GLP Batesford Holdings Pty Ltd v 68 Bridge Road Land Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST

S ECI 2022 04323

BETWEEN:

GLP BATESFORD HOLDINGS PTY LTD (ACN 657 971 198)	Plaintiff
and
68 BRIDGE ROAD LAND PTY LTD (ACN 632 148 988) AS TRUSTEE FOR 68 BRIDGE ROAD LAND UNIT TRUST (ABN 87 107 606 005)	Defendant

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JUDGE:	M Osborne J
WHERE HELD:	Melbourne
DATE OF HEARING:	19 January 2024
DATE OF JUDGMENT:	13 February 2024
CASE MAY BE CITED AS:	GLP Batesford Holdings Pty Ltd v 68 Bridge Road Land Pty Ltd
MEDIUM NEUTRAL CITATION:	[2024] VSC 36

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PRACTICE AND PROCEDURE – Particular discovery – Relevance – Overarching purpose and obligations – Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 29.08 – Civil Procedure Act 2010 (Vic), ss 7, 10, 11, 22, 55 – Subpoena for production to the Prothonotary – Whether subpoena issued for a legitimate forensic purpose – Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145 - Seven Network (Operations) Ltd v Fairfax Media Publications Pty Ltd [2023] FCAFC 185.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	E Gisonda	Clayton Utz
For the Defendant	S Hooper	Maddocks

HIS HONOUR:

Introduction

In March 2022, the plaintiff, GLP Batesford Holdings Pty Ltd, as purchaser entered into a contract of sale with the defendant, 68 Bridge Road Land Pty Ltd (as trustee for a unit trust) as vendor, to purchase a property at 205 Ballan Road, Moorabool. The purchase price was $176 million plus GST (the ‘contract of sale’). A deposit of $17.6 million has been paid to a stakeholder. The balance of the price is due at settlement. Settlement has not yet taken place and is due on the earlier of nine months from satisfaction or waiver of a rezoning condition or 13 September 2028.

At the time of entering into the contract of sale, the defendant was bound to purchase the property from a third party for $70 million less a stamp duty credit having been nominated as purchaser pursuant to a separate contract (the ‘head contract’) with settlement due to take place on 20 July 2022 (as in fact later occurred).

The conditions of the contract of sale include special condition 32 headed ‘Purchaser’s Caveat’ which is in the following terms:

32. Purchaser’s Caveat
32.1The Vendor acknowledges and agrees that the Purchaser may lodge a caveat over the title to the Property in respect of its interest under this Contract.
32.2If the Purchaser lodges a caveat in respect of its interest under this Contract, the Purchaser must permit registration of any dealings at the Titles Office contemplated by this Contract, including those required for the Vendor to:
(a) become the registered proprietor of the Property;
(b)grant a Security Interest to a Financier for the purpose of settling the Head Contract or refinancing thereof,
by providing a consent to those dealings in the form required by the Titles Office within 3 Business Days of request by the Vendor.

…

In addition, special condition 17 of the contract provides that the ‘Defendant may at any time prior to Settlement mortgage, assign, charge or otherwise deal in any of its rights, privileges, benefits or obligations under the Contract of Sale or all or part of the Property without reference to the Plaintiff’.

In this proceeding, the plaintiff seeks declaratory relief that on the proper construction of special condition 32, the defendant was (and is) only entitled to register those dealings at the Titles Office that were (or are) required for the defendant to become the registered proprietor of the property (pursuant to the head contract) and to grant a mortgage for the purpose of securing the indebtedness or refinancing the indebtedness if required.

Alternatively, the plaintiff seeks a declaration and orders to the effect that special condition 32.2 be rectified as follows:

32.2If the Purchaser lodges a caveat in respect of its interest under this Contract, the purchaser must permit registration of any dealings at the Titles Office ~~contemplated by this Contract, including those~~ required for the Vendor to:
(a) become the registered proprietor of the Property;
(b)grant a Security Interest to a Financier for the purpose of settling the Head Contract or refinancing thereof.

The proceeding is listed for trial commencing on 12 March 2024, on an estimate of 2-3 days.

Each of the parties have filed and served witness statements; in the case of the plaintiff, the statements of Rory John Costelloe dated 8 September 2023, John Yuen dated 8 September 2023 and Bridget Costelloe dated 14 September 2023, and in the case of the defendant, the statements of Drisha Kim Natarajan dated 20 October 2023 and Chi Ping (Bruce) Chan dated 18 October 2023.

The discovery and subpoena disputes

On 9 February 2023, the Court made orders by consent that the parties make discovery pursuant to r 29.01.1 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the ‘Rules’) by filing and serving a list of documents.

As such, the parties were required to discover documents after a reasonable search:

(a) on which the party relies;

(b) which adversely affect the party’s own case;

(c) that adversely affect another party’s case; and/or

(d) that support another party’s case.

By a list dated 7 March 2023, the defendant set out a list of documents limited to four documents only. The defendant’s solicitors, Maddocks, explained in a letter sent to the plaintiff’s solicitors, Clayton Utz, that the bulk of the documents that were relevant to the proceeding were common to both parties and as such did not have to be listed.

By summons dated 26 May 2023 (‘summons’), the plaintiff sought orders for further and better discovery pursuant to r 29.08 of the Rules.

When the matter came on before me, I made directions for the filing and service of witness statements and deferred the question of further and better discovery until such time as the statements were filed.

Despite subsequent correspondence between the parties, the question of the defendant’s alleged deficient discovery remains outstanding.

Further, and notwithstanding what the defendant contends is the narrowness of the overall dispute, the plaintiff has caused a total of nine subpoenas for production to the Prothonotary to be issued to eight parties.

The subpoenas issued included a subpoena issued to the defendant’s estate agents in connection with the sale of the property, Colliers International (Victoria) Pty Ltd (‘Colliers’) dated 27 October 2023 (‘Colliers subpoena’) and a subpoena to Loan Agency Services Pty Ltd (‘LAS’) dated 27 October 2023 (the ‘second LAS subpoena’),[1] as well as subpoenas to Telstra Limited dated 21 November 2023 (‘Telstra subpoena’), Vodafone Australia Pty Limited dated 21 November 2023 (‘Vodafone subpoena’), Singtel Optus Pty Limited dated 21 November 2023 (‘Singtel Optus subpoena’) and Optus Mobile Pty Limited (‘Optus subpoena’) dated 24 November 2023 (collectively, the ‘Telco subpoenas’).
[1]An earlier subpoena had been issued to LAS dated 1 August 2023.

The plaintiff does not call upon the Singtel Optus subpoena; in effect, the Optus subpoena covers the ground sought in the Singtel Optus subpoena.

The defendant has lodged objection to the Telco subpoenas on the basis that those subpoenas lack a legitimate forensic purpose.

I heard the defendant’s objections to the Colliers subpoena and the second LAS subpoena on 8 December 2023. In substance, I did not set aside those subpoenas but limited their scope so as to confine the documents in respect of which inspection is to be permitted. In effect, I acceded to the defendant’s alternative submission that the scope of the subpoena was too wide and ought be narrowed. As the documents had been produced, I did not set the subpoenas aside and require the documents to be returned and a fresh subpoena served but instead made orders which provided for a right of first inspection to the defendant, whose solicitors could place documents that fell outside the revised scope into a separate envelope which could not be inspected.

The parties remain at odds in relation to the adequacy of the defendant’s discovery and as to the Telco subpoenas.

For the purpose of the application, the plaintiff relies upon an affidavit of Vince Annetta, a solicitor at Clayton Utz, sworn 17 January 2024 (the ‘Annetta affidavit’) and an outline of submissions filed 17 January 2024. The plaintiff also relies upon a bundle of material handed up at the hearing on 19 January 2024. The defendant relies upon an affidavit of its instructing solicitor, Edward Lyall Howard, sworn 18 January 2024.

The question of the adequacy of the defendant’s discovery and the question of any legitimate forensic purpose pertaining to the Telco subpoenas require consideration of the scope of the issues in dispute in the proceeding in a little more detail. Accordingly, it is necessary to set out the relevant aspects of the pleadings and the evidence filed to date.

Pleading and evidence filed to date

The gravamen of the dispute between the parties concerns the effect of the negotiations which took place as to the terms of the contract of sale prior to its execution on 13 March 2022. Those negotiations took place over the period from 11 -13 March 2022 and are set out in the plaintiff’s amended statement of claim filed 14 June 2023 (‘ASOC’). Regard must also be had to the extent necessary to the plaintiff’s further and better particulars dated 23 February 2023 of the statement of claim dated 3 February 2023. The changes made in the ASOC do not materially impact on the relevance of the further and better particulars at least for present purposes. In the introduction to the further and better particulars, the plaintiff stated that it reserved the right to provide further particulars once discovery and other interlocutory steps had been completed.

In paragraph 9, the plaintiff pleads that on 11 March 2022 it executed an earlier version of the contract of sale which did not include special condition 32; the defendant denies the existence of any ‘earlier contract’ or ‘earlier version of the contract’ between the parties, and says that the contract of sale dated 13 March 2022, as subsequently amended by the deed of variation dated 6 June 2022, was the only contract between the parties, and otherwise does not know and does not admit the allegations in paragraph 9.

