Oberdan v Commonwealth Bank of Australia No. Scgrg-95-2262 Judgment No. S141

OBERDAN v COMMONWEALTH BANK OF AUSTRALIA
[1999] SASC 141

CIVIL

LANDER J. This is an appeal from a decision of a Master made on 29 October 1998 in which the learned Master declined to make an order, on the application by the appellant (defendant), for further and better discovery by the respondent (plaintiff).
The appellant is a property developer and the respondent is a Bank. Between 1970 and 1987 the appellant entered into more than thirty loan transactions with the respondent.
All of the loan transactions preceded three guarantees, which the appellant entered into with the respondent, whereby the appellant guaranteed the payment to the respondent of moneys owed by companies with which the appellant was associated.
On 17 September 1987, the appellant entered into a guarantee (the St Christopher guarantee) whereby the appellant guaranteed that St Christopher Pty Ltd, which was the trustee for the St Christopher Unit Trust, would pay to the respondent one million dollars then owing by that company to the respondent. Another company with which the appellant was associated, Haventide Pty Ltd, also guaranteed St Christopher Pty Ltd’s performance in relation to that debt.
On 2 June 1988, the appellant guaranteed to pay to the respondent, moneys owing by Haventide Pty Ltd (the Haventide Guarantee). The amount of money owed by Haventide Pty Ltd to the respondent was, at 10 October 1995, said to be just short of $6.5 million.
On 19 December 1988, it is alleged that the appellant entered into a third guarantee (the Edinburgh Castle Guarantee). It is admitted that the appellant and Graziella Piscioneri and Teresa Dimasi guaranteed to pay to the respondent the amount owing by Haventide Pty Ltd, V & G Piscioneri Investments Pty Ltd and Teresa Dimasi. As at 1 August 1996 it was alleged that that guarantee debt amounted to nearly $370,000.
There is no dispute that the appellant entered into the transactions referred to, but he denies that any amount is owing by him to the respondent.
He claims, in his defence, that the thirty or more transactions which he and the respondent entered into between 1970 and 1987 gave rise to a relationship between him and companies associated with him, on the one hand and the respondent on the other hand. In his defence he has described this as ‘the historical relationship’.
He claims that the relationship was of a kind whereby the respondent encouraged the appellant to regard the respondent as his partner or associate in his property developments.
He further claims that the encouragement arose out of statements made from time to time by officers of the respondent and by silence in response to statements, from time to time, made by the appellant.
The statements made by him and the responses of the respondent’s officers occurred in a number of conversations at the respondent’s offices and at other places. The defence claims that the respondent’s officers responsible for statements and or silence were Messrs Pomeroy, McArthur, Mullins, Wright and/or Royans.
The appellant claims that he relied upon the historical relationship in signing the three guarantees, the subject of the proceedings brought against him.
The appellant alleges that not only did a relationship develop but also a number of representations were made to him in connection with the thirty or more loan transactions which preceded the entry into the three guarantees. Those representations have been termed the historical representations.
There are six representations which are said to have been made over that period of time. They were:
“1..... The plaintiff required that security in the form of mortgages over property (“the mortgage securities”) be given by the plaintiff and/or members of the Group in respect of loan transactions;
2.The plaintiff would have its own valuers assess the value of properties which were to be the subject of mortgage securities;
3... That as a matter of formality, and as part of its standard processes, in addition to the mortgage securities, the plaintiff required that the defendant (and others) give personal guarantees in respect of loan transactions;
4.That if there was default in a finance facility, the plaintiff would first realise the mortgage securities and seek to recover from the borrower(s) in respect of that finance transaction before enforcing any guarantees it took;
5... That the personal guarantees sought by the plaintiff were securities of last resort in that the plaintiff would not attempt to enforce them until it had exhausted all other means of recovering monies owed to it;
6.If there was a default, the plaintiff would not look to the defendant’s guarantee alone, but would look to all guarantors.”
In his defence the appellant claims that the historical representations were made orally at meetings at the offices of the respondent and at other places by employees of the respondent, in particular Messrs Pomeroy, McArthur, Mullins, Wright and or Royans.
The appellant then particularised those representations giving particulars of the persons who made the representations and the date and place at which the representations were made.
