FEDERAL COURT OF AUSTRALIA

 Deppro Pty Ltd v Daly [2006] FCA 1727

PROCEDURE – judgment on default – respondents’ discovery – whether lists complied with orders of Court as a matter of substance – whether alleged deficiencies open to argument – whether any non-compliance such as to deprive respondents of entitlement to argument on the merits

Federal Court Rules O 15, O 15 r 2(3), O15 r 2(4), O 15 r 2(5), O 15 r 6, O 15 r 8, O 35A

Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433

Australian Competition and Consumer Commission v 1Cellnet LLC [2005] FCA 856

Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427

Burkett v Miller (unreported, Western Australian Supreme Court, 6 September 1977)

Freeman v Rabinov [1981] VR 539

Luna Park Sydney Pty Ltd v Bose [2006] FCA 94

Macquarie Bank Limited v Seagle (2005) 146 FCR 400

Magenta Nominees Pty Ltd v Bonini [1999] WASC 88

Reiss v Wolf [1952] 2 QB 557

Republic of Liberia v Roye [1876] 1 App Cas 139

Smith, In the Matter of Barron Entertainment Ltd (In Liq) (2004) 139 FCR 566

Southern Cross Oil v Fire and All Risks Insurance Co Ltd (1986) 7 NSWLR 319

DEPPRO PTY LTD ACN 070 490 747 AND DEPPRO (WA) PTY LTD ACN 099 861 248 v DANIEL JOSEPH DALY, DEPWEST PTY LTD ACN 115 751 758, RAMPANT CAPITAL PTY LTD ACN 115 272 681 and DALY CAPITAL PTY LTD ACN 115 272 716

WAD 381 OF 2005

NICHOLSON J

12 DECEMBER 2006

PERTH

THE COURT ORDERS THAT:

1.                  Paragraph 1 of the applicants’ notice of motion dated 14 September 2006 be refused.

2.                  Paragraph 2 of the same motion be held over for further direction following the case management conference listed for 20 December 2006.

3.                  Costs reserved.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The applicants bring a notice of motion that the first, second and fourth respondents’ defence be struck out.  In the alternative, they seek further and better discovery from those respondents.

2                     The notice of motion is supported by an affidavit of Mr Sauer sworn on 14 September 2006.  He is a solicitor in the employ of the applicants’ solicitors.  Additionally, reliance is placed on his affidavit sworn on 10 July 2006. 

History of relevant court orders

3                     On 8 March 2006 the Court ordered that the first, second and fourth respondents provide disclosure of relevant documents by 28 April 2006. 

4                     On 24 May 2006 the Court ordered that those respondents provide such disclosure by 9 June 2006. 

5                     On 9 June 2006 the solicitors for the same respondents sought a further seven days to perform disclosure.  That was rejected by the applicants’ solicitors and, despite a number of further letters to the respondents, no further response was forthcoming from them on that issue. 

6                     On 22 August 2006 the Court ordered (in part):

‘1.        The first, second and fourth respondents provide disclosure of relevant documents by affidavits on or before 4.00 pm on Friday 8 September 2006.

2.         Failing compliance with order 1 by any of the first, second or fourth respondents, judgment be entered in these proceedings for the applicants against the respondent who fails to comply; with damages to be assessed by the Court.’

Additionally, the same respondents were ordered to pay the applicants’ costs forthwith. 

7                     On 8 September 2006 each of the three respondents filed and served a list of documents.  It is this which the applicants claim ‘was token at best’.  The applicants submit that each of the three respondents has not given any explanation for failure to disclose documents which they assert, at the very least, previously existed and are highly likely still to be in existence and hence discoverable. 

Basis for order on default

8                     The applicants turn to O 35A of the Federal Court Rules (FCR) as a basis upon which they are entitled to judgment on default.  The relevant portions of that Rule for present purposes are as follows:

‘1         In this Order:

            “applicant” includes a cross-claimant.

            “claim” includes a cross-claim.

            “respondent” includes a cross-respondent.

...

