Addstead Pty Limited (in Liquidation) v Simmons

[2004] SASC 260

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

ADDSTEAD PTY LIMITED (IN LIQUIDATION) & ORS v SIMMONS & ORS

Reasons for Decision of The Honourable Justice Bleby

26 August 2004

PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - DISCOVERY OF DOCUMENTS

Application for discovery and inspection of a deed of settlement concerning related proceedings in Queensland - Whether certain terms of the deed are relevant - Evidence required to establish irrelevance - Conclusiveness of affidavit as to relevance - Masking of irrelevant parts - Confidentiality - Whether inspection should be conditional upon an undertaking that disclosure be limited to legal representation and an unrepresented party - Whether prejudice would be suffered by disclosure - Implied undertakings on the part of those to whom material is discovered - Consideration of the purpose for which disclosed material can be used - Discovery and inspection allowed - No express confidentiality undertaking required

Supreme Court Rules 1987 Rule 58A.03; Supreme Court Act 1935 s 65, referred to.
Fruehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359; Mulley v Manifold (1959) 103 CLR 341; Southern Equities Corporation Ltd (In liquidation) v Arthur Andersen & Co (No 5) [2001] SASC 335; GE Capital Corporate Finance Group Ltd v Bankers Trust Co [1995] 1 WLR 172; Peat Marwick Hungerfords v Executor Trustee Australia Ltd (Unreported, Olsson J 25 Octobdr 1995, Judgment NO; Morgan v Mallard (2001) 216 LSJS 143, applied.
Emmanuel Management Pty Ltd (In Liquidation) & Ors v Foster's Brewing Group Ltd & Ors (2003) 178 FLR 1, considered.

ADDSTEAD PTY LIMITED (IN LIQUIDATION) & ORS v SIMMONS & ORS
[2004] SASC 260

1. BLEBY J:             The defendants, by oral application, seek discovery and inspection of a certain deed of settlement concerning proceedings in the Supreme Court of Queensland between the present plaintiffs, as plaintiffs in that action, and a number of corporations comprising part of the Foster’s Brewing Group, some of their directors, the firm of Coopers & Lybrand and some of its partners as defendants. The action brought in Queensland was dismissed by Chesterman J: Emmanuel Management Pty Ltd (In liquidation) & Ors v Foster’s Brewing Group Ltd & Ors (2003) 178 FLR 1. The plaintiffs instituted an appeal. The deed of settlement resulted in the withdrawal of the appeal.

2. The scheme, the subject of the proceedings in this action, was one of the transactions the subject of the Queensland proceedings and hence of the deed of settlement.

3. Subject to one qualification to be mentioned, the plaintiff has conceded the relevance of the deed for the purposes of rule 58A.03 of the Supreme Court Rules by agreeing to make discovery of the deed. The qualification is that the liquidator of the plaintiff companies has sworn an affidavit asserting that clauses 1.1(h), (p) and (aa) and clauses 7 and 8 of the deed are not relevant to these proceedings and that, for the purpose of inspection of the deed, those clauses should be masked.

4. The plaintiffs also seek an order that the deed should only be produced for inspection upon an undertaking being given by the solicitors for the parties and by the unrepresented party that the contents be disclosed only to counsel and instructing solicitor and to the unrepresented party as if that party were counsel.

5. So far as the masking of the document is concerned, an assertion by a party in an affidavit as to the relevance of a document or part of a document is generally conclusive. There are two reasons for that. One is that courts are not equipped to decide such issues before trial where there is a conflict on affidavits. The other is that the factual issues in a case are those pleaded, not the allegations contained in an affidavit. See generally Fauehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359 and the cases cited therein; Mulley v Manifold (1959) 103 CLR 341. Nevertheless, and partly as a result of that inability to challenge the assertion in an affidavit, every party has what I have called an “uncompromising ethical obligation” to make true and honest disclosure of relevant documents: see Southern Equities Corporation Ltd (In liquidation) v Arthur Andersen & Co(No.5) [2001] SASC 335 at [17].

6. Where documents contain a mixture of relevant and irrelevant material, the practice of masking the irrelevant for the purpose of inspection is well established: GE Capital Corporate Finance Group Ltd v Bankers Trust Co [1995] 1 WLR 172;  Peat Marwick Hungerfords v Executor Trustee Australia Ltd (Unreported, Olsson J 25 October 1995, Judgment No.S5301).

