Citisecurities Ltd v John Fairfax Holdings Ltd
[1995] FCA 309
•15 May 1995
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG584 of 1994
GENERAL DIVISION )
BETWEEN: Citisecurities Limited & Ors
Applicants
AND: John Fairfax Holdings Limited & Ors
Respondents
CORAM: SHEPPARD J
PLACE: SYDNEY
DATE: 15 May 1995
REASONS FOR JUDGMENT
HIS HONOUR: By its notice of motion filed in court on 10 March last the first respondent (hereafter referred to as "Fairfax") sought an order that each of the applicants give discovery and inspection of all documents in their possession, custody or power referring or relating to a number of proceedings in this court and in the United States District Court for the Southern District of New York. Six proceedings in all were referred to. Each of them concerned a claim made by persons who had invested in bonds in Fairfax companies prior to its subsequent receivership. The bonds, which were referred to in the former proceedings as junk bonds, had a face value of approximately $US450 million. After it became apparent that the Fairfax companies were in financial difficulties, the bondholders sued them and also two of the banks which comprise the second applicants in these proceedings. The causes of action were for misrepresentation in each case. The proceedings were eventually settled when the Fairfax companies were acquired by Tourang Pty Ltd, now the second respondent, John Fairfax Group Pty Ltd. Before the matters were settled, substantial steps had been taken to prepare them for hearing. These steps included discovery and inspection of documents by the parties to the various proceedings including the applicants in these proceedings (to which I shall refer as "the banks").
The current proceedings are one of three proceedings being heard at the same time. The nature of the proceedings is explained shortly in reasons for judgment published in relation to an application for particulars in this matter on 8 May 1995.
The motion now to be decided was one of two filed in court on 10 March 1995. In order to distinguish it from the other motion, it was marked "A".
The initial hearing of the motion was on 17 March 1995. At the end of that day the hearing of the motion was adjourned until 27 March 1995. At the conclusion of oral reasons for judgment delivered on that day I said that I proposed to direct the applicants to put on such affidavits as they might be advised in relation to their difficulties of complying with an order for discovery of the kind sought by Fairfax "bearing in mind the types of documents that I think should be discovered..." I said that I would put the matter back in the list at a suitable time to enable the form of the order to be considered.
In the course of the reasons I said that the problem between the parties was crystallised in a letter dated 24 January 1995 written by the solicitors for the banks to the solicitors for Fairfax. That letter was written in response to a letter dated 18 January 1995 from the solicitors for Fairfax. The letter of 18 January 1995 said in part:
"It seems to us that many documents which should be in the possession, custody or power of your clients, concerning the bondholder litigation, have not been discovered or, at least, have not been included in Part 1 of the respective lists. We, of course, acknowledge that we cannot make a full assessment of the adequacy of your clients' discovery until we are served with final lists, including the required particularisation of privilege claims. We would, nonetheless, appreciate your informing us whether your approach to discovery has been to provide all material in respect of the bondholder litigation.
Critical to the issues in this case will be the state of mind of your clients regarding the prospects of the bondholder litigation. Although, as acknowledged, we do not yet have your detailed claims, it may be that privilege has been claimed in relation to documents arising out of, or referring to, the bondholder litigation. If that is the case, and assuming (which is not admitted) that such claims could be maintained in the circumstances, we invite your clients to waive any such claim and make the documents available for inspection. We note that, if this is not done, we will ask the court to draw inferences as to the effect of what is contained in those documents, at the hearing."
The letter of 24 January 1995 said:
"...an issue which occupied a significant period of time in 1991 in relation to the proceedings commenced in Australia by certain bondholders against Citibank Limited and ANZ related to the discovery (and the alleged inadequacy of that discovery) given by the bondholders. Lengthy correspondence exists in relation to this issue between the solicitors for the parties, and there is also correspondence to the client on the matter. We do not see how material such as this could be said to relate to any matters in issue. Presumably you would agree.
On the other hand, we accept that documents concerning any assessment of the prospects or merit of the bondholders' claims in the litigation are discoverable, as would be any other documents in the possession custody or control of our clients dealing with the bondholder litigation but which are discoverable by reason of the issues otherwise raised in the pleadings and, in particular, the matters put in issue by your client. This would include, for example, documents which might relate or connect the bondholder litigation to or with the bidding process.
