Noble Earth Technologies Pty Ltd v Hampic Pty Ltd trading as Cyndan Chemicals
[2012] NSWSC 935
•16 August 2012
Supreme Court
New South Wales
Medium Neutral Citation: Noble Earth Technologies Pty Ltd v Hampic Pty Ltd trading as Cyndan Chemicals [2012] NSWSC 935 Hearing dates: 7 August 2012 Decision date: 16 August 2012 Jurisdiction: Equity Division Before: Hallen AsJ Decision: (a) The Defendant's notice of motion filed on 19 June 2012 is dismissed.
(b) The decision of Assistant Registrar Musgrave made on 23 May 2012 insofar as it relates to the production to the Plaintiff of the document identified is confirmed but varied as to the documents to be provided.
(c) The Defendant to provide copies of documents, that are or have been in the Defendant's possession which are, or are styled as (whether signed or unsigned, or draft or non-draft) either: contracts, memoranda of understanding, purchase orders, invoices concerning the sale or purchase of the products known as "Visionguard", "Vitroglass" or "Vitroglaze", to which the parties are, or include, Hampic Pty Limited and Emirates Glass LLC or Emirates Glass Ltd, from the date 19 October 2009.
(d) The Defendant to pay the Plaintiff's costs of the notice of motion.
(e) The Plaintiff to pay the Defendant's reasonable costs of complying with order (c) above.
(f) The stay granted by the Assistant Registrar be lifted.
(g) The proceedings will be referred to the Registrar's list on a date suitable to the parties for further directions.
Catchwords: PRACTICE AND PROCEDURE: Review of Registrar's decision under UCPR rule 49.19 on preliminary discovery - principles to apply - nature of review
Preliminary discovery - UCPR rule 5.3 - principles to applyLegislation Cited: Civil Procedure Act 2005
Evidence Act 1995
Uniform Civil Procedure Rules 2005Cases Cited: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170
Al-Shennag v Statewide Roads Pty Limited [2009] NSWSC 210
ASIC v Rich [2004] NSWSC 1089
Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33
Clemett v New South Wales Lotteries Corporation Pty Ltd [2011] NSWSC 121
Dernacourt Investments Pty Ltd, Re (1990) 20 NSWLR 588
Fenwick v Wambo Coal Pty Limited [2011] NSWSC 176
Groeneveld v Wollongong City Council [2009] NSWLEC 149; (2009) 168 LGERA 260
Hatfield v TCN Channel 9 [2010] NSWCA 69; (2010) 77 NSWLR 506
House v R (1936) 55 CLR 499
Lawteal Pty Limited v Ofo [2005] NSWSC 984
Liu v Fairfax Media Publications Pty Ltd [2012] NSWSC 900
Liu v the Age Company [2010] NSWSC 1176
Lollback v Brakepower Pty Ltd [2010] NSWSC 1457
Maser Technology Group Pty Ld v Edmondson [2010] NSWSC 458
McCarthy v Dolpag Pty Ltd [2000] WASCA 106
Moran v Moran (No 3) [2000] NSWSC 151
Morton v Nylex Ltd [2007] NSWSC 562
Perpetual Ltd v Barghachoun [2010] NSWSC 108
Portal Software v Bodsworth [2005] NSWSC 1115
Ryder v Frohlich [2006] NSWSC 1324
Seven Network Ltd v News Ltd [2006] FCA 343
Steffen v ANZ Banking Group [2009] NSWSC 666
Thompson v New South Wales Land and Housing Corporation [2008] NSWSC 74
Tomko v Palasty (No 2) [2007] NSWCA 369; (2007) 71 NSWLR 61
Wentworth v Graham (2002) 55 NSWLR 638
Westpac Banking Corp v Abemond Pty Ltd; Westpac Banking Corp v Cameron (NSWSC, 3 November 1994, unreported)
Wily re LED (South Coast) Pty Ltd [2009] NSWSC 946Category: Principal judgment Parties: Noble Earth Technologies Pty Limited A.C.N. 125 837 103 (Plaintiff)
Hampic Pty Limited trading as Cyndan Chemicals A.C.N. 001 670 097 (Defendant)Representation: Counsel:
Mr C Purdy (Plaintiff)
Mr T Matlz (Defendant)
Solicitors:
Creagh & Creagh Solicitors (Plaintiff)
Swaab Attorneys (Defendant)
File Number(s): 2011/311345
JUDGMENT
The Claims
HIS HONOUR: These are reasons that follow the hearing of a notice of motion, filed on 19 June 2012, by the Defendant, Hampic Pty Limited t/as Cyndan Chemicals, in which it seeks that orders made by Assistant Registrar Musgrave on 23 May 2012 requiring the Defendant to produce to the Court a copy of the signed and executed contract between the Defendant and Emirates Glass Limited ("Emirates Glass") relating to the sale of a product known as "Vitroglass" to Emirates Glass; that the Defendant give discovery of that contract to the Plaintiff; that the order that the Defendant pay the Plaintiff's costs be set aside; and that the stay granted on the same date by the Assistant Registrar be continued until further order. The Defendant also seeks an order that the Plaintiff's amended Summons be dismissed. Finally, it seeks an order that the Plaintiff pay the costs of the notice of motion or, in the alternative, that costs be reserved.
The Plaintiff opposes the grant of any relief to the Defendant. It seeks to "defend the Assistant Registrar's decision as correct". It also seeks a review of his decision not to admit into evidence the material referred to in [12] of the reasons for judgment, which, in effect upheld the Defendant's objection under s 131 Evidence Act 1995, and that the decision be set aside. However, it has not filed a notice of motion seeking that relief and the claim is only found in the Plaintiff's written submissions. The Defendant did not object, on procedural grounds, to me dealing with that matter also.
