Roberts v Commonwealth Bank of Australia

[1998] FCA 1784

FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE - application for preliminary discovery under Order 15A rule 6 of the Federal Court Rules - agreement between parties - outstanding issue as to costs of application - costs reserved

Federal Court Rules:  Order 15A, rule 6

Paxus Services Limited v People Bank Pty Ltd (1990) 99 ALR 728, referred to
Commercial Bank of Australia v Amadio (1983) 151 CLR 447, referred to

ROBERTS v COMMONWEALTH BANK OF AUSTRALIA

NG 1234 of 1998

MADGWICK J
SYDNEY
8 DECEMBER 1998

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG 1234 of 1998

BETWEEN:

JANICE DINAH ROBERTS

APPLICANT

AND:

COMMONWEALTH BANK OF AUSTRALIA

RESPONDENT

JUDGE:	MADGWICK
DATE OF ORDER:	8 DECEMBER 1998
WHERE MADE:	SYDNEY

SHORT MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The costs in the matter are to be reserved.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY		NG 1234 of 1998

BETWEEN:

JANICE DINAH ROBERTS

APPLICANT

AND:

COMMONWEALTH BANK OF AUSTRALIA

RESPONDENT

JUDGE:	MADGWICK
DATE:	8 DECEMBER 1998
WHERE MADE:	SYDNEY

REASONS FOR JUDGMENT

HIS HONOUR:  In this case Janice Roberts (the applicant) sought an order from the Court, under Order 15A rule 6 of the Federal Court Rules, which provides that:

"Where -

(a)there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained;

(b)after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief; and

(c)there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision -

the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c)."

The power of the Court to order discovery under this rule is limited to ordering it against the person from whom relief might ultimately be sought.

The applicant's case is that she was tricked by her husband into mortgaging one property, of which she was a part-owner, and out of her equitable part-ownership of another property.  The applicant claims that, in relation to the mortgages over both properties taken by the Commonwealth Bank of Australia (the 'bank') to secure loans to a company operated by the applicant's husband, the bank was on sufficient notice of her special position of disadvantage so as potentially to give her an entitlement to relief against the consequences of the bank's proposed enforcement of the mortgages.  Various legal doctrines were suggested as being relevant, including those raised in Commercial Bank of Australia v Amadio (1983) 151 CLR 447.

Discovery from a prospective respondent
The applicant's solicitor began investigating the matter but did not have the adequate documentary evidence to enable a decision to be made whether to commence proceedings in the Court to obtain relief of the kind indicated.  When the solicitor asked the bank to produce the relevant documents the bank declined because, among other things, it had decided to commence proceedings in the Supreme Court of New South Wales to enforce one or more of its mortgages.  A short outline of the basis of the applicant's claim was given to the bank, but the bank's solicitors responded with a letter confirming their instructions to commence equity proceedings in the Supreme Court and seeking, by threats of pursuing indemnity costs, to dissuade the applicant from further contesting the bank's anticipated Supreme Court proceedings.  However, the applicant and her solicitor promptly came to this Court on the same day that the bank issued proceedings in the Supreme Court. 

In attempting to obtain information required to determine whether to issue proceedings, the applicant acted quite reasonably.  The Court's rule, which I have set out, was liberally interpreted by Burchett J in Paxus Services Limited v People Bank Pty Ltd (1990) 99 ALR 728, a decision which has been universally followed in the Court. The Supreme Court does not have such a rule and it is a commonplace that, where no such rule is applicable, the discovery of documents should prima facie await the conclusion of pleadings.

From the bank's perspective, it was being asked to provide a potential aggressor with the sinews of war.  Until the nature of a potential claim for relief, under Order 15A rule 6, is made clear with some particularity to a potential respondent to such an application, it seems

to me that such a person is entitled to insist on his or her prima facie right not to lend aid or comfort to the potential litigious enemy.

Agreement was reached by the first return date of the application that the bank would provide the documents sought.  However, the issue of costs remains outstanding.

Costs
There are two aspects to costs.  First, there will be the bank's minor but appreciable costs of producing the documents.  Second, there are the applicant's and the respondent's costs of dealing with the application to the Court.

As agreement was reached by the first return date of the application that the bank would provide the documents sought, there is no question of the bank being made to pay the costs of an unsuccessful effort to resist relief by way of a contested hearing, as was the case in Paxus.  In that case I note that Burchett J reserved all other costs of and incidental to the application.  The report does not make clear why this order was made, but I venture to think that it may have been because the same kinds of considerations, as arise from the present circumstances (and which are discussed below) also occurred to his Honour.

If the applicant's potential claims for relief ultimately prove well-founded, after a fully contested hearing, then the circumstances are likely to be such that she will, among other things, have demonstrated unconscientious behaviour on the part of the bank in its dealings with her.  In those circumstances, the costs that she has incurred in seeking the preliminary discovery might reasonably and properly be ordered against the bank.  If, on the other hand, the bank is able to demonstrate that her claims are moonshine, in that, for example, she was an active participant in her husband's company's business and had full knowledge of all the commercial dealings and mortgages, then it would be proper not only that she should not have her costs of the application for preliminary discovery, but that the bank should have such costs.  It may also be that there is some intermediate position.  For example, if the parties were to settle their claims for principal relief against each other, leaving the matter of costs still outstanding, then an order that they each pay their own costs or some variant of that, might be appropriate. 

In other words, one cannot, in my opinion, make a sensible order about where the costs of this application should lie until the rights of the parties are finally determined.  In the circumstances, I consider that it is too early to decide the question of costs with justice to each of the parties and therefore the costs are to be reserved.  Each party is to have liberty to apply on 48 hours notice.

I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Madgwick

Associate:

Dated:             8 December 1998

Counsel for the Applicant:	E Collins
Solicitor for the Applicant:	R Andrews
Counsel for the Respondent:	M Charlton
Solicitor for the Respondent:	Corrs Chambers Westgarth
Date of Hearing:	8 December 1998
Date of Judgment:	8 December 1998