Idoport Pty Limited v National Australia Bank Limited & 8 Ors; Idoport Pty Limited & Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited [34]

[2001] NSWSC 722

CITATION:	Idoport Pty Limited & Anor v National Australia Bank Limited & 8 Ors; Idoport Pty Limited & Market Holdings Pty Limited v Donald Robert Argus; Idoport Pty Limited "JMG" v National Australia Bank Limited [34] [2001] NSWSC 722
FILE NUMBER(S):	SC 50113/98; 50026/99; 3991/00
HEARING DATE(S):	22/08/01, 23/08/01, 27/08/01
JUDGMENT DATE:	27 August 2001
PARTIES :	Idoport Pty Limited (Plaintiff) Market Holdings Pty Limited (Plaintiff) National Australia Bank Limited (Defendant) Donald Robert Argus (Defendant)
JUDGMENT OF:	Einstein J

COUNSEL :	Mr M Dicker, Mr R Titterton (Plaintiffs) Dr AS Bell (Defendants)
SOLICITORS:	Withnell Hetherington (Plaintiffs) Freehills (Defendants)
CATCHWORDS:	Practice and procedure - Application for security for costs - Documents sought by defendants for purposes of application for security for costs - Conditions to be imposed by Court by way of confidentiality undertakings in relation to use of documents sought - Whether form of undertaking should oblige defendants not to use confidential information other than for the purposes of the proceedings or rather for the purposes of the security for costs application.
CASES CITED:	Idoport Pty Ltd & Anor v National Australia Bank Ltd & 8 Ors [2001] NSWSC 648 Idoport Pty Ltd & Anor v National Australia Bank Ltd & 8 Ors [2001] NSWSC 661 Raybos Australia Pty Ltd v Jones (1985) 2 NSWLR 47 Scott v Scott [1913] AC 417
DECISION:	Orders to be made imposing upon the defendants as a condition of access to confidential documents produced on notices to produce in relation to security for costs motions, a form of undertaking which will oblige those persons having access to the documents, not to use the confidential documents or the confidential information or any part of them other than for the purposes of the security for costs motions in the proceedings

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION - COMMERCIAL LIST

EINSTEIN J

Monday 27 August 2001 ex tempore
Revised 28 August 2001

50113/98 IDOPORT PTY LIMITED & ANOR v NATIONAL AUSTRALIA BANK LIMITED & 8 ORS

50026/99 IDOPORT PTY LIMITED & ANOR v DONALD ROBERT ARGUS

3991/00 IDOPORT PTY LIMITED (“JMG”) v NATIONAL AUSTRALIA BANK LIMITED

JUDGMENT

Background to the application by the defendants to have the question of confidentiality of documents tested.

1    The context in which these proceedings are presently before the court is generally outlined in two recent judgments, the first delivered on 31 July 2001 [2001 NSWSC 648] and the second delivered on 7 August 2001 [2001 NSWSC 661]. It is unnecessary for present purposes to do otherwise than to refer the reader to the matter summarised in paragraph 23 of the first of those judgments and paragraph 13 of the second of those judgments. I refer here to the defendants having reserved their entitlement to have the question of claims to confidentiality in respect of the particular documents tested, either closer to or more likely on the hearing of the motion for security for costs.

2    The position which now obtains is that the defendants have exercised their right to have the question of confidentiality of the subject documents tested. It is convenient to refer hereafter to the documents the subject of the claimed confidentiality as "the so-called confidential documents" or "the subject documents". As a matter of formality, both parties have accepted that the plaintiffs bear the onus of satisfying the court of the propriety of the regime pursued by the plaintiffs being imposed by the court as a condition of the defendants being granted access to the subject documents.

3    The position is precisely the same as if, for the first time, the defendants had called upon the subject notices to produce and the plaintiffs had produced the subject documents to the court, but had objected to the defendants being granted access to the documents save by a particular confidentiality regime. In that event, the plaintiffs would bear the onus of proving that any or any particular confidentiality regime, was appropriate to be imposed as a condition of the grant of such access to the defendants.

4    In that environment, the plaintiffs have sought to adduce evidence going to the claimed confidentiality and sensitivity of the subject documents. That evidence has comprised two affidavits made by Mr D'Emilio on 21 August 2001. Mr D'Emilio is a solicitor with the firm Withnell Hetherington actively engaged in the presentation of the plaintiffs' case and assisting Mr Hetherington who is the plaintiffs' solicitor on the record. The bulk of Mr D'Emilio's time over the past two-and-a-half years has been taken up with his work in relation to these proceedings.

5    The first of these two affidavits was referred to during the hearing of the application as "the shorter affidavit". The second of these affidavits was referred to during the hearing of the application as "the longer affidavit" and was produced in two forms. The first form (referred to in cross-examination as the "redacted form") masked sections of the longer affidavit on the basis that those sections covered confidential matters, the disclosure of which it was said would pre-empt the plaintiffs' endeavour to have the court impose a particular regime in relation to the subject documents prior to any such disclosure. The second form (referred to in cross-examination as the "unredacted form") was the unmasked version of the longer affidavit.

6    The plaintiffs sought first to read the shorter affidavit and the masked version of the longer affidavit as the defendants' stance was that this procedure was a necessary anterior step requisite to be taken so that the court could assess whether or not it was appropriate for the court then to itself examine the unmasked version of the longer affidavit as well as the particular documents the subject of the claimed confidentiality (being the documents identified and referred to in both the shorter affidavit and in the unmasked version of the longer affidavit).