Practically, it will not be necessary to deal with the matter raised by the Plaintiff, since the affidavit to be read by the Plaintiff on the review application is to be subject to the same objections by the Defendant. Therefore, I must deal with the admissibility of that evidence.
On the hearing of the notice of motion, the evidence read was an affidavit sworn 25 July 2012, by Ruth Mary Polin (on behalf of the Plaintiff), which affidavit, for the most part, repeated what she had stated in her affidavit sworn 26 September 2011, read by the Assistant Registrar; an affidavit sworn 19 June 2012, by Michelle Esther Harpur, to which affidavit was annexed a copy of the reasons for judgment dated 23 May 2012 of the Assistant Registrar; and the affidavit sworn 6 February 2012 by Harry Simon Snow. (Each of the deponents is a solicitor in the firm retained to act for one, or other, of the parties.)
Objections were taken to parts of Ms Polin's affidavit, which objections were to parts of the same paragraphs of her earlier affidavit with which the Assistant Registrar dealt. (In fact, the Defendant's objections were more limited than the objections that were taken to her affidavit read before the Assistant Registrar.) I dealt with the objections to the evidence at the hearing and later shall refer to my reasons for making the rulings that I made.
The Proceedings giving rise to the application before the Assistant Registrar
The Plaintiff's substantive proceedings were commenced by Summons filed on 28 September 2011. The Summons incorrectly named the Defendant. By amended Summons, filed on 23 February 2012, which corrected the name of the Defendant, the Plaintiff sought the following orders:
"(1) That, pursuant to Rule 5.3 of the Uniform Civil Procedure Rules 2005, the defendant produce to the Court a copy of the signed and executed contract between the defendant and Emirates Glass Limited relating to the sale of a product known as "Vitroglass" to Emirates Glass Limited and
(2) That the defendant give discovery of the contract to the plaintiff."
The broad terms of the Plaintiff's allegations are set out in the Assistant Registrar's reasons at [2], as follows:
"2. ... [the Plaintiff] alleges that a director of the plaintiff, Mr Pearsall, entered into discussions with a director of the defendant, Mr Raheb, in connection with the supply of certain products manufactured by the defendant to Emirates Glass Limited. The plaintiff alleges that an agreement thereby came into existence from about August 2009 onwards to pursue a business venture with respect to that sale, although the terms of that agreement were never formalised. In about October 2012, the directors of Emirates Glass visited Sydney to formalise the sale. The plaintiff alleges that the defendant contracted separately with Emirates Glass, that the plaintiff was excluded from financial negotiations and was not a party to the final contract."
(The reference to October 2012 is clearly incorrect and it should refer to October 2009 or perhaps October 2010.)
There was no dispute that what was stated in the reasons, so far as it went, was an accurate summary of the Plaintiff's allegations which were said to found the basis of its claim against the Defendant.
There was, however, a submission made that what was said constituted no more than "mere assertion" on the part of Ms Polin. I shall return to this issue later in these reasons.
The Assistant Registrar's Reasons for Decision
In broad summary, the reasons for the decision were in the following form:
(a) The relief claimed.
(b) The evidence in support of the relief claimed.
(c) The relevant Uniform Civil Procedure Rules 2005 ("UCPR"), rule 5.3, and the requirements of that rule.
(d) The relevant principles relating to UCPR rule 5.3.
(e) The Defendant's application to exclude part of the Plaintiff's evidence.
(f) The bases for the Defendant's application to exclude part of the Plaintiff's evidence.
(g) The decision to exclude part of the Plaintiff's evidence.
(h) The decision whether the requirements of UCPR rule 5.3 had been satisfied.
(i) The order made granting the relief sought by the Plaintiff.
The Evidence on the Review Application
By way of background, the facts, which are not the subject of any dispute, and which form part of the evidence before me, should be noted:
(a) The Plaintiff is an Australian Proprietary Company, limited by shares, which was first registered on 7 June 2007. Its director, secretary and sole shareholder, at all relevant times, was Harry Rex Pearsall.
(b) The Plaintiff developed products for the treatment and cleaning of glass, which it called "Vision Guard", as well as other products known as "Kristalbond" and "Vitroglass", all of which were manufactured using, as far as possible, environmentally friendly ingredients and processes. These products are different in name, composition, and use.
(c) The Defendant is also an Australian Proprietary Company, limited by shares, which was first registered on 10 January 1979.
(d) As at April 2009, the Defendant's directors were Michael Snounou and Sammy George Raheb. (As will be seen, Mr Raheb was involved in the dealings between the Plaintiff and the Defendant.)
(e) The Defendant trades under the name, "Cyndan Chemicals". It is a manufacturer of a broad range of chemical products.
(f) In about August 2009, Mr Pearsall contacted Mr Raheb to discuss the potential sale of the products "Vision Guard" and "Kristalbond" to Emirates Glass, a company based in Dubai, in the United Arab Emirates.
(g) Barry Schwind is a businessman with extensive contacts in Dubai. He was to be involved in the business relationship that was being proposed between the Plaintiff and the Defendant.
(h) On 4 September 2009, Mr Pearsall and Mr Raheb attended a meeting on the Gold Coast with Mr Schwind. Subsequently, on 25 September 2009, the three of them travelled to Dubai and attended meetings with Emirates Glass and other organisations, at which "Vision Guard" and other products were presented and demonstrated.
(i) There is email correspondence passing between various persons involved in each of the parties relating to discussions between them. On occasions, a copy of an email was forwarded to Mr Schwind.
(j) There is also other email correspondence passing between the Defendant and others that was copied to Mr Pearsall on behalf of the Plaintiff.
