Palmera Import Export Pty Limited t/as King of Tobacco v Tobacco Dome Pty Limited & Ors

[2007] NSWSC 1218

CITATION:	Palmera Import Export Pty Limited trading as King of Tobacco v Tobacco Dome Pty Limited & Ors [2007] NSWSC 1218
HEARING DATE(S):	26/10/07
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
EX TEMPORE JUDGMENT DATE:	26 October 2007
DECISION:	Application for separate question order dismissed.
CATCHWORDS:	Separate question orders - Access to documents
LEGISLATION CITED:	Fair Trading Act 1987 (NSW) Fair Trading Act 1985 (Vic)
CASES CITED:	Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130
PARTIES:	Palmera Import Export Pty Limited t/as King of Tobacco (Plaintiff) Tobacco Dome Pty Limited (First Defendant) Costs Sarris (Second Defendant) Cignall Pty Limited (Third Defendant)
FILE NUMBER(S):	SC 50130/05
COUNSEL:	Mr RW Tregenza (Plaintiff) Mr S Tatarka (Defendants)
SOLICITORS:	Malouf Solicitors (Plaintiff) Belleli King & Associates (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Friday 26 October 2007 ex tempore
Revised 29 October 2007

50130/05 Palmera Import Export Pty Limited t/as King of Tobacco v Tobacco Dome Pty Limited & Ors

JUDGMENT

The nature of the proceedings

1 The summons identifies, from the plaintiff's perspective, the principal issues of the dispute. Suffice it to say that the dispute concerns the plaintiff's alleged entitlement to the benefit of one half of the shares in the third defendant. The position put by the plaintiff is that it originally entered into a tripartite arrangement with the first defendant and a third party. The agreement had been that the businesses of the plaintiff, the first defendant and the third party would be merged. In order to achieve that merger, those parties had agreed to transfer their respective businesses to an entity described in the deed of 1 July 2004 as ‘Newco’. Each of the parties to the deed carried on the business of coordination and facilitation of dealings between tobacco wholesalers and groups of tobacco retailers.

2 The plaintiff's claim is that in late 2004 the agreement contained within the deed was terminated with the third party no longer a participant. It is the plaintiff’s case that the agreement remained on foot between the plaintiff and the first defendant. The first defendant denies that contention.

3 It is unnecessary for present purposes to repeat any of the additional detail to be found in the summons or the defence to the summons nor the detail to be found in the cross claim, save to observe that one of the approaches taken by the plaintiff to the defendants’ stance is that the first defendant is estopped from denying that an agreement [of the type for which the plaintiff contends], was entered into. The usual elements of an estoppel, including representation detriment and reliance need to be proved by the plaintiff if it is to succeed in that estoppel argument. The plaintiff also relies on causes of action for misleading and deceptive conduct under the New South Wales and/or Victorian Fair Trading Act legislation.

4 The matter has had some history of delay.

The separate question application

5 The defendants seek an order that the court make a separate question order limiting the hearing [now fixed for 17 March 2008] to issues of liability alone, any issue as to damages to be determined following the liability judgment.

6 The principled exercise of the court's discretion requires to treat with the usual questions which arise where a separate question order is sought. It is often the case that the need to make findings of fact for a decision of the separate question, especially findings which may involve issues of credit, tells against the making of an order because related facts and renewed issues of credit may well arise at a later stage in the proceedings, as Giles CJ Com Div [as his Honour then was], explained in Tallglen Pty Ltd v Pay TV HoldingsPty Ltd (1996) 22 ACSR 130 at 142:

"Experience teaches that it should be able to be seen with clarity that decision of a separate question will be beneficial in the conduct of proceedings and the resolution of the parties dispute."

7 Where there are intertwined issues of fact or law between the separated question and the other questions, such that determination of the separate question will not have any substantial effect upon the width of the field of litigious controversy or the prospect of the settlement of the balance of the litigation, a particular approach is sometimes taken to applications for a separate hearing.

8 In my view the principled exercise of the discretion is to refuse the application for the separate trial. There is clearly a possibility that the resolution of the separate issue will not finally determine the issue but will merely result in an appeal from the decision in relation to that issue, creating a multiplicity of proceedings, interruption to the court and undesirable fragmentation of the proceedings.

9 Further, I accept that the hearing will require the plaintiff to adduce evidence of its detriment by virtue of what it contends to have been the defendants’ conduct. That alleged detriment is identified in the summons. A number of factors are said to amount to the plaintiff being in a position to prove that detriment. Part of the measure of the detriment is likely to be the loss suffered by the plaintiff in the defendant having failed to complete the merger.

10 Ultimately, at the end of the day, a number of considerations seem to me to require a rejection of the application. One is that the case management procedures have to date been upon the basis that the matter would be heard on all issues, and to that end the matter has been fixed for 15 March. Both parties have been ordered to complete their expert and lay evidence by 30 November. My understanding is that another of the parameters of the motion [which I have not yet dealt with] involves the defendants seeking an extension of that time to 31 December 2007.

