Clone Pty Ltd v Players Pty Ltd (In liquidation) (Receivers Appointed)

[2016] SASCFC 134

Supreme Court of South Australia

(Full Court: Civil)

CLONE PTY LTD v PLAYERS PTY LTD (IN LIQUIDATION)

[2016] SASCFC 134

Judgment of The Full Court

(The Honourable Justice Blue, The Honourable Justice Stanley and The Honourable Auxiliary Justice Debelle)

8 December 2016

APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES

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

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

PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - ORDER FOR COSTS ON INDEMNITY BASIS

Appeal against order setting aside judgment after trial and ordering new trial.

In 1994, the appellant and first respondent entered into an agreement to lease premises for 10 years. Clause 11(i) provided for transfer, on determination of the lease, by the first respondent to the appellant of any liquor and gaming machine licences in respect of the premises. A dispute later arose whether the word “NIL” in the phrase “for NIL consideration” in clause 11(i) had been struck through by the respondent prior to execution of the agreement. The parties subsequently executed a lease.

In 2004, the appellant instituted the action against the first respondent and its directors seeking inter alia a declaration that the first respondent was obliged to deliver up the licences at the expiration of the lease. The respondents counter-claimed seeking inter alia a declaration that the appellant was obliged to pay reasonable consideration for delivery up of the licences and rectification of the lease to accord with the agreement to lease.

At trial, the original agreement to lease could not be located. The appellant tendered the respondents’ discovered photocopy of the agreement to lease (the first copy) and the respondents tendered the appellant’s discovered photocopy of the agreement to lease (the second copy).

During evidence in chief of the second respondent Mr Griffin, the appellant’s lawyers learnt that there was a photocopy of the agreement to lease (the third copy) in the possession of the fifth respondent, The Liquor and Gambling Commissioner. The appellant inspected the Commissioner’s file containing that document at his premises. The appellant did not discover or disclose the existence of the third copy.

During cross-examination of Mr Griffin, the appellant issued a notice to produce to the fifth respondent, who delivered several files to the Court. Unbeknown to the appellant, one of those files contained a fourth photocopy of the agreement to lease (the fourth copy). Mr Griffin was cross-examined concerning plans in those files but the notice to produce was not called on and no explicit disclosure was made by the appellant of its issue.

In 2005, the trial Judge granted judgment in favour of the appellant, relevantly finding in accordance with the approach articulated in Briginshaw v Briginshaw that the word “NIL” had not been struck through by the respondents. The respondents’ appeal to the Full Court was relevantly dismissed.

Subsequently, the respondents learnt of the existence of the third and fourth copies and applied to set aside the judgment.

The Judge who heard the set aside application held that the appellant breached an obligation to discover the third copy because it was in its power; this amounted to serious malpractice; absent the malpractice there was a reasonable possibility that there would have been a different result; the respondents had failed to exercise reasonable diligence to search for the photocopy that had been lodged with the fifth respondent; and that the discretion should be exercised to set aside the judgment and order a new trial on the relevant issues. The Judge found that the appellant breached the Rules of Court by not calling on the notice to produce but rejected the respondents’ contention that this justified setting aside the judgment. The Judge rejected the respondents’ contention that, independently of the failure to discover the third copy, the appellant misled the trial Judge and the Full Court.

The appellant appeals against the set aside order, contending that the Judge erred in concluding that it had an obligation to discover the third copy, that its failure to discover was reckless and amounted to malpractice and that the result may have been different if the third copy had been discovered; the Judge understated the lack of reasonable diligence by the respondents; and the Judge wrongly exercised his discretion to set aside the judgment. The appellant also contends that, although it accepted at trial that the appropriate approach was that articulated by the High Court in Commonwealth Bank of Australia v Quade, different principles apply on an application to set aside a perfected judgment as opposed to an appeal, and those principles require that there be no lack of reasonable diligence and that the applicant demonstrates that the result would have been different but for the malpractice.

The respondents contend by notice of contention that the Judge ought to have held that the third copy was also discoverable as being in the appellant’s custody; that the failure to call on or disclose the notice to produce amounted to malpractice justifying setting aside the judgment; and that the appellant’s conduct misled the trial Judge and the Full Court.

The appellant seeks permission to appeal against the Judge’s order that it pay the respondents’ costs of the set aside application on an indemnity basis. The fifth respondent seeks permission to appeal against the Judge’s order that there be no order as to the fifth respondent’s costs of the set aside application.

Held (dismissing the substantive appeal):

1.   (per Blue J at [148], Stanley J agreeing) The third copy was discoverable by the appellant because it was in the custody of the appellant.

(per Debelle AJ at [598] dissenting) The third copy was not in the custody of the appellant.

2.   (per Debelle AJ at [588], Stanley J agreeing) The Judge erred in concluding that the third copy was in the power of the appellant.

(per Blue J at [185] dissenting) The Judge correctly concluded that the third copy was in the power of the appellant.

3.   (per Blue J at [197], Stanley J agreeing) The Judge did not err in his assessment of culpability as to discovery of the third copy.

(per Debelle AJ at [607]) The Judge erred in his assessment of culpability as to discovery of the third copy.

4.   (per Blue J at [211], Debelle AJ at [627], Stanley J agreeing) The appellant’s failure to call on the notice to produce did not amount to malpractice capable of justifying setting aside the judgment.

5.   (per Blue J at [261], Stanley J agreeing) The appellant’s conduct at trial misled the trial Judge to believe that only two photocopies of the agreement to lease were available when the appellant knew that the third photocopy was available.

(per Debelle AJ at [630-644] dissenting) The appellant’s conduct was not misleading.

6.   (per Stanley J at [436], Blue J agreeing) Clone’s conduct on appeal misled the Full Court.

(per Debelle AJ at [640] dissenting) The appellant’s conduct was not misleading.

7.   (per Blue J at [280, 281, 285, 288] and Debelle AJ at [649]) The respondents failed to exercise reasonable diligence in searching for the third copy.

(per Stanley J at [451] dissenting) The Judge erred in finding that the respondents failed to exercise reasonable diligence in searching for the third copy.

8.   (per Blue J at [306], Stanley J agreeing) The Judge did not err in concluding that there was a reasonable possibility that absent the malpractice the result at trial would have been different.

(per Debelle AJ at [701] dissenting) The trial judge erred in concluding that there was a reasonable possibility that absent the malpractice the result at trial would have been different.

9.   (per Blue J at [392], Stanley J agreeing) On an application to set aside a perfected judgment, it is not essential for the applicant to demonstrate that it did not fail to exercise reasonable diligence or that the result would probably have been different but for the malpractice. Any failure to exercise reasonable diligence is a factor relevant to the exercise of the discretion. If the result was incapable of being affected by the malpractice, the judgment will not be set aside.

(per Debelle AJ at [714] dissenting) On an application to set aside a perfected judgment, the applicant must demonstrate that there was no lack or reasonable diligence and that but for the malpractice the result would probably have been different.

10.  (per Blue J at [400], Stanley J agreeing) The Judge did not err in the exercise of his discretion to set aside the judgment.

(per Debelle AJ at [702] dissenting) The Judge had no discretion to set aside the judgment.

11.  (per Stanley J at [454, 470], Blue J not deciding) The appellant’s malpractice in misleading the Full Court was sufficient in itself to justify setting aside the judgment and the discretion ought to be so exercised.

12.  (per Blue J at [418], Stanley J agreeing) The substantive appeal should be dismissed.

(per Debelle AJ at [716] dissenting) The substantive appeal should be allowed and the order setting aside the judgment set aside.

Held (allowing the appellant’s appeal against the indemnity costs order and refusing permission to the fifth respondent to appeal):

1.   (per Blue J at [407], Stanley J agreeing) The Judge erred in the exercise of his discretion to order that the appellant pay the respondents’ costs on an indemnity basis. Permission to appeal on this ground should be granted, the costs order set aside and in lieu thereof it should be ordered that the appellant pay the respondents’ costs on a party/party basis.

2.   (per Blue J at [414-416], per Stanley J at [478, 483]) The Judge did not err in the exercise of his discretion not to order costs in favour of the fifth respondent or in his finding that the fifth respondent did not afford even-handed treatment to the respondents and the appellant.

(per Debelle AJ at [743, 745]) The Judge erred in his finding that the fifth respondent did not afford even-handed treatment to the respondents and the appellant but did not err in not ordering costs in favour of the fifth respondent.

