Takapana Investments Pty Ltd v Teco Information Systems Co Limited [2001] FCA 111 (22 February 2001)

Last Updated: 22 February 2001

FEDERAL COURT OF AUSTRALIA

Takapana Investments Pty Ltd v Teco Information Systems Co Limited

[2001] FCA 111

TAKAPANA INVESTMENTS PTY LTD v TECO INFORMATION SYSTEMS CO LIMITED

VG 50 of 1997

GOLDBERG J

22 FEBRUARY 2001

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 50 of 1997

BETWEEN:	TAKAPANA INVESTMENTS PTY LTD Applicant
AND: AND:	TECO INFORMATION SYSTEMS CO LIMITED Respondent TECO INFORMATION SYSTEMS CO LIMITED Cross-claimant TAKAPANA INVESTMENTS PTY LTD Cross-respondent
JUDGE:	GOLDBERG J
DATE OF ORDER:	22 FEBRUARY 2001
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The respondent pay the applicant its costs of and incidental to the notice of motion filed by the applicant on 2 October 2000, and the costs of the hearing of that motion on 4 October 2000.

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 50 of 1997

BETWEEN:	TAKAPANA INVESTMENTS PTY LTD Applicant
AND: AND:	TECO INFORMATION SYSTEMS CO LIMITED Respondent TECO INFORMATION SYSTEMS CO LIMITED Cross-claimant TAKAPANA INVESTMENTS PTY LTD Cross-respondent

JUDGE:	GOLDBERG J
DATE:	22 FEBRUARY 2001
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1 On 2 October 2000, the applicant filed a notice of motion returnable on 4 October 2000 seeking an order that the respondent file a further list of documents in accordance with O 15 r 6 of the Federal Court Rules stating whether documents of the classes described in the schedule to the motion were, or had been, in its possession. The schedule to the motion was in the following terms:

"1. Documents which evidence or record ISO 9000 audit reports in relation to the manufacture of computer monitors by the Respondent (`the manufacturing process') from January 1992 until December 1994 (`the relevant period');

2. Documents which evidence or record ISO audit certificates in relation to the manufacturing process during the relevant period;

3. Documents which evidence or record the Respondent's compliance or non-compliance with ISO 9000 training requirements for personnel involved in the manufacturing process during the relevant period;

4. Documents which evidence or record the Respondent's compliance or non-compliance with the ISO 9000 standard in relation to the manufacturing process during the relevant period;

5. Documents which evidence or record any ISO 9000 corrective action requests or requests in relation to the manufacturing process during the relevant period;

6. Documents which evidence or record any notice of default in the manufacturing process complying with the standard ISO 9000 during the relevant period;

7. Documents which evidence or record the employment of students and work experience trainees in relation to the manufacturing process during the relevant period."

2 When the motion and a directions hearing in the proceeding came on for hearing on the morning of 4 October 2000, counsel for the respondent consented to an order that the respondent file and serve a further list of discoverable documents, including the documents referred to in the schedule. The applicant sought an order that the respondent pay its costs of the motion. The respondent resisted that application and I directed the parties to file submissions in relation to the issues of the costs of the motion. The respondent's position is that the costs of the motion should be either costs in the proceeding, or each party should bear its own costs of the motion.

3 The applicant's claim against the respondent arises out of an agreement by the respondent to supply the applicant with computer monitors. The applicant alleges that there were express terms of the supply agreement which included a term that the monitors be manufactured by a process and quality control system that complied with ISO quality standard ISO 9000 and that this term was breached. Paragraph 4(d) of the first statement of claim filed by the applicant on 6 February 1997 was in the following terms:

"There were express terms of the agreement that:

...

(d) the manufacturing process and quality control system employed by the respondent to manufacture the computer monitors would comply with the ISO quality standard ISO9000;"

Paragraph 7(d) of the first statement of claim was in the following terms:

"In breach of the express terms of the agreement:

...