If you consider that there are particular categories of documents falling within the description of 'all material in respect of the bondholder litigation' which you consider to be discoverable in addition to documents of the kind to which you specifically refer, namely document concerning any assessment of the prospects of the litigation, please detail these categories. Please also indicate the basis upon which you maintain any such further categories are discoverable, with particular reference to paragraphs of the pleadings."
In the reasons for judgment delivered on 27 March I said that I had reached the conclusion that the point of principle which the letter of 24 January 1995 identified ought to be answered adversely to the banks. I continued:
"I think that there is a misunderstanding as to the reliance which counsel for Fairfax wishes to place on documents, which may be produced as a result of the discovery, which will or may go, either because they are part of a series of documents which may properly be said to form links in a chain of inquiry or because put together with other documents ... already produced, ... or put together with oral evidence, will assist in determining whether or not there was a view by the banks to a particular effect in relation to the bondholder litigation."
I also said:
"...I am not prepared to make a blanket order for discovery of documents of the kind that is sought in the motion, because to do that would create an enormous burden, I think, particularly in light of the history of the matter, upon the applicants in the case. I think that would be quite unfair. It would almost certainly lead to a prolonged adjournment of the case which is undesirable in the interests not only of these parties, but of others and indeed of the court.
I need assistance in determining a method of limiting the discovery either by reference to categories of documents or something of that kind, so that the exercise can be kept within bounds. If that does not happen, or cannot happen, then in the exercise of the discretion I have under the Order, I may have to refuse the application after all, notwithstanding the view I take about the matter of principle. ...I know there must have been many discussions between the parties and a good deal of co-operation already. I am conscious of the fact that the parties have many other things to do in relation to the preparation of the case and its running and that demands on their time must be very great, but I would urge them nevertheless, despite all those difficulties, to try to reach some accommodation of this problem themselves without having to resort to an arbitrary conclusion by the court.
Mr McClintock [of counsel for the banks] has foreshadowed the need to put an affidavit on indicating what the difficulties would be in complying with a general order. I think that is useful but I am not going to make a general order and that should be understood. I am much more concerned to see what practical alternatives there are to that course and it behoves both parties to find a solution because if a solution is not found it may be that I will refuse the application. The applicants ought not to take too much comfort from that statement and hide behind it, because if they do, well then I will evolve a halfway house which may not suit either party. I think it would be much better for them to work out the halfway house, or the quarterway house themselves."
In the discussion which followed I urged Mr McClintock not to make the exercise bigger than I thought it was. I urged him not to go looking for difficulties. At the conclusion of the hearing on 27 March I directed the banks to file all further affidavits on which they proposed to rely in relation to the motion on or before 3 April. The matter was stood over to 6 April for further hearing.
In fact no hearing took place on 6 April and the matter was again in the list on 11 April. On that day I was informed that the parties had attempted to reach an appropriate "modus operandi" for discovery without success. I was told that the matter would take up to two hours and that it would not conclude before the principal hearing was due to resume at 10.00 am. Accordingly the matter was stood over to 13 April which was Easter Thursday. On that day I was informed by counsel that a further affidavit in the matter had been filed late the previous afternoon. Counsel had not had an opportunity of reading it.
Two affidavits have been sworn by Mr M.J. O'Connor who is a member of the firm of Norton Smith & Co., the solicitors for the banks. Messrs Norton Smith & Co, for reasons which need not be gone into, replaced the banks' former solicitors a short time before the hearing of the motion took place. Mr O'Connor was cross-examined on his affidavits. I shall refer to portions of the affidavits in a moment and also to Mr O'Connor's oral evidence. Before I do so, I propose to complete the account of the hearing of the notice of motion.
The matter was unable to be completed on the afternoon of 13 April. It was adjourned until 26 April and further adjourned to 27 April. After a hearing lasting several hours, I said that I would reserve my decision.
In his first affidavit sworn on 4 April 1995, Mr O'Connor said that he was a partner in Norton Smith & Co. and that that firm acted for the banks. He said that he was responsible for attending to all matters relating to further discovery of documents in relation to the bondholder litigation. He said that he had been informed by Mr Lloyd of Mallesons Stephen Jaques who had acted for one of the banks, Citibank Limited, in the bondholder litigation and that he verily believed that none of Citibank's documents in those proceedings were put on computer disk whether by visual imaging or any other method. Mr O'Connor also said that he had been informed by Mr Salgo of Baker & McKenzie, the solicitor who acted for the Australia and New Zealand Banking Group Limited ("ANZ") in the bondholder litigation, that none of that banks' documents in those proceedings had been put on computer disk.
