Players Pty Ltd (In liquidation) (Receivers Appointed) v Clone Pty Ltd

[2015] SASC 133

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

PLAYERS PTY LTD (IN LIQUIDATION) (RECEIVERS APPOINTED) & ORS v CLONE PTY LTD

[2015] SASC 133

Judgment of The Honourable Auxiliary Justice Hargrave

28 August 2015

PROCEDURE - JUDGMENTS AND ORDERS - AMENDING, VARYING AND SETTING ASIDE

New trial - Whether successful party engaged in malpractice by failing to discover relevant document - Likelihood of different result in absence of alleged malpractice - Whether unsuccessful party used reasonable diligence to find document - Nature of court’s discretion to set aside final orders - Relevant principles - Whether court’s discretion to set aside final orders enlivened by the alleged malpractice - Finality principle - Commonwealth Bank of Australia v Quade (1991) 178 CLR 134 applied - Lexcray Pty Ltd v Northern Territory of Australia (No 3) (2003) 13 NTLR 154 doubted.

PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - DISCOVERY OF DOCUMENTS

Discovery - Obligation to discover document in a party's power - Taylor v Santos Ltd (1998) 71 SASR 434 applied.

PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - PRODUCTION AND INSPECTION

Notices to produce to party - Failure to call upon notice to produce - Supreme Court Rules 1987 (SA), r 59.07.

Supreme Court Rules 1987 (SA) r 58.07, r 59.07; Supreme Court Civil Rules 2006 (SA) r 262, referred to.
Commonwealth Bank of Australia v Quade (1991) 178 CLR 134; Taylor v Santos Ltd (1998) 71 SASR 434, applied.
Lexcray Pty Ltd v Northern Territory of Australia (No 3) (2003) 13 NTLR 154, not followed.
Bailey v Marinoff (1971) 125 CLR 529; Briginshaw v Briginshaw (1938) 60 CLR 336; Brookfield v Yevad Products Pty Ltd [2004] FCA 1164; Browne v Dunn (1893) 6 R 67; Chong v CC Containers Pty Ltd & Ors [2015] VSCA 137; Clone Pty Ltd v Players Pty Ltd & Ors [2005] SASC 281; Clone Pty Ltd v Players Pty Ltd & Ors [2006] SASC 290; Clone Pty Ltd v Players Pty Ltd (in liq) (rec apptd) & Ors [2012] SASC 12; D’Orta-Ekenaike v Victorian Legal Aid & Anor (2005) 223 CLR 1; Jones v Dunkel (1959) 101 CLR 298; Players Pty Ltd & Ors v Clone Pty Ltd [2006] SASC 118; Players Pty Ltd (in liq) (rec apptd) & Ors v Clone Pty Ltd (2013) 115 SASR 547; Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue [2010] NZHC 176; The Ampthill Peerage [1977] AC 547; Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125; White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169, discussed.
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389; Commissioner for Railways v Small (1938) 38 SRNSW 564; Ho v Powell (2001) 51 NSWLR 572; Karidis v General Motors-Holdens Pty Ltd [1971] SASR 422; National Employers’ Mutual General Association Ltd v Waind & Hill (1978) 1 NSWLR 372; North Ganalanja Aboriginal Corporation v Queensland (1996) 185 CLR 595; Rees v Bailey Aluminium Products Pty Ltd (2008) 21 VR 478; Suzlon Ltd & Ors v Bangad & Ors (No 2) (2011) 198 FCR 1; X7 v R [2014] NSWCCA 273, considered.

PLAYERS PTY LTD (IN LIQUIDATION) (RECEIVERS APPOINTED) & ORS v CLONE PTY LTD
[2015] SASC 133

Civil

HARGRAVE AJ.

Introduction

History of the proceeding

Reasons of Vanstone J

The Full Court’s decision

Further decision of Vanstone J

Clone’s lawyers knew of the third copy Agreement during the trial

Players becomes aware of the third and fourth copies of the Agreement

The Full Court finds a colourable case of abuse of process

What must be established to enliven the Court’s discretion to set aside the judgment and order a new trial?

Did Clone engage in malpractice during the trial?  If so, to what degree?

Relevant procedural history

Relevant legal principles

The Clone case at trial

Players opens its case

Clone’s lawyers become aware of the third copy Agreement

Clone did not disclose the third copy Agreement

The final addresses at trial

Players’ contentions in the Application

Was the third copy Agreement discoverable?

Was the 11 April notice to produce varied for the purpose of avoiding production of the Grenfell Tavern removal file?

Should Clone’s counsel have called on the 11 April notice to produce?

Did Clone’s counsel mislead the Court?

Conclusion: Clone engaged in serious malpractice during the trial

What is the extent of any likelihood that the result at trial would have been different if the third copy Agreement had been in evidence?

Did Players exercise reasonable diligence? If not, to what degree?

What other factors are relevant to the exercise of the Court’s discretion?

The unpleaded unconscionable conduct issue

General considerations relating to the administration of justice

Should a new trial be ordered and, if so, on what terms?

Introduction

1. In April 1995, Clone Pty Ltd leased the premises at 73-79 Pirie Street, Adelaide (the ‘Premises’), to Players Pty Ltd for a period of 10 years ending 28 February 2005 (the ‘Lease’).  Players’ obligations under the Lease were guaranteed by Gregory Griffin, a solicitor, Christopher McDermott, Darren Cahill and Timothy May, each of whom was then a director of Players.  Players used the Premises to conduct licensed hotel and gaming machine businesses under the name ‘Planet Hotel’.

2. Disputes arose under the Lease.  In 2004 Clone commenced proceedings in this Court against Players and its guarantors and others.  After a 28 day trial in March and April 2005, the proceeding was determined by Vanstone J in Clone’s favour.[1] 

   [1]    Clone Pty Ltd v Players Pty Ltd & Ors [2005] SASC 281.

3. An important factual issue at trial concerned whether the word ‘NIL’ in the agreement to lease which preceded execution of the formal lease (the ‘Agreement’) had been deleted before it was executed by the parties (the ‘deletion issue’).  Vanstone J rejected the evidence called by Players on this issue.  That was a difficult fact-finding task, as the original of the Agreement was not in evidence.  Her Honour was informed that only two photocopies had been found — one from the possession of each of Clone and Players.  Both copies showed a horizontal line through the word ‘NIL’. 

4. Judgment was entered against Players and its guarantors. 

5. Players and Messrs Griffin, McDermott and Cahill (henceforth collectively ‘Players’) appealed to the Full Court.[2]  They were successful on some issues, but the appeal on the deletion issue was dismissed in April 2006.[3] 

   [2]    Mr May was represented by different solicitors at trial, did not appeal, and has played no further part in the proceedings. 

   [3]    Players Pty Ltd & Ors v Clone Pty Ltd [2006] SASC 118.

6. Investigations by Players in late 2009 and early 2010 revealed that Clone knew during the trial of a further copy of the Agreement, also containing a horizontal line through the word ‘NIL’, but had not disclosed its existence (the ‘third copy Agreement’).  Players formed the view that the result at trial on the deletion issue would or might have been different if the third copy Agreement had been in evidence.  As a result, Players applied in 2010 to set aside the adverse judgment and for a new trial (the ‘Application’).  The Application was made in two ways — by application in the 2004 proceeding and by a fresh proceeding commenced in 2010. 

7. Points of Claim and Points of Defence were filed in the 2010 proceeding. 

8. The issues raised by the Application involve contested evidence from legal practitioners in this State, including senior and junior counsel involved at the trial of the original proceeding — one of whom has since been appointed as a judge of this Court.  Although the judge’s evidence was not ultimately challenged, the possibility for substantial conflicts of interest if a judge of this Court were to hear the Application was obvious. 

9. In these circumstances, it was prudent that a judge of another Supreme Court be appointed as a judge of this Court, on an auxiliary basis, to hear and determine the Application.  I was appointed as a judge of this Court on that basis. 

10. The Application is based on the central allegation that Clone and its lawyers engaged in malpractice by failing to make discovery of the third copy Agreement to Players when its lawyers became aware of that copy during the course of the trial.  Where an application for a new trial is made on such grounds to an appellate court, the principles in Commonwealth Bank of Australia v Quade are relevant.[4]  In that case, the Court compared the different approaches to the Court’s power to set aside a judgment following trial in ‘mere cases of fresh evidence’ with cases where the trial itself has miscarried by reason of misconduct constituted by ‘surprise, malpractice or fraud’ by the successful party.[5]  As to such cases, the Court stated:

    It is neither practicable nor desirable to seek to enunciate a general rule which can be mechanically applied by an appellate court to determine whether a new trial should be ordered in a case where misconduct on the part of the successful party has had the result that relevant evidence in his possession has remained undisclosed until after the verdict. The most that can be said is that the answer to that question in such a case must depend upon the appellate court’s assessment of what will best serve the interests of justice, ‘either particularly in relation to the parties or generally in relation to the administration of justice’.[6] In determining whether the matter should be tried afresh, it will be necessary for the appellate court to take account of a variety of possibly competing factors, including, in addition to general considerations relating to the administration of justice, the degree of culpability of the successful party,[7] any lack of diligence on the part of the unsuccessful party and the extent of any likelihood that the result would have been different if the order had been complied with and the non-disclosed material had been made available. While it is not necessary that the appellate court be persuaded in such a case that it is ‘almost certain’ or ‘reasonably clear’ that an opposite result would have been produced, the question whether the verdict should be set aside will almost inevitably be answered in the negative if it does not appear that there is at least a real possibility that that would have been so.[8]

    [4] (1991) 178 CLR 134 (‘Quade’). 

    [5] Ibid 140.

    [6]    Cf, eg, McDonald v McDonald (1965) 113 CLR 529, 533, 542.

    [7]    Cf Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 2 NSWLR 340, 357.

    [8]    Quade (1991) 178 CLR 134, 142-3 (emphasis added; citations in original).

11. As this passage from the decision in Quade indicates there are three specific matters which, in addition to general considerations relating to the administration of justice, require consideration in the exercise of the Court’s discretion to grant or refuse an application for a new trial on the grounds of malpractice by failing to make discovery of relevant documentary evidence available at trial:

    (1)the degree of culpability of the successful party at trial;

    (2)the degree of any lack of diligence on the part of the unsuccessful party; and

    (3)the extent of any likelihood that the result would have been different if the non-disclosed material had been made available. 

12. The parties conducted the Application on the basis that these three matters must be addressed. 

13. Viewed against this background, the Application requires determination of the following broad issues:

    (1)What degree of culpability must be established to enliven the Court’s discretion to set aside the judgment and order a new trial?

    (2)Did Clone engage in malpractice during the trial?  If so, to what degree?

    (3)What is the extent of any likelihood that the result at trial would have been different if the third copy Agreement had been in evidence? 

    (4)Did Players exercise reasonable diligence?  If not, to what degree?

    (5)What other factors are relevant to the exercise of the Court’s discretion? 

    (6)Should a new trial be ordered and, if so, on what terms? 

14. Before turning to consider the issues, it is necessary to set out the history of the proceeding to date. 

    History of the proceeding

15. As appears above, Clone was the owner of the Premises at all relevant times.  Its directors at relevant times included Fiona Roche and Richard England.  Clone is the trustee of a trust, the beneficiaries of which include three companies, referred to informally as ‘the Roche Group’. 

