Proclear International Pty Ltd v United Beverage Co-Packers Pty Ltd
[2022] NSWSC 1630
•25 November 2022
Supreme Court
New South Wales
Medium Neutral Citation: Proclear International Pty Ltd v United Beverage Co-Packers Pty Ltd [2022] NSWSC 1630 Hearing dates: 25 November 2022 Decision date: 25 November 2022 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Disclosure before evidence ordered
Catchwords: CIVIL PROCEDURE – disclosure before evidence – where plaintiff’s case based on inferences – where documents sought to confirm that inferences arise – relevant information exclusively in possession of defendants – where second round of evidence in chief likely if disclosure not given before evidence – whether exceptional circumstances exist
Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW)
Texts Cited: Practice Note SC Eq 11
Category: Procedural rulings Parties: Proclear International Pty Ltd (Plaintiff/Applicant)
United Beverage Co-Packers Pty Ltd (First Defendant/Respondent)
RJ8 Enterprises Pty Ltd (Second Defendant/Respondent)
Michael Gordon (Third Defendant/Respondent)Representation: Counsel:
Solicitors:
B Michael (Plaintiff/Applicant)
P Russell (Defendants/Respondents)
Hall & Wilcox (Plaintiff/Applicant)
Vincent Young Lawyers (Defendants/Respondents)
File Number(s): 2021/363563
EX TEMPORE Judgment (REVISED)
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By Further Amended Notice of Motion filed in court today, the plaintiff seeks pre-evidence disclosure for the purpose of Practice Note SC Eq 11. The plaintiff also seeks to vary existing orders for security for costs or if, as the defendants contend, the proceedings are now stayed by reason of the plaintiff’s non-compliance with orders to which I will return, an order that the stay be lifted.
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On 24 March 2022, by consent the Court made orders:
That the plaintiff provide security for the first and second defendants’ costs of the proceedings by paying the sum of $160,000 into an interest-bearing controlled moneys account to be opened by Hall & Wilcox in the name of the plaintiff, the first defendant and the second defendant, in accordance with the following schedule:
1. Payable within 14 days of the date of this order - $30,000;
2. Payable on or before the service of the plaintiff’s evidence in chief - $40,000;
3. Before orders for discovery are made or agreed to - $30,000;
4. Six weeks before any final hearing - $30,000;
5. One week before any final hearing - $30,000
Total: $160,000
That such sums (including any interest earned thereon) to be held in that controlled moneys account as security for those costs and are not to be released or paid to any person without the prior written consent of the parties’ solicitors or further order of this Court.
That the proceedings against the first and second defendants be stayed if the security referred to above is not provided by the plaintiff in accordance with that order.
That the first and second defendants’ Notice of Motion listed on 25 March 2022 be dismissed.
That the first and second defendants’ costs of their Notice of Motion dated 16 February 2022 be reserved.
Noting that the first and second defendants reserve their rights to seek further security if necessary.
That the proceedings be listed for directions on 22 April 2022.
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There was a debate before me as to the proper construction of those orders; in particular, order 1 subpar 2 which obliged the plaintiff to provide $40,000 worth of security “on or before the service of the plaintiff’s evidence in chief”.
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On 14 July 2022, the Court directed that the plaintiff’s evidence in chief be served by 14 October 2022. The plaintiff did not comply with that order, evidently because of its apprehension that it needed the pre-disclosure which it now seeks.
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The defendants contend that order 1 subpar 2 should be construed as requiring security on the date that the plaintiff’s evidence was required, whether or not the plaintiff complied with the relevant direction. The defendants further contend that as the plaintiff did not so comply the proceedings are now stayed by reason of order 3. That is, in my opinion, to read into the orders words which do not appear. The words used by the parties in the order bespeak their intention that the plaintiff’s obligation was to provide the further security when it actually put its evidence on.
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As to order 1 subpar 3 made on 24 March 2022, that a further $30,000 security be provided “before orders for discovery are made or agreed to”, it appears clear to me that the parties were there referring to orders for general disclosure and not the orders which are now sought for pre-evidence disclosure.
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The plaintiff accepts that if it obtains the pre-evidence disclosure it seeks, it should provide security for that exercise, in addition to the existing regime for security. I return to this below.
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As the plaintiff’s submissions before me today set out, the proceedings concern a “Manufacturing Agreement” made on 2 April 2017 between the plaintiff and the defendants. The plaintiff is described in that document as the “Customer” and the first defendant as the “Manufacturer”. The second defendant was evidently a formulation, consulting and technical services provider. The third defendant, Mr Michael Gordon, is the director of both the first and second defendants.
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In these proceedings the plaintiff alleges, relevantly, that the first and second defendants breached obligations of exclusivity and confidentiality in the Manufacturing Agreement by manufacturing for and assisting third parties, and used confidential information in doing so.