The historical representations are said to have meant to and given rise to understandings on the part of the appellant. Those understandings are pleaded as follows:
“1..... That the plaintiff made its decisions to advance monies for property purchases on the basis of its valuations of the mortgage security properties (“the security representation”).
2.That the personal guarantees it sought were in the nature of formalities (“the formality representation”).
3... That the plaintiff would only resort to personal guarantees, if at all, after:
36.3.1.it had realised the mortgage securities for the transaction;
......... 36.3.2. it had pursued the principal debtor or debtors; and
36.3.3.it had exhausted any other remedies (“the last resort representation”).
36.4.......... That the plaintiff would not enforce personal guarantees selectively against the defendant (“the equality representation”).”
The appellant’s defence then addresses the particular guarantees, the subject matter of the respondent’s claim, and in particular asserts that the respondent knew or ought to have known that the appellant relied upon the historical relationship and the historical representations in entering into those guarantees.
In those circumstances it is claimed that the respondent owed the appellant a duty of care to qualify the historical representations. In failing to do so it is claimed that the respondent is guilty of negligence and contravened s7 of the Misrepresentation Act, s56 of the Fair Trading Act and s52 of the Trade Practices Act.
The application brought before the Master sought orders in the following terms:
“1..... The plaintiff by its proper officer after due enquiry file and serve an affidavit within days deposing as to whether the plaintiff has or has had in its custody, possession or power the following documents:
A.Any notes or diary entries or entries in diaries of meetings or telephone conversations between officers and employees of the plaintiff and the defendant:
A.1relating to transactions referable to the acquisitions identified in the said Schedule “SJW-1”.
A.2concerning, recording or relating to the Support Representations pleaded at paragraphs 94-100 of the Amended Defence filed herein; or
A.3concerning, recording or relating to the Agreement to Vary pleaded at paragraphs 83 and 84 of the Amended Defence filed herein.
B.Any records of settlements or releases of securities relating to one or more of Mr Z Ginos, Mr V Piscioneri and Mr and Mrs T Dimasi for the period 1992 to date in relation to the financial accommodations secured by the guarantees pleaded by the plaintiff in the Consolidated Statement of Claim herein.
C.The Bank legal opinion identified in document 1113 discovered by the plaintiff.
......... And if the documents or any of them have been but are not at present in the custody, possession or power of the plaintiff, when the plaintiff parted with the same and if known to the plaintiff what has become of the same.”
The schedule referred to in sub-paragraph A.1 relates to the transactions comprising the historical relationship and the historical representations.
The word “transactions” is defined in the order to mean:-
(a)     a request for the lending of money,
(b)    an offer to lend money,
(c)    an agreement to lend and borrow money, or
(d)    any form of security and taken in respect of such agreement.”
The reference to SJW-1 is to an exhibit to an affidavit of Mr White of Thomson Playford, solicitors for the appellant.
That document identifies thirty-six transactions between 1970 and 1989 most of which relate to the purchase of property between 1984 and 1989.
The schedule identifies the entity associated with the appellant which entered into the transaction, the property acquired in the transaction, the purchase price, the acquisition date, the branch of the respondent at which the transaction occurred and the bank managers involved.
In all transactions after 1985 the document identifies the bank employees and officers as “various”. The schedule identifies those “various” bank officers as being Messrs McArthur, Pomeroy, Mullins, Prentice, Wright, Royans, Wilson, Hyland, Hawkins and two bank valuers, Messrs Curley and Cashman.
In support of this application Mr White deposes that he has inspected the respondent’s documents discovered in this action and:
“There are very few notes of meetings or telephone conversations between the defendant and officers or employees of the bank concerning these transactions.”
The learned Master, after a discussion of the facts and of the law, refused this application.
In relation to par1.A.1 of the orders sought the learned Master found that the application was oppressive in requiring the respondent:
“To delve into its archives to see if anything that might be of assistance to the defendant is there.”
His Honour found that the appellant’s evidence was not sufficient to overcome the presumed conclusiveness of the respondent’s discovery and so rejected the application in respect of 1.A.2 and 1.A.3.
