Destec Pty Ltd v Mineral Resources Ltd [No 3]
[2024] WASC 135
•22 APRIL 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: DESTEC PTY LTD -v- MINERAL RESOURCES LTD [No 3] [2024] WASC 135
CORAM: HILL J
HEARD: 16 APRIL 2024
DELIVERED : 22 APRIL 2024
FILE NO/S: CIV 3173 of 2019
BETWEEN: DESTEC PTY LTD
Plaintiff
AND
MINERAL RESOURCES LTD
First Defendant
BULK ORE SHUTTLE SYSTEM PTY LTD
Second Defendant
Catchwords:
Practice and procedure - Application for further discovery - Whether reasonable grounds to believe documents exist - Whether documents sought are relevant to issues in proceedings - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA) O 26 r 6, O 26, r 7
Result:
Application successful in part
Category: B
Representation:
Counsel:
| Plaintiff | : | P D Evans |
| First Defendant | : | S Penglis SC |
| Second Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | HFW Australia |
| First Defendant | : | Bennett |
| Second Defendant | : | No appearance |
Cases referred to in decision:
Atlas Copco Australia Pty Ltd v Oxair Gases Pty Ltd [2013] WASCA 43
Compagnie Financiere et Commercial du Pacifique v Peruvian Guano Co (1882) 52 LJQB 181
Green v Fairfax Media Publications Pty Ltd (No 2) [2020] WASC 485
Hongkong Xinhe International Investment Company Ltd v Bullseye Mining Ltd [No 3] [2021] WASC 260
Lanco Resources Australia Pty Ltd v Griffin Energy Group Pty Ltd [2016] WASC 322
Perpetual Trustees Co Ltd v Burniston [2012] WASC 26
Roe v Western Australia [2013] WASC 130
Singh v Friedman [2013] WASC 78
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2010] WASC 218
Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 6] [2016] WASC 218
HILL J:
On 31 January 2024, the plaintiff filed an application (by way of letter) seeking orders for the first defendant to give further discovery of three categories of documents. These categories are:
(a)all documents not already discovered referring to 'Project Blue' or 'A703/03' in the email accounts or drives of 24 named employees of Mineral Resources;
(b)all documents not already discovered which have been sent to, from, copied, or blind copied to the email account '[email protected]'; and
(c) all documents not already discovered in the email accounts of Mike Grey, Chris Ellison, or Steven Pigozzo relating to work undertaken by Advanced Rail Technologies Ltd (ART) which is referred to in the defence and counterclaim including (but not limited to):
(i) documents provided to ART to prepare its report dated 6 March 2020 (including any drafts of the report);
(ii) correspondence between the first defendant and ART in respect of the report (including any drafts of the report); and
(iii) correspondence between the first defendant and ART in relation to the bulk ore shuttle system generally.
In support of its application, the plaintiff relied on an affidavit of Peter Edward Sadler filed 31 January 2024.
The first defendant opposed the plaintiff's application for further discovery and relied on an affidavit of Timothy Paul Lucas Drok filed 15 March 2024. There were two primary grounds for the opposition. First, the plaintiff had not established the documents sought existed, or were of sufficient relevance to a key issue in the proceedings such to warrant an order for specific discovery in the terms proposed. Second, the categories of documents sought by the plaintiff were overly broad and unfocussed.
Prior to the hearing:
(a)the plaintiff gave notice that, in light of Mr Drok's affidavit, it no longer pressed for discovery of the second category of documents sought in its application; and
(b)the first defendant informed the plaintiff that it consented to orders being made for the discovery of the correspondence between itself and ART in respect of the report (as set out at [1(c)(ii)].
For the reasons set out below, it is my view that:
(a)the first defendant should provide discovery of relevant documents (that have not already been discovered) referring to 'Project Blue' or 'A703/03' in the email accounts or drives of the employees of Mineral Resources, as set out in 'Annexure A' (except for those persons named at (f) and (w)); and
(b)given the concession made by the first defendant (which, in my view, will encapsulate the relevant documents in respect of the other categories of documents sought in the plaintiff's application) and the orders which have now been made by consent, no further orders for discovery should be made in respect of the third category of documents sought in the application.
Pleadings
These proceedings were commenced on 23 December 2019 by writ of summons endorsed with a statement of claim.