In paragraph 10, the plaintiff pleads that the earlier version of the contract was provided to the defendant for execution on 11 March 2022; the defendant admits that the plaintiff provided the defendant with a draft contract of sale in respect of the property which omitted special condition 32.

In paragraph 10(a), the plaintiff pleads that the earlier version of the contract was not executed by the defendant and therefore did not obtain contractual force; the defendant admits that it did not execute that draft contract and that the draft contract did not obtain contractual force.

In paragraph 11, the plaintiff pleads that on 12 March 2022, the defendant stated to the plaintiff to the effect that (the ‘12 March email’):

(a) the defendant did not oppose the plaintiff placing a caveat on the title to the property to protect its rights;

(b) the defendant would need some comfort that the plaintiff, having lodged a caveat, would not impede the mortgage that the defendant would need to grant over the property for the purpose of settling the head contract or refinancing such mortgage if required; and

(c) the defendant proposed inserting a special condition into the contract of sale (which was attached to the 12 March email).

The plaintiff then particularises the email sent by Ms Natarajan to the plaintiff’s John Yuen and the defendant’s estate agent at Colliers. In fact, as the evidence later filed makes clear the email was sent to the agent who forwarded it on to Mr Yuen, although nothing turns on this, at least for present purposes. Attached to the email was the text of the proposed special condition 32.

Although not set out in the pleading specifically, the 12 March email read:

Afternoon Gents,
As discussed, we would need some comfort around the caveat that they will be lodging. We do not oppose to them putting a caveat on to protect their rights but we do need some comfort that they would not impede the mortgage we will need to grant for the purpose of settling our head contract or refinancing such mortgage if required.
Please see attached proposed additional special condition to be inserted into the Contract. Can you please confirm VW is agreeable to it and if yes we will attend to incorporating the attached special condition and execute the contract once we are also satisfied with the guarantee that they have provided. The guarantee is more of the question our lender has asked as we have informed them this afternoon that we are now dealing with a different party and their comment was they had to be satisfied with the quality of the guarantee.
I will do an all assets search on the guarantor and hope to get results in the next 24 hours but I do not think this should be an issue. I will let you know if it is.

The attached proposed special condition 32 wording is in the same terms as the special condition 32 later incorporated into the contract of sale.

The defendant admits that it sent an email to its agents broadly to the effect set out in paragraph 11 and otherwise did not admit paragraph 11.

In paragraph 12, the plaintiff pleads that on 13 March 2022:

(a) the plaintiff agreed to the insertion of special condition 32 into the contract of sale in order to provide the defendant with the comfort that the plaintiff’s caveat would not impede the mortgage that the defendant would need to grant over the property for the purpose of settling the head contract or refinancing such mortgage if required, and for no other reason;

(b) the plaintiff agreed to the insertion of special condition 32 into the contract of sale on the assumption that the 12 March email accurately stated the effect of special condition 32; and

(c) the plaintiff and the defendant executed the contract of sale which included special condition 32.

Save for the defendant admitting that the plaintiff and the defendant executed the contract of sale which included special condition 32, the defendant otherwise denied the allegations in paragraph 12.

In paragraph 12A, the plaintiff pleads that the amount of indebtedness that was required by the defendant to settle the head contract is presently unknown to the plaintiff but could not have been any more than the amount to settle the head contract as defined in paragraph 4B of the ASOC; the defendant denies this.

In paragraph 13, the plaintiff pleads that:

Having regard to the facts and matters alleged in paragraphs 9 to12 above, on a proper construction of Special Condition 32, when read in the context of the Contract of Sale as a whole, the Defendant was (and is) only entitled to register those dealings at the Titles Office that were (or are) required for the Defendant to become the registered proprietor of the Property and to grant a mortgage for the purpose of securing the Indebtedness ~~settling the Head Contract~~ or refinancing the Indebtedness ~~such mortgage~~ if required (Proper Construction).

The defendant denies this and otherwise pleads various other matters which are not material to the present dispute.

In paragraph 13A, the plaintiff pleads that the defendant denies the ‘Proper Construction’. The defendant admits that it denies the allegation and otherwise pleads various other matters which are not material.

In paragraph 13B, the plaintiff pleads that it is entitled to a declaration in the terms of paragraph A of the prayer for relief; this is denied by the defendant.

In paragraph 14, the plaintiff pleads in the alternative that:

…having regard to the facts and matters alleged in paragraphs 9 to 12 above, at the time of executing the Contract of Sale it was the common intention of the parties that the Defendant was only entitled to register those dealings at the Titles Office that were required for the Defendant to become the registered proprietor of the Property and to grant a mortgage for the purpose of securing the Indebtedness ~~settling the Head Contract~~ or refinancing the Indebtedness if required (Common Intention).

This is denied by the defendant which in addition pleads that the plaintiff first posited the revised ‘Common Intention’ on 31 May 2023.

In paragraph 15, the plaintiff pleads that the contract of sale was executed by the parties in the belief and understanding that special condition 32 provided for the Common Intention; this is denied by the defendant.

In paragraph 16, the plaintiff pleads that if it is found that special condition 32 does not bear the Proper Construction then it was, inter alia, executed under a mutual mistake and should be rectified; this is denied by the defendant.

In paragraph 17, the plaintiff alleges that if special condition 32 did not bear the Proper Construction then the plaintiff executed the contract of sale under a misapprehension that it did bear the Proper Construction, that the defendant knew of that misapprehension and that in the context of the parties’ communications alleged above it is unconscionable for the defendant to contend for a construction other than the Proper Construction; this is denied.

In paragraphs 18-23, the plaintiff alleges a cause of action based on estoppel by representation to the effect that it assumed that special condition 32 was to be read as though it only entitled the defendant to register dealings at the Titles Office that were required for the defendant to become the registered proprietor of the property and to grant a mortgage for the purpose of securing the indebtedness or refinancing the indebtedness if required. Further that this was induced by the defendant by way of the provision of the 12 March email to the plaintiff. Save for referring to its earlier pleas in relation to paragraphs 13 and 14, this is denied.

In paragraphs 24-26, the plaintiff pleads an estoppel by convention in relation to the insertion of special condition 32 based on the parties adopting the assumption by reason of the execution of the contract of sale and thereafter alleging that following its execution the plaintiff and the defendant conducted their relationship on the basis of the mutual assumption. This too is denied and the defendant otherwise alleges that no cause of action is disclosed by these paragraphs.

Relevant also is the allegation in paragraph 38 of the ASOC under the subheading ‘The Defendant’s subsequent position’ in which the plaintiff pleads that ‘In September and October 2022, the Defendant’s agent confirmed to the Plaintiff that it was the Defendant’s expectation to borrow up to $140.8m,which would be secured by the Mortgage’. This too is denied.

As is apparent from the above, the issues in the proceeding are very narrow and comprise the following:

(a) the proper construction of special condition 32 of the contract;

(b) whether if that condition does not bear the meaning for which the plaintiff contends, it is liable to be rectified so as to bear that meaning;

(c) if that condition does not bear that meaning and is not to be rectified, whether the defendant is estopped from contending that special condition 32 bears a different meaning from that which the plaintiff contends, by reason of the terms of the 12 March email or the defendant’s conduct upon execution of the contract and subsequently until 18 July 2022;

(d) whether the defendant misled or deceived the plaintiff by reason of the content of the 12 March email and subsequently emails exchanged between the parties’ respective solicitors between 14 and 18 July 2022 about whether it could or would register a mortgage on title to the land for a purpose other than securing the amount the defendant required to settle the head contract dated 18 July 2018 (which amount the plaintiff alleged was to be no more than the amount required to settle under the head contract) which is said to be limited to the final instalment payable by the defendant under the nomination deed;

(e) whether the defendant has breached or intends to breach the contract by registering a mortgage on title to the land for a purpose other than securing the indebtedness or refinancing the indebtedness if required, thereby causing the plaintiff to suffer or causing it in future to suffer, unidentified and unqualified damages to the extent that the registered mortgage secures indebtedness beyond securing the indebtedness or refinancing the indebtedness if required; and

(f) whether in September and October 2022 the defendant’s agent confirmed to the plaintiff that it was the defendant’s expectation to borrow up to $140.8 million which would be secured by the mortgage.

Whilst the claim is advanced on various grounds, and without meaning to diminish the necessary elements of the various claims, its essential gist is whether the fact that the 12 March email refers only to the need to ensure that the plaintiff’s caveat (lodged as purchaser) does not impede the grant of a mortgage in favour of the lender who would advance funds to enable the settlement of the head contract (or its refinance) means that the defendant is only entitled to borrow the amounts necessary to settle that contract or refinance that debt, notwithstanding special condition 17 and the reference to ‘including’ in special condition 32.2

As would be expected by the pleadings, the witness statements filed by the parties are concise and to the point.