In relation to the orders sought in paragraph B he found that the appellant had not established the relevant belief necessary for further and better discovery.
Lastly, in respect of paragraph C he found that the document was not discoverable because it was not relevant on the pleadings.
The appellant complains of his Honour’s findings and determinations in respect of all five categories of documents.
A volume of evidence was put both before the learned Master and referred to on this appeal.
The appellant’s case was that he was present on each of the occasions when each of the transactions referred to in SJW1 occurred and he noticed on every occasion that notes were made by the bank officers or employees of matters discussed during those conversations. It is those documents which are described as notes in par1.A of meeting. Those documents should probably be better described as handwritten notes.
There was little or no evidence of any diary entries or entries in diaries apart from those already discovered.
The learned Master found that for the period 1972 to 1987 there must have been handwritten notes made by various officers of the bank with whom the appellant dealt. He found that there were at least thirty transactions involving loans to the companies associated with the appellant by the respondent. He also found that very little, if any, of historical documentation sought by the defendant had been discovered.
He said:
“It is clear that the plaintiff has not undertaken a search into its archives for the period 1972 to approximately 1987 because it considers that it would be oppressive for it to be required to do so and, in any event, the request for such discovery consists of a fishing expedition on the part of the defendant.”
In my opinion, there is no doubt, that the learned Master was correct in relation to his findings of diary entries and entries in diaries. There was insufficient evidence to suggest that any further documents existed which could give rise to the exercise of the jurisdiction to make an order for better and further discovery.
I also, with respect, agree with the learned Master that there can be no doubt that between 1972 and 1987, although I would suggest on the evidence even later up to and including 1989, there must have been handwritten notes made by various officers of the respondent.
Those handwritten notes have not been discovered.
The three categories of documents for which the appellant claims there must have been handwritten notes are those mentioned in A1, A2 and A3. I have identified the handwritten notes said to be discoverable in respect of A1.
The handwritten notes said to have been made in respect to the matters in A2 relate to conversations with Mr Wilson, an officer of the bank, and the appellant between February or March 1991 and September 1992.
The appellant asserts that during that period Mr Wilson made a number of representations which the appellant has particularised and called ‘the support representations’. Those representations not only included support but, it is claimed, positive representations as to what the respondent would or would not do.
The appellant asserts that there were numerous conversations between himself and Mr Wilson. His own diary indicates 38 meetings.
He identifies, in an affidavit in support of this application the material discovered by the respondent in relation to ‘the support representations’.
The respondent has not discovered any handwritten notes of any of these meetings. The appellant asserted in a previous affidavit that such notes were made.
It appears to me that the appellant has identified occasions where handwritten notes have been made.
Paragraph A3 relates to paragraphs 83 and 84 of the defence, which relate to a series of meetings between the appellant and one or more of Messrs Mullins, Wright and or Royans at the offices of the plaintiff at 100 King William Street, Adelaide, in or about 1988. These meetings were held for the purpose, so it is alleged by the appellant, of attempting to reach an agreement to vary the St Christopher guarantee. It is claimed that the respondent and officers of the appellant, on behalf of the appellant, orally agreed to vary the St Christopher guarantee.
It is the appellant’s evidence, as it was in relation to the first two categories of documents, that handwritten notes were made by officers of the respondent at those meetings.
I understand the learned Master’s finding to be that there must have been handwritten notes of all three categories of documents in paragraph A. In my opinion that finding on the evidence adduced was correct.
The question then for the Master was whether the appellant was entitled to further and better discovery of those handwritten notes.
There can be no doubt that the documents are relevant because they relate to matters raised in the defence.
The respondent successfully defended this application for further and better discovery upon a number of grounds. First it claimed that its affidavit of discovery was conclusive.
Secondly, it claimed that in respect of the documents in A2 and A3 it had made a search of its records and had discovered all of the documents presently in existence relevant to matters raised on the pleadings.
