Central Exchange Ltd v Anaconda Nickel Ltd

[2001] WASC 128

CENTRAL EXCHANGE LTD -v- ANACONDA NICKEL LTD [2001] WASC 128

Reported Decision:	(2001) 24 WAR 382
Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2001] WASC 128
Case No:	CIV:2316/2000	Heard:	6 MARCH 2001
Coram:	PARKER J	Delivered:	25/05/01
No of pages:	33	Judgment Part:	1 of 1
Result:	Applications dismissed
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Parties:	CENTRAL EXCHANGE LTD ANACONDA NICKEL LTD
Catchwords:	Contracts Construction and interpretation Implied terms Deed of Settlement of proceedings re sale of mining interests Whether defendant obliged to provide documents and information Fair dealing Whether necessary to enable plaintiff to have benefit of the contract Practice and procedure Pre-action discovery Interests of justice Contractual dispute resolution procedure Confidentiality Compliance burdensome
Legislation:	Rules of the Supreme Court (WA), O 26A r 4
Case References:	Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996 Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 Clarkson v Director of Public Prosecutions [1990] VR 745 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Cohen v Walthamstow Pty Ltd & Ors, unreported; SCt of WA (Sanderson M); Library No 980148; 30 March 1998 Davis & Ors v Sagar Pty Ltd & Anor, unreported; SCt of WA (Sanderson M); Library No 980443; 10 August 1998 Electronic Industries Ltd v David Jones Ltd (1954) 91 CLR 288 Elfic Ltd & Ors v Macks & Ors [2000] QSC 18 Far Horizons Pty Ltd v McDonalds Australia Ltd [2000] VSC 310 Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703 Horden-Richmond Ltd v Duncan [1947] 1 KB 545 Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney & Anor (1993) 31 NSWLR 91 J N Taylor Holdings Ltd (in liq) & Anor v Band & Ors (1993) 59 SASR 432 McCarthy & Ors v Dolpag Pty Ltd [2000] WASCA 106 Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 Pratt Construction Ltd v Palmerston North City Council [1995] 1 NZLR 469 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541 Australian Mutual Provident Society v 400 St Kilda Road Pty Ltd [1990] VR 646 Australian Securities Commission v Malborough Goldmines Ltd (1993) 177 CLR 485 Butt v M'Donald (1896) 7 QLJ 68 Government Employees Superannuation Board v Martin (1997) 19 WAR 224 Martselos Services Ltd v Arctic College [1994] 3 WWR 73 Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd [1999] WASCA 217 Riley v Jubilee Gold Mines NL [2000] WASC 114 Trans-Pacific Insurance Co (Australia) Ltd v Grand Union Insurance Co Ltd (1989) 18 NSWLR 675

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : CENTRAL EXCHANGE LTD -v- ANACONDA NICKEL LTD [2001] WASC 128 CORAM : PARKER J HEARD : 6 MARCH 2001 DELIVERED : 25 MAY 2001 FILE NO/S : CIV 2316 of 2000 BETWEEN : CENTRAL EXCHANGE LTD

Plaintiff

AND

ANACONDA NICKEL LTD
Defendant

Catchwords:

Contracts - Construction and interpretation - Implied terms - Deed of Settlement of proceedings re sale of mining interests - Whether defendant obliged to provide documents and information - Fair dealing - Whether necessary to enable plaintiff to have benefit of the contract

Practice and procedure - Pre-action discovery - Interests of justice - Contractual dispute resolution procedure - Confidentiality - Compliance burdensome

Legislation:

Rules of the Supreme Court (WA), O 26A r 4

(Page 2)

Result:

Applications dismissed

Representation:

Counsel:

Plaintiff : Mr D H Solomon
Defendant : Mr R L Le Miere QC

Solicitors:

Plaintiff : Solomon Brothers
Defendant : M H Ashby

Case(s) referred to in judgment(s):

Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996
Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468
Clarkson v Director of Public Prosecutions [1990] VR 745
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Cohen v Walthamstow Pty Ltd & Ors, unreported; SCt of WA (Sanderson M); Library No 980148; 30 March 1998
Davis & Ors v Sagar Pty Ltd & Anor, unreported; SCt of WA (Sanderson M); Library No 980443; 10 August 1998
Electronic Industries Ltd v David Jones Ltd (1954) 91 CLR 288
Elfic Ltd & Ors v Macks & Ors [2000] QSC 18
Far Horizons Pty Ltd v McDonalds Australia Ltd [2000] VSC 310
Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703
Horden-Richmond Ltd v Duncan [1947] 1 KB 545
Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney & Anor (1993) 31 NSWLR 91
J N Taylor Holdings Ltd (in liq) & Anor v Band & Ors (1993) 59 SASR 432
McCarthy & Ors v Dolpag Pty Ltd [2000] WASCA 106
Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728


(Page 3)

Pratt Construction Ltd v Palmerston North City Council [1995] 1 NZLR 469
Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541

Case(s) also cited:

Australian Mutual Provident Society v 400 St Kilda Road Pty Ltd [1990] VR 646
Australian Securities Commission v Malborough Goldmines Ltd (1993) 177 CLR 485
Butt v M'Donald (1896) 7 QLJ 68
Government Employees Superannuation Board v Martin (1997) 19 WAR 224
Martselos Services Ltd v Arctic College [1994] 3 WWR 73
Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd [1999] WASCA 217
Riley v Jubilee Gold Mines NL [2000] WASC 114
Trans-Pacific Insurance Co (Australia) Ltd v Grand Union Insurance Co Ltd (1989) 18 NSWLR 675

(Page 4)

1 PARKER J: By originating summons the plaintiff seeks declarations that terms should be implied into a Deed made between the parties on 17 September 1996 and that, in consequence of the implication, the defendant is required to provide to the plaintiff an extensive range of information and documents. Alternatively, the plaintiff seeks an order for pre-action discovery from the defendant pursuant to RSC O 24A r 4 in respect of essentially the same documents. Both forms of relief are opposed.

2 The plaintiff under its earlier names Central Bore Nickel NL and later Central Bore NL, and the defendant, with others, were parties to a Deed of Sale and Option dated 14 September 1995, which was later varied, and by which the plaintiff sold to the defendant a 50 per cent share in three mining leases and 100 per cent of two prospecting licenses. The subject matter of these is commonly known today as the Murrin Murrin Nickel Project which has been developed by the defendant at Murrin Murrin near Leonora (the "project"). There were proceedings by way of an action in this Court arising from that Deed of Sale and Option, although it is unnecessary to detail the parties or the issues. Terms were agreed in settlement of that action. These terms became the subject of a Deed of Settlement (the "Deed") which is the subject of this originating summons. In the Deed the plaintiff is referred to as Central Bore. On the basis of the Deed the action was settled and consent orders were made on 17 September 1996 with both parties represented by senior counsel.

The Deed of Settlement

3 Pursuant to the Deed and that settlement the plaintiff is entitled to US $16,250,000, which sum is subject to escalation from 30 September 1996 according to movements in the United States consumer price index. The Deed made provisions as to the circumstances in which this sum, so escalated (the "Agreed Amount") would become payable by the defendant to the plaintiff. Relevantly, the Deed provides:

"4. PAYMENT BY ANACONDA

4.1 Agreed Amount


(a) Subject to paragraph (b), in consideration of the Parties entering into this Deed, and as a separate obligation to the Sale Agreement, Anaconda agrees to pay the Agreed Amount to Central Bore in the manner set out in Clause 4.2.