2(2)     For this Order, a respondent is in default if the respondent has not satisfied the applicant’s claim and:

            …

(d)               the respondent fails to comply with an order of the Court in the proceeding; or

…

(f)                the respondent fails to serve a list of documents or an affidavit or other document, or does not produce a document as required by Order 15 …

…

3(2)     If a respondent is in default, the Court may:

            …

(c)                if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings – give judgment against the respondent for the relief that:

(i)                 the applicant appears entitled to on the statement of claim; and

(ii)               the Court is satisfied it has power to grant; or

(d)               give judgment or make any other order against the respondent; or

(e)                make an order specified in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time limited in the order.

…

3(5)     The Court may make an order of the kind mentioned in subrule (1), (2) or (4), or any other order, or may give such directions, and specify such consequences for non-compliance with the order, as the Court thinks just.’

9                     In Australian Competition and Consumer Commission v 1Cellnet LLC [2005] FCA 856 at [14] (1Cellnet FCA 856), I stated:

‘Pursuant to O 35A r 3(2)(c), where a respondent is in default the Court may (the proceeding having been commenced by application supported by a statement of claim) give judgment against the respondent for relief.  There are two conditions to that.  The first is that the applicant appears to be entitled to that relief on the statement of claim.  This rule does not require proof by way of evidence of the applicant’s claim; rather it requires that on the face of the statement of claim there is a claim for the relief sought and that the Court has jurisdiction to grant that relief:  Arthur v Vaupotic Investments Pty Ltd[2005] FCA 433 at [3] per Heerey J.  The second is that the Court is satisfied it has power to grant the relief.’

In Macquarie Bank Limited v Seagle (2005) 146 FCR 400 (Seagle 146 FCR), Conti J accepted a submission that so long as each element of the relevant civil wrong involved is properly and discretely pleaded in the statement of claim, the requirement of subrule (3)(2)(c)(i) will be satisfied in principle.  In Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427, Kiefel J reviewed the origins of O 35A.  At [45] her Honour accepted that the decisions of the Court in Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 and Luna Park Sydney Pty Ltd v Bose [2006] FCA 94, along with the decisions of 1Cellnet FCA 856 and Seagle 146 FCR confirmed that no evidence needs to be adduced under the relevant paragraph.  At [47], her Honour stated:

‘An approach that does not deny the prospect of any additional, or different, relief being granted under O 35A is consistent with the general provisions of O 35, which permits judgment to be given regardless of whether the particular claim for relief is made.  Order 35A does not itself deny the right to relief which may arise from admissions of the matters alleged in the statement of claim.  No general rule prohibiting additional or varied relief should be implied.  Whether it is permitted in any particular case should depend upon the nature of the case, the orders sought and whether the respondent is, or can be taken to be, cognizant of the prospect of such an order being made.  All these considerations are within the discretion maintained by the terms of O 35A.  In the present case the principal change in the relief sought is in the content of the declarations and injunctions and argument has been addressed by the respondents to them.’

At [50], Kiefel J stated that it may be accepted that some further affidavit material may be accepted by the Court in relation to the relief sought. 

10                  Here, if successful, the applicants ask that the motion be returned to Court so that orders can be considered in that context. 

11                  In the present case there has been purported compliance with the order by each of the relevant respondents.  That raises the question whether the springing order made on 22 August 2006 is prevented from being self-executing.  In Magenta Nominees Pty Ltd v Bonini [1999] WASC 88, Wheeler J took from Burkett v Miller (unreported, Western Australian Supreme Court, 6 September 1977) (Burt CJ) the proposition that:

‘... the filing of a wholly inadequate affidavit of general discovery will prevent a springing order from being self-executing, but the inadequacy of the affidavit may nevertheless enliven a discretion to strike out the claim pursuant to Order 26 rule 15, on the basis that an inadequate affidavit represents a failure to give discovery as contemplated by the Rules of the Supreme Court or by the relevant order.’

Her Honour referred to other authority for the proposition that a document which is not made in good faith or could be regarded as an illusory attempt to comply with a springing order will not prevent the order from being self-executing notwithstanding that, in its form, the document appears to be an appropriate affidavit: see Reiss v Wolf [1952] 2 QB 557; Republic of Liberia v Roye [1876] 1 App Cas 139 but cf Freeman v Rabinov [1981] VR 539 and Southern Cross Oil v Fire and All Risks Insurance Co Ltd (1986) 7 NSWLR 319.  Her Honour concluded from the authorities that:

‘... while the filing of a document, which is deficient in some respect, may prevent the operation of a springing order, it is not the case that the Court will never look at the substance of the document.  However, even if the document is of such apparent adequacy as to prevent the operation of the springing order, Burkett directs attention to a further inquiry, in the exercise of a discretionary decision.’