16. Prior to the Lease, the Premises had been used to conduct licensed premises known as the ‘Oaks Tavern’. 

17. For the purposes of its intended lease of the Premises, Players applied to the Licensing Court to transfer a liquor licence from the premises known as the ‘Grenfell Tavern’ to the Premises (the ‘hotel licence’).  Players also obtained a gaming machine licence for the Premises as an original grant. 

18. Following execution of the Agreement, the parties negotiated and executed the Lease.  Under the terms of the Agreement, the parties had agreed that the Lease would be consistent with the Agreement. 

19. The Agreement and the Lease obliged Players to transfer the hotel licence and the gaming machine licence (collectively, the ‘Licences’) to Clone upon the termination or expiration of the Lease.  Neither licence could be transferred without Clone’s consent. 

20. During 2002, a dispute arose between Clone and Players as to which party was obliged to carry out repairs to the roof of the Premises.  In May 2003, while the roof dispute was continuing, Players proposed to Clone in discussions and correspondence that it would, in effect:

    (1)procure an alternative liquor licence for the Premises;

    (2)sub-let the Premises to another party who would operate pursuant to the alternative liquor licence; and

    (3)remove the Licences from the Premises to other premises to be conducted by a third party. 

21. The proposal required Clone’s consent under the Lease.  Players contended that Clone gave the requisite consent by letter dated 30 October 2003.  Clone denied that contention. 

22. On 4 November 2003, Players agreed to sell the Licences, together with gaming machines and related equipment, to Alexander Falconer — a director of Fairtown Holdings Pty Ltd.  The agreement was conditional upon Players obtaining Clone’s consent to it making applications to the relevant licensing authorities for the removal of the Licences from the Premises. 

23. By letter dated 10 December 2003, Clone informed Players that it would not consent to the proposed removal of the Licences.  Players then contended that Clone was bound by its 30 October 2003 letter to consent, as Players had agreed to accept the conditions set out in that letter. 

24. Acting on the basis that its contentions were correct, Players joined with Fairtown in an application to the Liquor Licensing Authority for the removal of the hotel licence to alternative premises to be conducted by Fairtown and known as the ‘Harborsboard’.  At about the same time, Fairtown applied for a gaming machine licence in respect of those premises.  Clone threatened to apply for an injunction to restrain the proposed removal of the hotel licence to the Harborsboard premises. 

25. On 24 March 2004, Clone commenced the original proceeding.  The defendants were Players, Fairtown and its principals, the Liquor and Gambling Commissioner and the Licensing Court of South Australia.  The Commissioner and the Licensing Court were joined as parties so as to prevent them from dealing with the applications to remove the Licences to Fairtown’s Harborsboard premises, and to bind them to the relief sought by Clone to the effect that Players and Fairtown had no entitlement to apply for the removal of the hotel licence from the Premises. 

26. From the outset, the Commissioner and the Licensing Court considered that the dispute was one between private parties and, accordingly, they agreed to abide the result and sought to be excused from active participation in the proceeding.  As appears below, however, the Commissioner played a role in the production of relevant documents sought by Players and Clone for the purposes of their dispute. 

27. In summary, by its pleadings in the original proceeding, Clone:

    (1)alleged various breaches of the Lease (the ‘breach issues’), including breach of:

    (a)     the repair and maintenance covenants; and

    (b)    a series of express terms which Clone contended required Players to continue trading at the Premises and fully exploit the Licences throughout the term of the Lease (the ‘going concern issue’); 

    (2)alleged breaches of the Lease by reason of Players’ attempts to remove the Licences from the Premises, in particular by joining with Fairtown in the application to remove the hotel licence from the Premises;

    (3)sought a declaration that it had not consented to the removal of the hotel licence, or to any dealing with the gaming machine licence in the manner proposed by Players (the ‘consent issue’);

    (4)sought a declaration that Players must deliver the Licences to Clone at the expiration or sooner determination of the Lease;

    (5)sought an order restraining Players and Fairtown from proceeding with their joint application to remove the hotel licence from the Premises; and 

    (6)alleged that the Agreement was not binding because a proposed guarantor, Darren Cahill, did not execute it as guarantor (the ‘Cahill execution issue’).

28. In its defence, Players:

    (1)denied breaching the Lease;

    (2)alleged in relation to the consent issue that Clone had, by its 30 October 2003 letter, consented to it subletting the Premises and removing the Licences to other premises; and

    (3)denied that Clone was entitled to any of the relief it sought. 

29. By its counterclaim in the original proceeding, as supplemented by its counsel’s opening and the evidence adduced at trial, Players:

    (1)claimed that Clone was required to pay it reasonable consideration for the transfer of the Licences at the expiration or earlier termination of the Lease (the ‘reasonable consideration issue’).  The asserted reasonable value at the time was about $750,000.  This claim was based upon an allegation by Players that, before the Agreement was executed, it deleted the word ‘NIL’ in clause 11(i) of the draft of the Agreement which was subsequently executed by the parties — so that the requirement to transfer the Licences at the expiration or sooner termination of the Lease ‘for NIL consideration’ was amended to read ‘for consideration’.  This is the ‘deletion issue’ referred to above; 

    (2)sought rectification of the Lease to accord with the Agreement — in which the word ‘NIL’ had been deleted (the ‘rectification issue’) — in circumstances where the Lease provided that, upon expiration or earlier determination, Players was unconditionally obliged to transfer the Licences.  In response, Clone pleaded that, upon execution of the Lease, the Agreement ceased to have any effect and the rights and obligations of the parties were solely embodied in the Lease (the ‘embodiment issue’); and

    (3)sought relief against forfeiture of the Lease to the extent that any of the alleged breaches were made out at trial (the ‘relief against forfeiture issue’). 

    Reasons of Vanstone J

30. The original of the Agreement was not in evidence at trial.  However, two copies of the Agreement were admitted into evidence as exhibits ‘D9’ (discovered by Clone) and ‘P9’ (discovered by Players).  Each copy showed a line drawn through the word ‘NIL’ and was therefore consistent with Players’ case on the deletion issue.  The trial judge, Vanstone J, held, however, that the Agreement provided for the transfer of the Licences ‘for NIL consideration’.  This finding involved rejection of the evidence given at trial by Mr Griffin (supported by evidence from Mr McDermott) that he deliberately drew a line through the word ‘NIL’ before the Players signatories executed the Agreement and returned it to Clone’s agent for execution by Clone.  This finding was not disturbed by the Full Court on appeal.  The High Court denied special leave.  The finding had thus been conclusively determined by the Court as at April 2006. 

1. Vanstone J also found for Clone on all other issues she determined, except in respect of one of the breach issues.  As her Honour found that one of the proved breaches was incapable of remedy, her Honour did not determine the relief against forfeiture issue. 

2. In summary, Vanstone J made orders and declarations in Clone’s favour and dismissed Players’ counterclaim.  Her Honour ordered that Players transfer the Licences to Clone, and that Players pay Clone damages for breach of the Lease and its costs of the proceeding. 

3. It is necessary to summarise the evidence at trial concerning the deletion issue and Vanstone J’s reasons for rejecting the evidence of Messrs Griffin and McDermott on that issue. 

4. When Clone acquired the Premises in 1993, they were in a run-down state, including fire damage to that part of the Premises which had previously been used as ‘the Oaks Tavern building’.  The Roche Group recognised that, at the time, its proposed redevelopment of the Premises was at least 10 years away, and that it would endeavour to lease the Premises without committing any moneys for capital improvement.  Clone engaged Colliers Jardine to find a suitable tenant.  Alistair Mackie was the Colliers representative involved in the letting process.  On behalf of Clone, the letting negotiations were conducted by Ross Mallett, the General Manager of a company related to Clone — Adelaide Development Company Pty Ltd (‘ADC’). 

5. Mr Griffin and Mr McDermott conducted the lease negotiations on behalf of Players.  They gave evidence of certain representations made by Mr Mallett in the negotiations, to the effect that ADC planned to demolish the buildings at the end of the Lease and construct a high-rise office tower and that, accordingly, Players would be at liberty to take the Licences and its plant and equipment away from the Premises at the end of the Lease. 

6. As Mr Griffin was a solicitor, he acted as the solicitor for Players in connection with the negotiation and documentation of the Lease.  He was a partner at Phillips Fox solicitors at the time.  Clone instructed Grope Hamilton Budini (‘Grope Hamilton’ or ‘Clone’s solicitors’) to act on its behalf.  Peter Grope and Andrew Brown of that firm were involved at different stages. 

7. There were three drafts of the Agreement.  The first draft, which was not in evidence, was prepared by Mr Mackie and provided to Mr Grope.  He made handwritten alterations to it and returned it to Mr Mackie for re-engrossment.  The re-engrossed second draft was provided by Mr Mackie to both Mr Griffin and Mr Grope by letter dated 5 August 1994.  The second draft included the critical words ‘for NIL consideration’ in clause 11(i).  That amendment had not been discussed or agreed in the negotiations.  No attention was drawn to it in Mr Grope’s covering letter.  The second draft was in evidence before Vanstone J but not on the hearing of the Application.  Mr Grope made some further alterations and additions to the second draft and, once they were engrossed, Mr Mackie highlighted the further changes with a fluorescent pen and delivered the third draft with those highlights to Mr Griffin at his office.  Mr Mackie drew the highlighted changes to Mr Griffin’s attention and asked that they be initialled when the Agreement was executed.  As Vanstone J noted, it is important that the words ‘for NIL consideration’ were in both the second and third drafts.  Mr Griffin gave evidence that he did not notice this when he considered the second draft, which he provided to Messrs McDermott and May with the handwritten comment ‘I believe it is in order’.  Mr Griffin said that he did not read the second draft carefully, but Vanstone J rejected that evidence. 

8. Mr Griffin said that he sat down with Messrs McDermott and May and went through the third draft with them, drawing their attention to the highlighted amendments.  The trial judge described his evidence about his discovery of the words ‘for NIL consideration’, and his striking out of the word ‘NIL’ in the following terms:

   In evidence Mr Griffin described how he sat at a table in a room at the Phillips Fox offices ... He proceeded chronologically through the third draft in that way.  He drew attention to the highlighted amendments.  He said when he reached cl 11(i) that he recognised “one major discrepancy”.  He said there, introduced “for the first time”, was the concept of transference of the licences at the end of the Lease to Clone for nil consideration.  He commented to Mr McDermott and Mr May “they have tried to … pull a swifty here, this is not the deal” (t/s 1841).  He told the two men that “We should not agree to it”.  Mr May was in accord.  When the word “consideration” was explained to Mr McDermott he expressed his dismay.  Mr Griffin said “that we needed to correct that position” (t/s 1842) and put a line through the word “NIL”, using a pen having blue ink.  He said the three men proceeded to execute the document initialling each page, initialling the highlighted changes - but not initialling the deletion of “NIL” - and signing as guarantors and Mr May also on behalf of Players.[9]

   [9]    Clone Pty Ltd v Players Pty Ltd & Ors [2005] SASC 281 [45] (emphasis added).