The Defendant did not concede that there was a signed and executed contract between the Defendant and Emirates Glass relating to the sale of a product known as "Vitroglass" to Emirates Glass. This was the document that the Assistant Registrar ordered the Defendant to give discovery of to the Plaintiff.
However, during the course of the submissions, counsel for the Defendant, whilst not conceding that the Plaintiff was entitled to discovery of documents, acknowledged that the Defendant held two documents, one of which was an unsigned Memorandum of Understanding between Cyndan Chemicals and Emirates Glass LLC and the other was a Purchase Order, dated 24 November 2011, relating to the supply of three products, namely "Vitroglaze VG", microfibre mits and trigger spray bottles.
It is not necessary to set out the emails to which I have earlier referred passing between Mr Raheb and Mr Pearsall and others. The Defendant accepted that it was necessary for the Court to consider the email correspondence as part of the evidence relied upon by the Plaintiff and to give colour to the broad terms of the Plaintiff's allegations.
I was taken to the details of those emails and have read them carefully.
Evidence the subject of Objection on the Review Application
It is necessary to refer to parts of Ms Polin's affidavit, which were objected to on the application for review. So that the context can be understood, I have highlighted the parts that were objected to.
"...
19. On 22 July 2011 I travelled with Mr. Harry Pearsall to the Defendant's business premises at Warriewood where I met with Mr. Raheb for at least two hours, during which time repeated requests to be shown a copy of the contract were refused. I advised Mr. Raheb at the time that if a copy of the contract was not forthcoming, a Summons for preliminary discovery would be filed with the Court seeking an Order for the discovery of the contract.
20. Mr. Raheb confirmed with me during the course of that meeting that a contract did in fact exist and he was in possession of the contract. Mr. Raheb used words to the effect "I do have the contract and am not prepared to show it to you until after an agreement can be reached". I replied with words to the effect "I don't think I would be in a position to advise my client regarding any possible agreement without sighting the contract".
21. The Plaintiff says that there was an agreement with the Defendant between about August of 2009 onwards to pursue a business venture for the sale of the product to Emirates Glass Limited. Numerous attempts were made during the course of that period to formalize an agreement. A written agreement was not entered into and the Defendant contracted with Emirates Glass Limited separately for the ongoing sale of the product. The Plaintiff was excluded from final negotiations and was not made a party to the contract."
The basis of the claim to reject those paragraphs was a claim for "settlement privilege", which, so it would seem, was based upon the following evidence in Mr Snow's affidavit:
"7. In relation to paragraphs [10]-[12] and Annexure "F" of the Polin Affidavit, I am informed by Mr Raheb that at no time during, or prior to, the meeting which occurred on 22 July 2011 (and not on 22 June 2010 as incorrectly stated in the Polin Affidavit) between Mr Raheb, Ms Polin and Mr Pearsall, did the plaintiff's representatives say anything contrary to the description of the purpose of the meeting articulated in Mr Raheb's email of 14 June 2011 (2nd last paragraph only on page 2 of Annexure "F" to Ms Polin's Affidavit), being that the meeting was an 'off-the-record' (that is, confidential) meeting which was part of an attempt to resolve the dispute between the plaintiff and defendant. At all times, this remained Mr Raheb's understanding.
8. I am informed by Mr Raheb that the character of the meeting was confirmed by words to the following effect being said at the meeting by the following speakers:
I said: "We are 'off the record', so everything we say and discuss can't be used in any way as evidence. This will allow us to talk freely and openly without having to worry about it being used out of context."
Ms Polin said: "That's the pre-requisite I agreed upon for this meeting."
Mr Pearsall said: "Yes, this is 'off the record'."
Mr Snow's evidence was read, on the review, as if it referred to Ms Polin's affidavit of 25 July 2012.
Neither Ms Polin, nor Mr Pearsall, disputed, expressly, the conversation to which Mr Snow refers.
In dealing with the conversations alleged, by each solicitor, and upon the basis that this is an interlocutory application (which the parties agreed that it was), it is necessary to refer to the two emails that preceded the meeting of 22 July 2011.
The first email in time appears to have been sent by Ms Polin to Mr Raheb at 9:54 a.m. on 14 June 2011. Relevantly, it provided:
"As you are aware by now I have read the recent email exchange between yourself and Harry Pearsall. The purpose of the proposed informal meeting was to enable me to familiarize myself with the exact history of the dealings between yourself, your Company and my client to date.
As you are aware I have only very recently been engaged by Mr. Pearsall. There does appear to me, at least at this stage, to be a rather protracted and complicated history concerning both the relationship and negotiations between yourself and Harry (and Barry) that have led to what I believe, was the signing of a contract between your company and Emirates Glass. Harry has not been advised as to the details surrounding the final negotiations leading up to the signing of the contract nor has he seen the contract itself.
Until and unless I am possessed of further information in this regard I am unable to properly advise my client. Instructions to date would indicate that lengthy and difficult negotiations between Emirates Glass, yourself, Harry and Barry culminated in both Harry and Barry being left out of the "final deal" (In this regard I confirm I act only for Harry.) The reason for requesting a copy of the contract was indeed to allow for fruitful preliminary discussions without recourse to litigation. If indeed I am unable to obtain essential documents or details as to the final negotiations referred to above from you or your Company, I will have no option other than to either issue proceedings - as presently instructed - and either subpoena or obtain a direction from the Court that such essential documents be provided.
I confirm that both Harry and myself are agreeable and indeed seek an informal meeting with yourself in order to appraise ourselves, of what appears to be vital factual information that at this stage, is wholly within your possession. I would tentatively propose such meeting to take place on either: - Wednesday 22nd June or Tuesday 28th of June."
