O'Malley Nominees Pty Ltd v Shawtec Pty Ltd - [2010] WADC 62

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: O'MALLEY NOMINEES PTY LTD -v- SHAWTEC PTY LTD & ORS [2010] WADC 62

CORAM: PRINCIPAL REGISTRAR GETHING

HEARD: 7 APRIL 2010

DELIVERED : Delivered Extemporaneously on 7 APRIL 2010 typed from tape and edited by Principal Registrar

FILE NO/S: CIV 1163 of 2004

BETWEEN: O'MALLEY NOMINEES PTY LTD (ACN 008 782 821)
Plaintiff
AND
SHAWTEC PTY LTD (ACN 070 514 966)
First Defendant
MICHAEL JOHN SHAW
LAURENCE DAVID SHAW
Second Defendants

Catchwords:

Further and better discovery

Legislation:

Nil

Result:

Application declined

Representation:

Counsel:

Plaintiff:     Mr A J N Aristei
First Defendant             :     Mr A R MacPherson
Second Defendants       :     Mr A R MacPherson

Solicitors:

Plaintiff:     Irwin Legal
First Defendant             :     Hotchkin Hanly
Second Defendants       :     Hotchkin Hanly

Case(s) referred to in judgment(s):

Australian Railroad Group Pty Ltd & Ors v Rowan & Anor [2004] WASC 165
Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Company (1882) 11 QBD 55
Dare v Pulham (1982) 148 CLR 658
Lagouvardis v Brett & Janet Cottee Pty Ltd BC9402842 (Unreported, Supreme Court of New South Wales Common Law Division, Young J, 3 August 1994)
O'Malley Nominees Pty Ltd v Shawtec Pty Ltd & Ors [2009] WADC 171
O'Malley Nominees Pty Ltd v Shawtec Pty Ltd & Ors [2010] WADC 2
Pollard v Endale Pty Ltd [2009] WADC 97

PRINCIPAL REGISTRAR GETHING: The application before me is an application by the plaintiff by chamber summons dated 23 November 2009 for further and better discovery. The plaintiff seeks particular discovery of three groups of documents. In relation to the documents set out in par 1(a) and par 1(b) of the application, the plaintiff requests me to adjourn that part of the application. I will return to those documents at the end of these reasons.
The documents the subject of the contested hearing before me are at par 1(c) of the application. That application reads as follows:
"c)Any correspondence or documents relating to the First Defendant's loan application that resulted in its receipt of a loan that was used to purchase its property situated at 143 Francisco Street, Belmont on or about 3 October 2003, as referred to in the supporting affidavit of Mr. Goldthorpe filed herewith, including:
i)any loan application (including any correspondence or documents sent by the Defendants or either of them to the lender or its servants or agents and any correspondence or documents sent by the lender or its servants or agents to the Defendants or either of them);
ii)any correspondence or documents pertaining to the loan application;
iii)any letters of approval from the lender to the Defendants or either of them;
iv)any correspondence or documents pertaining to the settlement of the purchase of 143 Francisco Street, Belmont; and
v)any document authorising the Defendants to have early possession of 143 Francisco Street, Belmont prior to 1 July 2003 which enabled the Defendant to obtain Transfer of Land dated 9 May 2003 and obtain authority to transfer its operations to 143 Francisco Street, Belmont on 23 June 2003."
As can be seen from this description, the application relates primarily to loan documents resulting in receipt of a loan that was used to purchase property situated at 143 Francisco Street, Belmont on or about 3 October 2003.
The application takes as its context the plaintiff's action against the defendants for unpaid rent and for damages. The history of the action is set out by me in considerable detail in an earlier decision, O'Malley Nominees Pty Ltd v Shawtec Pty Ltd & Ors [2009] WADC 171.
In support of the application, the plaintiff, through its director, John Goldthorpe, filed an affidavit sworn 23 November 2009. For present purposes, there are two key portions of the affidavit.
The first is at par 13 which states:
"I received correspondence from the First Defendant (through its director, Michael Shaw) dated 3 November 2002, stating that the First Defendant was arranging to have a meeting with a finance broker 'tomorrow' in order to get a loan for the stated purpose of clearing 'outstanding amounts by the end of the month' - see lines 2 and 22 thereof. I also received a facsimile message on 4 November 2002 from the First Defendant stating that they were sending a cheque for rent and electricity dues and were 'arranging finance to cover the arrears' as explained in their earlier email - see lines 3, item 4 thereof."
The references to documents are to those in Annexure JG8, which comprise a note from Michael Shaw (the first named second defendant) dated 3 November 2002, and then a second note from Mr Shaw dated 4 November 2002.
The second key portion of evidence set out in Mr Goldthorpe's affidavit is a photograph of a sign on the leased premises. This is referred to at par 18 of the affidavit. The sign says:
"We are moving to 143 Francisco Street, Belmont. Opening 23rd June. Big New Store."
I am not told the date on which this sign first appeared on the window of the leased premises. Given the reference to 23 June, I infer that it appeared at some stage prior to 23 June 2003. By way of context, the lease the subject of the present dispute was due to expire on 30 June 2003.