7    The shorter affidavit is in the following terms.

“1. I am a solicitor of the firm Withnell Hetherington and, subject to supervision, assist the solicitor for the Plaintiffs in this matter.
2. I make this affidavit in relation to the Defendants’ applications seeking orders for security for costs (Notices of Motion No. 19 and No. 22).
3. This affidavit is sworn in relation to a claim for confidentiality by the plaintiffs as to certain documents referred to below.
4. Annexed hereto and marked “A” is a schedule setting out the documents which the plaintiffs claim ought to be subject to the confidentiality regime indicated by Einstein J. in his judgment of 31 July 2001 (“the confidential documents”).
5. The confidential documents consist of:
(a) documents identified as MFI D130 produced by Idoport Pty Ltd pursuant to a notice to produce issued by defendants dated 29 May 2001; these documents are listed in Part A of Annexure A;
(b) documents produced by Bank of Western Australia pursuant to a subpoena issued by the defendants dated 20 June 2001; these documents are listed in Part B of Annexure A;
(c) further bank statements produced by Idoport Pty Ltd pursuant to the notice to produce issued by defendants dated 29 May 2001; these documents are listed in Part C of Annexure A;
(d) a number of other bank statements produced by Idoport on this application; these documents are listed in Part D of Annexure A and were received by Idoport after the notice to produce was called on referred to in (c) above;
(f) the documents tendered by the defendants as a confidential tender bundle in proceedings 4964 and 4091 of 2000 before Justice Young. The index to that confidential tender bundle is set out in Part E of Annexure A.
6. I am informed by Mr John Maconochie (“Mr Maconochie”), a director of the plaintiffs, and verily believe, that the confidential documents can be described as being in the following categories:
(a) bank statements of bank accounts maintained by Idoport (or documents relating to those accounts, such as directions to the Bank of Western Australia from Idoport);
(b) various agreements to which Idoport or persons associated with Idoport are parties. These relate to shares being taken in Idoport by Idoport shareholders and loans made to one of Idoport’s shareholders, Negubo Pty Ltd and loans made to Idoport by Negubo;
(c) documents tendered by the defendants in proceedings 4964 and 4091 of 2000 before Justice Young.
Bank statements
7. I am informed by Mr Maconochie and verily believe that Idoport currently has the following bank accounts:
(a) Bank of Western Australia Limited account number 100-004715-7;
(b) Bank of Western Australia Limited account number 100-010357-7;
(c) National Australia Bank Limited account number 67-720-4742.
Bank statements from these bank accounts form part of the confidential documents and disclose the balances of such accounts at the dates of the statements.

8. In addition, I am informed by Mr Maconochie and verily believe that Negubo is the controlling shareholder of Idoport (holding 100 shares of the 117 shares on issue) and maintains Bank of Western Australia Limited account number 100-012051-7. The balance of that account as at 21 August 2001 was $8.74. A copy of a bank statement for this account for the period 15 June to 13 July 2001 is annexed hereto and marked “B”. A copy of a bank statement for this account for 21 August 2001 is annexed hereto and marked “C”.

9. I am instructed by Mr Maconochie and verily believe that Negubo has no other bank accounts and no other funds.

10. I am informed by Mr Maconochie and verily believe that the principal account now used by Idoport is the Bank of Western Australia Limited account number 100-010357-7. The funds in this account are used by Idoport to meet the ongoing costs and legal expenses of the proceedings. These include counsel’s fees, solicitor’s fees and disbursements.

11. I am informed by Mr Maconochie and verily believe that the bank statements referred to in paragraphs 6 and 7 above forming part of the confidential documents
(a) indicate current financial information as to the bank account balances of Idoport;
(b) indicate Idoport’s extent and frequency of usage and drawdown of funds over the period 24 June 1999 to date.
I am informed by Mr Maconochie and verily believe that Mr Maconochie is of the view and is concerned that Idoport does not have the financial capacity to provide the security for costs sought by the Defendants in the Notices of Motion Nos 19 and 22 without substantially threatening and undermining its capacity to continue to prosecute these proceedings against the Defendants.


Agreements

12. I am informed by Mr Maconochie and verily believe that the various agreements referred to in paragraphs 6(b) and 6(c) above, are documents of particular confidentiality. They consist of:
(a) the Negubo Loan Agreement between Efficiency, Negubo and Mr Maconochie and Mrs Maconochie as covenantors;
(b) the Idoport Loan Agreement between Negubo and Idoport;
(c) the Market Holdings’ Participation Agreement between Efficiency, Market Holdings, Mr Sheahan (in his capacity as liquidator of Market Holdings), Mr Maconochie and Negubo;
(d) the Partnership Agreement between Market Holdings and its partner Idoport, and Mr Sheahan (in his capacity as liquidator of Market Holdings), and Mr Maconochie;
(e) the Shareholders Agreement between Efficiency, Negubo, Mr Maconochie and Mrs Maconochie.

13. Related to the Shareholders Agreement is an Acknowledgement under Shareholders Agreement dated 10 May 2001. I am informed by Mr Maconochie and verily believe that this too is a confidential document, as it relates to matters referred to in clause 3.2 of the Shareholders Agreement.

14. In my confidential affidavit also sworn 21 August 2001 I have annexed the agreements referred to in paragraphs 12 and 13 above and provided my belief as to their operation and effect based upon information provided to me by Mr Maconochie.

Documents tendered by the defendants in proceedings 4964 and 4091 of 2000 before Justice Young.

15. I refer to Part E of Annexure A. I am informed by Mr Maconochie and verily believe that all the documents appearing in the index, other than documents numbered 18, 19, 20, 21, 22, 23, 28, 29 are confidential for the reason that they provide an insight into and an indication of moneys provided directly and indirectly to Idoport prior to the date of swearing this affidavit for the purposes of the proceedings”.