(Page 5)

(b) The Agreed Amount shall be paid by Anaconda to Central Bore only if at any Review Date the Average LME Nickel Settlement Price (as determined in the manner set out in Clause 4.2) for the 12 month period ending on the Review Date exceeds the Trigger Price.

4.2 Manner of making any payment

(a) After each Review Date Anaconda will procure its auditors to determine the Average LME Nickel Settlement Price for the 12 month period ending on that Review Date and the Trigger Price, and give notice of those figures to Central Bore and Anaconda within 14 Business Days of that Review Date. This notice shall also:

(i) indicate how those figures were calculated;

(ii) state what the Agreed Amount is as at that Review Date, and the basis for that calculation; and

(iii) state whether the Agreed Amount as at that Review Date is payable pursuant to Clause 4.1(b).


(b) In the event that no notice is issued by Anaconda's auditors in accordance with the requirements of paragraph (a), then Central Bore may procure its auditors to issue such a notice in accordance with that paragraph (a) and if that notice satisfies the requirements of paragraph (a), that paragraph will be deemed to have been complied with.

(c) Either Anaconda or Central Bore may by notice to the other within 7 Business Days of receiving a notice under paragraphs (a) or (b) (as the case may be) dispute any matter the subject of the notice. If the Parties cannot after negotiating in good faith agree on the disputed matter within 7 Business Days after notice of dispute is given, then either Party may refer the dispute to an

(Page 6)

independent expert nominated by the president of the Western Australian Bar Association. The expert shall decide the dispute in such manner as the expert deems fit and his or her decision shall be binding on the Parties. Anaconda shall give the expert reasonable access to its records insofar as they are relevant to the derivation of the figures in the notice PROVIDED THAT the expert first undertakes, in writing in a form reasonably acceptable to Anaconda, to maintain the confidentiality of any of those record. The Parties shall equally bear the costs of the expert.

(d) Anaconda shall pay the Agreed Amount (as the relevant Review Date) either:

(i) within 14 Business Days of the notice issued under paragraph (a) or (b) (as the case may be) if neither Party disputes any matter in that notice, or

(ii) if any party does dispute any matter in the notice, within 14 Business Days after the determination of the independent expert,

whichever is applicable.


(e) To avoid any doubt, Anaconda is only obliged to pay the Agreed Amount to Central Bore once pursuant to this Deed.

4.3 Banker's Acceptance Test

(a) Anaconda shall give notice to Central Bore:

(i) of the terms of the Banker's Acceptance Test to be agreed by Anaconda with the financiers to the Project immediately after they are agreed by Anaconda and the financiers to the Project; and

(ii) immediately when the financiers to the Project have notified Anaconda that the

(Page 7)

Banker's Acceptance Test has been satisfied.

(b) Anaconda shall use its best endeavours to ensure the Banker's Acceptance Test is satisfied in accordance with its terms at the earliest practicable date.

4.4 Dispute regarding Review Date

If there is any dispute whether any of the events referred to in the definition of 'Review Date' in Clause 1.1 have occurred in accordance with this Deed then either Party may refer that dispute to an independent expert in the same manner and subject to the same terms as Clause 4.2(c) of this Deed other than the first sentence of that Clause."

Clause 1.1 of the Deed contains the following relevant definitions:

"'Banker's Acceptance Test' means a test or tests to be performed pursuant to project financing arrangements in conjunction with the financiers to the Project to confirm that the Project is operating to design standards of performance in terms of throughput, recovery and metal production;

'Review Date' means

(a) the earlier of:


(i) the date that is 12 months after the date Anaconda is notified by the financiers to the Project that the Banker's Acceptance Test has been satisfied; or

(ii) the date being three years from the commissioning of a nickel/cobalt treatment plant for ore from the Project by Anaconda or any other party; or

(iii) the date being three years after the date when 250,000 tonnes of ore from the Project has been mined and treated; or

(iv) the date Anaconda has sold the whole of its interest in the Project for an amount not less than A$350,000,000; and

(Page 8)

(b) thereafter, on a monthly basis (that is, the same date in each month as the original Review Date, or if that date is not a Business Day, the next Business Day) following that date;

'Trigger Price" means:

US$3.50 x CPI(1)

CPI(2)"

4 In an affidavit in support of the originating summons it is sworn on behalf of the plaintiff that the -

" … plaintiff wants to commence proceedings against the defendant for payment of the $16,250,000.00, as escalated from 30 September 1996 …, possibly payable by the defendant to the plaintiff pursuant to cl 4.1 of the Settlement Deed. However, the plaintiff is unable to obtain sufficient information to enable a decision to be made as to whether to commence those proceedings. The reason that the plaintiff is unable to decide whether to commence those proceedings is that it does not know whether the Review Date ... has yet passed."

It is further deposed that the defendant has refused to provide the necessary information, which it has, to enable the plaintiff to reach a decision.

Relief sought by the plaintiff

5 The terms of the declarations sought by the plaintiff and the alternative order for discovery are as follows:

"1. A declaration that the settlement Deed between the defendant and the plaintiff made the 17th day of September 1996 (the 'Settlement Deed') contains an implied term:

1.1 that the defendant will deal with the plaintiff in good faith;

1.2 further or alternatively, the defendant will comply with the reasonable requests of the plaintiff;


2. a declaration that, pursuant to the term of good faith, further or alternatively the term to comply with the

(Page 9)

plaintiff's reasonable requests, implied into the Settlement Deed, the defendant is required to provide to the plaintiffs the information as to and documents showing:-

2.1 each act, matter or thing done by or on behalf of the defendant to comply with the obligation imposed on the defendant in paragraph 4.3(b) of the Settlement Deed, including details of precisely what was done and when with respect to each act, matter or thing;

2.2 the outcome of each act, matter or thing referred to in paragraph 2.1;

2.3 a copy of each document comprising or relating to any act, matter or thing referred to in paragraph 2.1 or an outcome referred to in paragraph 2.2;

2.4 whether, in terms of sub paragraph (I) of paragraph (a) of the definition of 'Review Date' in the Settlement Deed, the defendant has been notified by the financiers of the Project (as defined in the Settlement Deed) that the Banker's Acceptance Test (as defined in the Settlement Deed) has been satisfied and, if so, the date that the defendant was so notified;

2.5 whether, in terms of sub paragraph (ii) of paragraph (a) of the definition of 'Review Date' in the Settlement Deed, a nickel/cobalt treatment plant for ore from the Project was commissioned by the defendant or any other party and, if so, the date of the commissioning;

2.6 a copy of each document relating to the issue of whether or not a nickel/cobalt treatment plant for ore from the Project has been commissioned by the defendant tor any other party at all or on any particular date;

2.7 whether, in terms of sub paragraph (iii) of paragraph (a) of the definition of 'Review Date' in the Settlement Deed, 250,000 tonnes of ore from

(Page 10)

the Project has been mined and treated and if so, the date when that occurred.

2.8 a copy of all documents relating to the issue of whether or not 250,000 tonnes of ore from the Project has been mined and treated at all or on any particular date.