Relevant law

The law relating to specific discovery for the purposes of the District Court is summarised in the judgment of his Honour, Judge Sleight in Pollard v Endale Pty Ltd [2009] WADC 97 at [10]. For the purposes of this application, I adopt the statement of principles set out by his Honour Judge Sleight.
For present purposes, the first question is whether or not the documents are sufficiently relevant to be discoverable. In relation to that, the classic test is as set out in Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Company (1882) 11 QBD 55 at 63:
"It seems to me that every document relates to matters in question in the action, which would not only be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may - not which must - either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in words, 'either directly or indirectly' because as it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary, if it is a document which may fairly lead him to a chain of inquiry which may have either of these two consequences."
In relation to this case, it is relevant that the action was commenced in early 2003. The issue of possible amendments to the statement of claim was the subject of my earlier decision, O'Malley Nominees Pty Ltd (supra). In that decision I sought to bring finality to the question of the pleadings so that there could be a certain set of pleadings which could then form the basis of the issues the subject of the trial. That decision was subsequently affirmed on appeal by Judge Martino, as he then was: O'Malley Nominees Pty Ltd v Shawtec Pty Ltd & Ors [2010] WADC 2.
In this case, the pleadings assume particular importance in determining relevance. The High Court in Dare v Pulham (1982) 148 CLR 658 said the following about pleadings and particulars (at p 664 - excluding case references):
"Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it. They define the issues for decision in litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial, and they give a defendant an understanding of the plaintiff's claim in aid of the defendant's right to make a payment into court."
As Judge Sleight noted in Pollard (supra) at [7]:
"A party is only entitled to discovery of documents that relate to issues in the pleadings. The pleadings are the principal source of defining the matters in issue in the proceedings."
The decision in Australian Railroad Group Pty Ltd & Ors v Rowan & Anor [2004] WASC 165 at [22] is further authority for this last proposition.

