Primerock Ltd v Barr

[2000] WASC 194

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   PRIMEROCK LTD & ANOR -v- BARR & ORS [2000] WASC 194

CORAM:   MASTER SANDERSON

HEARD:   17 JULY 2000

DELIVERED          :   1 AUGUST 2000

FILE NO/S:   CIV 1162 of 2000

BETWEEN:   PRIMEROCK LTD

First Plaintiff

GERALD ALAIN DENIS KEET
Second Plaintiff

AND

BARRY WILLIAM BARR
First Defendant

BBA MORTGAGE CORPORATION PTY LTD
Second Defendant

CHERITON NOMINEES PTY LTD
Third Defendant

Catchwords:

Practice and procedure - Party seeking order limiting discovery - Principles to be applied - Policy consideration - Request for further and better answers to request for particulars

Legislation:

Rules of the Supreme Court, O 26A r 5, O 26 r 7(3), O 36 r 16A

Uniform Civil Procedure Rules, r 211(1), r 212

Result:

Application to limit discovery granted
Application for further and better answers to request for particulars refused

Representation:

Counsel:

First Plaintiff                :     Mr J C Giles

Second Plaintiff            :     Mr J C Giles

First Defendant             :     Mr K R Thomas

Second Defendant         :     Mr K R Thomas

Third Defendant           :     Mr K R Thomas

Solicitors:

First Plaintiff                :     Solomon Brothers

Second Plaintiff            :     Solomon Brothers

First Defendant             :     Phillips Fox

Second Defendant         :     Phillips Fox

Third Defendant           :     Phillips Fox

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

Compagnie Financiers du Pacifique v Peruvian Guano Co [1882] 11 QBD 55

Creative Land Management Australia Pty Ltd (In Liq) v Barfam Holdings Pty Ltd [2000] WASC 177

March v E & M H Stramare Pty Ltd (1991) 171 CLR 506

Case(s) also cited:

Astley v Austrust Ltd [1999] HCA 6; (1999) 161 ALR 155

Australia & New Zealand Savings Bank Ltd v Federal Commissioner of Taxation (1991) 91 ATC 4107

Avago Pty Ltd v Mt Burgess Gold Mining Co NL, unreported; SCt of WA; Library No 980319; 12 June 1998

Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214

Beneficial Finance Corp Ltd v Price Waterhouse (1996) 68 SASR 19

Collector of Customs v AGFA-Gevat Ltd (1996) 186 CLR 389

Dalecoast Pty Ltd v Monisse [1999] WASCA 103

Darbyshire v Leigh [1896] 1 QB 554

Dare v Pulham (1982) 148 CLR 658

Dolpag Pty Ltd v McCarthy [2000] WASC 133

Hancock Prospecting Pty Ltd v Bella Rosa Holdings Pty Ltd, unreported; SCt of WA; Library No 990062; 15 February 1999

Harman v Secretary of State for the Home Office [1983] 1 AC 280

Hoffmann La Roche AG v Chiron Corporations [2000] FCA 346

John Allan Ltd v Keegan [1968] WAR 125

Lyons v Kearn Konstructions (Townsville) Pty Ltd (1983) 47 ALR 114

Mann v Board of Health (ACT) (1996) 67 FCR 383

McCarthy v Dolpag Pty Ltd [2000] WASCA 106

Mulley v Manifold (1959) 103 CLR 341

Murex Diagnostics Australia Pty Ltd v Chrin Corporation (1995) 128 ALR 525

National Australia Bank Ltd v Idoport Pty Ltd [2000] NSWCA 8

Pegrum v Fatharly (1996) 14 WAR 92

Science Research Council v Nasse [1980] AC 1028

Swanston v Lisham (1881) 45 LT 360

Tipperary Developments Pty Ltd v Western Australia [1999] WASC 62; (1999) 21 WAR 250

Walker v Henville [1999] WASCA 117

1. MASTER SANDERSON:  On 24 February 2000 this matter came on before Registrar Rimmer at a status conference.  The plaintiffs and the defendants were at odds over discovery.  The learned Registrar ordered that by 3 May 2000 the defendants request discovery of the plaintiffs, identifying with particularity the documents or classes of documents required to be discovered.  The defendants complied with that order.  They filed and served a notice which sets out 24 classes or categories of documents of which they required discovery.  Essentially, they required discovery of all documents related to any matter in question between the parties - that is to say they sought to have the plaintiffs comply with what is commonly called the Peruvian Guano test:  see Compagnie Financiers du Pacifique v Peruvian Guano Co [1882] 11 QBD 55 per Brett LJ at 63.