3. Alternatively to paragraphs 1 and 2 above, discovery pursuant to Order 26A rule 4 of the Supreme Court Rules of all documents:-

3.1 comprising or concerning each act, matter or thing done by or on behalf of the defendant to comply with the obligation imposed on the defendant in paragraph 4.3(b) of the Settlement Deed, including details of precisely what was done and when with respect to each act, matter or thing;

3.2 comprising or concerning the outcome of each act, matter or thing referred to in paragraph 3.1;

3.3 relevant to whether, in terms of sub paragraph (i) of paragraph (a) of the definition of 'Review Date' in the Settlement Deed, the defendant has been notified by the financiers of the Project (as defined in the Settlement Deed) that the Banker's Acceptance Test (as defined in the Settlement Deed) has been satisfied and, if so, the date that the defendant was so notified;

3.4 relevant to whether in terms of sub paragraph (ii) or paragraph (a) of the definition of 'Review Date' in the Settlement Deed, a nickel/cobalt treatment plant for ore from the Project was commissioned by the defendant or any other party and, if so, the date of the commissioning;

3.5 relevant to whether, in terms of sub paragraph (iii) of paragraph (a) of the definition of 'Review Date' in the Settlement Deed, 250,000 tonnes of ore from the Project has been mined and treated and if so, the date when that occurred."

(Page 11)

The Plaintiff's Case

6 Somewhat in contradiction of its affidavit evidence noted above, in the course of argument it was made clear by counsel for the plaintiff that it was not the plaintiff's case that the Review Date had or might have occurred, but that an event referred to in subpar (a)(ii) of the definition of Review Date in the Deed had or might have occurred viz the commissioning of a nickel/cobalt treatment plant. It was further made clear that the proceeding contemplated by the plaintiff was not an action to recover the Agreed Amount but merely to obtain a declaration that the treatment plant had been commissioned within the meaning of the definition of Review Date. It is the effect of the terms of the Deed, of course, that the Agreed Amount is not payable until three years from the commissioning of the treatment plant or the earlier occurrence of any one of the other three events dealt with in the definition of Review Date.

7 It is accepted by the parties that the Deed does not effect an ouster of any jurisdiction of this Court and that s 53 and s 54 of the Commercial Arbitration Act 1985 (WA) has no application.

8 The plaintiff has expressed the opinion in correspondence to the defendant that the treatment plant contemplated by the definition of Review Date was commissioned on 7 May 1999. In reaching this opinion, the plaintiff has relied principally on the terms of public announcements of the defendant and events such as the official opening of the project at Murrin Murrin and the production of treated ore. If that opinion were correct, (and in the absence of some earlier Review Date) the Agreed Amount would be payable by the defendant at the earliest on 7 May 2002. That would require that at 7 May 2002 the Average LME Nickel Settlement Price for the twelve month period ending on that date exceeds the Trigger Price. If that was not the case on 7 May 2002, a further Review Date would occur at monthly intervals until such time as cl 4.1(b) was satisfied. The Agreed Amount would be due and payable on the first occasion (if ever) the Trigger Price was exceeded. It should be noted, however, that the Agreed Amount would become due and payable at an earlier time if any of the other limbs of par (a) of the definition of Review Date came to be satisfied at an earlier date.

9 In a letter dated 25 May 2000 in which the plaintiff indicated that it wrote with a view to allowing "the proper assessment of Anaconda's compliance with the obligations under the Deed", the plaintiff requested a variety of specific information directed, it would appear, to enabling it to determine for itself not only whether, and if so when, the treatment plant

(Page 12)

had been commissioned, but also whether events referred to in other limbs of the definition of Review Date had occurred or when they were likely to occur.

10 The defendant replied by letter dated 22 June 2000 that it was "under no obligation to provide information other than to advise [the plaintiff] when the obligation under cl 4 of the Deed arises, when or if in fact it does". In that letter, and in another dated 29 June 2000, the defendant also disagreed with the "trigger date" being 7 May 1999, an apparent reference to the plaintiff's opinion expressed in its letter dated 25 May 2000 that the plant had been commissioned on that date. In the letter of 29 June 2000 the defendant went on to advise that it was "proceeding on the basis that the Review Date is 28 September 2002" which was calculated in accordance with subpar (a)(iii) of the definition of Review Date, adding that the defendant would adjust its timetable and advise should an earlier Review Date become applicable. The letter of 29 June 2000 was in direct response to a letter from the plaintiff's solicitors, dated 28 June, which required the provision of much of the information and documents now sought in this originating summons.

11 It is apparent from this correspondence that the plaintiff and defendant were in disagreement whether the treatment plant had been commissioned on 7 May 1999.

12 It is also the case that the defendant has become involved in complex and extensive proceedings with Flour Daniel Pty Ltd which company was retained by the defendant in essence to design and construct inter alia the nickel/cobalt treatment plant referred to in the definition of Review Date. While a plant has been constructed and ore has been treated it appears there are issues whether, due to deficient design or construction, or both, it meets the stipulated performance requirements.

13 It is against this background that the present originating summons is brought by the plaintiff. It is the plaintiff's primary submission that there should be implied into the Deed by law, a term that the defendant will deal with the plaintiff in good faith. In this particular case the plaintiff submits, as clarified during argument, that an obligation of good faith would require that the defendant would be bound "to the spirit of the bargain" and not to render illusory the plaintiff's contractual entitlements. Further this would require, it is submitted, that the defendant comply with the reasonable requests of the plaintiff to be given the information sought, that being information sufficient to enable the plaintiff to determine for

(Page 13)

itself, now and on an ongoing basis, whether a Review Date or any event relevant to the definition of Review Date has occurred.

14 As I understand the submissions for the plaintiff this is put on two bases. It is said that it arises in virtue of the implied obligation of the defendant to deal with the plaintiff in good faith and it is also said that it arises by virtue of a specific implied term, which is considered later in these reasons, that the defendant should comply with the reasonable requests of the plaintiff to enable the plaintiff to have the benefit of the contract.

15 From what has been briefly outlined it is apparent that while the identified difference of opinion between the parties relates to the issue whether or not the treatment plant contemplated by the Deed has been commissioned, the plaintiff asserts an entitlement, pursuant to a term or terms to be implied by law in the Deed, to be informed of all matters sufficient, in the view of the plaintiff, to enable the plaintiff to determine for itself whether or not any one or all of the possible events which give rise to a Review Date may have or have occurred. The information sought by par 2 of the originating summons thus deals with all but one (sale) of the possible events that might give rise to a Review Date for the purposes of the Deed, as do the documents sought by way of discovery pursuant to par 3 of the originating summons.

Implied Term of Good Faith

16 It is the submission for the plaintiff that in Australia it is now established that there is to be implied as a matter of law in contracts, or at least in commercial contracts, a term of good faith. It is submitted this is the effect of Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 at 369 per Sheller JA, Powell and Beasley JJA concurring, together with the decisions there considered by Sheller JA, and subsequent decisions which applied Alcatel such as Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996, South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541 at [393-394] 426 per Finn J, Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703 at [34] per Finkelstein J, Elfic Ltd & Ors v Macks & Ors [2000] QSC 18 at [109] per Williams J and Far Horizons Pty Ltd v McDonalds Australia Ltd [2000] VSC 310 at [120] per Byrne J. There was also reliance on the position in the United States, Canada and New Zealand cf Pratt Construction Ltd v Palmerston North City Council [1995] 1 NZLR 469 at 486 per Gallen J.