Relatedly, the essential factual contest is also narrow and is conveniently identified in a comparison between the plaintiff’s witness Mr Costelloe’s in his witness statement at paragraphs 18 and 19 and the defendant’s witness Ms Natarajan in her witness statement at paragraphs 10 and 11.

In Mr Costelloe’s witness statement, after referring to the receipt and consideration of the 12 March email and the proposed new special condition, he refers to a discussion which he had with the plaintiff’s Mr Yuen as follows:

During that conversation, Mr Yuen and I talked about the purpose and effect of the defendant’s Proposed New Special Condition and Ms Natarajan’s explanation of why it was needed as set out in the First Natarajan Email.[2] We both said words to the effect that the purpose and effect of the proposed special conditions seemed reasonable because:
(a) firstly, it was not surprising to us that the defendant needed to borrow funds to settle the Head Contract, as stated in the First Natarajan Email; and
(b) secondly, the plaintiff would be protected from excessive debt on the Land because the proposed mortgage would only cover the debt required by the defendant for the purpose of settling the Head Contract or refinancing that debt if necessary. At that time, I believed that the Proposed New Special Condition operated in a way that would allow the defendant to get priority in relation to that debt but no more.

[2]The 12 March email.

In paragraph 19, he records that:

During that conversation with Mr Yuen, and on the basis of my understanding and belief of the purpose and effect of the Proposed New Special Condition as stated in the previous paragraph, I instructed Mr Yuen to inform the defendant that the new special condition was acceptable to the plaintiff.

In her witness statement at paragraphs 10 and 11, Ms Natarajan says as follows:

Mr Costelloe’s witness statement at paragraphs 18 and 19 refer to his understanding and belief that Special Condition 32 (which he describes as the Proposed New Special Condition) allowed 68 Bridge to get priority in relation to the debt required by 68 Bridge for the purpose of settling the Head Contract or refinancing that debt if necessary. I did not hold that understanding or belief at any time. Mr Yuen’s statement at paragraph 53(i) sets out matters that he said to Mr Costelloe about the First Natarajan Email. I did not hold the belief at any time that the right to lift the caveat to permit registration was limited in the way described there.
Rather, I intended Special Condition 32 to enable 68 Bridge to lodge any dealings contemplated by the contract (which includes a mortgage, assignment, charge or other dealing, as set out in Special Condition 17). In drafting Special Condition 32.3 I used the word ‘including’, so that the types of dealings were not limited by what was set out in paragraphs (a) and (b) of Special Condition 32.3. In drafting Special Condition 32.5 I set out a broad definition of Financier. I intended for 68 Bridge to have as much flexibility as possible, given that the contract would have a very long duration and I was concerned about 68 Bridge being impeded by GLP Batesford’s caveat.

Discovery issues

As noted above, the summons is brought pursuant to r 29.08 of the Rules. Relevantly, that rule provides:

(2)Where, at any stage of a proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any question in the proceeding may be or may have been in the possession of a party, the Court may order that party to make and serve on the other party an affidavit stating –
(a)whether that document or any, and if so, what document or documents of that class is or has been in that party’s possession; and
(b)if it has been but is no longer in that party’s possession, when the party parted with it and that party’s belief as to what has become of it.

The debate concerning the adequacy of the defendant’s discovery has been long-running notwithstanding the apparent narrowness of the issues in dispute.

The day after the defendant filed and served its list of documents on 7 March 2023, Clayton Utz wrote to Maddocks by letter dated 8 March 2023 in which Clayton Utz observed that the matters in dispute included ‘the terms of any loan arrangements between your client and its financiers and your client’s ability and intention to take on more debt which would be secured by the “Mortgage”’ and ‘the parties’ position in connection with the “Earlier Contract”, “Common Intention”, “Assumption” and “Mutual Assumption” referred to in the statement of claim’.

In response to those specific complaints, Maddocks in a letter dated 10 March 2023 agreed to provide discovery of the mortgage by way of a supplementary list of documents but otherwise observed that the defendant’s ‘ability … to take on more debt’ was not in dispute save insofar as it was elucidated by the proposition that the mortgage was an ‘all moneys’ mortgage.

In respect of the complaint as to documents going to the intention to take on more debt which would be secured by the mortgage, Maddocks wrote, ‘[w]e are instructed that our clients have no documents evidencing such an intention’.

In relation to documents evidencing the parties’ position in connection with the ‘Earlier Contract’, ‘Common Intention’, ‘Assumption’ and ‘Mutual Assumption’, Maddocks wrote:

(a) as to the ‘Earlier Contract’ that it was not clear from the pleadings what additional documents would be relevant in relation to the position in connection with the alleged earlier contract given the allegation made in the pleadings and otherwise noted the plea in the ASOC at paragraphs 9-12 of the matters relevant to the question of construction and identification of the documents the plaintiff alleges are relevant to construction. As such, Maddocks wrote that there was no suggestion in the pleading that other extraneous evidence goes to the question of interpretation and requested an explanation as to the basis on which further discovery was required;

(b) as to the allegation in connection with the ‘Common Intention’, Maddocks wrote to the effect that the same comments apply with respect to the alleged earlier contract, that is to say the pleading identifies the specific matters and documents said to found the ‘Common Intention’; and

(c) in relation to the question of the ‘Assumption’ and the ‘Mutual Assumption’, Maddocks asked what documents the defendant would be expected to discover beyond the specific documents referred to in the pleading.

By way of response dated 14 March 2023, Clayton Utz noted that the letter dated 8 March 2023 was not seeking to prescribe categories for discovery but was merely giving examples and further stated that:

Discovery must occur in the context of the matters in dispute in the proceeding including by reference to your client’s denials of the matters in paragraphs 14, 17(b), 21, 24 and 38 of the statement of claim; your client’s request for further and better particulars dated 3 February 2023, the extant court undertaking given by your client and the matters set out in paragraph 12 of our client’s further and better particulars dated 23 February 2023.

The defendant filed a supplementary list dated 22 March 2023.

By letter dated 22 March 2023, sent following the provision of the defendant’s supplementary list of documents, Clayton Utz reiterated that the discovery continued to be defective and that ‘discovery needs to occur in the context of the issues in dispute in the proceeding’. Otherwise, the letter identified that documents passing between the defendant and its lenders must be discovered including details of various forms of subordinated debt governed by a subordination deed referred to in a facility agreement entered into by the defendant in respect of the contract of sale. The plaintiff asserted that details of the subordinated debts including copies of any loan agreements, documents ancillary to those loan agreements and the subordination deed must be discovered along with any other material relating to the subordinated debt.

By email sent 23 March 2023, Maddocks asserted that it was unclear as to why the discovery was said to be defective and the plaintiff had not explained the basis upon which it asserted that certain categories of documents were discoverable. Further, Maddocks noted that the facility agreement did not assert that there was further debt and stated that the subordination deed deals with shareholder subordination which did not bear on any issue in dispute in the proceeding and was not discoverable.

By letter dated 22 May 2023, Clayton Utz wrote that as previously outlined the defendant’s discovery remains defective.

By response sent the same day, Maddocks advised that the defendant intended to provide supplementary discovery of the mortgage and the facility agreement and otherwise stated that ‘noting the limited factual issues in dispute we disagree that further discovery is required’. Maddocks noted that the plaintiff had not stated why the discovery was defective despite requests made on 10 March 2023 and 23 March 2023 and reiterated that Clayton Utz provide the defendant with reasons why discovery was defective and/or the documents that were missing and their relevance.

By response made 24 May 2023, described in oral submissions by the plaintiff’s counsel as an important letter, Clayton Utz wrote as follows:

Discovery deficient
5You say that we have not previously stated why we consider that the defendant’s discovery is deficient. This is incorrect as we have previously done so in our letters dated 8 and 14 March 2023.

6 For example, in paragraph 5 of our letter dated 14 March 2023 we said:
Discovery must occur in the context of the matters in dispute in the proceeding, including by reference to your client’s denials of the matters in paragraphs 14, 17(b), 21, 24 and 38 of the statement of claim; your client’s request for further and better particulars dated 3 February 2023; the extant court undertaking given by your client; and the matters set out in paragraph 12 of our client’s further and better particulars dated 23 February 2023.

7To expand on those, in the statement of claim dated 16 December 2022 (SOC) our client alleges that:
(a)the defendant knew of the plaintiff’s misapprehension in relation to the “Proper Construction” (SOC at [17(b)]);;
(b)the defendant knew that the plaintiff had adopted the “Assumption” (SOC at [21]);
(c)the plaintiff and the defendant conducted their relationship on the basis of the “Mutual Assumption” (SOC at [25(a)]);
(d)the plaintiff and the defendant each knew or intended that the other was acting on the basis of the “Mutual Assumption” or would be acting on the basis of the “Mutual Assumption” (SOC at [25(b)]); and
(e)the defendant knew that the plaintiff could or would consent to the registration of the Mortgage only if it had the “Assumption” (SOC at [50]).