Mr O'Connor said that he had estimated that, if the applicants were required to discover all of the documents referring or relating to the bondholder litigation as sought in the notice of motion, he estimated that it would take himself and three of his assistants approximately six to eight weeks to give such discovery. In giving this estimate he had regard to a number of matters which he specified in the affidavit. These were the necessity to review each document to determine whether it was subject to legal professional privilege and whether it was relevant; the fact that all Citibank's files were returned to it following settlement of the bondholder litigation; the fact that although that was so, Citibank's documents had been photocopied and were probably in Mallesons' file which was then in storage (the stored file was said to occupy 307 standard size file boxes); the fact that the originals of ANZ's files were returned to it following settlement of the bondholder litigation, but that these, like the Citibank documents, had been photocopied and the copies were available on a file in storage (the stored file was said to comprise eighty-nine large size file boxes); the fact that he was unaware of what the situation in relation to discovered documents was in the United States proceedings; the fact that the banks' files themselves would need to be obtained from the banks and inspected - Mr O'Connor did not know the extent of the number of documents or the number of files which would need to be inspected but thought the numbers would be large; documents already reviewed for the purposes of discovery would need to be inspected for the purpose of ascertaining whether they contained any documents relating to the bondholder litigation which were otherwise considered not to be discoverable; and once all the boxes of documents and files had been inspected and the relevant documents assembled the documents would have to be listed and verified by appropriate officers of the banks.
Mr O'Connor then referred to a letter dated 28 March 1995 received by Mallesons from the solicitors for the Fairfax companies, Freehill, Hollingdale and Page ("Freehills"), reference was made to earlier correspondence where it emerged that a number of documents were provided to Mr Macfarlan of Queens Counsel who had advised the banks in a written opinion upon their prospects of success in the bondholder litigation. Freehills said:
"Presumably, the documents given to Mr Macfarlan were indexed, gathered together and collated in readily retrievable form. We suggest that these documents be made available. Secondly, the Mallesons Stephen Jaques advice of 29 November identifies in a series of Appendices the material upon which that advice was based. Again this is no doubt readily retrievable. Thirdly, as we understand it, the Banks made discovery in the Australian proceedings. There should, prima facie, be no difficulty in making the documents discovered by those clients available to ours. They were, no doubt, either made, or to be made, available for inspection by the bondholders' representatives. Presumably all legitimate claims for privilege in those proceedings were made and there would be no necessity to redo the exercise in casu.
As regards the ANZ Bank we suggest you provide its discovery and (to the extent not included in discovery) the documents referred to in the Baker & McKenzie Memorandum dated 29 August 1991 and the documents in the binder of material concerning work done for the ANZ by Anthony Robb, referred to on p26 of that Memorandum.
It may well be the case that making those classes of documents available proves adequate and sufficient for our clients' purposes."
In their reply dated 4 April 1995, Norton Smith & Co said:
"We deal in turn with each of the categories of documents which you suggest should be discovered by our clients in the proceedings:
Documents provided to Mr Macfarlan QC - We are instructed that all of the documents provided to Mr Macfarlan QC upon which Mr Macfarlan's Opinion dated 13 August 1991 is based should still be available and included in MSJ's files in respect of the litigation. If so (but not otherwise) and subject to checking that this is the case our clients are prepared to give discovery of these documents subject to the matters listed under the heading Conditions.
Documents relied on in MSJ's advice of 29 November 1991 - As you would be aware, MSJ's advice contains 10 separate appendices listing the sources used in the advice, the majority of which do not refer to any documents. We are prepared to give discovery of the following categories of documents referred to in Appendix 1, subject to the matters referred to below and subject to the matters listed under the heading Conditions.
(a)Discovered documents of Citibank Limited - Although the original discovered documents were returned to Citibank following the settlement of the proceedings, it is likely that a full copy of the discovered documents is retained in MSJ's files. Our clients are prepared to provide discovery of the copies of the documents which are still in MSJ's files and which were listed in Schedule 1 Part 1 of Citibank's List of Documents.
