Health and Life Care Ltd (Receivers and Managers Appointed) v Price Waterhouse and Robert Lister and Co Ltd (No. 2) No. SCGRG 93/289 Judgment No. 4373 Number of Pages 5 Discovery and Interrogatories

[1994] SASC 4373

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA ANDERSON J

CWDS
Discovery and interrogatories - discovery and inspection of documents - application pursuant to Rule 60 against probable third party - relevance may be taken from existing pleadings as well as affidavits in support of application - there is no requirement to individually specify documents sought. Supreme Court Rules Rule 60. Modbury Hospital v O'Louqhlin (1988) 49 SASR 452 and Casley-Smith v Evans and Sons 151 LSJS 357 at 363, applied.

HRNG ADELAIDE, 20 December 1993 #DATE 13:1:1994
Counsel for plaintiff:         Dr R J Baxter with Mr J D Warde
Solicitors for plaintiff:     Johnson Winter and Slattery
Counsel for defendant Price Waterhouse:             Mr A J Besanko with
   Mr M Barrett
Solicitors for defendant Price Waterhouse:             Kelly and Co.
Counsel for other party Robert Lister and Co.:         Mr H G Rowell with Ms L King
Solicitors for other party Robert Lister and Co.:         Kelly and Co.

ORDER
Application will be granted to the extent that in accordance with the arrangement made with Dr Baxter production should not occur until the plaintiff is aware of the terms of the order and has the opportunity to consider whether it has a claim for privilege.