8    The masked version of the longer affidavit is in the following terms.

“1. I am a solicitor of the firm Withnell Hetherington and, subject to supervision, assist the solicitor for the Plaintiffs in this matter.
2. I make this affidavit in relation to the Defendants’ applications seeking orders for security for costs (Notices of Motion No. 19 and No. 22).
3. This is a confidential affidavit in relation to the Defendants’ applications for security for costs. The material exhibited to his affidavit is, subject to the order of the Court, only to be reviewed by legal representatives of the defendants who have executed undertakings consistent with the reasons for judgment of Justice Einstein of 31 July 2001.
4. In swearing this affidavit I will use the following abbreviations:
(a) Efficiency means Efficiency Investment BV;
(b) Negubo means Negubo Pty Limited;
(c) Market Holdings means Market Holdings Pty Ltd (in liquidation)
(d) IBS means Investors Buying Services (IBS) Pty Ltd;
(e) Idoport means Idoport Pty Ltd;
(f) Mr Maconochie means Mr John Malcolm Maconochie;
(g) Mrs Maconochie means Mrs Mary Jennifer Maconochie;
(h) Mr Sheahan means Mr John Sheahan, the former liquidator of Market Holdings.
5. Annexed hereto and marked “A” is a schedule setting out the documents which the plaintiffs claim ought to be subject to the confidentiality regime indicated by Einstein J. in his judgment of 31 July 2001 (“the confidential documents”).
6. The confidential documents consist of:
(a) documents identified as MFI D130 produced by Idoport Pty Ltd pursuant to a notice to produce issued by defendants dated 29 May 2001; these documents are listed in Part A of Annexure A;
(b) documents produced by Bank of Western Australia pursuant to a subpoena issued by the defendants dated 20 June 2001; these documents are listed in Part B of Annexure A;
(c) further bank statements produced by Idoport Pty Ltd pursuant to the notice to produce issued by defendants dated 29 May 2001; these documents are listed in Part C of Annexure A;
(d) a number of other bank statements produced by Idoport on this application; these documents are listed in Part D of Annexure A and were received by Idoport after the notice to produce was called on referred to in (c) above;
(f) the documents tendered by the defendants as a confidential tender bundle in proceedings 4964 and 4091 of 2000 before Justice Young. The index to that confidential tender bundle is set out in Part E of Annexure A. The documents themselves which the plaintiffs claim are confidential are exhibited to this affidavit as exhibit SAD’E.5.
Confidential documents
7. Exhibited hereto and marked “SAD’E.1” are copies of the confidential documents referred to in paragraph 6(a).
8. Exhibited hereto and marked “SAD’E.2” are copies of the confidential documents referred to in paragraph 6(b).
9. Exhibited hereto and marked “SAD’E.3” are copies of the confidential documents referred to in paragraph 6(c).
10. Exhibited hereto and marked “SAD’E.4” are copies of the confidential documents referred to in paragraph 6(d).
11. I am informed by Mr Maconochie, a director of the plaintiffs, and verily believe, that the confidential documents can be described as being in the following categories:
(a) bank statements of bank accounts maintained by Idoport (or documents relating to those accounts, such as directions to the Bank of Western Australia from Idoport);
(b) various agreements to which Idoport or persons associated with Idoport are parties. These relate to shares being taken in Idoport by Idoport shareholders and loans made to one of Idoport’s shareholders, Negubo Pty Ltd and loans made to Idoport by Negubo;
(c) documents tendered by the defendants in proceedings 4964 and 4091 of 2000 before Justice Young.
Bank statements
12. I am informed by Mr Maconochie and verily believe that Idoport currently has the following bank accounts:
Masked section

13. In addition, I am informed by Mr Maconochie and verily believe that Negubo is the controlling shareholder of Idoport (holding 100 shares of the 117 shares on issue) and maintains Bank of Western Australia Limited account number 100-012051-7. The balance of that account as at 21 August 2001 was $8.74. A copy of a bank statement for this account for the period 15 June to 13 July 2001 is annexed hereto and marked “B”. A copy of a bank statement for this account for 21 August 2001 is annexed hereto and marked “C”.

14. I am instructed by Mr Maconochie and verily believe that Negubo has no other bank accounts and no other funds.

15. I am informed by Mr Maconochie and verily believe that the principal account now used by Idoport is the Bank of Western Australia Limited account number 100-010357-7. The funds in this account are used by Idoport to meet the ongoing costs and legal expenses of the proceedings. These include counsel’s fees, solicitor’s fees and disbursements.

Masked section

16. I am informed by Mr Maconochie and verily believe that the bank statements referred to in paragraph 6 above forming part of the confidential documents
(a) indicate current financial information as to the bank account balances of Idoport;
(b) indicate Idoport’s extent and frequency of usage and drawdown of funds over the period 24 June 1999 to date.
I am informed by Mr Maconochie and verily believe that Mr Maconochie is of the view and is concerned that Idoport does not have the financial capacity to provide the security for costs sought by the Defendants in the Notices of Motion Nos 19 and 22 without substantially threatening and undermining its capacity to continue to prosecute these proceedings against the Defendants.


Agreements

17. I am informed by Mr Maconochie and verily believe that the various agreements referred to in paragraphs 11(b) and 11(c) above, are documents of particular confidentiality. They consist of:
(a) the Negubo Loan Agreement between Efficiency, Negubo and Mr Maconochie and Mrs Maconochie as covenantors;
(b) the Idoport Loan Agreement between Negubo and Idoport;
(c) the Market Holdings’ Participation Agreement between Efficiency, Market Holdings, Mr Sheahan (in his capacity as liquidator of Market Holdings), Mr Maconochie and Negubo;
(d) the Partnership Agreement between Market Holdings and its partner Idoport, and Mr Sheahan (in his capacity as liquidator of Market Holdings), and Mr Maconochie;
(e) the Shareholders Agreement between Efficiency, Negubo, Mr Maconochie and Mrs Maconochie.
18. Related to the Shareholders Agreement is an Acknowledgement under Shareholders Agreement dated 10 May 2001. I am informed by Mr Maconochie and verily believe that this too is a confidential document, as it relates to matters referred to in clause 3.2 of the Shareholders Agreement.
19. I am informed by Mr Maconochie and verily believe that:
Masked section
Earlier Agreements

20. I am informed by Mr Maconochie and verily believe as follows:

Masked section

Documents tendered by the defendants in proceedings 4964 and 4091 of 2000 before Justice Young.

21. I refer to Part E of Annexure A. I am informed by Mr Maconochie and verily believe that all the documents appearing in the index, other than documents numbered 18, 19, 20, 21, 22, 23, 28, 29 are confidential for the reason set out in the preceding sub-paragraph”.

