Croft v Evertop Investments Pty Ltd (No 2) [2011] FCA 749 (1 July 2011)

Last Updated: 8 July 2011

FEDERAL COURT OF AUSTRALIA

Croft v Evertop Investments Pty Ltd (No 2) [2011] FCA 749

Citation:		Croft v Evertop Investments Pty Ltd (No 2) [2011] FCA 749
Parties:		RODNEY KIM CROFT AND JANICE ANN CROFT v EVERTOP INVESTMENTS PTY LTD (ACN 091 802 201), JAMES ALEXANDER KIDD and THYE TAN
File number:		WAD 310 of 2006
Judge:		MCKERRACHER J
Date of judgment:		1 July 2011
Catchwords:		PRACTICE and PROCEDURE – application for further and better particulars – Federal Court Rules O 12 r 4 – application for further discovery – Federal Court Rules O 15 r 2 – whether sufficient particulars have been provided to determine quantification of loss and damage – whether an expert report is sufficient for the particularisation of damages – adequacy of discovery – limitation of the extent of further discovery when substantial discovery has already been provided – whether burden of discovery outweighs benefit – litigant in person in complex commercial litigation – balance needed in interests of justice
Legislation:		Federal Court Rules O 12 r 4(1), O 12 r 4(2), O 12 r 5(1), O 14 r 2(1), O 15 r 2(3), O 15 r 2(6), O 15 r 6(1)
Cases cited:		Cameron, B.A. & Anor v. Rural Press Ltd & Ors [1990] FCA 360 Croft v Evertop Investments Pty Ltd [2010] FCA 1485 Hadley v Blaxendale (1854) 9 Ex.341 Hayward v Pullinger & Partners, Limited (1950) 1 All ER 581 Kyocera Mita Australia Pty Ltd v Mitronics Corporation Pty Ltd [2005] FCA 242 MacPherson v R [1981] HCA 46; (1981) 147 CLR 512 Minogue v Human Rights and Equal Opportunity Commission [1999] FCA 85; (1999) 84 FCR 438 Monk v Redwing Aircraft Company Ltd (1942) 1 KB 182 Neil v Nott [1994] HCA 23; (1994) 68 ALJR 509 Perestrello E Companhia Limitada v United Paint Co. Ltd (1969) 1 WLR 570 Phipps v Orthodox Unit Trusts Ltd (1958) 1 QB 314 Prehn v The Royal Bank of Liverpool (1870) LR 5 Exch 92 United Salvage Pty Ltd v Louis Dreyfus Armateurs SNC [2006] FCA 116 Westside Typographics Pty Ltd v Flexi-Products International Pty Ltd & Anor [1988] FCA 543
Date of hearing:	28 March 2011
Date of last submissions:	11 May 2011
Place:	Perth
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	80
Counsel for the Applicant:	RK Croft represented the applicants
Counsel for the First and Second Respondents:	L Black with S Hemachandra
Solicitor for the First and Second Respondents:	Downings Legal
Counsel for the Third Respondent:	The Third Respondent did not appear

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	WAD 310 of 2006

BETWEEN:	RODNEY KIM CROFT JANICE ANN CROFT Applicants
AND:	EVERTOP INVESTMENTS PTY LTD (ACN 091 802 201) First Respondent JAMES ALEXANDER KIDD Second Respondent THYE TAN Third Respondent

JUDGE:	MCKERRACHER J
DATE OF ORDER:	1 JULY 2011
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. Within 35 days, the applicants file and serve further and better particulars of their losses and damages claimed setting out the quantification and calculation of loss and damage and the basis on which those amounts were calculated for the following:
   1. The diminution in value of the licence to use the Jim Kidd Sports name for:
      1. The Thornlie business;
      2. The Willetton business;
   2. A national ‘equal’ contribution by all Jim Kidd stores to the advertising fund;
   100. Funds paid by the applicants in excess of a 10% margin on goods purchased from the Jim Kidd Sports warehouse in Balcatta, Western Australia;
   4. Valuation of the Thornlie business at the time of its acquisition by the applicants;
   5. The aggregate value of the amount by which the applicants’ contribution to the actual costs of advertising was increased as a result of the alleged breaches to:
      1. The Thornlie Collateral Agreement;
      2. The Willetton Collateral Agreement;
   6. Interest paid on the applicants’ bank loan of $600,000 applied to the purchase of the Thornlie business;
   7. Payments made or owing by the applicants in meeting third party liabilities arising from the appointment of a receiver to:
      1. The Thornlie business;
      2. The Willetton business;
   8. Loss of opportunity to earn additional profits in a hypothetical situation in which an allegedly required amount of advertising expenditure exceeded amounts of advertising expenditure which were made and resulted in increased sales by the applicants in relation to:
      1. The Thornlie business;
      2. The Willetton business;
   1. Value of lost sales allegedly made by the first and second respondents into exclusive licence area for each of the Thornlie and the Willetton business.
2. Further to Order 1 above, if further and better particulars cannot be provided for orders 1A, 1D, 1E, 1H and 1I, the applicants do provide particulars by way of an expert report at a date to be fixed.
3. Within 35 days, the applicants file and serve particulars of damages pleaded in paras 12, 18, 24, 19, 33 and 39 of the applicants’ minute of proposed amended statement of claim dated ‘February 2011-02-03’ filed on 4 March 2011 (the amended statement of claim).
4. Within 45 days, the applicants provide discovery of:
   1. documents evidencing contributions to the advertising levy fund;
   2. relevant documents that are no longer in their possession, custody or power;
   100. any category or class of documents they do not search for;
   4. documents of the kind identified in O 15 r 2(3) of the Federal Court Rules.
5. The parties have liberty to apply on 7 days notice.
6. The applicants do pay the first and second respondents’ costs of the motion to be taxed if not agreed.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	WAD 310 of 2006

BETWEEN:	RODNEY KIM CROFT JANICE ANN CROFT Applicants
AND:	EVERTOP INVESTMENTS PTY LTD (ACN 091 802 201) First Respondent JAMES ALEXANDER KIDD Second Respondent THYE TAN Third Respondent

JUDGE:	MCKERRACHER J
DATE:	1 JULY 2011
PLACE:	PERTH

REASONS FOR JUDGMENT

INTRODUCTION

1. In Croft v Evertop Investments Pty Ltd [2010] FCA 1485 (Croft No 1), I outlined the reasons why further interlocutory steps needed to be taken before this matter could be set down for trial.
2. As a sequel to the consideration of those issues, the first and second respondents (Evertop and Mr Kidd respectively) now press for the provision of particulars as to the quantum of the claim by the applicants (the Crofts), for discovery and for orders concerning their own discovery.

