Channel Seven Adelaide Pty Ltd v Lane & Hurley - [2004] SASC 177

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
CHANNEL SEVEN ADELAIDE P/L v LANE & HURLEY
Judgment of The Full Court
(The Honourable Justice Duggan, The Honourable Justice Mullighan and The Honourable Justice Nyland)
17 June 2004
PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - DISCOVERY OF DOCUMENTS
Respondents are plaintiffs in defamation action brought against appellant – application by appellant for further and better discovery dismissed by a master – appeal from master’s decision dismissed by a single judge – consideration of scope of duty of discovery pursuant to SCR58A – whether documents “directly relevant to any issue arising on the pleadings”.
Application for discovery against non-party pursuant to SCR60 – scope of third party’s duty of discovery considered.
Appeal dismissed.
SCR 58A ; SCR60 , referred to.
Southern Equities Corporation Ltd (In Liquidation) v Arthur Andersen & Co (No 5) [2001] SASC 335; Quenchy Crusta Sales Pty Ltd v Logi-Tech Pty Ltd (2002) 223 LSJS 266; Rehn v Australian Football League & Ors (2003) 225 LSJS 378, considered.

CHANNEL SEVEN ADELAIDE P/L v LANE & HURLEY
[2004] SASC 177
Full Court: Duggan, Mullighan and Nyland JJ

DUGGAN J. The appellant is the defendant in a defamation action brought by the respondents (“the plaintiffs”).
The alleged defamation arose out of the broadcasting of a segment in the “Today Tonight” current affairs programme on 10 June 2002. The topic dealt with in the segment was the availability of the assets of Mr Peter Liddy, a person convicted of sexual offences, for the purpose of compensating the victims of his offences.
On 18 June 2001, a Mareva order was made in the District Court aimed at preserving the assets. Subsequently there was an application to vary that order. The first plaintiff, a barrister, acted for Mr Liddy on the application to vary and the second plaintiff was his instructing solicitor. It would appear that, after the Mareva injunction was ordered, the solicitors acting for Mr Liddy in the civil proceedings against him and the solicitors acting for the plaintiffs in those proceedings held discussions aimed at making arrangements to enable some of the assets to be accessed so that Liddy could obtain funds to appeal against his convictions and defend the civil proceedings. These discussions resulted in a document entitled “Memorandum of Understanding” being drawn up. The document reflected an agreement between the parties as to the manner in which the assets might be disposed of and the proceeds utilised.
The Memorandum of Understanding set out the circumstances and manner in which a house at Kapunda owned by Liddy and its contents might be sold. It referred to a rare collection of American and marine artefacts which were kept in the house and mention was made of the difficulty of valuing it. It was stated in the Memorandum of Understanding that:
“A Mr Erik Van Kruyssen, a barrister and solicitor and also a licensed antique dealer with a special interest in maritime artefacts has expressed an interest in assisting in the preparation of a catalogue and valuation of the items referred to in paragraph 8.2.2 hereof and assisting in effecting the sale of these items … It is imperative that the organisation and sale of the maritime and American artefacts, i.e. the items referred to in paragraphs 8.2.2.1 and 8.2.2.2 be commenced immediately … A copy of the catalogue(s) and valuation(s) prepared by Mr Van Kruyssen will be made available to the Plaintiffs’ solicitors upon receipt by the Defendant’s solicitors …”
Eventually, an offer of $500,000 was made by a Mr Stephens for the purchase of the house and its contents on a “walk-in walk-out” basis. A valuation of the contents of the house made by Mr Van Kruyssen placed a value of approximately $150,000 on the items of personal property which he specified in the valuation. His valuation contained the following statements:
“I do not pretend that this is a comprehensive list of items in the residence. I have not gone through all the cupboards. Nor have I appraised each item minutely to establish authenticity. Suffice to say, the majority of items do present a very well preserved or restored condition.
. . .
The total value of the above specified items comes to approximately $100,000.00. I have not made any specific allowance for the collection of books nor any of the guns, holsters or powder horns. The above figures would increase where specific relic items can be attributed to specific wrecks. Some items would of course realise even greater sums if sold on the international market.