8        The matters go to your client’s conduct and state of mind.
…
10In those circumstances, the matters referred to in paragraph 7 above are in dispute and, pursuant to r 29.01.1, your client must discover all documents:
(a)       on which it relies;
(b)       that adversely affect its own case;
(c)       that adversely affect our client’s case; and
(d)      that support our client’s case.
11Instead your client seeks to resist discovery on the basis set out in your letter dated 10 March 2023. With respect, that letter does not identify any proper basis to resist discovery, and tellingly, makes no mention of [17(b)], [21], [25(a)], [25(b)] or [50] of the SOC. 12 Further, your letter erroneously calls upon the plaintiff to identify ”documents [we] say are missing and the relevance of those documents”. With respect, that statement misconceives the discovery process and your client’s obligation to discover all relevant documents in its possession, custody or power. This includes all documents which support or harm your client’s case in respect of the conduct and state of mind referred to in paragraph 7 above.

By letter dated 2 June 2023, Maddocks replied, inter alia, observing that beyond repeating a number of paragraphs in the statement of claim at no stage had the plaintiff identified the missing documents that were said to be missing or why the plaintiff regarded those documents as relevant.

Maddocks then turned to the particular paragraphs in the pleading identified at paragraph 7 of Clayton Utz’s letter dated 24 May 2023, and responded as follows:

7 As to the paragraphs identified, we note as follows:[3]
[3](Underlining added).
(a)[17(b)]: the particulars of the allegation at 17(b) of the Statement of Claim (being an allegation that the Defendant knew of the plaintiff’s misapprehension pleaded at 17(a) are that our client’s belief and understanding ”arises from or is to be inferred from the exchange of the 12 March Email before Special Condition 32 was inserted …”. The document alleged to be relevant to our client’s knowledge is expressly identified by the pleadings and is in discovery. We therefore ask that you articulate what other or further documents would be discoverable by our client. Notwithstanding that we do not think broader discovery on this point is required, we are instructed that our client does not have any documents that suggest knowledge of the type alleged.
(b)[21]: Similarly, the particulars of our client’s knowledge of the Assumption are that the knowledge ”arises from or is to be inferred from the fact that the plaintiff executed the Contract of Sale after it received the 12 March Email”. That, is it is alleged by your client that our client’s knowledge arises from the fact of execution of the Contract of Sale. As such, we simply do not understand your assertion that our client’s discovery is inadequate. We ask that you let us know what types of documents you would regard as being discoverable that have not been discovered.
(c)[25(a)/25(b)]: the particulars of the allegations set out in these paragraphs of the Statement of Claim are said to be the conduct pleaded at paragraphs 31-35. Those paragraphs refer to specific emails, copies of which are in discovery. We therefore ask that you articulate what other or further documents would be discoverable by our client. We are otherwise instructed that our client does not have any documents that suggest knowledge of the type alleged.
(d)[50]: at paragraph 20 of the Further Particulars, the plaintiff says that the defendant’s knowledge that the plaintiff would consent to the registration of the Mortgage only if it had the Assumption, is to be inferred from the emails pleaded in paragraphs 11 and 31 to 35 of the Statement of Claim. Again, your client has pleaded the specific documents on which it allegedly relied, all of which are already in discovery.

8The assertion that our client’s discovery is deficient appears to be based on an assumption that the matters pleaded by your client as to our client’s knowledge are indisputably correct, and that our client necessarily has documents that support those assertions. Our client is aware of its discovery obligations and has made discovery of all documents relevant to the issues pleaded in the Statement of Claim. Our client cannot give discovery of documents that it does not have.
9At paragraph 11 of your 24 May 2023 letter, you say that our client ‘resist[s]’ discovery on the basis of our letter dated 10 March 2023. Our client did not resist discovery in that letter, and does not resist discovery now. In that letter, we explained the basis on which we say there are no further documents to discover in relation to the ‘Alleged Earlier Contract’, ‘Common Intention’, ‘Assumption’ and ‘Mutual Assumption’.

By letter dated 6 June 2023, Clayton Utz responded again denying that it had failed to identify the defects in the defendant’s discovery. Rather, Clayton Utz reiterated that ‘the real problem is that your client has mischaracterised what is “in dispute” in the proceeding and thereby given no discovery at all in respect of key issues’. Continuing that theme, Clayton Utz asserted that the defendant had ‘misapplied itself … based on its erroneous view of what is “relevant to the pleaded case”’, taking as one example that there were no documents discovered in respect of the settlement of the head contract when such documents must exist because it is common ground that the head contract did settle, on 20 July 2022.

Further, Clayton Utz asserted that the defendant ‘could not fail (completely) to give discovery based on a flawed view of the issues in dispute in the proceeding, and then call on [the plaintiff] to identify specific documents or categories of documents which should be discovered’.

Following that letter, the parties served witness statements and the plaintiff filed a list of documents which it proposed to tender in evidence. The defendant did not file a separate tender list, content to rely upon the documents referred to in the plaintiff’s tender list.

In a letter dated 25 October 2023, Clayton Utz complained of the absence of discovery of any documents at all:

(a) passing between the defendant and its mortgagee;

(b) passing between the defendant and the other parties to the head contract;

(c) passing between the defendant and its agent, Colliers, save for the one document referred to in paragraph 4 of the letter dated 25 October 2023; and

(d) passing between the defendant and its ‘shareholders’ and ‘investors’.

Clayton Utz said that there were reasonable grounds to be fairly certain that there would be documents in the defendant’s possession, custody or control which are relevant to the case as pleaded but which had not been discovered.

It then referred to paragraphs 8-12 and 17 of Ms Natarajan’s witness statement and paragraphs 8, 11 and 14 of Mr Chan’s witness statement. By way of response dated 26 October 2023, Maddocks, among other things, referred to the categories set out in paragraph 5 of the letter of 25 October 2023 and requested advice as to the relevance of the communications to the cases pleaded.

When the matter came on for directions on 17 November 2023, the plaintiff filed in advance of that hearing submissions in support of the assertion that the discovery was inadequate. Those submissions asserted the ‘self-evident inadequacy’ of the discovery describing it in these terms:

(a) The defendant has discovered 91 documents. However, documents numbered 8 to 88 (excluding the general ledger at document 66) comprise items of correspondence passing between the parties, and documents 5 and 6 comprise copies of the contract of sale between the parties. Each of these documents were already in the possession of the plaintiff and initially had not been discovered (and correctly so) in accordance with r 29.01(4) of the Rules.

(b) Of the remaining 9 documents, 5 were transactional documents (items 1, 2, 89-91) including a copy of the mortgage and memorandum of provisions which were already documents that the plaintiff had in its possession.

(c) Of the final four documents there has been:

(i) no discovery at all of any communications or documents passing between the defendant and its lender (the mortgagee) save for the general ledger at document 66;

(ii) no discovery at all of any communications or documents passing between the defendant and its agent save for the emails at documents 3 and 7;

(iii) beyond document 4, no discovery at all of any internal communications or documents within the defendant including with its shareholders and/or investors; and

(iv) no discovery at all of any communications or documents passing between the defendant and the counterparties to the head contract.

The form of order proposed sought an order that the defendant make discovery by affidavit of documents that are ‘relevant’ to the following issues:

(a) the amount required to settle the head contract and the amount of indebtedness required by the defendant to settle the head contract;

(b) whether the defendant had the common intention and executed the contract of sale in the belief and understanding that it provided for the common intention;

(c) whether the defendant knew that the plaintiff believed that special condition 32 bore the proper construction;

(d) whether the defendant knew that the plaintiff would execute the contract of sale only if it adopted the first assumption;

(e) whether the defendant also adopted the first assumption or acquiesced in the plaintiff’s adoption of the first assumption;

(f) whether the defendant knew or intended that the plaintiff was acting on the basis of the mutual assumption or would be so acting;

(g) whether it is or was the defendant’s expectation to borrow up to $140.8 million which would be secured by the mortgage;

(h) whether the mortgage is granted or whether the defendant registered the mortgage for a purpose other than securing or refinancing the indebtedness;

(i) whether the defendant intends to use the mortgage to secure moneys that will be used for a purpose other than securing or refinancing the indebtedness;

(j) whether the defendant had reasonable grounds for making the representation;

(k) whether the mortgage has secured or will secure indebtedness beyond the indebtedness; and

(l) whether the defendant knew that the plaintiff would consent to the registration of the mortgage only if had the second assumption.

The form of order proposed, although sought pursuant to r 29.08, did not readily comport with the rule; for one thing, insofar as it sought discovery of ‘relevant’ documents, the order sought begged the very question at issue, namely whether the documents existed, and if so their relevance.

At the hearing on 17 November 2023, senior counsel for the defendant sought an adjournment of the summons for three weeks stating that his client was currently in the process of undertaking further searches for documents that fell within the topics that had been identified in those submissions. Senior counsel stated that as a result of the further searches it is likely that there will be further documents that will be reviewed and may well be discovered.

Otherwise, senior counsel observed that it was not really an application for particular discovery but noted that ‘now we know what the plaintiffs are really seeking in terms of issues, we are searching for further documents and we’ll be in a position to inform the court, we propose 8 December, in 3 weeks’ time’.