BACKGROUND

3. The Crofts claim that in about May 1999, Mr Kidd, amongst others, made misleading and deceptive representations that all Jim Kidd Sports Stores contributed equally to the joint cost of advertising of the brand. This was apparently not the case.
4. The respondents contend the Crofts were well aware of the distribution of advertising costs between the franchises. The Crofts claim that they were induced into entering into a franchise agreement before finding that they were to be charged more than a 10% margin on stock and were liable for a greater share of the advertising costs than some of the other Jim Kidd Stores. In addition, there is a claim that not all of the money paid as the ‘advertising fee’ was used for advertising. There is a claim that the respondents should account for it.
5. Evertop became the registered proprietor of the ‘Jim Kidd Sports’ business name and began operating the Jim Kidd’s business from 8 March 2000. The Crofts plead an implied novation of the agreement previously entered into in November 1999 by which there was substitution of Evertop for Mr Kidd.
6. The claims by the Crofts are put in a variety of ways including claims for breach of fiduciary duties, breach of the Franchising Code of Conduct and unconscionable conduct. As indicated in Croft No 1, the third respondent (Mr Tan) was the finance manager for Evertop which traded as Jim Kidd Sports from various outlets in Western Australia. The claim against Mr Tan concerns similar representations as to a Jim Kidd business in Willetton, Western Australia. It is not relevant to the issues considered in these reasons.
7. The proceedings were issued in 2006 when the Crofts had the benefit of legal representation. At the outset of the proceedings there were several other applicants who also had claims against the respondents. The claims were mounted with the benefit of a very substantial quantity of pre-action discovery. In addition, an expert report was prepared initially for the larger group of applicants but is now relied upon by the Crofts.
8. Some time ago the Crofts’ legal representation discontinued. Since then in particular, although to some extent before that time also, the claim has been overtaken by interlocutory disputes. As noted in Croft No 1, the slow rate of progress has also been contributed by the fact that Mr Croft was declared bankrupt on 4 May 2009. On that date a sequestration order was made by a Registrar of the Federal Magistrates Court against Mr Croft’s estate. On 18 June 2010, the sequestration order was set aside and the creditor’s petition on which the order was based was dismissed.
9. From the Crofts’ point of view, the tardy progress is caused by strategic and tactical manoeuvring by the respondents. From the point of view of the respondents, however, the Crofts have not complied with directions made by the Court. The respondents argue that until there is satisfactory compliance, further steps beyond the very considerable steps already taken by the respondents are not required.
10. I noted in Croft No 1 that steps were taken by the Crofts to re-enliven the proceeding. Various measures taken have resulted in little progress. Mr Croft has stressed his anxiety to the Court and that the matter should proceed to trial as soon as possible. Mr Croft continues to impress upon the Court his frustration at the lack of progress but in reality much of this is due to his own inability to comply with Court directions or procedure. I have endeavoured to facilitate a greater accommodation for these difficulties in light of the self-representation but the problem can not be overcome by Mr Croft despatching numerous emails and letters emphasising, in essence, his frustration. Matters must be raised systematically and succinctly in written and oral submissions in support of or in response to particular motions. I am not empowered to accept informal communications in lieu of admissible evidence and submissions at the appropriate time. It is one thing to attempt to accommodate the difficulties Mr Croft is experiencing in advancing his claims but that can not be done in a manner which prejudices the respondents.
11. I am also mindful that judges are expected to inform unrepresented litigants of their rights and diminish their comparative disadvantage in the conduct of the proceedings without thereby conferring on them any advantage over legally represented opponents: MacPherson v R [1981] HCA 46; (1981) 147 CLR 512 and Minogue v Human Rights and Equal Opportunity Commission [1999] FCA 85; (1999) 84 FCR 438. As noted in Neil v Nott [1994] HCA 23; (1994) 68 ALJR 509, a frequent consequence of self-representation is that the Court must assume the burden of endeavouring to ascertain the rights of parties which are obfuscated by their own advocacy.
12. In Minogue, the Full Court said (at [26]-[29):

26 Unrepresented litigants present difficult issues for courts and for individual judges. As the majority observed in Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 at 415:

"Whilst the right of a litigant to appear in person is fundamental, it would be disregarding the obvious to fail to recognise that the presence of litigants in person in increasing numbers is creating a problem for the courts."

Increasing attention is being devoted to the policy issues created by the increasing numbers of litigants in person. See, for example, Australian Law Reform Commission, The Unrepresented Party (Background Paper 4, December 1996).

27 In Neil v Nott [1994] HCA 23; (1994) 68 ALJR 509; 121 ALR 148, the High Court considered whether the trial judge's exercise of discretion to refuse an extension of time for lodging an application for maintenance and support under the Administration and Probate Act (Vic). The Court observed (at 150) that a

“frequent consequence of self-representation is that the court must assume the burden of endeavouring to ascertain the rights of parties which are obfuscated by their own advocacy."

In Abram v Bank of New Zealand [1996] ATPR 42340 at 42347, a Full Federal Court, faced with an unrepresented litigant's claim that the trial judge had not given him appropriate assistance to present his case, made this comment:

“What a judge must do to assist a litigant in person depends on the litigant, the nature of the case, and the litigant's intelligence and understanding of the case.”

We respectfully agree with this observation. Because the duty of the judge varies according to the factors identified by the Full Court in Abram, the duty to assist an unrepresented accused in criminal proceedings is likely to be more extensive than that imposed on a judge hearing civil proceedings in which one or more of the parties are not legally represented: cf MacPherson v The Queen [1981] HCA 46; (1981) 147 CLR 512; DA Ipp, "Judicial Intervention in the Trial Process" (1995) 69 Australian Law Journal 365 at 369-370.

28 The general principles governing the role of the judge in civil proceedings involving an unrepresented litigant have been stated in Rajski v Scitec Corporation Pty Ltd (unreported, Court of Appeal, NSW, Full Court, No CA 146 of 1986, 16 June 1986). Samuels JA said this (at 14):

"In my view, the advice and assistance which a litigant in person ought to receive from the court should be limited to that which is necessary to diminish, so far as this is possible, the disadvantage which he or she will ordinarily suffer when faced by a lawyer, and to prevent destruction from the traps which our adversary procedure offers to the unwary and untutored. But the court should be astute to see that it does not extend its auxiliary role so as to confer upon a litigant in person a positive advantage over the represented opponent ... At all events, the absence of legal representation on one side ought not to induce a court to deprive the other side of one jot of its lawful entitlement ... An unrepresented party is as much subject to the rules as any other litigant. The court must be patient in explaining them and may be lenient in the standard of compliance which it exacts. But it must see that the rules are obeyed, subject to any proper exceptions. To do otherwise, or to regard a litigant in person as enjoying a privileged status, would be quite unfair to the represented opponent."

Mahoney JA made the following observation (at 27):

"Where a party appears in person, he will ordinarily be at a disadvantage. That does not mean that the court will give to the other party less than he is entitled to. Nor will it confer upon the party in person advantages which, if he were represented, he would not have. But the court will, I think, be careful to examine what is put to it by a party in person to ensure that he has not, because of the lack of legal skill, failed to claim rights or to put forward arguments which otherwise he might have done."

These comments have been referred to with approval in subsequent cases: see Johnson v Johnson (1997) 139 FLR 384 at 406 (Fam Ct/FC) (and cases cited there); Morton v Vouris (1996) 21 ACSR 497 at 513-514, per Sackville J. There is nothing in Neil v Nott inconsistent with what was said in Rajski v Scitec Corporation.

29 A trial judge often faces something of a dilemma. While he or she may be bound to provide some advice and assistance to an unrepresented litigant, the authorities make it clear that the Judge should not intervene to such an extent that he or she cannot maintain a position of neutrality in the litigation: Burwood Municipal Council v Harvey (1995) 86 LGERA 389 at 397 (NSW CA), per Kirby P. However, the boundaries of legitimate intervention are flexible and will be influenced by the need for intervention to ensure a fair and just trial: Panagopoulos v Southern Healthcare Network (unreported, Supreme Court, Vic, Smith J, 15 September 1997) at 6.