Relevance of the documents

The plaintiff asserts there are two bases on which the documents are relevant. The first is in relation to the conduct which the court can take into account in determining whether or not the plaintiff was entitled to accept the defendant's conduct in repudiating its obligations under the leases. The second relates to the plaintiff's defence to an allegation in the counterclaim that the plaintiff acted unconscionably.
In dealing with the first basis, counsel for the plaintiff relied on the decision in Lagouvardis v Brett & Janet Cottee Pty Ltd BC9402842 (Unreported, Supreme Court of New South Wales Common Law Division, Young J, 3 August 1994). In that case, the issue was whether or not a tenant was entitled to repudiate a lease based on the conduct of the landlord. In dealing with the issue, his Honour Young J referred to the distinction between a breach of condition and a repudiation (at 5):
"The distinction between a breach of condition and a repudiation essentially is that when one is looking to see whether there is a right to terminate for breach of condition, one looks to see the seriousness of the term and the seriousness of the breach may be immaterial. On the other hand, with repudiation, one does not direct one's mind to the seriousness of the term which is being breached, but rather to the seriousness of the breach. Despite this clear distinction as a matter of theory, it is not at all unusual to find in text books and authorities some blurring of the distinction and to put together breaches of fundamental terms and fundamental breaches of anything in the one category as repudiation. It seems to me, with great respect, that this is what the learned Magistrate has done in the instant case.
Despite the criticisms that may have been made on the analysis, it is clear that what the learned Magistrate did was to direct his mind as to whether the attitude of the lessors was such that they had evinced an intention not to perform the lease according to its tenor. From the findings of fact it would seem that the Magistrate considered that not only did the landlords know that the tenants were conducting a very sensitive business on the premises, but also that the tenants had complained about the problem, the landlords had promised to seal the carpark but had failed to do so, the landlords had promised to sweep the carpark regularly, but had failed to do so and a serious amount of dust was entering the premises from the carpark (the carpark being under the control of the landlords) which was causing great detriment to the tenants' business. He also found that the dust penetration was a nuisance. As A'Beckett J said in Harris v Carnegie's Pty Ltd [1917] VLR 95, 99, dust undoubtedly may be a nuisance. The learned Magistrate found as a matter of fact in the instant case that there was a nuisance and gave damages on the cross claim. This is really, however, peripheral to the question before this Court except that the Magistrate's finding of damages of $3,000 might be set against the loss of rent for the landlords if the lease is terminated. However, when one thinks about it, the amounts are not disproportionate because the Magistrate may very well have decided that the $3,000 compensated for past damage, but that future damage would invariably be suffered which had been avoided by the tenants vacating the premises.
It is said that repudiation is not lightly to be inferred, Ross T Smyth and Co Ltd v TD Bailey, Son and Co [1940] 3 All ER 60 at 71. It might be thought that some of the factors mentioned are minor, but it is clear that a series of minor matters may together constitute repudiation, Hudson Crushed Metals Pty Ltd v Henry [1985] 1 Qd R 202. However, finding that on particular facts there was repudiation is a question of fact to be judged on the totality of the parties' conduct. On the facts as he found them, the learned Magistrate was able to find as a matter of fact that there had been a repudiation in the instant case. The tenants accepted the repudiation by removing themselves from the premises."
Perhaps the key point from the passage just quoted is that the Magistrate needed to direct his or her mind as to whether or not the attitude of the lessors was such that they had evinced an intention not to perform the lease according to its tenor. Young J sets out a number of facts from which the learned Magistrate inferred the relevant intention not to perform the lease according to its tenor.
In the present case, the parties are the other way around. The key issue for the trial judge in relation to repudiation is whether or not the attitude of the lessees was such that they had evinced an intention not to perform the lease according to its tenor.
In the present case, the allegation of repudiation is found in par 31A(ii) of the statement of claim. The statement of claim I am referring to for present purposes is the minute of amended statement of claim dated 7 April 2010. Paragraph 31A(ii) states:
"By reason of the matters pleaded in the previous subparagraph herein, the first defendant has failed or refused to comply with the obligations set out in the default notices, thereby entitling the plaintiff to re-enter and terminate the said leases, or alternatively has thereby repudiated its obligation under the said leases."
This paragraph directs the reader back to the preceding paragraph, 31A(i). That paragraph provides:
"Alternatively, the first defendant has failed or refused to comply with the default notices issued in respect of units 4 and 5 and unit 6 (as pleaded in paragraphs 23(i) and 23(ii) respectively) either within the time period stipulated for their compliance or at all."
Then going back to the par 23(i) and par 23(ii), they provide:
"23(i)By reason of the First Defendant's continued failure to pay the outstanding rental, outgoings and interest payable thereon to the Plaintiff in respect of units 4 and 5 on the Property, the Plaintiff issued a further notice of default on or about 5 February 2003, which was served on the First Defendant on or about the said date, requiring the First Defendant to pay the sum of $15,756.70 for rent and outgoings up to 1 January 2003, interest for any late payments to that date and the Lessor's cots of the said notice in the sum of $385.00 (inclusive of GST) within seven days of receipt of the said notice.
23(ii)By reason of the First Defendant's continued failure to pay the outstanding rental, outgoings and interest payable thereon to the Plaintiff in respect of unit 6 on the Property, the Plaintiff issued a further notice of default on or about 22 January 2003, which was served on the First Defendant on or about the said dated, requiring the First Defendant on or about the said date, requiring the First Defendant to pay the sum of $10,634.86 for rent and outgoings up to 1 January 2003, interest for any late payments to that date and the Lessor's costs of the said notice in sum of $385.00 (inclusive of GST) within seven days of receipt of the said notice."
When read in the context of the decision of the High Court in Dare v Pulham (supra), the defendants should be able to discern from the pleadings the case they have to meet at trial. In terms of that discernment process, the only facts relied upon to establish the repudiation are the failures to comply with the default notices.
In the course of argument, counsel for the plaintiff, referring to the Lagouvardis case, stated that one of the issues for the court is the seriousness of the breach. Accepting this to be a correct statement of the law, the issue then is: what facts is the plaintiff going to put before the court from which it is going to ask the court to make findings in relation to seriousness?
Thus, in Lagouvardis, there were five or six factors set out from which the court made a finding as to seriousness.
It seems to me in order for the defendants to know the case they have to meet, the facts from which the court is going to be asked to make a finding of seriousness ought to be set out in the pleadings. Here, as I have mentioned, the only facts relating to repudiation are the failures or refusals to comply with the default notices. On the matters as currently pleaded, this is the only relevant allegation that the defendants have to meet at trial.
The argument for the plaintiff was that issues going to whether or not the defendants were genuine in their efforts to secure alternate funding to pay the arrears goes to the seriousness of the breach. As a matter of law, it may well be possible for a plaintiff who is a landlord in this situation to bring before the court factors such as the genuineness of the tenants or the lessees' efforts in securing financing as a fact relevant to seriousness. However that is not what is pleaded in the present case.
In the present case, the only allegations, or the only facts, which are going to be put before the court in relation to seriousness are those going to the failure or refusal to comply with the default notices.
It was open to the plaintiff to have pleaded its case in such a way that a wider basket of facts would be taken into account by the court in determining seriousness. However that is not what has occurred. The basket of facts is limited to the default notices.
The issue then arises as to whether or not any latitude ought to be given to the plaintiff in terms of amending the statement of claim to plead issues in relation to seriousness.
In my earlier decision, I granted the plaintiff leave to make certain of the amendments sought in order to present the existing case at its strongest. If the plaintiff had wanted to plead facts wider than the breach of the default notices from which the court would infer seriousness, then it was open for the plaintiff to have sought that those amendments at that time, back in October and earlier last year when the last series of amendments were made. However, as I have noted, it did not do so.
The second broad basis of relevance relates to unconscionable conduct. In relation to unconscionable conduct, the version of the defendant's set off and counterclaim that I am using for present purposes is a further minute of proposed amended defence set off and counterclaim dated 31 July 2007 ("Defence").
In par 27 of the Defence, the defendants set out 16 numbered paragraphs describing certain conduct on behalf of the plaintiff. In par 28, the defendants plead that the conduct in par 27:
"Took place in a matter of just weeks before the leases would have expired by effluxion of time in any event."
In par 29 of the Defence, the defendants plead that the totality of the conduct in par 27 and par 28 was unconscionable in breach of Trade Practices Act 1974 (Cth) s 51AC.
The plaintiff submitted that in responding to the allegations of unconscionable conduct set out in the Defence, the issue of the actions or the conduct of the defendants in securing alternate finance, as set out in Mr Goldthorpe's affidavit, is squarely relevant.
In the conduct set out in par 27 of the Defence, there is no reference to the financing activities of the defendants. On the face of the Defence, the issue of the conduct of the defendants in arranging alternate finance is not raised.
The relevant reply to the Defence for present purposes is that dated 12 December 2008. In par 11.1 through to par 11.16, the plaintiff denies the allegations in the various subparagraphs of par 27 of the Defence, makes certain admissions and pleads certain additional facts.
For example, in par 11.12, the plaintiff pleads a denial of a particular conversation, a denial of an allegation contained in par 27.12 of the Defence and then goes on to, further or in the alternative, make a positive allegation about the particular discussion.

