Cardiff Capital v SMEC Australia Pty Ltd [No 2]
[2013] WASC 309
•19 AUGUST 2013
CARDIFF CAPITAL -v- SMEC AUSTRALIA PTY LTD [No 2] [2013] WASC 309
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 309 | |
| 19/08/2013 | |||
| Case No: | CIV:3156/2009 | 23 JULY 2013 | |
| Coram: | PRITCHARD J | 19/08/13 | |
| 20 | Judgment Part: | 1 of 1 | |
| Result: | Objection to inspection of documents produced under subpoena be dismissed | ||
| B | |||
| PDF Version |
| Parties: | CARDIFF CAPITAL SMEC AUSTRALIA PTY LTD |
Catchwords: | Objection to the inspection of documents produced under subpoena |
Legislation: | Nil |
Case References: | Boase v Axis International Management Pty Ltd (No 3) [2012] WASC 498 Harman v Home Office [1983] 1 AC 280 Sofilas v Cable Sands (WA) Pty Ltd (1993) 9 WAR 196 Stanley v Layne Christensen Co [2004] WASCA 50 Temwood Holdings Pty Ltd v Oliver [1999] WASC 212 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
SMEC AUSTRALIA PTY LTD
Defendant
Catchwords:
Objection to the inspection of documents produced under subpoena
Legislation:
Nil
Result:
Objection to inspection of documents produced under subpoena be dismissed
Category: B
Representation:
Counsel:
Plaintiff : Mr C Williams
Defendant : Mr C Slater
Solicitors:
Plaintiff : Solomon Brothers
Defendant : Lee & Lyons Lawyers
Case(s) referred to in judgment(s):
Boase v Axis International Management Pty Ltd (No 3) [2012] WASC 498
Harman v Home Office [1983] 1 AC 280
Sofilas v Cable Sands (WA) Pty Ltd (1993) 9 WAR 196
Stanley v Layne Christensen Co [2004] WASCA 50
Temwood Holdings Pty Ltd v Oliver [1999] WASC 212
- PRITCHARD J:
Introduction
1 Cardiff Capital Pty Ltd has objected to the inspection of documents produced under subpoenas issued by SMEC Australia Pty Ltd to eight parties. None of the subpoenaed parties have made any objection to the inspection of the documents they produced.1
2 Each subpoena sought the production of documents described in various categories. Cardiff objects to inspection of any documents produced pursuant to some of those categories on the grounds that any such documents are not sought for a legitimate forensic purpose, are not relevant to matters in issue in the litigation, and/or are likely to contain information confidential to Cardiff.
3 For the reasons outlined below, Cardiff’s objection to the inspection of the documents produced under the subpoenas should be dismissed.
4 In these reasons for decision, I deal with following matters:
1. Principles governing the determination of objections to inspection of subpoenaed documents;
2. Overview of the litigation;
3. Consideration of the grounds of objection in respect of the subpoenas issued to:
(a) JDSi Pty Ltd;
(b) Landdevelopment.com.au Pty Ltd;
(c) First National Real Estate Kimberley;
(d) Integrated Valuation Services Pty Ltd;
(e) Barker Mortgages Pty Ltd;
(f) Cardiff;
(g) KWS Capital Pty Ltd;
(h) National Australia Bank Ltd.
4. Inspection of the documents.
1. Principles governing the determination of objections to inspection of subpoenaed documents
5 A subpoena must serve a legitimate forensic purpose - that is, the documents produced must give rise to a line of enquiry which is relevant to the issues in dispute.2 Once documents are produced under a subpoena, a question arises as to whether those documents should be inspected by the parties, and if so, on what terms.3
6 The principles relevant to the determination of objections to inspection of subpoenaed documents are well established, and there was no dispute between the parties in relation to them. The relevant principles were recently summarised by his Honour Beech J in Boase v Axis International Management Pty Ltd (No 3)4and I gratefully adopt his Honour’s summary:
10 The first question is whether the documents, or the passages to which objection is taken, have apparent relevance to the litigation.
11 Apparent relevance is a low threshold. It is not a question of whether it appears that the party issuing the subpoena could, or could probably, tender the document in evidence. It is enough to establish apparent relevance if a document or class of documents gives rise to a line of enquiry relevant to the issues before the trier of fact, including for the purpose of meeting the opposing case by way of cross-examination: Apache Northwest Pty Ltd v Western Power Corporation (1998) 19 WAR 350, 374; Stanley v Layne Christensen Co [2004] WASCA 50 [9]; Commonwealth of Australia v Albany Port Authority [2006] WASCA 185 [18].