Mr Raheb responded in an email that appears to have been sent by him to Ms Polin at 8:00 p.m. on 14 June 2011, which was in the following terms:
"The purpose of my request for a brief from you was to establish if you had what I would regard to be a good overall understanding of the history of this deal and your comments in regard to whatever legal rights your client is acting on and more importantly, whatever legal obligations it is claimed that Cyndan may not have met.
Further to that I was hoping you would outline, after assessing the information, what specifically your client was seeking and on what legal basis he was doing so.
This once complete would give us a good basis for meeting as we would then not spend the time going over immaterial emails and superseded agreements.
I do appreciate that you have only recently been given this matter to look into. However is your client claiming that Cyndan has not honoured any part of an agreement that they may have had with his company, or has not paid an agreed sum to his company or otherwise? If so I would request that any agreements or evidence of impropriety from Cyndan be provided to me to substantiate any claim (which remains undefined) so I may be prepared to comment on same when we meet.
Any contract that may be in place with Emirates Glass is immaterial at this stage, as it is yet to be established that your client has any rights to any of our company information.
All of the above aside for a moment, you are requesting an informal, off the record setting be organised for general discussion, possibly so that you can witness any exchange of comment from both parties, and then assess if you feel there is a legally valid case that can be brought against Cyndan. If this is what you believe is the best practical way forward I am willing to oblige as no doubt it will save your client substantial initial costs associated with your discovery process and save me time in email responses."
Whether the Evidence objected to should be excluded
The Defendant submitted:
"1. Substantial portions of the plaintiff's evidence should be excluded:
1.1 Settlement privilege: The attempted settlement communications disclosed at paragraphs [18]-[20] (and associated exhibits) and annexure [M] of Ms Polin's revised affidavit are inadmissible. The court will note that the annexed documents themselves make it clear the discussions on the day in question were "off the record" and "informal" discussions in an attempt to resolve a "Contractual Dispute" and a related potential motion for "pre-action discovery"...
1.2 Conclusions: Other than the annexures, the key portion of Ms Polin's affidavit, at paragraph [21] is composed of inadmissible conclusionary statements.
1.3 Discretionary exclusion/weight: To the extent that statements by Ms Polin are said to be 'hearsay', even on the assumption that this proceeding is interlocutory for the purposes of the Evidence Act 1995 (a matter capable of debate), if anything remains of the plaintiff's assertions in the affidavit, they should be given little weight or excluded on a discretionary basis - after all, there was no urgency, the plaintiff ought to have adduced better, broader, and more direct evidence if such evidence existed.
Specific objections
2. Specifically, the defendant objects to these paragraphs:
2.1 Paragraphs [18]-[20] and associated annexures (without prejudice communications);
2.2 Paragraph [21], first two sentences: "The plaintiff says..." and "Numerous attempts...to formalize..." (Bare conclusions without an articulated justification); and
2.3 Paragraph [21], last two sentences "A written agreement..." and "The plaintiff was excluded..." (Bare conclusions with an articulated justification).
3. Finally, the defendant objects to the following annexures: "C" (Relevance, no reference to product identified in orders sought by Summons - See Harry Snow Affidavit 6.2.12 at [4]); "L" (bare assertions by the plaintiff's solicitor, other than the admission there was no concluded agreement); "M" (all as without prejudice communications, alternatively emails by Ms Polin as hearsay and bare conclusions)."
The Plaintiff responded in its submissions:
"...
8. The defendant's objection relied upon the material in paragraphs 7 and 8 of Mr Snow's affidavit sworn 6 February 2012 and the penultimate paragraph of Mr Raheb's email to Ms Polin dated 14 June 2011. At its highest the defendant's objection is that the meeting on 22 July 2011 was "off the record" ie confidential.
9. That, of itself, does not attract the operation of s. 131(1)(a) which requires that the evidence be of a "communication ... made between persons in dispute ... in connection with an attempt to negotiate a settlement of the dispute".
10. Ms Polin's emails to Mr Raheb dated 14 and 20 June 2011, before and after the email relied upon, establish that the plaintiff's professed purpose was investigative rather. She sought a copy of a contract and needed this in order to advise the plaintiff. It is submitted that the evidence does not support the proposition that settlement of a dispute was any more than a possibility at that stage.
11. It is submitted that the evidence of the meeting on 22 July 2011 should have been admitted and regard had to Ms Polin's evidence of Mr Raheb's admission that he "ha(d) the contract"."
Principles relating to Settlement Privilege
UCPR rule 1.9 relevantly provides:
"(1)This rule applies in the following circumstances:
(a) if the court orders a person, by subpoena or otherwise, to produce a document to the court or to an authorised officer,
...
(3) A person may object to producing a document on the ground that the document is a privileged document or ....
(4)A person objecting under subrule (3) may not be compelled to produce the document ... unless and until the objection is overruled"
In the Dictionary to the UCPR, "privileged document" means a document that contains privileged information.
The Defendant relied, and continues to rely, s 131(1)(b) of the Evidence Act, which, relevantly, provides:
"131Exclusion of evidence of settlement negotiations
(1)Evidence is not to be adduced of:
(a)a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute, or
(b)a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of the dispute."
Section 131(2) sets out various circumstances in which s 131(1) does not apply. The Plaintiff did not rely upon any of the exceptions referred to. One exception, however, that might apply is (i), which provides where "making the communication, or preparing the document, affects a right of a person ...". (In Ryder v Frohlich [2006] NSWSC 1324, Brereton J stated that the exception was directed at communications that, "of themselves, have legal consequences for the rights of parties".)
What is spoken of in s 131 is a "communication" or "a document". In relation to a "communication" it includes both oral, and written, communications: Seven Network Ltd v News Ltd [2006] FCA 343 at [44]. Unlike the common law, there is no reason to limit the communication relied on as an admission. However, the communication should not be extended to objective facts that are ascertained during the course of negotiations.