In the reply, there is no reference to the financing activities of the defendants at the relevant time. It would have been open to the plaintiff to plead, for example, that the second defendants were in the process of securing finance to move to alternate premises and that their conduct was effectively trying to manufacture a breach on behalf of the plaintiff so that they could move to alternate premises. This then would have brought squarely into issue whether or not the financing documents for the move to alternate premises was relevant. There is no fact pleaded in the reply which would allow the plaintiff to raise at trial the relevant financing activities of the defendants.
The test in the Peruvian Guano case which I have quoted is essentially concerned as to the depth with which a discovery inquiry may proceed. The breadth of that inquiry is governed by the pleadings. The test requires the Court to give a party a considerable degree of latitude in terms of the sources of documents that it can get access to at the discovery stage.
The question of relevance at the discovery stage is necessarily wider than the question of relevance at the trial stage. The width of the Peruvian Guano test is designed to ensure the parties have access to a wide range of documents from which a suite of documents will be produced from trial.
However, the Peruvian Guano test does not allow an inquiry to take place in isolation. The inquiry needs to take place in the case in the context of pleadings. At the beginning of a case where the issues are still being crystallised, it may be that the court will allow slightly more latitude in the discovery process when viewed against the pleadings as the case is still being formulated. By contrast, in a case such as the present one, which has been on foot for nearly seven years, the court is entitled to view the pleadings as mature and strictly determining the outline of the issues in dispute, and then to determine discovery issues on that basis.
For those reasons, the application for further and better discovery is declined.

Balance of the application

In relation to the other two paragraphs of the application, it seems to me that with a trial scheduled as it is for September this year, in a case which is as long running as it is, that the issue of discovery needs to be finally ruled off.
In relation to the request in par 1(a) and par 1(b) of the application, I am prepared to allow the plaintiff a short further window to form a view as to whether or not the discovery provided is sufficient. Once that window is closed, then the action needs to be treated on the basis that both parties are satisfied that they have the discovery from each other that they are entitled to under the rules of this court.
I will hear from counsel in relation to costs and any future consequential orders.