2. By this application the plaintiffs sought to limit discovery to certain specified paragraphs in the defendants' notice.  During the course of his submissions, counsel for the plaintiffs offered an alternative formulation of the order which, in my view, is more appropriate and which I will refer to below.  However, to put the application in context, it is necessary to say something about the nature of the claim.

3. The statement of claim in this matter is a lengthy document which runs to 80 paragraphs and 27 pages.  However, the claim itself is relatively simple.  The first and second plaintiffs are interrelated, as are the first second and third defendants.  For present purposes I need identify the parties no more closely than that, and I will simply refer to the "plaintiffs" and the "defendants".  The plaintiffs plead that over a number of years they took advice from the defendants about investments in certain properties in Australia, these investments being secured by way of mortgage.  In February 1995 the plaintiffs engaged the defendants to advise in relation to proposed loans to a development known as the Kangaroo Valley Country Club ("KVCC").  It is pleaded that there then followed a series of written communications between the plaintiffs and the defendants, the upshot of which was that the plaintiffs lent $3 million to the developers of KVCC.  The plaintiffs say that in the course of arranging this loan the defendants engaged in misleading and deceptive conduct or were negligent and as a result the plaintiffs have suffered loss and damage.

4. It is further alleged that in mid 1996 the defendants asked the plaintiffs to consider investing more money in the development of KVCC.  Further correspondence passed between the parties.  As a consequence of this advice the plaintiffs say they invested a further $1,286,500 in the development of KVCC.  The plaintiffs allege that the defendants' actions with respect to both loans give rise to a breach of the defendants' fiduciary duty to the plaintiffs.  They also allege, in respect of this second loan, that the defendants engaged in misleading and deceptive conduct or were negligent.  The defendants deny all of the allegations made against them and deny that they are liable to the plaintiffs as alleged or at all.  This is very much a summary of the nature of the action between the parties, but it will suffice for the purposes of these reasons.

5. It would appear, although it is not entirely clear from the papers, that the plaintiffs' investment is lost.  The companies behind KVCC went into receivership and secured creditors standing in priority to the plaintiffs have taken all available funds.  What is clear is that certain documents relating to KVCC and the plaintiffs' investment are held by the former receivers.  The plaintiffs' application is supported by an affidavit of Douglas Howard Solomon, sworn 26 June 2000.  Appearing as Annexure "DHS‑1" to that affidavit is a copy of a letter from Prentice Parbery Barilla who were appointed receivers to the companies behind KVCC.  Their letter indicates that they have "accumulated approximately 28 lever arch files of correspondence and other relevant documentation".  The letter goes on to say that these documents are in storage.  Further, appearing as Annexure "DHS‑2" to Mr Solomon's affidavit is a letter from Perkins Lawyers.  It would appear they acted in some way in relation to the KVCC venture.  They say they have nine "Recall" storage boxes of files relating to dealings between the plaintiffs and the companies behind KVCC.

6. The plaintiffs' solicitors say they have in their possession a number of documents which are discoverable.  According to Mr Solomon's affidavit (par 5), these documents occupy five lever arch files.  During the course of his submissions, counsel for the plaintiffs indicated there may be a number of other documents in the possession of the plaintiffs or the plaintiffs' solicitors in addition to those contained in the five lever arch files which are discoverable.  What the plaintiffs wish to do is provide discovery of the documents they have in their custody and possession and not provide discovery of documents held by the former receivers or Prentice Parbery Barilla.  It was not in dispute that some or all of these latter documents might be discoverable on an application of the Peruvian Guano test.  Nor was it disputed that the documents were within the power of the plaintiffs.  It was the plaintiffs' argument that the scope of discovery should be limited, pursuant to the provisions of O 26 r 7(3).

7. The present O 26 r 7 was introduced in November 1996 as part of the raft of amendments designed to facilitate case management.  Order 26 r 7(3) is in the following terms:

   "On an application, or at any time of its own motion in any proceedings, the Court, having regard to Order 1 Rule 4B may -

   (a)order any or all of the parties to give discovery at that stage or at some specified future stage of the action;

   (b)as to the documents to be discovered by any party -

   (i)order that discovery be given of only those specified documents or specified classes of document;

   (ii)order that discovery be given of only those documents that are directly relevant to any specified matter in question or to all matters in question;

   (iii)order that discovery be given of all documents relating to any specified matter in question or to all matters in question;

   (c)make orders as to which parties are to be given discovery by any specified party;

   (d)order that any or all of the parties not give discovery at that stage of the action, or at all;

   (e)order any or all parties to make, file and serve an affidavit verifying the parties' list of documents discovered."