(b)Discovered Documents of John Fairfax Group ('JFG') and Applicants in all the Australian proceedings ('Bondholders') - The solicitor who acted for Citibank in these proceedings has informed us that not all of JFG's and the Bondholders' discovery was copied. Whatever copies were obtained should still be with MSJ's file. Our clients are willing to provide discovery of the copies of any documents which are still in the file which were copied from the Bondholders discovery. As you act for JFG we assume you have access to its discovered documents.
(c)Documents produced on subpoena by G Souter and C Anderson - The solicitor who acted for Citibank in the proceedings has informed us that the original documents produced on Subpoena have been returned to their owners. However, our clients will provide discovery of any copies of these subpoenaed documents which are still in MSJ's file.
(d)All pleadings in Australian proceedings - Our clients will provide discovery of these pleadings.
(e)Grant Samuel Draft Valuation Report - Our clients will provide discovery of this document.
(f)Materials obtained from United States regarding discovery and reliance - The solicitor who acted for Citibank in the proceedings has informed us that these documents have been returned to the United States, however there may still be some copies of these documents in the file. Our clients will give discovery of any copies of these documents which are still in MSJ's file.
Discovery by ANZ Bank - The solicitor who acted for ANZ in the proceedings has advised us that all original documents discovered by ANZ have been returned to ANZ. However, most if not all documents were copied and these copies should still be with the file. Our clients will give discovery of the copies of any documents referred to in Schedule 1 Part 1 of the ANZ's List of Documents which are still in the solicitor's file subject to matters listed under the heading Conditions.
As to the documents referred to in Baker & McKenzie's Memorandum of 29 August 1991, we note that until the copies of the previously discovered ANZ material are provided to us, we are unable to comment on the extent to which the documents referred to in the Memorandum are already included in the discovered documents. However, notwithstanding their possible inclusion in the previous discovery, we note that the Memorandum refers to numerous external and internal correspondence of ANZ. Should the documents referred to in the Memorandum not be included in the previously mentioned discovered documents, the task of sifting through many large boxes of documents in order to identify these further documents will, we would submit, be unfairly onerous for our clients and would unnecessarily delay this discovery process. Therefore, our clients are not prepared to give discovery of any document unless it is included in Schedule 1 Part 1 of ANZ's List of Documents and unless Baker & McKenzie still have a copy of this document in its file.
Given the fact that it does not seem to have been considered in connection with Baker & McKenzie's advice we do not see any basis for discovery of the 'binder of material concerning work done for ANZ by Antony Robb'. In any event, it is almost certainly privileged."
The proposal was made subject to conditions, these were the banks' right to claim legal professional privilege in respect to the documents to be discovered where privilege
attached; the discovery being by way of informal discovery with no need for a list of documents; and discovery of the documents to be given on an ongoing basis so that Fairfax could inspect the documents as and when they were located.
In his further affidavit sworn 13 April 1995, Mr O'Connor annexed some further letters passing between the solicitors. I confess that I have found the correspondence which followed Norton Smith's letter of 4 April confusing and difficult to follow. The reason for this is that detailed reference is made to a great many documents or categories of documents with which I have no familiarity whatever. As I indicated to counsel during the argument, I am being asked to make a judgment, which perforce must be an arbitrary one, on a question which the parties themselves should have endeavoured to resolve. It is my observation that neither has endeavoured to be at all appreciative of or sympathetic to the needs of the other party. The unsatisfactory position in which I am placed is that, without any real knowledge of what is involved, I have to make a decision to resolve a dispute because the parties have decided to be stubborn about the matter. That is of course their right but they should understand that in this day and age, litigation of the complexity of the litigation now being heard is a matter which involves more than their immediate private interests. It involves the public interest because there has to be considered the public time and expense which their litigation requires. As I indicated during the argument, I have sympathy for the position of the banks because they were joined comparatively late in the proceedings. On the other hand, I also sympathise with the Fairfax position because much is at stake and it is only natural that they should leave no stone unturned to see to it that all documents of any relevance to the issues in the case should be made available.
One of the criticisms I have of the banks' evidence is that, although I am sure that Mr O'Connor has done his best to assist me, relevant witnesses who may have been able to shed more light on the matter than he can were not called despite comments in this regard by counsel for Fairfax. I refer particularly to evidence which it may have been expected both Mr Lloyd and Mr Salgo may have been able to give. Mr O'Connor has no direct knowledge of the matter. In the light of what was said at the conclusion of my reasons for judgment delivered on 27 March I would have thought that it would have been obvious, if the sort of difficulties referred to by Mr O'Connor were likely to be encountered, that both Mr Lloyd and Mr Salgo would have been called as witnesses to give first hand information of the extent of the task which was involved.