Administration of Justice Act 1920 (UK) s 9; Common Law Procedure Act 1854 (Eng & Wales) s 50, s 51; Court of Chancery and Judicial Committee Act 1851 (Eng & Wales) s 10, s 11; Supreme Court of Judicature Act 1873 (Eng & Wales) s 3 – 6, s 16, s 17, s 18, s 19; An Act to Consolidate Several Ordinances relating to the Establishment of the Supreme Court of the Province of South Australia 1855-6 (SA) s 7, s 8, s 16, s 18, s 19; Equity Act 1866-67 (SA) s 7, s 11; Fourth Judge Act 1919 (SA); Income Tax Assessment Act 1936 (Cth) s 264; An Act for the Establishment of a Court to be called the Supreme Court of the Province of South Australia 1837 (SA) (No 5 of 1837) s 7, s 8, s 16, s 17; Liquor Licensing Act 1985 (SA) s 64; Supreme Court Act 1849  (SA); Supreme Court Act 1878 (SA) s 5, s 6, s 15, s 29; Supreme Court of Judicature Act 1875 (Eng & Wales) r 11; Supreme Court Act 1935 (SA) s 3, s 6, s 17, s 22 – 28, s 50; Third Judge and District Courts Act 1858 (SA); Equity Act 1880 (NSW); Rules of Court 1913 (SA) r 7; Fifth Judge Act 1926  (SA); Rules of Court 1947 (SA) r 8; Supreme Court Civil Rules 1987 (SA) r 3, r 58, r 58A, r 59, r 60; Supreme Court Civil Rules 2006 (SA) r 146; Supreme Court Act 1853 (SA) s 175, s 176; Supreme Court Procedure Act 1855-56 (SA) s 39; Rules of Court 1879 (SA) r 11; Income Tax Regulations 1936 (Cth) s 38; Motor Accidents Act 1988 (NSW) s 66; Family Law Act 1975 (Cth) s 93A, referred to.
Ammerlaan v The Distillers Co (Bio-Chemicals) Ltd (1992) 58 SASR 164; Archer Capital 4A Pty Ltd as trustee of the Archer Capital Trust 4A v Sage Group Plc (No 3) [2013] FCA 1160; B v B (1978) 3 WLR 624; Bailey v Marinoff (1971) 125 CLR 529; Birch v Birch (1982) 86 LT 364; Birds Eye Walls Ltd [1985] ILR 279; Boswell v Coaks (1894) 6 R 167; Botany Fork & Crane Hire Pty Ltd v New Zealand Insurance Co Ltd (1995) 133 ALR 274; Bourke v Beneficial Finance Corporation Limited (1993) 47 FCR 264; Briginshaw v Briginshaw (1938) 60 CLR 336; Brookfield v Yevad Products Pty Ltd [2004] FCA 1164; Burrell v The Queen (2008) 238 CLR 218; Cabassi v Vila (1940) 64 CLR 130; CDJ v VAJ [1998] HCA 67, (1998) 197 CLR 172; Clinch v Financial Corporation (1866) LR 2 Eq 273; Commonwealth Bank of Australia v Quade (1991) 178 CLR 134; Cosgrove v Johns [2000] QCA 157, [2002] 1 Qd R 57; Council of the City of Greater Wollongong v Cowan (1955) 93 CLR 435; Curwen v Yan Yean Land Co Ltd (1891) 17 VLR 745; D’Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; Davies v Eli Lilly Co [1987] 1 All ER 801; DJL v Central Authority [2000] HCA 17, (2000) 201 CLR 226; Federal Commissioner of Taxation v Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499; Flight v Robinson (1844) 8 Beav 22, 50 ER 9; Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336; Giannarelli v Wraith (1988) 165 CLR 543; Green v FP Special Assets Ltd [1992] 1 Qd R 1; Harrison v Schip [2002] NSWCA 78, (2002) 54 NSWLR 612; Hip Foong Hong v H Neotia and Company [1918] AC 888; House v The King (1936) 55 CLR 499; Hypec Electronics Pty Limited (in liq) v Mead [2004] NSWSC 731, (2004) 61 NSWLR 169; Jonesco v Beard [1930] AC 298; Kaliel v Aherne [1946] 1 WWR 461; Kyle v Legal Practitioner's Complaints Committee (1999) 21 WAR 56; Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627; McCann v Parsons (1954) 93 CLR 418; McDonald v McDonald (1965) 113 CLR 529; McGuire v Haugh [1934] OR 9; McHarg v Woods Radio Pty Ltd [1948] VLR 496; Minister Administering the Crown Lands (Consolidation) Act and Western Lands Act v Tweed Byron Aboriginal Land Council (1990) 71 LGRA 201; Monroe Schneider Associates Inc v No 1 Raberem Pty Ltd (No 2) (1992) 37 FCR 234; Morgan v Babcock & Wilcox Ltd (1929) 43 CLR 163; Orchard v Orchard (1972) 3 SASR 89; Orr v Holmes (1948) 76 CLR 632; Owens Bank Ltd v Bracco [1992] 2 AC 443; Quade V Commonwealth Bank of Australia (1991) 27 FCR 569; Re Bleechmore [1925] SASR 112; Ronald v Harper [1913] VLR 311; Rondel v Worsley [1969] 1 AC 191; Roux v Australian Broadcasting Commission [1992] 2 VR 577; Saif Ali v Sydney Mitchell & Co [1980] AC 198; Sheddon v Patrick (1854) HLC 535; Sunrise Auto Ltd v Deputy Commissioner of Taxation (1995) 61 FCR 446; SZFDE v Minister for Immigration and Citizenship [2007] HCA 35, (2007) 232 CLR 189; Taylor v Santos (No 2) (1998) 71 SASR 434; The Commissioner of Taxation of the Commonwealth of Australia v The Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499; Theodore v Australian Postal Commission [1988] VR 272; Tombling v Universal Bulb Co Ltd [1951] 2 TLR 289; Toubia v Schwenke [2002] NSWCA 34, (2002) 54 NSWLR 46; Vernon v Bosley (No 2) [1999] QB 18; Water Board v Moustakas (1988) 180 CLR 491; Wentworth v Rogers (No 5) (1986) 6 NSWLR 534; Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598; White v State of South Australia (2007) 96 SASR 581, discussed.
Ainsworth v Wilding [1896) 1 Ch 673; AKS Investments Pty Ltd v Gazal [2015] QSC 247; Anglo Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873; Attorney-General v Gaskill (1882) 20 Ch D 519 ; Baker v Wadsworth (1898)67 LJQB 301; Bingham v Dawson (1821) Jac 243; Birch v Birch [1902] P 130; Biritz v National Australia Bank Ltd (2001) 115 FCR 117; Bostock v Ramsey Urban District Council [1900] 2 QB 616; Charles Bright & Company Ltd v Sellar [1904] 1 KB 6 ; Clone Pty Ltd v Players Pty Ltd & Ors [2005] SASC 281; Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501; Commissioners of Inland Revenue v Maple & Co (Paris) Ltd [1908] AC 22; Commonwealth Bank of Australia v Casella [2000] FCA 1518; Cotter v James Earl of Barrymore (1733) 4 Brown 203; Esso Australia Resources Limited v Commissioner of Taxation [1999] HCA 67; (1999) 201 CLR 49; Everett v Ribbands (1946) 175 LT 143; Falcke v Scottish Imperial Insurance Co (1887) 57 LT 393; F. King & Co v Gillard & Co [1905] 2 Ch 7; Flower v Lloyd (1887) 6 Ch D 297 ; Flower v Lloyd (1879) 10 Ch D 327; Fountain v Alexander (1982) 150 CLR 615; Glatt v Glatt [1937] SCR 347; Green v Nixon (1857) 23 Beav 530; Grimson v O'Donnell [1999] FCA 245; Harris v Collett (1858) 26 Beav 222; Henjo Investments v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546; Horn v Kilkenny Railway (1855) 1 K&J 399; Hungate v Gascoyne (1846) 2 Ph 25; In re Bleechmore [1925] SASR 112; In re G Mayor Cooke (1889) 5 TLR 407; Jones v Dunkel (1959) 101 CLR 298; Kearsley v Philips (1883) 10 QBD 465 ; Kennedy v Daly (1804) 1 Sch & Lefr 355; Kirk v Ashdown [1999] FCA 522; Loyd v Mansell (1722) 2 P Wms 73; Magarditch v Australia and New Zealand Banking Group Limited (1999) 30 ACSR 265; McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623; Michael v Fripp (1870) 18 WR 423; Microsoft Corporation v Crosslink Marketing Group (CMG) Pty Ltd [2005] FCA 1817; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] H CA 31, (2010) 241 CLR 357; Morrell v Pritchard (1865) 14 WR 172; Musgrove v McDonald (1905) 3 CLR 132; Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133 ; Norris v Le Neve (1743) 3 Atk 27, 26 ER 818; Pembroke School Incorporated v Human Rights & Equal Opportunity Commission [2002] FCA 1020; Players Pty Ltd (In Liquidation) (Receivers Appointed) & Ors v Clone Pty Ltd (No 2) [2015] SASC 178; Players Pty Ltd (In Liquidation) (Receivers Appointed) & Ors v Clone Pty Ltd [2015] SASC 133; Players Pty Ltd & Ors v Clone Pty Ltd [2006] SASC 118; Preston Banking Co v William Allsup & Sons [1895] 1 Ch 141; Rattenberry v Monro (1910) 103 LT 560; Re Barrell Enterprises [1973] 1 WLR 19 ; R v Bell; Ex Parte Lees (1980) 146 CLR 141; Rees v Bailey Aluminium Products Pty Ltd [2008] VSCA 244, (2008) 21 VR 478; Re Harrison's Share Under a Settlement [1955] Ch 260; Re May (1885) 28 Ch D 516; Re Scott and Alvarez’s Contract [1895] 1 Ch 596; Re St Nazaire (1879) 12 Ch D 88; Re Sufield and Watts; Ex parte Brown (1888) 20 QBD 693; Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477; Saltoon v Lake [1978] 1 NSWLR 52; Sheldon v Fortescue (1731) 3 P Wms 104; SNF (Australia) Pty Ltd v Ciba Specialty Water Treatments Ltd (2015) 114 IPR 231; Magarditch v Australia and New Zealand Banking Group Limited (1999) 30 ACSR 265; Commonwealth Bank of Australia v Casella [2000] FCA 1518; Soyza v Adolphus [2007] VSC 549; Spalla v St George Motor Finance Ltd (No 5) [2004] FCA 1262; Biritz v National Australia Bank Ltd (2001) 115 FCR 117; Pembroke School Incorporated v Human Rights & Equal Opportunity Commission [2002] FCA 1020; Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691; Stace v Marbot (1754) 2 Ves Sen 552; Spalla v St George Motor Finance Ltd (No 5) [2004] FCA 1262; Microsoft Corporation v Crosslink Marketing Group (CMG) Pty Ltd [2005] FCA 1817; Stevens v Guppy (1823) 1 Turn R 178; Wu v Avin Operations Pty Ltd (No 2) [2006] FCA 792; Swanston v Lishman (1881) 45 LT 360; Soyza v Adolphus [2007] VSC 549; The Alfred Nobel [1918] P293; In the Matter of Wan Ze Property Development (Aust) Pty Ltd (in liquidation) [2013] NSWSC 189; Wilson v Church (1879) 9 Ch D 552 ; AKS Investments Pty Ltd v Gazal [2015] QSC 247; Wu v Avin Operations Pty Ltd (No 2) [2006] FCA 792; Yap v Granich [2001] FCA 1735; SNF (Australia) Pty Ltd v Ciba Specialty Water Treatments Ltd (2015) 114 IPR 231, considered.

CLONE PTY LTD v PLAYERS PTY LTD (IN LIQUIDATION)
[2016] SASCFC 134

Full Court:  Blue and Stanley JJ, Debelle AJ

BLUE J:

1. This is an appeal against an order setting aside judgment after a trial and appeal and ordering a new trial.

2. In August 1994, the appellant Clone Pty Ltd entered into an agreement to lease premises in Pirie Street Adelaide (the premises) for 10 years to the first respondent Players Pty Ltd for use as licensed hotel and gaming premises to be known as the Planet Hotel (the agreement to lease). Clause 11(i) provided for transfer by Players Pty Ltd to Clone Pty Ltd of any liquor and gaming machine licences (collectively licences) in respect of the premises on determination of the lease.

3. In April 1995, the parties executed a memorandum of lease (the lease).

4. In March 2004, Clone Pty Ltd instituted action 319 of 2004 (the original action) against Players Pty Ltd and its directors Gregory Griffin, Christopher McDermott and Darren Cahill (collectively Players[1]) and others. Clone sought declarations that it had not consented to a transfer by Players Pty Ltd of the licences to other premises and that Players Pty Ltd was obliged to deliver up the licences at the expiration of the lease. Players counterclaimed seeking declarations that Clone had consented to transfer of the licences and alternatively that Clone was obliged to pay reasonable consideration for their delivery up. Players sought rectification of the lease to accord with the agreement to lease.

   [1]    For ease of reference, I use the term “Players” to encompass the respondents Players Pty Ltd, Mr Griffin, Mr McDermott and Mr Cahill, except where it is clear that the reference is only to Players Pty Ltd.

5. In March and April 2005, the trial (the original trial) proceeded before the original trial Judge. One issue was whether clause 11(i) of the agreement to lease provided for the transfer by Players Pty Ltd to Clone of the licences for nil consideration or for reasonable consideration. Clone’s case was that clause 11(i) as typed provided for transfer “for NIL consideration”. Players’ case was that Players had struck through the word “NIL” with a blue pen so that the clause provided for transfer “for consideration”.

6. Neither party discovered the original of the agreement to lease. Players discovered one photocopy (Players’ discovered copy) and Clone discovered another photocopy (Clone’s discovered copy). Clone tendered Players’ discovered copy under the best evidence rule. Players later tendered Clone’s discovered copy. Each copy bore a horizontal mark (the mark) through the word “NIL” in clause 11(i). Clone’s case was that the mark was an artefact not present on the original.

7. On 7 April 2005, Clone’s lawyers learnt of the existence of another copy of the agreement to lease (the hotel licence copy) in the possession of the Liquor and Gambling Commissioner. Clone’s junior counsel attended at the offices of the Commissioner to inspect the document. Clone’s lawyers did not disclose the existence of the hotel licence copy to the Court or to Players.

8. On 11 April 2005, Clone issued to the Commissioner a notice to produce Planet files in his possession. On 12 April 2005, the Commissioner delivered to the Court six volumes of files. Clone’s lawyers were permitted by the Judge’s associate to inspect the files in the possession of the Court. Clone did not call on the notice to produce in open court or disclose it to Players. Unbeknown to Clone, one of the volumes contained another copy of the agreement to lease (the gaming licence copy).

9. In August 2005, the trial Judge granted judgment in favour of Clone (the original judgment).[2] The Judge found that Clone did not consent to transfer of the licences to other premises. The Judge, applying Briginshaw v Briginshaw,[3] was affirmatively satisfied that Mr Griffin did not strike through the word “NIL” with a blue pen and rejected his and Mr McDermott’s evidence that he did.[4]

   [2]    Reasons for judgment were delivered on 22 July 2005: Clone Pty Ltd v Players Pty Ltd & Ors [2005] SASC 281. Formal orders were made on 29 July and 18 August 2005, including a declaration that Players Pty Ltd was liable to transfer the licences to Clone and an order that it deliver up the licences to Clone.

   [3] (1938) 60 CLR 336.

   [4] At [43]. The trial Judge also decided various other issues in favour of Clone.

10. In April 2006, the Full Court dismissed Players’ appeal.[5]

    [5]    Players Pty Ltd & Ors v Clone Pty Ltd [2006] SASC 118.

11. In 2010, Players learnt of the existence of the hotel licence copy and gaming licence copy. Players brought an interlocutory application in the original action, and instituted new action 819 of 2010, seeking the setting aside of the judgments of the trial Judge and the Full Court (the set aside action).[6]

    [6]    For ease of reference, I treat both applications as if they were a single application in the new action.

