FEDERAL COURT OF AUSTRALIA

Redline Contracting Pty Ltd v MCC Mining (Western Australia) Pty Ltd [2012] FCA 1157

THE COURT ORDERS THAT:

1.    The respondent is to file and serve its amended defence (if any) and amended notice of cross-claim by 31 October 2012.

2.    The applicant is to file and serve its amended defence to the amended notice of cross-claim by 14 November 2012.

3.    The respondent is to file and serve its reply (compliant with the Federal Court Rules 2011 (the Rules), and including proper particularisation) to the applicant’s amended defence to the amended notice of cross-claim by 28 November 2012.

4.    The parties are to complete electronic standard discovery in accordance with Rule 20.14 of the Rules by 17 December 2012.

5.    The directions hearing is adjourned to 9.00 am on 14 December 2012.

6.     The respondent is to pay the applicant’s costs thrown away by the reason of making any amendments made in accordance with order 1 above, and the costs of today’s proceedings in any event.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    This is an interlocutory application whereby the applicant, Redline Contracting Pty Ltd (Redline), seeks a number of programming orders. The application arises out of two related issues in respect of which the parties disagree.

the reply

2    The first issue arises from Redline’s objection to MCC Mining (Western Australia) Pty Ltd (MCC Mining)’s reply to its defence to cross-claim. The background is as follows.

3    On 20 June 2012, the Court, as part of a number of directions made that day, ordered that by 20 July 2012, MCC Mining file and serve its reply to Redline’s defence to cross-claim. MCC Mining did not comply with the order. Redline’s solicitors complained in correspondence to MCC Mining’s solicitors about MCC Mining’s failure to comply with that order. Eventually, after Redline had relisted the matter to come back to the Court on 28 August 2012, to deal with MCC Mining’s failure to comply with the Court’s order, MCC Mining agreed to a consent order (which was made on 24 August 2012) whereby it was to file and serve its reply by 4 September 2012.

4    The reply which MCC Mining filed and served on 24 August 2012 comprised one sentence to the effect that it joined issue with every paragraph in the defence to the cross-claim, save insofar as any paragraph contained an admission. Senior counsel for Redline submitted that this approach to pleading was unacceptable because it was at odds with the modern approach of the Court which was to require the parties to identify what was truly in issue well before trial.

5    This Court has particularly in recent times, been astute to take steps to require that parties to litigation identify, at an early stage, those issues which are truly in issue between the parties, whether by way of the pleading process, or by some other means during the interlocutory stages. This approach is reflected in s 37N of the Federal Court of Australia Act 1976 (Cth) and also in the Practice Direction CM1 issued by the Chief Justice. The object of this approach is to see that, so far as is possible, litigation is conducted speedily and inexpensively; and also, by reducing interlocutory disputes and adjournments, to assist the Court in disposing of matters as efficiently as possible.

6    Mr Collins, counsel for MCC Mining, contended that Redline’s criticism of the reply was not warranted. This was because, contended Mr Collins, it was always open to Redline to do nothing in response to the Court’s order to file and serve a reply, and simply to rely on the implied joinder of issues provided for in r 16.11 of the Federal Court Rules 2011. I do not accept that contention. First, once the Court had ordered that MCC Mining was to file a reply by a certain date, then it should have complied with that order, or alternatively, sought an amendment to the order. Secondly, the complexities of the pleadings in this case would have rendered such a course of conduct inconsistent with the Court’s approach to the early identification of issues referred to above.

7    The defence to the cross-claim to which MCC Mining replied comprised 75 paragraphs and pleaded a number of facts and matters which were within the knowledge of MCC Mining. In my view, MCC Mining’s bare joinder of issues reply did not contribute to identifying what was truly in issue between the parties. Thus, for example, it is not apparent from its reply to paragraph 39 of Redline’s defence to cross-claim, whether MCC Mining is putting in issue Redline’s version as to the effect of the letter or as to the authority of the author to make the statement.

8    The submission by senior counsel for Redline is to be upheld. Not only did MCC Mining fail to comply with the Court’s order to file and serve a reply to the defence of cross-claim by 20 July 2012, but when MCC Mining did finally file a reply, the pleading did not comply with the requirements of the Federal Court Act, the Rules and the Practice Direction.

9    Accordingly, I will strike out that pleading, but I will give MCC Mining an opportunity to file a further reply in due course.

scope of discovery

10    The second contentious issue between the parties related to the question of the scope of discovery. The dispute between the parties arose from a disagreement of the construction of an order made by the Court.

11    Rule 20.12 provides that a party can only give discovery if the Court so orders. Rule 20.14, which deals with the scope of discovery, provides as follows:

(1)    If the Court orders a party to give standard discovery, the party must give discovery of documents:

(a)    that are directly relevant to the issues raised by the pleadings or in the affidavits; and

(b)    of which, after a reasonable search, the party is aware; and

(c)    that are, or have been, in the party’s control.