9. Mr McDermott gave evidence which supported Mr Griffin’s account of him putting a line through the word ‘NIL’ using a pen having blue ink.  Mr May did not give evidence. 

10. As noted above, the original of the Agreement was not in evidence.  Vanstone J accepted that the practice of Colliers Jardine was to retain the original of such agreements on its files once executed, to photocopy the original and send a photocopy to the solicitors for the relevant parties.  Mr Mackie acted in accordance with this practice.  He sent a copy of the Agreement to Mr Griffin under cover of a letter dated 30 August 1994 (the ‘30 August 1994 letter’).  That letter was, however, not addressed to him at his solicitor’s practice but, rather, to him at ‘Players Bar’, licenced premises run by Mr McDermott in which Mr Griffin had an interest.  Mr Griffin denied receiving this letter and the enclosed copy Agreement which, in the ordinary course, would likely have been made at the same time as the photocopy sent to Clone at this time. 

11. Mr Griffin’s evidence that he did not receive the 30 August 1994 letter or the enclosed copy Agreement is supported by contemporaneous correspondence.  First, by letter to Phillips Fox dated 8 September 1994 from the assistant to the Licensing Court judge, Tina Sarunic, in which she requested documents evidencing the lease or other document giving Players the right to occupy the Premises, and the landlord’s consent to the conduct of licenced premises.  These documents were required in order for approval to be given to Players’ application to transfer the hotel licence from the Grenfell Tavern to the Premises.  Second, Ms Sarunic’s letter caused Mr Griffin to send a letter dated 13 September 1994 to Mr Mackie (the ‘13 September 1994 letter’), in which he asked Mr Mackie to provide him with the ‘executed lease’ (a reference to the Agreement) for the purposes of forwarding it to the Licensing Court in support of the application by Players to remove the Licence from the Grenfell Tavern and transfer it to the Premises.  There was no letter from Mr Mackie in response to the 13 September 1994 letter, but Vanstone J found that Mr Mackie complied with Mr Griffin’s request ‘in some manner’, either by sending ‘the original or merely another photocopy’.[10]  Her Honour said:

    By letter dated 13 September 1994 to Mr Mackie (P3/59) Mr Griffin requested the “executed lease” from Colliers for the purposes of the application to the Licensing Court for transfer and removal of the Grenfell Tavern licence.  Mr Griffin’s evidence was that the Licensing Court did not require the original.  Mr Mackie said that he understood the request to refer to the Agreement to Lease rather than to the Lease itself.  Of course the Lease document was not then in existence.  By that time Mr Mackie had already (at least in his mind) forwarded to Mr Griffin and to the plaintiff a copy of the executed Agreement.  Certainly it appears that he complied with Mr Griffin’s request in some manner, but whether he sent the original Agreement or merely another photocopy remains unclear.  Mr Griffin said that it was not the practice of the Court to return documents provided in these circumstances. 

    It is also unclear what, if anything, was done to obtain Mr Cahill’s signature on the Agreement.  Much later – in fact in March 1995 – Mr Brown sought to follow up that matter.  But one would have expected that something would have been done earlier – and at the time when Mr Mackie received back the original Agreement from Clone – to obtain that signature.  No document has been produced to indicate that steps were taken to that end and nor has any oral evidence been given on that topic.  That the original Agreement might have been lost in the course of attempting to obtain Mr Cahill’s signature is a possibility which I cannot discount.[11]

    [10]   Emphasis added. 

    [11]   Ibid [23]-[24] (emphasis added). 

12. In these circumstances, there were only two photocopies of the Agreement in evidence.  Vanstone J considered that the provenance of both of them was uncertain.  Her Honour stated:

    There are two versions of the third draft in evidence, neither of which is original.  It is not possible to say whether they are copies of the original or of a copy of the original, or even whether the one is a copy of the other.  Exhibit D9 is a version produced from the files of ADC and P9 is a version produced from Mr Griffin’s papers.[12] 

    [12] Ibid [16].

13. As appears below, Players contends on the Application that the third copy Agreement, which emanates from the Licensing Court’s file concerning the removal of the hotel licence from the Grenfell Tavern to the Premises (the ‘Grenfell Tavern removal file’), would or might have provided some objective evidence at trial to support Mr Griffin’s evidence on the deletion issue. 

14. Following execution of the Agreement, Mr Grope set about drafting the Lease.  The task was completed by Mr Brown, when Mr Grope took annual leave.  When the first draft of the Lease was provided to Mr Griffin, he read it fairly closely and provided comments to Mr Brown about eight matters in relation to which he either sought clarification or an alteration to the draft.[13]  Mr Griffin raised no objection to those clauses of the Lease which, although expressed in much different terms to the Agreement, had the clear effect that Players was unconditionally obliged to transfer the Licences to Clone at the expiration or sooner determination of the Lease, without any reference to consideration being paid.  Moreover, Mr Griffin raised no objection to clauses in the Lease which have the clear purpose of putting Clone in the position of being able to take over and run the Premises as licenced premises upon the expiration or sooner termination of the Lease. 

    [13] Ibid [27].

15. Vanstone J gave detailed reasons for rejecting the evidence of Mr Griffin (and the supporting evidence of Mr McDermott) concerning the deletion issue.  In reaching that finding, her Honour was conscious of the fact that she was dealing with the credit of a practising solicitor and rejecting his evidence as false, thus requiring actual persuasion to the Briginshaw standard of proof.[14] 

    [14] Ibid [43], citing Briginshaw v Briginshaw (1938) 60 CLR 336.

16. Vanstone J’s rejection of Mr Griffin’s evidence concerning the deletion issue involved the following principal steps. 

17. First, as noted above, her Honour rejected Mr Griffin’s evidence that he did not read the second draft of the Agreement closely before he wrote a note to Messrs May and McDermott to the effect that he believed the second draft was ‘in order’.[15] 

    [15] Ibid [44].

18. Second, her Honour found critical parts of Mr Griffin’s account to be ‘inherently improbable’.[16]  Her Honour reached this view for the following principal reasons:

    [16] Ibid [45].

    (1)She found it ‘curious’ that Mr Griffin concluded that the inclusion of the words ‘for NIL consideration’ was a deliberate attempt to, in Mr Griffin’s words, ‘pull a swifty’ — rather than a mistake.  Her Honour considered that, on Mr Griffin’s own account of the negotiations to that point, to the effect there had been no discussion concerning consideration being paid by Clone for the Licences, Mr Griffin had no reason to think that the inclusion of the words ‘for NIL consideration’ was a deliberate attempt to ‘pull a swifty’ and ‘if it were a mistake, then it was one which could easily be rectified’.[17]  With respect to her Honour, it is difficult to see how the words could have been inserted by mistake. 

    [17] Ibid [46].

    (2)Although Messrs Griffin, McDermott and May initialled each page of the Agreement at execution, and initialled the changes from the second draft which had been highlighted by Mr Mackie, they did not initial the deletion of the word ‘NIL’.[18]  Nor did Mr Griffin make, or instruct anyone else to make, any attempt to bring his alleged deletion of the word ‘NIL’ to the attention of Clone or its solicitors.  He simply instructed Mr McDermott to forward the executed Agreement to Mr Mackie together with a cheque representing one month’s rental.[19] 

    [18] Ibid [45].

    [19] Ibid [47], [50].

    (3)Her Honour found Mr Griffin’s account ‘untenable when the effect upon the document of what he did is examined’.[20]  This finding was based upon a number of matters:

    [20] Ibid [48].

    (a)     It was improbable that a commercial solicitor would be satisfied with a provision requiring that the Licences be transferred ‘for consideration’.  Her Honour stated in this regard:

    It is hard to imagine a commercial solicitor being satisfied with such a provision.  It is not really to the point in my view that a court might strive to give some meaning to such a term.  Plainly the time to make the clause viable was before execution.[21]

    [21] Ibid.

    (b)    There were two other clauses in the Agreement which provided a mechanism for resolving future disputes.  One of them, clause 11(j), was one of the highlighted amendments in the third draft.  Her Honour reasoned that Clone ‘would have required a similar provision in the event that it agreed to the amendment to clause 11(i)’.[22] 

    [22] Ibid.

    (c)    The deletion did not accord with any prior agreements between the parties:

    Furthermore, the claimed deletion did not bring the clause into conformity with what Mr Griffin claimed were the terms agreed between himself and Mr Mallett.  According to Mr Griffin, nothing had been said about an option being afforded Clone to buy the licences.[23]

    [23] Ibid.

    (d)    On the other hand, Mr Griffin made no attempt to alter clauses of the Agreement which were inconsistent with representations he contended were made to him by Mr Mallett.[24] 

    [24] Ibid [49].

    (e)    It was not until some 10 years after the Agreement was executed that Mr Griffin alleged, for the first time, that he believed Clone had attempted to ‘pull a swifty’ by inserting the word ‘NIL’ without drawing attention to it, and thereby ‘ “sneaking” a rogue term into the Agreement’.[25] 

    (f)     Mr Griffin signed the Lease on behalf of Players and, therefore, must have approved its contents.  He clearly examined it closely, as he made detailed comments on the first draft.  The Lease did not require any consideration to be paid for the Licences when transferred to Clone.  Her Honour rejected Mr Griffin’s explanation that he did not read the Lease as creating an obligation upon Players to hand over the Licences at expiration.[26] 

    (g)    As an experienced commercial solicitor ‘who appeared to have a good memory’, it was to be expected that Mr Griffin would have been ‘extra vigilant’ in ensuring that the Lease was consistent with the Agreement, as it was required to be, and thus provided that there would be consideration payable for the Licences upon their transfer to Clone at the expiration or sooner termination of the Lease.[27] 

    (h)    Her Honour regarded Mr Griffin’s evidence as having ‘far greater significance’ than Mr McDermott’s evidence on the deletion issue, notwithstanding that Mr McDermott ‘claimed a good memory’.  In her Honour’s view, Mr McDermott’s evidence was ‘unpersuasive’ and she was not assisted by it.[28] 

    (i)     The deletion issue was not raised until after the original proceeding was commenced.  It was not contained in Players’ original defence filed 27 April 2004, and had been obliquely referred to in a letter dated 23 April 2004 from Players’ solicitors to Clone’s solicitors in terms of an ‘assertion that the transfer of the Licences at the end of the Lease would be accompanied by a payment of “compensation” (rather than “consideration”) …’.[29]  It was not until Players filed its amended defence and counterclaim on 16 July 2004 that it first sought rectification of the Agreement on the basis of Mr Griffin’s deletion of the word ‘NIL’.[30] 

    (4)As against the ‘improbable’ and ‘untenable’ evidence of Messrs Griffin and McDermott, her Honour found that each of Mr Grope, Ms Roche, Mr England and Mr Brown gave evidence ‘that the word “NIL” had not been scored out when the document was in their hands’.[31]  With respect, her Honour’s finding in this regard must be understood in the context of the factual findings which she made immediately below which, in my opinion, are ambiguous as to the precise content of the evidence: 

    (a)     In respect of Mr Grope, her Honour found only that he examined the Agreement in a professional capacity prior to its execution and that ‘had the deletion been present he would [likely] have seen it’.[32] 

    (b)    Ms Roche was ‘an impressive witness’ who adopted a ‘meticulous approach’ when she examined the Lease.[33]

    (c)    Mr England was also an impressive witness who ‘applied his mind to the job at hand’ and, had the deletion been made, her Honour was ‘satisfied he would have seen it’.[34]

    (d)    Mr Brown’s evidence was ‘less persuasive’, but ‘one would have expected him to note any deletion made to [the Agreement], particularly if it were not initialled’.[35]

    [25] Ibid [50].