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Relevantly to the pre-evidence disclosure application, the plaintiff says it does not know the detailed circumstances of the breaches, the scope of the products manufactured, when they were manufactured, for whom and how many units were manufactured, and for what price and the scope of the information used and disclosed.
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The basis of the application today is that all such information is solely in the possession of the defendants.
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The plaintiff accepts that it is able to adduce evidence in chief. However, as to two aspects of its claim, the plaintiff contends that it can only presently adduce evidence from which inferences (it says, strong inferences) can arise supportive of its case.
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In relation to the alleged breach by the defendants of the exclusivity term in the Manufacturing Agreement, the plaintiff says it has obtained samples of products manufactured by the first defendant which it says fall into what is called the “Product Category”, in circumstances where the plaintiff contends no other manufacturer in Australia was able to manufacture products of that kind. The plaintiff says this gives rise to an inference that the defendants have assisted third parties in this “Product Category”.
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The plaintiff says it does not know the further details about the nature, timing and scope of the arrangements under which the defendants assisted the third parties and that the documents it seeks will reveal all or some of that detail.
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In relation to the plaintiff’s claim for breach of the confidentiality terms of the Manufacturing Agreement, the plaintiff’s position is that there is a compelling inference that the defendants have breached those terms because the first defendant was manufacturing products for third parties in the “Product Category” and the first defendant was the only manufacturer in Australia capable of doing so. Again, the plaintiff says it does not know the full extent to which the confidential information was so used.
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The plaintiff also says, although with less enthusiasm, that the documents sought will enable it to determine “the practical utility” of amending its Commercial List Statement to add a further claim for breach of an equitable obligation of confidence. That looks very much like fishing to me and does not itself provide a basis upon which the plaintiff should get the pre-evidence disclosure it seeks.
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The plaintiff submits that if disclosure is not now given, and it adduces evidence in relation to the two aspects of its case to which I referred based on the information currently in its possession, it is likely, if not certain, that once there has been general disclosure in the usual way, it would wish to advance a second tranche of evidence in chief. That would not be an efficient way for this case to proceed in my opinion. It would also mean that the defendants could be faced with the prospect of themselves having to serve two tranches of evidence in response to those tranches of evidence from the plaintiff.
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It is true, as was pointed out on behalf of the defendants, that were I to make the orders sought by the plaintiff, there would be two rounds of disclosure. Looking at the documents sought, it appears to me to be unlikely that there would be any duplication of disclosure.
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The documents that the plaintiff seeks are:
All agreements between UBC and/or RJ8 on the one part, and any party (other than the plaintiff) on the other part, entered into on or after 2 April 2017 by which UBC and/or RJ8 agreed to manufacture, consult, or provide other assistance in relation to Relevant Products.
All purchase orders received by UBC and/or RJ8 for Relevant Products (other than orders received from the plaintiff).
All tax invoices issued by UBC and/or RJ8 to any party (other than the plaintiff) for manufacture, consultation, or assistance in relation to Relevant Products.
All documents recording the ingredients, formulae, and method of manufacture of the Relevant Products (other than products manufactured for the plaintiff), including without limitation the specifications of all Relevant Products.
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There is a dispute about the nature of the work that will be needed to produce the documents sought, but no suggestion that the task is oppressive, nor that the documents are not relevant.
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I am persuaded that there are “exceptional circumstances” for the purposes of Practice Note SC Eq 11 to justify the disclosures sought.
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As I have said, the plaintiff accepts it should provide security for the task of providing this preliminary disclosure, in addition to that already ordered.
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There is dispute as to the amount reasonably required by the defendants to disclose the documents sought. The plaintiff posits a figure of $5,000. The defendant posits a range of $19,000 to $40,000 for the task. That range allows between 43.5 and 105 hours of engagement of a junior solicitor on the task. It appears unlikely to me that such legal input would be required, bearing in mind the nature of the documents sought.
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A broad brush approach is required and, in my opinion, a more realistic figure is $15,000.
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In those circumstances I make these orders:
I vary the orders made on 24 March 2022 to add an order 1A as follows:
By 5pm on 1 December 2022 the plaintiff provide security of $15,000 for the pre‑evidence disclosure to be made in accordance with the following order.
Provided that the plaintiff has given security for costs for pre-evidence disclosure in accordance with the orders referred to above, within three weeks of the date of these orders, the defendants are to:
serve on the plaintiff in accordance with r 21.3 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) a verified list of all documents in their possession, custody or control falling within the classes specified in Annexure A to this Amended Notice of Motion; and
make such documents identified in their respective lists, other than privileged documents, available to the plaintiff for inspection in accordance with Div 1, Pt 21 of the UCPR.
Order 3 made on 14 July 2022 for the service of the plaintiff’s evidence is vacated.
I stand the matter over for directions on 10 February 2023.
[Discussion about costs]
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I order that the costs of the plaintiff's Further Amended Notice of Motion dated 25 November 2022 be the plaintiff's costs in the cause.
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Decision last updated: 29 November 2022
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