Supreme Court New South Wales Medium Neutral Citation: Imaging Partners v Imaging Independently [2014] NSWSC 1555 Hearing dates: 31/10/2014 Decision date: 31 October 2014 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Order discovery within categories sought, but with limitations. Catchwords: PRACTICE AND PROCEDURE - discovery - application for discovery order - whether the categories for discovery relate to a fact in issue in the proceedings - whether sufficient nexus to the case pleaded - whether order should be made in relation to documents subject to litigation privilege Cases Cited: Imaging Partners Pty Limited v Imaging Independently Pty Limited [2014] NSWSC 831 Category: Procedural and other rulings Parties: Imaging Partners Online Limited (Plaintiff) Imaging Independently Pty Limited (Defendant) Representation: Counsel: W Muddle SC (Plaintiff) S E Gray (Defendant) Solicitors: W Advisers (Plaintiff) Gadens Lawyers (Defendant) File Number(s): 2013/229871 Judgment 1HIS HONOUR: This is an application for discovery in accordance with specified categories, some of which have been narrowed in the course of argument. The application was made after the parties had served their evidence and hence is not covered by Practice Note SC Eq11. 2In the context of an application that was made under the Practice Note, Hammerschlag J in reasons given on 20 June 2014, Imaging Partners Pty Limited v Imaging Independently Pty Limited [2014] NSWSC 831, gave the background to the case, and stated the "two prongs" of the plaintiff's case, in the following terms, at [10] to [16]: 10. Both parties provide radiology services. A Victorian state organisation called Eastern Health, which apparently administers hospitals in that State, contracted with the defendant to provide radiology services ("the head contract") and it in turn, subcontracted with the plaintiff to provide after hours radiology services ("the sub-contract"). 11. The head contract provided for an extension if Eastern Health, acting reasonably was satisfied with the services provided under it. The sub-contract provided that it would be extended if the head contract was. 12. At or about the time of the contemplated extension, the defendant and Eastern Health entered into a new head contract, but no new sub-contract was made, because, so says the defendant, Eastern Health was unhappy with the component of services provided under the head contract by way of the plaintiff's performance of the sub-contract, an assessment with which the defendant says it agreed. This alleged below par performance was, it is said, manifested amongst others, by both the plaintiff and the defendant re-reporting an unacceptably high number of cases originally erroneously diagnosed by the plaintiff. 13. The plaintiff's case has two prongs. 14. The first prong is an assertion that Eastern Health, acting reasonably, was in fact satisfied with the performance under the head contract, with the consequence that the head contract was in fact extended, and with the further consequence that so was the sub-contract. 15. The second prong is an assertion by the plaintiff that if, contrary to its primary thesis, Eastern Health was not so satisfied, it (Eastern Health) was in that state of mind because the defendant wrongly failed to disabuse Eastern Health of its misapprehensions as to the plaintiff's performance, that failure being a breach by the defendant of obligations (including obligations of good faith) implied by the sub-contract and the circumstances of the parties' relationship. 16. Inherent in the second prong is the assertion that the plaintiff's performance was adequate. No element of it concerns the defendant's performance. Self-evidently, Eastern Health was satisfied with the defendant's performance, and it is not part of the plaintiff's case to impeach that performance. After all, Eastern Health later further contracted with the defendant. 3His Honour reiterated at [19] that the adequacy of the plaintiff's performance was a fact in issue. 4It is a fact in issue because, as is asserted at paragraph 51 of the Amended Commercial List Statement (ACLS): 51. IPO performed the Contract (including key responsibilities, key quality requirements and service requirements) satisfactorily. 5That assertion is denied by paragraph 51 of the Amended Commercial List Response (ACLR). The paragraph gives detailed particulars of why, the defendant says, the plaintiff did not perform its obligations satisfactorily. 6It seems to me that paragraph 53 of the ACLS is also relevant. I set out that paragraph: 53. Eastern Health, acting reasonably and comprehending the factual background on which reasonable satisfaction was required in accordance with the terms of clause 1.2 of the Head Contract, would have been satisfied of the matters in clauses 1.2.2 and 1.2.2 of the Head Contract. 7The defendant denies paragraph 53. It refers in effect by way of particulars to what it had earlier said in paragraph 52 of the ACLR, which alleges defective (non-timely) performance of reporting obligations. 