    [26] Ibid [51].

    [27] Ibid [52].

    [28] Ibid [53].

    [29] Ibid [54].

    [30] Ibid.

    [31] Ibid [55].

    [32] Ibid.

    [33] Ibid.

    [34] Ibid.

    [35] Ibid.

19. During the Application, the Court was provided with an agreed bundle of transcript pages from the trial which are relevant to Vanstone J’s findings.  Taking the evidence of the four witnesses mentioned above:

    (1)Mr Grope gave evidence that the word ‘NIL’ had not been struck out when he considered the Agreement prior to its execution by Clone.  When asked by her Honour if that was a specific recollection, he responded in terms demonstrating that he was reconstructing.

    (2)Ms Roche gave evidence that she could not remember if the word ‘NIL’ had been struck out when she submitted the Agreement to her father and Mr England for execution. 

    (3)Mr England gave evidence that he could not recall if the word ‘NIL’ had been struck out when he read the Agreement. 

    (4)Mr Brown initially gave evidence the word ‘NIL’ had not been struck out when he considered the Agreement for the purposes of drafting the Lease.  He later gave evidence that he could not recall ‘the way [clause 11(i)] looked’, and the exchanges between Vanstone J and Mr Whitington disclose that her Honour’s impression of Mr Brown as a witness was that ‘he can’t remember a single thing outside what the documents tell him must have happened’.

20. Vanstone J’s specific factual findings concerning each of the four witnesses and the evidence referred to above, demonstrate that her initial finding that each of the witnesses gave evidence ‘that the word “NIL” had not been scored out when the [Agreement] was in their hands’ is not supported by the evidence as a whole on that issue.  It appears that her Honour’s specific findings were based on the witnesses’ evidence as to their usual practices — ie reconstruction.  I would add that the inference remains open that these four witnesses did not notice that ‘NIL’ had been struck out because that alteration was not initialled — as were other amendments. 

1. Mr May did not give evidence, but Vanstone J did not draw any adverse inference against Players on that account.[36]  Nor did her Honour place any weight on Mr Griffin’s apparent state of mind during his endeavours to secure Clone’s consent to the transfer of Licences to the Harborsboard premises to be conducted by Fairtown.[37] 

   [36] Ibid [56].

   [37] Ibid [57].

2. In addition to rejecting Players’ claim for rectification based on the deletion of the word ‘NIL’ in the Agreement, Vanstone J found that, even if the deletion had been proved, the rectification claim would nevertheless have failed because:

   (1)Clone’s arguments concerning the Cahill execution issue should be accepted.  In short, the Agreement was conditional upon Mr Cahill executing his guarantee.  As he did not, the Agreement was not binding.[38]

   (2)Clone’s arguments on the embodiment issue should be accepted.  In summary, upon execution of the Lease the Agreement ceased to have any effect and ‘the Lease became the sole embodiment of the terms of the parties’ agreement’.[39]

   [38] Ibid [59]-[70].

   [39] Ibid [36]-[41].

3. As noted above, Vanstone J also found against Players on the consent issue.  There was no reason for her to consider the reasonable consideration issue, as Players’ rectification claim failed. 

   The Full Court’s decision

4. Players appealed against Vanstone J’s decision.  Although partly successful, Players lost its appeal on the deletion issue and the consent issue.  Accordingly, Players remained liable to transfer the Licences to Clone without receiving any consideration. 

5. The principal judgment on appeal was delivered by Doyle CJ (Sulan and Layton JJ agreeing).  In summary, Doyle CJ:

   (1)dismissed Players’ appeal on the consent issue,[40] but overturned Vanstone J’s alternative finding that Players had not, in any event, satisfied the conditions of any consent;[41] 

   (2)overturned Vanstone J’s decision on the Cahill execution issue,[42] and also overturned her decision on the embodiment issue.[43]  As a result, if Mr Griffin in fact deleted the word ‘NIL’ from clause 11(i) of the Agreement, and, as a result, the Agreement provided that the Licences would be transferred to Clone ‘for consideration’, then Players would have been contractually entitled to insist that the Lease reflect that form of clause 11(i);[44] 

   (3)upheld, however, Vanstone J’s finding on the deletion issue;[45] and

   (4)overturned Vanstone J’s finding on the breaches she found were incapable of remedy and, as a consequence, remitted the relief against forfeiture issue for determination by Vanstone J.[46] 

   [40]   Players Pty Ltd & Ors v Clone Pty Ltd [2006] SASC 118 [79]-[100].

   [41] Ibid [101]-[106].

   [42] Ibid [130]-[140].

   [43] Ibid [115]-[128].

   [44] Ibid [121].

   [45] Ibid [141]-[190].

   [46] Ibid [198]-[217].

6. As noted above, Doyle CJ overturned Vanstone J’s decision on the embodiment issue and held that, prima facie, Players was entitled to insist that the Lease reflect the terms of the Agreement, including clause 11(i) if the word ‘NIL’ had been deleted.  As the appeal on the deletion issue was dismissed, it was unnecessary for the Full Court to consider either the rectification issue or the reasonable consideration issue.  However, Doyle CJ commented that a further issue might have arisen had the appeal on the deletion issue been allowed (the ‘unpleaded unconscionable conduct issue’). 

7. In rejecting the appeal on the deletion issue, Doyle CJ stated that Mr Griffin’s failure to draw attention to his alleged deletion of the word ‘NIL’ when returning the executed Agreement to Clone’s agent was a ‘problematic aspect of his evidence’.[47]  As his Honour put it:

   Common sense, commercial practice, sound legal practice and fairness all called for Mr Griffin to draw the change to the attention of Clone through one of its representatives.  Mr Griffin’s failure to do so is inexplicable.  He offered no satisfactory explanation.[48] 

   [47] Ibid [166].

   [48] Ibid.

8. When commenting upon the unpleaded unconscionable conduct issue which could arise if the appeal on the deletion issue had succeeded, Doyle CJ stated:

   A striking feature of the case is that on Players’ own case Mr Griffin did nothing at all to bring the deletion of the word “NIL” to the attention of any representative of Clone.  Moreover, the signed Agreement was returned to Clone’s agent (Colliers) in circumstances that would suggest that Players had accepted the draft Agreement in the terms proposed by Clone.  Thereafter Players maintained its silence while the Agreement was executed by Clone and while the terms of the Lease were negotiated and the Lease was executed.

   Even if I were persuaded that Mr Griffin’s evidence that he deleted the word “NIL” should be accepted, I find no basis to reject the evidence of Mr Grope, Ms Roche and Mr England that they did not notice the deletion.  The appearance of condition 11(i) in exhibit P9 and exhibit D9 is such that the possibility of them having failed to observe the deletion cannot be put aside.

   On those facts and findings, could or should the court order that the Lease be rectified to provide (in accordance with the Agreement) that Clone should pay consideration to Players for the hotel licence and for the gaming machine licence?  On those facts and findings, the proper finding might be that Clone executed the Agreement under a mistake as to one of its terms.  Normally that would not enable Clone to deny that it was bound.  Players would be entitled to say that by signing the Agreement Clone had so conducted itself as to indicate to a reasonable person that it assented to the terms of the Agreement.

   But on the facts and findings referred to, it may be that the proper conclusion would be that Clone’s mistake as to condition 11(i) is one of which Players (through its directors) was aware, and that the mistake was attributable to Mr Griffin altering the Agreement without having the alteration initialled, and without doing anything to bring to Clone’s attention the fact of the alteration, in circumstances in which Clone had no reason to think that any alteration had been made.  In those circumstances a finding that Players had been guilty of unconscionable conduct might be made.  The case might be similar to A Roberts & Co Ltd v Leicestershire County Council,[49] in which rectification was ordered at the instance at the mistaken party.  I refer also to Leibler v Air New Zealand Ltd (No 2).[50]

   This matter was not argued on appeal.  Nor in its Defence to the Counterclaim has Clone raised this defence to the Counterclaim for rectification.  Nor has it claimed that it is entitled to rectification in the event that the Agreement was signed after the word “NIL” was deleted.  The closest Clone has come to this appears to be para 16.5 of its Defence to Counterclaim which asserts:

   The first defendant is estopped from asserting that the Lease does not embody the terms of the Agreement between the plaintiff and the first defendant and is estopped from seeking rectification of the Lease.

   In substance that plea is based on the fact that Players executed the Lease and that the parties have relied upon the terms of the Lease as governing the situation between them.

   This is a matter on which I would have wished to hear further submissions, had I been persuaded that the Judge erred in finding that the word “NIL” had not been struck out of condition 11(i) before Clone signed the Agreement.[51]

   [49] [1961] Ch 555.

   [50] [1999] 1 VR 1, 14 (Kenny JA).

   [51]   Players Pty Ltd & Ors v Clone Pty Ltd [2006] SASC 118 [192]-[197] (emphasis added; citations in original).

   Further decision of Vanstone J

9. The Full Court’s reasons were delivered on 24 April 2006, and final orders were made on the appeal on 4 July 2006.  Following this, Vanstone J heard and determined the Players’ counterclaim for relief against forfeiture and dismissed that claim on 22 September 2006.[52] 

   [52]   Clone Pty Ltd v Players Pty Ltd & Ors [2006] SASC 290.

10. It was unnecessary for Vanstone J to assess Clone’s damages entitlement for breaches of the Lease, because the parties settled that aspect of the proceeding on 16 October 2009. 

11. Players applied to the High Court for special leave to appeal against the Full Court’s decision in respect of the deletion issue.  The High Court denied special leave on 10 November 2006.[53] 

    [53]   Players Pty Ltd v Clone Pty Ltd & Ors [2006] HCATrans 625.

    Clone’s lawyers knew of the third copy Agreement during the trial

12. As appears in more detail below, Clone’s lawyers knew of the third copy Agreement during the course of the trial before Vanstone J, but chose not to either discover it or inform the Court or Players of its existence.  As a result, the trial was conducted on the basis that only two photocopies of the Agreement could be found and that this was the ‘best evidence’ of the form of the original Agreement at the time it was executed. 

13. In summary, the evidence detailed below establishes that:

    (1)Senior counsel for Players at trial informed the Court that the only copy of the Agreement in their possession was the Players copy, tendered by Clone as exhibit P9.  In turn, Clone had discovered only the Clone copy, tendered by Players as exhibit D9. 

    (2)When senior counsel for Players opened its case on 6 April 2005, he told the Court that enquiries had been made of the Liquor Licensing Commissioner (the ‘Commissioner’) in an endeavour to locate any file that had been created concerning the consent of the judge of the Licensing Court of South Australia to the removal of the hotel licence from the Grenfell Tavern to the Premises.  Senior counsel advised the Court that Players understood that any such file had been destroyed.  Those instructions emanated from Mr Griffin.  Moreover, senior counsel for Players informed the Court that searches were continuing for any further copies of the Agreement and that, if any further copy was found, it would be made available to the Court and Clone. 

