Leigh-Mardon Pty Ltd v Titan Corp Ltd
[1996] FCA 319
•19 Apr 1996
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY No VG 346 of 1993
GENERAL DIVISION
B E T W E E N :
LEIGH-MARDON PTY LTD
Applicant
A N D :
TITAN CORPORATION LTD AND OTHERS
Respondents
COURT: NORTHROP J
PLACE: MELBOURNE
DATE: 19 APRIL 1996
REASONS FOR JUDGMENT
This is the return of a motion on notice brought under Order 15A rule 8 of the Federal Court Rules by the respondents seeking third party discovery against the Commonwealth Bank of Australia. The general principles to be applied in determining motions of this kind are not in dispute. They are discussed by Kaye J in Keverous Pty Limited v Capital Building Society and Others, unreported 8 February 1988. The views expressed there were accepted with one qualification and applied by Burchett J of this Court in Richardson Pacific Limited v Fielding and Others (1990) 26 FCR 188. I do not need to repeat all those general principles but it is interesting to note that Burchett J took the view that, provided there was a need for third party discovery, the discovery should be as wide as is necessary to satisfy the particular circumstances of the matter before the Court. Reference is made to what his Honour said at page 189.
"It is said that the Court has traditionally adopted a policy of not burdening unduly a non-party to litigation in a manner comparable with a burden which is necessarily assumed by a party. As a generalisation this is true. It is then said that this policy would bar a general order for discovery by a third party not containing a quite precise specification of the documents to be discovered. While in many situations I accept that this represents a correct view of the approach which should be taken indications to the contrary being absent it should be pointed out that a purpose of Order 15A is quite expressly to enable discovery to be obtained in some case where anything less than the broad obligations imposed by an order for discovery would simply not meet the case".
The facts of this case, in my opinion, come very much within that expression of opinion by Burchett J. I do not need to go into any detail about those special circumstances except to say that from the way the case has developed, what is in issue between the parties involves a large number of contracts which had been entered into between one or other of respondents on the one hand, referred to in these reasons as Keydata, and clients of Keydata on the other. In this case the Commonwealth Bank of Australia is the client in relation to the provision of a service by Keydata for entering data into computer programs to assist the client in the conduct of its business. Subsequently the present applicant purchased the business of the respondents and is now seeking damages for breach of section 52 of the Trade Practices Act and other causes of action based on the proposition that the contracts entered into between the respondents and their clients was to charge a certain rate per thousand keystrokes, but in fact the respondents overcharged those clients by charging not on keystroke depressions but on outputs. The issue is whether the respondents were in breach of their contract with, among others, the Commonwealth Bank of Australia, in overcharging, thereby grossly inflating their profits which formed the basis of the sale price to the applicant. So in truth, as far as the present motion is concerned, what is really involved is an action that would normally have arisen between the Commonwealth Bank of Australia and the respondent on the basis that the Commonwealth Bank of Australia had claimed damages for breach of contract by overcharging under the contract entered into between Keydata and the Commonwealth Bank.
In the present case it is said in the statement of claim, that the contract between the Commonwealth Bank and Keydata is a contract in writing consisting of two letters in April 1990. It is alleged that it was a term of that agreement in writing that the charge would be so much per 1000 keystrokes depressed. Although no defence has yet been filed to this amended statement of claim, it is quite clear that the issue between the parties is whether the terms of the agreement in this contract related to keystrokes depressed or keystrokes per output. There is nothing in the letters referring to the words "keystrokes depressed" in that sense.
There is also an issue arising as to whether the applicants relied upon any misrepresentation by Keydata, particularly in the case of the Commonwealth Bank where it is said that the Managing Director of the Commonwealth Bank was a Director of the parent company of the applicant at all relevant times. Further, there is a suggestion in material already discovered that the Managing Director might have known of the allegation of over-charging before the contract of sale was entered into between the applicant and Keydata. It must be remembered, however, that a defence has not yet been filed to the amendment statement of claim.
One of the complaints made by the Commonwealth Bank is that, in the absence of a defence, the real issues have not yet been identified by the pleadings. Therefore, it is said that it is premature to have third party discovery. At the same time it is said on behalf of Keydata that discovery here is necessary because of the need to know what the position is before the defence is finally formulated, and also to assist in the preparing of a defence to, in effect, make some positive allegation rather than relying upon a mere denial that the written agreement did not include the term "keystrokes depressed".