The statement of claim has been amended on numerous occasions, as has the first defendant's defence and counterclaim. The current versions of the pleadings are an amended substituted statement of claim filed 25 May 2023 (statement of claim) and the fourth further amended defence and counterclaim filed 16 June 2023 (defence and counterclaim). The plaintiff filed an amended reply and defence to the first defendant's defence and counterclaim on 7 August 2023 (reply). This summary is based on these versions of the pleadings.
The claim in these proceedings arises from attempts by the parties to develop what is referred to in the pleadings as a bulk ore shuttle system (BOSS Concept). In summary, the plaintiff alleges that the first defendant has breached a shareholders deed of agreement entered into on 19 September 2017 (Shareholders Deed) and that the first defendant's conduct in respect of the second defendant has been oppressive to the interests of the plaintiff, contrary to s 232 and s 233 of the Corporations Act 2001 (Cth) (Act).
The plaintiff and first defendant incorporated the second defendant (Company) as a special purpose vehicle to own, develop, produce and exploit the BOSS Concept.
The plaintiff pleads that, from at least February 2018, the first defendant has breached the Shareholders Deed by, among other things, implementing a plan to develop an alternative rail system to the BOSS Concept, using confidential information (as defined in the Shareholders Deed) of the Company to create a bulk ore system (BOS) designed to compete with the BOSS Concept, and deliberately obstructing the development of the BOSS Concept.
In addition to the pleaded breaches of the Shareholders Deed, the plaintiff also contends that the first defendant actively developed a competitor to the BOSS Concept and prevented the Company's development of the BOSS Concept by (among other things) refusing to commit to or approve any expenditure under the Shareholders Deed, withdrawing ongoing support to the Company, and unilaterally terminating agreements with various parties. These matters, as well as the breaches of the Shareholders Deed, are relied upon by the plaintiff in support of its oppression claim.
The first defendant denies the plaintiff's allegations or that the plaintiff is entitled to any relief. The first defendant denies the BOSS Concept was as defined by the plaintiff and says that it was a research and development project of an alternative method to transport bulk commodities over short to medium distances. Broadly speaking, the first defendant denies that it has breached the Shareholders Deed or that its conduct has been oppressive to the plaintiff's interests.
Relevantly for the purposes of this application, on multiple occasions in its defence and counterclaim, the first defendant refers to 'BOSS IP', which is not a defined term in the defence. The first defendant pleads that as at August 2019, the BOSS IP was not being developed in accordance with the design principles set out in the Shareholders Deed and that on its then current design, it did not and would not have satisfied the criteria they plead were known to the parties at the time. In support of this contention, the first defendant relies on a report prepared by ART dated 6 March 2020 'as being true and correct in the above respects'.[1]
[1] Defence [52.1], Particular (c).
Relevant procedural history
On 7 October 2020, orders were made for the parties to provide general discovery, rather than discovery by categories, by 20 November 2020. A number of extensions of time were granted for the parties to complete discovery.
Ultimately, the first defendant filed an affidavit of discovery on 18 May 2021, and an affidavit verifying a substituted list of discoverable documents on 11 January 2023. The first affidavit set out the process and searches undertaken by the first defendant but does not descend to details as to the specific search parameters used. At present, the first defendant has discovered 19,744 documents.
On 11 January 2023, the first defendant permitted inspection of the discovered documents (save those listed in Parts 1B and 2A of their affidavit filed 11 January 2023) by providing electronic copies of the documents in accordance with an agreed protocol.
Following a detailed review of the discovered documents, in May and August 2023, the plaintiff's solicitors asked the first defendant's solicitors a series of questions about the review that had been undertaken, including as to whether specific keywords were used and certain mailboxes collected.
On 20 November 2023, the plaintiff's solicitors wrote to the first defendant's solicitors enclosing a draft application for further and better discovery. Conferral occurred between late December 2023 and 30 January 2024.
On 31 January 2024, the plaintiff filed a letter with the court seeking further discovery from the first defendant of three categories of documents.
Following receipt of Mr Drok's affidavit and the first defendant's submissions, the plaintiff (in reply submissions) gave notice that it no longer pressed for discovery of the second category of the documents sought in its application.
At the commencement of the hearing before me on 16 April 2024, counsel for the plaintiff informed me that the first defendant had advised that it consented to orders being made for discovery of the documents in category 3(b) of the plaintiff's application. Orders were made on 18 April 2024.