Thirdly, it said and, in particular in relation to the category of documents in paragraph A.1, that it would be oppressive to require the respondent to make the inquiries necessary to determine whether or not those documents ever came into existence and the present whereabouts of those documents.
A considerable amount of argument was presented in relation to the conclusiveness or otherwise of the respondent’s affidavit of discovery.
However, on the findings made by the learned Master, it is clear that the affidavit of discovery is not conclusive. The Master has found there must be handwritten notes of each of the categories contained in paragraph A of the application. Those handwritten notes have not been discovered. In respect of A.2 and A.3 the respondent claims that it had made a search and discovered all documents which are presently in existence. That, however, is not the test for discovery.
A party must discover all documents which are or have been in that party’s possession, custody or power relating to any matter in question in the action. It is clear that handwritten notes made at meetings, at which it is claimed by the appellant that relationships were formed, representations made and agreements reached, are relevant. The fact that they have been destroyed does not relieve the respondent of the obligation to discover these documents if the respondent is to comply with r58.
In my opinion, on the findings of fact made by the learned Master, the respondent is under an obligation to make discovery of those handwritten notes, because they are documents which are or have been in the possession, custody or power of the respondent and they are relevant to a matter on the pleading.
The respondent has not complied with its obligation to make discovery in relation to the documents in paragraph A. In relation to the documents in paragraph A.2 and A.3 the respondent has only purported to discover documents which are presently in the respondent’s possession, custody or power. That is not sufficient.
It seems to me therefore that the appellant was entitled to the order sought in paragraph A unless it could be said that the making of such an order would be oppressive to the respondent.
There is no doubt that an order of the kind envisaged in paragraph A, even restricted to handwritten notes, would present the respondent with a considerable task. The respondent would have to make inquiries of its officers and former officers to determine their practice and to ascertain whether handwritten notes were made and then to inquire as to what happened to those handwritten notes if in fact they no longer form part of the respondent’s documents.
However, I am not satisfied that to require the bank to make those inquiries would amount to oppression.
Rule 58.01 requires all parties to an action within 21 days of the close of pleadings to file a list of documents; i.e. make discovery. However, the Court can relieve a party of the necessity to make discovery or limit the discovery which need be made: R58.04. Discovery will not be ordered unless it is necessary for fairly disposing of the case.
An order for discovery therefore involves the exercise of a discretion on the part of the Court; Burmah Oil Co Ltd v Governor & Co of the Bank Of England (1980) AC 1090 at 1141.
In exercising that discretion the Court ultimately must determine whether the justice of the case requires a party to be put to the task of satisfying the obligation to make discovery to the extent provided in r58.
In exercising the discretion to order discovery or further and better discovery it is necessary to bear in mind that almost always discovery is a burden to any party. It requires first an understanding of the issues raised in the pleadings and secondly a thorough search of that party’s records to determine whether the party has any document which may lead to a train of inquiry on that party’s part or on the part of any other party. Next it requires the party to ascertain whether there are any other documents not within the party’s possession but which are within the party’s power. That may require the party to make enquiries with third parties.
Next the party must then identify any document which was, but is no longer, in that party’s possession, custody or power.
In Re McGoram; ex parte Co-operative Building Society of South Australia (1989) 86 ALR 275 at 278 von Doussa J said:
“The obligation resting on a party obliged to give discovery requires that he make proper inquiries and efforts to identify and disclose all relevant documents that are not in his possession. The obligation extends to making inquiries from the person in whose possession the documents now are: see Mertens v Haigh (1863) 3 De GJ and Sm 528 at 531; 46 ER 471 at 472. It was said in the nineteenth century case of Taylor v Rundle (1841) Cr and Ph 104; 41 ER 429 at 433 by Lyndhurst LC:
‘If it is in your power to give the discovery, you must give it; if not, you must show that you have done your best to procure the means of giving it;’
see also Palmdale Insurance Ltd (In liq) v L Grollo & Co Pty Ltd [1987] VR 113.”