9    The defendants read the affidavit of Mr Lovell made on 21 August 2001. That affidavit was in the following terms.

“1. I am a partner in the Litigation group of Freehills and am assisting in the conduct of proceedings No. 50113 of 1998 (the “Proceedings”) on behalf of the defendants/cross-defendants to the Second Cross-Claim (“the defendants”).
Public information concerning funding
2. Set out below is a list of those documents which the defendants have obtained (using various court procedures, such as issuing subpoenas and notices to produce), which deal with or relate to the funding of Idoport Pty Limited (“Idoport”) and/or Market Holdings Pty Limited (in liquidation) (“Market Holdings”), hereafter “the plaintiffs”, in the Proceedings. The documents listed in this affidavit have been obtained by the defendants in the following manner:
(a) many of the documents have been produced in the Proceedings in answer to subpoenas or notices to produce issued by the defendants; and
(b) some of the documents formed part of the non-confidential tender bundle in Equity Division proceedings No. 4964 of 2000 before Justice Young.
3. I am not aware, in relation to the documents listed below, of any claim for confidentiality by either the plaintiffs or in the case of subpoenas issued to third parties, by the entity which produced the documents in answer to the subpoena.
4. The following material was produced by the plaintiffs in answer to notices to produce issued by the defendants dated 24 May 2001 (in proceedings No. 3991 of 2000) and 29 May 2001 (in the Proceedings):
MFI D126:
(a) 2 copies of the Idoport Investor Shareholders Agreement dated 16 September 1998 between Mr Maconochie, Negubo Pty Limited and Australian International Insurances Limited;
(b) Letter from Permanent Trustee Company Limited to Mr Maconochie dated 5 May 1999;
(c) Minutes of Meeting of Directors of Idoport Pty Limited held at 30 Stanton Road, Mosman on 5 May 1999;
(d) Australian Standard Transfer Form dated 5 May 1999;
(e) Share Certificate No. 7 dated 5 May 1999;
(f) Facsimile from OAMPS to Mr Maconochie and Mr John Evennett dated 25 May 1999;
(g) Notification of Share Issue dated 26 May 1999.
Copies of these documents are exhibited at pages 1 to 31 of Exhibit “DGL1”.
MFI D128:
(a) Account number 67 720-4742 – National Australia Bank account statement for the period 31 August 1998 to 30 September 1998;
(b) Account number 100-0047157 – Bank of Western Australia account statement for the period 23 September 1998 to 23 December 1998;
(c) Account number 100-0047157 – Bank of Western Australia account statement for the period 24 December 1999 to 23 March 1999.
Copies of these documents are exhibited at pages 32 to 35 of Exhibit “DGL1”.
MFI D129:
(a) Unsigned letter from N W Nominees Limited to The Directors, North & South Group SA dated 20 March 2000;
(b) Idoport Shareholders Agreement with North & South Group SA executed on 19 May 2000;
(c) Letter to the Directors, North & South Group SA from Mr Maconochie dated 5 June 2000 regarding Share in Idoport Pty Ltd Issued to NSG;
(d) Letter to the Directors, North & South Group SA from Mr Maconochie dated 5 June 2000 regarding Capital Structure of Idoport Pty Ltd;
(e) Idoport Pty Ltd Register of Members.
Copies of these documents are exhibited at pages 36 to 46 of Exhibit “DGL1”.
5. The following material formed part of the non-confidential tender bundle in proceedings No. 4964 of 2000 before his Honour, Mr Justice Young:
(a) Facsimile to Mr Maconochie from Piper Alderman (per Glenn Davis) dated 15 September 2000;
(b) Account number 100-0103577 – Bank of Western Australia account statement for the period 12 September 2000 to 12 December 2000;
(c) Email from Nolke Postuma to Mr Sheahan dated 20 September 2000 regarding Wire Transfer;
(d) Email from Nolke Postuma to Mr Sheahan dated 2 October 2000;
(e) Account number 100-0103577 – Document titled “Payments from Idoport B/W A/C 010-357-7” dated 18 October 2000;
(f) Memorandum from Paul Griese to Mr Maconochie and Efficiency Investments BV dated 7 November 2000 regarding Draft Direction;
(g) Direction from Idoport Pty Ltd and Efficiency Investments BV to Mr Sheahan dated 7 November 2000 regarding Authorisation to Execute a Payment Instruction;
(h) Payment Instruction from Mr Maconochie and Mr Sheahan to Bank of Western Australia Limited dated 7 November 2000;
(i) Payment Instruction from Mr Maconochie and Mr Sheahan to Bank of Western Australia Limited dated 20 November 2000;
(j) Direction from Idoport Pty Ltd and Efficiency Investments BV to Mr Sheahan dated 20 November 2000 regarding Authorisation to Execute a Payment Instruction;
(k) Facsimile transmission from Efficiency Investment BV to Mr Sheahan dated 22 November 2000;
(l) Payment Instruction from Mr Maconochie and Mr Sheahan to Bank of Western Australia Limited dated 15 December 2000.
Copies of these documents are exhibited at pages 47 to 58 of Exhibit “DGL1”.
6. During the course of his Honour, Mr Justice Young’s written reasons, the following was stated (as reported at (2001) 37 ACSR 629):
“The fact that goes to the core of the present proceedings is that a foreign corporation, called in these reasons “the funder”, has entered into arrangements with Mr Maconochie, the company [ie Market Holdings] and Idoport to fund the plaintiffs in the commercial list proceedings for reward to the funder. It is clear that without such an arrangement, or some similar arrangement, the commercial list proceedings [ie proceedings No. 50113 of 1998] would be beyond the resources of such plaintiffs ” (at 633) [para 17]
“On the other hand, Mr Gleeson SC says that, whilst there may be no abuse if the case were simply one where a creditor or even an outsider were funding an action by an insolvent company who could not afford to proceed with it out of its own resources, the present is not such a case. He puts that the real vice of the situation is that Idoport is using the process of the law of liquidation and joining its action with that of the company to ensure funding by an outside party that otherwise would be plainly illegal.
As to the words "plainly illegal" in the previous paragraph, no-one has argued the contrary to Mr Gleeson SC's submission that the Idoport funding would, divorced from Market Holdings, be an illegal contract.
Mr Gleeson SC fleshes out his submissions with the following points:
1. The documents reveal that there were three stages in the funding process:
(a) The original tranche of funding under the Umbrella Agreement, where funds were supplied from the Funder via Idoport not subject to Court approval and non recourse save from the proceeds of the litigation;
(b) Three further payments via Idoport;
(c) The Partnership/ Participation Agreement under which:
(i) The Funder funds Idoport and the company;
(ii) The Funder has substantial rights to control the litigation, eg it has two votes out of four on the LOC;
(iii) The Funder receives a large share of the proceeds.
Mr Gleeson SC's analysis is close to the truth. The arrangement is much more than a creditor funding a liquidator's action where the creditor may obtain a preferential repayment of its debt, but otherwise the control of the litigation and the receipt of its proceeds is with an independent liquidator. The fact that the arrangement assists in what appears to be otherwise illegal litigation funding makes the matter worse for the Maconochie parties” (at 663) [paras 225-228].
7. The following material was produced in the Proceedings in answer to subpoenas issued to OAMPS Limited and Australian International Insurance Limited (“AIIL”):
(a) Facsimile to Mr Kingsley Lamont (OAMPS Limited) from Mr Maconochie dated 12 May 1999 attaching:
(1) Copy of Shareholders Agreement dated 16 September 1998 between Maconochie, Negubo Pty Limited and AIIL; and
(2) Share subscription letter of amendment;
(b) Letter from OAMPS to David Evennett dated 9 June 1999 regarding Permanent Trustee
Copies of these documents are exhibited at pages 59 to 74 of Exhibit “DGL1”.
8. The following documents were produced by the Bank of Western Australia in proceedings No. 3991 of 2000 in answer to a subpoena issued by the defendants dated 20 June 2001:
(a) Facsimile from OAMPS to Bank West dated 9 November 1998;