(d) the computer monitors supplied by the respondent were not manufactured by a manufacturing process and quality control system which complied with ISO quality standard ISO9000;"

The applicant also alleged that in order to induce the applicant to enter into the agreement, the respondent represented to the applicant that the monitors would be manufactured by a process and quality control system that complied with the ISO 9000 standard and that the representation was false.

4 Paragraph 10(d) of the first statement of claim was in the following terms:

"... the respondent represented to the applicant that:

...

(d) the respondent's manufacturing process and quality control system used to manufacture the computer monitors complied with ISO quality standard ISO9000;"

Paragraph 14(d) of the first statement of claim was in the following terms:

"Each of the representations were false, untrue, inaccurate and misleading in that:

...

(d) the respondent's manufacturing process and quality control system did not comply with ISO quality standard ISO9000;"

Paragraph 18(c) of the first statement of claim was in the following terms:

"Further or in the alternative, by making the representations the respondent has in trade or commerce, in connection with the supply or possible supply of goods or in connection with the promotion by any means of the supply or use of goods:

...

(c) falsely represented that the manufacturing process employed by the respondent has attained the approval of the ISO and certification to quality control standard ISO9000;"

5 The respondent in its defence, filed on 21 July 1999, denied that it failed to comply with the ISO 9000 standard: pars 4.6 and 10.1 of the defence. In par 7.2.3 of the respondent's defence it was alleged that:

"the computer monitors were manufactured by a manufacturing process and quality control system which complied with ISO quality standard ISO 9000."

6 On 19 May 2000, the applicant's solicitors wrote to the respondent's solicitors raising concerns about the adequacy of the respondent's discovery in relation to the ISO 9000 standard issue. On 30 May 2000, the respondent's solicitors denied that the classes of documents sought by the applicant were relevant to any issue between the parties.

7 There was subsequent correspondence in relation to the discovery of documents relating to the ISO 9000 standard issue. On 2 August 2000, the applicant served an amended statement of claim, but the amendments did not materially alter or add to the pleading in relation to the ISO 9000 standard issue. The respondent, in its amended defence, maintained its denial of the ISO 9000 standard issue.

8 On 21 August 2000, the applicant's solicitors wrote to the respondent's solicitors identifying the paragraphs in the pleading relevant to the issue of the discovery of the documents in relation to the ISO 9000 standard issue.

9 On 22 August 2000, the respondent's solicitors replied to the applicant's solicitors stating that their request for further and better discovery was not warranted and that:

"Should you wish to pursue this issue further, we suggest you make this application to the Court on proper notice and supported by proper material."

10 A directions hearing on 23 August 2000 was adjourned to enable the applicant to provide further clarification as to the categories of documents sought in relation to the ISO 9000 standard issue, and to enable the applicant to file a motion seeking further discovery if necessary.

11 On 23 August 2000, the respondent's solicitors wrote to the applicant's solicitors in the following terms:

"We would be grateful if in the context of the amended statement of claim, you could provide further details of the categories of the documents sought by the Applicant.

We will then seek instructions from our client in relation to the existence and retrieval of any relevant documents."

On 1 September 2000, the respondent's solicitors wrote to the applicant's solicitors seeking further details of the categories of documents sought by the applicant. On 15 September 2000, the applicant's solicitors wrote to the respondent's solicitors setting out the classes of documents which the applicant required the respondent to discover. The seven classes of documents referred to in the letter correspond with the schedule to the applicant's notice of motion filed on 2 October 2000. In the letter, the applicant's solicitors requested the respondent's solicitors to respond within seven days as to whether the respondent would provide such discovery. The letter stated that in the absence of such a response, the applicant would file a notice of motion.

12 On 19 September 2000, the respondent's solicitors wrote to the applicant's solicitors denying the relevance of the seven categories of documents in respect of which discovery was sought, save for categories one and three. The respondent's solicitors said they were seeking instructions from their client in relation to the "entirety of your request for ISO 9000 quality standardisation documents".

13 On 26 September 2000, the applicant's solicitors wrote to the respondent's solicitors and requested a response by 2 October 2000, failing which they would file a notice of motion.