13. I will return in the conclusion, to consideration of these principles.

PARTICULARISATION OF LOSS

The claims

14. On 4 March 2011, the Crofts’ document entitled ‘Minute of proposed amended statement of claim dated February 2011-02-03’ was filed in Court (the amended statement of claim).
15. To put Evertop and Mr Kidd’s complaints in context, it is necessary to have regard to the content of the pleading as it presently stands, to appreciate the extent of quantification provided.
    12. By reason of the second respondent’s breaches of section 10 of the FTA, pleaded in paragraph 11 above the applicants have suffered loss and damage.
        

Particulars

The applicants have suffered loss and damage and claim:
(i) The diminution in the value of the licence to use the “Jim Kidd Sports” name obtained by the applicants.
(ii) Alternatively a refund of all sums paid towards advertising costs alternatively the difference between what the applicants paid towards the costs of advertising each month and what the applicants would have paid towards the costs of advertising each month had:

1. all stores operating under the name “Jim Kidd Sports” contributed equally toward the cost of advertising; and
2. the second respondent contributed an amount equal to the amount contributed by the stores operating under the name “Jim Kidd Sports” towards the cost of advertising.

(iii) A refund of all monies paid in excess of 10% applied to stock purchased by the applicants from the Jim Kidd Sports warehouse.
(iv) Further or alternatively had the respondents not engaged in the conduct pleaded in paragraph 11 hereof, the applicants would not have purchased Jim Kidd Sports Thornlie store pleaded in paragraph 10 hereof:

1. The applicants claim the difference between the sums expended to acquire the said business and the true value of the business at the time of its acquisition.
2. The applicants paid the sum of $600,000 to purchase the Jim Kidd Sports Thornlie Store. The applicants borrowed the sum of $600,000 to finance the acquisition of the store and have paid 7.9% interest since. On 11 July 2006, a Receiver and Manager was appointed to the store, resulting in no return to the applicants. Accordingly, the applicants claim:

(aa) a refund of the sum of $600,000;
(bb) all interest payments, further and better particulars of which will be provided prior to trial;
(cc) an indemnity in relation to any liabilities incurred to third parties as a result of the appointment of the said Receiver and Manager.

...

18. By reason of the first respondent’s, further or alternatively, the second respondent’s breaches of the Thornlie Collateral Agreement, the applicants have suffered loss and damage.
    

Particulars

The applicants have suffered loss and damage in an amount equal to:
(i) The value of the loss of opportunity to earn additional profits through the increased advertising expenditure which would have resulted had:

1. all stores operating under the name “Jim Kidd Sports” contributed equally toward the cost of advertising at the rate of 6% of turnover;
2. the first respondent, further or alternatively, the second respondent, contributed an amount equal to the amount contributed by the stores operating under the name “Jim Kidd Sports” towards the cost of advertising; and

100. the first respondent, further or alternatively, the second respondent, fully applied all amounts contributed towards the cost of advertising to the cost of advertising the “Jim Kidd Sports” business name.

(ii) Further or alternatively, the aggregate value of the amount by which the applicants’ proportionate contribution towards the actual cost of advertising was increased.
(iii) Further or alternatively, the diminution in the value of the licence to use the “Jim Kidd Sports” names obtained by the applicants.
(iv) The aggregate value of the margins in excess of 10% applied by the second respondent to stock purchased by the applicants from the Jim Kidd Sports warehouse.

Particulars

The applicants repeat the particulars under sub-paragraph 11(d) hereof.

...

24. By reason of the first respondent’s, further or alternatively, the second respondent’s breaches of the Jim Kidd Sports Thornlie Agreement the applicants have suffered loss and damage.
    

Particulars

(i) By reason of the breaches pleaded in paragraphs 23(b)(i) and 23(b)(ii) above, the applicants have suffered loss and damage in an amount equal to the value of the loss of opportunity to earn additional profits through the increased advertising expenditure which would have resulted had:

1. the first respondent, further or alternatively, the second respondent, provided an amount equal to the advertising fee paid by the applicants towards the cost of advertising the “Jim Kidd Sports” business name; and
2. all monies contributed towards advertising been fully applied towards the cost of advertising the “Jim Kidd Sports” business name;

(ii) By reason of the breach pleaded in paragraph 23(b)(iii) above, the applicants have suffered loss and damage in an amount equal to the value of the loss of opportunity by them to have made the sales made by or on behalf of the second respondent, further or alternatively, by or on behalf of the second respondent through the first respondent, within the area of ten kilometres from the Thornlie premises.

Further particulars will be provided by way of expert evidence.

...

29. By reason of the first respondent’s breaches of section 52 of the TPA, further or alternatively, the second respondent’s further or alternatively the third respondent’s breaches of section 10 of the FTA, pleaded in paragraph 28 above the applicants have suffered loss and damage.
    

Particulars

The applicants have suffered loss and damage and claim:
(i) The diminution in the value of the licence to use the “Jim Kidd Sports” name obtained by the applicants.
(ii) Alternatively a refund of all sums paid towards advertising costs alternatively the difference between what the applicants paid towards the costs of advertising each month and what the applicants would have paid towards the costs of advertising each month had:

1. all stores operating under the name “Jim Kidd Sports” contributed equally toward the cost of advertising; and
2. the second respondent contributed an amount equal to the amount contributed by the stores operating under the name “Jim Kidd Sports” towards the cost of advertising.

(iii) A refund of all monies in excess of 10% applied to stock purchased by the applicants from the Jim Kidd Sports warehouse.
(iv) Further or alternatively had the respondents not engaged in the conduct pleaded in paragraph 28 hereof, the applicants would not have purchased the Jim Kidd Sports Willetton pleaded in paragraph 27 hereof. On 11 July 2006 a Receiver and Manager was appointed to the Willetton store resulting in no return to the applicants. The applicant (sic) claims:

1. a refund of the franchise fee in the sum of $70,000;
2. interest payments made on the said sum of $70,000 at the rate of 20% per annum charged by the second respondent and paid by the applicants;

100. an indemnity in relation to any liabilities incurred to third parties as a result of the appointment of the said Receiver and Manager.
     

Further particulars will be provided by way of expert evidence.

...
30B The applicants have suffered loss or damage as a result of the contraventions pleaded in paragraphs 30 and 30A hereof.

Particulars

Had the first respondent not engaged in the contraventions pleaded in paragraphs 30 and 20A hereof:
(a) the applicants would have been provided with a disclosure statement which would have revealed the extent to which:

(i) all stores operating under the name “Jim Kidd Sports” contributed (or failed to contribute) toward the costs of advertising; and
(ii) the second respondent contributed (or failed to contribute) to the overall costs of advertising;

(b) the applicants would have been told to obtain independent legal advice; and
(c) the applicants would not have entered into the Jim Kidd Sports Willetton Agreement.

The applicants accordingly claim the relief referred to in paragraphs (ii), (iii) and (iv) of the particulars to paragraph 29 hereof.

...

33. By reason of the first respondent’s, further or alternatively, the second respondent’s, breaches of the Willetton Collateral Agreement, the applicants have suffered loss and damage.
    

Particulars

The applicants have suffered loss and damage in an amount equal to:
(i) The value of the loss of opportunity to earn additional profits through the increased advertising expenditure which would have resulted had:

1. all stores operating under the name “Jim Kidd Sports” contributed equally toward the cost of advertising at the rate of 6% of turnover;
2. the first respondent, further or alternatively, the second respondent, contributed an amount equal to the amount contributed by the stores operating under the name “Jim Kidd Sports” towards the cost of advertising; and

100. the first respondent, further or alternatively, the second respondent, fully applied all amounts contributed towards the cost of advertising to the advertising of the “Jim Kidd Sports” business name.