. . .
I am available to make a complete inventory. Further time would be needed to locate salvage certificates, or to contact salvers in possession of wrecks and update this valuation accordingly, but such a task will be quite time consuming and correspondingly expensive.”
An application was then made to the District Court to vary the terms of the original Mareva injunction. Mr Van Kruyssen’s valuation was tendered at the hearing. On 19 October 2001 the original order was varied on terms which included the following orders as summarised in the Defence to the present action:
“. An order that Liddy file and serve an affidavit disclosing with full particularity information as to the superannuation policies previously held by him and the transfer of monies to his bank account as a result of the redemption of such policies and the use of such monies after the transfer.
.an order that the disposal of Liddy’s assets or the use of Liddy’s money with the consent of the Plaintiffs’ solicitors (which consent shall not be unreasonably withheld) shall not constitute a breach of the Mareva injunction.”
The essence of the case for the plaintiffs is set out in paragraph 9 of the statement of claim:
“9The broadcast was defamatory of the plaintiffs in that the audio and pictures in their natural and ordinary meaning meant and were understood to mean that the plaintiffs:
9.1procured and presented to the District Court and the lawyers for Liddy’s alleged victims a valuation of Liddy’s assets that they knew was false and misleading or manifestly inadequate;
9.2in the alternative, procured and presented to the District Court and the lawyers for Liddy’s alleged victims a valuation of Liddy’s assets that they ought reasonably to have known was false and misleading or manifestly inadequate;
9.3procured and presented to the District Court and the lawyers for Liddy’s alleged victims a valuation of Liddy’s assets that was false and misleading or manifestly inadequate for the purpose of ensuring that their own fees, and those of the other lawyers engaged by Liddy from time to time, were paid;
9.4procured and presented to the District Court and the lawyers for Liddy’s alleged victims a valuation of Liddy’s assets that was false and misleading or manifestly inadequate for the purpose of depriving the alleged victims of fair or any compensation;
9.5procured and presented to the District Court and the lawyers for Liddy’s alleged victims a valuation of Liddy’s assets that was false and misleading or manifestly inadequate for the purpose of ensuring that Liddy’s assets were dissipated in such a way as to deprive Liddy’s alleged victims of any recovery of damages in pending civil actions against Liddy;
9.6wrongly conspired with or knowingly assisted Liddy in depriving his alleged victims of fair compensation by the disposal of his assets at an undervalue;
9.7acted unscrupulously and unethically in their own interests to procure payment of fees that were exorbitant;
9.8submitted to Liddy and had paid from the proceeds of the sale of Liddy’s assets fees which were other than fair and reasonable;
9.9ignored or failed to follow Liddy’s instructions;
9.10conspired with or knowingly assisted Liddy to connive with a person of ill-repute, one Mr Terry Stephens, to put his assets beyond the reach of the alleged victims of his offending.”
The valuation referred to in paragraph 9 is that prepared by Mr Van Kruyssen.
The defendant has pleaded in its Amended Defence that the imputation alleged in para 9.2 of the Statement of Claim is true in substance and fact. In their Amended Reply the plaintiffs plead the following facts in answer to the defendant’s assertion that the imputation in para 9.2 of the Statement of Claim is true:
“As to paragraph 10 of the Amended Defence, the plaintiffs say:-
1.1That the valuation was competently prepared by a Mr Eric J Van Kruyssen (“Mr Van Kruyssen”), a licensed dealer and a person properly qualified to perform the valuation;
1.2That the valuation was performed by Mr Van Kruyssen in conformity with his instructions, which instructions were first communicated to and settled by the alleged victim’s solicitors;
1.3That the solicitors for the alleged victims were advised of and did not object to the scope, manner and extent of the valuation and satisfied themselves that Mr Van Kruyssen was a person properly qualified to perform the valuation;
1.4That the valuation arrived at by Mr Van Kruyssen was appropriate in all the circumstances;
1.5That the solicitors for the alleged victims did not oppose the valuation arrived at by Mr Van Kruyssen as being other than appropriate in all the circumstances;
1.6That the valuation was provided to the solicitors to the alleged victims prior to their appearing before the Court in the Civil Proceedings and not opposing the sale of Liddy’s assets;
1.7That the plaintiffs had no personal knowledge of the nature and extent of Liddy’s assets from any source other than that as communicated to them by Liddy in the Civil Proceedings (and as deposed to by Liddy on affidavit in the Civil Proceedings), Mr Van Kruyssen and another solicitor retained by Liddy to advise him, Mr W A G Morris.”