After citation of these passages in Smith, In the Matter of Barron Entertainment Ltd (In Liq) (2004) 139 FCR 566 French J said at [31]-[32]:

‘31       There is no express provision of the Federal Court Rules which confers upon the Court the power to enter judgment on a discretionary basis where formal compliance with a condition of a springing order, sufficient to defeat the operation of the order, has occurred.  In my opinion, the questions the Court is asked to consider in determining whether there has been compliance with an order that a pleading be filed. are:

1.         Has any document be filed at all, and if so

2.         Does the document filed as a matter of form and substance comply with the order made?

If the answer to the second question is no, then the self-executing default order will operate.  If it is yes, then the self-executing default order will not operate.  The answer to the question may involve an assessment and evaluation of the substance of the document filed and whether, as a matter of substance, it obeys the order of the Court.  That is not a question of discretion.  If there be compliance then, in my opinion, no question of discretion arises in relation to the operation of the default order.

32        If a pleading is filed it may comply with the requirements of the order and yet be amenable to strike out under the provisions of the rules relating to pleadings which fail to disclose a reasonable cause of action or defence or on one of the other prescribed grounds.  That it is struck out does not mean that its filing was nugatory and that it did not satisfy the requirements of the self-executing default order.  Such an order is a serious measure which, if it takes effect, deprives a party of its entitlement to have its case heard and determined on the merits.  It does so on the basis of a serious failure to comply with an order of the Court.  It is not to be construed broadly or vaguely.’

12                  I propose to follow and apply this reasoning of French J.

Requirements of discovery

13                  The applicants’ case is that the nature of the list filed by each of the three respondents constitutes a failure to comply with an order of the Court and failure to serve a list as required by FCR O 15.  The documents required to be disclosed in the normal course pursuant to FCR O 15 r 2(3) are documents on which the party relies; those which adversely affect the party’s own case; those which adversely affect the other party’s case; and those that support another party’s case.  A document is not required to be disclosed if the party giving discovery reasonably believes that the document is already in the possession, custody or control of the party to whom discovery is given: FCR O 15 r 2(4).  Order 15 r 2(5) makes apparent that what is required under O 15 r 2(3) is a reasonable search taking into account the nature and complexity of the proceeding, the number of documents involved; the ease and cost of retrieving a document; the significance of any document likely to be found; and any other relevant matter.

14                  The manner in which documents are to be listed in the case of general discovery is subject to the provisions of FCR O 15 r 6 which makes Form 22 applicable.  It is required to enumerate the documents that are or have been in the possession, custody or control of the party making the list.  This has to be done in a convenient sequence and as shortly as possible but with a sufficient description of each document to enable it to be identified.  Privileged documents must be identified and the grounds of privilege sufficiently stated.  Documents no longer in possession of a party are to be distinguished, it should however be stated when the documents were parted with and what has become of it.  A solicitor is required to certify the list. 

15                  FCR O 15 r 8 provides for orders for particular discovery.  It allows further orders to be made even though an opponent’s affidavit of documents may be sufficient in point of form. 

Documents said to be waiting discovery

16                  In each of the respondents’ lists the relevant respondents say that they have in their possession, custody or control certain documents enumerated in each case in sch 1.  The first and second respondents object to production of several identified documents on the grounds of confidentiality.  All of the respondents claim legal professional privilege in respect of Pt 2 of Sch 1 to their list.  Each list also includes a Sch 2 of documents which they had in their possession but do not now have in their possession, custody or control.  On the face of it, each of the three respondents has in their respective list endeavoured to address the requirements of FCR O 15 r 6. 

17                  The applicants say that is not so because of the failure of any of the three respondents to address the question whether they have or have had in their possession, custody or control documents as follows:

(i)         a soft copy of the first respondent’s address book;

18                  The applicants say that on 3 February 2006 the relevant respondent provided a hard copy of the address book and informed the applicants that the hard copy was a printout of the soft (electronic) copy. 