(2)    For paragraph (1)(a), the documents must meet at least one of the following criteria:

(a)    the documents are those on which the party intends to rely;

(b)    the documents adversely affect the party’s own case;

(c)    the documents support another party’s case;

(d)    the documents adversely affect another party’s case.

(3)    For paragraph (1)(b), in making a reasonable search, a party may take into account the following:

(a)    the nature and complexity of the proceeding;

(b)    the number of documents involved;

(c)    the ease and cost of retrieving a document;

(d)    the significance of any document likely to be found;

(e)    any other relevant matter.

(4)    In this rule, a reference to an affidavit is a reference to:

(a)    an affidavit accompanying an originating application; and

(b)    an affidavit in response to the affidavit accompanying the originating application.

12    At the directions hearing on 20 June 2012, the Court, using a minute of proposed orders filed by MCC Mining, made an order that the parties give “general discovery” by 4 October 2012.

13    Mr Collins contended that there was a distinction between “standard discovery” and “general discovery” and that in making the order for “general discovery” on 20 June 2012, the Court had required the parties to give discovery in accordance with the test in Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Company (1882) 11 QBD 55 (Peruvian Guano test). This test provides for a very wide scope of discovery so that parties are required to discover even documents which may lead to a train of inquiry that may damage the case of the party giving discovery or advance the opponent’s case.

14    Mr Collins advised that MCC Mining had already given what it has referred to as “general discovery” in accordance with the Peruvian Guano test. He complained that Redline had not provided its discovery, and that there was nothing before the Court to show why it could not do so.

15    Mr Collins contended that at the directions hearing on 20 June 2012, Mr Dunning SC who appeared for Redline on that day, had agreed that general discovery in accordance with the Peruvian Guano test should be given.

16    I do not agree with Mr Collins’ construction of what occurred at the directions hearing on that day. The transcript shows that Mr Dunning SC did not understand there to be any distinction in the scope of the discovery arising from the use of the words “general discovery” (used in MCC Mining’s minute of proposed orders) and “standard discovery” (used in Redline’s minute of proposed orders). Further, I was not conscious that the question of whether the Court should order discovery which went beyond the scope of discovery provided for in r 20.14, was even before the Court.

17    Further, a letter dated 25 September 2012, written by Mr Spencer Flay, a partner in the firm of solicitors representing MCC Mining, to Redline’s solicitors, demonstrates an understanding that the scope of discovery to be given pursuant to the order made on 20 June 2012, was that provided for in r 20.14 of the Rules. In paragraph 2 of the letter, Mr Flay says:

As you know, both parties are required to give general discovery in accordance with the agreed protocol. That is, both parties are required to give discovery of documents directly relevant to the issues raised in the pleadings –

which is the test for standard discovery under r 20.14. This is emphasised by the fact that there is a footnote notation above the word “pleadings” which refers specifically to r 20.14.

18    In my view, therefore, the scope of the discovery which was ordered on 20 June 2012 was that of standard discovery under r 20.14 of the Rules. For the Court to make an order permitting, or requiring, any party to provide discovery under the Peruvian Guano test, would be a highly unusual order for this Court to make. The Court would need to be persuaded by way of a fully argued application to make such a radical order for discovery (see r 20.15 of the Rules).

19    The evidence also showed that in the course of the correspondence between the parties’ solicitors, there was talk of MCC Mining wanting to amend its pleadings, and of the possible joinder of further parties.

20    Mr Derrington SC for Redline contended that for the efficient conduct of the case, such amendments should be made prior to the giving of discovery. I agree. The scope of discovery is dependant upon what is in issue between the parties, which in turn, is dependant upon what is pleaded. If, as appears to be the case, the foreshadowed amendments relate to matters of which the parties are already aware, then those amendments should be made now. The case should be put on its best footing at this stage before discovery is given, so that the parties can give discovery in respect of a case where the matters truly in issue have been properly identified.

21    Mr Collins foreshadowed that, after the giving of discovery by the parties, MCC Mining may wish to make a further application to amend its pleadings. It is not uncommon for an amendment application to be made after discovery. If any such application for leave to amend a pleading is made by MCC Mining, that application would, of course, then be considered on its merits. But at the moment, the case needs to be restructured and put back on track.

22    Mr Collins’ argument that there was nothing before the Court to indicate why Redline could not have given its discovery, notwithstanding the absence of a fully pleaded reply, suffers from a misapprehension as to the fact that the giving of discovery is dependant upon there being a properly pleaded case, which sufficiently identifies what is truly in issue between the parties. The inadequate effort which was made by MCC Mining in relation to the pleading of its reply undermined the discovery process.

23    I will hear from the parties in relation to the orders that I should make, in light of what I have said.

Associate:

Dated:    22 October 2012