I made the orders in the form sought by the plaintiff given that its terms only required the defendant make discovery of relevant documents and otherwise relisted the summons for hearing in 3 weeks’ time. I informed the parties that the making of the order did not carry with it acceptance of the submission that the discovery was deficient; I observed that it was convenient to make the order as it could not prejudice the defendant given that the order, as sought (and made), only required discovery of ‘relevant’ documents falling within the identified categories by 4:00pm on 1 December 2023.

In accordance with that order, the defendant served an affidavit of documents on 1 December 2023 which listed additional documents numbered 92-153.

The matter returned to Court on 8 December 2023 where, among other things, I heard argument as to the defendant’s objection to the Colliers subpoena and the second LAS subpoena. The day before the directions hearing, Clayton Utz wrote a further letter to Maddocks which, inter alia, referred to the provision of the affidavit of documents and the statement in the accompanying letter from Maddocks which stated that save for documents that responded to category 1(a), the defendant did not have any further documents that fell within the categories.

In the letter Clayton Utz sent 7 December 2023, the author referenced the categories of documents sought by reference to ‘the following “core issues”’:

(a)Category 1(a) – goes to the amount required to settle the Head Contract and the amount of indebtedness required by the Defendant to settle the Head Contract;

(b) Categories 1(b)-(l) – go to:
(i)the state of the parties’ intentions and belief in respect of the amounts required as stated in sub-paragraph (a) above and their consequent conduct;
(ii)whether it is or was the defendant’s expectation to borrow up to $140.8 million, which would be secured by the Mortgage; and
(iii)whether the Defendant intends or intended to use the mortgage to secure moneys that will be used for a purpose other than securing or refinancing the amounts required in sub-paragraph (a) above.

Those core issues capture the following specific matters appearing in the evidence, as set out in [6] of our client’s submissions on the subpoena objections dated 5 December 2023 (omitting footnotes):
(a)whether John Yuen of the plaintiff told Bruce Chan of the defendant that the defendant could borrow ‘whatever [Mr Chan] wanted’;
(b)whether the defendant has ever said that it intends to borrow amounts under the mortgage in excess of the $60 million (plus the capitalised interest) or expected or intended to do so;
(c)whether the defendant ”had to borrow” certain funds ”to acquire the Land” pursuant to the Head Contract’; and
(d)whether the defendant intended or knew that the plaintiff received the email dated 12 March 2022 referred to in paragraph 11 of the ASOC.

In the letter, Clayton Utz further submitted that the defendant’s affidavit should explain the relevance test applied by Mr Chan and otherwise requested that an itemised list of privileged documents be prepared.

At the hearing on 8 December 2023, senior counsel for the defendant stated that his client would provide an itemised list of privileged documents and otherwise submitted that the discovery summons should be dismissed as there were no further documents to discover.

The plaintiff sought a further adjournment of the discovery summons on the basis that it retained an apprehension that the defendant had misconceived the issues in the case. Through its counsel, the plaintiff stated that it would seek to resolve the apprehended misapprehension in the first instance via correspondence.

Accordingly, I made orders that any further hearing in relation to the application for particular discovery be adjourned until 2:15pm on 19 January 2024 and that each party file and serve any further material on which it wishes to rely in relation to the application, including any proposed form of order, by 4:00pm on 17 January 2024.

On 18 January 2024, the defendant filed and served a further affidavit of documents listing an additional two documents.

Despite the indication by the plaintiff that it would set out its concerns as to the defendant’s failure to properly assess the issues in the case in correspondence, this did not occur. The plaintiff did not communicate at all with the defendant as to discovery until about midday on 19 January 2024, a little over two hours prior to the hearing when it provided the defendant with a bundle of documents which would be relied upon in the discovery application; none of the correspondence in the bundle post-dated the hearing on 8 December 2023.

The only communication relating to the extant interlocutory disputes concerning the Telco subpoenas and discovery took place via the service of the Annetta affidavit and the associated outline of submissions which related to the Telco subpoenas alone which as stated above was served on 17 January 2024.

In oral submissions, the plaintiff’s counsel outlined the defendant’s misapprehension which he submitted related to the allegations made by the plaintiff concerning the defendant’s knowledge or intention. Counsel stated that where a plaintiff makes an allegation as to the state of mind of the defendant, the defendant must discover all documents that either support or harm its case, or support or harm the plaintiff’s case. Counsel further submitted that a defendant misapplies itself if it constrains its discovery only by reference to knowledge derived by reference to the specific documents pleaded by the plaintiff which evidences such knowledge. Counsel observed that given the inherent information disparity which applies where a plaintiff makes a plea as to a defendant’s knowledge, it is common for a plaintiff to plead only limited particulars of that knowledge at the time of the plea. But, as counsel continued, there will often be other documents which establish that knowledge of which the plaintiff was not aware. Counsel submitted that the vice of the defendant’s approach was that it eschewed discovery obligations going to the defendant’s knowledge except in respect of knowledge derived from a specific and identified fact or matter pleaded or particularised by the plaintiff. By way of further illustration, counsel provided as an example a case where a plaintiff pleads that a defendant intends to demolish a building with the pleaded or particularised basis of that knowledge being an email sent from A to B, but unknown to the plaintiff there is a separate internal email amongst representatives of the defendant or a further email from C in the defendant’s possession which evidences that intention. In such a case, counsel submitted that documents that indicated a defendant’s knowledge derived from that other source are discoverable and that the vice in the defendant’s approach is that it confined its discovery task concerning knowledge only to the documents specifically identified and relied upon in the plaintiff’s pleading.

In response, counsel for the defendant observed that this oral submission was the first time in which the asserted misapprehension had been squarely identified; secondly, counsel readily accepted that an approach to discovery on such a limited basis would indeed be misapprehended but that the defendant had not adopted any such approach. Counsel referred in particular to paragraph 7 of the letter from Maddocks to Clayton Utz dated 2 June 2023 in which, in response to paragraphs 7(a)-7(d) of the letter from Clayton Utz dated 24 May 2023, Maddocks advised, in respect of the documents referred to in paragraphs 7(a) and 7(c), the defendant did not have any documents that suggest knowledge of the kind alleged. Further, counsel stated that the defendant did not have any documents with respect to the matters set out in paragraphs 7(b) and 7(d), namely that the defendant knew that the plaintiff had adopted the assumption and that the plaintiff and the defendant each knew or intended that the other was acting on the basis of the mutual assumption, although this was not specifically referred to in the letter. I also note that the defendant also stated in paragraph 8 of that same letter that it could not give discovery of documents that it does not have; and otherwise served an affidavit of documents on 1 December 2023 in respect of ‘relevant’ documents in certain identified categories and stated in a covering letter that it did not have any other documents that fell within the categories.

Having carefully read the correspondence contained in the bundle, I do not accept that it is obvious that the defendant misapprehended the discovery task. Nor do I accept that the plaintiff made that deficiency clear. Aside from the initial rather confusing reference to the ‘all moneys mortgage’ viewed as a whole, the sensible reading of the correspondence is that there are no documents beyond those which are referred to in the ASOC which shed light on the defendant’s state of mind.

As earlier noted, the critical issue in the case, insofar as it concerns the question of the proper construction of special condition 32 and the associated alternative claims for rectification and in estoppel, is whether the express reference in the 12 March email to the need for comfort that any caveat lodged by the plaintiff ‘would not impede the mortgage we will need to grant for the purpose of settling our head contract or refinancing such mortgage if required’ has the effect that the reference to ‘including’ in special condition 32.2 and the associated reference to the words ‘contemplated by this contract’ and special condition 17 are to be put to one side as it were, either as a matter of the contract’s proper construction or because of the grant of some form of relief consequent upon the plaintiff’s equitable claims.

The fact that the defendant asserts a state of mind contrary to the limitation apprehended by the plaintiff does not necessarily carry with it that the defendant would be expected to have any documents in its possession beyond the contract, which does not on its face contain words of limitation (or the 12 March email, which arguably does) which bear on the question. It may have discussed its intended effect and documented the discussions or it may not.

To put it another way, it by no means follows that one would ordinarily expect there to be documents that go to the question of the defendant’s state of mind in respect of those issues beyond the 12 March email or the contract of sale. Further, the defendant has in correspondence confirmed that it does not have any such documents. To the extent that it failed to give any specific statement to this effect in relation to the categories in paragraphs 7(b) to 7(d), I do not see that anything turns on this as they are materially of the same nature as those categories where the defendant has expressly stated that it has no documents. Further, prompted by the plaintiff, the defendant has revisited the question of discovery on a number of occasions including by purporting to comply with the orders made 8 November 2023.

The allegation pleaded in paragraph 38 of the ASOC and the further allegations that proceed by reference to that paragraph warrant separate consideration.

It is convenient to set out paragraphs 38 to 40 in full.