(Page 14)

17 The plaintiff confines its submission that there should be implied into the Deed a term that the defendant will deal with the plaintiff in good faith to an implication by law rather than an implication in fact or ad hoc. This distinction receives some consideration by Priestley JA in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 255 - 256. As his Honour there pointed out the rules governing implication ad hoc are those stated by the Privy Council in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 and the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337. At heart implication ad hoc is founded in the actual intention of the parties to a particular contract. Whether a term is to be implied by law is a different issue, however, and is based on imputed intention rather than actual intention, on the analysis favoured by Priestley JA which drew in turn on the discussion by Hope JA, Samuels and Priestley JJA agreeing, in Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 where at 486 - 490. There it was said that probably in deciding whether an implication by law attached to a particular class of contract which had not previously been held to be subject to such an implication, a court should only adopt the implication if it could be seen that the type of contract required such implication as a matter of necessity and also of reasonableness. This view was expressed as a tentative one open to further examination in later cases. In Renard Constructions Priestley JA was led to conclude at 262 that in the building and engineering contract there in question there should be implied interalia by law into cl 34 a requirement of reasonableness on the part of the principal, both when considering whether the contractor "has failed to show cause" and when considering whether to exercise one or more of the powers available to the principal where the contractor had failed to show cause. Clause 34 stipulated the procedure to be followed on the happening of any breach by the contractor, no matter how minor the breach or at what stage of the contract it occurred. It empowered the principal to cancel the contract.

18 In Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney & Anor (1993) 31 NSWLR 91 a majority of the Court of Appeal, Kirby P and Priestley JA, Meagher JA dissenting, applied the reasoning of Priestley JA in the Renard Constructions decision. Both Hughes Bros and RenardConstructions concerned the same general conditions of contract. Kirby P at 93 considered himself bound by the decision in Renard Constructions, in particular as its correctness had not been challenged by any of the parties in argument.

(Page 15)

Like the decision in Renard Constructions, the decision of the majority in Hughes Bros turns on the particular wording of the contractual provisions being considered and some emphasis is placed on the contractual provision by which the contractor was required to be called on to show cause why the powers of the principal contemplated by cl 44 should not be exercised. In the view of the majority in both decisions a pre-condition of reasonableness was imported into the contract both as to the consideration of the show cause power and its exercise .

19 In Alcatel Australia v Scarcella (supra) the Court of Appeal considered inter alia whether a term of good faith or reasonableness was to be implied in a long term lease of a multi-storey office building, the lease being in pursuance of a sale and lease back arrangement. The contention was that by the implication of such a term the owner was obliged to cooperate in a reasonable way to ensure that the tenant was not subject to the expense and impact of an unreasonable fire order which might fall on the tenant by virtue of its covenant to maintain the premises. In the course of a most helpful analysis of the issues, including a consideration of Australian and other authority as well as learned writings, Sheller JA, with whom Powell and Beazley JJA concurred, expressed the view at 369 that -

"The decisions in Renard Constructions and Hughes Bros mean that in New South Wales a duty of good faith, both in performing obligations and exercising rights, may by implication be imposed upon parties as part of a contract. There is no reason why such a duty should not be implied as part of this lease."

This does not appear to be a decision, however, that a duty of good faith, both in performing obligations and exercising rights, is to be implied in all contracts or even in all commercial contracts. Sheller JA appears to have recognised that, at least in New South Wales, such a duty may be implied by law as part of a contract. In my respectful view, that reflects the earlier Australian decisions considered by his Honour. While passages in the reasoning canvass considerations in favour of an implication of good faith or reasonableness in all contracts, the actual decision does not appear to be authority for such a proposition.

20 In further support of the submission that an implication of good faith should be made in all commercial contracts the plaintiff relied on subsequent decisions noted earlier, and in particular on the decisions in Garry Rogers Motors (supra) at [34] and in South Sydney District Rugby League (supra). But in Garry Rogers Motors the reasons of Finkelstein J

(Page 16)

at [34] relying in particular on Alcatel, Renard Constructions and Hughes Bros put the matter no higher than -

"Recent cases make it clear that in appropriate contracts, perhaps even in all commercial contracts, such a term will ordinarily be implied … as a legal incident of the relationship …."

His Honour went on to add at [37] -

"In my view, a term of a contract that requires a party to act in good faith and fairly, imposes an obligation upon that party not to act capriciously. It would not operate so as to restrict actions designed to promote the legitimate interests of that party. That is to say, provided the party exercising the power acts reasonably in all the circumstances, the duty to act fairly and in good faith will ordinarily be satisfied."

In South Sydney District Rugby League, Finn J at [392] and [393] said -

"Distinct from implication in fact, a term may be implied as a matter of law as a legal incident of a particular class of contract: see Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 122 - 123. This implication does not depend upon the intention of the parties: Breen v Williams [(1996) 186 CLR 71] at 103. Its imposition can in the end be explained as resulting from when 'the law thinks that policy requires it': Samonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 at 348; on this form of implication see generally Cheshire & Fifoot [Law of Contract, 7th Aust ed, 1997] par 10.39 ff.

Australian law has not yet committed itself unqualifiedly to the proposition that every contract imposes on each party a duty of good faith and fair dealing in contract performance and enforcement … Such a duty has been accepted as an implied legal incident of particular classes of contract …" [His Honour referred to Alcatel, Hughes Bros and Garry Rogers Motors].

21 The emphasis in the plaintiff's submissions on an implication in all commercial contracts led the defendant to submit that the contract in question in this case was not a commercial contract in any event as it was in settlement of judicial proceedings. While, for the reasons indicated, I don't find the notion of all commercial contracts particularly helpful or relevant, it would seem to me somewhat artificial to deny this contract a

(Page 17)

commercial character because it was negotiated in settlement of legal proceedings. In this case there was a commercial dispute as to the acquisition of mining interests and, significantly, the nature and terms of the agreement recorded in the Deed made detailed provision for the payment of the purchase price. In my view, should it be material, the agreement in issue is properly to be regarded as a commercial contract.

22 I am not presently persuaded that the proposition advanced by the plaintiff in this case represents the present state of the law in this country. Clearly, the issue is alive in current jurisprudence and no doubt it will receive much consideration in cases to come. For the present, however, I would see that a duty of good faith in the performance of obligations and in exercising rights may, by implication, be imposed upon parties as an incident of a contract, but I would not see it to be established for all contracts, regardless of the nature and terms of the particular contract and the circumstances of the parties by which the contract was concluded, that such a term should be universally implied.

23 Rather than spend more time on these issues, however, as this is an interlocutory application hardly suited to the full analysis of a possible major development in the law of contract in this country I propose, for the purpose of dealing with this particular summons, to proceed to consider what should be the relevant consequences for this summons of the implication as a matter of law of a term of good faith binding on both parties. In other words, I will turn to the question whether the implication of a duty of good faith would have any consequence in the resolution of the dispute which has given rise to this application. In effect, for the purposes of this application I will proceed as though a term of good faith is to be implied, reserving that question for decision in more appropriate circumstances.

24 It is submitted for the applicants that the implication of a term of good faith requires, at least, that the parties be bound to "the spirit of the bargain" and not to render illusory contractual entitlements; South Sydney District Rugby League at [426]. In further development of these notions and drawing on observations of Sir Anthony Mason referred to in Alcatel at [367], and which are reflected in A F Mason "Contract, Good Faith and Equitable Standards in Fair Dealing" (2000) 116 LQR 66 at 69, it is submitted that it should be accepted that good faith involves at least three related notions -

• an obligation on the parties to cooperate in achieving the contractual objects (loyalty to the promise itself),

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• compliance with honest standards of conduct, and

• compliance with standards of conduct which are reasonable having regard to the interests of the parties.