(ii) Further or alternatively, the aggregate value of the amount by which the applicants’ proportionate contribution towards the actual cost of advertising was increased.
(iii) Further or alternatively, the diminution in the value of the licence to use the “Jim Kidd Sports” names obtained by the applicants.
(iv) The aggregate value of the margins in excess of 10% applied by the second respondent to stock purchased by the applicants from the Jim Kidd Sports warehouse.

Particulars

The applicants were charged an average of 15.48% margin on the stock purchased from the Jim Kidd Sports warehouse.

...

39. By reason of the second respondent’s breaches of the Jim Kidd Sports Willetton Agreement the applicants have suffered loss and damage.
    

Particulars

(i) By reason of the breaches pleaded in paragraphs 38(a) and 38(b) above, the applicants have suffered loss and damage in an amount equal to the value of the loss of opportunity to earn additional profits through the increased advertising expenditure which would have resulted had:

1. the first respondent, further or alternatively, the second respondent, provided an amount corresponding to the advertising fee paid by the applicants towards the cost of advertising the “Jim Kidd Sports” business name; and
2. all monies contributed toward advertising been fully applied towards the costs of advertising the “Jim Kidd Sports” business name;

(ii) By reason of the breach pleaded in paragraph 38(c) above, the applicants have suffered loss and damage in an amount equal to the value of the loss of opportunity by them to have made the sales made by the second respondent, further or alternatively, the second respondent through the first respondent, within the area of ten kilometres from the Willetton premises.

Further particulars will be provided by way of expert evidence.

...

42. The applicants have suffered loss or damage as a result of the contravention pleaded in paragraph 41 hereof.
    

Particulars

(a) Had the first respondent and, or alternatively the second respondent not acted as pleaded in sub-paragraph 41(a) to (g) hereof, the applicants would have become aware that:

(i) no contribution towards the cost of advertising was made by the stores pleaded in paragraph 4A and 4C hereof from December 2003 onwards, nor by the proprietor of Jim Kidd Sports Bunbury;
(ii) the second respondent was not matching and did not match the amount contributed or that should have been contributed by the stores operating under the name “Jim Kidd Sports” towards the cost of advertising;

(b) In such an event, the applicants would have compelled the first respondent and second respondent to comply with their obligations as set out in paragraphs 13, 14 and 31 hereof, alternatively as set out in paragraphs 19 to 21 and 34 to 36 hereof, alternatively as set out in paragraphs 24D to 24E and 39D to 39E hereof to make the contributions to advertising as set out in paragraph 41(a)(i) and (ii);
(c) The applicants have lost the benefit of the advertising that would have taken place had the first respondent and the second respondent not acted as pleaded in paragraphs 41(a) to (g) hereof. Further and better particulars will be provided by way of expert evidence prior to trial.
(d) Further or alternatively, had the first respondent and the second respondent not acted as pleaded in paragraphs 41(a) to (g) hereof, the applicants would not have contributed towards the cost of advertising at the rate of 6% of turnover or at all;
(e) Further or alternatively, had the first respondent and the second respondent not acted as pleaded in paragraphs 41(a) to (g) hereof, the applicants would not have entered into the Jim Kidd Sports Thornlie Agreement and Jim Kidd Sports Willetton Agreement, alternatively would have shortly after entering into the Jim Kidd Sports Thornlie Agreement and or the Jim Kidd Sports Willetton Agreement, sought rescission of those Agreements. The applicants accordingly lost the opportunity to avoid the detriment as set out in:

(i) paragraph (iv) of the particulars to paragraph 12 hereof; and
(ii) paragraph (iv) of the particulars to paragraph 29 hereof
and accordingly claim compensation and or alternatively relief as set out therein.

16. Evertop and Mr Kidd contend that the Crofts have not complied, and have made it clear that they will not comply with orders made on 1 February 2011 requiring them to file and serve an amended statement of claim quantifying their loss on or before 25 March 2011. Mr Croft (appearing in person) informed me that the Crofts had filed and served an amended statement of claim in compliance with those orders. In fact, the amended statement of claim does not provide any further particulars of loss and damage claimed. The only amendments made to that pleading do not relate in any way to the quantification of the loss which the Crofts assert they have suffered.

The principles

17. Order 12 r 4(1) of the Federal Court Rules (FCR) provides that where a party claims damages which include moneys which he has paid or is liable to pay, he shall give particulars of those moneys. A number of the heads of damage claimed by the Crofts appear to relate to moneys which have been paid by them or which they are liable to pay. No exemption from compliance with O 12 r 4(1) FCR has been sought. For that reason, in general terms, I provided that they should provide particulars of their loss when the matter was last before me.
18. The power of the Court to order particulars to be provided is set out in O 12 r (5)(1) as follows:

(1) the Court may order a party to file and serve on any other party:
...

(c) where he claims damages, particulars relating to general or other damages.
...

19. An order would not usually be made for the provision of particulars for general damages. There is a difficulty, however, in identifying a clear delineation between special damages and general damages. That difficulty was discussed by French J, as his Honour then was, in Westside Typographics Pty Ltd v Flexi-Products International Pty Ltd & Anor [1988] FCA 543 where his Honour considered the decisions of the Court of Appeal in Monk v Redwing Aircraft Company Ltd (1942) 1 KB 182; Phipps v Orthodox Unit Trusts Ltd (1958) 1 QB 314 per Jenkins LJ (at 319) and Hayward v Pullinger & Partners Limited (1950) 1 All ER 581 per Devlin J. French J noted (at 6) that the reference to ‘special damages’ must be approached with care, that the term ‘special’ has been used to describe damage of the kind addressed by the second limb of the rule in Hadley v Blaxendale (1854) 9 Ex.341, defining circumstances limiting the liability of the party in breach, and that a distinction between ‘general’ and ‘special’ damages is also drawn to define the different kinds of proof that they may require (see Prehn v The Royal Bank of Liverpool (1870) LR 5 Exch 92).
20. French J cited (at 7) with apparent approval, comments by the Court of Appeal in Perestrello E Companhia Limitada v United Paint Co. Ltd (1969) 1 WLR 570 where the court said:

There is plenty of authority for the proposition that a plaintiff need not plead general damage; but since the expressions "special damage" and "special damages" are used in such a wide variety of meanings, it is safer to approach this question by considering what a plaintiff is required to plead rather than what he is not.

The Rules of the Supreme Court are of no direct assistance. Ord 18, r.7, requires that every pleading shall contain a summary of the material facts and by Rule 12 "every pleading must contain the necessary particulars of any claim..." By rule 15 "a statement of claim must state specifically the relief or remedy claimed. It follows that the necessity of pleading "damage" (meaning injury) or "damages" (meaning the amount claimed to be recoverable), if it arises at all, does so as an example of the general requirement of any statement of claim that it shall "put the defendants on their guard and tell them what they have to meet when the case comes on for trial. (per Cotton LJ in Philipps v Philipps (1878) QBD 127, 139).

Accordingly, if a plaintiff has suffered damage of a kind which is not the necessary and immediate consequence of the wrongful act, he must warn the defendant in the pleadings that the compensation claimed will extend to this damage, thus showing the defendant the case he has to meet and assisting him in computing a payment into court.

The limits of this requirement are not dictated by any preconceived notions of what is general or special damage but by the circumstances of the particular case. "The question to be decided does not depend on words, but is one of substance" (per Bowen L.J. in Ratcliffe v Evans (1892) 2 QB 524, 529).