Section 131(5) provides that "a reference to a dispute is a reference to a dispute of a kind in respect of which relief may be given in an Australian or overseas proceeding", and that a reference to a communication made by a person in dispute includes "a reference to a communication made by an employee or agent of such a person".
Importantly, evidence of "a communication" or of "a document" will not be privileged unless the communication was made or the document was prepared "in connection with an attempt to negotiate a settlement of the dispute". It is said that the phrase imports two requirements, namely "an attempt to negotiate a settlement of the dispute" and that the communication was made, or the document was prepared, "in connection with" such an attempt.
There is no general discretion given to the court, so that if the material is caught by the prohibition in s 131(1), and does not fall within any of the exceptions in s 131(2), it may not be produced: Moran v Moran (No 3) [2000] NSWSC 151 at [8]; Liu v Fairfax Media Publications Pty Ltd [2012] NSWSC 900 per Harrison AsJ at [37].
The party claiming privilege, in this case the Defendant, bears the onus of establishing the basis of its claim, while the party seeking disclosure does not bear any onus of excluding privilege: ASIC v Rich [2004] NSWSC 1089 at [2]; Liu v Fairfax Media Publications Pty Ltd at [38].
The Nature of Proceedings to review a Registrar's Decision
There was really no dispute about the law on this topic.
The Court is permitted by UCPR rule 49.19, to review any direction, order, decision or other act, of a Registrar and to make such order by way of confirmation, variation, discharge, or otherwise, as the Court thinks fit.
UCPR rule 49.20 provides that an application for review of a decision of a registrar is to be instituted by filing a notice of motion and that the notice of motion must be filed within 28 days after the material date. For the purposes of this rule, the "material date" is the date of the direction, certificate, order, decision or other act to be reviewed.
There was no dispute that the Defendant's application complied with UCPR rule 49.20.
Relevant principles drawn from authorities relating to the nature of a review are:
(a) The review power conferred is not an appeal and, accordingly, is not subject to the limitations that apply to proceedings by way of appeal: Tomko v Palasty (No 2) [2007] NSWCA 369; (2007) 71 NSWLR 61 at [6], [10], [50], [52]; Al-Shennag v Statewide Roads Pty Limited [2009] NSWSC 210 per Hall J at [44]-[46]; it is "not restricted" to a reconsideration of the primary material before the Registrar: Lollback v Brakepower Pty Ltd [2010] NSWSC 1457 at [10].
(b) It is unnecessary for the applicant for review to demonstrate any material error of fact, or principle, in the order under review. On the review, the court may exercise its powers regardless of error. However, review, in the relevant sense, involves discretionary intervention: Tomko v Palasty (No 2) at [52]; Lollback v Brakepower Pty Ltd at [13]; the discretion extends to a discretion whether, and if so, how, to intervene.
(c) The conduct of the review is at large and in the discretion of the Court. Notwithstanding the foregoing, the review is not accurately described as a hearing de novo: Perpetual Ltd v Barghachoun [2010] NSWSC 108 at [3], although it involves many of the features of a hearing de novo.
(d) There is an onus on a person seeking to have a court set aside, or vary, a registrar's decision to make out a case that the court conducting the review, in the interests of justice, should exercise its discretion to do so: Tomko v Palasty (No 2) per Hodgson JA at [7]. In other words, there must be a basis shown for setting aside, or varying, the decision or orders of the registrar.
(e) Although on review, the Court should consider the matter afresh, it does not follow that the reasoning of the registrar should be ignored, or that variations in the material presented to her, or him, and the evidence that was adduced are irrelevant. The starting point is, therefore, the decision that is to be reviewed. The court does not merely cast that decision to one side and proceed as if it had never been made. The court will have regard to the basis on which the decision was made and the material placed before the court itself on the application for review: Wily re LED (South Coast) Pty Ltd [2009] NSWSC 946 at [24] - [26].
The real question is whether there are any grounds, or any reasons, which would warrant a review of the orders that have been made by the registrar: Al-Shennag v Statewide Roads Pty Limited at [47].
(f) What will be required to make out a case for intervention will vary depending upon the nature of the registrar's decision under review: Groeneveld v Wollongong City Council [2009] NSWLEC 149; (2009) 168 LGERA 260, per Preston CJ at [12]. However, the court should inform itself of the material before the registrar at the time when he, or she, made the decision, should consider the reasons for the decision, and then should make its own decision based on the material before it after having the benefit of the submissions of each party.
(g) It is proper for the Court to exhibit a natural inhibition against the unrestrained substitution of the reviewing Court's views for those of the registrar: Westpac Banking Corp v Abemond Pty Ltd; Westpac Banking Corp v Cameron (NSWSC, 3 November 1994, unreported).
(h) When it comes to matters of practice and procedure, there should be a natural inhibition against overturning a registrar's decision: Wentworth v Graham [2002] NSWSC 397; (2002) 55 NSWLR 638 at 640-641. However, where substantive error is established, then the Court would consider reviewing the registrar's decision and would make such other order as it is authorised to make: Al-Shennag v Statewide Roads Pty Limited at [46].
(i) In the case of a decision which finally determines a party's rights, or which (albeit one of practice or procedure) has a decisive impact on those rights, a Court may be more willing to intervene. It may permit further evidence to be led that does not satisfy the strict requirements for fresh evidence, if it is satisfied that the interests of justice require this. It may decide to substitute its own discretionary decision for that of the registrar, even though no House v R (1936) 55 CLR 499 error is shown, again if it is satisfied that the interests of justice require this: Tomko v Palasty (No 2) at [5]-[9], [50], and [52].