The Defendant’s subsequent position
38.In September and October 2022, the Defendant’s agent confirmed to the Plaintiff that it was the Defendant’s expectation to borrow up to $140.8m, which would be secured by the Mortgage.
Particulars
The Plaintiff refers to paragraphs 4 and 5 of the affidavit of Rory Costelloe sworn 16 November 2022 (noting that the reference to ‘the Plaintiff’ in paragraph 5 should be read as a reference to ‘the Defendant’).
Claims in Contract
39The Plaintiff refers to and repeats paragraphs 37[4] and 38 above and says that by reason of those facts:
[4]Paragraph 37 pleads that on 20 July 2022 the defendant settled the head contract and the mortgage was registered.
(a)the Defendant has breached the Contract of Sale by registering a mortgage for a purpose other than securing the Indebtedness ~~settling the Head Contract~~ or refinancing the Indebtedness if required;
(b)alternatively, the Defendant intends to breach the Contract of Sale by using the Mortgage to secure moneys that will be used for a purpose other than securing the Indebtedness ~~than~~ ~~settling the Head Contract~~ or refinancing the ~~such~~ Indebtedness ~~that wa~~s if required ~~to settle the Head Contract~~.

40The Plaintiff has, alternatively will, suffer loss and damage to the extent that the registered Mortgage secures indebtedness beyond securing the Indebtedness ~~that which was required to settle the Head Contract~~ or refinancing the Indebtedness if required ~~same~~.

The defendant denies paragraphs 38, 39 and 40 and in respect of the allegation in paragraph 40 pleads further as follows:
40 It denies the allegations in paragraph 40 and says further that:
(a)paragraph 40 does not disclose a cause of action and/or is embarrassing;
(b)the plaintiff has not identified or quantified, “to the [unpled] extent that the registered Mortgage secures indebtedness beyond securing the Indebtedness or refinancing the Indebtedness if required”, what loss and damage it contends it:
(i) has already suffered; or
(ii)will in future suffer, and in this latter case, any relevant contingencies to such damage being suffered;

(c)the law does not recognise a contingent claim for future loss and damage (i.e. loss and damage that has not actually been suffered) as actionable;
(d)insofar as the plaintiff’s claim for damages for breach of contract is a claim for damages which it may suffer in future upon the happening of one or more unspecified contingencies, such claim is bad at law;
(e)the defendant cannot understand this aspect of the case alleged against it.

The state of mind of the defendant relevant to this allegation is not one which directly goes to the defendant’s understanding of the effect of special condition 32.2, including in the light of the 12 March email. Rather, paragraph 38 pleads a fact, namely that in September and October 2022, the defendant’s agent confirmed to the plaintiff that it was the defendant’s expectation to borrow up to $140.8 million which would be secured by the mortgage. As the subheading which introduces the allegation, namely ‘The Defendant’s subsequent position’ makes clear, the relevance of the matter pleaded is that it alleges a fact, namely a statement made by the defendant’s agent to the plaintiff which discloses the defendant’s state of mind, namely that it expected to be able to borrow up to $140.8 million. This plea, insofar as it relates to the defendant’s intentions post contract also informs the context of paragraphs 39 and 40 of the ASOC.

Paragraph 39 picks up both paragraph 37, which alleges the fact of settlement of the head contract and the registration of the mortgage, and paragraph 38 which refers to the conversation with the agent disclosing the defendant’s intention to borrow up to $140.8 million, as giving rise to both an existing breach and an intention to breach the contract in the future by borrowing up to $140.8 million.

Relevantly, on 9 February 2023, after the proceeding had been commenced, the defendant gave an undertaking to the Court that it would not, without giving 28 days prior written notice to the plaintiff, or obtaining its prior written consent, use the registered mortgage over the property for any purpose other than in relation to financing, or refinancing, the defendant’s acquisition of the property pursuant to the head contract. Although time limited, the undertaking has been extended on a regular basis and remains in place.

Settlement of the contract of sale has not yet taken place and is due on the earlier of nine months from satisfaction or waiver of a rezoning condition, or 13 September 2028. The plaintiff’s interest as purchaser under the yet to be completed contract of sale is protected by caveat. No such dealing can be registered absent its consent, or court order. Further, the deposit paid by the purchaser must be held by a stakeholder pursuant to s 24 of the Sale of Land Act 1962 (Vic) (the ‘SLA’) and cannot be released prior to settlement save with the purchasers’ written consent given pursuant to s 27 of the SLA.

In those circumstances, it is not clear how the plaintiff says that it has suffered any loss in respect of any breach which has occurred; certainly, it has not particularised any such loss. Noting, but putting to one side the defendant’s plea that the law does not recognise a contingent claim for future loss and damage, the purchaser’s apprehension appears to be that it may suffer harm in some way if the defendant borrows more than the plaintiff contends that the contract permits and cannot transfer the property in 2028 (or earlier if the rezoning takes place before then), because of the borrowings secured against the property.

Against that background, it appears that paragraphs 38 to 40 address both a specific breach that has already occurred when the mortgage was registered, but in addition go to the defendant’s apprehension of an apprehended future breach. The likelihood of that further breach may be relevant to the grant of the quia timet injunction restraining the defendant from using the mortgage for a purpose other than securing the indebtedness or refinancing the indebtedness if required.

It appears that the question of actual and apprehended breach explains the request by the plaintiff for documents (unlimited by time, passing between the defendant and its mortgagee)[5] and ‘relevant’ documents relating to the categories set out at paragraph 71(g) and (i) above, namely whether it is or was the defendant’s expectation to borrow up to $140.8 million which would be secured by the mortgage and whether the defendant intends to use the mortgage to secure moneys that will be used for a purpose other than securing or refinancing the indebtedness.
[5]See the letter from Clayton Utz dated 25 October 2023.

As noted above, the defendant denies any existing breach and denies both the allegation of fact as to the communication between the defendant’s agent and the plaintiff and as to the implied allegation that it expected to be able to borrow $140.8 million against the property. The defendant has not elected to call the agent who engaged in the alleged conversation with Mr Costelloe; the only paragraphs of the defendant’s witness statement relevant to those matters are to the effect that no officer of the defendant concerned was party to the conversation. Otherwise, the defendant’s witness statements are carefully drawn and refer only to an absence of any present intention to borrow more money than the $60 million plus capitalised interest already borrowed and otherwise refers to the fact that the existing facility agreement which has been discovered requires the loan to value ratio to be kept at or below 48% of the purchase price less the deposit.

To the extent to which there are documents in the defendant’s possession which bear upon any existing breach (occasioned by the lodgement of a registered mortgage which secures indebtedness which goes beyond that permitted by the contract of sale on the interpretation proffered by the plaintiff) those documents are plainly discoverable. I see no basis however for going behind the lists of documents and two affidavits of documents served.

In relation to the allegation of the intention to take on more debt in the future, on a strict reading of the pleading, the sole basis of the intention pleaded as a material fact relates to the alleged $140.8 million the subject of the alleged discussion in September and October 2022 with the agent, which will not be subject of any contrary evidence called by the defendant at trial. On a strict reading of the pleading, only documents which relate to that allegation and that intention are discoverable. The allegation in paragraphs 38 and 39 is not one of a general allegation of an intention to borrow more than the amount necessary to settle the head contract which is particularised by the conversation with the agent with provision for further particularisation. The form of the pleading differs from the pleas in paragraphs 15 to 26 where the allegation as to the defendant’s state of mind are pleaded broadly. Although the form of the pleading could be clearer, when read in light of the further and better particulars relating to paragraphs 38 and 39 which refer to the undertakings and various exchanges of correspondence between the solicitors as to what is permitted by the undertaking and the contract of sale, a less strict reading of the plea to the effect of an allegation of a general intention to borrow more money than that necessary to settle the head contract seems more likely to be what have been intended. In any event, in its responses Maddocks appears to have proceeded on the basis of a broader interpretation, and has stated that there are no documents evidencing such intention.[6] Further, in the affidavit of documents filed 1 December 2023 pursuant to the orders made 17 November 2023, the defendant did not list any such documents and Maddocks confirmed that there are no other documents that fall within the categories which included such documents.[7] Further the defendant also filed a short supplementary affidavit of documents on 18 January 2024.
[6]See above [55].
[7]See above [75]-[77}.

The above matters notwithstanding, in addition to pressing for an order that the deponent explain the relevance test adopted, the plaintiff presses for some further form of order in respect of communications between the defendant and its lender as the content of such communication may bear on the question of whether the defendant’s denial of an intention is well founded. It would also it seems permit the plaintiff’s policing of the defendant’s adherence to the undertaking. Of course, an absence of documents evidencing an intention which is denied, would be consistent with no such intention being held.

To the extent to which the correspondence from Clayton Utz referencing all communications between the defendant and its lender,[8] unlimited by subject matter or time, requires production of all communications between the defendant borrower and the mortgagee because the absence of references to such intention also proves the negative and hence supports the denial, I do not accept that the discovery burden on a party denying an allegation of state of mind extends this far. Alternatively, if documents of such nature are discoverable, then I do not accept that an order to such effect is necessary or otherwise appropriate and proportionate and should not be made on discretionary grounds given the defendant’s repeated denial, its undertaking offered to the Court, the repeated insistence of the fact that there are no relevant documents and importantly the fact that the issue of an apprehended breach does not bear upon the question of the proper construction of the contract of sale or the equitable claims (save in respect of the latter only on the question of relief).
[8]If this is the suggestion is does not emerge clearly from the correspondence.