A transcript of the soundtrack from the television programme is annexed to the Statement of Claim. In a preview of the programme, the presenter announced that Liddy had left his victims almost nothing. The segment commenced with the presenter posing the question why Liddy would sell his home “to someone like ex-conman Terry Stephens in the first place”. There followed an interview with an alleged victim who did not give evidence at the trial because any offences committed against him would have been time barred.
The reporter then referred to the injunction in the District Court and a claim that victims were distressed when the court permitted the sale “so Liddy could pay his lawyers”. Reference was made to a letter which Liddy allegedly sent to one of his supporters saying he was against the sale. The reporter then posed the question “But how can that be right when it was Liddy’s own lawyers who beat the injunction and worked hard to set up the deal?” The reporter added:
“And as the victims feared, the lawyers pocketed almost all of it leaving them little to gain from court action.”
At this point in the segment the reporter raised the suggestion that the house and contents should be sold for significantly more. The reporter produced a document and commented that it was the valuation of the contents prepared by a valuer and then presented to the court by Liddy’s lawyers. Mention was made of the fact that the house was valued at $350,000.00 and the contents at $150,000.00.
The reporter referred to an article written by Liddy in 1999 concerning his collection of antique guns and the comment by Liddy in the article that, if the guns were sold, they would set an Australian record for antique guns. However, the reporter pointed out that, according to the valuation, no specific allowance was made for the guns and associated items or a collection of books. The reporter also said that the valuer admitted to not having checked the entire home. The reporter commented:
“But despite all that, the valuation was accepted by lawyers on both sides.”
Finally, there was a brief comment that Liddy’s superannuation payout had also disappeared on legal fees.
As stated in the appellant’s written outline of argument, the central issues raised by the pleadings are whether the valuation of the house and contents was false and misleading or manifestly inadequate and whether the plaintiffs ought to have known that this was so.
After the plaintiffs had given discovery, the defendant made application for further and better discovery in relation to six categories of documents. The defendant also applied for an order for discovery by three non-parties, namely, Westpac Banking Corporation, Westpac General Insurance and Westpac Financial Services. Both applications were dismissed by a master and an appeal against the master’s decision was dismissed by a judge of this court. The present appeal is against the single judge’s decision in relation to two of the six categories of further and better discovery sought from the plaintiffs. There is also an appeal from the dismissal of the defendant’s application for non-party discovery.
The documents relevant to the appeal, in so far as it relates to the discovery by the plaintiffs, are Mr Liddy’s superannuation statements and his credit card and bank statements. At the hearing of this appeal counsel for the defendant indicated that the defendant did not wish to pursue an earlier claim for discovery of documents pertaining to the instructions to, or retainer of, Mr Van Kruyssen to undertake the valuation of the contents of the house at Kapunda.
Both the master and the judge appealed from held that it had not been established that the superannuation statements and the credit card and bank statements were directly relevant to any issue arising on the pleadings.
The scope of the parties’ duty of discovery for lists of documents and affidavits of discovery filed after 3 June 2000 is defined in r 58A which provides:
“The parties must discover in their lists of documents, but discover only, the documents which are or have been in their possession, custody or power which are directly relevant to any issue arising on the pleadings.”
R58A significantly narrows the obligation to provide discovery. The earlier rule which was in the same terms as the requirement in the English Rules, required discovery of all documents in a party’s possession or under that party’s control “relating to any matters in question in the action”. The well known construction put upon these words by Brett LJ in Compagnie Financiere Du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 at 63 required discovery of documents which may fairly lead to a train of inquiry which, in turn, may enable the party to whom discovery is made to advance that party’s case or damage the case of an adversary in the litigation (see also Mulley v Manifold (1959) 103 CLR 341 at 345).