12 In advance of trial, the determination of whether a document is relevant is a difficult one: National Employers' Mutual General Association Ltd v Waind [1978] 1 NSWLR 372, 385; Apache Northwest Pty Ltd (373).
13 In determining relevance, the difficulty of assessing relevance prior to trial must be taken into account. The necessity for having a document in order to fairly dispose of the issues at trial might well not become apparent before trial: Apache Northwest Pty Ltd (374, 376, 379); Stanley v Layne Christensen Co [9]; Commonwealth of Australia v Albany Port Authority [18].
14 Ultimately the relevance of the documents produced will be a question for determination at the trial. It is not appropriate for the court to embark on a detailed preliminary enquiry involving evidence from the party seeking to issue the subpoenas and the recipient of the subpoenas: Apache Northwest Pty Ltd (379).
15 Documents can be inspected whether or not they are in an admissible form: Waind (385); Apache Northwest Pty Ltd (372).
16 One object of the rule permitting early return of subpoenas is to appraise the parties of the strengths and weaknesses of their case at an early stage in proceedings. Accordingly, a narrow view should not be taken as to the legitimate purposes of a subpoena of apparent relevance: Stanley v Layne Christensen Co [9]; Commonwealth of Australia v Albany Port Authority [18].
17 The determination of whether inspection should be permitted of documents produced on subpoena is separate from the question of whether to grant leave to issue the subpoena: Waind (381); Apache Northwest Pty Ltd (371); Stanley v Layne Christensen Co [11] - [13].
18 Further, the question of inspection is distinct from the question of whether a document may be tendered at trial: Waind (381); Apache Northwest Pty Ltd (371). The tests are very different. Many documents might meet the apparent relevance threshold for inspection, but fall well short of being sufficiently relevant to be admissible at trial.
19 If a document is apparently relevant, inspection will usually be permitted, even though it is not admissible as it stands and the party seeking the document has not undertaken to tender it or use it in cross-examination: Waind (385); Apache Northwest Pty Ltd (373 - 374).
20 Confidentiality is not of itself a ground to refuse inspection of an apparently relevant document. In the end, the public interest in the administration of justice prevails over the interest in confidentiality of the information: Apache Northwest Pty Ltd (379); Mobil Oil Australia Ltd v Guina Developments Pty Ltd [1996] 2 VR 34, 38. However, confidentiality can be taken into account, together with any assessment of the extent of the document's apparent relevance, in the exercise of discretion whether to permit inspection: Apache Northwest Pty Ltd (380 - 381).
21 The principles of case flow management and the objects in O 1 r 4(b) of the Rules of the Supreme Court 1971 (WA) must be kept in mind in the exercise of discretion whether to permit inspection: Wookey v Quigley [No 5] [2011] WASC 275 [35].
7 In order to assess Cardiff’s objections to inspection it is necessary to identify the issues in dispute in the action, by reference to the pleadings.
2. Overview of the litigation
8 These proceedings arise out of an action commenced by Valentine Falls Estate Pty Ltd against SMEC in 2009. Valentine Falls subsequently went into liquidation and its causes of action were assigned to Cardiff, which has been substituted as the plaintiff in these proceedings.
9 In 2008, Valentine Falls engaged SMEC to provide civil engineering and project management consultancy services in relation to a residential subdivision in Kununurra (the Development). SMEC produced engineering designs for the Development. After tenders were sought to proceed in accordance with those designs, Valentine Falls concluded that proceeding in accordance with SMEC’s designs would result in far higher costs than it wished to expend on the Development. In February 2009, Valentine Falls engaged another engineering company, JDSi, to review SMEC’s designs and subsequently to prepare new civil engineering designs. It is claimed that engaging JDSi for those purposes resulted in a delay in the Development proceeding.
10 Valentine Falls had secured finance for the Development from the NAB, Barker Mortgages and KWS. Sometime after JDSi was engaged, the NAB refused to continue to finance the Development unless Valentine Falls provided an additional $4 million equity for the Development. In order to do so, Valentine Falls entered into a facility agreement with Cardiff whereby Cardiff advanced that sum to Valentine Falls. Pursuant to its agreement with Cardiff, Valentine Falls was required to engage Landdevelopment as the project manager for the Development.