The same principle gives rise to a plaintiff's undoubted obligation to plead and particularise any item of damage which represents out-of-pocket expenses, or loss of earnings incurred prior to trial, and which is capable of substantially exact calculation. Such damage is commonly referred to as special damage or special damages but is no more than an example of damage which is "special" in the sense that fairness to the defendant requires that it be pleaded.

The obligation to particularise in this latter case arises not because the nature of the loss is necessary unusual, but because a plaintiff who has the advantage of being able to base his claim upon a precise calculation must give the defendant access to the facts which make such calculations possible. (emphasis added)

21. Therefore, it follows that there is no hard and fast rule as to the nature or extent, if any, of particularisation of damage that may be required. Rather it is largely an assessment of whether the defending party has an adequate opportunity to appreciate the nature and extent of financial exposure embraced by an applicant’s case.

Expert evidence

22. It is not at all uncommon in claims, such as that advanced here, for applicants to rely upon expert reports in which a suitable expert, such as an accountant, will attempt to calculate the specific loss suffered under the respective heads of damage to provide a basis on which the opposing party can at least identify the quantum of the claim advanced. In this particular case, there has been reference to an expert report but as discussed below, the report is not in evidence in any sense and certainly does not descend to identifying the financial loss sustained by the Crofts whether by reference to the heads of damage appearing in the amended statement of claim or otherwise.
23. To the extent that the heads of damage appear to be on their face quantifiable, that is, capable of calculation, there seems no good reason why, at this stage of the proceeding the respondents should not be informed of what the specific loss is. If there was a clearly identifiable expert report which descended to some particularity specifically addressing the heads of damage claimed in the pleading, then this particularisation may not be necessary but at present, the Crofts’ claim is somewhat ‘at large’ and the respondents have no computation of the loss and damage for which it is said they are liable. This makes it difficult to sensibly contemplate any realistic negotiation concerning the claim let alone to brief experts for the respondents to prepare for and examine the computations as they are put forward. Those were the reasons why I considered that quantification of loss was desirable.
24. The respondents should not be exposed to the risk of guessing what methodology may be put forward by the Crofts in trying to calculate their losses. At this stage it appears that the Crofts will rely upon the content of a report dated 21 September 2006, prepared by Pitcher Partners (accountants), specifically Mr Vincent Smith, a Senior Partner (the Pitcher Report). The Pitcher Report is prospective evidence not a pleading or particulars. The case that the Crofts intend to advance at trial must be tied down to specific material facts and particulars set out in the pleadings to which Evertop and Mr Kidd will respond. So far, the Crofts have not undertaken this task.
25. The Crofts have repeatedly sought to reverse the onus of proof by seeking an order requiring the respondents to prove that the accounts, which are challenged by the Crofts, can be properly verified by independent audit. But until Evertop and Mr Kidd know precisely what case is put against them as reflected in the pleadings (as distinct from an expert report which may or may not be proved at trial), there is no requirement for them to adduce any evidence at this stage. This is particularly relevant in the present instance where a very significant amount of pre-action discovery was provided by the respondents and notwithstanding this, the Crofts have still not quantified their claim, either under particular headings or generally.

The groupings of claims

26. I propose addressing groupings of the claimed heads of damage to identify specifically what heads of loss and damage require particulars.
27. The pleadings in relation to the following damages claims are said, by the respondents, to provide neither a quantification of loss claimed nor particulars (or sufficient particulars) of a method sufficient to allow for quantification.

(A) the alleged diminution in value of the licence to use the Jim Kidd Sports name for:

(i) the Thornlie business;

(ii) the Willetton business;

28. In my view, this topic would largely be the subject of expert evidence. If the Crofts are able to put a value on this item at this stage, they should do so. If they cannot, it may properly await professional computation by way of an expert report.

(B) a national ‘equal’ contribution by all Jim Kidd stores to the advertising fund;

29. As to this item, no attempts have been made to particularise these amounts and particulars should be supplied. It has not yet been made clear whether or not the Crofts presently have the capacity to do so. If they cannot provide particulars until further discovery, they should say so.

(C) funds paid by the Crofts in excess of a 10% margin on goods purchased from the Jim Kidd Sports warehouse in Balcatta, Western Australia;

30. These amounts should be capable of particularisation by the Crofts.

(D) valuation of the Thornlie business at the time of its acquisition by the Crofts;

31. In my view, this is properly the subject of expert evidence. Again, if the Crofts are able to put a value on this item at this stage, they should do so but if they cannot, it may properly await professional computation by way of an expert report.

(E) the aggregate value of the amount by which the Crofts’ contribution to the actual costs of advertising was increased as a result of the alleged breaches to:

(i) the Thornlie Collateral Agreement;

(ii) the Willetton Collateral Agreement;

32. As to this item, in my view, this is properly the subject of expert evidence. Again, if the Crofts are able to put a value on this item at this stage, they should do so but if they cannot, it may properly await professional computation by way of an expert report.

(F) interest paid on the Crofts’ bank loan of S600,000 applied to the purchase of the Thornlie business;

33. The Crofts should particularise the amounts.

(G) payments made or owing by the Crofts in meeting third party liabilities arising from the appointment of a receiver to:

(i) the Thornlie business;

(ii) the Willetton business;

34. The Crofts should particularise these amounts.

(H) loss of opportunity to earn additional profits in a hypothetical situation in which an allegedly required amount of advertising expenditure exceeded amounts of advertising expenditure which were made and resulted in increased sales by the Crofts in relation to:

(i) the Thornlie business;

(ii) the Willetton business;

35. In my view, this is properly the subject of expert evidence. Again, if the Crofts are able to put a value on this item at this stage, they should do so but if they cannot, it may properly await professional computation by way of an expert report.

(I) value of lost sales allegedly made by Evertop and Mr Kidd into exclusive licence area for each of the Thornlie and the Willetton businesses.

36. In my view, this is properly the subject of expert evidence. Again, if the Crofts are able to put a value on this item at this stage, they should do so but if they cannot, it may properly await professional computation by way of an expert report.
37. In addition to this, the Crofts seek an order that the respondents do provide an account of profits or, alternatively, equitable compensation without particularising the basis on which this is to be quantified or providing any quantification.
38. An account of profits would focus on the profits made by the respondents. The Crofts, if they succeed, may elect between pursuing their claim in damages on the one hand and seeking an account of profits on the other. The objective of the latter is designed to entitle them to a sum equal to the profits derived by reason of the various pleaded breaches, if established.
39. In my view, it is clearly not possible at this stage for the Crofts to compute the sums involved in respect of an account of profits. The first stage would be to ascertain whether or not there has been any claimed breach and, if so, whether an account of profits would be an appropriate remedy, if an election to seek it is made.
40. I will order the Crofts to file and serve within 35 days the further and better particulars identified in [28]-[39] above.

EXEMPLARY DAMAGES

41. Exemplary damages fall into a different category. It is necessary that particulars are given of the facts and matters on which reliance is placed to establish a claim for exemplary damages (O 12 r 4(2) FCR).
42. The respondents submit, and I accept, that the application and the amended statement of claim put forward a complex set of claims for damages and/or compensation, few of which are readily quantified or quantifiable. Most of them also appear to seek aggravated or aggravated and exemplary damages without suitable material facts being pleaded and/or particularised in support of such claims. This is not particularly surprising given that the Crofts are litigants in person. Nevertheless, it does not mean that the respondents should be required to deal with a case of which they have no adequate notice.
43. Four of the damages claims seek common law aggravated and exemplary damages without provision of particulars of the basis on which the claims are made (these are contained in paras 18, 24, 33 and 39 of the amended statement of claim). Particulars should be provided within 35 days.
44. Two of the claims include claims for an indemnity against third party liabilities arising from the appointment of a receiver without particularising sums paid or owed by the Crofts. (These are para 12 and para 29 of the amended statement of claim). Those sums should be particularised.