25 On the assumption, for the purposes of this decision, that an obligation of good faith is to be implied into this Deed and that by virtue of this the defendant may not render illusory the contractual entitlements of the plaintiff, and is to cooperate with the plaintiff in achieving the contractual objects, and is to act honestly and reasonably having regard to the respective interests of the parties, it might well be the case that were the defendant to act dishonestly, or unreasonably, or not to cooperate, or act to frustrate or deny to the plaintiff its contractual entitlements, in the relevant senses, it would be open to a court in appropriate proceedings to find the defendant in breach of the implied term with damages or other appropriate remedies to follow. In the course of any litigation to determine any such issue, the processes of discovery would no doubt be available to the plaintiff to better enable it to pursue the particular breach of the implied contractual term which it alleged. What the plaintiff seeks at present, however, is on a quite different basis and to quite different ends. It is the plaintiff's contention that an implied obligation of good faith should have the consequence that the defendant is obliged in the course of the ordinary ongoing working out of the contract, not merely to keep the plaintiff informed of events and developments which give rise to a contractual entitlement in the plaintiff (or have the potential to do so in the future), but also to provide to the plaintiff full access to the defendant's records and information, as and when required by the plaintiff, to enable the plaintiff fully to assess for itself whether any possible entitlement has in fact arisen or potentially may do so. By these means, it is contended, the plaintiff should be as fully informed in these respects as the defendant and able at any time, and on an ongoing basis, to determine for itself, according to its own view of the contract and the circumstances, whether or not a contractual entitlement has arisen or whether events relevant to the future arising of a potential contractual entitlement have occurred. Indeed, as in the present circumstances, inter alia the plaintiff seeks to be fully provided with documents and material information now, so that, should it be disputed, it may now litigate to determine as between the plaintiff and the defendant whether or not an event has occurred, against the possibility that the event may later prove to become relevant to, or determinative of, a contractual entitlement of the plaintiff.

26 In my view, no decision on which the plaintiff relies offers support for such proposition. Even if the defendant owes a duty of good faith it would not, in my view, be an incident of such a duty, in circumstances

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such as the present, to provide documents and information so that the plaintiff may constantly monitor, according to its own interpretation and views, the progress of the defendant's activities and the possibility of the occurrence of any event of the type being considered.

27 In my view it is not the case, as is contended by the plaintiff, that its contractual entitlements would be rendered illusory unless it is provided with the necessary documents and information to determine for itself whether an entitlement has arisen or whether an event has occurred which may in time possibly prove to be relevant to an entitlement. What is contended appears to misconceive and distort the notion which underlies an obligation not to render illusory contractual entitlements. Further, relevantly, no issue has been identified as to which the cooperation of the plaintiff and defendant is required to achieve contractual objects. No dishonesty by the defendant is relied on.

28 The plaintiff does contend that, by failing to provide the documents and information that it seeks, the defendant is failing to act reasonably having regard to the plaintiff's interests. This contention seems to beg the question, however, whether the demand for the information and documents is itself reasonable. If not, it is difficult to see how the failure to provide them would constitute a failure by the defendant to act reasonably. It appears to me to be relevant to the question of reasonableness of conduct, bearing in mind the interests of each of the plaintiff and the defendant, to have regard to matters such as the nature and terms of the contract, the parties, the purpose for which the information and documents are sought, what is involved for the defendant in the production of the information and documents, the interest of the plaintiff to be served in obtaining the information and the interests of the defendant in not making it available, at least at this time.

29 The contract recorded in the Deed is a detailed agreement reached with full legal advice, itself being in settlement of a serious earlier dispute that had led to litigation. The subject matter involves a very substantial, high profile, mining venture. The parties are significant public companies. Relevantly, the contract provides for the payment of the Agreed Amount to the plaintiff when, at any Review Date, cl 4.1(b) is satisfied. The initial Review Date is the earlier of any one of four possible events, ie 12 months after satisfaction of the banker's acceptance test, 3 years from the commissioning of the treatment plant, 3 years after the date when 250,000 tonnes of ore has been mined and treated, and the sale by the defendant of the whole of its interest for not less than $350,000,000.

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30 The project itself has a high public profile and is the subject of a good deal of public interest and knowledge. Events such as the commissioning of the plant and significant production may be expected to be the subject of much information in the public domain and to be dealt with when the defendant reports quarterly to the stock exchange and annually in the ordinary way. A sale of the project by the defendant is to be expected to be the subject of considerable public attention. Thus only the first of the four events relevant to Review Date is by its nature one which is likely to occur without the knowledge of the plaintiff. Clause 4.3 of the Deed contains special provisions relating to the first event by which the defendant is required to give notice to the plaintiff of the terms of the banker's acceptance test to be agreed with the financiers, and to do so immediately after they are agreed, and to give notice to the plaintiff immediately when the financiers notify that the banker's acceptance test has been satisfied. The defendant is also expressly obliged to use its best endeavours to ensure the banker's acceptance test is satisfied at the earliest practicable date. The parties thus anticipated the need for special and specific provision with respect to the banker's acceptance test. These include provisions to ensure that the plaintiff is immediately notified of the occurrence of the event which, 12 months later, could give rise to a Review Date.

31 The parties have also anticipated the possibility of inaction by the defendant, or disagreement, as to the determination required at any Review Date whether the Average LME Nickel Settlement Price for the 12 month period ending on the Review Date exceeds the Trigger Price. By cl 4.2(a) the defendant is required to procure its auditors to make that determination and give notice of those figures both to the plaintiff and the defendant within 14 business days of that Review Date. This notice is required to indicate how the figures have been calculated, state what the Agreed Amount is at that Review Date, and the basis for the calculation, and to state whether the Agreed Amount is payable. Should there be a failure to issue the notice in accordance with those requirements, the plaintiff may procure its own auditors to do so and on the issue of a satisfactory notice by the plaintiff's auditors the requirements of cl 4.2(a) are deemed to have been complied with. In the event that either the plaintiff or the defendant dispute any matter the subject of such a notice, there is by cl 4.2(c) express provision for the dispute to be referred to an independent expert whose decision is binding on the parties. For this purpose the defendant is required to give the expert reasonable access to its records insofar as they are relevant to the derivation of the figures in the notice, the expert being first required to undertake in writing to

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maintain the confidentiality of those records. The costs of the expert are to be borne equally by the plaintiff and defendant.

32 The parties have also anticipated, by express provision, dispute between them whether any of the events referred to in the definition of Review Date in cl 1.1 have occurred in accordance with the Deed. By cl 4.4, in the event of such a dispute occurring, either party may refer that dispute to an independent expert in the same manner and, with one modification, subject to the same terms as those just considered, ie those provided by cl 4.2(c).