Despite what I have said about the difficulty of comprehending the implications of the correspondence which followed Norton Smith's letter of 4 April, I propose to say something of it. In their reply to that letter Freehills say that Mr O'Connor's affidavit confirms a concern Freehills have had that an essential category of document was omitted from discovery. These are said to be documents mentioned in para. 5(f) of his affidavit of 4 April in which he indicated that he had not provided, on discovery, such of the documents as referred or related to the bondholder litigation. Freehills said that it was no answer to say that Norton Smith would have to inspect the documents again because my reasons for judgment indicated that that was the basis upon which discovery should have been undertaken.
Freehills said, however, that they were, subject to some further matters, prepared to agree, for the present, to discovery in relation to the documents "underlying the bondholder litigation being in accordance with the paragraphs numbered 1, 2 and 3" of the letter of 4 April. They went on to say, however, that, with respect to the material provided to Mr Macfarlan QC, they required that there be provided those documents in the form of the brief provided to Mr Macfarlan together with observations and any other material given to him. Freehills also said that, in relation to the documents relied on in Mallesons' advice, they sought, in addition to the documents referred to in para. 2 of Norton Smith's letter, all statements taken from or notes of meetings with persons referred to in certain paragraphs of an appendix to the advice.
There is then a reference to material in a binder concerning work done by Mr Robb of counsel. The letter said that the fact that the material might not have been considered in connection with the advice was irrelevant. The letter also said that each document was to be "uniquely numbered" and discovery was to be given by lists setting out the document numbers. In respect of documents which were the subject of a claim for privilege, the list was to set out an adequate description of each document and the basis upon which privilege was claimed.
On 7 April 1995 Freehills wrote a further letter which said that, in addition to the classes of documents referred to in the letter of 6 April, they also required discovery of documents which referred or related to the bondholder litigation which were included in material received from two firms, Sidley & Austin and Wilmer Cutler & Pickering. These documents were said to be clearly discoverable. I do not know what these documents are and am at a loss to understand how I can make a ruling in respect of them. However, annexed to the letter of 7 April, is a letter dated 31 March 1995 from Mallesons. In that letter Mallesons say that the documents which have been received from Sidley & Austin and Wilmer Cutler & Pickering were in the possession, custody or control of Citibank Limited. Discovery would be given by Citibank Limited of those documents which had been received and which were discoverable. In their reply, the date of which has been mistyped, to the letters of 6 and 7 April, Norton Smith said that they were unable, subject to checking Mallesons' file, to say in what form the documents were sent to Mr Macfarlan QC or whether he was supplied with observations. It was also said that, if observations were supplied, they would "certainly be privileged." They considered the proposals set out in their letter of 4 April to be reasonable in the circumstances.
They then dealt with the documents in the appendix to Mallesons' advice of 29 November 1991. They said that such documents would certainly be privileged from production. I have difficulty with this statement in the light of the fact that the advice itself has been produced. Norton Smith also said that it would be unfairly onerous for them, and would unnecessarily delay discovery, to search needlessly for privileged documents.
There was then reference to the binder of material in relation to work done for ANZ by Mr Robb. The letter said that, on further checking with Mr Salgo, they were advised that this material was discovered as part of the discovery in the bondholders' litigation proceedings and set out in ANZ's list of documents.
The letter contained the following paragraphs:
"We are prepared to paginate the pages of the documents of which we give discovery and to prepare a list of privileged documents. However, it must be realised that the more requirements you place on us in connection with this discovery, the longer it will take to provide discovery. On the basis of the categories of documents we set out in our letter of 4 April 1995 we would anticipate that we should be able to supply the non-privileged documents paginated to you in approximately four weeks, namely, by approximately 8 May 1995, and the list of privileged documents by approximately 15 May 1995.
We note that you attempt to reserve a right to seek further documents should the circumstances arise. We dispute your right to do this. There must be some finality to this process. Subject to his Honour ruling otherwise, the proposal set out in our letter of 4 April 1995 should be regarded as final. We will submit to his Honour that even the proposal contained in our letter of 4 April, 1995 is unduly onerous in the circumstances."