The effect of the new rule has been considered in decisions of single justices of this Court.
In Southern Equities Corporation Ltd (In Liquidation) v Arthur Andersen & Co (No 5) [2001] SASC 335 Bleby J expressed the view that the new test required a greater focus on the pleadings and the issues which arose thereon. He said that the test of relevance is the same as that which is applied to admissibility, but that it is not a test which includes only those documents which are strictly admissible in that documents, although relevant, may not be admissible under the common law or various statutory provisions.
Referring to the use of the word “directly” his Honour said at [10]:
“However, there is a further qualification, in that the documents must be ‘directly’ relevant. I doubt whether that qualification effectively narrows, for the purposes of discovery, ordinary concepts of relevance for the purpose of admissibility into evidence. In my opinion, it cannot mean, if the document is not itself proof of a fact in issue but is merely a piece of circumstantial evidence tending, along with other evidence, to prove the fact in issue, that it is not discoverable. Many a case is provable and in fact proved by circumstantial evidence, including documents. I note that a similar view was expressed by Demack J in Robson v REB Engineering Pty Ltd (1997) 2 Qd R 102 at 104 ‑ 105 in respect of a similar rule in Queensland. The Rule cannot be allowed to govern in practice the admission of documents into evidence merely because they have not been revealed in the discovery process.
What the qualification does reinforce is the notion of relevance to proof or disproof of a fact in issue, and the unquestionable abolition of the rule which required discovery of a document which might directly or indirectly lead to a train of inquiry or which might, in some other way, otherwise advance the party’s case or damage that of the adversary. For example, it would seem that documents going solely to the credit of a witness, unless that witness’s credit is an issue raised on the pleadings, would not be discoverable. However, it is inappropriate to attempt to define exhaustively what will and what will not be discoverable under this Rule.”
Doyle CJ agreed with these observations in Quenchy Crusta Sales Pty Ltd v Logi-Tech Pty Ltd (2002) 223 LSJS 266. He added [11]:
“It is not wise to attempt to state in comprehensive terms the effect of the requirement that the document be ‘directly relevant’. The adverb ‘directly’ is probably intended to emphasise the requirement of relevance, and to be used in the sense of requiring that the document be directly in point, excluding as sufficient indirect relevance which might be established through another linking circumstance. That is not to say, as I have already said, that a document is not directly relevant if it is merely a piece of circumstantial evidence. The point is that a document will not be directly relevant if, rather than tending to prove an issue on the pleadings, it merely tends to prove something that may be relevant to an issue.”
In Rehn v Australian Football League and Ors (2003) 225 LSJS 378 Doyle CJ again considered the rule. He said at [24]:
“However, as I commented in Quenchy Crusta, it is not possible to state precisely the effect of the adverb “directly” in r58A.03. Indirect relevance to an issue is not enough for the purposes of r58A.03, but distinguishing between direct and indirect relevance is not easy.
It is consistent with the intent of r58A.03 to apply the requirement of direct relevance firmly, and to give it a relatively narrow meaning. To hold that a document is not directly relevant to an issue arising on the pleadings is not to deprive a party of access to the document. The effect of such a holding is merely that the requirement to discover the document is not imposed by r58A.03, and that the court will decide, on application to it, whether the document must be discovered. In other words, r58A.03 draws the line between an obligation to make discovery as a matter of course, and an obligation to make discovery upon application to the court and after the court has considered whether the interests of justice requires that discovery should be made.
Another point relevant to the meaning of r58A.03 is that the rule assumes that a party is able to decide, from the pleadings, what documents must be discovered. This also suggests a narrow meaning for “directly relevant”. It would be counter-productive if a party was expected to discover documents because they might be relevant, depending on how the other party’s case was put at trial. r58A.03 assumes that a party can determine that party’s obligation to make discovery by reference to the pleadings.