12. In August 2015, after a trial of the set aside issues (the 2015 trial) a Judge of this Court concluded that Clone engaged in malpractice by failing to discover the hotel licence copy which was in its “power”.[7] The Judge also concluded that Clone engaged in malpractice by not calling on the notice to produce in open court but did not set aside the original judgment on that ground. The Judge rejected Players’ contention that Clone’s conduct, independently of its discovery obligations, misled the trial Judge and the Full Court. The Judge partially set aside the original judgment and ordered that there be a new trial on the agreement to lease/lease rectification issues (the set aside orders).[8] The Judge ordered that Clone pay Players’ costs of the set aside applications on an indemnity basis and that there be no order as to the costs of the Commissioner.

    [7]    Players Pty Ltd (In Liquidation) (Receivers Appointed) & Ors v Clone Pty Ltd [2015] SASC 133.

    [8]    The Judge did not disturb the original judgment insofar as it dealt with the consent issue and consequential issues. For ease of reference, I refer to the Judge’s order as setting aside the original judgment without distinguishing those parts not set aside.

13. Clone appeals against the set aside orders. The Attorney-General intervenes to contend that the formulation by the Judge of the test for enlivening the power to set aside a perfected judgment is erroneous. Players contend by alternative contention that the Judge should have held that the hotel licence copy was in the “custody” of Clone and that Clone misled the trial Judge and the Full Court by failing to disclose the hotel licence copy. Clone and the Commissioner also seek permission to appeal against the costs orders.

14. Clone’s substantive appeal and Players’ notice of contention raise the following issues:

    1Did the Judge err in concluding that Clone was guilty of malpractice by not discovering the hotel licence copy?

    2Did the Judge err in concluding that Clone was guilty of malpractice by not calling on the notice to produce in open court?

    3Did the Judge err in not finding that Clone engaged in malpractice by failing to inform the Court at trial of the hotel licence copy?

    4Did the Judge err in not finding that Clone engaged in malpractice by failing to inform the Court at the hearing of the appeal of the hotel licence copy?

    5Did the Judge err in concluding that Players did not become aware of the hotel licence copy before or during the trial?

    6Did the Judge err in assessing Players’ diligence in searching for additional copies?

    7Did the Judge err in assessing the probative significance of the hotel licence copy?

    8Did the Judge err in formulating the test for enlivening the power to set aside a perfected judgment on the basis conceded by Clone at trial?

    9Did the Judge err in the exercise of discretion to set aside the original judgment?

15. It should be noted that Clone itself (and in particular its director Fiona Roche) had no knowledge of the matters alleged by Players or found by the Judge to comprise malpractice. However, Clone accepts that it bears legal responsibility vis a vis Players for the conduct of its lawyers when acting on its behalf during the original trial.

    Background

16. Clone was part of the Roche group of companies, owned by John Roche’s family. In 1994 and 1995, its directors were John Roche, his daughter Fiona Roche, and Richard England.

17. In 1993, Clone purchased the land on which the premises were situated for future redevelopment as a multi-storey office tower. Clone expected that it would take at least 10 years before market demand for tenancies justified construction of the office tower. The premises comprised two vandalised vacant buildings: one having been used as the Oaks Tavern some years earlier and being fire-damaged and the other having previously been used by a firm of solicitors. Clone intended to demolish the buildings when it undertook the future redevelopment.

18. Clone had a sister company, the Adelaide Development Company Pty Ltd (ADC). Both companies formed part of the Roche group of companies and ADC acted as agent for Clone for certain purposes. For ease of reference, I treat ADC and Clone as a single entity. Ross Mallett was general manager of ADC.

19. Clone engaged Colliers (Alistair Mackie) to find a tenant willing to undertake the capital works necessary to make the premises usable. Mr Mackie entered into negotiations with a prospective tenant, the Hokie Pokies Group. On 24 May 1994, he wrote a letter to the Hokie Pokies Group setting out proposed terms and conditions for a lease.

20. In 1994, Players Pty Ltd was conducting Players Bar in Grenfell Street Adelaide. Its directors were Messrs Griffin, Cahill, McDermott and Timothy May. Players became interested in conducting a hotel at the premises. Mr Griffin was a solicitor and partner at Phillips Fox.

21. On 19 July 1994, Mr Griffin and Mr McDermott viewed the premises in company with Mr Mackie. On 21 July 1994, Mr Griffin and Mr McDermott met with Mr Mackie and Mr Mallett. Mr Mallett said that ADC’s long-term plan was to demolish the buildings and erect a high-rise office tower and at the end of the lease Players could take the licences and equipment.[9] Mr Mackie gave to Mr Griffin a copy of his 24 May 1994 letter to the Hokie Pokies Group to indicate the proposed terms of a lease.

    [9]    The trial Judge admitted this evidence and made these findings as relevant to Messrs Griffin’s and McDermott’s state of mind and not as evidence of the position of Clone.

22. On 27 July 1994, Phillips Fox by Mr Griffin wrote to Mr Mackie expressing Players’ interest in taking the tenancy of the premises. He set out proposed terms by reference to Mr Mackie’s 24 May 1994 letter. There was no suggestion in the letters of 24 May or 27 July 1994, or during the discussions prior to execution of the agreement to lease by Players Pty Ltd, that the licences to be obtained by Players Pty Ltd if a lease eventuated were to be transferred to Clone at the expiration of the lease.

23. In July 1994, Players Pty Ltd negotiated with the liquidator of Beau Shadow Pty Ltd to purchase hotel licence 50106084 (the hotel licence), which licence then applied to the Grenfell Tavern but had been suspended in January 1994 when Beau Shadow was placed into provisional liquidation and ceased trading. The purchase price was $3,000 but Players Pty Ltd was also obliged to pay outstanding licence fees totalling just over $26,000.

24. In early August 1994, Mr Mackie prepared a draft agreement to lease, which was submitted to Clone’s solicitor Peter Grope of Grope Hamilton. The draft agreement did not address what would happen on determination of the lease to the licences to be obtained by Players Pty Ltd. Mr Grope advised Mr Mackie that a clause should be inserted addressing this topic. Mr Grope drafted a clause (clause 11(i)) to be inserted into the draft agreement to lease to be submitted to Players Pty Ltd as follows:

    The Lessee will upon expiration or earlier determination of the Lease transfer to the Lessor any Liquor Licenses or gaming machine Licenses held in respect of the premises for NIL consideration.

25. On 5 August 1994, Mr Mackie sent to Mr Griffin a letter enclosing a draft agreement to lease incorporating Mr Grope’s suggested amendments (the draft agreement to lease). Mr Griffin onforwarded the draft agreement to Mr McDermott and Mr May saying “We need to discuss this” and “I believe it is in order”.

26. On or before 10 August 1994, Mr Mackie gave to Mr Griffin the agreement to lease on which Mr Mackie highlighted with a fluorescent pen three changes from the draft agreement to lease which are not presently material.

27. On a date between 10 and 15 August 1994, Mr Griffin, Mr McDermott and Mr May executed the agreement to lease on behalf of Players Pty Ltd and themselves as guarantors and Mr McDermott delivered it to Mr Mackie. There was and remains a dispute whether Mr Griffin struck a line through the word “NIL” in clause 11(i). Mr Cahill did not execute the agreement to lease because he was overseas.

28. On 15 August 1994, Mr Mackie wrote to Mr Mallett enclosing the agreement to lease executed by Players. He requested that Clone execute and return it.

29. On 16 August 1994, Phillips Fox on behalf of Players Pty Ltd lodged with the licensing authority[10] an application for transfer of the hotel licence to Players Pty Ltd and its removal to the premises. The application was listed for callover in the Licensing Court on 19 September 1994.

    [10]   The licensing authority is the compendious term for the Commissioner and the Licensing Court.

30. On 23 August 1994, Mr Roche and Mr England on behalf of Clone executed the agreement to lease in the presence of Ms Roche. Clone’s execution bore a handwritten indorsement inserted by Mr Grope that it was “subject however in all things to the execution of Darren John Cahill below” (Mr Grope’s handwritten indorsement). Clone returned the executed agreement to Mr Mackie.

31. Mr Mackie gave unchallenged evidence at the original trial that Colliers’ usual practice was to take three copies of an agreement to lease, provide one each to the landlord and tenant as parties and a third to the landlord’s solicitors to prepare the lease, and retain the original in Colliers’ files. On 30 August 1994, Mr Mackie wrote to Mr Griffin enclosing a copy of the agreement to lease. The parties conducted the original trial and the 2015 trial on the basis that Mr Mackie also wrote to Clone on 30 August 1994 enclosing a copy of the agreement to lease (Clone’s discovered copy) and to Grope Hamilton enclosing a copy of the agreement to lease (Grope Hamilton’s lost copy) in accordance with his usual practice.

32. On 8 September 1994, Tina Sarunic, Personal Assistant to the Judge at the Licensing Court, wrote to Phillips Fox requesting, amongst other things, the lease and landlord’s consent prior to the callover on 19 September 1994.

33. On 13 September 1994, Mr Griffin wrote to Mr Mackie informing him of the callover on 19 September 1994 and requesting the “executed lease” and landlord’s consent for that purpose. It was common ground at the original trial that the reference to “the lease” was intended by Mr Griffin and understood by Mr Mackie to refer to the agreement to lease executed in August 1994 (there being no memorandum of lease in existence in 1994). Mr Mackie gave evidence at the original trial that his usual practice was to respond to such a request in such circumstances. On the evidence adduced at the original trial,[11] there remained a possibility that the Licensing Court had been provided with the original of the agreement to lease which had been destroyed when it culled its files (and the trial Judge referred to this possibility in her Honour’s reasons for judgment) although Mr Griffin gave evidence that the Licensing Court was content with a copy of evidence of tenure and he thought it was a copy he received from Colliers rather than the original.

    [11]   It is now known that the Licensing Court file was not in fact destroyed and the Licensing Court did not in fact receive an original but received a copy.

34. On 16 September 1994, Mr Mallett wrote a letter addressed to Mr Griffin conveying the landlord’s consent. On 19 September 1994, this letter was provided by Phillips Fox to Ms Sarunic at the Licensing Court under cover of a Phillips Fox “with compliments” slip together with a copy of the agreement to lease (the hotel licence copy).

35. On 20 January 1995, the Licensing Court granted Players’ application for removal and transfer of the hotel licence and issued an interim certificate under section 64 of the Liquor Licensing Act 1985 (SA). In due course, the Commissioner issued hotel licence 50106084 in lieu of the interim certificate.

36. On 1 March 1995, Players took possession of the premises and commenced a major refurbishment.

37. On 16 March 1995, the Licensing Court issued to Players gaming machine licence G50106084 (the gaming licence).

38. On 22 March 1995, Clone’s solicitor Andrew Brown of Grope Hamilton wrote to Mr Griffin enclosing a draft memorandum of lease and a copy of the agreement to lease. He requested that the agreement to lease be forwarded to Mr Cahill for execution.

39. In April 1995, both parties executed the lease. The lease contained clauses preventing Players transferring or removing the licences without Clone’s consent and requiring Players on demand to transfer and deliver up the licences to Clone and/or its nominee on determination of the lease.

40. In October 2003, correspondence passed between Players and Clone. Players later claimed that this comprised the granting of consent by Clone to a sublease by Players to Gavan Walsh to operate the premises under a new entertainment venue licence and removal of the existing licences by Players to other premises in Adelaide.

41. In November 2003, Players entered into a contract with Fairtown Holdings Pty Ltd[12] (Fairtown) to sell the licences for $750,000 and certain equipment for $200,000 to be used at premises to be leased by Fairtown at Victoria Square, Adelaide.

    [12]   The contract was entered into by Alexander Falconer who nominated Fairtown as the purchaser.

42. In December 2003, Players and Fairtown applied to the Licensing Court for removal of the hotel licence from the Pirie Street premises to the Victoria Square premises and Fairtown applied for approval of the transfer of the hotel licence and the grant of a new gaming machine licence (the Fairtown applications).