(j) If fresh, or additional, evidence, is produced, it may be received by the court and taken into account (Fenwick v Wambo Coal Pty Limited [2011] NSWSC 176, per White J, at [46]), or the court may refer the matter back to the Registrar for consideration as a fresh application: Portal Software v Bodsworth [2005] NSWSC 1115 at [17]. The court may be more inclined to intervene on a review based on fresh evidence, changed circumstances, or where error is demonstrated in the decision under review: Tomko v Palasty (No 2) at [52].
(k) The decision of the registrar stands until it is set aside: Lawteal Pty Limited v Ofo [2005] NSWSC 984, per Malpass AsJ at [19].
(l) The registrar must give sufficient reasons for his, or her, decision: Thompson v New South Wales Land and Housing Corporation [2008] NSWSC 74 per Malpass AsJ at [9] - [16].
Preliminary Discovery
There was really no dispute about the principles that apply in respect of preliminary discovery either.
UCPR rule 5.3 relevantly provides:
"(1) If it appears to the court that:
(a) the applicant may be entitled to make a claim for relief from the court against a person ("the prospective defendant") but, having made reasonable inquiries, is unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant, and
(b) the prospective defendant may have or have had possession of a document or thing that can assist in determining whether or not the applicant is entitled to make such a claim for relief, and
(c) inspection of such a document would assist the applicant to make the decision concerned,
the court may order that the prospective defendant must give discovery to the applicant of all documents that are or have been in the person's possession and that relate to the question of whether or not the applicant is entitled to make a claim for relief.
(2) An order under this rule with respect to any document held by a corporation may be addressed to any officer or former officer of the corporation.
(3) Unless the court orders otherwise, an application for an order under this rule:
(a) must be supported by an affidavit stating the facts on which the applicant relies and specifying the kinds of documents in respect of which the order is sought, and
(b) must, together with a copy of the supporting affidavit, be served personally on the person to whom it is addressed ..."
The Assistant Registrar, in my view, correctly, referred to the reasons of McColl JA in Hatfield v TCN Channel 9 [2010] NSWCA 69; (2010) 77 NSWLR 506, at [47] - [52], which set out the relevant considerations:
"47 First, "[i]n order for it to 'appear' to the Court that the applicant 'may be entitled' to make a claim for relief, it is not necessary for the applicant to show a prima facie or pleadable case": Morton v Nylex (at [25]).
48 Secondly, while "the mere assertion of a case is insufficient...[i]t will be sufficient if there is reasonable cause to believe that the applicant may have a right of action against the respondent resting on some recognised legal ground" : Morton v Nylex (at [25]).
49 Thirdly, "belief requires more than mere assertion and more than suspicion or conjecture. [It] is an inclination of the mind towards assenting to, rather than rejecting a proposition. Thus it is not sufficient to point to a mere possibility. The evidence must incline the mind towards the matter or fact in question. If there is no reasonable cause to believe that one of the necessary elements of a potential cause of action exists, that would dispose of the application insofar as it is based on that cause of action": St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147 (at [26](d)) per Hely J, referring in turn to John Holland Services Pty Ltd v Terranora Group Management Pty Ltd [2004] FCA 679 (at [13], [14], [17] and [73]) per Emmett J. The use of the word "may" indicates the court does not have to reach "a firm view that there is a right to relief": Telstra Corp Ltd v Minister for Broadband, Communications and the Digital Economy [2008] FCAFC 7; (2008) 166 FCR 64 (at [58]).
50 Fourthly, the requirement that the matters set out in UCPR 5.3 "appear[s]" to the court to establish an entitlement to an order under the rule may be wider than the requirement in the Federal Court Order 15A r 6 that there "is reasonable cause to believe": see Panasonic Australia Pty Ltd v Ngage Pty Ltd [2006] NSWSC 399; (2006) 69 IPR 595 (at [22]) per Young CJ in Eq; Papaconstuntinos v Holmes à Court [2006] NSWSC 945 (at [17] per Simpson J; Hornsby Shire Council v Valuer General of NSW [2008] NSWSC 1179 (at [33]) per Adams J. Nevertheless Hely J's statement in St George Bank Ltd (at [26](e)) remains apposite, namely that "whilst uncertainty as to only one element of a cause of action might be compatible with the 'reasonable cause to believe' required by subparagraph (a), uncertainty as to a number of such elements may be sufficient to undermine the reasonableness of the cause to believe".
51 Fifthly, "the question posed by [UCPR 5.3(1)(a)] ... is not whether the applicant has sufficient information to decide if a cause of action is available against the prospective respondent [but]... whether the applicant has sufficient information to make a decision whether to commence proceedings in the Court. Accordingly, an applicant for preliminary discovery may be entitled to discovery in order to determine what defences are available to the respondent and the possible strength of those defences": St George Bank Ltd (at [26](f)) (emphasis in original); see also Morton v Nylex (at [33]). Thus application of the rule will not be precluded by the fact that the applicant already has available evidence establishing a prima facie case for the granting of relief, as there might be matters of defence which could defeat a prima facie case: Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 1500 (at [41]) per Lindgren J; referred to with approval by the Full Federal Court (French, Weinberg and Greenwood JJ) in Telstra Corp Ltd (at [60]).
52 Sixthly, as Hely J said in St George Bank Ltd (at [26](a)), "the Rule is to be beneficially construed, given the fullest scope that its language will reasonably allow, with the proper brake on any excesses lying in the discretion of the Court, exercised in the particular circumstances of each case".
"Claim for relief" is defined in s 3 of the Civil Procedure Act 2005 to include, relevantly, "(c) a claim for the recovery of damages or other money", and "(e) a claim for the determination of any question or matter that may be determined by the court", and "(f) any other claim (whether legal, equitable or otherwise) that is justiciable in the court".