8The reason why Eastern Health's hypothetical satisfaction is relevant is apparent from what Hammerschlag J said at [15] and [16] of his Honour's reasons. It arises on the plaintiff's alternative case. That case asserts that the defendant, in breach of good faith and other obligations, did not properly disclose to Eastern Health the adequacy of the plaintiff's performance. 9It is correct to say, as Mr Muddle of Senior Counsel, who appears for the plaintiff, submitted, that in terms of a failure to disclose said to be in breach of obligations of good faith, the question must depend on what it was that the person said to owe the obligation knew, and what it was that the person failed to disclose. It is not an ordinary usage of language to say that one can disclose something of which one does not know. 10Nonetheless, I do not think that Hammerschlag J intended to state comprehensively the entirety of the plaintiff's case under its second prong. In particular, I do not think that his Honour was intending to encompass the level of complexity introduced by paragraph 53 of the ACLS. 11Accordingly, I do not agree that it follows from what Hammerschlag J said at [15] that it was only matters in fact known to the defendant that could be relevant to the asserted breach of the obligation of good faith. After all, it is at least arguable that Eastern Health might have failed to have maintained any relationship with the plaintiff regardless of what the defendant had or had not reported, if some position of far wider breach had come out. 12Accordingly, I see no reason for confining the case of satisfactory performance in the limited way in which Mr Muddle sought to confine it. It seems to me to follow that, subject to other issues, documents in categories 1, 3 and 4 (as amended) in the defendant's Notice of Motion filed on 31 October 2014 are in principle discoverable. 13There was a question raised as to the width of the discovery sought. That was a legitimate concern. It arose because the requests were not related only to reports (and reviews of them) prepared in the course of performance of the subcontract. Mr Gray of counsel, for the defendant, accepted that this was an appropriate limitation. 14In short, in relation to those categories, I think there is sufficient nexus between the case pleaded (and I do not just base this on the summary given by Hammerschlag J) and the documents in question as to make them legitimately discoverable. 15It was not suggested that making an order in the terms sought (with appropriate limitations relating to performance of the subcontract) would be of itself, burdensome or oppressive. Nor was it submitted that to make the orders sought, with those limitations, would be likely to derail the hearing which has been fixed, as I understand it, for the beginning of the new term on 2 February 2015. 16The fifth category of documents sought was records, assessments and estimates of profit, costs and the like, relevant to the subcontract and referable to the period of the subcontract. The suggested answer was that to the extent that the documents had not been put into the public domain by being referred to in a witness statement served on behalf of the plaintiff, they were privileged because they were prepared for the purposes of litigation. To put it another way, it was said that there were no such documents prepared by the plaintiff in the course of its ordinary business operations during the term of the subcontract. 17That may or may not be correct. I do not mean for a minute to suggest that I do not accept the assurance given by Mr Muddle, or the statement made by his instructing solicitor on which the assurance was based. However, looking at the documents in question, experience teaches that it is frequently the case that commercial entities produce such documents in the course of their operations. If a claim for litigation privilege is to be made, it seems to me to be appropriate to order that a list of documents be prepared and that the basis of the claim for privilege be articulated. 18Since compliance with the Notice of Motion, limited in the way that I have indicated, will require the parties to put their heads together and confer both on the time within which discovery is to be provided and the way in which the categories are to be limited, I will do no more at this stage than to indicate that discovery, to the extent that I have said, should be given and direct the parties to prepare orders to give effect to what I have said. [Counsel addressed.] 19I note that Mr Muddle has, very properly, indicated that the hearing is to commence in the beginning of March, not the beginning of February 2015. 20I direct the parties to submit to my Associate by 7 November 2014 draft orders intended to give effect to the reasons I have indicated. [Counsel addressed on costs.] 21I order that the costs of the Notice of Motion be the applicant's/defendant's costs in the proceeding. 22I will direct the exhibits on this and the previous application be handed out once the revised reasons have been made available to the parties. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 November 2014