43. The Commissioner and the Licensing Court (the licensing authority) maintained a separate file bearing the same file number as the licence number allocated to a given hotel licence. The licensing authority maintained one series of folders for a given hotel licence bearing the same file number even though the licence might be transferred from one premises to another. The licensing authority created file 50106084 when the original hotel licence was issued in respect of the Grenfell Tavern and the file retained that number when the licence was transferred to the Planet Hotel. The licensing authority used the same number for the Fairtown applications and files relating thereto. At all material times in 2004 and 2005, the licensing authority was unable to locate the first folder for file 50106084 (which related to a period when Beau Shadow was operating the Grenfell Tavern).

44. When Players applied in 1994 for removal of licence 50106084, the licensing authority created a second folder for the file which was variously known in the Commissioner’s office as “Planet Hotel file 50106084” or the “Grenfell Tavern Removal file 50106084” (Planet hotel folder 1 or the Grenfell Tavern removal file). When that folder was full, the licensing authority created consecutively a series of four further folders relating to the hotel licence (Planet hotel folder 2, folder 3, folder 4 and folder 5).

45. When Players applied in 1995 for a gaming machine licence, the licence was allocated number G50106084 and the licensing authority created consecutively two folders relating to the gaming licence (Planet gaming folder 1 and Planet gaming folder 2).

1. When Fairtown made the Fairtown applications in 2003 relating to licence 50106084, the licensing authority created four further folders relating to different aspects of the applications (Planet hotel folder 6, folder 7, folder 8 and folder 9).

2. In March 2004, Clone instituted the original action against Players Pty Ltd and the four guarantors.[13] Clone joined Fairtown and its two directors as the second to fourth defendants in order to seek injunctive relief precluding further steps being taken in respect of the Fairtown applications. Clone joined the Commissioner and Licensing Court of South Australia as the fifth and sixth defendants for the same reason.

   [13]   Players was the first defendant and Messrs Griffin, Cahill, May and McDermott were the seventh to tenth defendants respectively.

3. Players were represented by Griffin Hilditch. Ms Bell had the principal conduct of the matter throughout 2004. She was succeeded by Mr Tisato at the end of that year.

4. In April 2004, at the first directions hearing, Mr Mackintosh of the Crown Solicitor’s Office appeared for the Commissioner and the Licensing Court and informed the Court that they would abide the event. Master Bowen Pain made an order excusing them from further appearance.

5. On 14 May 2004, Ms Bell sent a letter to Mr Hamilton saying that the word “NIL” in clause 11(i) of the agreement to lease had been deleted by the parties and this was apparent from Players’ discovered copy and Clone’s discovered copy.

6. On 4 June 2004, Clone brought an interlocutory application seeking an order that the defendants other than the Commissioner and the Licensing Court make further and better discovery of 15 categories of documents or alternatively that they verify their discovery on oath.

7. On 8 June 2004, Master Bowen Pain made a direction that “the parties to file and serve lists of documents verified on oath by 2 July 2004” (the 8 June order). The Commissioner and Licensing Court were not represented at that hearing in accordance with their prior excusal. Given that the application by Clone for discovery was not made against them and they were given no notice, the direction on its proper construction applied to the substantive parties and not to the Commissioner and Licensing Court. However, Mr Mackintosh took the view that, literally construed, the direction required his clients to file and serve a list of documents.

8. On 6 July 2004, there was a further directions hearing before Master Bowen Pain. Mr McNamara QC and Mr Dal Cin appeared for Clone, instructed by Ms Karagiannis. Mr Mackintosh applied for an order dispensing with his clients filing and serving a list of documents and affidavit on the basis that they would make their files available for inspection by the parties. He told the Master that he understood from speaking to Clone’s solicitors that the 8 June order was not intended to apply to his clients but as things stood they were caught by it. Master Bowen Pain made an order (the 6 July order) as follows:

   On the understanding that the 5th and 6th defts will make available to the other parties their files in relation to this matter, I dispense with the need for them to comply with para 3 of the orders made by me on 8 June 2004.

9. On 4 March 2005, as a result of a request by Ms Karagiannis to produce the Commissioner’s files relating to the Fairtown applications (the March notice to produce), Mr Mackintosh wrote to the trial Judge’s associate enclosing Planet hotel folders 6 to 9 (comprising the 2003/2004 parts of the Commissioner’s 50106084 file). Mr Mackintosh informed both parties of this.

10. On 7 March 2005, the trial of the action commenced. During Clone’s opening, Mr McNamara QC called for Players’ discovered document (Players’ discovered copy) and tendered it (exhibit P9) under the best evidence rule. Mr McNamara also tendered Clone’s discovered copy, but it was the subject of objection by Mr Whitington QC for Players and was not received at that point.

11. Clone proceeded to call evidence from Mr England that he did not recall whether the word “NIL” was struck through when the agreement to lease was executed by Clone and from Ms Roche that she did not believe that it was struck through and could not recall that it was. Clone called evidence from Ms Roche, Mr Hamilton and Mr Grope regarding searches of or for their files which showed that Clone could not locate on its files the agreement to lease (other than the copy which was Clone’s discovered copy) and that the Grope Hamilton file had been destroyed in September 2003. During Mr Grope’s cross-examination, Mr Whitington tendered Clone’s discovered copy (exhibit D9).

12. Mr Mackie gave evidence that Colliers’ records showed that the Clone leasing file had been destroyed. He said that the version of the agreement sent to Mr Griffin on 30 August 1994 would have been a photocopy of the original. Mr McNamara called for production of that copy. Mr Mackie referred to the letter from Mr Griffin dated 13 September 1994 requesting a letter of consent and executed lease. He said that, while he did not recall taking steps to provide those documents, he had a practice of responding to such requests and assumed that he did so.

13. On 5 April 2005, Mr Whitington responded to the call for production of the agreement to lease enclosed with Mr Mackie’s 30 August 1994 letter. He said that Players’ discovered copy had come from a Phillips Fox file maintained in relation to the Planet Hotel and Players believed that was the only copy of the executed agreement which came into their possession but they could not be certain.

14. On 5 April 2005, during Mr Brown’s evidence in chief, Mr McNamara called for the copy agreement enclosed with Mr Brown’s letter to Mr Griffin dated 22 March 1995. Mr Whitington responded that he would check for it and that Players had only been able to find the one copy (being Players’ discovered copy).

15. On the morning of 6 April 2005, at the end of Clone’s case, Mr McNamara sought a final response to his various calls for copies of the agreement to lease. In the course of his response, Mr Whitington referred to filing of a copy of the agreement to lease at the Licensing Court in September 1994 and said that inquiries were being made of the Licensing Court. He said that Mr Griffin was not sure whether he received Mr Mackie’s 30 August 1994 letter and it was likely that the copy he requested of Mr Mackie on 13 September 1994 was filed in the Licensing Court. Mr Whitington said that Mr Griffin could not recall whether a copy of the agreement to lease was actually sent to him with Mr Brown’s 22 March 1995 letter. Mr Whitington said that Players were continuing to pursue all inquiries to try to find any further versions of the draft agreement to lease which came into their possession. He said that Players would like to track down these various versions of the agreements to lease as much as Clone and Players would make every endeavour to find them and would provide anything found to Clone.

16. As a result of Mr Whitington’s statements, Mr McNamara expressed annoyance to Ms Karagiannis that she had not checked the Commissioner’s files for the agreement to lease and said that he was concerned that, if Mr Griffin found a document favourable to Clone, he would not disclose it. He instructed her to make inquiries with the Commissioner with respect to the files.

17. On the afternoon of 6 April 2005, Mr Whitington opened Players’ case, during the course of which he said that there was a practice in the Licensing Court to destroy files after five years and the file created which led to the Court’s consent to the licence removal had been destroyed. He said that the best evidence of the agreement to lease available, and likely to be available by the end of the evidence, was Players’ discovered copy and Clone’s discovered copy.

18. On the morning of 7 April 2005, Ms Karagiannis sent by facsimile to Ms Varricchio, and copied to Mr Mackintosh, a letter referring to their conversation on the previous day. The letter said:

    As discussed, it was mentioned in Court today by Mr Whitington QC, counsel for some of the defendants, that the Draft Agreement to Lease for the Planet premises was forwarded to the Office of the Liquor and Gaming Commissioner in the latter half of 1994 when Players was proceeding with its application for a hotel licence at the Players site.

    We enclose a copy of the document entitled “Draft Agreement to Lease” which has been executed by a number of the parties.

    This is the document Mr Griffin says he lodged to satisfy the Commission’s request for evidence of a lease between the parties.

    We understand that as the site at the Planet Hotel was previously known as The Oaks Tavern there were a number of documents (when Mr Griffin first lodged his application for removal of the licence from the Grenfell Tavern to the Oaks Tavern site) that were actually lodged in the Commission’s The Oaks Tavern files.

    It is also remotely possible that a copy of this Agreement may even be on the removal application file of the Grenfell Tavern licence.  Similarly, a copy of this document may also be in the original Players file held at your offices. 

    Accordingly, we would appreciate you searching the abovementioned files including the old Oaks Tavern files, the Grenfell Tavern file and the Players files to locate this document. Whilst this document is undated, it was signed some time in August 1994. 

    If you are able to locate the document, you will need to produce the document at Court with several copies, and let counsel sight the primary copy in your files. 

    If the document can not be located we may need to inspect the files ourselves.

    If there are any difficulties with the above please do not hesitate to contact the writer.

    Thank you for your assistance in this matter.

19. On the afternoon of 7 April 2005, Ms Varricchio sent an email to Ms Karagiannis. It said:

    I refer to your letter dated 6 April.

    I have searched our files for the draft lease agreement as requested. At this stage I have found a version of the document which is identical to the one you forwarded to me, this document was found on the “Grenfell Tavern” file.

    I have requested the ‘early parts’ of the Planet Hotel files from our off site archives. These files should be available to me within a few days, and I will inform you whether there are any further lease agreements on the file.

    If you have any further queries do not hesitate to contact me.

20. After Court, Ms Karagiannis told Mr Dal Cin that Ms Varricchio had found a copy of the agreement to lease. It was agreed that Mr Dal Cin would go to the Commissioner’s offices to inspect the document.

21. When Mr Dal Cin attended at the offices of the Commissioner, he was given one or more files, which must have included Planet hotel folder 1, which he took to a carrel desk (a desk with high sides). He looked through the documents on the spike and found the hotel licence copy. He confirmed that it was a copy rather than an original. He observed the mark through the word “NIL” and that it was not blue.

22. Mr Dal Cin thought that Players’ lawyers were unaware of the document. He asked Ms Varricchio to advise Clone’s lawyers of any searches or inspections undertaken by Players’ solicitors. He reported the results of his inspection to Mr McNamara either that evening or the following day.

23. On 8 April 2005, Mr Griffin gave evidence that in the presence of Mr McDermott and Mr May he had struck through the word “NIL” in clause 11(i) of the agreement to lease with a blue pen and after execution asked Mr McDermott to take it to Clone for its execution.  Mr McDermott later gave evidence corroborating this evidence.

24. Mr Griffin gave evidence that the Licensing Court’s practice was to destroy files after five years. He said that the agreement to lease received from Mr Mackie as a result of Mr Griffin’s letter dated 13 September 1994 was provided to the Licensing Court together with Mr Mallet’s 16 September 1994 letter of consent.

25. On 8 April 2005, Mr Tisato instructed Mr Field to attend at the Commissioner’s office and inspect the Commissioner’s files in an attempt to find a copy of the agreement to lease. Mr Field attended at the Commissioner’s office and spoke to Ms Varricchio. He said “I’d like to inspect all volumes of your file relating to the Planet Hotel”. Ms Varricchio provided him with Planet hotel folders 2, 3, 4 and 5. Mr Field inspected every page of the four files. They did not contain the agreement to lease. Ms Varricchio did not provide Mr Field with Planet hotel folder 1. Mr Field reported the results of his inspection to Mr Tisato.

26. On 8 April 2005, Ms Varricchio telephoned Ms Karagiannis’ secretary and said that Mr Dal Cin had asked to be informed if Griffin Hilditch inspected any documents. She provided a detailed report of what Mr Field had inspected and copied, which did not include the hotel licence copy. Ms Karagiannis’ secretary passed this information on to Mr McNamara QC, Mr Dal Cin, Ms Karagiannis and Mr Hamilton.

