26 Sep 2013
Practising the Practice Note
by Luke Buchanan, Nadia Latti
The NSW Supreme Court has so far taken a pretty broad approach when applying Practice Note SC Eq 11.
The Practice Note SC Eq 11 has the result that in the Equity Division of the NSW Supreme Court (except in the Commercial Arbitration List), evidence is to be served before any order for disclosure is granted unless there are "exceptional circumstances necessitating disclosure".
In addition, any application for disclosure will need to set out:
reasons why disclosure is necessary for the resolution of the real issues in dispute in the proceedings;
the class of documents in respect of which disclosure is sought; and
the likely cost of disclosure,
and the Court will not order disclosure at all unless the first of those requirements is made out. Limits may be imposed on the recoverable costs relating to disclosure.
The Practice Note commenced on 26 March 2012. Now that the Practice Note has been in place for more than a year, what may be derived from the cases that have considered it?
Two main questions have arisen:
What are exceptional circumstances?
Situations which have been identified as constituting "exceptional circumstances necessitating disclosure" include:
when the information sought is solely or largely in the possession of the party against whom disclosure is sought (Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue (No 2)  NSWSC 89; In the matter of Mempoll Pty Limited, Anakin Pty Limited and Gold Kings (Australia) Pty Limited  NSWSC 1057; Suncorp Metway v Rider Levett Bucknall  NSWSC 975);
when the documents are necessary to fairly prepare a case for trial (Danihel v Manning  NSWSC 556, in which discovery was not ordered but the threshold test was identified); and
when disclosure sooner rather than later is consistent with the just, quick and cheap resolution of the real issues in dispute (RSA (Moorvale Station) Pty Ltd v VDM CCE Pty Ltd  NSWSC 534; In the matter of Mempoll Pty Limited, Anakin Pty Limited and Gold Kinds (Australia) Pty Limited  NSWSC 1057).
And what aren't
Some particular cases in which "exceptional circumstances" were not made out include:
where there was a partial admission by the Defendant, with the result that, after the introduction of the Practice Note, disclosure before evidence was no longer justified and the existing consent orders were vacated (SkyMesh Pty Ltd v Ipstar Australia Pty Ltd  NSWSC 696); and
where disclosure was sought prematurely and the relevant material would be provided through expert evidence later in the proceedings (Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue  NSWSC 913 – however, note the subsequent decision in the same proceedings which is referred to above: Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue (No 2)  NSWSC 89 where an order for disclosure prior to service of expert evidence in reply was granted).
Additional observations from the bench regarding exceptional circumstances include:
a strict formulation of the Practice Note should be avoided so as not to fetter a flexible approach (SkyMesh Pty Ltd v Ipstar Australia Pty Ltd  NSWSC 696) and every case must be examined in its own context (RSA (Moorvale Station) Pty Ltd v VDM CCE Pty Ltd  NSWSC 534);
the words "exceptional circumstances" take their ordinary meaning, and "exceptional" means "out of the ordinary" or "unusual", rather than "unique" (Leighton International v Hodges; Thiess v Reinforced Earth  NSWSC 458);
the quick and cheap resolution of the real issues in the dispute should not outweigh the just resolution of the proceedings, so that a party may be allowed access to documents essential to the preparation of its case at an early stage if the interests of justice require that course (Leda Manorstead Pty Ltd v Chief Commissioner of State Revenue (No 2)  NSWSC 89); and
if adding restrictive criteria would add to the costs of disclosure, then the general class of documents can be produced and the party seeking disclosure should bear the burden of analysis (Suncorp Metway v Rider Levett Bucknall (No. 2)  NSWSC 999).
Processes other than disclosure
While the wording of the Practice Note refers specifically to disclosure, the judicial approach has been to adopt a broader interpretation, in view of its purpose. The aim here seems to be to ensure that the Practice Note is not circumvented through the use of other processes akin to disclosure.
Interrogatories are not captured by the Practice Note, but they should not be used to subvert its requirements.
In the Matter of Olsen Infrastructure Pty Limited  NSWSC 1202, the use of interrogatories was deemed appropriate, for reasons including that the relevant information was solely in the possession of the other party.
Notices to produce
The Practice Note does not apply to Notices to Produce on its terms, however following the reasoning of Justice Stevenson in Owners Strata Plan SP 69597 v Baseline Constructions Pty Ltd  NSWSC 502, notices to produce should not be used to circumvent the purpose of the Practice Note. This approach was followed in In the matter of Mempoll Pty Limited, Anakin Pty Limited and Gold Kings (Australia) Pty Limited  NSWSC 1057.
In VPlus Holdings Pty Ltd v Bank of Western Australia  NSWSC 1327, a Notice to Produce was set aside as it was in truth a request for discovery and liable to subvert the intended operation of the Practice Note. In that decision, Justice Stevenson referred back to his observations in Owners Strata Plan.
A subpoena will not be considered analogous to disclosure if the responding party is not party to the proceedings, and what is sought is not discovery: Westgate Finance v May  NSWSC 806.
However, similar considerations apply to issuing subpoenas as ordering discovery. The party requesting the issue of a subpoena should be able to demonstrate the precise issues in respect of which the documents are required, in line with the intention of the Practice Note that discovery (if it occurs at all) is to follow evidence: New Price Retail Services v David Hanna; Australian Pharmaceutical Industries v David Hanna  NSWSC 422.
If you are really pressed for time…
…read only paragraphs - of Bergin CJ in Equity’s decision in Armstrong Strategic Management and Marketing Pty Ltd v Expense Reduction Analyst Group Pty Ltd  NSWSC 393. Her analysis of the Practice Note has been referred to in multiple subsequent judgments as a general explanation of the Practice Note (although the decision itself does not apply the Practice Note, and was successfully appealed on other grounds).
The Court's likely approach
The existing cases on the Practice Note indicate a broad approach will be taken to its application. Judges have focused on the purpose of the Practice Note, as opposed to an excessively technical reading of its terms. While it is still possible to seek disclosure before evidence is served, that will only be ordered in very limited circumstances, such as where the information is solely or largely in the possession of the other party.
It is likely that the Court will also continue to consider the purpose of the Practice Note in dealing with processes other than discovery. Practitioners seeking an order for discovery (or for another process requiring the production of documents) should be prepared to demonstrate why such an order is necessary for the just, quick and cheap resolution of the issues in the proceedings.
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