addition I received as Exhibit P1, de bene esse, part of the report of Mr P V Jorgensen who had been retained by the plaintiffs to provide a report in relation to the quantum of the plaintiffs’ damages. The parts of the report were tendered not so much as evidence but as an explanation of the way in which at trial the plaintiffs intend to prove their loss. Having heard the argument on the application by both counsel, I think it appropriate to confirm my conditional admission of parts of the report as Exhibit P1 because a more detailed understanding of how the plaintiffs intend to prove their alleged loss has assisted with my understanding as to why the plaintiffs contend that the further and better discovery sought should be provided.
I will refer to the third and fourth defendants as the defendants. They did not adduce any evidence on the application.
The application is based on the 1987 Supreme Court Rules – RR 58.04(e) and 58A.04. It is necessary to examine the interrelationship of the two Rules.
Rule 58.04 is as follows:
58.04 The Court may on application for discovery made at any stage of the proceedings:
…..
(e)Further and better discovery where it appears to a Court that there are grounds for a belief that some document or class of documents relating to any matter in question in the proceedings may be or may have been in possession, custody or power of a party, order that party:
(i)to file an affidavit stating whether that document, or any of that class, is or has been in his possession, custody or power and, if it has been but is not presently, to state when he parted with it and what has become of it;
(ii)to deliver the affidavit to any other party.
The leading case relating to the way in which Rule 58.04(e) is to be applied is Mulley v Manifold (1959) 103 CLR 341. Since 6 April 2000, when Rule 58A came into effect, the underlying test for discoverability has been that the documentation must be directly relevant to the issues in the proceedings except where the Court, in the interests of justice, orders to the contrary (Rule 58A.04(1)).
An application based on R 58.04 is for further and better discovery. It has three aspects: first, it must appear to the Court that there are grounds for a belief that the documents sought exist; second, that the documents are directly relevant to an issue arising on the pleadings (or indirectly relevant where R 58A.04(1) applies); and third, that such documentation is or has been in the custody, possession or power of the respondent to the application. If the applicant establishes the grounds for belief, the next part of the inquiry is whether or not the relevant documentation is directly relevant (or, in the appropriate case, indirectly relevant) to the issues in the proceedings.
Where, as in this case, the existence of the documentation is not in dispute, and the respondent to the application has or has had the documents in their custody, possession or power, an applicant need not have recourse to R 58.04 because R 58A.04 is sufficient. As explained by Doyle CJ in Rehn v AFL & Ors (2003) 227 LSJS 378 at [2] and [21], the ambit of discovery is restricted to directly relevant documents (R 58A.3) unless, under R 58A04(1) it is in the interests of justice that indirectly relevant documents be discovered.
Mr White conceded that documentation of the type sought by the plaintiffs’ amended application was in existence and within the custody, possession or power of the defendants or either of them. Consequently, it i only necessary to deal with the question of the relevance of the documentation to the issues raised in the proceedings. Whilst I accept Mr White’s submission that the nature and extent of the issues in respect of which discovery is sought is to be ascertained from the pleadings, there is no reason why that the Court should not take into account the way in which, evidentially, the quantum of the plaintiff’s alleged loss is to be established. It is for this reason that I have confirmed the admissibility of Exhibit P1.
Although the defendants have not yet filed a defence to the further amended statement of claim, it is clear from the previous defence that they deny the allegations as to loss made by the plaintiffs. Consequently, the question of whether or not the plaintiffs or either of them have suffered loss as a result of the conduct of the defendants is very much in issue.
It was also apparent from Mr Cox’s submissions and Mr Jorgensen’s report that the plaintiffs were not seeking to establish their loss by reference to the profits made by Kentia resulting from the acquisition and development of the subject land. Rather, the measure of the plaintiffs’ alleged losses is what profits they each would have derived had Messrs O’Callahan and Woods sold the land in its broadacre form to the first plaintiff. As I understand it, Kentia derived most of the profit by selling vacant allotments, whereas the plaintiffs would have sold the allotments with residences constructed on most if not all of the allotments.