8. Remarkably enough, there have been very few applications made to the court which have relied upon this rule.  The rule appears to be most often applied when an application is made for further and better discovery and although the further discovery sought might, strictly speaking, be available an order is not made.  The case of Creative Land Management Australia Pty Ltd (In Liq) v Barfam Holdings Pty Ltd [2000] WASC 177 is a recent example of this approach.

9. It has long been appreciated that the Peruvian Guano test does, in some circumstances, impose upon parties to litigation a heavy burden.  In some jurisdictions the rules have been changed to limit the discovery process.  In Queensland, for instance, the discovery has been replaced by a requirement for "disclosure".  This process requires a party to disclose to other parties to proceedings documents it has in its possession or under its control which are directly relevant to an allegation in issue in the pleadings:  see r 211(1) and r 212 of the Uniform Civil Procedure Rules.  Victoria, on the other hand, has followed the approach adopted in this State and provided to the court the power to limit discovery in certain circumstances:  see O 29.05.  In my view, this case provides a good example of circumstances in which an order limiting discovery ought be made.  There are a number of reasons why I have reached that conclusion.  First, the plaintiffs' claim is based on a number of documents which are referred to in the pleadings.  Apart from these documents which are directly relevant to the matters in issue between the parties, there is nothing in either the statement of claim or the defence which suggests that the documents held by the former receivers and the company's solicitors will impact upon the proceedings.  The claim involves two plaintiffs and three defendants.  What is of prime relevance is the documents passing between these parties.  That is the foundation of the plaintiffs' claim.  No doubt there is other correspondence passing between the plaintiffs and the defendants and other parties which will be relevant.  But it is difficult to see that any of this correspondence will be central to the determination of the question of liability.

10. In reaching this conclusion I am mindful that, given the nature of the plaintiffs' claims, it is necessary for them to establish loss if their claim is to succeed.  To establish this loss the plaintiffs will need to establish a chain of causation.  The defendants argue that the chain of causation may have been broken and if this is the case it will only be disclosed by discovery of the documents held by the former receivers and their solicitors.  Counsel for the defendants made the valid point that no plea that the chain of causation has been broken can properly be made until all the documents have been examined and it has been ascertained that there is material to support the plea.  To make such a plea at present without documents would be improper.  If such a plea had been made, discovery would undoubtedly be ordered.  Counsel submitted the defendants should not be penalised for following proper pleading practice.

11. There is some force in that submission.  However, given the way the plaintiffs' claim is framed, the losses appear to be a direct result of the alleged negligence or breach of the Trade Practices Act.  Something quite specific would have to have occurred to break that chain of causation:  see March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 per Mason CJ at 514. That is not to say that the defendants are in any way precluded from arguing there has been a break in the chain of causation. But as matters stand at the moment, the prospects of maintaining such a defence seem limited.

12. The second reason why, in my view, this is an appropriate case is that it is open to the defendants to subpoena the documents in question prior to trial.  In other words, if the defendants wish to inspect the documents in the hands of the receivers and their solicitors it is open to them to seek the appropriate order under O 36 r 16A.  Alternatively, they could seek discovery from a non‑party under O 26A r 5.  So far as the defendants are concerned, both of these courses of action have the disadvantage of exposing them to the cost and expense of organising the production of documents.  It might well be argued that the result is an exercise in cost shifting - instead of the plaintiffs having to bear the cost of providing discovery of all documents, the defendants must bear that expense.  Once again, the force of the defendants' argument on this point must be acknowledged.  It then becomes a question of determining whether, given that the plaintiffs do not intend to rely on the documents in question, whether it is they who should bear the expense or the defendants.  On balance, in this case, I am satisfied that if the defendants think that the documents will assist their case then they should undertake the steps necessary to organise and obtain those documents.

