Koal P/L T/a Natbio Solutions v Ladewig

[2006] QDC 370

[2006] QDC 370

DISTRICT COURT

CIVIL JURISDICTION

JUDGE KINGHAM

No 584 of 2005

KOAL PTY LTD TRADING AS NATBIO SOLUTIONS ABN 80 075 989 178	Plaintiff
and
RAY LADEWIG AND THELMA LADEWIG	Defendants

BRISBANE

..DATE 13/10/2006

JUDGMENT

HER HONOUR:  Mr and Mrs Ladewig entered into a contract to sell ginger to Koal Proprietary Limited.  They agreed the ginger should exceed 1200 units on a zero to 2500 scale of suitability.  Koal is suing the Ladewigs for a $50,000 deposit paid to secure the ginger supply.  The Ladewigs have counterclaimed damages.

The Ladewigs asked Koal to disclose documents relating to the scale and to the testing undertaken to determine whether the ginger supplied met that scale.  Koal did not dispute that it possesses documents of the nature sought.  In correspondence Koal's objection related primarily to the commercially sensitive nature of documents regarding the scale.  Before me Koal objected to production on the grounds of relevance.  If I find against the company on that point its counsel asked for the opportunity to make submissions on the form of the order for disclosure and measures required to protect any commercially sensitive material.

Koal say the matter is ready for trial.  The Ladewigs' solicitors have not signed the certificate of readiness because of the dispute about disclosure.  Koal's solicitors have asked for the matter to be set down for trial regardless.  The issues before me then are should the documents be disclosed and should the matter be set down for trial.

In relation to whether the documents should be disclosed the primary issue is are the documents relevant. Koal's counsel said the documents are not relevant because the effect of the Ladewigs' pleading is that they admit that the ginger did not meet the contractual standard. Documents tending to prove or disprove that allegation are, it is said, therefore irrelevant. Koal's counsel said the admission arises from the form of the defence and the application of Rules 166(4) and (5) of the Uniform Civil Procedure Rules.

Rule 166(4) requires a denial or non-admission in the pleading to be accompanied by a direct explanation of the party's belief that the allegation is untrue or cannot be admitted.  If it is not, Rule 166(5) provides that the party is taken to have admitted the allegation. 

Koal's counsel said that paragraph 4 of the Ladewigs' defence does not contain a direct explanation of their belief that the allegation that the ginger did not meet the contractual standard is untrue.  He conceded this could be cured by amendment of the defence to withdraw the admission but asked for the opportunity to be further heard if I considered an amendment was necessary.

The Ladewigs say that on a fair reading of their defence they have given a direct explanation of their belief that the allegation is untrue.  The paragraphs in the statement of claim and defence of primary relevance are these: 

-Statement of Claim, paragraph 5:  In breach of the agreement the defendants have failed to supply ginger to the plaintiff to the standard required by agreement or at all.

-Defence, paragraph 4:  As to paragraph 5 the defendants deny that they have failed to supply ginger to the plaintiff to the standard required by the agreement or at all.  The defendants say they were at all times ready, willing and able to supply ginger to the plaintiff, however the plaintiff was not in a position to accept delivery of the product from the defendants.

There is a clear denial of the composite allegation, and the composite allegation is this:  that the Ladewigs failed to supply ginger that met the standard required and that the Ladewigs failed to supply ginger at all.  Koal accepts the one denial of the two allegations but seeks to sever the following explanation and say it applies only to the second allegation and not to the first.  I do not accept that is a fair reading of the pleading.  It could certainly have been made explicit that the ginger the Ladewigs were ready, willing and able to supply was ginger that met the standard required.  However, I consider that is implicit when paragraph 4 is read as a whole and not severed as requested or as urged by Koal's counsel.

In applying the rule to this pleading I have borne in mind the function of pleadings and the mischief the rule was designed to remedy.  The function of pleadings is to state clearly the case that must be met as a matter of procedural fairness.  Rule 166(4) is designed to prevent evasive denials and non-admissions.  The Ladewigs' denial and explanation is not so specious as to amount to no explanation at all.  The quality of the ginger is clearly placed in issue.  On a fair reading the Ladewigs have clearly enough pleaded their case that they sought to supply ginger that met the standard but the plaintiff was not in a position to take delivery of it.  That Koal's solicitors were in no doubt about that is evident from the lengthy correspondence between them which proceeded on that assumption.

The statement of claim pleads only that the Ladewigs failed to supply the ginger to the required standard.  Koal's reply to the Ladewigs' counterclaim does not take the allegation much further.  In paragraph 3 of the counterclaim Koal pleaded the standard was not met in July and August, and that the Ladewigs' ginger did not meet the standard until November.  On its face the scale referred to in the contract does not specify what criteria are used to allocate points on the scale. 

Given this, their allegation the ginger did not meet the standard or did not do so before a certain month, is so vague as to be incapable of a detailed response.  The Ladewigs are not required to say how the ginger met the standard.  Indeed it is hard to conceive how they could do so on the basis of the information at their disposal.  This is why they seek disclosure.  Koal has already disclosed some documents, the results of the analysis.  They, likewise, do not of themselves reveal in what way the ginger did not meet the contractual standard, just that they did not reach the necessary point on the scale.  The Ladewigs are not entitled to, and have not sought, documents that demonstrate how the scale was devised or developed.  The Ladewigs have sought, and by Rule 223 are entitled to, an order that Koal disclose any documents it possesses which:

1. demonstrate the criteria used to allocate points on the scale used to set the contractual standard; and

1. tend to prove or disprove that ginger the Ladewigs supplied or sought to supply did not meet that standard.

It is not to the point that a third party such as a laboratory that analysed the ginger may possess such documents.  It is a matter for the Ladewigs whether they choose to take that path.  Koal has an obligation to disclose all documents tending to prove or disprove a fact in issue, in this case the quality of the ginger the Ladewigs supplied or sought to supply. 

That leaves the second matter, should the matter be set down for trial.  Given my conclusion on the application for disclosure it follows that I do not consider it appropriate at this stage to set the matter down for trial.  I indicated to Koal's counsel that he would have the opportunity to make further submissions on the scope for, and confidentiality requirements of, a disclosure order.  I consider the appropriate course is to adjourn the matter to Friday the 20th of October to allow the parties to discuss the terms of an order that conforms with these reasons, provides appropriate protection for any commercially sensitive material and deals with the costs of these applications.  If the parties cannot reach agreement on those terms they have leave to provide me with written submissions by 4 p.m. on that day.

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