11 Cardiff's claim against SMEC is that the designs it prepared would have meant that Valentine Falls would have incurred costs significantly higher than those reasonably necessary for the Development. Cardiff claims that in preparing those designs SMEC breached its contractual duty, or alternatively a duty of care, to provide its services with such skill, care and diligence as was generally exercised by competent members of the engineering profession performing services of a similar nature.
12 Cardiff claims that as a result of the breach by SMEC of its contractual duty or its duty of care, Valentine Falls was required to engage JDSi to prepare replacement designs, the Development was delayed for 12 months, as a result of the delay NAB required the injection of an additional $4 million in equity by Valentine falls, Valentine Falls entered into the agreement with Cardiff and it subsequently engaged Landdevelopment as its project manager for the Development. Cardiff claims that as a result of these events, Valentine Falls incurred loss and damage including fees and charges charged by Cardiff, fees charged by Landdevelopment, additional interest on funds borrowed by Valentine Falls in relation to the Development (including interest charged by Cardiff which was at a higher rate than Valentine Falls was charged on its loans from other lenders) and additional expenses (such as local government rates and land tax) in connection with the Development.
13 SMEC denies any breach of a contractual duty or a duty of care and does not admit that any breach of such duties caused the loss and damage alleged by Cardiff. SMEC claims that in February 2009 Valentine Falls purported to terminate its agreement with SMEC, and that SMEC accepted this repudiation of their agreement.
14 SMEC claims that there were alternative causes of Valentine Falls' loss and damage. These are said to have included Valentine Falls' failure to obtain finance from the NAB, and Valentine Falls’ decision to terminate its agreement with SMEC.
15 SMEC claims that the NAB's decision to refuse to extend finance to Valentine Falls resulted from the delay to the Development which was caused by Valentine Falls, or changes to the perceived financial risk posed by Valentine Falls. SMEC also claims that Valentine Falls' decision to obtain finance from Cardiff was not referable to SMEC’s conduct, or alternatively was caused by the decision of the NAB to require additional equity, or was unreasonable. SMEC also claims that the interest, fees and costs associated with the finance provided by Cardiff were not reasonably foreseeable as arising from the services provided by SMEC, or were unreasonably incurred.
16 SMEC claims that Valentine Falls' decision to engage Landdevelopment as project manager for the Development was not caused by SMEC’s conduct, or alternatively was caused by NAB’s decision to require additional equity, or alternatively was unreasonable or not within the risk created by SMEC’s services, and that the fees charged by Landdevelopment were not reasonably foreseeable.
17 Finally, SMEC counterclaims for unpaid invoices to Valentine Falls for services performed by SMEC in connection with the preparation of the designs, and for damages for Valentine Falls’ breach of its agreement with SMEC.
3. Consideration of the grounds of objection in respect of the subpoenas
18 In relation to the subpoenas issued to KWS, Barker Mortgages, Integrated Valuation Services, and First National Real Estate, Cardiff objected to the inspection of the documents sought in every category of the subpoena. In relation to the subpoenas issued to JDSi, Landdevelopment, Cardiff and the NAB, Cardiff objected to the production of documents falling within some of the categories set out in the subpoenas.
19 I will deal with Cardiff’s specific objections in a moment. Before doing so, it is convenient to outline the submissions made by counsel for SMEC in relation to the relevance of the documents sought under each subpoena. Counsel for SMEC submitted that the documents sought under the subpoenas were relevant to three key issues in dispute. (Counsel for Cardiff did not take issue with the three issues identified.)
20 The first issue in dispute (Issue 1) was the ‘standard’ which applied in relation to SMEC’s preparation of the design, and whether the designs met that standard. Counsel for SMEC submitted that Cardiff’s claim was that the designs were too complex and would have resulted in the Development being too expensive. He submitted that the assessment of this claim would require a consideration of the issues or contingencies SMEC should reasonably have foreseen in relation to the Development, and which it therefore should reasonably have taken into account in the preparation of the designs. Counsel for SMEC submitted that a factual issue relevant to this assessment would be what actually occurred in the course of the Development – in other words, what issues or contingencies actually arose. He submitted that this line of enquiry would be relevant in assessing SMEC’s assumptions about what issues or contingencies might arise, and in cross examining any expert witnesses called by Cardiff as to the assumptions they consider should have been made and incorporated into the designs.