(See also Mercantile Mutual Custodians Pty Ltd v Village/Nine Network Restaurants & Bars Pty Ltd [2001] 1 Qd. R 276 at 282).

I respectfully agree with the observations made in these cases. It is unnecessary to attempt any further analysis of the concept of direct relevance in order to resolve the issues raised in the present case.
Mr Harris QC, for the defendant, argued that the superannuation, credit card and bank statements were relevant to the adequacy of the Van Kruyssen valuation. He said that it was important to establish what assets were in the house at the time of the valuation. Mr Van Kruyssen stated in his report that he did not pretend to be providing a comprehensive list of items which were in the house and that he “had not gone through all cupboards”. According to the defendant’s argument, the financial statements could provide an indication of purchases and sales of assets which would, in turn, assist in establishing what was in the house at the time of the valuation.
In my view, the most which could be said of this suggested use of the statements is that they might contain information which might fairly lead to a train of enquiry which could assist the defendant’s case. If the documents are in this category then they do no more than satisfy the Peruvian Guano test. It could not be said that they are directly relevant to an issue arising on the pleadings.
Movements of funds in and out of bank accounts or superannuation funds would establish no more than the fact of those transactions. It is true that evidence of this nature could, in certain circumstances, constitute an item of circumstantial evidence which, when taken along with other evidence, establish that an item was purchased at a particular time.
In Southern Equities Corporation Ltd (In Liquidation) v Arthur Anderson and Co. (No 5) Bleby J pointed out that documents may be “directly relevant” by reason of the fact that they constitute an item of circumstantial evidence tending, along with other evidence, to prove a fact in issue. However, r58A.03 contemplates that the relevance of the documents is apparent at the time when discovery is under consideration. The possibility that a financial statement of this nature could lead to an enquiry which might uncover other aspects of circumstantial evidence or that it could be used along with other circumstances not apparent on the pleadings to establish the existence of an item in the house at the time of the valuation, cannot lead to the conclusion that the document is directly relevant for the purposes of the rule.
Credit card statements might go further in tending to establish that an item was purchased on a particular occasion. However, it is not apparent on the material presently available how the mere purchase of an item could establish that it was present in the Kapunda house at the time of the valuation. Again, knowledge of what is in such statements could give rise to a line of enquiry but no more.
It was also argued that the financial statements, if they are or were in the possession of the plaintiffs, are directly relevant to the state of knowledge of the plaintiffs in relation to the adequacy of the valuation. If it were established that the plaintiffs had knowledge that there were items in the house relevant to the valuation which had not been valued, this fact would be relevant to the issues raised on the pleadings. However, for the reasons which I have set out above, it has not been established that the documents are capable of proving the existence of items in the house at the time of the valuation. If that is so, then it is difficult to see how they could have any effect on the minds of the plaintiffs in relation to the adequacy of the valuation.
In my view, the financial statements which are the subject of the application for further and better discovery are not directly relevant to any issues arising on the pleadings and the application for further and better discovery in relation to them was rightly refused.
Although it is my view that the financial statements need not have been discovered by the plaintiffs, it is appropriate to comment on two other issues which were raised in the course of argument. There is a question as to whether the financial statements are or were in the possession of the plaintiffs. The master held that it had not been established that the plaintiffs had documents of this class in their possession at the time discovery was made. He said that at best there may be grounds to assume that some of the material may have been in the possession of the second plaintiff at some time. This finding appears to be based on an affidavit sworn by the second plaintiff in which she stated that she had “conducted full investigations of all superannuation policies that [Mr Liddy] has ever held and investigations into the transfer of monies into the [Mr Liddy’s] bank account and the use of monies after the said transfer”.
The master commented that if the documents had been in the possession of the plaintiffs or either of them it would seem to be of no value to order that a supplementary list of documents be prepared stating what had happened to them.
The judge appealed from agreed that the affidavits before the master did not support the contention that the material was currently in the possession of the plaintiffs. He also agreed that it was pointless to require the filing of a supplementary list.
These findings must be qualified in one respect. Mr Trim QC, for the plaintiffs, acknowledged that in the second plaintiff’s supplementary list of documents that party discovered the following documents as being currently in her possession:
“48.Bundle of faxes and other documents relating to Mr Peter Liddy’s superannuation entitlements.”