27. On 11 April 2005, Ms Karagiannis caused a letter to be sent by facsimile to Ms Varricchio, and copied to Mr Mackintosh, requiring the Commissioner to “produce to the Court all the files in your possession, including files from the inception of The Planet Hotel” (the April notice to produce). Ms Karagiannis later varied this to exclude the Grenfell Tavern removal file.

28. On 12 April 2005, in response to the April notice to produce, the Commissioner delivered to the Court Planet hotel folders 2 to 5 and Planet gaming folders 1 and 2. Mr Dal Cin and Ms Karagiannis were permitted by the trial Judge’s associate to inspect the files in the possession of the Court.

29. During cross-examination of Mr Griffin, Mr McNamara asked that two plans be shown to Mr Griffin in a file which Mr McNamara said he understood had been produced to the Court under a notice to produce from the Commissioner. Mr McNamara did not identify the notice to produce or distinguish the file from the folders produced on 4 March 2005 pursuant to the March notice to produce. The notice was not called on in open court.

30. On 22 July 2005, the trial Judge delivered reasons for judgment. The trial Judge held that the agreement to lease was wholly superseded by the memorandum of lease; in any event found that Mr Griffin did not strike through the word “NIL” in clause 11(i) of the agreement to lease; and in any event held that Mr Grope’s handwritten indorsement rendered the agreement to lease void in the absence of execution by Mr Cahill. The trial Judge held that Clone did not in October 2003 grant consent to removal of the licences by Players.

31. On 29 July and 18 August 2005, the trial Judge granted the original judgment in favour of Clone, including a declaration that Players Pty Ltd was liable to transfer the licences to Clone and an order that Players Pty Ltd deliver up the licences to Clone.

32. Players appealed against the judgment. On 7 and 8 February 2006, the Full Court heard the appeal.

33. On 24 April 2006, the Full Court dismissed Players’ appeal against the findings.[14]

    [14]   Players Pty Ltd & Ors v Clone Pty Ltd [2006] SASC 118.

    The Judge’s reasons

34. The Judge recorded that it was common ground between Players and Clone that the approach identified by the High Court in Commonwealth Bank of Australia v Quade[15] was to be applied to the resolution of the set aside application. It was common ground that this approach required determination whether Clone had engaged in relevant malpractice and, if so, whether in all of the circumstances the original judgment should be set aside, taking into account in particular any lack of reasonable diligence on the part of Players and the materiality of the hotel licence copy to the decision at the original trial.

    [15] (1991) 178 CLR 134.

35. The Judge held that the hotel licence copy should have been discovered by Clone because it was in Clone’s “power” as a result of the Commissioner’s agreement to make his files available to the parties in return for the discovery dispensation order. The Judge applied the approach to the meaning of “power” identified by this Court in Taylor v Santos (No 2).[16] The Judge found that the failure of Clone’s legal team to consider whether to discover the third copy Agreement was reckless and constituted malpractice.

    [16] (1998) 71 SASR 434.

36. The Judge held that Clone was required to disclose and call on the April notice to produce and its failure to do so comprised malpractice, but it was far less culpable than Clone’s reckless malpractice in failing to discover the hotel licence copy and the Judge did not rely on it in setting aside the original judgment.

37. The Judge rejected Players’ contention that, independently of an obligation to discover the hotel licence copy, Clone misled the Court and Players by failing to inform them of its existence and prosecuting a case on the false premise that the provenance of copies of the agreement to lease was unknown. The Judge found that Clone misled the Court by failing to discover the hotel licence copy but not independently of its discovery obligations.

38. The Judge found that Players’ solicitors did not see the hotel licence copy during inspections at the Commissioner’s office before and during trial.

39. The Judge found that Players failed to exercise reasonable diligence because Mr Tisato did not instruct Mr Field on 8 April 2005 to check with the Commissioner whether the Grenfell Tavern removal file had been destroyed, notwithstanding Mr Tisato’s belief that the file had been destroyed.

40. The Judge found that, but for Clone’s malpractice, there was a reasonable possibility that there would have been a different result at the original trial.

41. The Judge determined that, in weighing all of the relevant circumstances, it was appropriate to set aside the original judgment and direct that the issues relating to the agreement to lease and lease be the subject of a new trial.

42. The Judge delivered separate reasons for judgment on final orders.[17] The Judge held that Clone’s malpractice was engaged in by Clone’s lawyers in the conduct of the original proceeding as a litigant and it would be artificial to treat the set aside action as separate and distinct from the original proceeding. Accordingly, Clone should pay Players’ costs of the set aside action on an indemnity basis. The Judge made no order as to the Commissioner’s costs in accordance with agreed submissions by Players and the Commissioner.

    [17]   Players Pty Ltd (In Liquidation) (Receivers Appointed) & Ors v Clone Pty Ltd (No 2) [2015] SASC 178.

    The arguments on appeal

43. Clone contends that, applying the principles identified by the High Court in Commonwealth Bank of Australia v Quade that it accepted at trial were applicable (described by the parties as “Quade principles”), the Judge erred in finding malpractice and in his Honour’s consideration of the other factors bearing on the decision to set aside the original judgment. Most of Clone’s contentions on appeal are premised on the application of those principles, although Clone’s final contention is that any lack of reasonable diligence on the part of the applicant is fatal either on appeal or a set aside application on the ground of malpractice and that a finding that the result at the original trial would have been different but for the malpractice is essential on a set aside application (but not an appeal) on the ground of malpractice.

44. Clone contends that the Judge erroneously applied this Court’s decision in Taylor v Santos (No 2) in concluding that the hotel licence copy was within the “power” of Clone. Clone contends in the alternative that the Judge erred in finding that the failure to discover the hotel licence copy was reckless because the Judge addressed only relevance and not possession, custody or power in making that finding and the failure did not constitute malpractice. Clone accepts that, if it recklessly failed to discover the hotel licence copy, its conduct amounted to malpractice capable, subject to issues of reasonable diligence and materiality and exercise of the residual discretion, of justifying setting aside the original judgment.

1. Players contend by way of alternative contention that the hotel licence copy was in any event within the “custody” of Clone. Clone submits that this contention was not advanced before the Judge and Players should not now be permitted to advance it on appeal.

2. Clone contends that the Judge erred in holding that it was required to disclose and call on the April notice to produce and its failure to do so comprised malpractice, but in any event the Judge’s reasons disclose that his Honour would not have set aside the original judgment on this ground. Players contend that this conduct was sufficient in itself to justify setting aside the original judgment.

3. Players contend by way of alternative contention that the Judge erred in rejecting their contention that, independently of an obligation to discover the hotel licence copy, Clone misled the trial Judge, the Full Court and Players by failing to inform them of its existence and prosecuting a case on the false premise that the provenance of copies of the agreement to lease was unknown. Clone takes issue with Players’ contention but accepts that, if its conduct was misleading, it amounted to malpractice capable, subject to issues of reasonable diligence and materiality and exercise of the residual discretion, of justifying setting aside the original judgment.

4. Clone contends that the Judge erred in finding that Players did not sight the hotel licence copy on the Commissioner’s files and in failing to find additional and more serious instances of Players’ failing to exercise reasonable diligence.

5. Clone contends that the Judge erred in finding that, but for Clone’s malpractice, there was a reasonable possibility that there would have been a different result at the original trial.

6. Clone contends that the Judge erred in any event in deciding that it was appropriate to set aside the original judgment, including by overstating the degree of Clone’s malpractice (if established), understating Players’ lack of reasonable diligence, overstating the materiality of the hotel licence copy and giving insufficient weight to the prospect that Clone would succeed on any retrial in establishing that Players were precluded from relying on any striking through of the word “NIL” by their unconscionable conduct in failing to draw attention to it.

7. Clone’s final contentions are that Quade principles require an appellant on appeal or an applicant on an application to set aside judgment to demonstrate that the exercise of all reasonable diligence by the applicant would not have disclosed the malpractice and that in any event on an application to set aside a judgment (regardless of the position on appeal) an applicant is required to demonstrate no lack of reasonable diligence and that the result at the original trial would have been different but for the malpractice. Clone accepts that it did not advance these contentions before the Judge but contends, in the face of opposition by Players, that it is entitled to do so on appeal.

8. The Attorney-General contends that, in order to justify setting aside a judgment that has been entered in the records of the Court, it is necessary inter alia that the party who secured the judgment engaged in conduct amounting to fraud or conduct similar to fraud. The Attorney-General makes no submissions on the facts and does not contend that reckless failure to make discovery or misleading the Court do not justify setting aside such a judgment. The Attorney-General submits that it must also be established that there was no lack of reasonable diligence on the part of the applicant but does not submit that it is a necessary element that the result at the original trial would have been different but for the malpractice (it being sufficient that this is a reasonable possibility).

9. On the issue of costs, Clone contends that the Judge erred in taking into account the malpractice as conduct engaged in as part of a single action and hence in ordering indemnity costs in favour of Players. The Commissioner contends that the Judge erred in finding that Ms Varricchio did not give equal treatment to Players and Clone and, absent that finding, the Judge ought to have ordered that Players pay his costs of the set aside action.

   Malpractice

10. Players’ case at trial was that Clone engaged in malpractice during the original trial in three respects:

    1Clone breached an obligation to discover the hotel licence copy;

    2Clone breached an obligation to disclose to Players the production to the Court by the Commissioner of the six folders under the April notice to produce;

    3Clone misled the Court and Players by failing to inform them of the existence of the hotel licence copy and/or prosecuting a case on the false premise that the provenance of copies of the agreement to lease was unknown.

11. The Judge’s findings on these three aspects are challenged by one or other party on appeal and it is necessary to consider each in turn.

    Breach of obligation to discover hotel licence copy

12. Clone contends that the Judge erred in concluding that the hotel licence copy was in the “power” of Clone within the meaning of rule 58 of the Supreme Court Civil Rules 1987 (SA) (the 1987 Rules).

13. Players support the Judge’s conclusion and advance an alternative contention that the Judge ought to have concluded that the hotel licence copy was also in the “custody” of Clone. Clone submits that this contention was not part of Players’ case at trial and they ought not to be permitted to advance it for the first time on appeal.

    Discovery obligations

14. Discovery of documents and facts is equitable in origin and nature.[18] Historically, common law courts had no significant power to order discovery of facts or documents.[19] The Court of Chancery (and the Court of Exchequer in its equitable jurisdiction) required parties to answer interrogatories about facts and to disclose documents in their “possession or power” relating to matters in question in the suit.[20] Interrogatories were required to be answered and discovery of documents was required to be made on oath.[21] A party was required to disclose not only documents currently in his or her possession or power but also documents formerly in his or her possession or power and to the best of his or her knowledge, information and belief their present whereabouts.[22]

    [18]   Edward Bray, The Principles and Practice of Discovery (Reeves and Turner, 1885) 4-9; Wilson v Church (1879) 9 Ch D 552 at 554-556 per Jessel MR; Attorney-General v Gaskill (1882) 20 Ch D 519 at 526 per Jessel MR, 528 per Cotton LJ and 530 per Lindley LJ; Kearsley v Philips (1883) 10 QBD 465 at 466 per Brett LJ.

    [19]   Edward Bray, The Principles and Practice of Discovery (Reeves and Turner, 1885) 4-5. This is subject to the very limited exceptions identified by Bray.

    [20]   Edward Bray, The Principles and Practice of Discovery (Reeves and Turner, 1885) 5; Sir William Holdsworth, A History of English Law (Methuen & Co Ltd, 3^rd ed, 1922) vol I, 458.

    [21]   Walter S. Sichel and William Chance, The Law Relating to Interrogatories, Production, Inspection of Documents and Discovery (Stevens and Sons, 1883) 2.

    [22]   Edward Bray, The Principles and Practice of Discovery (Reeves and Turner, 1885) 224-225.

15. In its auxiliary jurisdiction, the Court of Chancery on a bill for discovery exercised power to order parties in a common law action to answer interrogatories and disclose documents in their possession or power relating to matters in question in the action and in certain cases to order a prospective party to make such disclosure.[23]

    [23]   Edward Bray, The Principles and Practice of Discovery (Reeves and Turner, 1885) 4-5; Sir William Holdsworth, A History of English Law (Methuen & Co Ltd, 3^rd ed, 1922) vol V, 281-282, 332; vol VI, 661; Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133 at 173 per Lord Reid and 191-193 per Lord Cross of Chelsea; McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 644 per Young J.