21 The second issue in dispute (Issue 2) was the delay in the Development - both as to its causes, and as to the impact of the delay on Valentine Falls’ finance for the Development. Counsel for SMEC submitted that the causes of the delay would be relevant to assessing how much of the additional interest claimed by Cardiff could be said to have been caused by the designs, and how much of that additional interest was referable to other problems in relation to the Development. In so far as Cardiff claimed that the delay impacted on Valentine Falls' finance, counsel for SMEC submitted that it would be necessary to ascertain the reasons for the decision by the NAB to require extra equity from Valentine Falls. These matters would be relevant to questions of causation.
22 The third issue identified (Issue 3) pertained to Cardiff’s loss and damages claim, and specifically to the interest component of that claim, and to the claims for the fees and charges Valentine Falls paid to JDSi and to Landdevelopment. Counsel for SMEC submitted that it would be necessary to ascertain the reason why the additional interest charges were levied, including the interest rates themselves, whether the draw down of funds by Valentine Falls was for the purposes of the Development, and Valentine Falls’ financial obligations in relation to the Development. In relation to the fees and charges paid to JDSi and Landdevelopment, counsel for SMEC submitted that it would be necessary to ascertain whether the delay in the Development was in any way attributable to the work done by these companies. He submitted that these matters would be relevant to causation and to whether the loss and damage claimed by Cardiff should be borne by SMEC.
23 It is convenient to deal collectively with those subpoenas where there was an overlap in the categories of documents sought.
(a) JDSi Pty Ltd and Landdevelopment.com.au Pty Ltd
24 Cardiff objects to the inspection of two categories of documents sought pursuant to the subpoena to JDSi, namely:
5. Documents and correspondence created or sent by JDSi in the course of the engagement as a consultant for the development relating to the following, and all documents received by JDSi in the course of the engagement from the following:
(a) the Valentine Falls;
(b) Landdevelopment;
(c) The Shire of Kununurra / Wyndham;
(d) The Western Australian Planning Commission;
(e) The Land Information Authority and office of the Registrar of Land Titles.
6. Documents and correspondence within JDSi and between JDSi and its advisors relating to the engagement as a consultant for the Development.’
25 Cardiff objects to the inspection of documents falling within three categories of the subpoena issued to Landdevelopment, namely:
2. Documents and correspondence between Landdevelopment and Cardiff Capital Pty Ltd in relation to Landdevelopment's engagement as project manager for the Development.
6. Documents and correspondence created or sent by Landdevelopment in the course of the engagement as a project manager for the Development relating to the following and all documents received by Landdevelopment in the course of the engagement from the following:
(a) the Valentine Falls;
(b) Landdevelopment;
(c) The Shire of Kununurra / Wyndham;
(d) The Western Australian Planning Commission;
(e) The Land Information Authority and office of the Registrar of Land Titles.
7. Documents and correspondence with Landdevelopment and between Landdevelopment and its advisors relating to the engagement as project manager for the Development.
26 In relation to the documents in category 5 of the JDSi subpoena, counsel for Cardiff submitted that the claim in relation to JDSi’s engagement related only to its preparation of replacement designs and the cost Valentine Falls incurred for this. Accordingly, he submitted that whether JDSi performed other work, and if so what other work it performed, was irrelevant. Counsel for Cardiff also submitted that correspondence between JDSi and third parties, such as the Land Information Authority, would, in the present context, be irrelevant to the matters in issue. In relation to correspondence with the Land Information Authority, for example, he submitted that any documents would be unlikely to extend beyond certificates of title for the land involved, and those could be of no relevance to the matters in issue.
27 Counsel for Cardiff relied on the same submissions in relation to the documents in category 6 of the Landdevelopment subpoena. He submitted that these documents pertained to what Landdevelopment did after it was engaged, not the terms on which it was engaged or the remuneration it was paid, and consequently those documents could not be relevant to any matter in issue.
28 I do not accept these submissions. It is not difficult to envisage that such documents as may have been produced in relation to these categories in each subpoena may lead to lines of enquiry about Issues 1 and 2, may contain information which would be useful for the purposes of cross examination of witnesses called by Cardiff, or may be used to assess the strengths or weaknesses of SMEC’s case and of Cardiff’s case. Correspondence with the third parties specified may disclose whether problems or issues arose in relation to the Development prior to, or in the course of, its construction, and may shed light on whether SMEC should have, or did, reasonably incorporate certain assumptions into the designs (such as, for example, requirements for obtaining planning approval). Correspondence with Valentine Falls or with the third parties specified may also disclose the reasons for the delay in the Development and may assist in ascertaining whether that delay was attributable to decisions made by Valentine Falls, or to the decisions or conduct of third parties (such as whether there were any delays in obtaining planning approval, or in obtaining registration of the titles for individual blocks within the subdivision). Accordingly, the documents described in this category have apparent relevance to Issues 1 and 2 identified by counsel for SMEC.