The extent of the obligation to make discovery is much greater in contemporary times. That is because of the proliferation of records and because a document now includes not only writing on paper but photographs, films, disc tapes, sound tracks and all of these items identified within the definition of “document”: r5.00.
If a party is a corporation the obligation is even more onerous. Where a party is a corporation the officer, who has the obligation of identifying the documents for which discovery must be made, has an obligation to satisfy himself or herself that all inquiries have been made within the organisation to satisfy the corporation’s obligation to make discovery. The larger the corporation the greater the burden.
The more complex the litigation again the greater the burden. Where the factual situation is said to have arisen over a number of years the obligation is even greater.
However, the burden to make discovery is not oppressive by reason that a party is a large corporation and the issues are complex and because the factual situation is said to have risen over a number of years. There is no doubt it will be onerous but that, in my opinion, is not the test.
I am not satisfied that the respondent could not make discovery of those documents without suffering oppression. I believe the respondent could make inquiries of all of the officers named in the various affidavits as to their practice in relation to handwritten notes first as to their creation, secondly as to their compilation and thirdly as to their retention.
That really does not involve speaking to more than perhaps ten or twelve bank officers. If all of the notes have been destroyed, which was suggested from the bar table, then it is not at all oppressive for the respondent to discover those documents.
If, on the other hand, the documents have not been destroyed then it would not be too onerous, certainly not oppressive in my view, to require the respondent to find those documents within its own organisation and make discovery of them.
In my opinion, on the Master’s own findings, the documents referred to in paragraph A of the application were discoverable and an order should have been made for their discovery.
In relation to the documents in paragraph B the learned Master found that documents of the kind identified in the application would, if they existed, be relevant.
He concluded, however, that the appellant had failed to bring in sufficient evidence to indicate that the affidavit of discovery was not conclusive.
The documents referred to in paragraph B were the subject of evidence from the appellant.
He said that he had inspected the respondent’s discovery and had found references to settlements with the three persons mentioned in paragraph B. He has, however, been unable to find any reference in the discovered documents to release documents (paragraph 14 affidavit 7 August 1988 document 30).
The learned Master said in relation to these classes of documents that if any other guarantor had been released then there would be little doubt that such documentation evidencing the release would be discoverable in these proceedings.
With respect I agree with that. There can be no doubt that if such documents exist they would be relevant having regard to representation six of the historical representations.
The difficulty about the appellant’s contentions in respect of paragraph B is that the respondent has discovered documents relevant to representation number six and in particular documents relevant to settlement with other guarantors. It would be necessary to assume, for the correctness of the appellant’s argument, that the respondent has with full knowledge of the issues raised, failed to discover documents relevant to those issues.
I am not prepared to make that inference in respect of the documents in paragraph B. I am prepared to assume that the affidavit of discovery is in respect of that paragraph, conclusive.
I am not satisfied that the appellant is entitled to an order for further and better discovery in relation to paragraph B of the application.
Paragraph C identified a discrete document which was referred to in a document discovered by the plaintiff.
Apparently the document relates to the capacity of a trust to borrow money from the respondent.
The learned Master rejected the application for further and better discovery in relation to that document upon the basis that the document was not relevant to any matter raised on the pleadings.
In my opinion the Master was right in respect of that document. It is not clear to me that the subject matter of that document is a matter raised on the pleadings. In those circumstances the Master was right, in my opinion, to reject the application for further and better discovery.
It follows from those reasons that, in my opinion, the appeal must be dismissed in respect of paragraphs B and C of the application before the Master.
However, the appellant is entitled to succeed in respect of paragraph A but only in respect of handwritten notes, not in respect of diary entries or entries in diaries.
I therefore make the following orders:
1. Appeal allowed.

2.The respondent by its proper officer after due inquiry file and serve an affidavit within fifty-six days deposing as to whether the plaintiff has or had in its custody, possession or power the following documents:

A)any handwritten notes of meetings or telephone conversations between the appellant and employees of the respondent not presently discovered;

A.1relating to transactions referable to the acquisitions identified in schedule SJW1;

A.2concerning recording or relating to the Support Representations pleaded at paragraphs 94 to 100 or the Amended Defence filed herein; or

A.3concerning, recording or relating to the Agreement to vary pleaded at paragraphs 83 and 84 of the Amended Defence filed herein.

I will hear the parties as to costs.

[1999] SASC 141

13 April 1999