JUDGE1 ANDERSON J By application of 28 October, 1993 the defendant sought orders pursuant to Supreme Court Rule 60 against, inter alia, Robert Lister and Company Pty Ltd ("Lister"). The application was supported by affidavits of Mr Barrett, solicitor, sworn that day and on 19 November, 1993. An affidavit was sworn by Mr Lister, a director of "Lister", in opposition to the application on 13 December, 1993. Mr Besanko, of counsel, appeared with Mr Barrett, for the defendant applicant, and Mr Rowell with Ms King, for the respondent Lister. The plaintiff, by its counsel Dr Baxter, was present and indicated a desire to take no part in the application but sought to be heard on the question of privilege should the application be granted. On that basis and by leave he withdrew. 2. At the outset it was made plain by Mr Besanko that the defendant viewed Lister as a probable third party in the proceedings and the application proceeded on that basis. No submissions were directed to the circumstance of Lister being a stranger to the action. Mr Rowell submitted, and I agree with him, that in such circumstances Rule 60.04(a) was apposite and it was not possible in such an application proceeding pursuant to Rule 60.01(2)(a) to require a respondent to discover or produce any document which would not be so available had the action begun. This, of course, is significantly narrower than the test applicable to an application pursuant to Rule 60.04(b) (see White J: Casley Smith v District Council of Stirling (1989) 51 SASR 447). 3. It has been acknowledged on several occasions since the decision of Bollen J in Modbury Hospital v O'Loughlin (1988) 49 SASR 452 that Rule 60 is such as to catch documents not previously within the 1947 Rules O31. Here, whilst relevance remains of central significance it is relevance as applicable to specified documents which is significant to the success or otherwise of the application. This was the significant submission of Mr Rowell. 4. This application, relating to an action which has commenced but involving proceedings within that action which have not yet been commenced, is different from the usual application purusant to Rule 60 where there is no surrounding atmosphere from which assistance may be gained. Mr Besanko indicated that it is the defendant's intention to issue proceedings against Lister pursuant to the provisions of Section 25 of the Wrongs Act, 1936 with it to be alleged that there has been a breach of duty by Lister to the plaintiff and should the defendant be liable then Lister should contribute to any judgment in favour of the plaintiff. Thus, this application falls to be considered therefore not only within the context of the affidavits and the exhibits thereto but also by having regard to the scene set by the statement of claim. 5. The statement of claim seeks damages from the defendant. It alleges that there was an agreement entered into between the plaintiff and the Consolidated Health Care Group on 23 March, 1987. The consideration is set out in paragraph 6 of the statement of claim. As was required in the agreement, an extraordinary meeting of the members of the plaintiff approved the acquisition of the new assets by the plaintiff. The statement of claim alleges that on 13 March, 1987 the plaintiff retained the defendant as an expert to act for and advise the plaintiff as particularized in paragraph 10(a) in these terms:
    " (i) whether the proposed acquisition of the New Assets
    was fair and reasonable;
    (ii)
    .....
    (iii) whether the proposed acquisition price of the New
    Assets was fair and reasonable;
    (iv) whether the future maintainable net profit per annum
    after interest of the New Assets would be at least $7.89
    million before tax; and (v) whether the statement of profits
    provided to the Plaintiff by the Consolidated Health Care
    Group in respect of the New Assets was accurate and
    sufficient in the circumstances to carry out the terms of
    the Retainer;
    (b) to prepare and present a report to the Plaintiff ('the
    Report') for incorporation in the explanatory memorandum to
    be sent by the Plaintiff to its members for the purpose of a
    meeting pursuant to Section 12(g) of the Companies
    (Acquisition of Shares) (South Australia) Code, and in
    accordance with the provisions of National Companies and
    Securities Commission Policy Statements relating to experts
    and experts' reports including policy statement nos 102 and
    116.
    (c) to prepare and present an advice to the Board of
    Directors of the Plaintiff advising whether the future
    maintainable net profit per annum after interest of the new
assets would be at least $7.89 million before tax." 6. It is subsequently alleged in paragraph 16 that the defendant was in breach of the retainer or in breach of the duty owed to the plaintiff. Allegations of the alleged failures by the defendant are particularized. Damages sought exceed $104 m (even though the plaintiff acknowledges a need to further particularize the calculation of that sum). 7. Whilst Lister is not mentioned in the statement of claim it is referred to in the information given by the plaintiff to its shareholders prior to the meeting referred to in paragraph 10 of the statement of claim which was held on 22 April, 1987. Lister reported to the directors of the plaintiff by letter of 21 March, 1987 (that letter was included in the advice to shareholders given over the hand of the Acting Chairman of the plaintiff and dated 27 March, 1987 (Exhibit 1 of Mr Barrett's affidavit of 28 October, 1993). Individual valuations were provided to the plaintiff, as was a summary valuation, by Mr Lister (Exhibit 2, ibid). These valuations were based upon analyses completed by Mr Lister as set out in each. 8. A further report (Exhibit 3 ibid.) was provided by Lister to the plaintiff as to the market values of the listed properties. Certain qualifications and disclaimers are within the report but it clearly indicates a reliance upon profit and loss accounts provided by the vendors, verbal advice from "various authorities" and again, a detailed analysis of recent sales adjacent to each individual location. 9. The defendant's report to the plaintiff (in both long and short form) is in the exhibits. 10. Against this background the defendant's application against Lister is made on the basis that what also is to be tested in this trial (when Lister becomes a third party) will be the accuracy of Lister's valuation. 11. Mr Besanko submitted that if the defendant's report is in error then the defendant should be able to test Lister's report to ascertain whether or not that has contributed to any loss sustained by the plaintiff. 12. Mr Rowell opposed this application principally on the basis that the applicant had failed to specify documents and to show that they are relevant to the proposed proceedings. 13. He placed reliance upon the propositions formulated by Olsson J in Casley-Smith v Evans and Sons 151 LSJS 357 at 363. The first two of these are:
    "(1) The Rule clearly contemplates that any orders sought to
    be made must relate to specified documents which can fairly be
    said to be relevant to proceedings either in existence or
    proposed to be instituted. In that context it must be borne in
    mind that the rule speaks of relevance to proceedings and is
    not, like the former RSC Order 31 Rule 31, limited in its
    application to documents relevant to an issue likely to arise in
    proceedings. It also fails to be contrasted with the express
    verbiage of SCR 58, which speaks of inter partes discovery of
    documents 'relating to any matter in question' in an action.
    (2) SCR 60 constitutes a separate code for disclosure and
    production of documents in relation to a person who is not a
    party to proceedings. The expressions employed in SCR 60 must
    be given a wide and liberal interpretation and they extend to
    and encompass not only documents relating to matters in question
    in an action but also to documents which, it is reasonable to
    suppose, contain information which may - not which must - either
    directly or indirectly enable the relevant party to advance his
    own case or to damage the case of his adversary. Indeed, Jacobs
    J went so far as to express the opinion that one of the purposes
    of SCR 60 is, for example, to assist a potential plaintiff to
    determine whether any, and if so what, issues can be raised by
    that party. White J considered that, for the purposes of SCR
    60, documents were relevant if they were capable of throwing
    light at all on the matters at issue in the proceedings."
    (emphasis added in (2)) 14. Mr Rowell submitted that in an application such as this where there are no pleadings as between the parties to the application it is very difficult to determine what is relevant bearing in mind that the respondent need not provide more than it may be required to discover at the usual time. He referred again to Casley Smith (ibid) at p367 where His Honour said:
    "... the applicant must be able to demonstrate the
    existence of specific documents which are at least capable
    of throwing some light on the matters directly in issue or
    likely to be in issue in this action." in support of this proposition. 15. Of course I accept what has fallen from His Honour but to my mind Mr Rowell has sought to ascribe a very narrow interpretation to the way in which this Rule may be used and has sought to equate His Honour's use of the word "specified" with "individually identified". Whilst in some instances there may be some basis for such an argument where an action is yet to be instituted to adopt such an approach in the present circumstances would seem to reduce the work this Rule has to do. This is particularly so where regard is had to the words in proposition (2) which I have emphasized. 16. Where there is, as here, a statement of claim in reasonably settled form and the plaintiff therein plainly has relied upon the work of an expert other than and in addition to the plaintiff (as can be seen from what the plaintiff distributed to shareholders and otherwise received from the respondent) then it is much more difficult to argue that it is uncertain as to what matters are in issue or likely to be. Similarly, in such circumstances and having regard to the words used by Lister in its reports as to what it relied upon or had access to in preparing its reports, it would be obstructive to the intent of the Rule to require that an applicant specify in terms of individually identifying or nominating documents. 17. Here, where the defendant will seek contribution from Lister, it is enough that it specify those classes, types or groups of documents and their relevance to the proposed proceedings. In my opinion, Mr Barrett's second affidavit achieves that end. I am not of the view that the defendant has failed to specify documents relevant to any claim for contribution it will bring against Lister when regard is had to what the plaintiff published and Lister stated it had used to formulate its expert opinion. 18. Mr Rowell also raised objections as to confidentiality and oppression having regard to the extensive and voluminous records of Lister gathered over many years. He sought that these heads be merged as one. What Lister must discover is what it relied upon, as set out in its correspondence and reports to the plaintiff, in formulating its advice. At this time there is no need to discover the individual files of other clients. They may become relevant subsequently depending upon the course of the proceedings. I am not persuaded that it would be oppressive to have Lister discover those documents. 19. Thus, the defendant should have its orders in terms of paragraphs 1, 2 (excluding 2.4.2) and 3 of the Schedule, being Exhibit 16 annexed to Mr Barrett's affidavit of 19 November, 1993. Objection was taken to paragraph 6 of the Schedule as being either fishing or seeking documents available from the vendors. However, as what is sought are documents provided to Lister by the vendor "in the course of preparing the valuation reports" and as reference is made in the reports to information provided by the vendor these documents are relevant and should also be discovered. The paragraphs of the Schedule not referred to or excluded are those in relation to which Mr Lister has deposed there are no documents. 20. Accordingly, the application will be granted to this extent. In accordance with the arrangement made with Dr Baxter production should not occur until the plaintiff is aware of the terms of the order and has the opportunity to consider whether it has a claim for privilege. I shall hear counsel as to further directions and costs.