29 As for the documents described in category 6 of the JDSi subpoena, counsel for Cardiff submitted that while the terms on which JDSi was engaged were in issue, any documents of relevance in relation to the terms on which JDSi was engaged would be produced under other categories of documents sought in this subpoena (to which no objection to inspection was made). He submitted that JDSi’s internal correspondence, or correspondence with its advisors, could have no relevance, because they were not contractual documents or documents constituting evidence of surrounding circumstances which might be relevant to the construction of the agreement between Valentine Falls and JDSi.
30 Similarly, in relation to the documents sought in category 7, counsel for Cardiff submitted that documents internal to Landdevelopment, or between it and its advisers, in relation to its engagement, were not contractual documents nor could they constitute evidence of surrounding circumstances admissible in the construction of Landdevelopment’s contract of engagement, and thus had no apparent relevance to any matter in issue.
31 I do not accept these submissions. The documents sought in these categories have apparent relevance to Issue 3 identified by counsel for SMEC. Any documents which may have been produced in relation to these categories may shed light on how JDSi calculated the fees it charged to Valentine Falls, and whether the fees and charges Valentine Falls paid to JDSi were actually referable to the work done by JDSi in relation to the Development, and so would be relevant to ascertaining whether any breach of duty by SMEC caused the loss represented by the quantum of these fees and charges.
32 The same conclusion applies in relation to the documents sought in category 7 of the Landdevelopment subpoena as to those in category 6 of the JDSi subpoena.
33 In relation to the documents sought in category 2 of the Landdevelopment subpoena, counsel for Cardiff submitted that Landdevelopment was not engaged by Cardiff so any documents and correspondence between Landdevelopment and Cardiff could not be relevant to the engagement of Landdevelopment or to any other matter in issue. He submitted that the documents sought could not be relevant to the question of the costs charged by Landdevelopment, because the case was that Valentine Falls had to engage Landdevelopment and the issues on the pleadings did not extend to the reasonableness of the charges levied by it.
34 I do not accept these submissions. Documents in this category are apparently relevant to the issues in dispute because they may open up a line of enquiry into the basis on which Landdevelopment was engaged, and more particularly into the basis for the fees and charges it charged Valentine Falls. Counsel for Cardiff accepted that a fair inference, in the circumstances, was that Cardiff wanted to ensure that a party it trusted would act as the project manager for the Development it was financing. One line of enquiry may be whether the existence of any prior relationship between Cardiff and Landdevelopment had an impact on the quantum of the fees Landdevelopment charged Valentine Falls, and whether all of those fees were referable to the work it did as the project manager for the Development. Furthermore, the reasonableness of the fees paid by Valentine Falls to Landdevelopment is an issue in dispute, having regard to the pleadings. Any documents in relation to category 2 which may have been produced by Landdevelopment may contain material which could be used in cross examination of witnesses in relation to the fees charged and the basis for those fees.
(b) First National Real Estate Kimberley and Integrated Valuation Services Pty Ltd
35 Cardiff objected to inspection of all of the documents sought in the First National Real Estate subpoena, namely:
1. Agency agreement between the Licensee of First National Real Estate Kimberley ('First National') and Valentine Falls Estate Pty Ltd ('VF') in relation to the sale of lots in the residential subdivision development at Lot 21, Weero Road, Kununurra ('Development').
2. Documents and correspondence between First National and VF in relation to the Development including drafts and final documents containing lists of lots for sale and proposed sale prices for the lots in the Development.
3. Marketing material, including drafts of that material, drafted or prepared or received by First National in relation to the Development.
4. Contracts for the sale of lots in the Development (including Contracts for the Sale of Land/Strata Title by Offer & Acceptance forms received in relation to lots in the Development).
5. Correspondence with prospective purchasers of lots in the Development, including expressions of interest and lists or documents relating to prospective purchasers of lots in the Development.
6. Documents and correspondence created or sent by First National in the course of the engagement as VF's real estate agent for the Development and all documents received by First National in the course of the engagement.