33 At present the only identified difference between the parties is as to whether an event referred to in the definition of Review Date has occurred, ie whether the treatment plant was commissioned on 7 May 1999. The plaintiff contends that this does not constitute a dispute within the meaning of cl 4.4. It says there can't be a dispute as, without the information and documents it seeks in this application, it cannot reach a final decision. Thus it submits that it doesn't know whether or not it disputes the contrary opinion of the defendant. This argument appears to me to be without substance and places too limited a construction on the notion of a dispute within the meaning of cl 4.4. In the present case the plaintiff has formed and relied on its opinion that the plant was commissioned on 7 May 1999. It has done so on the basis of information capable of supporting that view which is known to it from the public domain. That opinion is denied by the defendant. As a matter of ordinary usage there appears to me to be a dispute between the parties whether the plant has been commissioned. I would not understand cl 4.4 to require more. It is true that cl 4.4, by incorporating the cl 4.2 procedures, contemplates negotiations in good faith between the parties after notice of dispute. It is only if those negotiations fail to resolve the dispute within seven days that either party may refer the dispute to an independent expert. The plaintiff contends it cannot negotiate effectively without the information and documents it now seeks. While in the present circumstances it is no doubt true that the plaintiff would be in a different position, one that may be either stronger or weaker, if it had access to the defendant's documents and information, that is hardly conclusive of the propositions that the parties can't have intended that the plaintiff should not have access to the defendant's records, or that the agreement is fundamentally deficient because it has failed to provide for the plaintiff to have the information and documents which it believes it needs to negotiate effectively in the present circumstances.

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34 Clause 4.4 and cl 4.2 are designed to deal with a variety of situations. While in this case the plaintiff may be assisted by access to the defendant's information and records, that is not necessarily the case in all possible situations. Further, even though its present negotiating position may be less than ideal, it can still negotiate. If it perceives its present position to be inadequate or unlikely to result in a negotiated settlement which it will find to its liking, it is to be remembered that this is a consequence of terms to which the plaintiff was prepared to bind itself.

35 In my view, cl 4.4 is a provision which expressly deals with the present situation. It provides that the plaintiff may refer this dispute to an independent expert nominated by the President of the Western Australian Bar Association and that expert is to decide the dispute in the manner the expert deems fit. It has been agreed between the parties that the decision of the expert shall bind them. Significantly, the defendant has expressly bound itself to give the expert reasonable access to its records insofar as they are relevant to the dispute, provided that the expert first undertakes in writing to maintain the confidentiality of those records. This appears to me most material to the question what should be the substance and effect of an obligation of good faith, should such a term be implied in this Deed.

36 I am satisfied from the evidence that at least a significant portion of the information and documents sought by the plaintiff from the defendant contain commercially sensitive information and also that many of those documents are the subject of confidentiality obligations which the defendant has undertaken. In their wider interests, apart from this Deed and the Murrin Murrin project, the plaintiff and the defendant are in the nature of commercial competitors. Hence, the commercial sensitivity of this information and documents is a matter of material concern to the defendant. This can be seen to be reflected in the express contractual provisions of cl 4.4 and cl 4.2 for the resolution of disputes by an independent expert who is bound to maintain the confidentiality of the defendant's records made available for the purposes resolving a dispute between the plaintiff and the defendant. It is the effect of this provision, expressly agreed between the parties, that the plaintiff will not itself have direct access to the defendant's records.

37 Later in these reasons I consider more fully the nature of the commercial sensitivity and confidentiality of some of the defendant's records. I will also record at a later point in these reasons the effect of the evidence as to the physical task which would face the defendant were it required to provide the information and documents now sought by the plaintiff pursuant to an implied obligation of good faith. I will not detail

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those matters at this point although they have some relevance to the issue whether failure to make that documents and information available to the plaintiff constitutes a failure on the part of the defendant to act reasonably, having regard to the interests of the plaintiff and the defendant.

38 It is also relevant that, subject to the possible further issue concerning the Banker's Acceptance Test considered later in these reasons, the only identified matter of present dispute between the parties concerns the commissioning of the treatment plant. Yet what is sought by the plaintiff is access to the defendant's information and records relevant to three of the four events which could possibly give rise in the future to a Review Date. What is sought goes beyond any actual dispute between the parties and is clearly directed to the plaintiff monitoring for itself and on an ongoing basis the progress toward a Review Date and the possible occurrence of events referred to in the definition of Review Date.

39 Having regard to these matters I am not persuaded that, should an implication by law be warranted in this Deed of a term of good faith, it would be an incident of the implied term that the defendant should provide to the plaintiff the information and documents set out in par 2 of the originating summons. In my view, such a requirement would impose an unwarranted and unreasonable obligation on the defendant, one that is unnecessary and which goes beyond what any implied obligation of good faith would require. In my view a failure to provide that information and documents would not go outside the spirit of this particular contract so as to render illusory the plaintiff's contractual entitlements, would not reveal a want of appropriate cooperation in achieving the contractual objects, and would not involve any failure to comply with honest standards of conduct, or to observe a reasonable standard of conduct having regard to the interests of both the plaintiff and the defendant. In particular, the express provision of cl 4.4 of the Deed tells with considerable force against the acceptance of the contention that by the implication of a term of good faith in this Deed the defendant should be required to produce the documents and information sought by the plaintiff, or that a refusal to do so would constitute a failure by the defendant to comply with reasonable standards of conduct having regard to the interests of the parties.

Alternative implication

40 Alternatively, the plaintiff seeks to rely on an implied obligation in the Deed that the defendant will "do all such things as are necessary on [its] part to enable the [plaintiff] to have the benefit of the contract". It is further submitted that this implied obligation requires that the defendant

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comply with the requests of the plaintiff for the production of the information and documents sought in cl 2 of the originating summons. In support of the implication of this specific term the plaintiff relies on Electronic Industries Ltd v David Jones Ltd (1954) 91 CLR 288 at 297 - 8 and Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 - 8.

41 In Secured Income Mason J, with whom Barwick CJ, Gibbs, Stephens and Aickin concurred, said at 607 - 8:

"But it is common ground that the contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract. As Lord Blackburn said in Mackay v Dick:

'as a general rule … where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.'

It is not to be thought that this rule of construction is confined to the imposition of an obligation on one contracting party to co-operate in doing all that is necessary to be done for the performance by the other party of his obligations under the contract. As Griffith CJ said in Butt v M'Donald:

'It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.'

It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall

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be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself."

In that decision Mason J went on to say at 609, as to the intention of the parties as manifested by the contract itself -

" … Despite this, there is clearly manifested in the contractual provisions, inaptly expressed in part though they are, the intention that the respondent was not to be entitled before the final date for completion by any capricious or arbitrary decision to prevent the grant of a lease of unlet space in the building.

The question then is whether the respondent capriciously or arbitrarily refused to grant a lease to the appellant, the appellant having the onus of establishing that the refusal was capricious or arbitrary because it was bound to establish the respondent's breach of contract. The respondent was not bound to give reasons for refusing to grant a lease to the appellant, though its failure to do so leads more readily to the inference that the refusal was capricious (Frederick Berry Ltd v Royal Bank of Scotland [1949] 1 KB 629 at 623).


In the end Mason J concluded that the appellant had "failed to show that the respondent's refusal to grant the lease was capricious or arbitrary."

42 In the present case the plaintiff seeks from the defendant documents and information not "necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract". Instead, the implication contended for is, at most, within the other category identified by Mason J being "necessary to entitle the other contracting party to a benefit under the contract" but not being essential to the performance of that parties obligations and not fundamental to the contract.

43 There is an obvious difficulty in the present circumstances with the notion that the documents and information sought by the plaintiff are "necessary" in the sense dealt with by Mason J in particular as, in themselves, they give rise to no entitlement. They are presently required only to enable the plaintiff to conduct its own assessment or audit to satisfy itself as to the progress toward an entitlement. Further, as Mason J has indicated, the intention of the parties as manifested by the contract

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itself is a most material factor. The express agreement of the parties to the dispute resolution procedure, a procedure which protects the confidentiality of the defendant's documents and information, appears to tell with some force against the implication of an obligation on the defendant to make available to the plaintiff the documents and information sought.