Legal principles
The legal principles that govern this application were not in dispute and are well-known.
The plaintiff's application is brought under O 26 r 6(1) of the Rules of the Supreme Court 1971 (WA) (Rules), or alternatively, O 26 r 7(3) of the Rules and/or in the court's inherent power.
The court has inherent power to order a party to give further discovery.[2] The court may also order a party to give discovery of any specified document or class of specified documents that is or has at any time been in its possession, custody or power pursuant to O 26 r 6(1) of the Rules.
[2] See, for example, Green v Fairfax Media Publications Pty Ltd (No 2) [2020] WASC 485 [22].
Where the court has reasonable grounds for being fairly certain that the documents are or have been in the possession of the defendant, and the documents relate to a matter in question in the action, the court may make an order under the Rules or in its inherent jurisdiction.[3]
[3] Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 6] [2016] WASC 218 [48].
The obligation of general discovery requires the parties to discover all documents which are, or have been, in their possession, custody or power and relate to any matter in question in the proceedings. The matters which are in issue must be determined by reference to the pleadings, including the admissions of the parties and the nature of the action.[4]
[4] Atlas Copco Australia Pty Ltd v Oxair Gases Pty Ltd [2013] WASCA 43 [20].
Traditionally in this court, the obligation of general discovery applied the Peruvian Guano test, namely that a document is discoverable if it is reasonable to suppose that it contains information which may either directly or indirectly enable the party seeking discovery to either advance their case or damage their adversary's, including documents which may fairly lead to a chain of inquiry which has either of these consequences.[5]
[5] Compagnie Financiere et Commercial du Pacifique v Peruvian Guano Co (1882) 52 LJQB 181; Lanco Resources Australia Pty Ltd v Griffin Energy Group Pty Ltd[2016] WASC 322 [14].
More recent decisions of this court, particularly for matters in the Commercial and Managed Cases list, have emphasised that this obligation must be tempered by the principles set out in the Rules and in particular, the principles set out in O 1 r 4A and O 1 r 4B.[6]
[6] See for example, Roe v Western Australia [2013] WASC 130 [10] - [13]; Singh v Friedman [2013] WASC 78 [3] - [7]. These cases were cited with approval in Hongkong Xinhe International Investment Company Ltd v Bullseye Mining Ltd [No 3] [2021] WASC 260 [23].
On an application under O 26 r 6 of the Rules, it is necessary for an affidavit to be sworn in support of the application which states the deponent's belief that the documents are in the possession, custody or power of the other party and they relate to one or more of the matters in question. The court will only make an order for further discovery if it has reasonable grounds for being fairly certain that the particular documents sought exist, are relevant and ought to have been discovered.[7]
[7] Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 6] [2016] WASC 218 [48].
The onus is on the party seeking orders for further discovery under O 26 r 6 of the Rules to satisfy the court of three matters:[8]
(a)there are reasonable grounds for being fairly certain that the documents sought (or class of documents sought) exist;
(b)the documents sought are relevant; and
(c)the documents ought to have been discovered.
[8] Perpetual Trustees Co Ltd v Burniston[2012] WASC 26 [29].
There are additional limitations on the court's inherent power to order further discovery. An affidavit of discovery filed by a party is conclusive as to the sufficiency of discovery of the documents in its possession, custody or power unless:[9]
(a)an insufficiency appears from the pleadings;
(b)an insufficiency appears from the affidavit itself;
(c)an insufficiency appears from the documents themselves which are referred to in the affidavit or subsequently disclosed by the party as relevant;
(d)an insufficiency appears as a result of an admission; and
(e)an insufficiency appears because documents have been excluded by a misapprehension of its own case.
[9] Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2010] WASC 218 [3] - [8].
In considering whether or not to make an order for discovery, it is necessary to consider the broad overriding objectives of case flow management set out in O 1 r 4B of the Rules.
The discretionary power to order discovery is to be exercised having regard to:[10]
(a)the principles in O 1 r 4A and O 1 r 4B of the Rules;
(b)the timely and cost-effective disposal of litigation including whether the categories of discovery are necessary for fairly disposing of the proceedings;
(c)relevance; and
(d)the notion of proportionality.
[10] Roe v Western Australia [10] - [13]; Singh v Friedman [3] - [7]; Hongkong Xinhe International Investment Company Ltd v Bullseye Mining Ltd [No 3] [28].