Importantly, to attract its operation, the rule requires that it must "appear" to the Court that the applicant "may be entitled to make a claim for relief". This does not mean, however, that the rule will apply in any case in which the applicant asserts a possible cause of action against some other person, no matter how speculative or remote. There needs to be an inclination of the mind towards assenting to, rather than rejecting, a proposition. It is not sufficient to point to a mere possibility: Clemett v New South Wales Lotteries Corporation Pty Ltd [2011] NSWSC 121 per Hoeben J (as his Honour then was) at [43].
In Morton v Nylex Ltd [2007] NSWSC 562, at [25], White J referred to this part of the rule saying:
"It will be sufficient if there is reasonable cause to believe that the applicant may have a right of action against the respondent resting on some recognised legal ground (Panasonic Australia Pty Ltd v Ngage Pty Ltd (2006) 69 IPR 595 per Young CJ in Eq at 589 [20] and 599 [27])."
At [26], his Honour described the test as "undemanding".
What constitutes "reasonable inquiries" for the purpose of r 5.3(1)(a) is a question of fact, to be considered in all the circumstances of the particular case, which includes the relationship (if any) between the applicant and the prospective defendant (Steffen v ANZ Banking Group [2009] NSWSC 666, per McDougall J, at [15]). McColl JA added, Hatfield v TCN Channel 9, at [86], that the relationship (if any) between the prospective defendant and any source of information was also relevant.
In Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33, at [83], Steytler JA, without being exhaustive, set out the factors that the Court would consider in exercising its discretion on an application for preliminary discovery:
"[83] A Court, in considering whether or not to exercise the discretion afforded it by the section, or, to put it differently, in considering whether or not the order is reasonably necessary to achieve the proper administration of justice, will ordinarily take into account a range of factors. Without attempting to be exhaustive, these will usually include such things as the likelihood that a cause of action of the kind suggested will be found to exist, the nature and significance of that potential cause of action, the likely effect, on the person against whom discovery is sought, of the making of an order of the kind contended for, whether there is any other adequate means, available to the intending plaintiff, of obtaining the information which it seeks, the nature and confidentiality of the documents proposed to be obtained, the possible significance of the information contained within those documents to the decision whether or not to commence the contemplated proceedings, whether the applicant is able to compensate the potential party for its cost of complying with the order and whether there is any evidence of bad faith on the part of the applicant."
Preliminary discovery is a matter of practice and procedure rather than a matter of substance. The distinction was adverted to in the High Court in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170, at 176-177, where their Honours (Gibbs CJ; Aickin, Wilson and Brennan JJ) said:
"The essence of such a matter is described in terms which are sufficient for present purposes in Salmond on Jurisprudence 10th ed (1947), P 476:
Substantive law is concerned with the ends which the administration of justice seeks; procedural law deals with the means and instruments by which those ends are to be attained. The latter regulates the conduct and relations of courts and litigants in respect of the litigation itself; the former determines their conduct and relations in respect of the matters litigated."
Also see, Re Dernacourt Investments Pty Ltd (1990) 20 NSWLR 588; and Maser Technology Group Pty Ld v Edmondson [2010] NSWSC 458, per Hamilton AJ, at [15] - [16].
Orders for preliminary discovery should not be made as a matter of course but only when reasonably necessary to achieve the proper administration of justice: McCarthy v Dolpag Pty Ltd [2000] WASCA 106 at [13].
The measure of any preliminary discovery to be ordered is the extent of information that is necessary, but no more than that which is necessary, to overcome the insufficiency of information already possessed by the applicant after the making of all reasonable inquiries, to enable a decision to be made whether to commence a proceeding.
The rule does not allow for third party discovery. Preliminary discovery may be ordered only against the "prospective defendant".
Determination
With these matters in mind, I turn now to the determination of the application for review.
I shall deal, first, with the question of the evidence that was objected to. On the hearing of the application to review, this question assumed much less importance than it had before the Assistant Registrar, particularly in light of the documents which the Defendant admitted it had, but which it did not admit the Plaintiff was entitled to inspect.
With respect, I have come to a different conclusion to that expressed by the Assistant Registrar. In my view, the meeting between the parties was not one that gave rise to a communication, or document, in connection with an attempt to negotiate a settlement of the substantive dispute between the parties. To the contrary, at the time of the meeting, the Plaintiff was not sure that it was in dispute with the Defendant other than in respect to the question of whether preliminary discovery would be necessary. It was only that matter which was the subject of dispute and the purpose of the meeting between Ms Polin and Mr Raheb related to only that dispute.
In this regard, the emails passing between Ms Polin and Mr Raheb make it clear that the purpose of the meeting was to enable information to be provided by the Defendant to the Plaintiff (and its solicitor). If that information were provided, an application for preliminary discovery might not have been necessary. If it was not provided, the Plaintiff's solicitor was not in a position to advise regarding any possible agreement of what might be the substantive dispute.
In my view, the passages admitted at the hearing were really evidence that could not be the subject of real dispute between the parties. The only passage rejected at the hearing (paragraph 20 of Ms Polin's affidavit), did appear to have been, a communication in connection with an attempt to negotiate a settlement of the dispute that related to the need for preliminary discovery. It was for that reason that the passage was rejected.
I turn next to the requirements to be satisfied before a preliminary discovery order will be made.
As the Assistant Registrar pointed out, there are five separate matters to be established before an order under rule 5.3(1) can be made. He said:
"4. ... It must appear to the court that the applicant may be entitled to make a claim for relief; that the applicant has made reasonable enquiries; that, notwithstanding those reasonable enquiries, the applicant has been unable to obtain sufficient information to decide whether or not to commence proceedings against the prospective defendant; that the prospective defendant may have a document or thing that could assist in determining whether the applicant is entitled to make a claim for relief; and that inspection of that document or thing would assist the applicant to decide whether or not to commence proceedings."