44 Electronic Industries Ltd v David Jones Ltd does not offer any greater support for the plaintiff's case. The appellants had agreed to install TV equipment in the respondent's store and to demonstrate its operation for the period 11-23 July 1949. Before those dates the appellant agreed with the respondent's request to postpone the demonstration to another period to be fixed. Attempts to agree a later period having failed, the respondent advised it no longer desired to have the demonstration. The appellant succeeded at trial on a claim for breach of contract by the respondent, but this had been reversed on appeal by the Full Court. On further appeal the High Court reinstated the trial judgment. In the reasons of the Court, Dixon CJ, McTiernan, Webb, Kitto and Taylor JJ, at 297 - 8 it was said:

"In the situation which resulted both parties remained bound by the contract. The fact that there was no longer a fixed date for performance brought into application the principles which impose on parties, in all cases where the performance of their obligations requires co-operative acts, the duty of complying with the reasonable requests for performance made by the other. In Mackay v Dick Lord Blackburn says:- 'I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect'. What it was reasonable for the plaintiff to demand was that within a specified time when the plaintiff's apparatus was not unreasonably committed elsewhere the defendant should name a time for the plaintiff to commence the fortnight's exhibition or demonstration and should make available its store for a reasonable period in advance of the date for the plaintiff to install its equipment and make the necessary preparations. Of course the plaintiff could not give the defendant an unreasonably short period of time or one specially inopportune to the defendant, having regard to the purposes to be served by

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the exhibition. All that the plaintiff was bound to do was to take reasonable measures to obtain from the defendant a time when he might enter the store for the purpose of performing his part of the contract and no doubt there were more ways than one in which the plaintiff was entitled to require the defendant to make its store available to the plaintiff to perform its obligation at some proper and reasonable time. It is hardly necessary to repeat the commonplace statement that what is reasonable depends on all the circumstances including the nature and purpose of the express stipulations."

This decision turned on the performance of contractual obligations which required cooperative acts to achieve what the parties had agreed should be done. The duty of compliance with the reasonable request for performance with which it deals arose in that context as the reasons make clear. This is not such a case.

45 I am not persuaded that the defendant is under any implied contractual obligation arising on this alternative basis to comply with the requests of the plaintiff to provide the documents and information sought.

Discovery

46 Alternatively, the plaintiff seeks in substance the same documents by way of pre-action discovery. Relevantly, Rules of the Supreme Court O 26A r 4 provides:

"4 (1) This Rule applies if a person who may have a cause of action against a person whose description has been ascertained ('the potential party') wants -

(a) to commence proceedings against the potential party; or

(b) to take proceedings against the potential party in the course of an action to which the person is a party,


but the person, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings.

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(2) If there are reasonable grounds for believing that the potential party had, has, or is likely to have had or to have, possession of documents that may assist in making the decision, the person may apply for an order under this Rule.

…

(4) On the application the Court may order the potential party to give discovery of all documents that are or have been in the potential party's possession and that may assist the applicant in making the decision."

It has been held of similar rules that they allow "fishing" and if an application is bona fide and the circumstances required by the Rules are shown to exist the Court has discretionary power to order the discovery; Clarkson v Director of Public Prosecutions [1990] VR 745 at 758. As these are rules of a beneficial nature in appropriate cases full scope should be given to their terms; Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 at 733.

47 The view has been expressed that O 26A r 4(1) is less restrictive than equivalent rules elsewhere in Australia as all that is required to attract its operation is that a person "may have a cause of action" (emphasis added); Cohen v Walthamstow Pty Ltd & Ors, unreported; SCt of WA (Sanderson M); Library No 980148; 30 March 1998 at 5 - 6. The particular facts of this case do not suggest that this is an issue material to the proper resolution of this present application. I am content for present purposes to proceed on the basis that in this respect the threshold test is no higher than that the plaintiff "may have a cause of action" and that this is satisfied in the present case. I am not persuaded, however, that it should follow that unless it is shown that the application for an order for discovery is brought vexatiously or with mala fides the application ought to be granted, as has been ventured; see Davis & Ors v Sagar Pty Ltd & Anor, unreported; SCt of WA (Sanderson M); Library No 980443; 10 August 1998 at 11.

48 It is to be remembered that discovery is a discretionary remedy. According to the circumstances of the case a number of factors may be relevant to the discretion to grant such relief. It does not follow from the circumstance that a power to order relief is drawn widely, so that relief may be obtained where the justice of the case makes that appropriate, that, in the absence of vexation or mala fides it is in the interests of justice to order relief in every case to which the power may be found to extend. As

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was said of this rule in McCarthy & Ors v Dolpag Pty Ltd [2000] WASCA 106 at [13], per Anderson and Scott JJ,

"There is no doubt that caution must be exercised before making an order and that such order should not be made as a matter of course. They should only be made when reasonably necessary to achieve the proper administration of justice: Tipperary Developments Pty Ltd v Western Australia [1999] WASC 62; (1999) 21 WAR 250, per Parker J at 24; O'Sullivan v Herdsman Ltd [1987] 2 All ER 129 at 135 - 6. It must be remembered that discovery constitutes a very serious invasion of privacy and confidentiality [and] the process should not be allowed to place upon a litigant any harsher or more oppressive burden than is strictly required: Harman v Secretary of State for the Home Department [1983] 1 AC 280 at 308 per Lord Keith of Kinkel; and this is a fortiori the position where the discovery is sought before action and is for the purpose of determining whether or not there is an issue to litigate."

49 It is perhaps inevitable that at times it will be difficult to discern where and how the interests of justice are best served. It is necessary to weigh inter alia the competing interests of both parties. The plaintiff has an interest to ensure that it receives its entitlements under the Deed. The defendant, a party with the plaintiff to the Deed, has a proper interest in conducting their relations in accordance with its terms and, otherwise, has interests as a competitor of the plaintiff to keep from the plaintiff commercially confidential information, and further to avoid what could be the very considerable practical and financial burden of meeting an order for discovery in the terms sought.

50 When weighing the interests of justice in the present circumstances it appears to me to be relevant that the plaintiff does not presently assert a cause of action which would entitle it to substantive and final relief in settlement of a dispute with the defendant. The plaintiff, at best, contemplates proceedings for a declaration as to whether the plant has been commissioned. I also note the possibility of proceedings for a declaration that the Banker's Acceptance Test had been satisfied, which is canvassed in the evidence and submissions, but that is at best clearly a more remote possibility. Subject to the discretionary nature of declaratory relief, it would appear open to the plaintiff as a matter of jurisdiction to seek declaratory relief of the nature contemplated even though the apprehended impact on the parties may be no more than a future possibility; see Horden-Richmond Ltd v Duncan [1947] 1 KB 545, J N

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Taylor Holdings Ltd (in liq) & Anor v Band & Ors (1993) 59 SASR 432 at 437. Nevertheless, such declaratory relief, even if granted, would not relate to any other presently existing cause of action and would not itself give rise to any entitlement to any substantive or final relief as between the parties. It may never do so. The issue could well prove to be entirely irrelevant to the working out of the contractual relations of the plaintiff and the defendant. The interest of the plaintiff to pursue a claim for declaratory relief is only anticipatory and precautionary, in that it would enable the issue to be resolved now between the plaintiff and the defendant whether, and if so when, the plant had been commissioned against the possibility that in the future that may become an issue relevant to the entitlement of the plaintiff to be paid the Agreed Amount of US $16,250,000 escalated. The position with respect to the further possible issue of the Banker's Acceptance Test is similar.

