Scholle Industries Pty Ltd v AEP Industries (NZ) Limited - [2004] SASC 398

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master)
SCHOLLE INDUSTRIES PTY LTD v AEP INDUSTRIES (NZ) LIMITED & ANOR
Judgment of The Honourable Justice Besanko
2 December 2004
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PRACTICE UNDER RULES OF COURT - OTHER MATTERS ARISING BEFORE TRIAL
Appeal from an order of a Master - where the appellant sought an order under r 6A.08 that the respondent produce all experts' reports in its possession relevant to the proceedings - where the Master dismissed the appellant's application because the appellant had not invoked the operation of r 6A by serving a notice under r 6A.02 - where the Master held that in these circumstances the disclosure of experts' reports was dealt with by r 38 - whether r 6A.08 can be invoked when a plaintiff has not served a notice under r 6A.02 - consideration of the object and operation of r 6A - appeal allowed.
Supreme Court Rules 1987 rr 6A, 38.01, 2.01, 2.02, referred to.

SCHOLLE INDUSTRIES PTY LTD v AEP INDUSTRIES (NZ) LIMITED & ANOR
[2004] SASC 398
Appeal from a Master

BESANKO J: This is an appeal from an order made by a Master of this Court. Scholle Industries Pty Ltd has brought proceedings in this Court against AEP Industries (NZ) Limited and D S Smith (UK) Limited claiming damages and other relief in relation to loss said to have resulted from defective taps in wine casks. The action was commenced by inter partes summons dated 25^th February 2004. The plaintiff did not serve notice of its claim under r 6A.02 of the Supreme Court Rules 1987 (“the Rules”) prior to issuing the inter partes summons.
On 23^rd July 2004 the plaintiff issued a notice for specific directions seeking an order that the second defendant produce to its solicitors copies of all experts reports in its possession relevant to the proceedings within seven days. It is important to note that the reports sought were all experts’ reports, not just those upon which the second defendant seeks to rely. The second defendant took the view that the plaintiff was not entitled to such an order, and the plaintiff’s application was argued before a Master of this Court. The Master agreed with the second defendant’s submissions, and he dismissed the plaintiff’s application. The plaintiff appeals to a Judge of this Court. The second defendant sought to uphold the Master’s order. The first defendant took no part in the appeal.
The plaintiff’s inter partes summons contains an endorsement to the effect that although no notice of claim has been served in accordance with r 6A the plaintiff asserts that there are good grounds to relieve it from the consequences of failing to make such a notification and it identifies those grounds as follows:
“1.The first defendant has been aware that the plaintiff intends to claim upon it for over two years and was involved in investigations of the claim.
2.The second defendant received a letter dated 17 January 2002 advising that a claim would be made and was involved in investigations of the claim.
3.By reason of the matters set out in the Statement of Claim it was not possible prior to the issuing of proceedings to quantify the plaintiff’s claim.
4.The provision of experts reports to the first defendant.
5.Further matters which may relate to discussions without prejudice save as to costs and which may not appropriately be disclosed.”
The other matter to note at this point is that in August 2004 the second defendant sent an expert’s report dated 4^th October 2002 to the plaintiff and first defendant respectively describing the expert’s report as a report on which it intended to rely in the proceedings.
Issues on appeal
The plaintiff’s application was made under r 6A.08 of the Rules. In order to understand the issues on the appeal it is necessary to set out r 6A in full.
“Notice Before Action
6A.01(1) Rule 6A applies to inter parties actions commenced on and after 3 September 2000 and to the exclusion of Rule 101.01 (1) (b) in relation to those actions.
(2) Rule 6A does not apply to actions:
(a)if the claims made do not include any liquidated or unliquidated monetary sum other than costs;
(b)     if urgent relief is sought;
(c)     if the Court so directs; or
(d)     in the Land and Valuation Division.
6A.02(1) At least 90 days before commencing an action the plaintiff is to post or send to the defendants at their last known address a notice of the proposed claim with sufficient detail so that the defendants have a reasonable opportunity to make an offer to settle the claim before it is commenced.