    (3)Later that day, Clone’s principal instructing solicitor, Antonia (Tonia) Karagiannis, telephoned Vicki  Varricchio (now Vicki Brunello), a legal and policy officer employed by the Commissioner.  Ms Karagiannis asked her to search for any versions of the Agreement within the Commissioner’s files.  She repeated that request by facsimile letter sent the following day, 7 April 2005.  Ms Karagiannis enclosed a copy of exhibit D9 with her facsimile, and advised Ms Varricchio that, if a copy of the Agreement was located, the Commissioner would need to produce several copies of it at Court and let counsel sight the primary copy from the file. 

    (4)Later that day, Ms Varricchio emailed Ms Karagiannis and informed her that she had located the third copy Agreement on the Grenfell Tavern removal file.  She said that there was no such Agreement on the principal files maintained by the Commissioner, known as the ‘Planet Hotel Premises File’. 

    (5)Later that day, after court adjourned, Clone’s junior counsel, Arturo Dal Cin inspected the Grenfell Tavern removal file at the offices of the Commissioner.  He saw the third copy Agreement and noted that it contained a line through the word ‘NIL’, but made a deliberate decision not to photocopy it, because if a copy was taken then he believed it would be discoverable.  Mr Dal Cin asked Ms Varricchio whether she would be willing to advise Clone’s solicitors if Players’ solicitors came to inspect files and which files Players’ solicitors had inspected.  Ms Varricchio agreed to do so. 

    (6)On the following day, 8 April 2005, William Field, a solicitor representing Players, attended at the Commissioner’s offices and spoke with Ms Varricchio.  He said to her: ‘I’d like to inspect all volumes of your file relating to the Planet Hotel’.  In response, Ms Varricchio provided him with volumes 2, 3, 4 and 5 of the Planet Hotel premises file and said that the other volume, volume 1, was being searched for in archives.  She said: ‘as soon as we locate it we’ll call you and you can come and inspect it’.  That was a narrow response to Mr Field’s request.  Mr Field inspected the files produced by Ms Varricchio in an endeavour to locate a copy of the Agreement.  He did not find one.  Mr Field was not shown the Grenfell Tavern removal file at the time of his attendance. 

    (7)Later that day, Ms Varricchio telephoned Ms Karagiannis and spoke with her secretary, Annette Wescombe.  She informed Ms Wescombe that Mr Field had attended to inspect various documents.  Ms Wescombe then sent an email to Clone’s legal team, including senior and junior counsel, Ms Karagiannis and the managing partner, Mark Hamilton, informing them that Mr Field had attended and inspected the Planet Hotel premises file and listing the documents he inspected. 

    (8)On the morning of 11 April 2005, Ms Karagiannis telephoned Ms Varricchio and requested she deliver some files to Court.  By letter sent later that day, Ms Karagiannis gave a notice to the Commissioner to produce to the Court that day, or at latest by 9:30 the following morning, ‘all the Planet files in your possession, including files from the inception of The Planet Hotel’. 

    (9)In contrast to the narrow response to Mr Field the previous Friday, Ms Varricchio had some doubt as to whether the Commissioner was required to produce only the Planet Hotel premises file or other files relating to the Planet Hotel, including the Grenfell Tavern removal file and the file relating to the Oaks Tavern.  Following internal discussions between Ms Varricchio and the solicitor for the Commissioner, Don Mackintosh of the Crown Solicitor’s Office, Mr Mackintosh telephoned Ms Karagiannis and spoke with Ms Wescombe.  Ms Wescombe, in turn, spoke with Ms Karagiannis.  Ms Wescombe then informed Mr Mackintosh that Clone required production of the Planet Hotel premises file only, ‘just since the inception of The Planet (and not including The Oaks or The Grenfell Tavern [removal file])’.  The effect of this instruction was that the Grenfell Tavern removal file would not be produced at Court by the Commissioner, which file was known by Clone’s legal team to contain the third copy Agreement. 

    (10)When the files were delivered to the Court the next morning, the Commissioner delivered volumes 2, 3, 4 and 5 of the Planet Hotel premises file and also the two volumes of the file relating to Players’ Gaming Machine application (the ‘Gaming Machine application file’).  As it happened, there was a fourth copy of the Agreement in one of those volumes of the Gaming Machine application file (the ‘fourth copy Agreement’).  The Court took possession of the files through its Registry or Vanstone J’s associate.  The associate allowed Clone’s legal representatives to inspect the files, without the notice to produce being called on in open court.  Some plans from the Planet Hotel premises file were produced and shown to Mr Griffin during his cross-examination. 

    (11)Although Mr Griffin had given evidence that the Licensing Court files, which must have been a reference to the Grenfell Tavern removal file at least, had been destroyed, that evidence was not challenged in cross-examination.  It appears that a forensic decision was made not to raise the known existence of the Grenfell Tavern removal file with Mr Griffin or the Court. 

    Players becomes aware of the third and fourth copies of the Agreement

14. The Legal Practitioners Conduct Board undertook an investigation into the conduct of Mr Griffin concerning his evidence at trial.  As part of this investigation, the Board inspected the Commissioner’s files.  The Board did not take any action against Mr Griffin. 

15. In December 2009, the Board informed Mr Griffin’s firm that it had located two further copies of the Agreement — the third copy Agreement, which was found in the Grenfell Tavern removal file, and the fourth copy Agreement, which was found in the Gaming Machine application file.  Both copies contain a line through the word ‘NIL’ in clause 11(i). 

16. At this time, Players and Clone were in dispute over the taxation of Clone’s costs.  In the context of that taxation, Mr Griffin inspected documents on the Grope Hamilton file listed in Clone’s bill of costs.  His purpose in doing so was to investigate whether Clone had been aware of the third copy Agreement or fourth copy Agreement during the trial but had not discovered it.  Mr Griffin was allowed to inspect the documents without any claim being made by Clone or its solicitors for legal professional privilege.  In the course of the inspection, Mr Griffin discovered documents evidencing the fact that Clone knew of the third copy Agreement during the course of the trial (the ‘Grope Hamilton documents’), but did not discover it or otherwise bring it to the attention of the Court, and that the fourth copy Agreement was contained in the Gaming Machine application file which had been produced to the Court pursuant to Clone’s notice to produce — which had not been called upon during the trial. 

17. In this context, Players commenced the Application in June 2010.  In connection with the Application, and in order to avoid any suggestion that it was making improper collateral use of documents inspected during the taxation process, Players applied to the Court for leave to use the Grope Hamilton documents.  Clone agreed that the third and fourth copies of the Agreement could be used by Players to support the Application, but claimed legal professional privilege over the Grope Hamilton documents.  I will refer to this application as the ‘privilege application’. 

18. The privilege application was heard by Kourakis J (as his Honour then was) on 31 May and 2 June 2011.  On 3 February 2012, Kourakis J delivered extensive reasons accepting Clone’s arguments that the Grope Hamilton documents were privileged, and that the privilege had not been waived by permitting Mr Griffin to inspect the documents as part of the taxation process.[54]  In the course of his reasons, Kourakis J rejected Players’ contention that any privilege attaching to the Grope Hamilton documents was defeated on the grounds that the documents evidenced communications for an ‘illegal or improper purpose’,[55] ‘for the purpose of frustrating the processes of the law’,[56] or in connection with ‘sharp practice’.[57]  Kourakis J summarised his decision on the privilege application in the following terms:

    In my view, the production of documents on a taxation of costs pursuant to the rules of this Court waives litigation privilege in those documents only for the limited purpose of the taxation.  A successful litigant should not be put to an election between prosecuting his or her statutory entitlement to costs and losing his or her substantive right, as a litigant, to confidentiality over communications related to the litigation.  I also find that Clone has not, by its defence, implicated the documents in a way which is inconsistent with maintenance of the privilege.

    I find that there is no evidence of improper conduct by Clone’s legal representatives and no prima facie case that the privileged communications were made for an improper purpose.

    In my view, an application to set aside final orders by reason of fraud, or on analogous grounds, is an interlocutory application brought in the proceedings in which those orders were made invoking the power of this Court to review, on limited grounds, its final orders.  Nonetheless, the purpose of compulsory production of documents on a taxation of costs is completely unrelated to the merits of the resolution of the underlying controversy.  For similar reasons to those which support the conclusion that production on a taxation results only in a limited waiver of privilege, I find that the Players Parties are subject to the rule of preclusion.  I am also of the view that there are insufficient grounds, in the circumstances of this case, to exempt the Players Parties from the rule of preclusion.[58] 

    [54]   Clone Pty Ltd v Players Pty Ltd (in liq) (rec apptd) & Ors [2012] SASC 12.

    [55] Ibid [156], citing Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501, 534 (Toohey J).

    [56] Ibid, citing Commissioner of Australian Federal Police v Propend Finance Pty Ltd (1997) 188 CLR 501, 546 (Gaudron J).  

    [57] Ibid, citing Barclays Bank Plc v Eustice [1995] 4 All ER 511, 525.

    [58] Ibid [15]-[17] (emphasis added).

1. In his detailed reasons, Kourakis J gave consideration to the scope of the Court’s power to set aside perfected orders.[59]  In the course of his Honour’s consideration of the history of the law on this subject, his Honour considered Quade,[60] and Brookfield v Yevad Products Pty Ltd.[61]  His Honour concluded his review of the law in the following terms:

   In my view, the same considerations which operate to preserve the power to set aside perfected orders in the case of fraud operate with equal force where there has been an intentional or reckless abuse of the Court’s process which is calculated to frustrate the just disposition of the proceeding.  The abuses of the process I have in mind are those which can be described as “irregularities so fundamental as to create an unconditional right, ex debito justitiae, to have the judgment set aside”.

   I conclude that this Court is empowered to set aside a perfected judgment on an application brought in the action in which it was made, or in a separate action brought for that purpose, on the ground of an intentional or reckless abuse of the procedures of this Court which has concealed, from the unsuccessful party, important evidentiary material which it would otherwise have obtained.  It is the importance of the internal documents to the power so defined which must inform the application of the rule of preclusion and the question of loss of privilege.[62]

   [59] Ibid [19]-[105].

   [60] (1991) 178 CLR 134.

   [61] [2004] FCA 1164.

   [62]   Clone Pty Ltd v Players Pty Ltd (in liq) (rec apptd) & Ors [2012] SASC 12 [104]-[105] (emphasis added; citation omitted).

2. Kourakis J also reviewed the evidence relied upon by Players in support of its contention that the Grope Hamilton documents disclosed communications for an improper purpose and were not privileged — a similar question to the power to set aside perfected orders in the case of fraud or abuse of the Court’s processes.  In the course of determining that there was no improper conduct disclosed on the evidence before him, Kourakis J accepted that additional photocopies of the Agreement were relevant to the factual controversy on the deletion issue, especially if it is likely that an additional copy was the result of an additional photocopy being made of the original Agreement at a different time than the two copies in evidence or one of them.  His Honour stated:

   I accept that photocopies of the Agreement which were made, or might have been made, directly from the original Agreement, are relevant to the factual controversy over the striking-out of the word “NIL”.  I also accept that the existence of additional photocopies, which generally show the mark, are capable of supporting [Mr Griffin’s] account.  I acknowledge that if the mark is an artefact produced by photocopying, and the additional photocopies are photocopies of a single imperfect copy, the existence of the additional photocopies, no matter how many there are, does not offer much support for [Mr Griffin’s] testimony.  However, if two or more photocopies of the original Agreement, made at different times, show the same mark, the likelihood that the mark existed on the original Agreement is increased.  Moreover, the number and location of additional photocopies exhibiting the mark might support an inference that they were not copied from the original Agreement at the same time or by the same photocopier and that therefore the mark is not a photocopying artefact.[63]

   [63] Ibid [113] (emphasis added).