16. The equitable position was succinctly summarised by Bray:

    The right of discovery is the right by which a party to some proceedings (actually commenced or contemplated) before a civil court is enabled, before the determination of any matter in question in those proceedings, to extort on oath from another party to those proceedings –

    (1)all his knowledge, remembrance, information and belief (of facts, not matters of law) concerning the matter so in question;

    (2)the production of all documents in his possession or power relating to such matter.

    …

    A party was entitled to discovery in order to ascertain facts material to the merits of his case, either because he could not prove them, or in aid of proof and to avoid expense, to deliver him from the necessity of procuring evidence, to supply evidence or to prevent expense and delay in procuring it…

    Discovery is not limited to giving the plaintiff knowledge of that which he does not already know, but includes the getting an admission of anything which he has to prove on an issue between himself and his opponent.

    …

    It was only through the medium of the Court of Chancery that any general right of discovery can be exercised. A party, therefore, to an action at common law was, as a rule, obliged to come into Chancery if he wished to get discovery, and to file a bill for the sole purpose of getting it. The jurisdiction to give discovery and Chancery to sustain an action at law seems to date back as far as Henry VI.

    In Chancery, on the other hand, discovery was of the very essence of the bill. Every bill for relief in equity was, in reality, a bill for discovery…[24]

    [24]   Edward Bray, The Principles and Practice of Discovery (Reeves and Turner, 1885) 1, 1-2, 4-5.

17. In 1854, section 50 of the Common Law Procedure Act 1854 (Eng & Wales) empowered the common law courts to order a party to a civil proceeding to answer on affidavit what documents the party has in its possession or power relating to the matters in dispute or what the party knows as to the custody they or any of them are in and to make consequential orders. Section 51 empowered them to order a party to answer interrogatories.

18. In 1856, section 39 of the Supreme Court Procedure Act 1855-56 (SA) gave to this Court (without limitation to its existing jurisdiction) powers in the same terms as section 50.

19. In 1875, the Supreme Court of Judicature Act 1875 (Eng & Wales) enacted as Schedule 1 Rules of Court to apply in the High Court of Justice and Court of Appeal and empowered the making of additional or substituted Rules of Court. Order 31 rule 11 empowered the Court to make an order directing a party to an action to make discovery of documents which are or have been in his possession or power relating to any matter in question in the action.

20. In 1878, section 29 of the Supreme Court Act 1878 (SA) gave to this Court power to make Rules for the regulation of matters relating to practice and procedure.[25] In 1935, the Supreme Court Act 1935 (SA) repealed the 1856 and 1878 Acts and gave to this Court power to make Rules for the regulation of matters relating to practice and procedure. Order 28 rule 11 of the Rules of Court 1879 (SA), Order 30 rule 7 of the Rules of Court 1913 (SA) and Order 62 rule 8 of the Rules of Court 1947 (SA) were all essentially the same as Order 31 rule 11 of the 1875 English Rules.

    [25] The 1856 Act, and in particular section 39, was not repealed.

21. The 1947 Rules were amended in 1972 to apply discovery obligations to documents in or formerly in the “possession, custody or power” of a party and to impose, subject to any contrary order, an obligation on parties to make discovery within 21 days after the close of pleadings (Order 31 rules 10 and 11). They were amended in 1986 to impose an explicit obligation on the parties to make continuing discovery upon discoverable documents coming into their possession, custody or power (Order 31 rule 11A).

22. When made in 1987, rule 58 of the 1987 Rules effectively reproduced the regime under Order 31 of the 1947 Rules. In 2000, rule 58A was inserted into the 1987 Rules to modify discovery. Most of the provisions of rule 58 continued to apply but some primary rules were modified.

23. Rules 58A.02(1), 58A.03 and 58.06(1) of the 1987 Rules as in force in 2004/2005 provided:

    58A.02(1) [Time to make discovery]

    (a)    Within 21 days of the close of any first Settlement Conference;
    (b)      within such other time as the Court may direct; or
    (c)      where there is to be no Settlement Conference within 21 days of close of pleadings,

    each party is to file and serve a list of documents in form 19.

    58A.03 [Documents to be discovered]

    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.

    58.06(1) Requirement for continuing discovery after initial discovery given

    Wherever a party has made discovery of documents pursuant to these Rules, or to any order or direction of the Court, and thereafter, but before judgment or a final order in the proceedings, further documents come into his possession, custody or power, which would have been discoverable if they had been in his possession, custody or power when he made his prior discovery, he shall from time to time and so soon as practicable, make further discovery by filing and serving a supplementary list or lists of documents describing each of such further documents.

24. The rationale for requiring parties to make discovery of documents in their possession, custody or power remains the same today as it was historically. It includes facilitating the determination of cases according to the underlying truth of the matter by reference, inter alia, to available contemporaneous documents.

25. In Flight v Robinson,[26] Lord Langdale MR said:

    According to the general rule which has always prevailed in this Court, every Defendant is bound to discover all the facts within his knowledge, and to produce all documents in his possession which are material to the case of the Plaintiff. However disagreeable it may be to make the disclosure, however contrary to his personal interests, however fatal to the claim upon which he may have insisted, he is required and compelled, under the most solemn sanction, to set forth all he knows, believes, or thinks in relation to the matters in question. The Plaintiff being subject of a like obligation, on the requisition of the Defendant in a cross-bill, the greatest security which the nature of the case is supposed to admit of is afforded, for the discovery of all relevant truth, and by means of such discovery, this Court, notwithstanding its imperfect mode of examining witnesses, has, at all times, proved to be of transcendent utility in the administration of justice. It need not be observed, what risks must attend all attempts to administer justice, in cases where relevant truth is concealed, and how important it must be to diminish those risks, and that if there be any cases, in which for predominant reasons, parties ought to be permitted ought to be held privileged to conceal relevant truth, those cases ought to be strictly defined, and strictly limited by authority.[27]

    [26] (1844) 8 Beav 22, 50 ER 9.

    [27]   At 33-34.

26. In Davies v Eli Lilly & Co,[28] Sir John Donaldson MR said:

    Let me emphasise that the plaintiffs’ right to discovery of all relevant documents, saving all just exceptions, is not in issue. The right is peculiar to the common law jurisdictions. In plain language, litigation in this country is conducted "cards face up on the table". Some people from other lands regard this as incomprehensible. "Why", they ask, "should I be expected to provide my opponent with the means of defeating me?" The answer, of course, is that litigation is not a war or even a game. It is designed to do real justice between opposing parties and, if the court does not have all the relevant information, it cannot achieve this object. [29]

    [28] [1987] 1 WLR 428, [1987] 1 All ER 801.

    [29]   At 431.

27. In Ammerlaan v The Distillers Co (Bio-Chemicals) Ltd,[30] Olsson J said:

    …the fundamental policy of the Rules of Court bearing upon the processes of discovery is to ensure that litigation is decided upon the merits…[31]

    [30]   (1992) 58 SASR 164.

    [31]   At 173.

    Document in “custody” of Clone

28. Before considering the Judge’s conclusion that the hotel licence copy was in the “power” of Clone, it is desirable to consider the question raised by Players’ contention that it was in the “custody” of Clone on 7 April 2005 while Mr Dal Cin was inspecting Planet hotel folder 1.

    Availability of contention on appeal

29. Clone submits that this contention was not part of Players’ case at trial and Players ought not to be permitted to advance it for the first time on appeal.

30. In Water Board v Moustakas,[32] Mason CJ, Wilson, Brennan and Dawson JJ said:

    More than once it has been held by this Court that a point cannot be raised for the first time upon appeal when it could possibly have been met by calling evidence below. Where all the facts have been established beyond controversy or where the point is one of construction or of law, then a court of appeal may find it expedient and in the interests of justice to entertain the point, but otherwise the rule is strictly applied.[33]

    [32] (1988) 180 CLR 491.

    [33]   At 497.

31. By paragraphs 59.4 and 59A of their points of claim, Players pleaded that Clone did not discover the hotel licence copy and this amounted to malpractice of the kind identified by the High Court in Commonwealth Bank of Australia v Quade. Players’ allegation was that Clone was obliged to discover the hotel licence copy. This connoted that the hotel licence copy was in the possession, custody or power of Clone. In their pleading, Players made no distinction between the document being in Clone’s “power” as opposed to its “custody”.

32. In their opening address, Players did not elaborate on their pleaded case in respect of discovery of the hotel licence copy and did not make any distinction between power and custody. In its written opening address, Clone referred to Players’ allegation that Clone’s then legal advisers failed to discover further copies of the agreement to lease and, like Players, drew no distinction between power and custody.

33. When Clone’s witnesses gave evidence, it was in the context that the relevant issue was whether Clone failed to discover the hotel licence copy, not whether it was in Clone’s power as opposed to its custody. Clone closed its case on 20 May 2015. Directions were given for the parties to exchange written closing submissions on 2 June 2015 and for oral closing addresses on 11 June 2015.

34. In its written closing submissions, Clone denied that its inspection of the hotel licence copy invoked any discovery obligation, contending that mere inspection of a document does not make that document within a party’s possession, custody or power. Clone drew no distinction between power and custody for this purpose or otherwise in its written closing submissions.

35. In their written closing submissions, Players submitted that the hotel licence copy was within Clone’s power. Players did not advance a submission that it was within Clone’s custody. Players’ oral address was conducted in the same manner.

36. Given the conduct of both parties, it was a live issue at trial up to the close of both parties’ cases whether Clone breached its discovery obligations because the hotel licence copy was within its power or custody. Clone cannot contend that the point could have been met by calling evidence at trial or that it conducted or may have conducted its case differently at trial. Moreover, I am satisfied in any event that there is no evidence that might have been called at trial that was not adduced bearing on the question whether the hotel licence copy was within Clone’s custody.

37. The passage from the reasons of the majority in Water Board v Moustakas extracted above makes it clear that an appellate court has a residual discretion not to entertain a point not argued below notwithstanding that it could not have been met by calling evidence below. In the present case, where there is an overlap between concepts of possession, custody and power and the phrase “possession, custody or power” is a composite concept, Players’ contention that the hotel licence copy was within Clone’s custody should be entertained.

    Meaning of “custody”

1. For these reasons, if Players is to succeed on its application to set aside the judgment, it must be able to establish at least two propositions.  The first is that its failure to locate the third copy Agreement occurred notwithstanding that it exercised reasonable diligence.  As already noted, the trial Judge held that Players had failed to establish that it had acted with reasonable diligence.  Players, therefore, failed to establish a necessary ingredient of its action. The second is that the third copy Agreement is material and that, if it had been in evidence, it would probably have affected the result.  I have already demonstrated that it is not possible to conclude that, on the balance of probabilities, the third copy Agreement has been copied from the original of the Agreement.  It is equally open to conclude that it is a photocopy of an earlier photocopy.  The third copy Agreement is, therefore, not material.  It must, therefore, follow that there is no probability that, had the third copy Agreement been in evidence, Players would have established that Mr Griffin had deleted the word “NIL” so that the result would not have been different. 

2. Counsel for Players contended that, if the principle of finality applied in this way, it would result in the absurdity that:

   A party’s substantive rights in respect of setting aside a verdict based upon misconduct by the unsuccessful party should be determined by reference to whether that party was fortunate enough to discover the misconduct before an appeal.

   On analysis, this emotional contention is without foundation.  I put to one side the question whether the asserted substantive right in fact exists.  More importantly, the principle fails to have regard to the principles of finality of litigation.  Furthermore, notwithstanding the principle of finality of litigation, equity does provide a remedy where the unsuccessful party can establish fraud.  The only material difference between the test in Quade and the tests in Wentworth v Rogers and in Monroe Schneider is the higher standard of satisfaction as to the outcome in the case of a perfected order.  Of necessity, there must be a more substantial burden to discharge in the case of a perfected order than on an appeal.  As Monroe Schneider demonstrates, the law recognises that the principles of finality of litigation should yield only where the court is satisfied that it is probable that the result would have been affected.