An application for an order for discovery under O 26 r 7 of the Rules may be made at any time by a party whose request under O 26 r 6 of the Rules for discovery has not been satisfied. It is not necessary for a party to file an affidavit in support of the application.
I turn now to consider the two categories of documents which are pressed by the plaintiff.
Category One
The first category of documents sought by the plaintiff is all documents not already discovered referring to 'Project Blue' or 'A703/03' located in the email accounts or drives of the 24 named employees of the first defendant, as set out in 'Annexure A' of its application.
Following inspection and review of the documents discovered by the first defendant, the plaintiff's solicitors identified approximately 59 documents (including duplicates) which contained the keyword 'Project Blue' that related to the development of an ore transportation system other than the BOSS Concept. 56 of these documents are emails and attachments.[11]
[11] Affidavit of Peter Edward Sadler filed 31 January 2024 [10] - [11], Schedule 1.
These documents include:
(a)a confidentiality deed in relation to Project Blue, which recites that the first defendant is proposing to disclose Confidential Information for the Express Purpose which is defined as including the purpose of enabling the parties to discuss and investigate the first defendant's development of an innovative rail based transport system;[12]
(b)a list of 23 people (including two external contractors, Colin Lee and Gong Xiao-Ping) who were approved as of 4 May 2018 to be working on Project Blue;[13] and
(c)proposed draft budgets for Project Blue ranging from $10.3 million to $17.45 million.[14]
[12] Affidavit of Peter Edward Sadler filed 31 January 2024 [14], 'PES-13', 'PES-14'.
[13] Affidavit of Peter Edward Sadler filed 31 January 2024 [17], 'PES-15'.
[14] Affidavit of Peter Edward Sadler filed 31 January 2024, 'PES-16', 'PES-17', 'PES-18', 'PES-19', 'PES-20', 'PES-21'.
The plaintiff's solicitors asked the defendant's solicitors a number of questions in relation to the searches done as part of the discovery process. These included whether the mailboxes of the Project Blue team and Colin Li / Lee were collected and reviewed for the purposes of discovery, and whether 'Project Blue' and its project code 'A703/03' were used as keywords for identifying potentially relevant documents.[15] The first defendant's solicitors have confirmed their discovery process did not capture entire mailboxes of custodians, but instead, applied search terms (involving keywords) over databases to identify the documents that were potentially relevant. The first defendant has not disclosed in its affidavit of discovery nor in any response to this application as to whether 'Project Blue' was one of these keywords used.
[15] Affidavit of Peter Edward Sadler filed 31 January 2024 [36.1] - [36.3].
The first defendant has confirmed that its development of the BOS was also referred to as 'Project Blue' and given the project code 'A703/03',[16] and that all of the individuals referred to in Schedule 1 to the affidavit of Mr Sadler filed 31 January 2024 save 'Collin Lee' (sic) and Gong Xiao Ping were employees of the first defendant as of 4 May 2018.[17]
[16] Affidavit of Timothy Paul Lucas Drok filed 15 March 2024 [7].
[17] Affidavit of Timothy Paul Lucas Drok filed 15 March 2024 [10].
Mr de Haas, executive general manager for the first defendant, has informed the first defendant's solicitors that, in relation to the BOS Project:[18]
(a)the BOS management team comprised Chris Ellison, Danny McCarthy and Simon Rushton;
(b)Mr de Haas and Mr Pigozzo presented to the BOS management team;
(c)Colin Lee translated meetings held in China; and
(d)he is not aware what, if any, involvement the remaining individuals referred to in Schedule 1 to the affidavit of Mr Sadler filed 31 January 2024 had in relation to the BOS Project.
[18] Affidavit of Timothy Paul Lucas Drok filed 15 March 2024 [11].
I accept that issues are raised on the pleadings in relation to the development by the first defendant of the BOS system, including as to the extent to which this development, if at all, used the Company's intellectual property, and whether this development was a breach of the Shareholders Deed or was oppressive conduct. On this basis, I am satisfied that the first defendant's development of the BOS system is relevant to the issues in dispute in these proceedings.