36 Cardiff also objected to the inspection of all of the documents sought in the Integrated Valuations Services subpoena namely:
1. Instructions (or similar documentation) provided to Integrated Valuation Services (NT) ('Integrated') by Valentine Falls Estate Pty Ltd ('VF') to undertake a valuation of the land at Lot 21, Weero Road, Kununurra ('Property') including any documentation accompanying the instructions.
2. Valuation of the Property dated 15 September 2009 and any other valuations of the Property undertaken by Integrated.
3. Documentation relied upon by Integrated in support of valuations of the Property.
4. Documents and correspondence between Integrated and VF in relation to the valuation of the Property.
5. Documents created or sent by Integrated in the course of the engagement to value the Property including all notes and drafts of each valuation prepared in that engagement and all documents received in the course of that engagement related to the engagement.
37 The primary focus of the documents sought in these subpoenas was valuations which may have been conducted by First National and Integrated Valuation Services. The value of the blocks of land which would be available for sale following the subdivision would no doubt have been a key consideration in decisions made by lenders about the provision (or continued provision) of finance to Valentine Falls, and the basis on which that finance would be provided.
38 The basis for Cardiff’s objection to all of the documents sought from First National and from Integrated Valuation Services was that in so far as these documents were said to be relevant to the NAB’s decision to demand more equity from Valentine Falls, all documents relevant to that matter would be produced pursuant to other categories of the subpoena issued to the NAB (in respect of which no objection to inspection is taken). That was because any information relating to the value of the land the subject of the Development, and on which the NAB relied in reaching its decision about the terms on which it provided finance to Valentine Falls, would almost certainly have been recorded and thus would be produced by the NAB in answer to its subpoena. However, the prospect of any overlap in the documents produced under the subpoenas issued to NAB (or indeed under the subpoenas issued to the other lenders) does not mean that the documents produced by First National or Integrated Valuation Services would be irrelevant to the issues in dispute.
39 Counsel for Cardiff submitted that documents in relation to the valuation of the blocks of land the subject of the Development could only be relevant if they contained information which had come to the attention of the NAB and was taken into account by the NAB (or other lenders) in determining whether to provide finance, or to continue to provide finance, to Valentine Falls. However, that submission ignores the possibility that, if any other information was available at the time, that information may provide a foundation for cross examination about what information was taken into account by the lenders, and what information was available to them at the relevant time.
40 In addition, counsel for Cardiff submitted that any documents created after July 2009, when Valentine Falls entered into its finance agreement with Cardiff, could not be relevant. That was because by that time the NAB had made its decision to require more equity from Valentine Falls, Valentine Falls had entered into its agreement with Cardiff, and its loss had crystallised. NAB’s decision to require additional equity could only have been influenced by events which occurred before the requirement for additional equity was imposed. However, that submission ignores the possibility that documents created shortly after July 2009 may still contain information relevant to the valuation of the land the subject of the subdivision as at July 2009, and which would be relevant to that valuation.
41 It is possible that some of the documents produced under the subpoena to First National may be of less utility or less apparent relevance than others. For example, it is difficult to immediately see how the agency agreement between First National and Valentine Falls will be of relevance to the issues in dispute. However, it would be a highly artificial distinction to permit inspection of all other documents sought under this subpoena but to decline inspection of the agency agreement (which is the document that secured First National’s role in relation to the valuation and sale of the land in the first place) because that document has less apparent relevance than some of the other documents sought from First National.
(c) Cardiff Capital Pty Ltd, National Australia Bank Ltd, Barker Mortgages Pty Ltd, and KWS Capital Pty Ltd
42 The categories of documents in respect of which objection was made in relation to the subpoenas issued to Cardiff, the NAB, Barker Mortgages and KWS Capital were in almost identical terms, and it is convenient to deal with them together. I have set out below the categories of documents in the Cardiff subpoena in respect of which an objection is made. For present purposes, it is unnecessary to set out the corresponding categories of the subpoenas issued to the NAB, Barker Mortgages and KWS Capital.
5. Deed of charge or similar documentation relating to the creation of ASIC charge number 1804388 registered by Cardiff against Valentine Falls on 22 June 2009 ('Charge').
6. Deed of mortgage or similar documentation relating to the creation of mortgage number K982188 registered by Cardiff against the Certificate of Title for Lot 21, Weero Road, Kununurra ('Mortgage').
