Kestral Trading Pty Ltd v Montano Corp Pty Ltd

[2003] FCA 1391

FEDERAL COURT OF AUSTRALIA

Kestral Trading Pty Ltd v Montano Corp Pty Ltd
[2003] FCA 1391

KESTRAL TRADING PTY LTD & ORS v MONTANO CORP PTY LTD & ANOR
N 1251 OF 2002

WHITLAM J
8 JULY 2003
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1251 OF 2002

BETWEEN:

KESTRAL TRADING PTY LTD
FIRST APPLICANT

ADAM JOHN HENNESSY
SECOND APPLICANT

CELIA MARY HENNESSY
THIRD APPLICANT

AND:

MONTANO CORP PTY LTD
FIRST RESPONDENT

PETER MONTANO
SECOND RESPONDENT

JUDGE:

WHITLAM J

DATE OF ORDER:

8 JULY 2003

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1. The first and second respondents give discovery with respect to categories 1 to 18 in the letter dated 27 May 2003 from the solicitors for the applicants to the solicitors for the respondents by filing and serving an affidavit by 25 July 2003.
2. The respondents pay the applicants’ costs of the applicants’ motion, notice of which was filed 11  June 2003.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1251 OF 2002

BETWEEN:

KESTRAL TRADING PTY LTD
FIRST APPLICANT

ADAM JOHN HENNESSY
SECOND APPLICANT

CELIA MARY HENNESSY
THIRD APPLICANT

AND:

MONTANO CORP PTY LTD
FIRST RESPONDENT

PETER MONTANO
SECOND RESPONDENT

JUDGE:	WHITLAM J
DATE:	8 JULY 2003
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. This is an motion, notice of which was given on 11 June 2003, in relation to discovery by the respondents.  The motion relates to an action for damages and other relief under the Trade Practices Act 1974 (Cth) (‘the Act’) in which it is alleged that there have been various contraventions of the Act with respect to the purchase by the first applicant of a real estate business from the first respondent in Sydney and its operation pursuant to a franchise agreement.

2. The second and third applicants are the directors of the first applicant and the second respondent is the director of the first respondent.  The second applicant also alleges that he is a former employee of the first respondent and asserts a claim for breach of contract of employment.  The respondent admits the agreement as to the purchase of the business and little else.  The pleadings have closed.

3. In this matter, leave was granted to the parties to file and serve notices of discovery.  The applicants and respondents filed such notices on 26 February 2003 and 4 March 2003 respectively.  The applicants purported to give discovery by filing a list of documents on 2 April 2003 and the respondents did likewise on 6 May 2003.  The application before the Court seeks an order that ‘the first and second respondents give discovery of all relevant documents by 20 June 2003’.  Of course, that obligation is already in existence pursuant to the notice given under leave already granted.

4. The immediate background to this motion emerges from the course of correspondence between the parties.  In a letter dated 27 May 2003 the applicants’ solicitors sought discovery by reference to eighteen numbered categories that were set out.  There has been further correspondence between the parties in the period between notice of the applicants’ motion and the hearing today.  The applicants, in order to get their evidence ready, requested that the respondents provide at least a minimal amount of discovery by reference to three refined categories set out in a letter to the respondents dated 24 June 2003.  The respondents have not complied with that request.

5. Ms Ronalds, counsel for the applicants, has drawn my attention to the provisions of the Franchising Code of Conduct (‘the Code’). The applicants allege that the respondents have contravened the Code and have therefore contravened s 51AD of the Act and seek damages in respect of such breaches. In particular, the applicants allege that the respondents have breached clause 9 of the Code which imposes disclosure obligations upon a franchisor in relation to franchisees and prospective franchisees. Under clause 9, a franchisor must disclose the information contained in Annexure 1 to the Code. The categories of discovery contained in the applicants’ letter of 27 May 2003 emerge from Annexure 1 to the Code.

6. Mr Mendel, counsel for the respondents, opposed the order for what is effectively particular discovery on the basis that the respondents had in fact admitted to not giving disclosure pursuant to the Code.  Therefore, the respondents submitted, the pleadings confined the issues in such a way as to make the categories sought by the applicants irrelevant to the matters in dispute in these proceedings.  Regrettably however, counsel overstated his clients’ position.  The respondents, in their defence, make a wholesale denial of contravention of the Code.  Plainly, on the pleadings, the documents sought to be discovered are on any view relevant.

7. Mr Mendel accepted that he had rather overstated the position.  He then sought an adjournment of the motion on the basis that he would be able to obtain instructions to amend the defence in a way that brought the pleadings into line with the position as he had first represented it.  However, that application has no attraction to me for the following reasons.  First, the motion has been specially fixed for today.  More importantly, it seems to me that the relevance of these documents will not disappear in relation to the allegations of contravention of the Code even if such an admission were in fact made.  The consequence of the contravention, if there be one, requires that these matters be agitated in order to determine the damages and other consequences resulting from the contravention.

8. Having regard to all the circumstances, in my opinion the applicants have made out their case for the order of particular discovery.  Accordingly, pursuant to O 15 r 8 of the Federal Court Rules, the first and second respondents are to give discovery of the categories of documents identified in items 1 to 18 of the letter dated 27 May 2003 from the applicants’ solicitors to the respondents’ solicitors by filing and serving an affidavit on or before 25 July 2003.  The respondents are to pay the applicants’ costs of the motion, notice of which was filed 11 June 2003.

I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Whitlam.

Associate:

Dated:             28 November 2003

Counsel for the Applicant:	C A Ronalds
Solicitors for the Applicant:	John M Fitzgerald & Associates
Counsel for the Respondent:	J S Mendel
Solicitors for the Respondent:	Egisto Solicitors
Date of Hearing:	8 July 2003
Date of Judgment:	8 July 2003