Overall, I do not accept that the premise of the plaintiff’s complaint is made out; I do not accept that the defendant has approached the discovery task on a misapprehended basis.

Returning to r 29.08 of the Rules, I am not satisfied from ‘evidence or from the nature of circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of documents relating to any question in the proceeding may be or may have been in possession of [the defendant]’.

Orders made pursuant to r 29.08 are discretionary and are not to be made lightly.[9]
[9]Opti-Pharm Pty Ltd v Nature One Dairy Pty Ltd (No 2) [2018] VSC 688, [20].

Section 55(1) of the Civil Procedure Act2010 (Vic) (‘CPA’) provides that a court may also make any order or give any direction in relation to discovery that it considers necessary or appropriate.

I have given some thought to whether, notwithstanding that the plaintiff has not satisfied the elements of r 29.08(2), I should nevertheless make an order pursuant to s 55 of the CPA to the effect that the defendant file and serve an affidavit confirming that it does not have any other documents in its possession beyond those already discovered.

In my view such an order is not necessary; a fair reading of the correspondence suggests this has been the defendant’s position throughout; in any event, it has now been stated by responsible counsel in the course of a contested application. Further, the plaintiff did not articulate its complaint in the cogent manner in which it was advanced orally until the date of the hearing. I do not believe that such an order is necessary, nor is it consistent with the overarching purpose which requires disputes to be resolved in a cost effective and efficient manner.

The plaintiff’s counsel also asserted at the hearing that the list of privileged documents was defective in that it was not in the form of an affidavit and nor did it list all recipients of emails which was said to be important as it may amount to a disclosure of otherwise privileged information to a third party giving rise to a waiver of privilege. In response to this assertion, raised for the first time orally on 19 January 2024, counsel for the defendant stated that on her instructions the description in the list accurately recorded all recipients. Counsel stated that the defendant would in any event verify the list on oath. Given its willingness to do so, I do not consider that it is necessary to make any order; the defendant should attend to this as soon as practicable.

Accordingly, I propose to dismiss the summons. I turn now to the Telco subpoenas.

The Telco subpoenas

The Telco subpoenas seek production of text messages sent or received from/on telephone numbers belonging to:

(a) Ms Natarajan, the general counsel of the defendant;

(b) Mr Chan, the director of the defendant;

(c) Sioris Lambro of LAS, which company acted as the broker for the lending arrangements taken out by the defendant;

(d) Mr Gardiner and Mr Hobart of Colliers,

during the period[10] from:
[10]A total period of 78 days.

(e) 11 March 2022 to 5 April 2022[11] (which the plaintiff submits is the period that the contract of sale was negotiated) as appears from paragraphs [17]-[89] of the witness statement of Mr Yuen;

(f) 21 June 2022 to 21 July 2022 (30 days) relating to the period in which the parties corresponded in respect of the registration of the mortgage as appears from [23]-[48] of the witness statement of Mr Costelloe; and

(g) 1 September 2022 to 22 September 2022 (22 days) relating to the period referred to in [63]-[64] of Mr Costelloe’s witness statement.

[11]Given that the plaintiff pleads that the contract of sale was dated and executed on 13 March 2022 and these allegations are admitted by the defendant, the apparent relevance of 5 April 2022 is not clear.

On 4 December 2023, Maddocks, prior to lodging the formal objection, wrote to Clayton Utz in respect of the Telco subpoenas and proposed a regime to resolve the objection in which the parties would consent to an order allowing the defendant the right of first inspection of any documents produced so it could assess the documents for relevance, confidentiality and privilege and at the expiry of two days after such inspection either:

(a) consent to uplift an inspection by the plaintiff of all documents; or

(b) consent to uplift an inspection by the plaintiff of all documents except those in an enumerated list of documents which were irrelevant, confidential or privileged (with any dispute about whether the plaintiff was entitled to inspect documents in the list to be referred to an Associate Judge for hearing and determination).

Following receipt of a copy of the Telco subpoenas, by notice given 5 December 2023 the defendant notified the Prothonotary of an objection to the Telco subpoenas on the grounds that there was no legitimate forensic purpose.

In response to service of the Telstra subpoena, Telstra informed the plaintiff’s solicitors by email dated 21 November 2023 that ‘[o]ur communication records include calls, text messages and data sessions. Please be advised that we do not store the content of text messages. We are unable to produce records of communication between specific numbers. All outgoing records for each of the four numbers listed will show any communication between the respective pairs’.

Telstra’s response appears consistent with s 108 of the Telecommunications (Interception and Access) Act 1979 (Cth) which provides that it is an offence, inter alia, to access stored communications.

As a result, any documents produced on subpoena will show the fact of outgoing communications taking place at a particular time and date and the duration (whether by time in the case of a telephone call or character length in relation to a text message) but not disclose the content of the text message.

At the hearing of the application, counsel for the plaintiff stated that he had confirmed that this was also the case with respect to Vodafone and he believed that it was likely to be the case with respect to Optus. That is to say, production of documents pursuant to the Telco subpoenas will not facilitate the identification of the content of the text messages. Having now inspected the documents produced, that is indeed the case.

Given the content of the Telstra email and the inability to assess the content of any text message, it seems possible and perhaps likely that Maddocks had not perceived that inspection of at least the Telstra documents, would not reveal the content of the texts and hence assist in identifying irrelevant, confidential or privileged material. Certainly, there is no evidence that Clayton Utz provided Maddocks with a copy of Telstra’s email sent 21 November 2023 or otherwise explained its effect.

As noted above, at the hearing on 8 December 2023 I substantially accepted the defendant’s submissions regarding the breadth of the Colliers subpoena and the second LAS subpoena, and made orders which in effect narrowed the scope of subpoenas served upon Colliers and LAS.

The orders made facilitated the inspection by the plaintiff of, inter alia, text messages between Mr Sioris (whether as author or recipient) and Ms Natarajan, Mr Chan, Mr Gardiner and Mr Hobart and, separately, between Mr Gardiner (whether as author or recipient) and Ms Natarajan, Mr Chen, Mr Sioris and/or Mr Vasarelli (another employee at LAS) for the period 10 March 2022 to 31 October 2022. In the case of both subpoenas, production was limited to communications during that period in relation to:

(a) special conditions 17, 20.1 and/or 32 of the contract;

(b) the use to which any funds secured by the mortgage may be put; and/or

(c) any funds borrowed under the facility agreement.

On 21 December 2023, having received no response to its letter dated 4 December 2023, nor a copy of the Telstra email, Maddocks sent a further letter to Clayton Utz regarding the defendant’s objections to the Telco subpoenas.

After making reference to the orders made 8 December 2023, the letter requested the plaintiff either:

(a) withdraw the Telco subpoenas; or

(b) propose more narrowly drawn iterations of those subpoenas for the defendant’s consideration.

Clayton Utz did not respond to either the letter dated 4 December 2023 or that dated 21 December 2023. No communication was effected until 17 January 2024, when the plaintiff served the Annetta affidavit and a copy of the plaintiff’s submissions in respect of the Telco subpoenas.

In the case of the Vodafone subpoena and Optus subpoena, the plaintiff submitted that the Court should inspect the documents to see whether they are of the same nature as those produced by Telstra. It submitted that if the documents reveal the substantive content of text messages then they would apparently be relevant to the issues in the case and may bear upon the cross-examination of witnesses expected to be called in the proceedings for the plaintiff to know whether the defendant communicated by text with its lender or real estate agent at all and, if so, whether the text messages bear upon the defendant’s intention or state of mind. I inspected the documents; they are to the same effect as to the Telstra subpoena; the content of text messages is not revealed.

Notwithstanding that the material produced will not disclose the content of any text messages sent, the plaintiff still presses for the right to inspect the documents produced in response to the subpoenas on the basis that there is a legitimate forensic purpose in respect of any documents produced.

The plaintiff submitted that the records are ‘apparently relevant to the issues in the case and/or bear upon the cross-examination of witnesses expected to be called in the proceedings’. The plaintiff submitted that when one looks at the defendant’s witness statements, the effect of the defendant’s position by reference to ‘the totality of its evidence’ is that there were no relevant communications between the defendant and its lender or real estate agent that are relevant to the issues in dispute. Further that ‘the plaintiff will want to test this contention in its cross-examination of the witnesses in circumstances where the plaintiff would want to suggest that there would have been such communications’. As such, it wants to know, in the first instance, whether there was any communication at all between the defendant and its lender and/or estate agent in the relevant periods and, if so, the form of those communications (whether by phone or text) and their timing.

I accept that the relevant principles to be applied in determining objections of this nature were set out by the New South Wales Court of Appeal in Secretary of the Department of Planning, Industry and Environment v Blacktown City Council.[12]
[12][2021] NSWCA 145.