(b) Account number 100-0047157 – Bank of Western Australia account statement for the period 24 March 1999 to 23 June 1999.
Copies of these documents are exhibited at pages 75 to 76 of Exhibit “DGL1”.
9. The defendants have obtained other information in relation to the funding of the plaintiffs in the Proceedings from public documents of OAMPS, namely:
(a) Letter from OAMPS to Companies Announcement Office, Australian Stock Exchange (“ASX”) dated 25 August 1999; and
(b) the OAMPS Annual Report 2000. Page 9 of the OAMPS Annual Report 2000 states:
“The 1998 investment of Australian International Insurance Ltd of $1.55m in Idoport Pty Ltd is yet to perform. Idoport is currently utilising its funds in pursuit of its claim against the National Australia Bank and the Bank’s subsidiary, National Markets Group Limited. The action surrounds an alleged breach of contract in relation to the development of on-line e-commerce systems. Should Idoport’s claim prove ultimately successful the Group may expect to realise $15 million on the investment which, in part, will be distributed to Shareholders.”
A copy of the letter to the ASX and the OAMPS Annual Report 2000 is exhibited at pages 77 to 103 of Exhibit “DGL1”.
10. Exhibited at pages 104 to 107 of Exhibit “DGL1” is a copy of the transcript of the Proceedings before his Honour Mr Justice Einstein dated 28 July 1999, a copy of which was exhibited to my affidavit sworn 11 July 2000.
11. Exhibited at pages 108 to 127 of Exhibit “DGL1” is a copy of the defendants’ submissions in respect of security for costs dated 10 August 2001.
Position of the National Australia Bank Limited
12. Exhibited at pages 128 to 191 of Exhibit “DGL1” is a copy of the National Australia Bank Limited’s Annual Review 2000. It states, inter alia, that:
(a) the National Australia Bank Limited (the “Bank”) has more than 12 million customers worldwide; and
(b) the Bank employs about 50,000 people; and
(c) approximately 40% of the Bank’s shares are held by large corporate trustees.
13. I am informed by Ms Josephine D’Arcy, General Counsel Dispute Resolution for the Bank, who has day-to-day responsibility for instructing in relation to these Proceedings on behalf of the defendants, and believe, that:
(a) the defendants wish to reserve the right to brief counsel and solicitors of their choice in the Proceedings, particularly given the length of the final hearing, the number of interlocutory motions, and the different tasks undertaken by the various counsel briefed; and
(b) in the event that orders as contemplated in his Honour’s judgment of 30 July 2001 were imposed as a condition of access to documents, it would mean that the defendants’ choice of legal representatives would, in the future, be restricted. Alternatively if the defendants did not wish their choice of counsel and solicitors to be so constrained they would be forced to forego exercising any right of access to the documents or making any use of the documents by way of, for example, objection, cross-examination or submissions in relation to such documents.
Non-confidential tender bundle in proceedings No. 4964 of 2000
14. Exhibited at pages 192 to 211 of Exhibit “DGL1” is a copy of the index to the non-confidential tender bundle in proceedings No. 4964 of 2000.”

The issues before the court on the application.

10    Both Dr Bell of counsel for the defendants and Mr Dicker of counsel for the plaintiffs who argued the application accepted that the issues thrown up were as follows:

· whether any of the subject documents [referred to in annexure A to Mr D'Emilio's affidavit (from pages 8 to 23)] but excluding the documents identified in MFI A4 and also excluding the eight documents identified in the third line of paragraph 15 of the shorter affidavit, are confidential.

· if so, are these documents confidential in their entirety or as to part, and if so which part?

· if any of these documents are confidential either in whole or in part, are they of such a level of confidentiality as to justify the regime sought to be imposed upon the defendants as a condition of their having access to the documents?

· in relation to the endeavour by the plaintiffs to have the court read the unmasked version of the longer affidavit, whether the plaintiffs had demonstrated on the application insofar as the reading of the shorter affidavit was concerned, that the contents of the unmasked version of the longer affidavit were in whole or in part confidential.

· if so, whether the content of the unmasked version of the longer affidavit is shown to be of such a level of confidentiality as to justify the regime sought to be imposed upon the defendants as a condition of their having access to the subject documents.