(2) Where the claim is for any unliquidated amount the notice is to state the sum which the plaintiff will accept in satisfaction of such unliquidated claim or why, with brief reasons, such sum cannot be stated.
6A.03Where the plaintiff believes that an insurer is likely to indemnify any proposed defendant against the claim the notice under Rule 6A.02 is also to be sent to that insurer.
6A.04Where the claim is supported by expert evidence the plaintiff is also to send to the defendants and the insurers copies of any relevant reports from any expert which are relied upon with the notice under Rule 6A.02 unless such reports have already been supplied.
6A.05The Court may deprive a plaintiff who does not comply with Rule 6A of the whole or part of the costs of the action.
6A.06(1) Within 60 days of receipt of any notice under Rule 6A.02 the defendants or their insurers are to post or send to its sender a response to it and copies of any relevant reports from any expert on which they intend to rely unless such reports have already been supplied.
(2)The response under (1) is to include whether liability for the claim is    denied, and, if so, briefly state the grounds of such denial.
6A.07In any order for the costs of the action the Court is to have regard to any failure of a defendant or insurer to make any, or a reasonable, response under Rule 6A.06 and it may as a result of it order costs as between solicitor and client to the plaintiff for the whole or part of the action.
6A.08Where a proposed party to an action or an insurer has any relevant report of an expert which has not been supplied under Rules 6A.04 or 6A.06 such reports must be sent to the other parties by plaintiffs on the commencement of the action and by defendants on the filing of their notices of address for service.
6A.09The summons or other originating process is to include an endorsement stating that a claim has been notified in accordance with Rule 6A, or that no such claim has been notified as the plaintiff believes that there are good grounds to relieve the plaintiff of the consequences of failing to make such a notification, or for such other reason as may be briefly stated in the endorsement.”
Some features of r 6A may be noted. First, it does not apply to certain actions. For present purposes it is sufficient to note that it does not apply if the claim does not include a claim for money or if urgent relief is sought. Secondly, the experts’ reports which a plaintiff is to send with the notice are those upon which the plaintiff relies. Thirdly, the sanction against a plaintiff who does not comply with r 6A is that the Court may deprive the plaintiff of the whole or part of the costs of the action. The Court has a discretion, and clearly there may be good reason not to impose this sanction. Fourthly, the experts’ reports which the defendant or its insurer must send with his response are those upon which the defendant or its insurer intends to rely. Fifthly, the defendant or its insurer’s failure to comply with the obligation in r 6A.06 may be taken into account in an award of costs in favour of the plaintiff. Sixthly, the critical rule, r 6A.08, refers to “any relevant report of an expert”, and on the appeal it was common ground that this included all relevant experts’ reports whether they be favourable to the party supplying them or not. In other words, whether the party intends to rely on them or not. I think that that is the correct interpretation of r 6A.08. Seventhly, r 6A.08 was part of r 6A when it was introduced. Although it has been amended, it has not been amended in any respect relevant to the issues on the appeal. Eighthly, r 6A.09 makes clear what is implicit in the earlier provisions of the Rules, namely that the plaintiff can be relieved of the consequences of failing to serve a notice under r 6A.02.
The other rule of court which should be noted is r 38. This rule deals with the disclosure of experts’ reports in the course of an action in the Court. It provides that within 28 days after the time limited by the Rules for making discovery in the action, each party in an action shall deliver to all other parties a full copy of every expert report in the party’s possession or power relating to any matter in issue in the action. Rule 38.01(1) requires a party to deliver all experts’ reports relating to any matter in issue in the action irrespective of whether those reports are favourable or unfavourable and irrespective of whether the party intends to rely on those reports. There is power in r 38.01(4) for a party to apply for an order that it not be required to deliver an expert’s report because its case would be unfairly prejudiced by the disclosure of the particular report.