3. Players appealed the decision of Kourakis J. 

   The Full Court finds a colourable case of abuse of process

4. The Full Court (Gray, Blue and Stanley JJ) delivered a joint judgment,[64] allowing the appeal.  In summary, the Full Court found:

   (1)Clone waived any privilege in the Grope Hamilton documents when it allowed Mr Griffin to inspect them ‘when under no obligation to do so, without claiming confidentiality and without restriction or limitation’.[65] 

   (2)Use by Players of the Grope Hamilton documents in the Application did not involve a breach of the implied undertaking as to collateral use of discovered documents.[66] 

   (3)Players had ‘established a colourable case that the [Grope Hamilton documents] evidence an abuse of process in connection with additional copies of the [Agreement] and, accordingly, Clone [was] not entitled to the protection of legal professional privilege in relation to those documents’.[67]

   [64]   Players Pty Ltd (in liq) (rec apptd) & Ors v Clone Pty Ltd (2013) 115 SASR 547.

   [65] Ibid 552 [17].

   [66] Ibid [19].

   [67] Ibid.

5. The Full Court considered the facts arising from the Grope Hamilton documents, the written communications passing between Clone’s solicitors and the Commissioner and the existence of the third and fourth copies of the Agreement.[68]  Like Kourakis J, the Full Court did not have evidence from the Commissioner’s representatives, or of the Commissioner’s documents, concerning its internal communications resulting from Ms Karagiannis’s requests and Mr Dal Cin’s inspections.  The Full Court concluded, on an interlocutory basis, that a colourable case of abuse of process had been made out.  In the course of doing so, the Full Court recorded that, at trial, Players had contended that:

   … further copies could be expected to provide support for Mr Griffin’s evidence that the horizontal line appearing through the word NIL had existed on the original agreement to lease.  It was pointed out that Vanstone J in her reasons for judgment said that she was not satisfied that the two copies of the agreement to lease that were in evidence were not each a copy of the other.  Beyond the existence of P9 and D9, which might be copies of each other and whose provenance was uncertain, there was no independent documentary evidence to support Mr Griffin’s evidence that the horizontal line appearing through the word NIL had existed on the original agreement to lease.[69]

   [68] Ibid 552-6 [23]-[42].

   [69] Ibid 571-2 [110] (emphasis added; citations omitted).

6. Next, the Full Court quoted, with apparent approval, paragraph [113] of the decision of Kourakis J (quoted above) concerning the relevance of additional photocopies, particularly if an additional copy was made from the original at a different time.[70] 

   [70] Ibid 572 [111].

7. After reviewing the evidence summarised above as to Clone’s lawyers’ knowledge that the third copy Agreement was on the Grenfell Tavern removal file, that Mr Dal Cin requested Ms Varricchio to inform Clone’s lawyers of any inspection of the Commissioner’s files by Players, the circumstances surrounding the notice to produce from Clone’s solicitors to the Commissioner, and the fact that Clone and its legal representatives were well aware that Players had informed the Court of the importance of any further copies,[71] the Full Court concluded:

   Clone submitted to this Court, as it did to the Judge at first instance, that the inferences of an abuse of process sought to be drawn by the Players parties were no more than mere speculation without any evidentiary support. It was accepted that the documents over which privilege is claimed did disclose a level of monitoring. It was said that there was nothing unusual or sinister about this and the steps taken in the monitoring process were not illegal and were entirely proper. The Players parties’ assertion that there was a colourable case of abuse was strenuously denied.

   The drawing of inferences at the interlocutory stage from incomplete and untested material is always difficult. In principle, there is nothing wrong with a party taking lawful steps to ascertain what investigations another party may be pursuing. On the other hand, a party so informed should not be involved in the Court being misled as to the true circumstances involving matters being discussed, raised or advanced in Court. A party must be zealous not to be involved in any conduct that may mislead the Court or cause the Court to act under a material misapprehension.

   In the present case, the situation was complex. All in Court were aware of the need to produce as many of the copies of the agreement to lease as may exist. Both parties, at times, asserted to the Court that they had produced all copies in their possession. It is the Players parties’ case that Clone understood at the time of the trial that the Players parties believed that the Grenfell Tavern files had been destroyed and that Clone further understood that that was incorrect and that there was a further copy of the agreement to lease in the possession of the Commissioner. To our mind, the evidence before the Court does raise a level of suspicion. The question is: does the evidence raise a colourable case of abuse? We have concluded that, for the purposes of an interlocutory finding, there is sufficient evidence to raise a colourable case. We emphasise that the persons concerned have not been examined or cross-examined. There are no affidavits from several important witnesses. We accept that we are being asked to draw inferences from incomplete material. Notwithstanding these reservations, we consider that a colourable case of abuse has been made out. As a consequence, any valid claim for privilege cannot be maintained.[72]

   [71] Ibid 572-3 [114]-[119].

   [72] Ibid 574 [120]-[122] (emphasis added).

8. Clone applied to the High Court for special leave to appeal.  The application was refused.[73] 

   What must be established to enliven the Court’s discretion to set aside the judgment and order a new trial?

   [73]   Clone Pty Ltd v Players Pty Ltd (in liq) (rec appointed) & Ors [2013] HCATrans 216.

9. In Quade,[74] the High Court held that failure to comply with discovery obligations could, particularly where the failure was deliberate or remains unexplained, come within the category of ‘cases of malpractice’ which enliven the Court’s jurisdiction to order a new trial.[75]

   [74] (1991) 178 CLR 134.

   [75] Ibid 140-1.

10. In Brookfield v Yevad Products Pty Ltd,[76] Lander J set aside a perfected judgment on an application brought before him as a single judge, on the grounds that relevant and important material had not been discovered by the successful party at trial and the failure to make discovery was largely unexplained.  Even though a finding of fraudulent suppression of evidence was not open, Lander J nonetheless considered that his discretion to set aside the judgment and order a new trial was enlivened.[77]  In circumstances where it had not been established that the applicants had failed to prosecute their case diligently, and the production at trial of the undiscovered documents ‘may have led the Court to a different conclusion’,[78] Lander J considered that it was in the interests of justice to set aside the judgment and order a re-hearing.[79] 

    [76] [2004] FCA 1164.  

    [77] Ibid [390]-[422].

    [78]   Emphasis added. 

    [79]   Ibid [416]-[420]. 

11. The decision in Brookfield was referred to with approval by Kourakis J (as he then was) in earlier interlocutory proceedings in this case.[80] 

    [80]   Clone Pty Ltd v Players Pty Ltd (in liq) (rec apptd) & Ors [2012] SASC 12 [100]-[104].

12. A potential issue concerning the breadth of the Court’s jurisdiction under rule 242 of the Supreme Court Civil Rules 2006 to set aside a perfected judgment and order a new trial was ultimately not argued.  It is accordingly unnecessary to consider whether the obiter dicta of the Full Court on appeal in the privilege application should be applied as a separate, and wider, head of jurisdiction.[81] 

    [81]   Players Pty Ltd & Ors v Clone (2013) 115 SASR 547, 552 [20], 561 [69].

13. Clone and Players agree that Quade[82] is the governing authority to be applied to the resolution of the Application.  In summary, the Attorney-General (as an intervener on this issue only) contends that, in a case such as the present where all appeal avenues have been exhausted, the power of the Court to set aside a perfected judgment is limited to cases of fraud, or conduct analogous to fraud. 

    [82] (1991) 178 CLR 134.

14. As to what constitutes fraud for this purpose, the Attorney-General relied upon the decision of the New Zealand High Court in Redcliffe Forestry Venture Ltd v Commissioner of Inland Revenue.[83]  In that case, Venning J relevantly concluded that fraud for this purpose included ‘the deliberate suppression of material facts which effectively amounts to the presentation of false evidence to the Court’.[84]  As to the content of ‘deliberate suppression of material facts’, Venning J quoted with approval some statements from the speeches in The Ampthill Peerage,[85] which countenance reckless suppression of the truth as falling within the concept of deliberate suppression.  In The Ampthill Peerage, Lord Simon stated that:

    To impeach a judgment on the ground of fraud it must be proved that the Court was deceived into giving the impugned judgment by means of a false case known to be false or not believed to be true or made recklessly without any knowledge on the subject.  No doubt, suppression of the truth may sometimes amount to suggestion of the false …[86]

    [83] [2010] NZHC 176.

    [84] Ibid [42].

    [85] [1977] AC 547.

    [86] Ibid 591 (emphasis added).

15. The Attorney-General placed considerable reliance upon the decision of the Full Court of the Northern Territory in Lexcray Pty Ltd v Northern Territory of Australia (No 3).[87] In that case, a failure to discover a relevant document was held to be insufficient to set aside the judgment and order a new trial.  Angel ACJ dissented.  In his view, the governing authority was Quade,[88] and he was satisfied that the requirements of that decision had been satisfied in circumstances where there was no excuse for the failure to discover the relevant document, there was no lack of diligence on the part of the appellant and, although it was not possible to say that the result of the case would have been different if the document had been discovered, the ‘whole dynamics of the trial would have been different’ such that there had been a real miscarriage of justice which could only be remedied by a retrial.[89] 

    [87] (2003) 13 NTLR 154.

    [88] Ibid 159-61 [13].  

    [89] Ibid 161-2 [14]-[16].

16. The majority judgment was delivered by Gallop AJ (Bailey J agreeing).  Gallop AJ noted the submission by the appellant that the application fell to be determined in accordance with the principles laid down by the High Court in Quade,[90] but did not deal with that submission.  Instead, Gallop AJ determined the application by reference to the previous High Court authority of Bailey v Marinoff,[91] without considering the status of Quade.[92] 

    [90] Ibid 165-6 [25].

    [91] (1971) 125 CLR 529.

    [92]   Lexcray Pty Ltd v Northern Territory of Australia (No 3) (2003) 13 NTLR 154, 167-9 [31]-[35].

17. Bailey v Marinoff was not a case involving an allegation of malpractice or misconduct of the kind considered in Quade.  It was a case concerning the power of a court to reopen litigation which had been finally determined by operation of a self-executing order.  Moreover, Gallop AJ dealt with the application in that case on the basis that it was a mere case of fresh evidence coming to light after a judgment has been perfected on appeal.[93]  The reasons in Quade make it clear that they were not dealing with such a case.[94]

    [93] Ibid 169 [35].

    [94] (1991) 178 CLR 134, 140-1.

18. In my respectful opinion, Gallop AJ was wrong to determine the application before the Court on the basis of the rule as laid down in Bailey v Marinoff.  In any event, the decision of the Full Court of the Northern Territory cannot alter the authority of the High Court’s decision in Quade in circumstances where, as here, an allegation of misconduct at trial is made. 