14 On 28 September 2000, the respondent's solicitors wrote to the applicant's solicitors and said that they were awaiting instructions from their client. After receipt of that letter, and on the same day, the applicant's solicitors wrote to the respondent's solicitors in the following terms:

"We will now commence the preparation of a notice of motion and supporting affidavits in respect of the matters referred to in our letter of 26 September 2000 with the intention that it be made returnable at the directions hearing in this matter on 4 October 2000.

If you inform us by noon tomorrow that your client will comply with our client's requests for proper discovery within the period to be specified by Justice Goldberg on 4 October, we will not seek costs associated with the preparation or filing of those documents in so far as they relate to the ISO9000 documents discovery issue."

There was no response to that letter.

15 It was only on the morning of 4 October 2000, prior to the matter being called on for hearing, that counsel for the respondent notified counsel for the applicant that the respondent would provide the discovery sought.

16 The applicant submitted that the documents set out in the schedule to the motion, in respect of which discovery was sought specifically in the letter of 15 September 2000, were clearly discoverable and that as the applicant had obtained the relief it sought in the motion, it should have its costs of the motion. The respondent, in its written submissions, did not dispute that the documents were "now" relevant to the proceeding, but it submitted that the request for discovery in the early letters was not in the terms of the discovery sought in the notice of motion. It was said that until the claims based upon the ISO 9000 standard were particularised, it was not possible to determine the relevance of the applicant's claim for particular discovery of the ISO 9000 standard documents: see letter of 7 June 2000 from the respondent's solicitors.

17 The respondent submitted that the amendments to the statement of claim on 2 August 2000 were not inconsequential in relation to the ISO 9000 standard issue, as the applicant claimed, but rather they clarified what was being alleged by the applicant in relation to the ISO 9000 standard issue.

18 The pleading of the ISO 9000 standard issue in the first statement of claim and the denial of those allegations by the respondent made discoverable the documents sought by the applicant's solicitor in the correspondence prior to the delivery of the amended statement of claim. The delivery of the amended statement of claim did not alter that position. In essence, all the amendments did in relation to the pleading of the ISO 9000 standard issue was to change the description of the standard from "the ISO quality standard ISO 9000" to "the series of quality standards that comprise ISO 9000".

19 The fact that the applicant was seeking discovery of documents relating to the ISO 9000 standard would not have been a surprise to the respondent and its solicitors on 15 September 2000. In their letter of that date, the applicant's solicitors set out specifically the categories of documents subsequently sought in the notice of motion.

20 Although the respondent's solicitors indicated in their letter of 19 September 2000 that they were seeking instructions in relation to the request for discovery of ISO 9000 standard documents, and although they indicated that they would take a number of weeks to be able to confirm whether or not further discovery could be provided, the relevant issue to be determined was not whether the discovery could be provided but whether, as a matter of proper principles of discovery, the discovery sought was appropriate and compellable.

21 The correctness of this proposition is demonstrated by the fact that on the morning of the return of the notice of motion on 4 October 2000, counsel for the respondent was able to give the respondent's consent to the discovery sought.

22 I am satisfied that it was not unreasonable for the applicant to file the notice of motion seeking further discovery of the documents set out in the schedule to the motion and to bring it on for hearing on 4 October 2000, having regard to the sequence of correspondence and events to which I have referred. I am also satisfied that at the time the notice of motion was filed, the applicant was entitled to the relief sought.

23 The order of the Court will be that the respondent pay the applicant its costs of the notice of motion filed by the applicant on 2 October 2000, and the costs of the hearing of that motion on 4 October 2000.

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.

Associate:

Dated: 22 February 2001

Counsel for the Applicant:	S M Anderson
Solicitor for the Applicant:	Middletons Moore & Bevins
Counsel for the Respondent:	J D Elliot
Solicitor for the Respondent:	Baker & McKenzie
Date of Hearing:	4 October 2000
Date of filing of written submissions:	27 October and 8 November 2000
Date of Judgment:	22 February 2001