I turn now to the Master’s reasons. The Master said that r 6A was introduced with a view to the parties exploring the possibility of a commercial resolution of a matter prior to the issue of any proceedings and before significant costs were incurred. He noted that r 6A.09 provided for an endorsement to be included on the summons or other originating process stating whether the provisions of r 6A have been complied with or if not, whether there are good reasons for the non compliance. The Master noted that the endorsement on the summons in this case was to the effect that the plaintiff has not invoked the operation of r 6A. The Master said that:
“… r 6A is a complete code in relation to actions to be taken in relation to provision of experts’ reports where the parties comply with r 6A.”
After noting that the plaintiff by its endorsement had acknowledged that it had not invoked the operation of r 6A the Master said:
“That rule, therefore, has no operation in relation to the production of experts reports by either party in this action.”
The Master referred to r 38 and said that that rule dealt with the provision of experts’ reports generally in actions in this Court. He noted that as no party had yet filed a list of documents, discovery had not been made and the obligation to provide experts’ reports pursuant to r 38 had not arisen.
In practical terms the issue in this appeal relates to experts’ reports in a party’s possession upon which it does not intend to rely. It may be assumed that a party will not resist disclosure of those reports that it wishes to rely upon. The issue is whether a party is required to disclose experts’ reports in its possession upon which it does not intend to rely at the commencement of the action, or in the case of a defendant upon filing a notice of address for service, or, if a plaintiff does not serve a notice pursuant to r 6A.04, is it required to disclose such reports (subject to a dispensing order) only at the later point in time identified in r 38. That issue is to be determined as a matter of construction of the relevant rules.
The plaintiff submits that the terms of r 6A.08 are clear and each party must disclose all experts’ reports in its possession at the commencement of the action. It was said that there is no reason to read the rule down so that it only applies if the plaintiff has served a notice under r 6A.02. It was said that this construction of the rules is consistent with the “philosophy” of the rules which is to encourage disclosure of relevant material with a view to the early resolution of actions. Reference was made to the purpose of the rules and the rules establishing a system of case flow management and the objects of that system (rules 2.01 and 2.02). It was also said that a plaintiff may have good reason for not serving a notice under r 6A.02 but the Court may not be able to determine whether that is so at the commencement of the action. It was said that despite the fact that a plaintiff may have good reason for not complying with r 6A.02, the construction of the rule advanced by the second defendant would mean that the plaintiff would be denied the benefit of r 6A.08.
The second defendant submits that the decision of the Master was correct. It submits that the obligation in r 6A.08 only arises if the plaintiff serves a notice under r 6A.02. The plaintiff should not have the benefit of r 6A.08 if it does not serve a notice under r 6A.02. It is said that r 38 provides for adequate disclosure to an opposing party. It is said that r 6A.08 is part of a rule that deals with notice before action and that it should be restricted to the situation in which a plaintiff activates the procedure under that rule.
In my opinion, the starting point for the resolution of the issue are the terms of r 6A.08 itself. On the face of it there is no reason to read down the rule so that it applies only in cases in which the plaintiff has served a notice under r 6A.02. The fact that r 6A.08 appears in a rule which deals with a pre-action notice procedure is suggestive of the construction advanced by the second defendant, but in my opinion that consideration is not sufficient to outweigh the plain terms of r 6A.08. Furthermore, there are considerations which support a broad construction of r 6A.08. It is hard to see why its operation should be contingent on the service of a notice under r 6A.02 particularly as a plaintiff may have good reason for not serving such a notice. In addition, to a point the rules do promote disclosure with a view to early resolution of actions although this consideration cannot be taken too far because ultimately the question is one of the proper construction of the relevant rules.
In my opinion, the terms of r 6A.08 require the disclosure of relevant experts’ reports in a party’s possession and the Master erred in declining to make the order sought.
Conclusion
The appeal must be allowed. An order should be made that the second defendant produce to the plaintiff copies of all experts’ reports in its possession relevant to the action within seven days. I will hear the parties as to costs and any other orders.