With that background information, which was intended to be brief but was longer than I had hoped, one comes to the question of the particular discovery being sought. I have regard to the fact that here there are peculiar, in the sense of special, circumstances of the kind mentioned arising in proceedings in which the Commonwealth Bank is not a party, but in a practical sense is. It has also been put on behalf of the Commonwealth Bank that many of the documents which may be the subject of discovery here would have been in the possession of Keydata at appropriate times but have since been given to the applicant and would be subject to discovery by the applicant, and that full discovery has not yet been completed in regard to all those documents. It should be noted that some of those documents may still be in the possession of other persons, including various Police Forces and possibly Security Commission people. But, in any event, it is said that these documents could be obtained by ordinary discovery from the applicant and it is premature to give third party discovery at this stage before the normal discovery processes have been completed as between the parties.
The motion for the third party discovery sets out the classes of documents which are being sought. Looking at them, it is apparent that very wide-ranging discovery is being sought. On its face the request could easily be mistaken as being oppressive and not appropriate, particularly having regard to the stage of the proceedings that have been reached. In support of the motion, the affidavit sworn by Stephen Newman, on its face, satisfies the conditions precedent to the making of the third party discovery where requests have been made for discovery and refused, and also expressions of opinion have been expressed as to the need for the discovery sought. The motion also makes it clear that, if discovery is ordered, Keydata agrees to pay the reasonable costs of the Commonwealth Bank of Australia on a solicitor/client basis, including the cost of the motion itself and the cost of complying with the discovery being sought. This is an order which is normally made in cases of this kind, but Keydata has expressly indicated that it will agree to such an order.
I turn then to consider the particular discovery sought in the light of what has been said. The first group of documents relate to documents leading up to the agreement between the Commonwealth Bank and Keydata directed to diary notes, memoranda, reports, minutes and correspondence relating to the reasons for deciding in or about 1989, that is before the contract in 1990, to hire an outside contractor to process its key-to-disk data entry work instead of performing those functions in-house apparently as it had done previously. It is important to note here the process is described as key-to-disk data entry work which illustrates the type of activity the subject of the agreement entered into between the Bank and Keydata. The whole of paragraphs (a), (i), (ii), (iii), (iv) and (v), are directed to matters of that kind.
For instance, paragraph (ii) refers to the request or requests to tender for that key-to-disk data entry work, including in (iii) the proposals or tenders lodged with the Bank by all tenderers for the 1989 tender, analyses in (iv) of work performed internally, and (v), reasons for selecting Keydata as the successful tenderer of the 1989 tender.
It is argued in support that these are all necessary in order to enable the respondent to support its contention that in the agreement the word "keystroke" has a meaning which relates to output per keystroke and not merely keystroke depressed. This, as I understand it, will be a key issue in the whole of this case. What is being sought is documentation that was in existence at the relevant times which might lead to evidence to support the allegation of the respondents.
At one stage in the course of submissions I had grave doubts as to whether the requirement to give discovery of other proposals lodged by all tenderers to the CBA would come within this category, but on reflection and on further submissions I am satisfied it is a relevant matter, going to the issue of the meaning to be given to the word keystroke in this area, particularly the key-to-disk data entry work in which it is easy to foresee a new and growing industry, and questions arising as to what is included within that phrase.
Despite the fact that these days there is a tendency to restrict discovery and to depart from the earlier view that discovery should be such as to require production of any document, even though not directly relevant, that might lead to a further line of inquiry as being relevant and that that wide type of discovery is being limited from time to time, in my opinion, having regard to the peculiar nature of this case, this is a case where the Commonwealth Bank should be required to give discovery as set out in paragraph 1(a) of the motion.
Paragraph (b) comes within the same category, although in some respects it is of historical interest only. For similar reasons as those given it is relevant having regard to the defences raised as to the meaning of the word "keystroke".