Finally, in relation to the documents sent by Sidley & Austin and Wilmer Cutler & Pickering it was said that now to require the banks to go back and review the files again would be unfairly onerous and delay the discovery process by one to two weeks.
Freehills responded in a letter dated 11 April 1995. I do not refer to the detail of this letter. I have noted its contents but it takes the matter no further. The same may be said of a second letter dated 11 April 1995 upon which I do not propose to comment.
Finally, there is Freehills' letter of 12 April 1995. Again it raises material upon which I can make no useful comment because I do not understand the nature of the documents that are there referred to nor fully the significance of the matters which are stated in the letter.
At the conclusion of Mr O'Connor's cross-examination a number documents were tendered. I have taken these into account but do not find it necessary to refer to the detail of them.
Counsel for Fairfax handed up some suggested short minutes of order in order to assist the understanding of what it was that his client required. The short minutes of order, if made, would require each of the banks to give discovery of the documents relating to the proceedings in the first schedule to the short minutes "in and on the basis set forth in the Second Schedule". The first schedule incorporates the various proceedings referred to in the notice of motion. What follows in the second schedule should be read in the light of what is comprehended by the first schedule. In other words, the apparently general words of the second schedule are limited by what appears in the first schedule.
The second schedule is in the following terms:
"1.Documents dated or coming into existence between 1 January 1991 and 31 December 1991 including any statement or copy statement or notes of interview with any officer of the relevant party, but excluding:
(a)Any document in the files of any solicitors save for communications to and from the client or notes of communications with the client.
(b)any document discovered in any of the proceedings in the First Schedule ("the proceedings").
Documents discovered in any of the proceedings provided that each party shall have special liberty to apply in the event that it claims special difficulty or hardship in complying with this order.
Documents provided to Mr McFarlan for the purpose of obtaining his opinion of 13 August 1991 including the observations of Mallesons Stephen Jaques.
Documents identified in the appendices to the advice of Mallesons Stephen Jaques dated 29 November 1991 including all statements or draft statements or notes of meetings with the persons referred to in paragraphs 6(b) and 6(c) in Appendix 1.
Documents referred to in the Memorandum of Baker & McKenzie of 29 August 1991 including the binder of material concerning work done for Australia & New Zealand Banking Group Limited by Anthony Robb.
Documents included in any list of documents in the the proceedings need not be included in the list of documents in the present proceedings provided that the previous list is provided to the respondents.
Discovery and inspection be provided sequentially as soon as convenient groups of documents are available, to commence not later than 5 May next, with lists of documents to follow in due course as may be necessary."
Strictly speaking paras 6 and 7 ought not to form part of the schedule but should be the subject of paragraphs in the orders themselves. That, however, is a detail which can be dealt with once I decide what the appropriate orders are.
In the course of his submissions in support of the making of orders in terms of the short minutes of order, counsel for Fairfax said that what was required were documents which related only to the banks' knowledge, not the banks' imputed knowledge but their actual knowledge. He also said that it was accepted that some of the documents would be privileged.
Counsel for Fairfax further said that the most significant question would be the bona fides of what the bank officers said to Fairfax, to INP and AIN, and, perhaps, to their own merchant banker, Mr Burrows when they said in effect that the litigation was not to be a factor in the process. Counsel said that the case ought not to end without there being a proper examination of what the banks themselves were saying to each other about it and what the banks' legal advisers were saying about it. In a sense counsel is right in the statement he made, but it ought to be understood in the light of the fact that there are serious questions to be determined in the principal hearing about every assertion that he made. Only a fraction of the evidence in the principal proceedings has been heard and that only from witnesses called by INP or AIN. I want it clearly understood that I have no view about any of the matters that are in question; I could not have. My agreement with counsel is limited to the fact that, if certain issues are decided as he contends they should be, then the issue which is says is the real issue will arise for determination.
In the run of the argument counsel for the banks complained that, if orders were to be made in the form of the short minutes, the effect would be tantamount to the making of an order for general discovery, something which I indicated I would not order when I delivered the reasons for judgment on 27 March. Counsel for the banks foreshadowed that, if I were to make the orders, the likelihood was that he would apply to have the trial, so far as it affected the banks, postponed until after the determination of the issues between the other parties in the case. I did not indicate my reaction to this but said that I would not deal with it in this application. If the banks wish to make such an application based upon the outcome of this matter, it will have to follow the making of the orders in it. I must say, however, that I have not understood why a separation of the issues should be necessary.