7. Documents and correspondence between Cardiff and Valentine Falls in relation to the Charge and the Mortgage.
8. Financial statements [loan accounts] in relation to the $4,000,000 advance and the Mortgage.
9. Documents and correspondence between Cardiff and Valentine Falls relating to each review of the agreement to provide finance for the Development.
10. Documents and correspondence between Cardiff and Valentine Falls relating to compliance with the agreement to provide finance for the Development including the completion of any conditions precedent and subsequent.
11. Documents and correspondence between Cardiff and Valentine Falls relating to the repayment of the agreement to provide finance for the Development.
12. Documents and correspondence within Cardiff and between Cardiff and its advisors relating to each review, completion of any conditions precedent and subsequent and repayment of the agreement to provide finance for the Development.
43 Counsel for Cardiff pointed out that Cardiff has already provided discovery of certain categories of documents in its possession, custody or power which pertain to the matters in issue in this action. Accordingly, it appears likely that at least some of the documents sought by the subpoena will have been produced on discovery already. Although Cardiff had not sought to set aside the subpoena on this basis (for example, on the basis that it would be oppressive to produce under subpoena documents already produced by the same party through discovery), counsel for Cardiff submitted that this was nevertheless a relevant consideration in determining whether inspection should be permitted in respect of those documents sought which were clearly at the margins of relevance. Although one would expect all relevant documents within Cardiff’s possession and control to have been discovered, if there exist any others which have been produced pursuant to the subpoena then they should be able to be inspected by SMEC. Furthermore, in this case, counsel submitted that discovery had been conducted by reference to categories of discovered documents, but the Court was not advised what those categories of documents were, and thus it is not possible to ascertain whether the documents required to be produced in discovery were the same as those sought pursuant to the subpoena.
44 In the course of submissions, counsel for Cardiff abandoned the objection to the documents sought in category 8 of the Cardiff subpoena and category 7 of the NAB subpoena. Although counsel did not expressly refer to the corresponding categories in the subpoenas to Barker Mortgages (category 4) and KWS Capital (category 4) I have assumed that the same approach is intended in respect of those categories. In any event, documents sought within category 4 of those subpoenas are in my view apparently relevant, in so far as they may reveal what repayments were made in respect of loans, and that may reveal, or lead to enquiries which may reveal, the circumstances in which those repayments were made (for example, whether repayments were delayed because of delays in the progress of the Development which were attributable to causes unrelated to any breach of contract or duty by SMEC).
45 Counsel for Cardiff submitted that the loss and damage Cardiff claims in the action includes interest payable by Valentine Falls to Cardiff, and the additional interest paid or payable by Valentine Falls on its borrowings from the NAB, Barker and KWS as a result of the delay in the Development allegedly caused by SMEC’s breach of its contractual duty or its duty of care. Cardiff did not object to the inspection of documents which related to that issue, but objected to the inspection of other documents sought under these subpoenas which did not relate to the quantum of the interest paid by Valentine Falls to these lenders. Counsel for Cardiff submitted that the documents sought in categories 5 - 7 and 9 - 12 of the subpoena to Cardiff (which correspond to categories 4 - 6 and 8 - 11 of the subpoena to the NAB, and categories 1 - 3 and 5 - 8 of the subpoenas to Barker Mortgages and KWS Capital) did not concern the terms of the agreement between Valentine Falls and those lenders, or the interest and fees charged by those lenders.
46 Using the Cardiff loan by way of example, counsel for Cardiff submitted that the issue in dispute was simply whether Cardiff lent Valentine Falls $4,000,000 and the terms on which that money was lent. He submitted that the security given (which was the subject of the documents sought in categories 5 - 6) was not relevant, nor was any correspondence between Cardiff and Valentine Falls (category 7), save in so far as it dealt with the terms of the agreement or the reason the loan was sought, in which case it would be produced under other categories of documents in the subpoena. He relied upon that submission in relation to the corresponding categories of documents in the NAB subpoena, the Barker Mortgages subpoena and the KWS Capital subpoena.
47 Again, it would be a highly artificial and technical approach to refuse the inspection of the very documents which formed the basis for Cardiff’s loan arrangement with Valentine Falls, while permitting the inspection of other documents which pertained to that arrangement. Such an approach is not appropriate, particularly when the party producing the documents makes no objection to their inspection. In any event, in my view, the apparent relevance of the security documents at the very least is that they place other documents within their context.