In Seven Network (Operations) Limited v Fairfax Media Publications Pty Limited,[13] the Full Court of the Federal Court conveniently summarised the relevant propositions as follows:

(a)the language of “tests” should be eschewed; whether a subpoena should be set aside depends on whether it involves an abuse of process, and it will be an abuse of process if it is not issued for a legitimate forensic purpose: Bell P at [60]-[61], with whom McCallum JA agreed at [98];
(b)it is not necessary to show that the documents subpoenaed will or will be likely to assist the case of the party that has issued the subpoena: Bell P at [57]-[58], Brereton JA at [86] and [96], McCallum JA at [98] and [100];
(c)it is sufficient to show that the subpoena can plausibly be seen to relate to an issue or issues in the proceedings or to cast light on such an issue, and the subpoena is not in other respects too vague or oppressive: Bell P at [57], McCallum JA at [98] and [100];
(d)put differently, it is sufficient to show that there is a reasonable basis for supposing that the material called for would likely add, in the end, in some way or another, to the relevant evidence in the case: Brereton JA at [89], with whom McCallum JA agreed at [100]; and
(e)it is sufficient to show that the documents sought are apparently relevant in the sense that it can be seen that the documents sought to be produced by way of subpoena will materially assist on an identified issue or that there is a reasonable basis beyond speculation that it is likely that the documents subpoenaed will so assist: Bell P at [65], with whom McCallum JA agreed at [98].[14]

[13][2023] FCAFC 185.

[14]Ibid [38(a) – (d)], citing Secretary of the Department of Planning, Industry and Environment v Blacktown City Council [2021] NSWCA 145.

It seems likely that the defendant’s initial concern was motivated more by what it perceived as the breadth of the subpoenas and the concern that the production of the content of irrelevant text messages passing between the defendant and its lender and between officers of the defendant and its estate agent over a lengthy period would or could extend to matters substantially beyond those in dispute in the proceeding.

This underlays the offer by Maddocks to Clayton Utz of a first right of inspection on the part of Maddocks and then a request to narrow the scope of the subpoenas.

This initial concern can be put to one side given that the material produced on subpoena will not reveal the content of the text messages.

In that context, the defendant argues that insofar as there are text messages between the plaintiff and the defendant relevant to the issues in dispute in the case, those text messages, insofar as they were sent or received by the defendant and retained by it, are discoverable and if they exist would have been discovered; secondly, to the extent sent or received by either Colliers or LAS, they are caught by the Colliers and the second LAS subpoenas. Thirdly, the defendant submits that all that the documents produced will reveal is the fact of communications taking place between representatives of the defendant and its estate agent and representatives of the defendant and its loan broker but not content. The defendant accepts that it communicated with its agent and loan broker during the 78 day period. It would be highly surprising if it did not; indeed, so much is apparent from the matters set out in the ASOC where Colliers acted as something of a go-between the plaintiff buyer and the defendant vendor, as would ordinarily be expected. In those circumstances, the defendant submits that there is no legitimate forensic purpose attending to the question of whether in fact representatives of the defendant and its agents and lender were in communication during the relevant periods or the time of those communications when in fact it is obvious that the defendant was in communication with its lender and agent.

Against that background, it is far from clear how the mere fact of a communication between representatives of the defendant and its agents or its lenders in and of itself has any legitimate forensic purpose. The plaintiff’s submissions, which are cast in general terms as set out above, do not materially assist in the identification of the legitimate forensic purpose. The only specificity attached to the submission, as to legitimate forensic purpose, is to test the defendant’s contention that there are no relevant communications between the defendant and its lender or real estate agent.

It is far from clear how communications between the defendant and its lender or between the defendant and its real estate agent are relevant to the issues in dispute save to the extent to which those communications bear on the defendant’s state of mind in respect of the matters considered in the context of the discovery dispute.

But putting that matter to one side, and as now appears, the documents produced on subpoena will not condescend to identifying the content of any such communications. On that basis and recognising the fact that the defendant and its agents and the defendant and its lenders were in communication by telephone and text during the relevant period, it is difficult to see what legitimate forensic purpose could be served by the fact of communications when the significance of those communications can only be determined by reference to their content which will not be apparent by the production.

There is nothing in this case which suggests that anything turns on the fact that the defendant and its lender and estate agent were in communication during the relevant period. In some cases, the mere fact of communication alone will be the subject of legitimate forensic enquiry; the plaintiff did not advance any submission to my satisfaction which would enable me to conclude that the fact that the agent called one of the defendant’s representatives on a particular day or sent them a text can plausibly be seen to relate to an issue or issues in the proceedings or cast light on such an issue. Nor am I persuaded on the current material that evidence of the fact of a call or the sending or receipt of a text will likely add in some way or another to the relevant evidence in the case, or that the documents establishing those propositions will materially assist on an identified issue.

However, given that the documents have been produced by the producing parties to the Court and are held in the custody of the Court, I do not propose to set the subpoenas aside. It may be the case that the evidence develops in some way not presently ascertainable whereby the fact of a communication being made or not on a particular day or at a particular time assumes significance. If that emerges and it becomes necessary for the subpoenaed documents to be inspected, that can be attended to by an appropriate order with inspection likely to be completed with despatch.

Accordingly, the order that I will make is that subject to further order, no party may be permitted to inspect the documents produced by the Telco subpoenas.

Miscellaneous other matters

Section 7 of the CPA provides that the overarching purpose of the Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. The overarching purpose applies to both parties and legal practitioners acting for those parties.[15] The overarching obligations apply in respect of the conduct of any aspect of a civil proceeding including any interlocutory application or interlocutory proceeding.[16] Section 20 provides that a person to whom the overarching obligations apply must cooperate with the parties to a civil proceeding and the court in connection with the conduct of that proceeding. Section 22 provides that a person to whom the overarching obligations apply must use reasonable endeavours to resolve a dispute by agreement between the persons in dispute unless it is not in the interests of justice to do so or the dispute is of such a nature that only judicial determination is appropriate.
[15]Civil Procedure Act 2010 (Vic) s 10.
[16]Ibid s 11.

In this case, the matters in dispute between the parties concerning the adequacy of the defendant’s discovery and the objections by the defendant to the Telco subpoenas are matters which ought to have been capable of resolution in a substantially more cost-effective and efficient manner than that which has ensued.

In particular, the core proposition advanced cogently by counsel for the plaintiff in oral submissions, to the effect that the defendant had misapprehended the discovery task by reference to assessing relevance as to documents evidencing its state of mind only by reference to documents identified by the plaintiff in its statement of claim, did not clearly emerge until the hearing. This oral submission was made well after numerous letters had been sent and a series of lists of documents provided and the matter had been debated to varying lengths at 3 prior interlocutory hearings. The failure to clearly identify the alleged deficiency occurred notwithstanding that on a number of occasions Maddocks had specifically asked the plaintiff to identify why it was that the defendant’s discovery was deficient. Beyond asserting that the discovery was insufficient and the regular repetition of the circular proposition that the deficiency arose by reference to a failure to perceive the relevant issues in dispute, the plaintiff did not identify with particularity the nature of the defect alleged.

When it did so, the defendant was able to respond quickly with assurance that it had not undertaken the discovery exercise by reference to the misapprehension feared by the plaintiff.

Similarly, in the case of the Telco subpoenas, it is probable that the defendant’s concerns with respect to the documents produced by those subpoenas related more to the possible disclosure of the content of the text messages rather than the fact of their sending.

This notwithstanding, there is no evidence that the plaintiff sought to explain to the defendant that, at least in the case of the Telstra subpoena, the produced material did not extend to the content of the text messages despite Telstra sending a direct communication to Clayton Utz alone on 21 November 2023.

Further, two letters sent 4 December 2023 and 21 December 2023 by Maddocks to Clayton Utz proposing a manner which could minimise the extent of any dispute relating to the Telco subpoenas were not the subject of any response at all. The failure to respond at all to those letters is regrettable at the very least and seems difficult to reconcile with the overarching obligations.

Accordingly, I consider it appropriate to take such matters into account in the context of the costs orders I shall make, although in a measured approach the defendant did not press for any costs orders in respect of the discovery application. I note that I adverted to cost consequences at previous hearings. The defendant did however seek an order that the plaintiff pay its standard costs of the objection to the Telco subpoenas although this was sought in the context of an order that those subpoenas be set aside which I do not think is necessary. That said, the subpoena issues were eminently resolvable and some cost consequence should apply.

Accordingly, the orders I shall make are as follows:

(1) The application by the plaintiff by summons dated 26 May 2023 is dismissed.

(2) There be no orders as to costs of that application.

(3) Until further order, no party be permitted to inspect documents produced to the Prothonotary pursuant to :

(a) the subpoenas dated 21 November 2023 to Telstra Limited and Vodafone Australia Pty Limited; and

(b) the subpoena dated 24 November 2023 to Optus Mobile Pty Limited.

(4) The plaintiff pay the defendant’s standard costs of and incidental to the objection to the subpoenas incurred during the period from 5 December 2023 to the date of this ruling (including 50% of counsel’s fees).

[2024] VSC 36

13 February 2024