In this regard it is helpful to refer to oral reasons given by me on 6 October 1994 when it was decided that this matter would proceed for hearing on 14 February 1995. Mr Conti QC, who then appeared for the banks, had submitted that I should fix the hearing, not for 14 February, but for 1 April 1995. In refusing to adopt that course I said that the case had been in the list for a long time and that it was desirable that it be commenced and disposed of as soon as reasonably possible. In saying what I did I had in mind the fact that the particular proceedings in question here had not been commenced until 1 September 1994 and that a cross-claim brought by the receivers had been instituted on 16 September 1994. I also said:
"Having reflected on the matter I have come to the conclusion that the case should stand adjourned for hearing to 14 February. In reaching that conclusion I have endeavoured to take into account all that Mr Conti urged upon me. I must say, however, that I think that certainly in the initial stages of the case the evidence which will be in question will be evidence which will be contested by Mr Bathurst's clients and Mr Charles' clients and Mr Conti's clients. I would think - I know it is always a dangerous thing to do to attribute particular problems or not to attribute them to counsel who after all have the burden and responsibility of conducting a case, it does seem to me there is common cause to be made amongst those three sets of respondents in relation to what I might regard as the early weeks of evidence. I cannot think that the position could be otherwise.
The documents which have been tendered today by Mr Ellicott and Mr Gyles persuade me and indeed Mr Conti does not contest this, that this case is not new to the banks. Indeed there are signs in the various documents that the fact that they were ultimately joined into the proceedings did not come as a surprise to them. At least that is the inference that I draw in the absence of any evidence to the contrary. I think it is desirable that the case be tried as a whole, that is to say that all cross-claims be heard at the same time and that there not be postponement of any issue. In other words, I think that Mr Gyles' cross-claim should proceed along the claim that Mr Ellicott's clients make. I had not made a decision about that until today.
I have, however, a view that I think I should reserve the question of whether the cross-claim against Mr Conti's clients should proceed at the same time. It is obviously desirable that it should. He wants that course and it is a wise course but he was joined by Mr Bathurst's client and I think Mr Charles' client quite late in the day and if it turns out that it is impractical because of the reasons Mr Conti puts to me for it to be tried as early as 14 February, then I am afraid the only fair course is for that part of the proceedings to be separated and tried at a later time, hopefully on the basis of the evidence that will at that time already have been given.
I am not therefore prepared to make up my mind at this stage whether the cross-claim against Mr Conti's clients or the cross-claims will be heard at the same time as the others. All I say is I think it is highly desirable that they should be."
With the benefit of hindsight it can now be seen that the case did start on 14 February and has proceeded, albeit with some breaks, down to the present time. The INP and AIN cases are far from finished. In other words, the only witnesses who have been called so far are witnesses called by those parties. At least four principal witnesses remain to be called in their cases. It is also to be observed that the forecast made in the first paragraph of the quotation has proved to be correct. So the case has run very much as it was expected to run. We are now looking at the matter not in 1994, nor in February 1995, but with the benefit of a good deal of evidence, much of it documentary, which has been led since the hearing commenced. The banks' legal advisers must now have a very much greater appreciation of what is involved than they had in October last year. I say that, notwithstanding the change of solicitors which has occurred. There is nothing in the evidence to suggest that Mallesons will not make available such assistance as is required to enable Norton Smith & Co to complete the task of discovery.
Another matter to notice is that there are comprehensive lists of documents discovered by Citibank and ANZ in the bondholder proceedings. The ANZ list is undoubtedly a most comprehensive one, but it has the advantage of being specific. Documents are not listed by category but by description of each individual document. The Citibank list is similarly constructed. That is not always the case in modern litigation. Increasingly, parties by agreement or courts making orders for discovery permit lists to be given by reference to categories of documents. The very specificity of the lists should, in my opinion, make the task of producing the documents less difficult. True it is they have to be found. But at least people will know what is being sought. I do not gainsay, however, that the exercise will be a most time
consuming one. That has to be acknowledged and sufficient time for it to be undertaken has to be allowed.