19                  The respondents say no evidence is before the Court as to why the soft copy is relevant given that the hard copy has been disclosed and no inspection has taken place.  It is said the applicants’ discovery includes a number of documents held both as hard and soft copies but no soft copies are disclosed by the applicants’ list. 

(ii)               copies of all ‘Depwest Launch Party’ invitations sent to the second respondent on or about 8 November 2005;

20                  The respondents assert that copies of the invitation are already in evidence from both the respondents and the applicants.  That being the case, they are not required to discover a document which they reasonably believe is already in the possession, custody or control of the party to whom discovery is given.  This is based on the affidavit of Ms Tucker sworn on 8 December 2005: [12].  Examination of that paragraph shows that it makes available a particular invitation but does not make available copies of all invitations. 

(iii)             copies of all depreciation reports produced by the second respondent;

21                  The respondents say that the request is too wide in that all depreciation reports produced by the second respondent will include reports not relevant to the proceedings.  Further, such reports contain information private to the customers of the second respondent so that the request should be explicit and more fully justified. 

(iv)             all correspondence, including but not limited to letters, emails and facsimiles, passing between the first respondent and Brian Gerard McNamara or Wentworth Mutual Limited or any of Wentworth Mutual’s directors;

22                  It is pleaded in [19] of the statement of claim that whilst an employee of the first applicant and/or the second applicant, on a date or dates prior to 9 August 2005, the first respondent formed the intention that Mr Brian McNamara and/or Wentworth Mutual Limited, and/or alternatively persons not associated with the applicants and to be identified by the first respondent, would establish or cause to be established a company to conduct business in competition with the first applicant and/or the second applicant. 

23                  The respondents say that they do not know to what issue the correspondence is said to be relevant.  Further, that the request is without limitation as to time and so oppressive. 

(v)               all mobile and landline telephone records of the first respondent;

24                  The respondents say there is no explanation of why these documents might be relevant and discoverable. 

(vi)             a copy of the attendee list for the launch of the business of the second respondent as referred to in paragraphs 38 and 40 of the affidavit of the first respondent dated 15 December 2005 and filed herein;

25                  The applicants’ foundation for this item is a statement in the affidavit of the first respondent dated 15 December 2005 ([38] and [40]) that he ‘asked Shana Weiland to compile a list of invites to the (launch of Depwest)’ and that ‘it took about three business days for Ms Weiland to complete the list and send the invitations’.  The applicants base this on allegations in issue concerning the first respondent’s alleged inappropriate sending of documents from his work email account to his home email account. 

26                  The respondents rely on the evidence of the first respondent in his affidavit sworn on 27 January 2006 that no list of invitees was produced or kept. 

(vii)           copies of all emails forwarded from the first respondent’s work email account with the first applicant to the first respondent’s home email account or private email account;

27                  The respondents say that the first respondent has given evidence he deleted all information on his home computer arising from his employment with the second applicant.  Further, that the category has been discovered at [25] of the first respondent’s list.  That appears in the second schedule of the list. 

(viii)         copies of all bank account statements for the first respondent from May 2003 to November 2004;

28                  The applicants ground this request on [13] of the defence that the first respondent’s job title changed to State Manager for Western Australia without any admission that he was promoted by the second applicant. 

29                  The respondents say the category is too wide and that no explanation of relevance is provided. 

(ix)             copies of all documents held by the first, second and fourth respondents relating to preparations to commence the businesses of the second, third or fourth respondents;

30                  The applicants ground this on [41] of the defence in which the relevant respondents deny that the second respondent would not have commenced (or been in a position to commence) preparations to carry on its business until a later date than that on which it did so. 

31                  The respondents point to the fact that this rolls up the second, third and fourth respondents but without any explanation as to why the first, second or fourth respondents might have documents relating to the preparations of the third respondent.  It is submitted that it is widely drawn and apparently fishing.

(x)               copies of all bank account statements, financial documents and books of account of the second respondent;

32                  The applicants base this on what they say is an issue in the proceedings, namely, the extent to which the second respondent has made or will make profits which it would not otherwise have made as a result of the facts referred to in the statement of claim.