Even if the applicant establishes each of the five matters, the power to make an order remains discretionary.
The first requirement is that it appears to the court that the applicant for preliminary discovery may be entitled to make a claim for relief. The fundamental issues in these proceedings, which have been raised in Ms Polin's affidavit, appear to relate to whether there was a concluded agreement between the Plaintiff and the Defendant; if there was one, what was the nature of that agreement; if there was a concluded agreement whether the Defendant breached that agreement; and if it did, whether the Plaintiff has sustained damages.
The Defendant asserted that the Plaintiff had not established this requirement. It submitted that the allegations set out in the Assistant Registrar's reasons at [2] were nothing more than mere assertions. It submitted that more was required and that nothing had been advanced about the nature of the agreement or the arrangement alleged between the Plaintiff, the Defendant and perhaps, Mr Schwind. By way of example, it was submitted that there was no reference to the parties to any agreement or arrangement, no reference to the terms of any agreement or arrangement and nothing to demonstrate a finally concluded agreement or arrangement. It relied upon an email dated 18 December 2009, sent by the Plaintiff's solicitor to the Defendant in which the solicitor acknowledged that "there is some doubt as to whether the parties are in complete agreement in relation to the terms of the Memorandum of Understanding and the way in which the matter is to move forward".
The Plaintiff says that there is sufficient evidence in the emails to establish an appearance of a joint venture agreement, or an agency agreement, or a partnership between at least the Plaintiff and the Defendant; that duties owed by members of the joint venture to each other, the agent to the principal, or by each of the partners to the other partners should be implied; and that there was a breach of duty since the Plaintiff was not informed of what occurred between the Defendant and Emirates Glass. The documents sought go to the question of breach and of damages.
As McColl JA pointed out in Hatfield v TCN Channel 9 at [51], what must be established is not whether there is sufficient information to decide if a cause of action is available, but whether sufficient information to make a decision on the question whether to commence proceedings. Thus, a document that demonstrates the method by which damages would be assessed may be discoverable under UCPR rule 5.3, because a decision whether to commence proceedings must necessarily (or, at least, prudently, should) include consideration of the quantum of damages that may be recoverable if the other elements giving rise to the claim are established.
Having read the evidence, I consider that the first requirement is satisfied.
As to the second requirement that reasonable inquiries must be made, I have referred to the attempts made by, or on behalf of, the Plaintiff, to obtain the information that would be revealed by the document sought by requests to the Defendant. As the Assistant Registrar said at [17], access to the contract in the hands of Emirates Glass, which is situated in Dubai, is "self-evidently problematic" and that "(I)t is difficult to imagine any further avenue of endeavour through which the contract could be obtained".
There was no real dispute that the second requirement having been satisfied.
As to the third requirement, (whether or not the applicant for preliminary discovery has been unable to obtain sufficient information), the only document the subject of the Assistant Registrar's decision, relates, principally, to the issues of breach and damages. (The Assistant Registrar at [18] referred to its relevance to damages.)
Accordingly, I consider the third requirement is also satisfied. There was no real dispute that the second requirement having been satisfied.
In relation to the fourth and fifth requirements, there was no dispute that the Defendant has the original or a copy of the documents to which I have referred. Inspection of those documents would enable the Plaintiff to consider whether it can establish a breach and damages, and thus, whether it should pursue a cause of action. A consideration of the documents will clearly assist the Plaintiff to decide whether it should commence proceedings.
There was no real dispute about these requirements having been satisfied.
Finally, as to the discretion, I am satisfied that the Defendant should reveal the documents to the Plaintiff. One of the factors identified by Steytler JA in Central Exchange Ltd v Anaconda Nickel Ltd is the magnitude of the task of identifying and producing for inspection the documents sought and the possible significance of the information contained within those documents. In the present case, only a few documents are sought to be produced. Their significance is obvious.
In all the circumstances, having considered these matters, like the Registrar, I am satisfied that the Court should order that the Defendant must give discovery to the Plaintiffs of all documents that are, or have been, in the Defendant's possession and that relate to the question whether or not the Plaintiff is entitled to make a claim for relief against the Defendant.
Following the submissions, I indicated to the parties that they should provide to me alternative short minutes, one set on the basis that the Defendant was successful and one set on the basis that it was not successful. They agreed to do so within 7 days and have complied. I have adopted the form of Short Minutes with appropriate amendments where necessary. I have not amended the documents identified by them to be provided.
In accordance with the proposed Short Minutes of Order agreed to by the parties, I order that:
(a) The Defendant's notice of motion filed on 19 June 2012 is dismissed.
(b) The decision of Assistant Registrar Musgrave made on 23 May 2012 insofar as it relates to the production to the Plaintiff of the document identified is confirmed but varied as to the documents to be provided.
(c) The Defendant to provide copies of documents, that are or have been in the Defendant's possession which are, or are styled as (whether signed or unsigned, or draft or non-draft) either: contracts, memoranda of understanding, purchase orders, invoices concerning the sale or purchase of the products known as "Visionguard", "Vitroglass" or "Vitroglaze", to which the parties are, or include, Hampic Pty Limited and Emirates Glass LLC or Emirates Glass Ltd, from the date 19 October 2009.
(d) The Defendant to pay the Plaintiff's costs of the notice of motion.
(e) The Plaintiff to pay the Defendant's reasonable costs of complying with order (c) above.
(f) The stay granted by the Assistant Registrar be lifted.
(g) The proceedings will be referred to the Registrar's list on a date suitable to the parties for further directions.
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Decision last updated: 16 August 2012
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