THE PITCHER REPORT

45. Mr Croft appears to rely in his arguments, in relation to particulars and discovery, on the Pitcher Report. It was provided to Mr Croft’s then solicitors in support of his claim.
46. I stress that, at this stage, I do not take the Pitcher Report as evidence but there is a question as to whether it can at least be a guide to the particulars of loss that the Crofts claim. Amongst the documents examined by Pitcher Partners for preparation of the Pitcher Report, there were over 900 categories of documents provided by way of pre-trial discovery or pre-action discovery by Evertop and Mr Kidd. It is not possible to estimate the total number of documents but, as indicated, many of the 900 categories run to numerous documents. The Pitcher Report, of course, is not in evidence other than to provide some guidance as to the parameters of this particulars and discovery dispute. The matter is complicated by the fact that the Pitcher Report was prepared in the proceeding when there were several other applicants who no longer pursue the proceedings.
47. The conclusions reached by Mr Smith in the Pitcher Report were that the stores owned by Jim Kidd did not make any contribution to the advertising levy fund during the relevant time period but had they done so, the relevant contribution would have been in excess of $3 million. Despite the extensive discovery, Mr Smith was unable to identify any documents showing any contributions being made by Mr Kidd to the advertising levy fund. He concluded that no such contributions were made.
48. Mr Smith noted, in contrast, that Evertop and Mr Kidd claimed to have spent a total exceeding $6 million on advertising and promotional expenses over the five year period from 1999 to 2004. Given that receipts recorded from licensees totalled $2,183,013 for the same period, he concluded that meant that the total claimed contribution to the advertising levy fund by the respondents was $3,885,504. The conclusion Mr Smith reached was that the large majority of expenses claimed under the heading of ‘Promotional Support Administration Costs’ were not properly claimable as expenses of the advertising levy fund. In his opinion the $6 million recorded as expenses was ‘grossly overstated’.
49. The following (at 30) of the Report illustrates one of the difficulties:

Subsequent to my review I was provided information by [Mr Croft] which indicated that the Respondents’ calculations of the contributions for the Thornlie store for the financial years 2000/2001, 2001/2002, 2002/2003 and 2003/2004 were in actual fact only 50% of the actual contributions paid by [Mr Croft] to the Respondents. [Mr Croft’s] assertion is supported by invoices included in the Discovered Electronic Records for the 2001/2002 and 2002/2003 periods, issued by the Respondents to the Thornlie store. These invoices total an amount approximately double what the Respondents indicated [Mr Croft] paid as a contribution (i.e. as shown in The Statements).

The information provide (sic-provided) by [Mr Croft] consisted of tax returns for the Relevant Time Period. However, whilst the returns do detail revenue generated during the Relevant Time Period they do not contain sufficient detail to show the actual amount of contributions paid to the Advertising Levy Fund by [Mr Croft].

It should also be noted that in regards to confirming the actual contributions by the [Crofts] to the Advertising Levy Fund, I am not in receipt of records from the [Crofts] (other than already mentioned above) recording what they paid in the form of advertising levies to the Respondents. Accordingly, in forming my opinions in regards to contributions to the Advertising Levy Fund I have relied entirely upon the Discovered Electronic Records and specifically the Respondents’ calculations of the contributions made by the [Crofts] (i.e. which are the supporting documents to the Statements and are summarised in Table 6 above).

50. The passage above appears to indicate that even in preparing the Pitcher Report, which the Crofts wish to rely on, the expert did not have original records from the Crofts but, rather, was dependent upon the records supplied by the respondents as to the contributions made by the Crofts. At the time of hearing these interlocutory motions, no further discovery had been given by the Crofts of the documents evidencing those contributions. No indication has been given as to whether the documents remain in existence or not. One way or another, discovery must be given, either of the source documents or as to the non-availability of those source documents. I can appreciate the difficulty for the Crofts comprehending the technical nature of these matters but I can only go so far in providing assistance to them. It is not appropriate that I assist them to a point which favours them in proving their case to the prejudice of the respondents.

ADEQUACY OF DISCOVERY BY THE CROFTS

51. In an affidavit made by Ms Samudu Thushari Hemachandra, solicitor for Evertop and Mr Kidd, Ms Hemachandra refers to correspondence to Mr Croft which confirmed that the respondents have identified documents or categories of documents referred to in the Pitcher Report which have not been discovered by the Crofts. The documents have been included in requests made by Evertop and Mr Kidd since 2007 but have not been produced.
52. As noted in Croft No 1, by letter from the Crofts’ former solicitors dated 21 January 2008, there was agreement to the provision of discovery of documents in the categories described in Croft No 1.
53. The documents that the Crofts’ solicitors agreed to discover in 2008 were referred to in Croft No 1 (at [18]-[19]) as follows:

18 It appears that the categories of discovery required by the Crofts is substantial. While they were represented by solicitors, the Crofts, through their solicitors, informed the respondents’ solicitors on 21 January 2008, it appears, that the Crofts had agreed to discover the following categories of documents:

• documents and correspondence between you, or on your behalf, with Jansin Pty Ltd relating to the business of Jim Kidd Sports Thornlie;
• documents and correspondence relating to your purchase of the Jim Kidd Sports Thornlie business from Jansin Pty Ltd (including a copy of the sale agreement);
• documents and correspondence relating to the appointment of a receiver and manager to Jim Kidd Sports Thornlie and Jim Kidd Sports Willetton on 11 July 2006 and any reports prepared by the receiver and manager in relation to those businesses;
• documents and correspondence relating to your payment of the licence fees as alleged at paragraph 22(a) and 37(a) of your amended statement of claim;
• documents and correspondence relating to your payment of the advertising fee as alleged at paragraph 22(b) and 37(b) of your amended statement of claim, including documents and correspondence relating to your disclosure to our clients of, your gross revenue for each calendar month;
• documents and correspondence relating to our clients being engaged or involved in business or activities the same or similar to those engaged in by you within the area of ten kilometres from the premises as alleged in your amended statement of claim;
• documents and correspondence relating to you being charged a margin in excess of 10% on stock purchased from the Jim Kidd Sports warehouse including details of each specific item of stock on which you were charged a margin of more than 10%; and
• the following documents referred to in the Pitcher Partners’ report dated 21 September 2006:

(a) the “Discovered Electronic Records” in Adobe Acrobat (i.e. PDF) format as referred to at paragraph 6 / page 16;
(b) “the records provided by the Respondents” as referred to at paragraph 7.1 / page 17;
(c) the “affidavit sworn on 27 May 2005 on behalf of the Fourth Applicant” as referred to at paragraph 7.2 / page 18;
(d) the “information provided by the First Applicant” as referred to at paragraph 8.3.1 / page 30;
(e) the “Respondents’ own calculations and records” referred to at paragraph 8.3.1 / page 30; and
(f) the “set of invoices provided ... by the Applicants” and, in particular, “every tenth invoice” as referred to at paragraph 9.2 / page 42.