13. As I have mentioned above, during the course of his submissions counsel for the plaintiffs suggested that rather than be ordered to provide discovery in relation to certain specified paragraphs of the defendants' notice, it would be preferable if the plaintiffs were ordered to give discovery of documents within their possession.  In my view, that is the preferable order and subject to hearing from counsel that is the order that I would propose to make.

14. By separate chamber summons the plaintiffs also sought an order that the defendants provide further and better answers to the plaintiffs' request for further and better particulars of the defence.  As I have indicated, the plaintiffs plead in their statement of claim that they engaged the defendants on what they have subsequently referred to as "a retainer".  This pleas is to be found in par 6 of the statement of claim and is in the following terms:

    "6.Primerock and Keet sought and received investment advice regarding investments in loans secured by mortgage over properties located in Australia from Barr, further or alternatively BBA, further or alternatively Cheriton."

15. Particulars of this claim are given and essentially those particulars are to the effect that there was a course of dealing between the parties over a number of years prior to March 1995.  Paragraph 5 of the defence is in the following terms:

    "5.As to paragraph 6 of the statement of claim:

    (a)Each defendant says that Cheriton located borrowers from time to time to whom Keet made loans secured by mortgages over properties located in Australia;

    (b)Otherwise, each defendant denies each and every allegation in paragraph 6."

16. The first two requests made by the plaintiffs of the defendants refer to the retainer pleaded in par 6 of the statement of claim.  For instance, request 1.1 seeks further and better particulars of:  "The terms of the retainer between the third defendant and the second plaintiff alleged in par 5 (for the purpose of this request, the 'Retainer')".

17. The assumption explicit in this request is that the defendants admit the retainer.  But that is not the case at all.  The defendants admit that Cheriton located borrowers from time to time and that Keet made loans to these borrowers secured by mortgages over properties in Australia.  That may or may not amount to a retainer.  At trial, it might be found that the course of dealing did give rise to a retainer.  That is a question for the trial Judge and any request for particulars which proceeds upon the basis that a retainer is admitted, is, in my view, misconceived.  On that basis, I would not be prepared to order further and better answers to the plaintiffs' request for particulars 1 and 2.

18. Request 3 seeks from the defendants further and better particulars of "the purport or substance" of 18 paragraphs of the defence.  For instance, further and better particulars are sought of par 8(a) of the defence.  Paragraph 8 of the defence responds to par 9 of the statement of claim.  Paragraph 9 of the statement of claim is in the following terms:

    "9.By facsimile dated 17 February 1995 Barr, further or alternatively BBA:-

    9.1represented to Primerock and Keet that Barr, further or alternatively BBA, had 'thoroughly investigated' the Proposal;

    9.2recommended the Proposal to Primerock, further or alternatively Keet, subject to 'final approval' after Barr inspected the property offered as security at Kangaroo Valley in New South Wales being the property on which the KVCC was to be developed (the 'Property')."

19. In response to that paragraph, par 8 of the defence reads as follows:

    "8.As to paragraph 9 of the statement of claim:

    (a)Each defendant says that by a facsimile dated 17 February 1995 BBA represented to Keet that Barr on behalf of Cheriton had "thoroughly investigated" the Proposal subject to final approval by Barr on behalf of Cheriton after Barr on behalf of Cheriton visited the site of the  KVCC and provided Keet with a final report;

    (b)Otherwise, each defendant denies each and every allegation in paragraph 9."

20. It is clear both parties admit the existence of the facsimile of 17 February 1995.  The plaintiff says that the facsimile has one meaning, the defendant says it has another.  Both agree that the representation by the defendants to the plaintiffs was that the Proposal had been "thoroughly investigated".  The plaintiff says that the Proposal was recommended to the plaintiffs by the defendants, subject to "final approval after inspection".  The defendants deny this to be the case.  The answer, of course, is to look at the facsimile.  It will speak for itself.  The only issue between the parties is whether or not what is pleaded in par 9.2 of the statement of claim is apparent from reading the letter.  In my view, the pleading in par 8 of the defence is not what is sometimes called a pregnant negative.  It simply puts in issue between the parties the proper interpretation of part of the facsimile of 17 February 1995.  In the circumstances, I accept that the defendants have adequately particularised their position and there is no necessity for them to provide further and better answers to this request.

1. The same reasoning applies in relation to each of the remaining 17 requests found as sub‑paragraphs to request 3.

2. I would dismiss the plaintiffs' application in relation to the defendants' answers to the request for further and better particulars of the defence.

3. I will hear the parties as to the form of the orders.