Paragraphs (c) to (g) deal with a different matter. They go to matters related to the performance by Keydata of its contractual obligations to the Commonwealth Bank, particularly in relation to the pricing and the charges rendered by Keydata to the Bank. Again, on its face, these appear to be extremely wide requirements for discovery. Going back to the period of July 1988 to 30 April 1990, it being remembered that the contract itself was only entered into in 1990. This is illustrated by paragraph (c):
"Any diary note, memorandum, report, minute, computer print-out, correspondence, and the like, falling within the period 1 January 1988 to 30 April 1990, which records the CBA's analysis of the cost of and benefit of the in-house revision to the CBA of its key to disk data entry work."
Having regard to the nature of the issues between the parties to the application, this could be a source of information as to the meaning of the word "keystroke" in this industry. Because of this, in my opinion, there should be discovery as far as (c) is concerned also.
Paragraph (d), to some extent, goes to a slightly different issue.
"Any document relating to statistics maintained or imported to Keydata to the CBA pursuant to the agreement, for the provision of the data entry services between CBA and Keydata made April 1990, and the extension therefore made in or about May 1992."
This is conduct subsequent to the 1990 agreement. The way it is put on behalf of counsel for Keydata, is that this is necessary to indicate that the question of the charging was not in dispute. There may well be material in the records of the Bank which support the view that this was accepted because of the meaning to be given to "keystroke" as including output. Some of this material may be in the possession of the applicant, or have been in the possession of the applicant, but nevertheless, as between the Bank and Keydata, in my opinion, it is necessary for Keydata to be able to ascertain what records the Commonwealth Bank has in this regard.
The same can be said, in my opinion, of the whole of paragraphs (e), (f) and (g). There are variations between them, but for reasons similar to those I have expressed they should be made the subject of discovery.
Paragraph (h) is directed to the issue of reliance and here minutes or notes of the meeting referred to in paragraph (h) have been discovered by the applicant. The paragraph is seeking notes, memorandum, etc. in relation to a meeting held on 29 April 1994, that is after the application in this matter had been issued in 1993, attended by officers of the Commonwealth Bank and by officers of Keydata. The minutes, apparently which have been kept by Keydata, have been in the
possession of the applicant and have been discovered. Despite the submissions made on behalf of Keydata, that it is necessary to see what additional documents are in possession the Commonwealth Bank, in my opinion this is one case where there should not be any discovery by the Bank.
Paragraph (i) refers to documents in relation to the decision by the Commonwealth Bank not to renew the contract with Keydata in 1993, but to perform that function in-house, and the reasons for so deciding. This, in my opinion, can be of importance as far as discovery is concerned because it may well be that references are made in these documents to the meaning of "keystroke", particularly if expenditure and cost is a relevant consideration. Accordingly, I will include (i) in the order to be made.
I then turn to paragraph (k) before dealing with (j). Paragraph (k) is any diary note, memorandum, etcetera, relating to any refund given to the CBA by the applicant in respect of data entry services provided to the CBA by Keydata and the reasons for the giving of any such refund.
This is discussed in the affidavit of Mr Newman in paragraph (d) and it shows that apparently the applicant has made certain offers to the customers of Keydata in relation to charges previously rendered by Keydata to them. This was contained in a proforma letter which relates to the credit memoranda although there is no reference to any specific addressee or the amount and matters of that kind. Again, this is an area where it may be important to find out what is said about the charges and whether they do throw light on the meaning to be given to the word "keystrokes" as whether depressed or output and I include (k).
Paragraph (j) of the motion is another paragraph which has given me much concern. In (j) there are a number of sub-paragraphs all of which relate to the period 1 January 1993 to the date of the discovery and relate to records in dealings or communications by and between CBA and any police force, between CBA, including its chairman, Mr Besley, regarding allegations of overcharging made against Keydata and the police force, any regulatory authority, or the Commonwealth Auditor-General and also in relation to AMCOR, Containers Limited or the applicant regarding the allegations of overcharging and matters of that kind. I do not need to go through paragraphs 4 and 5 but they are all of a similar nature. I have formed the view that although it is admitted that these documents may well give rise to information which could lead to a clarification of the meaning to be given to "keystrokes", at this stage and having regard particularly to the pleadings and despite what I said earlier as to the need for the respondents to have discovery before pleading its defence to the amended statement of claim, in my opinion, it is premature to make any order in the nature of paragraph (j) in the motion at this stage.
This does not mean that at some time in the future further discovery should not be given if there is further material to support the view that it is necessary to enable the Court to determine the matter fairly as between the parties and discovery is necessary to enable Keydata to present its case in a proper manner.