Privilege is claimed in respect of these documents.
The solicitor for the plaintiffs stated in an affidavit filed in the proceedings that the second plaintiff has given discovery of documents in her possession comprising correspondence between her, Westpac and others in respect of superannuation and other financial matters pertaining to Mr Liddy but that, as each was brought into existence for the dominant purpose of the civil proceedings in the District Court, privilege in the documents rests with Mr Liddy. According to the affidavit Mr Liddy gave instructions to the plaintiffs to maintain the claim of privilege.
Leaving aside the documents described in para 48, there appears to be support for the findings of the trial judge and the master that there are no other financial documents comprising superannuation, credit card and bank statements in the possession of the plaintiff.
Some further identification of the documents to which para 48 refers would be necessary in order to deal with any argument in relation to privilege and Mr Trim has agreed that the plaintiffs should provide an itemised list of those documents. Counsel for the defendants suggested that the discovery of these documents amounts to a concession that they are directly relevant. I would not be prepared to draw any inference from this circumstance which would have a bearing on whether the financial documents as a class are discoverable.
In the light of my view that the financial statements are not directly relevant, the issues of possession and privilege in relation to these documents fall by the wayside. I should add, however, that I do not accept the argument of Mr Harris that, if the documents were privileged, the privilege has been waived by Liddy.
The master and the judge appealed from concluded that there had been no waiver of privilege by Liddy. Liddy has claimed privilege in respect of the documents from the outset. However, Mr Harris argued that a waiver arose from Liddy’s apparent consent to, or acquiescence in, the actions of the plaintiffs commencing and maintaining these proceedings. There is no evidence of any act from which a waiver could be inferred. There is no suggestion that Liddy had some role to play in the initiation of the proceedings. Furthermore, he has actively sought to maintain privilege throughout the discovery process.
The defendant put forward an argument that, even if the various documents sought by the defendant, were only indirectly relevant to any issue arising on the pleadings, it is nevertheless in the interests of justice to order discovery pursuant to r58.04. This course was not raised with the master and the material before the court does not satisfy the requirement that extended discovery is to be ordered only where it is in the interest of justice to do so. Not only are the documents not directly relevant, but the only use to which they could be put in the first instance would be to assist in a “fishing expedition”.
The next ground of appeal complains that the judge appealed from wrongly upheld the decision of the master to dismiss the defendant’s application for non-party discovery against the Westpac identities. The documents sought are those dealing with Liddy’s superannuation, bank statements, credit card statements and any statements dealing with the insurance of the contents of the properties owned by Liddy.
Discovery against a non-party pursuant to r60 requires the exercise of a discretion by the court in cases where the person against whom the order is sought appears likely to have or have had in his possession, custody or power, any document relevant to the proceedings or proposed proceedings.
It has been held that, despite the differences in wording between r58A.03 and r60, the test under r60 should not differ from that applicable under r58 (Southern Equities Corporation Ltd (In Liquidation) v Arthur Anderson and Co. (No 8) [2002] SASC 20. I agree with that approach.
According to the amended defence, an insurance policy on the property and contents of the house at Kapunda was cancelled on 4 August 2001. The defendant argued that it would be expected that an insurance policy would have some list or description of the contents of the property insured and that the amount for which the contents were insured would appear in the policy.
In my view, any such insurance policy could not be described as a document directly relevant to the issues. The argument to the contrary assumes that the contents are identified, an accurate value for insurance purposes is placed upon them and that they were in the house at the time of the valuation. There is no suggestion in the pleadings that the plaintiffs were aware of the contents of any relevant insurance policy.
For these reasons, I am of the view that the pre-condition for the exercise of the discretion under r60 has not been established and that the decision to dismiss the application for non-party discovery was correct.
I would dismiss the appeal.
MULLIGHAN J. I agree that the appeal should be dismissed for the reasons given by Duggan J.
NYLAND J. I agree that the appeal should be dismissed for the reasons given by Duggan J.