Federal Court of Australia

SMBC Leasing and Finance, Inc v Flexirent Capital Pty Ltd [2022] FCA 1393

ORDERS

THE COURT ORDERS THAT:

In proceeding NSD 542 of 2022

1.    The applicant have leave to file a proposed amended originating application on or by 7 November.

2.    The parties provide a joint list of available dates for the hearing of the matter by 7 November 2022.

3.    The final hearing be set as soon as practicable and be communicated to the parties by Lee J.

4.    Seven days before the final hearing, the parties exchange an outline of submissions and file any statement of agreed facts, annexing copies of the relevant agreements that are the subject of the dispute.

5.    Two days before the hearing, the parties are to file and exchange an updated version of their outline of final submissions incorporating any responsive material, which will serve to supersede the submissions provided pursuant to Order 4.

6.    In the event a final hearing date is not set in accordance with these orders, the matter be relisted for a further case management hearing at 9:30 am on 30 January 2023.

7.    The submissions filed by the parties in accordance with these Orders are to be in Times Roman 12 point-type, are to refer to any authorised report and medium neutral citation of any cases referred to or cited (or in the absence of an authorised report, any unauthorised report and the medium neutral citation), and are not to include footnotes.

In proceeding NSD 543 of 2022

8.    The matter be listed for a further case management hearing at 9:30 am on 30 January 2023.

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

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from the transcript)

LEE J:

1    Before the Court are two proceedings tangentially connected to a group of proceedings listed for hearing before Cheeseman J. It is the common position of the parties, however, that the issues to be determined in these proceedings are not dependent upon findings her Honour may make.

2    The first proceeding (NSD 542 of 2022) is an application brought by SMBC Leasing and Finance Inc (SMBC) for preliminary discovery against the respondent, Flexirent Capital (Flexirent), accompanied by prayers for relief in the nature of two declarations together with orders for specific performance (Document Proceeding). The second proceeding (NSD 543 of 2022) is brought by SMBC against Flexirent and its holding company, Humm Group Limited, by which judgment is sought for an amount in excess of $33 million, together with additional relief (Primary Proceeding).

3    At the case management hearing today, I raised the issue of whether the Document Proceeding can continue in its current form. As noted above, SMBC seeks preliminary discovery against Flexirent pursuant to r 7.23 of the Federal Court Rules 2011 (Cth) (FCR), which provides:

7.23    Discovery from prospective respondent

(1)     A prospective applicant may apply to the Court for an order under subrule (2) if the prospective applicant:

(a)     reasonably believes that the prospective applicant may have the right to obtain relief in the Court from a prospective respondent whose description has been ascertained; and

(b)     after making reasonable inquiries, does not have sufficient information to decide whether to start a proceeding in the Court to obtain that relief; and

(c)     reasonably believes that:

(i)     the prospective respondent has or is likely to have or has had or is likely to have had in the prospective respondent’s control documents directly relevant to the question whether the prospective applicant has a right to obtain the relief; and

(ii)     inspection of the documents by the prospective applicant would assist in making the decision.

(2)     If the Court is satisfied about matters mentioned in subrule (1), the Court may order the prospective respondent to give discovery to the prospective applicant of the documents of the kind mentioned in subparagraph (1)(c)(i).

4    As is clear from the above, FCR 7.23 allows a “prospective applicant” to seek discovery from a “prospective respondent” to assist the prospective applicant in deciding whether to commence a proceeding in the Court. It cannot be used to build up a case that an applicant has already decided to bring: see Matrix Film Investment One Pty Limited v Alameda Films LLC [2006] FCA 591 (at [15]–[19] per Tamberlin J).

5    Apparently, the position of SMBC is that it needs access to certain documents, referred to in the schedule to the originating application (relevant documents), in order to form a view about whether proceedings should be commenced against Flexirent for breach of the Master Receivables and Acquisition Servicing Agreement dated 2 August 2018 between SMBC and Flexirent (2018 MRASA). However, SMBC also asserts that it is entitled to be provided with those documents in any event under the 2018 MRASA and a supplemental deed (Supplemental Deed) dated 2 August 2018. It seeks declaratory relief as to the proper construction of those agreements along with orders for specific performance.

6    Given the current demands in my docket, it is unlikely that I will have an opportunity to hear the Primary Proceeding in the near future. Accordingly, instead of making directions to further progress the Primary Proceeding, it seems to me the question of whether SMBC is going to seek the substantive relief foreshowed in the Document Proceeding should be determined as soon as practicable.

7    In the light of this, the appropriate course is to grant SMBC leave to file in the Document Proceeding an amended originating application seeking declaratory relief and an order for specific performance. Such application should truly identify the disputed construction relating to the obligations of Flexirent under the 2018 MRASA and Supplemental Deed. This will allow SMBC, if it is successful in obtaining the relevant documents through the Document Proceeding, or through some other adjectival application, to consolidate the two proceedings by amending the relief sought in the Primary Proceeding.

8    Although I have not seen the relevant documents, it does seem to me that it is likely to be a relatively short construction dispute. Given the nature of the dispute, there is no reason why the parties should not be able to prepare a statement of agreed facts pursuant to s 191 of the Evidence Act 1995 (Cth), together with a bundle comprising the two documents the subject of the construction dispute. I will order that those documents be provided to me together with an exchange of submissions a few days prior to the date of the hearing, which will be fixed in due course.

Associate:

Dated:    24 November 2022