11 In the circumstances where there has also been an order for a mediation to take place, [the order apparently requiring mediation by 15 December 2007, albeit there is to be an application today to extend that date to the end of January], to my mind it is uniquely important for these parties to treat with the rapidly approaching date for final hearing along precisely the basis that it will be a final hearing.

12 These questions of the occasions when the court should or should not accede to an order separating liability from quantum are never simple and on occasion there can even be real dispute between the parties as to which side of the line evidence adduced during the liability tranche falls. Those issues are difficult when as here, liability and quantum can exhibit a degree of admixture.

13 The principled exercise of the discretion is to reject the application constituted by order 2 in the notice of motion.

Access to documents

14 The second matter litigated in terms of the notice of motion concerns a matter related to the application made in order 1 of the notice of motion [which seeks an order that the plaintiff produce for inspection and copying documents in respect of which the plaintiff had claimed privilege]: namely those documents listed on pages 13 and 14 of the plaintiff's amended list of documents.

15 The position since the framing of that order in the notice of motion, is that the plaintiff has now accepted that the privilege [which it had previously claimed attached to these documents] does not exist. However the plaintiff takes the stand that in the present circumstances the only order [insofar as those to whom access may be given of the documents listed on pages 13 and 14 of the plaintiff's amended list of documents], should be the legal advisors for the defendants and not their client, in essence and reality, instructions being received from Mr Sarris.

16 The defendants’ proposition is that it would be unfair at this stage of the proceedings for the defendants’ legal advisors not to be in a position to furnish those documents to Mr Sarris for his consideration.

17 As I understand it, the documents may be broadly described as trading terms and correspondence passing between the plaintiff and/or King of the Pack, on the one hand, and one of the three main tobacco suppliers, on the other hand, as well as franchise agreements between King of the Pack as franchisors and as various franchisees.

18 In truth, it eventuates that the plaintiff has already obtained an expert's report by a Mr Kitson, a careful reading of which makes it reasonably obvious that he has had access to the disputed documents. That report has been furnished in the usual way to the defendants without any caveat in relation to those in the defendants’ legal team, or Mr Sarris, being entitled to inspect the documents.

19 There is evidence that the defendants' solicitors have provided that expert report to their own expert, Mr Hawkes, who is intended to prepare a report in reply. Mr Hawkes has made clear that he believes he requires copies of all the documents relied upon by the plaintiff's expert, including the privileged documents, in order to respond meaningfully. The privileged documents are in his view essential because they disclose the sources of income either from the tobacco suppliers or from the franchisee stores upon which the plaintiff premises its claim for damages.

20 The principled exercise of the court's discretion has to take into account the sensitivity of the passing of information from one trade rival to another, even in circumstances as here, where there is litigation afoot between those parties.

21 To my mind it is quite plain that if the mediation which is proposed does not succeed, the orders now sought by the defendants in paragraph 1 of the notice of motion require to be made. In relation to those orders Mr Sarris should in due course, subject to a confidentiality undertaking to be given by him directly to the court, be entitled to inspect those materials.

22 The only question is one of timing. As I see it the materials must now be made available to the defendants' legal advisors for the purpose of being passed on to Mr Hawkes on a confidentiality basis. The principled approach to the matter in issue is that the court should now order that if the mediation is not successful by a defined date, the order will come into effect and effectively the orders sought in order 1, subject to Mr Sarris giving the personal undertaking to the court, would be made.

23 Hence, as soon as practicable, the short minutes of order should accommodate that finding on order 1. There will still be sufficient time between the mediation, [which on this hypothesis will have failed], and the trial, for Mr Sarris to have adequate access to this information in order to be able to proceed through the hearing and to instruct his legal advisors accordingly.

Orders

24 The following orders are made:

1. I dismiss paragraph 2 of the notice of motion of 11 October 2007.

2. I extend the time fixed by Justice Bergin on 5 October 2007 for the filing by the defendant of expert evidence so that the defendant is to file and serve expert evidence on or before 31 December 2007

3. I extend the time fixed by Justice Bergin on 5 October 2007 for a mediation to take place so that the mediation is to take place on or before 31 January 2007.

4. Subject to order 5, I make an order in terms of order 1 as sought in the motion.

5. I grant a stay of order 4 insofar as it relates to Mr Sarris up to 7 February 2008 and subject to a written undertaking being given by Mr Sarris to the Court by which he undertakes not without leave of the Court, to disclose to any person save to his legal advisers and experts retained in these proceedings the extent of the documents listed in order 1 as sought in the motion except as already disclosed in any expert report.

6. Costs of the motion are to be costs of the proceedings.

7. I direct that the proceedings be sound recorded and a transcript be taken of the proceedings by an external transcription service. Initially the parties are ordered to jointly fund the external transcription. Costs of the transcription will ultimately be costs in the proceedings.

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