11    It is clear from these submissions of Mr Dicker that the basis upon which the plaintiffs rely in support of the assertion that any of the documents are relevantly confidential, goes to the question of the plaintiffs' resources and lines of resource in terms of the plaintiffs being able to fund the continued rollout of the proceedings. In short, the plaintiffs assert from the Bar table but also need to prove, that any document forming part of the subject documents which happens to:

· identify or go to the financial resources available to the plaintiffs for the purpose of conducting the litigation;

· identify or go to the funding arrangements available to the plaintiffs for the purpose of conducting the litigation;

· identify or go to a matter which may alert the defendants to the amounts which the plaintiffs have had to expend up to this point in time in or about their conduct of the litigation;

· identify or go to a matter which may alert the defendants to the amounts which the plaintiffs anticipate that they may have to expend in or about their conduct of the litigation from time to time;

should be regarded as sufficiently sensitive and confidential as to require that the regime for which the plaintiffs press and terms of access to the subject documents, be imposed by court direction or order.

12    The regime presently in place by court order made on 22 August 2001, consistently with the judgment of 31 July 2001, is that for which the plaintiffs contend in terms of a continued regime to regulate access by the defendants' camp to the subject documents. That order was in the following terms.

“Until further order, access to the documents falling within paragraphs 4 to 6 of the Defendants’ Notice to Produce dated 29 May 2001 and the documents MFI D130 be given only to those person listed below, upon the signing of a confidentiality undertaking in the form annexed hereto and marked “A”:
(a) such person including counsel and solicitors as are nominated by the Defendants who are not involved and who are not to be involved from the date of the undertaking in the ongoing conduct of proceedings 50113 of 1998, 50026 of 1999 and 3991 of 2000;
(b) such secretaries or assistants entrusted with ensuring the safe custody of the Confidential Documents.”

13    The defendants put forward the following three alternative forms of suggested regime:

(i) there being no confidentiality at all demonstrated by the plaintiffs in respect of the subject documents, there should be no confidentiality regime at all.

(ii) in the alternative to (i), the defendants should only be obliged by being bound by the Harman undertaking.

(iii) in the alternative to (i) and (ii), the confidentiality regime should permit access to the defendants in respect of the subject documents upon the giving by the defendants' legal advisers or clients of an undertaking

· not to use the subject documents otherwise than for the purposes of the security for costs application unless and until by court order released from this undertaking; and

· not to disclose the subject documents to any person otherwise than persons who had themselves given the undertaking referred to in the first bullet point above unless and until by court order released from this undertaking.

14    The defendants further claimed that even if it be held that there is some "commercial" confidentiality in the subject documents, there is a prima facie finding, also capable of being made on the material before the court, even without examining the documents, that the funding agreements and associated documents which it is to be inferred concern the operation of the funding agreements, are contrary to public policy and illegal so that as such no claim for confidentiality should be sustained. This matter will be referred to below.

15    As already stated, the defendants' approach to the application was that a condition precedent to the court determining that it was appropriate for the court itself to examine the unmasked version of the longer affidavit and the subject documents, obliged the plaintiffs to prove from the shorter affidavit, that a prima facie case had been made in support of the proposition that the plaintiffs may following such examination, succeed in obtaining an order imposing the confidentiality regime for which the plaintiffs were contending.

16    In that regard, the court granted leave to the defendants to cross-examine Mr D'Emilio on particular matters in relation to the application generally thrown up by his shorter affidavit and the masked version of his longer affidavit.

17    It is clear from that cross-examination that Mr D'Emilio, in using the words, "I am informed by John Maconochie and verily believe that":

[as for example that:
"The documents are confidential", or that
"Sections of the confidential documents indicate current financial information as to the bank account balances of Idoport", or that
"Sections of the confidential documents indicate Idoport's extent and frequency of usage and drawdown of funds over particular periods", or that
"Particular documents are of particular confidentiality or that particular documents are confidential for the reason that they provide an insight into and an indication of moneys provided directly and indirectly to Idoport prior to the date of swearing of the affidavit"]

by and large, did not regard himself as otherwise than acting as a conduit in stating that which Mr Maconochie had himself said.

18    In other words, Mr D'Emilio saw himself as discharged from any obligation to do otherwise than to repeat effectively that which he understood Mr Maconochie to have meant when Mr Maconochie stated that the written form of the subject affidavits was "correct and 100 per cent accurate in its entirety". [Transcript page 12048]

19    Effectively, Mr D'Emilio did not engage his own mind in relation to the question of whether any of the statements made on information "and belief", were, as a matter of fact to his own observation and following his own investigation, confidential or of particular confidentiality. Hence allowing the reading of Mr D'Emilio's shorter affidavit and the masked version of the longer affidavit on information and belief [without objection save as to the second sentence of paragraph 11, which was allowed following objection] appears simply to have resulted in the circumstance that the defendants have not been in the forensic position of being able to seriously test on cross-examination the veracity or depth of any of what are effectively Mr Maconochie's "claims" to confidentiality or sensitivity. The court does not even know in what sense Mr Maconochie used or intended to use the terms "confidential" or "of particular confidentiality" because the net result of the cross-examination of Mr D'Emilio was that he had simply not made this inquiry of Mr Maconochie and was unable to assist. Nor had Mr D'Emilio explained his own understanding of the word "confidential" to Mr Maconochie. Mr D'Emilio did not see Mr Maconochie reviewing each of the subject documents but saw him reviewing folders, that is to say, scrolling through documents, effectively flicking through them.

20    Mr D'Emilio gave evidence that he did not know how well Mr Maconochie knew the documents or the content of the documents in those folders and made the point that, if Mr Maconochie was extremely familiar with them, then obviously there was no need for him to read them carefully.

21    In the result, Mr D'Emilio agreed that he had simply accepted Mr Maconochie's instructions on what was contained in his affidavits. The role, which Mr D'Emilio played in the preparation of the affidavits, was to peruse the same and to ensure that Mr Maconochie confirmed to him that the affidavits were entirely correct and accurate. [Transcript 12048]

22    Apart from accepting what Mr Maconochie said to him, namely that the affidavit was 100 per cent accurate, Mr D'Emilio did nothing else to confirm that what Mr Maconochie had said to him about the accuracy was in fact correct. [Transcript 12049]

23    Reference has already been made to the second sentence of paragraph 11 of the shorter affidavit. Here Mr D'Emilio had given evidence that he was informed and verily believed that Mr Maconochie "is of the view and is concerned that Idoport does not have the financial capacity to provide the security for costs sought by the defendants in the notices of motion 19 and 22 without substantially threatening and undermining its capacity to continue to prosecute the proceedings against the defendants". Mr D'Emilio gave evidence that he did nothing to independently verify this statement by Mr Maconochie who did not tell him the basis for the statement.