33                  The respondents say this is also too wide and imprecise. 

(xi)             copies of correspondence, file notes and memoranda between James Lachlan Hannah and the first respondent in relation to the first respondent’s control over the operations of the second applicant as referred to in paragraph 22(b) of the respondents’ defence filed herein;

34                  This is based by the applicants on [22(b)] of the defence in which the relevant respondents allege that the first respondent had day to day control over the operations of the second applicant in Western Australia subject to instructions from Mr Hannah. 

35                  The respondents assert there is no evidence that any such documents exist and no basis for suggesting that any one other than the first respondent had copies of such documents even if they existed.  In the case of the first respondent, he has disclosed that, when he ceased employment with the second applicant, he destroyed documents relating to his employment by the second respondent.  It is also submitted that if the documents existed they were with James Hannah in his capacity as director of the applicants so that there are good grounds to consider the applicants have such documents in any event. 

(xii)           copies of all documents relating to the nature of the business conducted by the second respondent;

36                  This is founded by the applicants on the issue said to be in the proceedings of the extent to which the second respondent conducts its business in competition with the first applicant. 

37                  The respondents say the category is too wide and imprecise and the matter identified is not an issue in the proceedings. 

(xiii)         copies of all correspondence (including but not limited to emails, letters and facsimiles) passing between the first respondent and the second respondent and relating to the establishment and development of the business of the second respondent;

38                  This is based by the applicants on [28(d)] of the defence in which the relevant respondents deny that the first respondent established and developed or took steps to establish and develop the business of the second respondent. 

39                  The respondents say the category is too wide and imprecise and that there is no evidence suggesting the existence of such documents.  They assert that it is plain from the evidence filed in the proceeding to date that the first respondent was, from the commencement of the second respondent’s business until August 2006, a director and/or employee of the first respondent.

(xiv)         copies of all telephone accounts held by each of the first, second and fourth respondents and relating to the period from August 2005 to the current day;

40                  The respondents maintain the category is wide and vague and the need for it is unsupported by any evidence. 

(xv)           all correspondence (including but not limited to emails, letters and facsimiles) passing between the first respondent and any other person relating to the commencement of the business of the second respondent;

41                  The applicants base this on [28(e)] of the defence in which the relevant respondents deny the first respondent contacted parties who had previously referred business to the applicants and advised them of the commencement of the business operations of the second respondent.  Also, on [28(f)] of the defence in which the relevant respondents deny that the first respondent contacted parties who had previously engaged the services of the applicants or one of them and advised them of the commencement of business operations of the second respondent. 

42                  The respondents say the category is too wide and imprecise and is speculative and involves fishing, its relevance being unexplained. 

43                  The applicants’ position in relation to these matters was set out in a letter dated 12 September 2006 to the solicitors for the relevant respondents.  No response has been received to that letter from those respondents.  The lists were filed on 8 September 2006 and thus preceded receipt of the letter. 

44                  The respondents submit that the categories of documents sought in the application are sought from each of the three relevant respondents as if they were a single party, when it is obvious that none of them are likely to have documents in all of the categories listed.  It is said that the failure of the applicants to specify which documents are to be discoverable by which respondents demonstrates the failure of the applicants to address the requirements of FCR O 15 r 8 in any meaningful way.  That is, it is said the applicants have failed to make any genuine attempt to discharge the burden on them for specific discovery. 

Reasoning

45                  I do not consider the applicants have made out such a serious failure to comply with the order of the Court relating to discovery as to entitle them to the default order becoming self-executing.  There are two inter-related reasons for this conclusion. 

46                  Firstly, I am not satisfied that the lists filed by each of the relevant respondents fail as a matter of substance to comply with the order.  Each list discovers documents and no exception is taken to what has been discovered.

47                  Secondly, the alleged deficiencies in discovery are clearly open to argument.  Relevance is disputed on a number of the requests.  Only by working through each category in detail after further submissions could any exact measure of further discovery be arrived at.  The submissions of the respondents in the categories are reasonable and open to argument and submission.

48                  Consequently I do not consider the applicants have made out a case of non-compliance in substance such as would entitle them to a self-executing default order so as to deprive the respondents of their entitlement to have their cases heard and determined on the merits. 

49                  It follows that outstanding issues of discovery should be among those listed for consideration at the forthcoming case management conference.  Paragraph 2 of the motion should therefore be held over pending that conference. 

Associate:

Dated:         12 December 2006