In all the circumstances then the Court makes orders on the motion as noted but the question of the time this is to be done is relevant. The motion seeks a period of five days, and I think that is too short.
Further submissions were made with respect to paragraph (j). I do not propose to change my mind. I was in error when I referred to "keystroke". Paragraph (j) goes to the question of reliance. At this stage, without having heard any further evidence, I will not change my mind. At the same time I will leave it open to Keydata to move at a later stage if so desired, on further material.
The court makes the following orders that:
On or before 3 May 1996 the Commonwealth Bank of Australia ("CBA") make, file and serve on the Respondents a List of Documents which includes the following documents:
(a)Any diary note, memorandum, report, minute, correspondence and the like relating to:
(i)the CBA's reasons for deciding in or about 1989 to hire an outside contractor to process its key-to-disc data entry work instead of continuing to perform such functions in-house;
(ii)the request or requests to tender for the CBA's key-to-disc data entry work made by the CBA in or about 1989 ("the 1989 tender");
(iii)the proposals ("tenders") lodged with the CBA by all tenderers for the 1989 tender;
(iv)the CBA's analysis, whether performed internally or by an external organization, of the proposals (tenders) referred to in sub-paragraph (iii); and
(v)the CBA's reasons for selecting Keydata as the successful tenderer of the 1989 tender.
(b)Any diary note, memorandum, report, minute, correspondence and the like relating to the CBA's request that tenderers for the 1989 tender quote their prices on a thousand keystrokes per hour rate.
(c)Any diary note, memorandum, report, minute, computer printout, correspondence and the like falling within the period 1 January 1988 to 30 April 1990 which records the CBA's analysis of the cost of and benefit of the in-house provision to the CBA of its key-to-disc data entry work;
(d)Any document relating to statistics maintained and reported by Keydata to the CBA pursuant to the Agreement for the provision of data entry services between the CBA and Keydata made in April 1990 ("the 1990 Agreement") and the extension thereof made in or about May 1992 ("the 1992 Extension").
(e)Any diary note, memorandum, report, minute, computer printout, correspondence and the like relating to the CBA's input monitoring results, review of statistics and appraisal of Keydata's input performance undertaken pursuant to the 1990 Agreement and the 1992 Extension and referred to in the letter dated 9 October 1991 from K D Cox, Manager New Systems of the CBA to Mr Bob Archer, Executive Corporate Accounts of Keydata.
(f)Any diary note, memorandum, report, minute, correspondence and the like relating to the CBA's reasons for agreeing to enter into the 1992 Extension.
(g)Any diary note, memorandum, report, minute, computer printout, correspondence and the like falling within the period 1 January 1988 to the date hereof which records the CBA's analysis of the comparative cost of and benefit of the in-house provision to the CBA of its key-to-disc data entry work and the provision of that service by Keydata.
(h)Any diary note, memorandum, report, minute, correspondence and the like relating to:
(i)the CBA's decision made in or about 1993 not to further renew its contract for the provision of data entry services with Keydata but to again perform that function in-house; and
(ii)its reasons therefor.
(i)Any diary note, memorandum, report, minute, computer printout, correspondence and the like relating to any refund given to the CBA by Leigh-Mardon in respect of data entry services provided to the CBA by Keydata or Leigh-Mardon and the reasons for the granting of any such refund.
The respondents pay the reasonable costs on a solicitor-client basis, including reserved costs, of CBA of and incidental to the Notice of Motion dated 29 March 1996 and of complying with paragraph 1 hereof.
The costs of the respondents of the motion and as provided for in paragraph 2 hereof be costs in the cause.
The costs of the applicant of the motion be costs in the cause.
I certify that this and the preceding fifteen (15) pages are a true copy of the Reasons for Judgment of The Honourable Justice R.M. Northrop.
Associate:
Date:
ATTACHMENT
Counsel for the Applicant: Mr R. Robson QC with
N. Lucarelli
Solicitor for the Applicant: Maddock Lonie &
Chisholm
Counsel for the Respondents: Mr P. Hayes QC with
Mrs K. Williams
Solicitor for the Respondents: Jerrard & Stuk
Date of Hearing: 19 April 1996
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