51 Also relevant to a weighing of the interests of justice in this case, is the evidence as to the extent of the records of the defendant that may be comprehended by the order for discovery sought by the plaintiff. As has been indicated the issue whether the treatment plant has been commissioned appears in this case to involve and to be greatly complicated by the issues which have led to the dispute between the defendant and Flour Daniels Pty Ltd over the design, specification, construction and performance of the plant that has been built.

52 On the very limited materials before me it is not possible to reach a concluded view but, as presently informed, I am persuaded that there is good reason to anticipate that a good deal of the 2,600 individual files containing an excess of some 784,000 pages deposed to by Mr James, and being but part of the defendant's potentially relevant documents, will prove relevant to the questions whether or not the plant has been commissioned and if so when. While counsel for the plaintiff in the course of his submissions was quick to say nothing so extensive was intended, no amendment to the proposed order has been formulated or anticipated. At present the touchstone of the proposed order is relevance. It is not apparent that this can be satisfied by some limited number of the records of the defendant nor, if that were so, how that limited number could be identified without the need for consideration by the defendant's officers and legal advisers of the materials in the 2,600 individual files. On the information presently before me I am persuaded, therefore, that an order as proposed in par 3.4 of the originating summons alone, quite apart from the other orders, would involve the defendant in a very considerable effort and place on it a considerable physical and financial burden. Of course, this could be partially offset by orders as to the costs of

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compliance but the nature, extent and disruption of the physical burden would remain. In this respect I also note that there is nothing in the materials before me to support the assertion from the Bar table that the defendant has in truth commissioned the plant but will not admit to this for fear of prejudicing its dispute with Flour Daniels Pty Ltd.

53 There is also the question of the commercial confidentiality of some of the documents deposed to by Mr James. There is an objection by the plaintiff that no confidentiality agreements have been provided and in this respect RSC O 37 r 2(8) is relied on. The evidence of Mr James relies only in part on confidentiality agreements with third parties. Independently of that I am persuaded by the evidence that at least much of the financial information and operating data of the defendants is commercially sensitive. In addition, it is apparent that the defendant has possession of documents pursuant to discovery orders in connection with its dispute with Flour Daniels Pty Ltd which are thereby protected from disclosure to the plaintiff. At the least this would require an evaluation of the defendant's documents with a view to determining which classes of documents or individual documents were affected by this consideration. That in itself would be a significant physical undertaking, again attended with disruption and expense. Of course, the mere fact of confidentiality would not preclude discovery in an appropriate case but it is a factor to be weighed both as to the exercise of discretion to grant discovery and as to the nature of the discovery that is ordered.

54 In my view, in the particular circumstances of this case, it is also relevant to the weighing of the interests of justice that in the Deed which gives rise to this application, the parties anticipated that there might arise disputes between them, in particular, as to "whether any of the events referred to in the definition of 'Review Date' in Clause 1.1 have occurred in accordance with this Deed". Those events included the commissioning of the treatment plant which is the subject of the order proposed by par 3.4, and the satisfaction of the Banker's Acceptance Test which is the subject of the orders for discovery proposed by par 3.1, par 3.2 and par 3.3, and whether 250,000 tonnes of ore from the project had been mined and treated which is the subject of the order for discovery proposed by par 3.5 of the summons. Thus, by cl 4.4 of the Deed, in the event of dispute as to the issues which are the subject of the discovery orders sought by the plaintiff, it is agreed that the dispute may be referred to an independent expert for decision. As has been indicated it is agreed that the decision of the expert is to bind the parties and it is expressly provided that the defendant should give the expert reasonable access to its relevant

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records but only on the basis that the expert is bound to maintain their confidentiality.

55 The express anticipation of dispute between the present parties, inter alia as to the very matter or matters which now concern the plaintiff, and the agreement of a means of resolving such a dispute, and doing so in a manner which meets the defendant's concerns for confidentiality, appears to me to be most relevant. These matters weigh significantly in favour of the view that the interests of justice do not require discovery to be ordered in the terms sought by the defendant. The plaintiff is not left without remedy if discovery is refused. It has the remedy to which it was prepared to agree when it executed the Deed. A remedy which appears to be directed interalia to meeting its present concerns. That remedy may or may not be preferable to pursuing declaratory relief but it is a remedy which was acceptable to the plaintiff when the Deed was executed.

56 As canvassed earlier in these reasons the plaintiff contends that this contractual remedy is inapplicable to its present position and therefore inadequate. It says that it is not in dispute with the plaintiff within the meaning of cl 4.4 of the Deed. Rather, it needs to have access to the defendant's documents to determine whether there is reason for it to be in dispute. It is submitted that there is no provision in the Deed which contemplates how the plaintiff will obtain the information and documents necessary for it to be able to decide whether or not to give notice of a dispute as to whether any of the events referred to in the definition of Review Date have occurred. As canvassed earlier in these reasons, with respect to the commissioning of the treatment plant the factual circumstances suggest this distinction is unreal. From its correspondence with the plaintiff and its evidence in support of this summons it is clear that the plaintiff has formed the opinion that the plant has been commissioned. The disclosed bases for that opinion are public statements by the defendant in its official reports, the official opening of the plant and the operation of the plant to produce treated ore. The defendant denies the plant has been commissioned. The plaintiff may not be in a position to assess the full merits of this particular issue but, as indicated earlier, it seems to me that this does not provide an adequate basis for contradicting the proposition that there is a dispute with the defendant whether the plant has been commissioned.

57 Whatever be the strengths and weaknesses and the advantages and disadvantages for the plaintiff of the agreed dispute resolution procedure I am not persuaded that it does in truth fail to have account of the obvious circumstance that, inevitably in many situations, the defendant would

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have more detailed knowledge information and documents than the plaintiff relevant to matters of dispute within the contemplation of cl 4.4, which knowledge, information and documents would be relevant to the ultimate determination of the question in dispute, ie whether an event referred to in the definition of Review Date had occurred. That is expressly recognised by the procedure by which the defendant is to make its documents available to an independent expert. While the plaintiff may now be less than satisfied that the agreed dispute resolution procedure is entirely satisfactory for its present purposes, especially given the dispute between the defendant and Flour Daniel Pty Ltd as to the plant, it was nevertheless the procedure to which the plaintiff and the defendant bound themselves in the Deed for reasons which, no doubt, had regard not merely to the interests of the plaintiff but also to those of the defendant.

58 With regard to the other events referred to in the definition of Review Date which are the subject of this application for discovery, ie the Banker's Acceptance Test and the mining and treatment of 250,000 tonnes of ore, it is not demonstrated that there is any present dispute. If that be so, cl 4.4 is not available to assist the plaintiff at the present time. Even so, I am not persuaded that the interests of justice require that there should be an order for discovery. The plaintiff's interest has not been shown to be sufficiently real and compelling to warrant an order which would be productive of significant effort, cost and disruption for the defendant, especially having regard to the defendant's legitimate concerns to protect the confidentiality of many of its documents.

59 For these reasons I am not persuaded that in the interests of justice there should be orders for discovery as sought by the plaintiff in its originating summons. As a matter of discretion I refuse to order discovery.