48 Furthermore, SMEC's defence puts in issue whether the interest, fees and costs associated with the finance provided by Cardiff were reasonably incurred. Documents and correspondence between Cardiff and Valentine Falls in relation to the security required from Valentine Falls for the loan are of apparent relevance to that question, because that correspondence may bear upon the reasonableness of the terms of the loan agreements between Cardiff and Valentine Falls.
49 By way of further example, documents and correspondence passing between Valentine Falls and the NAB in relation to the security provided by Valentine Falls for its loan from the NAB are of apparent relevance, because those documents may contain information which discloses the reasons for the NAB’s decision to require further equity to be provided, and thus will bear upon the question whether the loss and damage claimed can be said to have been caused by the alleged breach of duty by SMEC.
50 In relation to the documents sought in categories 9, 10 and 12 of the Cardiff subpoena (and corresponding categories in the other subpoenas) counsel for Cardiff submitted that while there might have been reviews of the finance agreements between these lenders and Valentine Falls, or documents concerning compliance with requirements for conditions precedent and subsequent, and that these might have touched on the progress of the Development and how that bore on the security required from Valentine Falls, these documents (if they existed) would be at the outermost margins of relevance. He submitted that the Court in its discretion should not permit inspection of them.
51 In relation to the documents in category 11 of the Cardiff subpoena (and the corresponding categories in the subpoenas to the NAB, Barker Mortgages and KWS Capital), counsel for Cardiff submitted that the repayment of the loan to Valentine Falls was irrelevant to the matters in issue.
52 I am unable to agree. Correspondence in relation to compliance with Valentine Falls’ loan agreements, the repayment of its loans, and reviews of its loan agreements, may disclose whether additional funds, or further drawings of funds, were required to cover unexpected contingencies in relation to the Development. Such correspondence has apparent relevance to Issue 1 identified by counsel for SMEC and to the question whether the contingencies which SMEC took into account were reasonable. Similarly, such documents have apparent relevance to Issue 2 because they may disclose whether repayments were delayed by virtue of delays in the progress of the Development which were unrelated to any alleged breach of duty by SMEC. Documents within these categories may also disclose information relevant to the question whether the additional interest paid to the lenders, and which forms part of the loss and damage claimed, can be said to have been caused by any alleged breach of duty by SMEC or to unrelated delays in the progress of the Development. Such documents clearly have apparent relevance to the question of causation of the loss and damage claimed, and may provide information able to be used in cross examination of any officers of Cardiff who give evidence at the trial.
53 Finally, counsel for Cardiff submitted that the documents sought from Cardiff would be likely to contain information pertaining to its security position and lending practices, which he submitted was confidential. He submitted that that confidentiality weighed against the Court exercising its discretion to permit inspection. Counsel did not seek to develop this submission by reference to particular consequences which might flow from any disclosure of the kinds of documents which may have been produced under this subpoena, although clearly that information would be particularly within the knowledge of his client.
54 In the circumstances, I am not persuaded that this consideration, expressed in the general terms in which it was, warrants the exercise of my discretion against inspection of the documents. Inspection of the documents will be subject to the implied undertaking applicable to SMEC as a party to the litigation that the documents will not be used for purposes other than the litigation.5 There is nothing before the Court which suggests that that implied undertaking will not be adequate to protect the confidentiality of the documents produced pursuant to the subpoena.
55 Accordingly, in my view, any documents produced under categories 5 - 7 and 9 - 12 of the subpoena to Cardiff (and corresponding categories of the subpoenas to the other lenders) are of apparent relevance and inspection of those documents will be permitted.
4. Inspection of the documents
56 Cardiff’s objection to the inspection of the documents produced under the subpoenas should be dismissed. I will hear from the parties as to the orders which should be made in relation to the inspection of the documents, and as to costs.
1 Affidavit of Mitchell Davis, sworn 12 August 2013.
2Stanley v Layne Christensen Co[2004] WASCA 50 [9] (Miller & EM Heenan JJ).
3Stanley v Layne Christensen Co[2004] WASCA 50 [11] - [13] (Miller & EM Heenan JJ).
4Boase v Axis International Management Pty Ltd (No 3) [2012] WASC 498 (Beech J).
5Harman v Home Office [1983] 1 AC 280, 307 - 308 (Lord Keith); Sofilas v Cable Sands (WA) Pty Ltd (1993) 9 WAR 196, 201 - 202 (Murray J); Temwood Holdings Pty Ltd v Oliver [1999] WASC 212 [10], [20] - [31] (Steytler J).
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