A comparison of the detail of Norton Smith's letter of 4 April 1995 with what is sought in the short minutes of order discloses that there are not only points of difference between them; there are also points of substantial similarity. Of course I understand that the banks, in making the suggestion they did in the letter of 4 April 1995, were doing so in an attempt to reach a final solution to the problem. It was their attempt to offer what they thought would be sufficient and at the same time practical, large though the task might be. The offer made in the letter was subsequently withdrawn but the letter is an open one and I propose to treat it at its face value. To the extent that there is common ground between what is contained in the offer and what is contained in the short minutes that should provide the starting point for the solution to the problem. Furthermore, it can provide a guide as to the order in which documents are to be discovered and the period reasonably required for that discovery and the inspection of those documents for which no claim of legal professional privilege is made.
That being my view, I think it follows that I should, subject to some qualifications, make the orders sought by counsel for Fairfax in the short minutes of order. The qualifications are as follows:
(a)the words to be added at the beginning of the orders after the words "in the Second Schedule hereto" "identified and on the basis of the Second Schedule hereto." should be added as counsel for Fairfax suggested.
(b)Paragraph 1 of the Second Schedule excludes in subpara. (b) documents discovered in the proceedings but these are brought in in para. 2. The qualification to para. 2 "each party shall have special liberty to apply in the event that it claims special difficulty or hardship in complying with this order." should apply in relation to each category and not only to those documents specified in para. 2.
(c)The documents referred to in para. 2 should be understood to be the photocopy documents in the possession of Mallesons and Baker & McKenzie. If there is a deficiency in these, consideration can be given, as necessary with the aid of the Court, to requiring documents to be produced by the banks themselves. For the moment, there should be no requirement that there be discovery of documents discovered in the United States proceedings.
(d)I am prepared to make an order in terms of para. 3 of the Second Schedule but I do so mindful of the contentions of counsel for the banks that the observations to Mr Macfarlan are either non-existent or cannot be found or reconstructed. If that is indeed the position, the document will not be available and this can be stated in the list.
(e)I have no comment to make in relation to para. 4.
(f)In relation to para. 5, I appreciate that this material may well be privileged from inspection because of legal professional privilege. However, the claim should be made in proper form if that is the case. The document will need to be included in a list and identified.
(g)I agree with paras 6 and 7 but, as earlier said, take the view that these should be part of the general orders rather than limited to the Second Schedule. That is a matter of drafting. The liberty to apply - there is no need to say "special liberty" provided for in para. 2 can be treated in the same way. In reserving that liberty to apply I am not to be taken as giving any encouragement to the banks or their legal advisers to make further extensive applications based on the inability to comply or difficulty in complying with a general order for discovery.
It remains to say that I do not regard the orders which I propose to make as amounting to an order for general discovery. I realise that the amount of work which will be involved in complying with what has been proposed is substantial but I do not believe the task in a case of this complexity and size is beyond the resources of the banks. I was told by counsel that the exercise would involve additional costs of upwards of $500,000. I am not prepared to say that this estimate is exaggerated. I think it may well be right. But in the context of this case that is not a particularly large sum of money. Everything is relative and the view I have expressed is based on that being the case.
I would hope that, despite the disagreement the parties have, they will approach the task constructively. I will be sympathetic to lists of documents being by category of documents rather than by individual document, although this will not be possible in cases where there are claims made for privilege from inspection. Commonsense, flexibility and a lack of technicality is what the matter calls for.
I propose to stand this matter over for a short time to enable counsel to consider what I have said. When the matter is next in the list counsel for the banks are to bring in short minutes of order to give effect to my decision. I would hope that this matter can be disposed of finally on Friday. The parties will need, of course, to work out sensibly a progressive discovery of the documents. The starting point, I would think lies in what has already been discovered. If these documents are produced, I think it will go a long way to solving the problem. In this respect, the parties should keep the matter under review and if it emerges that the production of groups of documents has largely overcome the problem, then the exercise can be reviewed. In particular it may overcome the apparent breadth of what is comprehended in para. (a). Its requirements must not be allowed to control the matter or make the exercise larger than it should be. I hasten to add, however, that this is not be read as a sign encouraging the making of further applications of this kind to the Court. I think it is regrettable that the parties have not been able to reach agreement about these matters. I am conscious that my own decision has a degree of arbitrariness which is not desirable. I have done, however, what I think is best and I leave it to the parties to carry it out.
I certify that this and the 27 preceding pages are a true copy of the reasons for judgment herein of the Honourable Justice Sheppard.
Associate
Dated: 15 May 1995
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