3. For these reasons, the trial judge has failed to apply the correct test.  If the correct test is applied, the judgment should not be set aside.  This is a further reason for allowing the appeal by Clone.

   Finality of Litigation

4. This is a case where the public interest in the finality of litigation assumes a special importance.  The facts relating to the question of whether directors of Players deleted the word “NIL” from the Agreement occurred in August 1994.  The Lease itself was executed in 1995.  These are events that occurred more than 21 years ago. 

5. The trial of the action occurred in 2004, some ten years after the relevant events.  It is apparent from the reasons for judgment and from the evidence that memories had already begun to fade by that time.  Memories will be no better ten years after the trial and some twenty years after the events.  Importantly, not only have relevant documents had been lost and destroyed but there is no suggestion that there will be evidence in addition to that led before Vanstone J.  The trial judge noted at [301] that it is unlikely that there will be any further evidence.  That last sentence only serves to emphasise the futility of a new trial.  More importantly, as already noted, neither the third copy Agreement nor its provenance adds anything to the state of the evidence before Vanstone J.  There is no basis for setting aside the perfected judgment of Vanstone J.  Nothing is to be gained by a new trial.

6. The trial judge had regard to the general considerations of justice including the finality of litigation.  However, it is apparent from his reasons that his conclusion was substantially turned on his finding that the legal advisors to Clone had been culpable in failing to discover the third copy Agreement.  As he said at [302] “Clone’s culpability is sufficiently serious and the interests of justice should prevail.”  For the reasons expressed above, he has erred in reaching that conclusion and he has erred in his assessment of the probative value of the third copy Agreement.

7. The fact that Players has been found not to have exercised reasonable diligence serves to emphasise why the public interest in the finality of judgments should prevail in this case.  Having failed to exercise reasonable diligence to locate the document on which it now seeks to rely, Players should not be permitted to set aside the judgment of Vanstone J and by that means to seek to remedy that failure.

   The Commissioner’s Application to Cross-appeal

8. The Commissioner has applied for permission to cross-appeal against the order made in paragraph 10 of each action that there be no order as to the costs of the Licensing Court, the Commissioner or the Attorney-General.  The cross-appeal is limited to that part of the order that affects the Commissioner.  The grounds of the cross-appeal include grounds complaining of findings of fact made by the trial judge.  I will set out the relevant facts, consider the issues of fact, and then determine whether the Commissioner should be granted permission to appeal. 

9. After the trial judge had delivered his reasons for judgment, he adjourned the hearing in order to give the parties an opportunity to consider the orders he should make.  Players gave all parties notice of the orders including the orders as to costs that a party intended to seek.  As against the Commissioner, Players sought in both actions an order that there be no order as to the costs of the Commissioner.  The Commissioner was, therefore, informed of Players’ intention.  The Commissioner was also aware of the criticisms that the trial judge had made of the conduct of Ms Varricchio in his reasons for judgment. 

10. The Commissioner lodged a submission on the question of costs.  For present purposes, the relevant part of the submission is in paragraphs two and three which were in these terms:

    2.On the basis of the findings made in Players Pty Ltd & Ors v Clone Pty Ltd [2015] SASC 133, the Liquor & Gambling Commissioner and the Attorney-General do not oppose paragraph 10 of the Draft Orders. It is noted that the Licensing Court of South Australia took no active role in the proceedings and abided the event. Accordingly, it is also appropriate for there to be no order as to the costs of the Licensing Court of South Australia.

    3.As the Players Parties brought applications in both Action Number 819 of 2010 and Action Number 319 of 2004 to set aside the previous orders,[321] and the identity of the parties is different between the two proceedings, orders should be entered in both Action Number 819 of 2010 and Action Number 319 of 3004 to finalise the applications as against all parties. Further, the Attorney-General should be identified as an intervener in both proceedings on the Form 1 coversheet.

    It is clear that the Commissioner did not oppose the proposed orders because of the adverse findings against Ms Varricchio.

    [321] Trial Book, Tabs 1 and 2.

11. The Commissioner seeks permission to appeal against the two orders for costs.  He asks that those orders be set aside and that in their place there be an order that Players pay the Commissioner’s costs in each action.  The grounds of the Commissioner’s application are that the trial judge erred in law in finding an obligation to provide even-handed treatment to the parties in complying with the discovery dispensation order, by failing to give adequate reasons for finding a failure to provide even-handed treatment to the parties, and in misconstruing the terms of the discovery dispensation order.  The Commissioner also challenged the findings of fact made by the trial judge against Ms Varricchio.  For its part, Players opposed the application.  It contended that the Commissioner’s consent to the orders proposed by its solicitors barred the application.  It also submitted that there was no error in the reasoning of the trial judge that justified setting aside the orders as to costs against the Commissioner. 

12. For the Commissioner, the Solicitor-General contended that Clone had appealed as of right and, if its appeal succeeded, it would be necessary to reconsider all orders as to costs.  If the trial judge had erred in his findings, the Commissioner, he said, was entitled to his costs. 

13. For the reasons that follow, I find that the trial judge was correct in finding that the Commissioner and his staff were under a duty to act in an even-handed manner to Clone and to Players.  However, I conclude also that the trial judge erred in a number of his findings against Ms Varricchio.  In addition, the finding that Ms Varricchio gave unequal treatment to Players is not supported by the evidence.  I shall set out the facts as found by the trial judge and then his interpretation of those facts.  I shall then examine the correctness of his findings.  Fairness to Ms Varricchio requires this approach. 

    The Relevant Facts

14. I set out the facts concerning Ms Varricchio’s conduct relevant to this application for permission to cross-appeal. 

15. It is convenient to begin with the letter dated 6 April 2005 and sent on 7 April 2005 by Ms Karagiannis.  In that letter she asked Ms Varricchio to search the Commissioner’s files for a copy of the Agreement.  The letter was in these terms:

    I refer to our conversation today. 

    As discussed, it was mentioned in Court today by Mr Whitington QC, counsel for the defendants, that the Draft Agreement to Lease for the Planet premises was forwarded to the Office of the Liquor and Gaming Commissioner in the latter half of 1994 when Players was proceeding with its application for a hotel licence at the Players site.

    We enclose a copy of the document entitled “Draft Agreement to Lease” which has been executed by a number of the parties.

    This is the document Mr Griffin says he lodged to satisfy the Commission’s request for evidence of a lease between the parties.

    We understand that as the site of the Planet Hotel was previously known as The Oaks Tavern there were a number of documents (when Mr Griffin first lodged his application for removal of the license from the Grenfell Tavern to the Oaks Tavern site) that were actually lodged in The Oaks Tavern files.

    It is also remotely possible that a copy of this Agreement may even be on the removal application file of the Grenfell Tavern licence.  Similarly, a copy of this document may also be in the original Players file held at your offices. 

    Accordingly, we would appreciate you searching the above-mentioned files including the old Oaks Tavern files, the Grenfell Tavern file and the Players files to locate this document. Whilst this document is undated, it was signed some time in August 1994. 

    If you are able to locate the document, you will need to produce the document at Court with several copies, and let counsel sight the primary copy in your files. 

    If the document can not be located we may need to inspect the files ourselves. 

    If there are any difficulties with the above please do not hesitate to contact the writer.

    Thank you for your assistance in this matter.

    A copy of the letter was also sent to Mr Mackintosh by facsimile transmission on the morning of 7 April.  As is apparent from the second paragraph of her letter, Ms Karagiannis had enclosed a copy of the Agreement. 

16. Ms Varricchio complied with the request.  She searched the files and found a copy of the Agreement in the Grenfell Tavern removal file.  On 7 April 2005 she sent an email to Ms Karagiannis in these terms:

    I refer to your letter dated 6 April.

    I have searched our files for the draft lease agreement as requested. At this stage I have found a version of the document which is identical to the one you forwarded to me, this document was found on the ‘Grenfell Tavern’ file.

    I have requested the ‘early parts’ of the Planet Hotel files from our off site archives. These files should be available to me within a few days, and I will inform you whether there are any further lease agreements on that file.

    If you have any further queries do not hesitate to contact me.

    Ms Karagiannis then informed Mr Dal Cin that a copy of the Agreement had been found and asked him to go to the Commissioner’s office and inspect it.  Mr Dal Cin inspected the document late in the afternoon of 7 April 2005.  After he had inspected it, he asked Ms Varricchio to inform Clone’s solicitors “of any searches or inspections undertaken by Players’ solicitors”. 

17. On 8 April 2005 Mr Field went to the Commissioner’s office to search for a copy of the Agreement.  He spoke to Ms Varricchio and said to her:

    I’d like to inspect all volumes of your file relating to the Planet Hotel.

    In response to his request Ms Varricchio provided him with volumes 2, 3, 4 and 5 of the Planet Hotel premises file and said that the remaining volume, volume 1, was being searched for in the archives.  She promised to inform him as soon as it had been located so that he could come and inspect it.  Mr Field inspected the files produced by Ms Varricchio but did not find a copy of the Agreement.  Ms Varricchio did not show the Grenfell Tavern removal file to Mr Field. 

18. Later on 8 April 2005 Ms Varricchio called Ms Karagiannis but, as Ms Karagiannis was not available, she spoke to Ms Karagiannis’ secretary, Ms Wescombe.  She informed Ms Wescombe that Mr Field had attended to inspect the documents and had copied some documents. 

19. Ms Varricchio also telephoned Mr Mackintosh on 8 April 2005.  Neither could recall the conversation.  Mr Mackintosh’s handwritten file note records that they spoke for ‘12-13’ minutes and states:

    —    draft lease. GH have

    —    one clause says at end of lease licences to be transferred for ‘nil’ consideration

    —    Griffin Hilditch

    As the trial judge noted, the file note made by Mr Mackintosh is cryptic.  Mr Mackintosh could not say if the expression “GH” in the first point in his note referral to Griffin Hilditch or Grope Hamilton.  Nor could he otherwise recall the discussion it records. 

    The Findings of the Trial Judge

20. The trial judge made the following findings and observations in respect of those facts.

    [277]The circumstances surrounding events before and after Mr Field’s inspection reveal that every assistance was given by Ms Varricchio to Ms Karagiannis and the Clone legal team in connection with: (1)  their search for further copies of the Agreement; (2)  monitoring and reporting on searches of the Commissioner’s files by the Players legal team; and (3)  raising queries about the scope of Ms Karagiannis’s initial oral request for inspection or production of files and the 11 April notice to produce.  This assistance is to be contrasted with the unhelpful treatment Ms Varricchio gave Mr Field when he attended on 8 April to search the Commissioner’s files for further copies of the Agreement.  In my opinion, Players was not provided with equal treatment by Ms Varricchio and, as a result, Mr Field did not find the third copy Agreement during the course of his inspection on 8 April 2005.  The following matters support this finding:

    (1)     By her 7 April letter, Ms Karagiannis specifically asked Ms Varricchio to search the Commissioner’s files for the Agreement forwarded by Players in connection with its Grenfell Tavern removal application, and stated that it was ‘possible that a copy of this Agreement may even be on the removal application file’.[322]  The terms of the search request established the potential relevance of the third copy, and that its relevance emanated from Mr Whitington’s 6 April statements. 

    [322] Emphasis added by trial judge. 

    (2)     On 7 April 2005, without any obligation to do so, Ms Varricchio searched the Commission’s files at Ms Karagiannis’s request and located the third copy Agreement.  She made that search and advised its result promptly.  She volunteered her opinion that the third copy Agreement was ‘identical’ to the one provided to her by Ms Karagiannis under cover of her 7 April letter.

    (3)     On 7 April, when Mr Dal Cin attended at the Commissioner’s offices after Court, Ms Varricchio knew what he was there for and provided him with the Grenfell Tavern removal file.  I infer that Ms Karagiannis had telephoned Ms Varricchio and informed her that Mr Dal Cin was coming to inspect the third copy Agreement. 

    (4)     On 7 April, during Mr Dal Cin’s inspection, Ms Varricchio agreed to monitor any searches or inspections of the Commissioner’s files undertaken by Players’ solicitors.  She informed Mr Dal Cin at that time of Mr Griffin’s inspection on 1 April 2005 and of the fact that Mr Tisato had previously requested files be retrieved from archives.