This conclusion has an important bearing upon the application. It seems to me that if the plaintiffs had sought to prove their loss by reference to the profits made by Kentia, the documents sought in this application would be directly relevant to the issue of damages raised in the statement of claim. However, given that the plaintiffs claim damages commensurate with the profit they would have derived had they developed and marketed the properties in the manner just referred to, the documents sought can, at best, only be indirectly relevant to the issue of damages. In arriving at that conclusion I have taken into account what was said by the Chief Justice in Rehn’s case (at [28]) where his Honour said:
In the case of an injured worker claiming damages from the worker’s employer, the employer’s records of payments to the worker who replaced the injured worker, or the record of payments to a worker doing the same work, would in my opinion be directly relevant to the issue of the injured worker’s earning capacity but for the injury. On the other hand, the employer’s record of payments to workers doing merely similar work, or records of payments to workers doing different work, but work which the plaintiff might have done apart from the injury, I would regard as indirectly relevant to the issue of the worker’s loss of earning capacity. The latter category of documents would arguably provide relevant material in valuing the lost earning capacity, and might help to provide upper and lower limits to the value of that capacity. But, it seems to me, such material can fairly be regarded as indirectly relevant rather than as directly relevant.
That reasoning is applicable to this case. It forms the basis of my conclusion that, where the plaintiffs intend to prove loss by reference to the way in which they would have marketed and sold the completed subdivision, a documentation relating to the way in which the development was actually marketed and sold can only be indirectly relevant.
Thus, the matter for determination on this application is whether or not it is in the interests of justice that an order be made compelling the defendants to give discovery of the documents referred to in the amended application.
In Rehn’s case, the Chief Justice referred at [22] to the limited scope of discovery, since the introduction of Rule 58A.03, being acceptable because full discovery, under the old case law, required a costs expenditure which “was disproportionate to the contribution the discovery process made to the just and efficient disposition of civil litigation”. He had to consider whether or not it was in the interests of justice for an order to be made requiring discovery of documentation which he considered to be only indirectly relevant.
The Chief Justice observed that “[m]atters relevant to the interests of justice will vary from case to case” (at [36]). He considered the assistance that the discovery of such documentation would provide to the applicant. He observed that in the case before him the provision of such discovery was an efficient way of collecting relevant information.
There was in Rehn’s case as in this case, no evidence that discovery of the documentation was onerous or would involve significant expense.
At [43] the Chief Justice referred to the discovery providing information to the applicant which would assist the Court in assessing that aspect of the applicant’s claim. In my opinion, that factor is material to this case.
I am mindful that where a litigant asks the Court to make an order for discovery beyond documentation which is directly relevant, the Court should preserve the distinction between the two types of discovery. In other words, it would be counter-productive to order discovery of indirectly relevant documents to the extent that the purpose of the Rules in restricting discovery to the provision of directly relevant documents was undermined.
I have also considered the effect that an order or the refusal of an order in relation to discovery of indirectly relevant documents might have upon the trial of the matter. In my opinion, there is a reasonable possibility that if an order for discovery of the documents sought is not made at this stage, matters may arise during the course of the trial which might interrupt the trial process to a greater or lesser degree. In other words, if there is cross-examination, of either the plaintiffs’ or the defendants’ witnesses concerning the way in which the properties were actually marketed by Kentia, the lack of access to relevant documentation may require a temporary interruption of the trial. This is a factor which I think should be taken into account.
When considering the extent of the discovery sought, the fact that discovery of same would be neither an onerous nor an expensive task, the usefulness of the information to the plaintiffs and the contribution to an orderly trial present discovery would make, I think it appropriate to make an order for discovery as sought pursuant to Rule 58A.04(1) because I am of the view that it is in the interests of justice to do so.
I will hear the parties as to costs.