19 No reason has been advanced why that discovery cannot or should not now be given.

54. No discovery, formal or informal, had been provided at all by the Crofts at the time of hearing these motions. No documents have been delivered to the solicitors for Evertop and Mr Kidd. Undertakings have been provided on at least three occasions to do so but there has been no compliance with the undertakings.
55. The Crofts are currently in breach of earlier orders by which they were required to give discovery by 1 March 2011. An affidavit has been sworn and filed by Mr Croft on behalf of the Crofts, although it clearly does not comply with either Form 22, being the required form for a list of discovered documents verified by affidavit in accordance with O 15 r 6(1) FCR or Form 20 being the required form for affidavit evidence, O 14 r 2(1) FCR. It cannot be relied upon in the proceedings without leave of the Court. Further, it does not address anything other than certain categories of documents put forward by Evertop and Mr Kidd at an earlier point in the proceedings. This is substantially less than that which is required to comply with an order for discovery in relation to the claim as pleaded by the Crofts.
56. The Crofts have also not provided any affidavit evidence establishing that they cannot or need not provide any further discovery. Although it is clear that the Crofts may not understand completely their obligations to discover documents, it is clear that they must provide at least those documents to which the discovery obligations extend in accordance with the Rules of the Federal Court including documents of the kind identified in O 15 r 2(3) FCR, namely:
    1. documents on which the Crofts will rely in proving their case;
    2. documents that adversely affect their own case;
    3. documents that adversely affect the case of all or any of the respondents; and
    4. documents that support the case of all or any of the respondents.
57. The suggestion, as I understand it from Mr Croft, is that the Crofts no longer have access to documents which would fall within the categories under the Rules as requiring discovery. The Rules also provide (O 15 r 2(6) FCR) that they must disclose any category or class of documents which they do not search for and the reason why.
58. I therefore accept the submissions for the respondents that the Crofts must either give discovery in proper form and provide evidence by way of a properly sworn affidavit that relevant documents, including documents in the discovery categories, are no longer in their possession, custody or power or provide discovery of documents by list verified by affidavits.
59. Orders will be made for discovery to be given within 45 days.

LIMITATION OF THE EXTENT OF FURTHER DISCOVERY TO BE PROVIDED BY EVERTOP AND MR KIDD

60. On the other side of the coin, the respondents are concerned about the financial burden of further discovery, having given very substantial discovery already. They rely on affidavits which illustrate the extent and nature of the difficulty that would be encountered.
61. On a number of occasions, both in oral argument in relation to these procedural motions and in other communications directed to the Court, Mr Croft has sought orders that the respondents must prove that their audited figures were not false. This overlooks the fact that if the Crofts seek to claim that the audited figures are false, fabricated or incorrect then it is for them to prove that is so. Mr Croft made it clear that he cannot quantify his loss without bank accounts showing ‘where the money went’. He needs audited figures to prove that they were false. He cannot prove that the audited figures are false without the secondary documents on which those audited accounts were created and have not been discovered despite numerous requests.
62. Mr Timothy Robert Hantke provides franchising consultancy services to Evertop and has sworn an affidavit in consequence of an attendance to review documents and records held by Evertop. He attended Evertop’s warehouse and administration office on 23 August 2010 to review the accounting records held by Evertop and Mr Kidd. He endeavoured to ascertain what documents or records available could be relevant to the Crofts’ account for profit claim by which the Crofts required Mr Kidd or, alternatively, Evertop ‘to provide a full account to the Applicants of all profit received directly or indirectly from the advertising of the “Jim Kidd Sports” business name’.
63. Mr Hantke had difficulty in understanding what was meant by ‘directly or indirectly’ in this context. It is unclear, he says, whether the advertising referred to in the claims for account of profits is for the advertising of the ‘Jim Kidd Sports’ business name:

(a) notionally paid for by the amount contributed to the advertising fund by the Crofts;

(b) purchased with contributions made to the advertising fund by other licensees and the stores owned by Evertop and/or by Mr Kidd and by Mr Kidd himself;

(c) from the ‘conception’ of the ‘Jim Kidd Sports’ business name going back a number of years; or

(d) for the period after the Crofts opened their business using the ‘Jim Kidd Sports’ business name.

64. Equally, difficulty is experienced by the expression ‘all profits ... received from the advertising of the “Jim Kidd Sport” business name’. That expression could mean, Mr Hantke says, all profits derived from:

(a) all the stores owned by Evertop and/or Mr Kidd; and/or

(b) the stores owned by licensees at various times.

65. In an attempt to understand the issues in relation to this claim so as to identify relevant documents which should be discovered, Mr Hantke says he has assumed, solely for the purpose of considering his findings from the August inspection and review, that:

(a) the relevant period for him to consider is the period from 1999 to 2005;

(b) advertising paid for by all contributors to the advertising fund may be relevant; and

(c) not all income streams to Evertop and Mr Kidd will be relevant to an assessment of ‘profits received directly or indirectly from the advertising of the “Jim Kidd Sports” business name’.