On the evidence before me, I am satisfied that:
(a)the first defendant's development of the BOS System was given the project name 'Project Blue' or 'A703/73';
(b)all of the persons listed in 'Annexure A' of the plaintiff's application were approved by the first defendant to work on this project;
(c)all of the persons listed in 'Annexure A' of the plaintiff's application apart from Colin Lee and Gong Xiao-Ping, were employees of the first defendant as of 4 May 2018;
(d)there is no evidence that searches have been specifically undertaken of the email accounts of the employees referred to in [43(b)-(c)], including by using the keywords 'Project Blue' and 'A703/03';
(e)the BOS management team have only discovered six emails between them that were sent or received; and
(f)no emails sent or received by number of the employees approved to work on the project have been discovered.
Counsel for the first defendant submitted that, notwithstanding these matters, I could not be fairly certain that any documents within this category existed. In support of this submission, counsel referred to the decision of Le Miere J in Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 6]. In that case, it is notable that the defendants filed evidence as to the searches done of relevant documents and locations, and that the defendants did not consider that any new locations would need to be reviewed or that it was likely any documents existed within this category which had not already been discovered.
In contrast, in this case, the first defendant has not descended into any detail as to the specific processes adopted in completing discovery or the keywords that were used. Nor has the first defendant expressed any view as to whether it is likely that any documents exist which have not already been discovered.
In my view, consistent with its obligations of general discovery as ordered on 7 October 2020, the first defendant ought to have conducted searches across the email accounts of its employees named in 'Annexure A' of the plaintiff's application using the keywords 'Project Blue' and 'A703/03' to determine whether there were documents within these emails that ought be discovered. This has not occurred.
Given the matters referred to at [42] and in circumstances where there is no evidence that searches were made using the keywords 'Project Blue' or 'A703/03', I am satisfied there are reasonable grounds on which I can be satisfied that documents within this category exist and have not been discovered.
There is no evidence before me as to the time or cost that would be involved in requiring the first defendant to undertake these searches and review the documents. In the absence of any evidence, it is difficult for the court to make a proper assessment of proportionality.[19]
[19] Singh v Friedman [6].
In the exercise of my discretion, orders should be made for the first defendant to provide discovery of the relevant documents within this category using these keyword searches. This should be done across the email boxes of its employees, which excludes Colin Lee and Gong Xiao-Ping.
Even if was not satisfied there were reasonable grounds on which I was satisfied that these documents exist, as required by O 26 r 6 of the Rules, I would still have exercised my discretion to order discovery of these documents under O 26 r 7 of the Rules. This is because I consider this category is relevant to the issues in the proceeding and the first defendant has not provided discovery of these documents.
Category Three
The third category of documents sought by the plaintiff was:
All documents, not already discovered, relating to the work undertaken by Advanced Rail Technologies Limited (ART) in connection with the preparation of the report referred to in [52.1(a)-(c)], [52.2(d)], [73.2(a)], [74(b)] of the Fourth Further Amended Defence & Counterclaim dated 16 June 2023 in the email accounts and drives of Mike Grey, Chris Ellison, or Steven Pigozzo, including (but not limited to):
(a) documents provided to ART to prepare its report dated 6 March 2020 (including any drafts of the report);
(b) correspondence between the first defendant and ART in respect of the report (including any drafts of the report); and
(c) correspondence between the first defendant and ART in relation to BOSS generally.
Prior to the hearing, the first defendant, quite properly in my view, consented to orders being made in terms of category (b).
The evidence before the court is that:[20]
(a)approximately 75 documents were considered relevant by ART; and
(b)neither the first defendant nor ART are now able to identify what these documents were.
[20] Affidavit of Timothy Drok filed 15 March 2024 [16] - [18].
In its defence, the first defendant relies on the ART report for its truth. On this basis, I accept that the documents in both categories (a) and (b) are relevant on the pleadings. However, there is no evidence before me on which I can be satisfied that there are reasonable grounds to believe that there is other correspondence between the first defendant and ART in relation to BOSS generally.
I accept the submission of senior counsel for the first defendant that any documents which were provided to ART fall within category (b), which it has agreed to provide. On this basis, I do not consider that any further orders in respect of the third category of documents sought in the plaintiff's application are required to be made.
Conclusion
For these reasons, I consider that orders should be made for the discovery of relevant documents in terms of the first category of documents sought in the plaintiff's application (except for those persons named at (f) and (w)).
I will hear from the parties as to the precise orders that ought be made to reflect these reasons and as to the costs of the application.
ANNEXURE A
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KC
Associate to the Honourable Justice Hill
22 APRIL 2024
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