19. It was contended on behalf of the Attorney-General that the most recent authority on the power of the Court to set aside a perfected judgment following appeal is Lexcray,[95] because special leave to appeal to the High Court was refused in that case by McHugh and Kirby JJ.[96]  I reject that argument.  First, statements made in the course of refusing, or reasons for refusing, a special leave application do not constitute binding precedent.[97]  Second, the transcript of the special leave application indicates, in strong terms, that both McHugh J and Kirby J did not think that the undiscovered document was of sufficient forensic weight to justify reopening the case.  Kirby J said the document was ‘forensically … just not very big’,[98] that the appellants had ‘a very weak factual case’,[99] and McHugh J, in giving reasons for dismissing the application for special leave, said that the ‘factual substratum’ was of insufficient strength to warrant special leave.[100]  In my opinion, the comments made in the course of the special leave application in Lexcray, and the decision to refuse special leave, do not affect the authority of Quade in a case such as the present, which is based upon alleged malpractice, as opposed to the discovery of fresh evidence after the appeal process has been concluded. 

    [95] (2003) 13 NTLR 154.

    [96]   Lexcray Pty Ltd v Northern Territory of Australia [2004] HCATrans 171.

    [97]   X7 v R [2014] NSWCCA 273 [97]; North Ganalanja Aboriginal Corporation v Queensland (1996) 185 CLR 595, 643.

    [98]   Lexcray Pty Ltd v Northern Territory of Australia [2004] HCATrans 171, 7.

    [99] Ibid 11.

    [100] Ibid 14.

20. Moreover, as appears below, the Attorney-General in any event contends that reckless suppression of relevant evidence falls within the scope of the Court’s undoubted power to set aside a perfected judgment on the ground of fraud.  For the reasons appearing below, that test is satisfied in this case. 

21. I turn to consider whether Clone engaged in malpractice during the trial and, if so, to what degree.  In other words, what was its degree of culpability for the third copy Agreement not being in evidence? 

    Did Clone engage in malpractice during the trial?  If so, to what degree?

    Relevant procedural history

22. As stated above, it is necessary to consider the circumstances surrounding Clone’s conduct at trial in more detail than the brief summary above. 

23. It is first necessary, however, to recount some procedural history before trial, in order to give context to some of the events which occurred. 

24. As noted above, the deletion issue was not raised by Players until April 2004, and then in an unsatisfactory manner.  To that, I would add the following:

    (1)By paragraph 4.2.2 of its amended defence and counterclaim filed 16 July 2004, Players alleged that clause 11(i) provided that Clone ‘must pay reasonable consideration’ to Players for a transfer of the Licences upon the expiration or early determination of the Lease.  The plea in paragraph 40 was to similar effect — that it was a term of the Agreement that Players would transfer the Licences to Clone ‘for a reasonable price’.  On this basis, Players claimed rectification of the Lease so as to accord with the plea in paragraph 4.2.2. 

    (2)Players did not plead material facts to support its allegation that clause 11(i) of the Agreement provided for the payment by Clone to Players of ‘reasonable consideration’ or ‘a reasonable price’ upon transfer of the Licences.  Counsel for Players pointed to earlier correspondence from Griffin Hilditch which referred to the issue by assertions that it was a term of the Agreement that Clone ‘pay compensation’ for the hotel licence in the event that it acquired it, that the word ‘NIL’ was ‘expressly deleted by the parties’, and that Players ‘deleted the reference to the word NIL in [clause 11(i)] and as a consequence your client remained silent thereafter on the topic’.  In my opinion, however, these assertions in earlier correspondence, while relevant, fall short of making the pleading a fair one which gave adequate notice of the case Clone had to meet at trial.  This is especially so in circumstances where Clone’s solicitors applied to the Court before the amended defence and counterclaim was filed, referring to the earlier correspondence containing the assertions which then existed and complaining that ‘Players and others have raised an issue of crucial commercial importance to a resolution of the dispute between the parties in correspondence, but have not raised the issue in their defence — or by way of counterclaim’.  In these circumstances, a more informative pleading was required. 

    (3)As appears above, and is expanded upon below, it was not until senior counsel for Players made statements during Clone’s opening of the case, and during his opening of Players’ case, that the precise basis of the case on the deletion issue was outlined. 

1. These circumstances stand in stark contrast to the treatment given to Mr Field when he attended on 8 April and asked to inspect ‘all volumes of your file relating to the Planet Hotel’.  In her evidence, Ms Varricchio said she had no recollection of the occasion, and so could not assist the Court as to why she did not provide a copy of the Grenfell Tavern removal file to Mr Field.  The evidence establishes, however, that Mr Field was given a very narrow response to a very broad request to inspect ‘all volumes’ of the Commissioner’s file ‘relating to the Planet Hotel’.  Having regard to the terms of Ms Karagiannis’s 7 April letter, the urgent assistance afforded to Clone’s legal team on the previous day in connection with locating and providing inspection of the third copy Agreement on the Grenfell Tavern removal file, and Ms Varricchio’s agreement to monitor and report on searches by Players’ solicitors, I infer that Ms Varricchio knew of the importance of further copies of the Agreement and that the third copy was located on the Grenfell Tavern removal file.  Further, that file clearly related to the Planet Hotel.  It was the source of the hotel licence for the Planet Hotel and bore the same licence number.  It contained documents relating solely to the Planet Hotel.  In all the circumstances, it should have been obvious to Ms Varricchio that Mr Field’s broad request included the very file inspected by Mr Dal Cin the previous evening.  If she was in any doubt and genuinely wanted to provide equal treatment to Players, she ought to have at least asked Mr Field if he wanted to inspect the Grenfell Tavern removal file and told him that Clone’s legal team had inspected it the previous evening.  An even-handed approach of this kind would have been consistent with her agreement with Mr Dal Cin to monitor and report on searches by Players’ solicitors, and the clarification request on the following Monday in response to Ms Karagiannis’s broad oral request to inspect files and the 11 April notice to produce. 

2. I find that Ms Varricchio gave unequal treatment to Players in her narrow responses to Mr Field’s broad request, and thereby caused Players to remain ignorant of the third copy Agreement and the fact it was located on the Grenfell Tavern removal file.  She may not have intended to do so, perhaps because she was undertaking a routine job or had other pressing matters to attend to, but that is what she did. 

3. It was submitted on behalf of the Commissioner that such a finding should not be made for two reasons.  First, because ‘Ms Varricchio gave Mr Field exactly what he requested’.  For the above reasons, I reject that submission.  Second, because it was not directly put to Ms Varricchio that she did anything improper.  I reject that submission also.  Players’ Points of Claim and its written and oral openings gave notice that it would be contended that Ms Varricchio’s conduct in not providing the Grenfell Tavern removal file to Mr Field would be challenged.  In any event, Ms Varricchio made it plain in her evidence that she had no recollection of relevant events and made no attempt to do so.  It would have been a fruitless exercise to put matters to her directly.  If she couldn’t recall what she did, she would not have recalled why. 

4. Notwithstanding any finding concerning Ms Varricchio’s conduct in failing to give the Grenfell Tavern removal file to Mr Field for inspection, Clone contends that Ms Varricchio would probably have produced the Grenfell Tavern removal file to him if he had specifically asked to inspect that file.  Notwithstanding my criticisms of Ms Varricchio above, I agree that it is more likely than not that she would have produced the Grenfell Tavern removal file for inspection if specifically asked for it or for the file relating to Players’ application for removal of the Grenfell Tavern hotel licence to the Premises.  In that context, Clone contends that Mr Tisato’s failure to instruct Mr Field to make such a specific request was imprudent and lacking in diligence.  Clone’s contentions in this regard involved the following steps. 

5. First, given Mr Tisato’s knowledge that Ms Sarunic had requested a copy of the Agreement in the context of the Grenfell Tavern removal application, that Mr Griffin had written his 13 September letter to Mr Mackie for that purpose, and that the removal application had been allowed, Mr Tisato accepted in cross-examination that the logical starting point in looking for a copy of the Agreement on the files maintained by the Commissioner was the Grenfell Tavern removal file. 

6. Second, despite being told by Mr Griffin of a practice of destroying Licensing Court files after five years, Mr Tisato accepted in cross-examination that it would nevertheless be prudent to search for the Grenfell Tavern removal file in case it had not been destroyed in accordance with such a practice. 

7. Third, Mr Tisato acknowledged in cross-examination that he did not know what precise files were the subject of the destruction policy which Ms Sarunic had informed Mr Griffin about. 

8. Fourth, Mr Tisato acknowledged in cross-examination that he would not have expected Mr Field to know what files to search when looking for a further copy of the Agreement on the Commissioner’s files. 

9. Fifth, in these circumstances, especially given that Mr Field was a very junior solicitor, Mr Tisato ought to have specifically instructed Mr Field to ask for a search to be made for the Grenfell Tavern removal file (or a file of that character) when he attended to search the Commissioner’s files and, if it could be found, to look for any further copy of the Agreement on that file.  Instead, Mr Tisato gave general instructions to Mr Field to attend the Commissioner’s offices and search for copies of the Agreement on the Planet Hotel premises file only.  It was the generality of this instruction to Mr Field which caused Ms Varricchio to only give Mr Field the files he specifically asked for when he attended to search for further copies of the Agreement. 

10. I accept that best practice by Mr Tisato would have been to instruct Mr Field to search all the Commissioner’s files relating to the Planet Hotel and, in addition, a specific instruction to inspect the Grenfell Tavern removal file if it was available.  Mr Tisato could not recall the terms of the instruction which he gave Mr Field.  He could only give evidence about his intention to have Mr Field attend at the Commissioner’s offices and search for further copies of the Agreement on the Commissioner’s files.  Mr Tisato summarised his intention in differing ways:

    (1)In his evidence in chief, he said that the purpose of his instruction to Mr Field:

    was to see if the Liquor and Gambling Commissioner had a copy of the agreement on any of the files that might be in the Liquor and Gambling Commissioner’s possession in respect of The Planet.[151]

    [151] Emphasis added.

    (2)In cross-examination, he said that the specific purpose of Mr Field’s inspection:

    was for him to go and see if he could find the copy of the agreement that Mr Griffin had sent to Ms Sarunic in September of 1994 to see if he could find it in any of the commissioner’s files.[152]

    (3)In further cross-examination, he said that he recalled accepting what Mr Griffin had told him about the destruction of the Grenfell Tavern removal file, and on that basis he instructed Mr Field to:

    … inspect the balance of any files that the commissioner might have in case the copy of the agreement or a copy of agreement had found its way onto the commissioner’s files.  That’s what was in my mind when I directed Mr Field.

    Q.  So in your mind, just absorbing that answer, was that you did not instruct Mr Field to look for the removal file simply because Mr Griffin had told you it had been destroyed.