24    Under cross-examination, Mr D'Emilio was asked whether he had a view, other than his belief of Mr Maconochie, as to whether or not that statement was true or false. His answer was that he believed it to be correct. He was then asked what was the basis for his saying that and his answer was, "My past two-and-a-half years' involvement in this litigation". [Transcript 1206]

25    Cross-examination on 23 August in relation to Mr D'Emilio's said view confirmed that his view was based upon on the one hand, his view about the likely cost of the proceedings in the future and on the other hand, his knowledge about what is currently in Idoport's bank account. He was not expressing any view based upon his knowledge of the plaintiffs' financial capacity to fund the proceedings in terms of the funding arrangements.

Dealing with the application.

26    It is important to recall that in deference to the approach sought to be taken by the defendants, as a pragmatic matter, the plaintiffs' application to sustain the particular confidentiality regime for which they press had proceeded in the suggested two-stage process. The first stage was to examine the shorter affidavit. The second stage, if reached, would involve the court in examining the whole of the unmasked version of the longer statement as well as the subject documents. The longer statement in its unmasked version apparently includes references to the subject documents which references the plaintiffs see as of assistance in the court understanding the subject documents. The defendants, however, strongly urged the court to refrain from moving into stage 2, the submission being that the plaintiffs had in no way, shape or form justified any such inspection for the simple reason that such evidence as was put forward in the shorter affidavit, upon being tested by the cross-examination of Mr D'Emilio, should be regarded as of no or virtually no relevant weight. And this for the reason that the court remained in the dark as to what were the criteria by which Mr Maconochie, by his own lights, apparently came to form the view that the subject documents were confidential or of particular confidentiality. The submission is that the plaintiffs have had every opportunity to seek to place such evidence before the court as they may be able to muster to prove the confidentiality/sensitivity of the subject documents and have failed to come up to the mark in that respect, having succeeded in placing before the court material only of the most insignificant weight mobilised on information and belief by a solicitor who, far from himself testing or becoming engaged in examining the strength or otherwise of the proposition that the subject documents were confidential, simply eschewed any such course, electing to rely upon the bald statement of Mr Maconochie that the content of the affidavit was effectively 100 per cent accurate in its entirety.

27    I do not accept that the so-called two-stage process is necessarily apt in the present circumstances. The defendants have certainly had the right to seek to approach the matter in that way and the plaintiffs have endeavoured to treat with the so-called first stage. To do otherwise would have pre-empted the defendants' endeavour to assert that no case had been made out for the court's private examination of the subject documents and the unmasked longer affidavit.

28    At the least, however, the court had a clear discretion to examine all of the facts, matters and circumstances in determining whether or not to proceed to examine the unmasked version of the longer statement as well as the content of the subject documents.

Open justice.

29    Clearly the relevant claims for confidentiality must be assessed with the notion of open justice in mind. The defendants submit that if the court were to carry out a private inspection of the subject documents, this would effectively amount to a "private dialogue" with one side of the record to the exclusion of the other. Such an exercise would clearly undermine the general principle that courts must administer justice in public - Scott v Scott [1913] AC 417; Raybos Australia Pty Ltd v Jones (1985) 2 NSWLR 47 and should only be adopted in clearly appropriate circumstances.

Onus of proof - strength of evidence put forward.

30    As already made plain, it is common ground that the plaintiffs now bear the onus of strictly proving confidentiality such as to warrant a particular confidentiality regime being imposed in respect of the defendants' access to the subject documents.

31    Mr D'Emilio's affidavit, as tested by Dr Bell in cross-examination, does not present a strong case in favour of the confidentiality claim. Absent any in-depth personal consideration of the subject documents, Mr D'Emilio's evidence as to the supposed confidentiality relies entirely upon the belief of Mr Maconochie in relation to these matters. Mr D'Emilio did nothing himself to assess or verify the confidentiality of the documents. His evidence relied entirely upon a confirmation of accuracy from Mr Maconochie who has had no legal training, who has an enormous personal interest in the outcome of this case and his understanding of the word "confidentiality" remains entirely untested.

32    The following exchange took place during the course of the cross-examination:

Q: “The evidence to his Honour is you either had no view or formed no view as to whether or not the documents referred to in your affidavit are confidential or not?”
A: “…I would need to review every single document referred to, whether it be an annexure or an exhibit, to my first affidavit or even the longer version of the affidavit, and I have not done so.”
Q: “Your evidence is that you have not review………..reviewed all of the documents referred to in annexure A to your affidavit for the purposes of swearing an affidavit in support of the claim of confidentiality. That is your evidence is it?”
A: “That is correct.”

Then later.

Q: “When you say in your affidavit you verily believe something?”
A: “Yes.”
Q: “After having been informed by Mr Maconochie?”
A: “Yes.”
Q: “All you are really saying is that I have been informed by Mr Maconochie and without taking any independent steps to check it, I believe what he tells me?”
A: “Yes.” [Transcript page 12049]

33    In the result, the only evidence before the court in relation to this threshold question comprises indirect assertions of confidentiality made by Mr D'Emilio and based entirely on Mr Maconochie's instructions.

34    Evidence of Mr Maconochie's views and opinions as to documents being "confidential" or of "particular" confidentiality, unsupported by detail as to the explicit basis for putting forward such views and opinions, has the net result of essentially leaving it to the court to infer the necessary basis for the claimed confidentiality.

35    Whilst the interest of the defendants in the plaintiffs' funding arrangements and lines of resource may be accepted as of special interest for obvious reasons in this particular litigation [generally explored in the first judgment delivered on 31 July 2001], the altered environment in which the plaintiffs are required to strictly prove the bases for the claimed confidentiality means that:

(1) there is now a real limit to the extent to which the process of court inference may be taken;
(2) real care requires to be taken to avoid the court being engaged in what may amount to little more than a speculative exercise.