    (5)     On 8 April, when Mr Field attended and inspected documents, Ms Varricchio monitored what he inspected and copied and provided detailed information about his inspection to Clone’s legal team.

    (6)     On 8 April, Ms Varricchio had a discussion with Mr McIntosh, as recorded in his cryptic file note.  It is clear that they discussed something about an issue in the case relating to a clause in the Agreement requiring Licences to be transferred for ‘nil’ consideration.

    (7)     On 11 April, Ms Varricchio’s response to Ms Karagiannis’s initial oral request for files, and the subsequent 11 April notice to produce, was to ask Mr Mackintosh to seek clarification as to the scope of the request, rather than simply make the files available — a simple task as the files were under her control at the Commissioner’s offices. 

    [278]These circumstances stand in stark contrast to the treatment given to Mr Field when he attended on 8 April and asked to inspect ‘all volumes of your file relating to the Planet Hotel’.  In her evidence, Ms Varricchio said she had no recollection of the occasion, and so could not assist the Court as to why she did not provide a copy of the Grenfell Tavern removal file to Mr Field.  The evidence establishes, however, that Mr Field was given a very narrow response to a very broad request to inspect ‘all volumes’ of the Commissioner’s file ‘relating to the Planet Hotel’.  Having regard to the terms of Ms Karagiannis’s 7 April letter, the urgent assistance afforded to Clone’s legal team on the previous day in connection with locating and providing inspection of the third copy Agreement on the Grenfell Tavern removal file, and Ms Varricchio’s agreement to monitor and report on searches by Players’ solicitors, I infer that Ms Varricchio knew of the importance of further copies of the Agreement and that the third copy was located on the Grenfell Tavern removal file.  Further, that file clearly related to the Planet Hotel.  It was the source of the hotel licence for the Planet Hotel and bore the same licence number.  It contained documents relating solely to the Planet Hotel.  In all the circumstances, it should have been obvious to Ms Varricchio that Mr Field’s broad request included the very file inspected by Mr Dal Cin the previous evening.  If she was in any doubt and genuinely wanted to provide equal treatment to Players, she ought to have at least asked Mr Field if he wanted to inspect the Grenfell Tavern removal file and told him that Clone’s legal team had inspected it the previous evening.  An even-handed approach of this kind would have been consistent with her agreement with Mr Dal Cin to monitor and report on searches by Players’ solicitors, and the clarification request on the following Monday in response to Ms Karagiannis’s broad oral request to inspect files and the 11 April notice to produce. 

    [279]I find that Ms Varricchio gave unequal treatment to Players in her narrow responses to Mr Field’s broad request, and thereby caused Players to remain ignorant of the third copy Agreement and the fact it was located on the Grenfell Tavern removal file.  She may not have intended to do so, perhaps because she was undertaking a routine job or had other pressing matters to attend to, but that is what she did. 

    [280]It was submitted on behalf of the Commissioner that such a finding should not be made for two reasons.  First, because ‘Ms Varricchio gave Mr Field exactly what he requested’.  For the above reasons, I reject that submission.  Second, because it was not directly put to Ms Varricchio that she did anything improper.  I reject that submission also.  Players’ Points of Claim and its written and oral openings gave notice that it would be contended that Ms Varricchio’s conduct in not providing the Grenfell Tavern removal file to Mr Field would be challenged.  In any event, Ms Varricchio made it plain in her evidence that she had no recollection of relevant events and made no attempt to do so.  It would have been a fruitless exercise to put matters to her directly.  If she couldn’t recall what she did, she would not have recalled why. 

    [281]Notwithstanding any finding concerning Ms Varricchio’s conduct in failing to give the Grenfell Tavern removal file to Mr Field for inspection, Clone contends that Ms Varricchio would probably have produced the Grenfell Tavern removal file to him if he had specifically asked to inspect that file.  Notwithstanding my criticisms of Ms Varricchio above, I agree that it is more likely than not that she would have produced the Grenfell Tavern removal file for inspection if specifically asked for it or for the file relating to Players’ application for removal of the Grenfell Tavern hotel licence to the Premises. 

1. Before examining the inferences drawn by the trial judge and his criticisms of Ms Varricchio’s conduct, it is necessary to refer to another part of his reasons where he had rejected a submission by Players as to the effect of paragraph 10 of the order of Master Bowen Pain on 6 July 2004. 

2. Players had contended that the order made by Master Bowen Pain on 6 July 2004 had a wide content.  It made the following submission as to the effect of that order.  

   10C.The conditional words in paragraph 10 of the Court’s 6 July 2004 Order, namely the words ‘On the understanding that the fifth and sixth defendants will make available to the other parties their files in relation to this matter’, had the following practical and/or legal effect:

   Where the Liquor and Gambling Commissioner and/or the Licensing Court was, or became, aware that one of its files had not previously been made available to each party to the Previous Proceedings and/or that there was such a file and it contained a document that was or may be relevant to the Previous Proceedings, it was obliged to forthwith make such a file available to each such party, whether they be Players, Griffin, Cahill and McDermott, or Clone.

   (Emphasis in original)

   The trial judge rejected that contention as being too widely expressed.  He correctly concluded that the terms of the order and general fairness from statutory authorities who were abiding the decision of the Court required the Commissioner’s representatives to provide even-handed treatment to the parties in complying with the order of 6 July 2004.  However, he did not spell out what he meant by “even-handed treatment” in this context.   I turn to that question.

3. The order made by Master Bowen Pain on 6 July 2004 was made “on the understanding that the fifth and sixth defendants will make available to the other parties their files in relation to this matter.”  The Commissioner and the Licensing Court were the fifth and sixth defendants.  As already noted in paragraph [580] above, that order did not require the Commissioner to make the files available.  However, if he did not, he was obliged to file and deliver a list of documents verified on oath as required by the order made on 8 June 2004.  The effect of the order was that, if the Commissioner made his files available, he was relieved from the obligation to comply with the order made on 8 June 2004 that required all parties to file and deliver a list of documents verified on oath.  The Commissioner consented to make his files available to the parties.  Having done so, he was then under an obligation to answer each request for files made by each of the parties by providing the file or files requested. 

   The Findings Against Ms Varricchio Are Incorrect

4. I turn to examine the observations and findings made by the trial judge.  The comment in sub-paragraph (2) of paragraph 277 that Ms Varricchio searched the Commissioner’s file “without any obligation to do so” fails to have regard to the terms of the order of 6 July 2004 that had dispensed the Commissioner from the obligation to file a list of documents on the undertaking that the Commissioner would make files in relation to the matter available.  While Ms Karagiannis might have been opportunistic in asking Ms Varricchio to search for a particular document, a search that Ms Karagiannis should have made and Ms Varricchio could have fairly required Ms Karagiannis to make, nevertheless Ms Varricchio might have believed that the order of 6 July 2004 required her to act as she did. 

5. More importantly, the plain and indisputable fact is that on 8 April 2005, Mr Field’s request was limited to files relating to the Planet Hotel.  He said:

   I’d like to inspect all volumes of your file relating to the Planet Hotel.

   That was a clear and unambiguous request and Ms Varricchio complied with it.  She handed him all of the files then in the Commissioner’s possession relating to the Planet Hotel and informed Mr Field that the fifth file would be located and made available to him to search.  The fact that Ms Varricchio had the day before located a document in the Grenfell Tavern removal file did not impose on her any obligation to ask Mr Field if he also wanted to inspect the Grenfell Tavern removal file.  To conclude that it did is to reach a conclusion entirely contrary to the trial judge’s rejection of Players’ contention as to the effect of the order made on 6 July 2004. 

6. The trial judge inferred at [278] that Ms Varricchio knew of the importance of further copies of the Agreement.  There are at least three reasons why there is no reasonable justification for that inference.  First, the letter from Ms Karagiannis had not in any respect indicated that any forensic significance attached to finding a copy of the Agreement.  All that Ms Varricchio knew was that Mr Whitington had said that a copy of the Agreement had been sent to the Licensing Court in the latter half of 1994 and that Ms Karagiannis had asked Ms Varricchio to search for it. 

7. Secondly, neither the Commissioner nor Ms Varricchio were aware of the detailed issues of the proceedings.  The Commissioner was not taking an active part in the proceedings as both the Licensing Court and the Commissioner had said they would abide by the order of the Court.  Players had not served the Commissioner with copies of the pleadings.  There is simply no basis for inferring that Ms Varricchio was aware of the issues or of the forensic significance of any particular document. 

8. Finally, even if Ms Varricchio knew of the importance of the third copy Agreement, it does not follow that she should have responded to Mr Field’s request for all volumes on the Commissioner’s file relating to the Planet Hotel by asking if he wanted to inspect the Grenfell Tavern removal file.  Ms Varricchio did not and could not have known why Mr Field wanted to inspect the Planet Hotel files.  Even if she had known of the importance of the existence of further copies of the Agreement, she could not have known whether the Players’ legal team had found a copy in their own file.  All that she knew was that Mr Field had asked for “all volumes of your file relating to the Planet Hotel” and she complied with that request.  Moreover, there was nothing in that request that indicated Mr Field’s purpose in asking for those files.  He could have been asking for those files for some purpose entirely unrelated to the question of additional copies of the Agreement.  In that respect, it should be remembered that a few days later on 11 April 2004, the Clone legal team asked the Commissioner to produce to the Supreme Court all files relating to the Planet Hotel for the purpose of seeking to establish that Players had failed to comply with the covenants in the Lease in failing to handover the business as a going concern.  In other words, although Ms Varricchio had a duty to act in an even-handed manner between Clone and Players, she was under no obligation or duty to divine Mr Field’s purpose in asking for the Planet Hotel files.  The plain fact is that Ms Karagiannis and Mr Field each made a different request of Ms Varricchio and Ms Varricchio answered each of those requests. 

9. For these reasons, the trial judge’s criticism of the conduct of Ms Varricchio and his finding that she gave unequal treatment to Players in the manner in which she responded to Mr Field’s request is unjustified.  The finding is also inconsistent with his rejection of Players’ contention that the order of Master Bowen Pain made on 6 July 2004 imposed on the Commissioner and his staff an obligation to make available to one party a file that the other party had inspected.  The finding that the Commissioner had to act in an even-handed manner meant no more than that the Commissioner and his staff should, if asked for a file, provide the file requested or, if the file was archived, to retrieve it from the archives.  The trial judge’s finding that Ms Varricchio had not provided even-handed treatment was grounded in part on the fact that Ms Varricchio had agreed to monitor and report on searches by Players’ solicitors.  Whatever might be said of Ms Varricchio’s willingness to make those reports, it does not follow that she did not treat the parties equally when responding to their separate requests to search the Commissioner’s files.  It is relevant to note also that Ms Varricchio had complied with all earlier requests by Players to search the Commissioner’s files. 

10. For these reasons, the trial judge has erred in his criticism of Ms Varricchio.

    Should Permission to Cross-appeal be Granted?

11. Although the Commissioner did not participate in the hearing before Vanstone J, he appeared on Players’ application for retrial in both action number 319 of 2004 and in the action number 819 of 2010. 

12. As the trial judge records at [98], although the Commissioner was a party to the Application, no relief was sought against him.  The Full Court, however, had expressed the view that having regard to the nature of the allegations to be made against the Commissioner’s representatives, he should be entitled to appear on the hearing of the application.  The Commissioner participated in the actions and sought to refute the allegations made against members of his staff.  However, the conduct of the Commissioner’s staff was not a central issue in the application.  It was an instance of a statutory authority assisting a court in the determination of issues.  I do not think, therefore, the Commissioner would have been entitled to an order for costs had he succeeded in defending the attacks upon his staff.  This was a case where a statutory authority should bear its own costs whatever the outcome of the proceedings.  There is no issue of principle that warrants an order granting permission to appeal.  For these reasons, I would not grant the Commissioner permission to appeal.

    Conclusion

13. For all of these reasons I would allow the appeal by Clone but dismiss the application for permission to appeal by the Commissioner.  I would set aside the orders made by the trial judge save and except for paragraph [10] of his order in each action which made no order as to the costs of the Commissioner.  I would dismiss the application and hear the parties as to the orders that should be made concerning the costs of the action and the costs of this appeal.