    A.  No, I didn’t.  I don’t recall the precise instructions I gave to Mr Field.  My intention was that I wanted him to find the copy of the agreement that Mr Griffin had sent in September 1994 or some other copy that might have found its way into the commissioner’s files.[153]

    (4)Later in cross-examination, he said of his instructions to Mr Field:

    I just wanted him to find - I wanted him to go through everything they had and see if he could find a copy of the agreement.  I didn’t turn my mind specifically to what files might be there.  I wanted him to see all the files.  That was my intention.  That was my purpose.[154]

    (5)Finally, in cross-examination, Mr Tisato endeavoured to reconstruct his instructions to Mr Field:

    My request as the person running that trial at that time is likely to have been something along the lines of ‘Go and have a look and see all of their files and go right through every single page until you can find a copy of the agreement if it's there and if it’s not there either way come back and tell us.  We need to find any further copies of the agreement’ and it would have been a broad scope direction.[155]

    [152] Emphasis added. 

    [153] Emphasis added. 

    [154] Emphasis added. 

    [155] Emphasis added. 

11. In my opinion, given that Mr Tisato cannot recall the instructions he gave to Mr Field, the best evidence of his instructions is to be found in Mr Field’s contemporaneous affidavit, sworn 11 April 2005, in which he deposed to the request he made of Ms Varricchio when he attended to search for any further copy of the Agreement:

    Upon my arrival at the [Commissioner’s office] I said to an employee of that Office, whose name was Vicky, ‘I’d like to inspect all volumes of your file relating to the Planet Hotel’. 

12. The fact that Mr Field expressed his search request in these terms is likely to reflect the generality of Mr Tisato’s instructions.  I find that Mr Tisato did not alert Mr Field to the need to make any specific request for the Grenfell Tavern removal file, or a file of that character. 

13. The generality of Mr Tisato’s instructions to Mr Field was likely dictated by his belief, based on what Mr Griffin had told him about his conversation with Ms Sarunic, that the Grenfell Tavern removal file had likely been destroyed in accordance with a destruction policy at the Licensing Court.  Mr Tisato’s evidence of what Mr Griffin told him about the likely destruction of the Grenfell Tavern removal file is set out below:

    A.  Yes.  Mr Griffin informed me that he had already made inquiries of Tina Sarunic, who was the Licensing Court judge’s secretary, at the time that Players had applied for the removal of the licence in 1994/5 from Grenfell Street to Pirie Street.  He had made inquiries of her seeking the file that had been the subject of that application and specifically the agreement to lease that he had forwarded to her, and by this stage, I was aware that, according to the documents I had seen, Mr Griffin had written to Mr Mackie in September 1994 and sought a copy, and that he had done so in response to a letter from Ms Sarunic requesting a copy of the lease and landlord’s consent.  So I had seen those documents and I was trying to ascertain what had become of that, and Mr Griffin informed me that Ms Sarunic had told him that the file and the relevant documents had been destroyed and that there had been a practice - that she had had to go through a practice in the Licensing Court of destroying files that were older than five years, and that this was one of the files that had been destroyed.  So that satisfied my inquiry that the file - for the purposes of instructing Mr Whitington as to the state of these matters, that was as far as I had gone in respect of that matter.

14. While I accept that Mr Tisato was entitled to believe what Mr Griffin had told him about the destruction policy, his candid acknowledgments that the most likely place on which the copy Agreement sent by Mr Griffin to Ms Sarunic was on the Grenfell Tavern removal file, and that it would nonetheless be prudent to request a search for that file, lead me to conclude that Mr Tisato failed to exercise reasonable diligence in searching for the third copy Agreement.  As to the degree of Mr Tisato’s lack of reasonable diligence, I find that it was at the lower end of the scale.  It was an error of judgment in the context of a trial, but not reckless.  Mr Tisato’s lack of reasonable diligence falls well short of the reckless malpractice engaged in by Clone’s legal team in failing to discover the third copy Agreement. 

    What other factors are relevant to the exercise of the Court’s discretion?

15. In addition to the three specific factors considered above, the Court must consider general considerations relating to the administration of justice, in particular the principle that there should be finality to litigation, and any other specific factors which are relevant to the case at hand.  One further specific factor concerns the unpleaded unconscionable conduct issue.  It is likely that, if a fresh trial is ordered, Clone will endeavour to rely upon this issue in the manner suggested by Mr McNamara in his argumentative evidence — to the effect that Players should be refused the equitable remedy of rectification because of Mr Griffin’s unconscionable conduct in failing to draw his deletion of the word ‘NIL’ to the attention of Clone or its representatives when returning the executed Agreement.  I turn to consider whether that matter should be given weight in the exercise of the Court’s discretion and, if so, how much weight. 

    The unpleaded unconscionable conduct issue

16. As noted above, Clone did not raise the unconscionable conduct issue at trial.  For the following reasons, I infer that Clone’s legal representatives made a deliberate forensic decision that they would not seek leave to raise the issue at trial.  While I accept Mr McNamara’s evidence that he cannot recall whether or not he sought instructions as to whether to make such an application, his evidence as a whole indicates that the issue was given serious consideration but was not the subject of an application for leave to amend.  It is unnecessary to speculate as to why that forensic decision was made.  On the basis of this inference, Clone may face difficulty in applying for leave to amend its pleadings to raise this issue if a new trial is ordered.[156] 

    [156] For example, Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 181-2 [4] (French CJ), 214-15 [102] (Gummow, Hayne, Crennan, Kiefel and Bell JJ).

17. In final submissions on the Application, senior counsel for Clone:

    (1)acknowledged that, if a new trial is ordered, Clone will endeavour to rely upon ‘a case based on unconscionability along the line suggested by Doyle CJ’;

    (2)conceded that it was presently unable to formulate a proposed pleading with precision;

    (3)recognised that it might face limitation of actions constraints in raising the issue, or related issues, by way of positive case; and

    (4)submitted that, in any event, the underlying conduct of Mr Griffin in failing to bring any deletion to the attention of Clone could, in any event, be relied upon in a defensive way, as a factor precluding Players’ right to the discretionary remedy of rectification in any event. 

18. Clone contends that Mr Griffin’s conduct in this regard was on any view inappropriate conduct for a competent legal practitioner such as Mr Griffin to engage in if acting in good faith, and that this had been recognised by both Vanstone J and Doyle CJ in their reasons.  In these circumstances, Clone contends that Mr Griffin’s conduct is a strong factor to be considered in the exercise of the Court’s discretion.  I note, however, that Clone’s own conduct in adding the critical words ‘for NIL consideration’ in the second draft Agreement, without prior discussion, will also be relevant if leave to raise this issue is granted in any new trial. 

19. Players contends that it is likely that Clone will be denied the opportunity to raise the unpleaded unconscionability issue on a new trial, because a deliberate decision was made not to raise it at the original trial.  In those circumstances, the factor is of little, if any, weight in the exercise of the Court’s discretion as to whether to order a new trial.  There is a mere possibility that the issue will be permitted to be raised and, if so, there is no certainty of outcome.  The question of leave to amend the current pleadings in any new trial should await a decision as to whether there should be a new trial at all. 

20. In my opinion, the possibility that the unpleaded unconscionable conduct issue will form part of the issues to be determined in any new trial should be given little weight in the exercise of the Court’s discretion.  The form in which Clone intends to raise the issue is uncertain, there is no certainty that the Court will grant leave for the issue to be raised, and the Court cannot predict the outcome if the issue is permitted to be raised. 

    General considerations relating to the administration of justice

21. Clone, the Commissioner and the Attorney-General all join in the submission that the public interest in the finality of litigation should be given significant weight in the exercise of the Court’s discretion in determining the Application.  I agree that the finality principle is an important one.  However, as Quade makes clear, where there is misconduct and a real possibility that the result in the case would have been different in the absence of that misconduct, the Court must balance general considerations relating to the administration of justice, including the finality principle, with the justice of the particular case being considered.[157]  In Quade, the High Court approved the approach of Burchett J in the Full Federal Court in respect of a serious failure by the successful party to comply with its discovery obligation.  The High Court described Burchett J’s approach to such a case in the following terms:

    His examination of the relevant documents led him to conclude that the result ‘might’ have been different if the Bank had not failed to produce them to the respondents on discovery. In these circumstances, his Honour considered that the question whether the verdict should be set aside should be determined by reference to ‘broad considerations of justice’ including the public interest in finality of litigation and the ‘equally important principle that a party should not be permitted to mock the orders of the court’. It should be apparent from what has been said above that the approach adopted by Burchett J was correct.[158]

    [157] Quade (1991) 178 CLR 134, 141-3.

    [158] Ibid 143.

22. In my opinion, this is a similar case. 

23. Another relevant consideration is whether a fair trial is now possible given the lapse of time since the original trial (10 years) and the relevant events concerning the deletion issue (21 years).  Clone contends that the further fading of memories since the original trial will, especially in a case involving credit issues, ‘make a fair trial extremely problematic’. 

24. Players contends first that the factual issues arising on the deletion issue are confined to a few witnesses, Griffin, McDermott, Mackie, Grope, Roche, England and Brown, each of whom gave evidence on oath at the original trial.  The transcript of that evidence is available for tender on a new trial and there is unlikely to be any further oral evidence beyond that already given.  Second, Players contends that the probabilities will likely be determined by the contemporaneous documents and the evidence already given by Messrs Griffin and McDermott.  Third, Players contends that Clone’s culpability in this case is serious enough that the interests of justice should prevail and, if memories have further faded, that is a secondary consideration. 

25. In my opinion, Players’ contentions should be accepted.  Clone’s culpability is sufficiently serious that the interests of justice should prevail.  I would add to Players’ contentions that the original trial took place more than 10 years after the relevant events, and memories had by then already faded to a significant degree, such that much of the evidence is likely to have been reconstruction, even at that time. 

    Should a new trial be ordered and, if so, on what terms? 

1. It is important to recall that Vanstone J found that Mr Griffin (a practising solicitor) and Mr McDermott (a prominent ex-sportsman) lied in their evidence on the deletion issue.  They have suffered both financially and in having had their reputations damaged.  Vanstone J’s findings against Mr Griffin were referred to the Legal Practitioner’s Conduct Board.  For the reasons given above, Vanstone J’s findings were made following a trial which was unfairly conducted because of reckless malpractice by Clone’s legal team in failing to discover the third copy Agreement.  Players’ lack of reasonable diligence in failing to find the third copy Agreement was not sufficiently serious to deprive it of the opportunity of now having a fair trial.  The injustice should be remedied by ordering a new trial.  In my opinion, such a result is dictated by the need to preserve the integrity of the judicial process. 

2. In summary, balancing my findings as to: 

   (1)the culpability of Clone’s legal representatives;

   (2)the fact that the result at trial on the deletion issue might have been different if the third copy Agreement had been in evidence;

   (3)Mr Tisato’s lack of reasonable diligence; and

   (4)general considerations relating to the administration of justice, including the public interest in finality of litigation,

   the interests of justice would in my opinion best be served by ordering a new trial of the deletion issue, the rectification issue and the reasonable consideration issue. 

3. I conclude that Players is entitled to orders:

   (1)setting aside those orders of Vanstone J (as varied by the Full Court) which depend, in whole or in part, upon Vanstone J’s findings on the deletion issue; and

   (2)for a new trial on the deletion issue, the rectification issue, the reasonable consideration issue, costs orders in the proceeding, and such other issues as the Court permits to be raised if any application is made for leave to amend the pleadings as they stood at the original trial. 

4. I will hear the parties as to the precise form of orders and as to costs.