7. However, the conclusiveness of the affidavit does not mean that the pleadings or some other document or part of this document or a combination of documents might not justify an application for further and better discovery because it is apparent from that other material that the masked part of the document is relevant. If that is the case, then such an application can be made.

8. However, all that has been put to me so far is that, if the bulk of the document is relevant, so the disputed clauses must be. That is not necessarily so, and without more, the assertion in the affidavit must prevail.

9. The court will, if satisfied that a document is relevant, sometimes inspect it for the purpose of determining whether a claim for some form of privilege from production should be allowed, but it will not inspect a document in order to determine its relevance.

10. Therefore, for present purposes, I am unable to go behind the affidavit of the liquidator and his assertion that the clauses concerned are not relevant. I will, however, entertain an application, if a party chooses to make one on reasonable grounds, that the masked clauses should be discovered because they appear to be relevant by reference to other documents or to parts of documents or to the pleadings. For the purpose of this case I recognise that, in the interest of saving costs, this order for discovery and inspection is being made to assist in a process of mediation which I have directed under s 65 of the Supreme Court Act 1935. I also recognise that, if the mediation fails, some parties may wish to amend their pleadings to raise other issues, and that that fact may well be relied on in the course of the mediation. There is a further possibility that the masked portions of the deed may become relevant if such an amendment to the pleadings were made.

11. In the circumstances, that requires a pragmatic and practical approach without putting the parties to the expense of a formal application to seek leave to amend, thereby further delaying the mediation. In those circumstances, I would be prepared to consider an application for an order for further and better discovery based on a proposed or intended amendment should it appear reasonably likely that leave would be given to make such amendment, and should the intended amendment appear to render the masked portions of the document relevant for the purposes of rule 58A.03 of the Supreme Court Rules. Such an application, if made, would need to be made as soon as possible so as not to disrupt the course of the mediation.

12. The second qualification sought by the plaintiffs concerns the question of confidentiality and disclosure to legal advisers only.

13. The Foster’s Brewing Group companies do not oppose production of the deed of settlement. They merely seek an undertaking by the parties in this action to whom it is disclosed that it would only be used for the purpose of these proceedings, and would otherwise be kept confidential. The same attitude is taken by PricewaterhouseCoopers, the successor to Coopers & Lybrand. Gordian Runoff Ltd, the provider of litigation funding to the plaintiffs and a third party in these proceedings, seeks the masking of the paragraphs which the plaintiffs claim are irrelevant, but otherwise does not object to the disclosure “upon the provision of the usual undertakings”.

14. Sometimes there are obvious difficulties involved in the disclosure of commercially sensitive material to an opposing party. Where potential prejudice of that type can be shown, undertakings by solicitors and counsel not to disclose the documents to any other person are sometimes volunteered or required by the Court before inspection is given. It has not been suggested that this deed is of that nature. No reference has been made to any prejudice to be suffered by any of the parties to the deed by disclosure of its contents in these proceedings.

15. Because of the compulsory nature of discovery and inspection, it has long been subject to an implied undertaking on the part of those to whom it is given that the person to whom disclosure is made will not use it for any collateral or ulterior purpose not connected with the litigation in which it is disclosed. That implied undertaking extends to not making the contents public or communicating them to a stranger to the suit, nor using them for any collateral objective. See generally Morgan v Mallard (2001) 216 LSJS 143. The obligation extends not only to legal advisers but to those to whom the document might need to be shown for the purpose of obtaining instructions.

16. It seems to me that in this case the required degree of confidentiality is covered by the implied undertaking. Nothing has been put to me which would require anything beyond that in the circumstances of this case. Accordingly, I do not propose to give any further directions in that regard.

17. The order of the court will be that the plaintiffs give discovery and inspection of the deed of settlement relating to the proceedings in the Supreme Court of Queensland between Emmanuel Management Pty Ltd (In Liquidation) & Ors v Foster’s Brewing Group Ltd & Ors other than clauses 1.1(h), (p) and (aa) and clauses 7 and 8 of the said deed. I direct that for the purpose of inspection of the deed those clauses may be masked. There will be liberty to apply.