36    The plaintiffs were clearly put on notice of the requirement that the claimed confidentiality be strictly proven. The evidence now advanced in relation to the claimed confidentiality, although identifying and describing the documents said to be confidential, cannot be said to have come up to the mark in terms of detail and, in particular, in terms of explaining the way in which Mr Maconochie used the words "confidential" or "of particular confidentiality". In truth, the court is left without any evidence as to precisely what Mr Maconochie had sought to convey by the use of those terms.

37    Moreover, it seems to me that the plaintiffs should have been able to present far more cogent evidence as to the threshold issue of confidentiality without actually disclosing the content of the subject documents. For example, it would appear that the supposed confidential nature of the funding arrangements could have been better exposed by describing, in a general way, any possible ultimatums or limits which may have been insisted upon by funders, without giving away specific detail as to names, dates or numbers. Alternatively, the effect of particular clauses within the subject funding agreements could in an open fashion have been described in very general terms in order to give the court some idea of what is involved. No such material was presented in that form to the court.

38    Mr Dicker did, however, strongly submit that the plaintiffs were being prevented from putting before the court the very evidence which they had intended to place before the court and which would describe the particular clauses within the funding agreements and other particular matters in relation to the subject documents to point up the confidentiality and the claims in that regard. This was for the simple reason that the reading of the longer affidavit was being opposed. Following Mr Dicker's very close and detailed submissions from the Bar table in relation to the importance of the court scrutinising at least the agreements themselves, the court acceded to those submissions but to a limited extent. Mr Dicker was given a particular time period in which to be able to draw the court's attention to the particular sections of the funding agreements which were said to be of such high confidentiality as to require that those sections be specially dealt with so that there would either be a bifurcated or separate team regime imposed or if not, then those representatives of the defendants' legal team and/or any employees or officers of the defendants would simply never be entitled to inspect those documents. This procedure then took place.

39    The net result of that procedure was that Mr Dicker did take the court to those documents. To my mind, Mr Dicker succeeded in that regard only in persuading the court that insofar as the confidentiality regime the subject of the orders made last week should now be otherwise varied, the otherwise variation should not permit any access to Ms D’Arcy to:

(a) any part of the documents marked for identification A(4)(i)-A(4)(x) as includes any reference to percentages or figures;
(b) insofar as the document marked for identification A(4)(i) is concerned, no such access should be granted to clause 11.1.
(c) Insofar as the document marked for identification A(4)(iii) is concerned, no such access should be granted to clause 14.1 of that document.

40    Subject to the orders outlined below, the defendants nominated counsel who give appropriate undertakings will have access to the parts of the documents to which Ms D’Arcy will not be permitted access.

41    The court declines to take:

(1) the further step of examining any other of the particular documents the subject of the claim for confidentiality; and

(2) the further step of permitting the masked sections of Mr D'Emilio's longer affidavit to be read.

42    I earlier referred to the defendants' submissions that for reasons made explicit in the defendants' written submissions, the court should hold that no confidentiality regime at all should be imposed for the reason that the subject funding arrangements would disclose agreements contrary to public policy or which were illegal for various reasons.

43    During the course of the argument today, the court made plain that a tentative view which was announced to both counsel may be the appropriate regime. The defendants indicated that for pragmatic reasons, but wishing to reserve the question of the claimed illegality to be tested on some future occasion by appropriate application, the defendants were content that the regime which the court had tentatively outlined should be imposed, subject to some minor matters. On that basis only, it is therefore now inappropriate and unnecessary for the court to deal with the so-called illegality arguments.

44    To my mind, the court should now vary the confidentiality regime the subject of orders made last week by an "otherwise order". The appropriate regime justified by the now evidence adduced by the plaintiffs is to make the documents available to nominated legal representatives confined to counsel or solicitors of the defendants; namely to Mr Gleeson SC, Dr Bell, Mr Healy, Mr Lovell and Ms Yelland, as well as to Ms D'Arcy who is an officer and employee of NAB, being a Corporate Counsel and solicitor of the Supreme Court of Victoria. In the case of the counsel and solicitors to whom I have referred, each of those persons will be obliged to undertake to the court that:

(1) until further or other orders, such persons will not use the documents or the information disclosed in the documents otherwise than for the purposes of the security for costs applications.

(2) until further or other order, such persons will not take further copies of or disseminate the documents or the information as to the content of the documents to any other persons than one another.

45    Insofar as the subject documents are to be disclosed to Ms D’Arcy as a nominated representative of the defendants, the appropriate regime will also oblige her to undertake in generally the same terms-it already having been made plain that insofar as the agreements are concerned, she is not to be shown percentages or figures and is not to be shown the above described particular clauses of two particular agreements.

46    Obviously there are some questions of detail which require to be more closely examined and I am certainly content to hear either the plaintiffs or the defendants on minor, as it were, ‘nuts and bolts’ type aspects to do with the proposed particular short minutes of order to be brought in.

47    The regime to which I have referred as appropriate is justified in the particular circumstances where the court now has a reasonably detailed description of the subject documents and notwithstanding some questions raised as to Mr Maconochie's precise meaning of the word "confidentiality”, can infer their confidentiality and sensitivity from the detailed description of the documents, from Mr D'Emilio's evidence at transcript 12117.56-12118.21, and from the court's inspection of the agreements-bearing in mind also the nature of the case, the point in time when the issue is raised, the matters at stake for each party, the conduct of the hearing up to this point in time, the obviously enormous sums expended on both sides of the Bar table in terms of the nature of and preparation involved in relation to the proceedings generally and the stances adopted by both parties in the litigation where every point is generally taken and where the plaintiffs' funding and funding arrangements should receive some real confidentiality protection but where the bifurcated or separate team proposal is not shown to be warranted.

I certify that paragraphs 1 - 47
are a true copy of the reasons
for judgment herein of the
Hon. Justice Einstein
given on 27 August 2001ex tempore
and revised on 28 August 2001

___________________
Susan Piggott
Associate
28 August 2001

Last Modified: 06/13/2002