66. Mr Hantke is not expressing any opinion as to the correctness of the assumptions he has made but simply disclosing what the assumptions are to define the scope of his collection of data as to the state of existing documents as a result of his inspection in August. Because of the way that Evertop and Mr Kidd maintained financial records in the relevant period (that is, the period from 1999 to 2005), the records for stores owned by Evertop and Mr Kidd recorded figures on a store by store basis with the door sales figures. It may not, therefore, be possible to allocate costs in the way that the claim is framed, particularly having regard to the expression ‘directly or indirectly’.
67. As to advertising sales records, Mr Hantke says that the records are in no way comprehensive and relate to only short periods of time occurring at irregular intervals and were conducted simply to assist Evertop and Mr Kidd to determine whether certain products should be readvertised. Further, the records do not provide complete information on income streams resulting directly from advertising campaigns through the relevant period. Mr Hantke also says that he was informed by Mr Kidd and believed that there would be no other records in existence which could provide information regarding the profits received directly from the advertising of the ‘Jim Kidd Sports’ business name.
68. As to primary financial records, generally speaking, records such as sales invoices, till receipts, stock orders receipts and cheque butts (primary financial records) for the businesses have been retained at the Balcatta warehouse for up to ten years. They are not stored in a well organised fashion and without considerable work, it is impossible to state accurately whether or not all primary financial records for the relevant period are in storage. Mr Hantke has no other information on the existence or location of primary financial records other than what he was told by his solicitors and believes that some of the documents in the category have already been discovered in the proceeding. Secondly, Mr Hantke believes that Evertop and Mr Kidd do not or are most unlikely to have in their possession, custody or power records such as sales invoices, till receipts, stock orders receipts and cheque butts for any stores other than the stores owned by Evertop and Mr Kidd because the only information obtained and retained from the licensee stores were sales and gross turnover figures, some outside stock purchases, particularly in relation to Albany licensee, royalty and advertising levy fees paid, licence fees paid and information relating to stock purchased from the warehouse. Accordingly, in relation to primary financial records, to the extent that they exist and if not already discovered, they are likely only to be locatable among the archive documents at the Balcatta warehouse; they are likely to be difficult to locate because the archived material is not maintained in a well organised fashion; they are unlikely to be complete and are unlikely to be readily assignable to a particular income stream relevant to an assessment of ‘profits received directly or indirectly’ from the advertising of the ‘Jim Kidd Sports’ business name.
69. In summary, in relation to complete records of either or both annual accounts and primary financial records of the Evertop and Mr Kidd businesses in the relevant period in relation to the account for profits claim, the attempt to locate such documents is likely to be a very significant and expensive exercise taking in the order of weeks or months. It will involve as a preliminary step separating this material out from other irrelevant data; may not be feasible at all; and is only likely to result in the location of partial records.
70. Mr Hantke says that even if complete records of either or both annual accounts and primary financial records of the respondents’ businesses were located, trying to match relevant income to relevant expenditure would only be possible after considerable work; would be likely to involve only an estimate; and would probably be inaccurate. It is impossible to say whether doing so could ever provide an accurate account of the profits received by the respondents.
71. Mr Hantke says the cost of such an exercise is likely to be in the order of $10,000 per week over many weeks. That would be wasted expenditure if the documents did not reveal an accurate assessment of ‘profits received directly or indirectly from the advertising of the “Jim Kidd Sports” business name’.
72. In relation to the further discovery sought from Evertop and Mr Kidd, Ms Hemachandra indicates that the solicitors for the respondents have identified documents amounting to approximately 35 lever arch files and five archive boxes, which they hold, and a further 30 archive boxes located at the respondents’ premises as requiring review for further discovery. On the basis of her preliminary review of the documents held at the solicitors’ premises, Ms Hemachandra estimates that the majority are relevant only to the account for profit claim pursued by the Crofts. Ms Hemachandra estimates that a review of the material would take at least three working weeks for a solicitor working full time on an assumption of time per document.
73. Against that background, in summary Evertop and Mr Kidd point to the fact that the single largest document search and review task remaining for the respondents is in relation to the Crofts account for profits claim. As currently pleaded, the Crofts require Evertop and Mr Kidd to account for all profits received ‘directly or indirectly’ from the advertising of the ‘Jim Kidd Sports’ business name.
74. The problems with locating that material and its likely incompleteness have been described above. The discovery task would be undertaken in circumstances where it is possible or even likely that no documents capable of fitting the description could be found.
75. In addition to this, the Crofts have separately alleged that Evertop and Mr Kidd have benefited by way of undisclosed profits of $211,193 and $287,354 but it is not apparent whether these sums constitute the limit of the Crofts account for profits claim in which case that needs to be made clear on the pleadings. In either case, the costs of discovery to the respondents, they contend, are inordinately burdensome and wholly disproportionate to the usefulness of any information that can be located as a result. That being so, they rely upon the principle that a party does not have an unqualified right to discovery under the Federal Court Rules: Cameron, B.A. & Anor v. Rural Press Ltd & Ors [1990] FCA 360 per Burchett, Gummow and Hill JJ. The Court will not order discovery if discovery in the form sought will entail huge expense and a great deal of time and the benefit, if any, could not possibly warrant such an order: Kyocera Mita Australia Pty Ltd v Mitronics Corporation Pty Ltd [2005] FCA 242 per Stone J (at [18]). The Court will ensure that in all the circumstances the litigation is conducted fairly in the interests of both parties and care must be taken to make sure that there is no excessive or unnecessary discovery: United Salvage Pty Ltd v Louis Dreyfus Armateurs SNC [2006] FCA 116 per Tamberlin J (at [3]).
76. Accordingly, before discovery is given, the contention for Evertop and Mr Kidd is that, in relation to the account for profits claim, orders should be made requiring or allowing the Crofts to amend the account for profits claim to plead it with sufficient particularity so as to allow the respondents to understand what is being sought. Secondly, requiring or allowing the Crofts to identify the documents or categories of documents that they require to be discovered in relation to the account for profits claim so as to frame the onerous discovery task with more precision and that the respondents have the opportunity to respond to those claims. The respondents submit that orders requiring them to provide discovery in relation to the account for profits claim should be vacated until each of those three steps has been completed by the Crofts.

CONCLUSION

77. In my view, in light of the non-compliance with several of the orders of the Court in recent times and the inability that the Crofts are experiencing in particularising their claim and providing discovery, it would be inappropriate to require the respondents to incur the substantial additional financial burden of having to provide further discovery at this stage in the manner sought by the Crofts or at all.
78. I propose, therefore, in indicating that I expect no further costs to be incurred by the respondents in complying with discovery until the obligations directed in these orders are met by the Crofts. Should there be particular difficulty sustained or experienced in complying with the orders, then it is for the Crofts to apply for the orders to be reviewed or reconsidered. In the meantime, it is clear that even if the respondents are totally to blame, as the Crofts contend, they should not be required to incur the very substantial expenditure in providing further discovery in the manner sought by the Crofts until such time as there is compliance by the Crofts with outstanding directions. The Crofts should also understand that non-compliance with the orders does place their entire claim at jeopardy.
79. As mentioned on a number of occasions, in these reasons, while I am sympathetic to the difficulties occasioned by the Crofts in pursuing this claim without the benefit of legal assistance, that does not meant that assistance can be rendered to them to the prejudice of the respondents. This is particularly so in the circumstance of a substantial pre-action discovery benefit which has been afforded to the Crofts (and other applicants). Notwithstanding this substantial benefit (and corresponding cost to the respondents), the Crofts have still not been able to fashion their claim in a manner which properly enables it to go forward to trial. In that regard, I have indicated the orders I propose making concerning particulars and discovery.
80. I make the following orders:
    1. Within 35 days, the applicants file and serve further and better particulars of their losses and damages claimed setting out the quantification and calculation of loss and damage and the basis on which those amounts were calculated for the following:
       1. The diminution in value of the licence to use the Jim Kidd Sports name for:
          1. The Thornlie business;
          2. The Willetton business;
       2. A national ‘equal’ contribution by all Jim Kidd stores to the advertising fund;
       100. Funds paid by the applicants in excess of a 10% margin on goods purchased from the Jim Kid Sports warehouse in Balcatta, Western Australia;
       4. Valuation of the Thornlie business at the time of its acquisition by the applicants;
       5. The aggregate value of the amount by which the applicants’ contribution to the actual costs of advertising was increased as a result of the alleged breaches to:
          1. The Thornlie Collateral Agreement;
          2. The Willetton Collateral Agreement;
       6. Interest paid on the applicants’ bank loan of $600,000 applied to the purchase of the Thornlie business;
       7. Payments made or owing by the applicants in meeting third party liabilities arising from the appointment of a receiver to:
          1. The Thornlie business;
          2. The Willetton business;
       8. Loss of opportunity to earn additional profits in a hypothetical situation in which an allegedly required amount of advertising expenditure exceeded amounts of advertising expenditure which were made and resulted in increased sales by the applicants in relation to:
          1. The Thornlie business;
          2. The Willetton business;
       1. Value of lost sales allegedly made by the first and second respondents into exclusive licence area for each of the Thornlie and the Willetton business.
    2. Further to Order 1 above, if further and better particulars cannot be provided for orders 1A, 1D, 1E, 1H and 1I, the applicants do provide particulars by way of an expert report at a date to be fixed.
    3. Within 35 days, the applicants file and serve particulars of damages pleaded in paras 12, 18, 24, 19, 33 and 39 of the applicants’ minute of proposed amended statement of claim dated ‘February 2011-02-03’ filed on 4 March 2011 (the amended statement of claim).
    4. Within 45 days, the applicants provide discovery of:
       1. documents evidencing contributions to the advertising levy fund;
       2. relevant documents that are no longer in their possession, custody or power;
       100. any category or class of documents they do not search for;
       4. documents of the kind identified in O 15 r 2(3) of the Federal Court Rules.
    5. The parties have liberty to apply on 7 days notice.
    6. The applicants do pay the first and second respondents’ costs of the motion to be taxed if not agreed.
       

I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

Associate:

Dated: 1 July 2011